Consultation on Safeguarding Rules for Payment and E-Money Firms
New FCA Consultation on Safeguarding Rules for Payment and E-Money Firms
At Alumni Compliance, we strive to keep our clients informed about the latest regulatory changes that could impact their businesses. The Financial Conduct Authority (FCA) has recently opened a consultation on significant changes to the safeguarding regime for payment and e-money firms. This new framework aims to improve consumer protection and strengthen compliance with existing regulations.
Key Highlights of the Proposed Safeguarding Rules:
1. The FCA is proposing a two-stage approach:
- Interim Rules: Focus on improving compliance with the current Electronic Money Regulations (EMRs) and Payment Services Regulations (PSRs), with enhanced record-keeping and monitoring requirements.
- End-State Rules: Will replace the existing safeguarding framework with a ‘CASS-style’ regime, ensuring that relevant funds and assets are held on trust for consumers.
2. Enhanced Monitoring and Reporting: The new rules will require payment and e-money institutions to maintain detailed books and records and implement a monthly regulatory return. These measures aim to increase transparency and ensure funds are appropriately safeguarded.
3. Minimising Shortfalls: The FCA’s focus is on reducing the risk of shortfalls in safeguarded funds, ensuring these funds are returned to consumers as efficiently as possible in the event of a firm’s failure.
4. Statutory Trust: Under the new end-state regime, the FCA proposes to impose a statutory trust over relevant funds. This change will provide consumers with better legal protection, as the funds will be held in trust, safeguarded from competing creditors in the event of firm insolvency.
Who Will Be Impacted by These Changes?
These proposed changes will apply to:
- Authorised Payment Institutions
- E-Money Institutions
- Small E-Money Institutions
- Credit Unions issuing e-money in the UK
- EEA Firms in supervised run-off under the financial services contracts regime
The rules will also be relevant to insolvency practitioners, auditors, and other financial services providers responsible for safeguarding relevant funds.
Why These Changes Matter
The growth of e-money and payment services in the UK has led to increased consumer reliance on these firms. The FCA’s changes are aimed at addressing the rising number of safeguarding issues, ensuring that consumers’ money remains protected even if a firm becomes insolvent. The CP24/20 Consultation Paper can be read in full and responses submitted on the FCA’s website.
How Can We Help?
At Alumni Compliance, we’re here to help your business navigate these regulatory changes. With our expertise in financial compliance and safeguarding practices, we can ensure your firm meets the new standards and continues to operate smoothly. We offer tailored compliance consulting services to help your business:
- Implement effective safeguarding practices
- Ensure full compliance with the FCA’s proposed safeguarding rules
- Improve your firm’s internal record-keeping, monitoring, and reporting systems
For more information on how Alumni Compliance can assist your firm in adapting to these new regulations, contact us today.