On 4th July 2019 the Financial Conduct Authority (FCA) published the results of a multi-firm review of 11 non-bank payment service providers (PSPs). This review considered how well the firms met the requirements for safeguarding service users’ funds in the Payment Services Regulations 2017 (PSRs) and Electronic Money Regulations 2011 (EMRs).

Alongside these results the FCA sent a "Dear CEO" letter to all electronic money institutions and authorised payment institutions asking them to sign a Safeguarding Attestation confirming that they have reviewed safeguarding procedures and that these comply with the requirements set out in Part 3 of the Electronic Money Regulations 2011 and regulation 23 of The Payment Services Regulations 2017.

How we can help 

Compliancy Services is a leading provider of compliance consultancy services to the Payments Sector.  Almost 1 in 5 of all authorised payment and e-money institutions have used our services and our team is led by one of the UK's foremost experts in Payments Sector regulation, John Burns.

We have the knowledge and experience to review your current safeguarding arrangements, to quickly and efficiently help you undertake any remedial action and enable you to respond in time and with confidence to the FCA.

Our service:

  1. Analyses the business flows and identifies when you are required to safeguard and when the safeguarding obligation ends (this includes a review of agents or distributors where appropriate)
  2. Reviews reconciliation processes
  3. Reviews whether you have the correct acknowledgment from your bank
  4. Comments on alternative safeguarding methods including emerging insurance alternatives
  5. Provides a report on whether safeguarding meets regulatory requirements, detailing any necessary remedial action

Find out more about our safeguarding service

What's going to happen next?

The signed attestation places a personal responsibility and clear accountability on senior management to ensure that their firm is compliant with the regulations. This issue is clearly high on the FCA's agenda and the FCA have been clear that they will be conducting further work on firms' safeguarding arrangements and which is bound to involve further reviews of individual firms.

Any firms that miss the 31 July 2019 deadline can naturally expect to be in immediate focus and those firms which sign the attestation but are then found to be in breach may face serious consequences.

Further information

The main aim of the FCA review was to assess how well non-bank PSPs meet the requirements to safeguard customer funds and whether e-money holders and payment service users may suffer financial loss or other harm if a firm fails.

The FCA found many examples where firms were meeting the individual components of the requirements effectively, but others where further work was needed to ensure customers’ funds were fully protected if the firm became insolvent.  The Key recommendations were summarised:

  • Firms need to be clear about how their business models work and which funds are relevant and should be safeguarded.
  • Relevant funds must be segregated as quickly as possible on receipt. 
  • The checks the FCA saw to ensure that correct amounts are being safeguarded were not always as frequent or accurate as they should be.
  • Firms with networks of agents or distributors must have adequate processes to ensure that relevant funds are segregated on receipt.
  • Firms need to ensure they have sufficient oversight of their arrangements for managing the risks to customer funds. This includes sufficient detail and rationale in their documentation and regular, effective monitoring and review of safeguarding processes. This is particularly relevant where firms have rapidly evolving business and operating models.

More information can be found on the FCA website.

Enquire about our safeguarding service

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