FCA strengthens safeguarding rules for e-money and payments firms
The Financial Conduct Authority plans to overhaul the safeguarding regime for e-money and payments firms, aiming to address concerns over weak compliance across the sector. Its consultation outlined a two-stage reform intended to strengthen customer fund protection and bring payments regulation closer to the FCA’s established client assets framework.
The compliance challenge
The FCA published its new policy statement on 7 August 2025. Judging from the measures it proposes, the work of FCA compliance consultants will be crucial. Many businesses will not have the expertise to ensure water-tight compliance and will need the services of experts such as https://www.adempi.co.uk.
The FCA proposals
In the short term, interim rules will bolster existing requirements under the Electronic Money Regulations and Payment Services Regulations. Key proposals include requiring firms to appoint a senior manager with responsibility for safeguarding, maintaining detailed records and resolution packs, carrying out reconciliations, and submitting monthly reports to the FCA. External audits of safeguarding arrangements would also be mandatory. New expectations on the due diligence of custodians and diversification of safeguarded funds are designed to reduce the risks of poor oversight.
Looking further ahead, the FCA plans to introduce end-state rules that will replace existing legislation with a regime comparable to that governing investment firms. Central to this will be the requirement that customer funds be held on trust, a change intended to resolve long-standing legal uncertainty while imposing stricter operational standards.
The FCA expects interim measures to take effect in the second half of 2025, with fundamental reform phased in once government legislation clears the way.
