The Financial Reporting Council (FRC) has published a consultation on a new safeguarding assurance standard for payment and e-money institutions, following a request from the Financial Conduct Authority (FCA).
The proposed standard will shape how safeguarding audits are carried out under the FCA’s strengthened safeguarding regime, raising important questions for payment and e-money firms about their audit requirements and what they should be doing now.
We spoke to Nigel Reed, Chief Operating Officer at Neopay, about what the consultation means for firms, what they should expect from their safeguarding audit and how they can prepare.
What should firms be aware of with respect to these new standards?
The standards themselves are more for the auditors than client firms. Clients need to make sure that the auditors they use meet the requirements as laid out in the FCA handbook. We’re still not sure when the new standards will come into force, so you need to make sure you’re keeping up with your annual safeguarding audits until then.
Does Neopay meet these requirements?
Yes – through our partnership with a leading registered accountant. You will need to show you’ve done due diligence on this though – for example, that you’ve checked the registration details. We’ll provide this to clients as needed.
What will the new audit cover?
It will be very similar to previous audits we’ve done for clients, although for those who haven’t had this year’s audit yet, they’re amended slightly due to the new safeguarding regulations – so, for example, it now includes things like resolution packs and revised reconciliation requirements. More information can be found in our guide, What Do Auditors Look for During a Safeguarding Audit?
If anyone’s worried about whether they meet the new requirements, now’s a good time to get a safeguarding audit or a less formal gap analysis review to help give you more confidence.
And you need to bear in mind that you still need to make sure you get an annual safeguarding audit while these new standards are defined. It’s looking possible that the final standards won’t be applicable until your 2028 audit.
Can we have our audit now?
We do know enough about the proposed standards to provide an audit that’s in line, although obviously some of the standards may change and it’s still too early to have an audit that formally meets these new standards as they haven’t been finalised.
Firms still need their annual audit, and this should meet new requirements already defined by the FCA. It would also be good practice for audits to meet the suggested requirements in the consultation, as far as possible.
Some firms may find this useful, so they are prepared prior to the final standards being implemented.
What should firms do now?
Make sure you are up to date with your annual safeguarding audits and that your latest one covers the new rules.
Firms could also do a review or regulatory mapping, if you haven’t already, to make sure you are up to date with the recent rule changes, although this should be covered in an audit.
Also, keep an eye out for the end of the consultation and the final rules being published, as there are likely to be a lot of firms looking to book soon after.
The important thing is not to delay your current safeguarding work while waiting for the FRC standard to be finalised. Firms should continue meeting the FCA requirements that apply now and make sure their safeguarding arrangements reflect the strengthened regime.
If you’re preparing for your next safeguarding audit or would like to understand how the recent changes affect your firm, contact Neopay to speak with one of our regulatory consultants.
About Nigel Reed
Nigel Reed has 25 years of experience in financial services, including roles with leading e-money and payment providers such as Neteller and a number of international banking groups.
At Neopay, Nigel leads the consultancy team, supporting payment and e-money firms across regulatory authorisations and wider compliance requirements. He is also an experienced trainer and compliance auditor, with a strong track record of helping firms navigate complex regulatory requirements in a practical and commercially focused way.
His extensive experience across the payments and e-money sector gives him a detailed understanding of the regulatory and operational challenges firms face, including safeguarding and audit requirements.
Useful Links
Resolution Pack
Relevant funds
FCA Approach Document
Intended amendments to FCA Approach Document
Changes to the safeguarding regime for payments and e-money firms Policy Statement
What do auditors look for during a Safeguarding audit?
