Changes to payment safeguarding rules: are you ready?

If you're subject to the FCA's payments safeguarding requirements, then time is running tight for you to make sure you're compliant with some big changes taking effect in May. Every affected firm will need to make changes, some significant, and some which mean firms have to rely on others to play their part in order to meet the implementation date. All of this means that if your implementation plans are not already underway, you should start urgently. Here's a brief reminder of what the changes are.

Who do the changes affect?

All firms subject to the safeguarding provisions of the E-Money or Payment Services Regulations. So that's all authorised and small E-money institutions, and almost all authorised payment institutions, as well as credit unions that issue e-money. Small payment institutions can choose to opt into the regime.

What are the changes?

Put simply, the changes require firms to

• Put in place policies and procedures, and keep records, to show how they safeguard and to enable immediate identification of where client funds are
• Beef up existing reconciliation requirements
• Get an external audit (unless the amounts safeguarded are small)
• File a new monthly regulatory return, and
• Ensure their range of safeguarding providers undergo proper due diligence, are appropriately diversified, and have clear and up to date mandates.

While some of these changes may represent what firms are doing anyway, many of them are new requirements.

What do I need to do?

Here's a brief checklist:

• Allocate safeguarding compliance oversight to an appropriate individual
• Create a resolution pack with all required information
• Review and update reconciliation policy and procedure
• Review current providers and update due diligence
• Ensure any insurance or investments held meet regulatory requirements
• Ensure all safeguarding letters are compliant and up to date
• Appoint external auditor and agree audit procedure
• Schedule regulatory return preparation and submission
• Review and update compliance monitoring and record keeping schedules
• Cross-check for any consequential changes to other policies and procedures.

When do the changes take effect?

7 May 2026. That may still seem a little way away, but the FCA gave firms nine months lead in time as opposed to the six months it originally planned because firms said they would need this time. So there is no time to lose.

Need help?

We can help. Our team brings a unique understanding of how non-bank payment providers operate with familiarity with the more traditional "client money" type protections to which the FCA is gradually moving. Whether you need advice on or validation of your gap analysis, your policies or your current arrangements with third parties, we're here. If you'd like to discuss, please get in touch.