Authorised Payment Institutions (PIs) and Electronic Money Institutions (EMIs) must comply with certain safeguarding requirements.
Safeguarding requirements for authorised PIs and EMIs
The PSRs and EMRs impose safeguarding requirements to protect customer funds received for the provision of a payment service or e-money that has been issued.
All authorised PIs are required to comply with the safeguarding requirements in regulation 23.
All EMIs are required by regulation 20 to safeguard funds received in exchange for e-money that has been issued.
Read about the safeguarding requirements in Chapter 10 of Payment Services and Electronic Money – Our Approach.
Safeguarding requirements for small PIs
Small PIs can choose to comply with safeguarding requirements in order to offer the same protections over customer funds as authorised PIs must provide. If a small PI does choose to safeguard, it will need to apply the same level of protections that are expected of an authorised PI.
Safeguarding requirements: informing the FCA
If a small PI chooses to safeguard funds, we expect it to tell us when:
- it applies for registration, and
- in annual reporting returns
If a small PI decides to begin safeguarding funds after it has been registered, or, decides that it will cease doing so, it should let us know via:
- phone: 0300 500 0597
Funds that need to be safeguarded for PMIs
The requirement to safeguard applies to ‘relevant funds’. These are sums received:
- from, or for the benefit of, a payment service user for the execution of a payment transaction, and
- from a payment service provider for the execution of a payment transaction on behalf of a payment service user
Credit unions and safeguarding requirements
A credit union that issues e-money will have a Part 4A permission under FSMA to issue e-money. It is required under the EMRs to safeguard funds received in exchange for e-money as if it were an EMI, see regulation 20(5).
Safeguarding funds from unrelated payment services
EMIs and credit unions are entitled to provide payment services that are unrelated to the issuance of e-money.
Authorised EMIs that provide unrelated payment services are subject to the safeguarding provisions of the PSRs (regulation 19 of the PSRs) as if they were authorised payment institutions.
Small EMIs that provide unrelated payment services are in the same position as small payment services providers.
Small EMIs and credit unions may choose to safeguard funds received in exchange for unrelated payment services.
Funds that need to be safeguarded for EMIs and credit unions
EMIs and credit unions must safeguard funds that have been received in exchange for e-money that has been issued (referred to as ‘relevant funds’).
Authorised EMIs must also separately safeguard funds received in exchange for unrelated payment services.
Read about the safeguarding requirements in Chapter 10 of Payment Services and Electronic Money – Our Approach. This includes:
- How funds must be safeguarded, including the segregation and insurance methods.
- Protection from the claims of other creditors.
- Relevant systems and controls.
- Effect of an insolvency event.