The FCA’s updated safeguarding requirements are set to bring important changes for e-money and payments firms. With new deadlines, stricter expectations, and added responsibilities, businesses will need to review their frameworks carefully to ensure they remain compliant. But what exactly do firms need to focus on first, and how can they best prepare?
To help answer that, we spoke with Nigel Reed, Neopay’s Chief Operating Officer, who has guided more than 100 firms through FCA authorisation. In this interview, Nigel breaks down the new safeguarding requirements, explains the key areas firms need to prioritise, and shares practical steps to ensure compliance well ahead of the May 2026 deadline.
When do firms need to be compliant with the new rules?
7th May 2026. Some of the changes may require quite a bit of work though, so I would advise firms to start going through the requirements quite soon.
There’s also some potential further changes – the proposed post repeal changes. The FCA has said it will review these if and when it decides to proceed with them – so it is not certain now whether the FCA will continue with these changes or not and, if they do, when this will be. These included the proposals in relation to receiving funds directly into a relevant funds bank account and holding funds under a statutory trust.
With the new rules that have been published, what are the main things that firms should be looking at to start with?
I’d be starting with a review of your reconciliations and record-keeping to ensure they meet the requirements of the new rules and also starting to compile the Resolution Pack to the required standard.
With your reconciliations and record keeping, you need to be aware that the FCA stressed a few areas where many firms are currently falling short of requirements.
Firstly – e-money must be safeguarded separately from unrelated payment services and there must be separate reconciliations for each. So, if you’re not doing this already – you need make sure you start as soon as possible.
Secondly, reconciliations shouldn’t be used to maintain books and records. These two things are separate and, as well as the reconciliation requirements, you need to maintain separate records and accounts so you can distinguish between relevant funds and other funds.
You mentioned starting on the Resolution Pack. What’s that?
The Resolution Pack is basically all the information and access requirements that a third party would need if they needed to take over and refund your clients from your safeguarding accounts or insurance, for example in the case of bankruptcy. The FCA have specified contents that must be included. You also need to include a master document that states all the documents and other data and information in your pack and where to find it.
You should already have a lot of this within your Wind Down plans – but you must review this and ensure that any pack meets the new requirements.
The FCA is recommending the use of ‘living documents’ that link directly to the most recent versions of the relevant records although this isn’t a specific requirement.
In our last interview about the proposals, you mentioned a monthly return. Is this something firms should be thinking about?
Yes, you’ll need to submit a return every month – within 15 business days of the end of each calendar month. The FCA has provided template returns in the back of the Policy Statement, so I would recommend that you review these and make sure your firm is ready for their submission.
There’s also the requirement for an annual safeguarding audit, but we are still waiting for further clarification and details on this. The FCA are working with the FRC on the introduction of an auditing standard.
Firms who haven’t needed to safeguard more than £100,000 at any time over at least 53 weeks, won’t need the annual safeguarding audit, however the FCA has suggested that voluntary audits may help ensure they meet their obligations.
What else should firms be aware of?
3rd party diversification – You should note the changes in respect of diversification of the parties you use to hold safeguarded funds. The FCA is expecting firms to periodically review the parties they use and also whether they need to diversify and spread the risk, for example by using several approved banks and making sure they are not all part of the same group. These reviews need to be included in your monitoring controls and the procedures properly documented. The reviews themselves will also need to be properly documented and available if requested.
Also, firms who use insurance policies or guarantees need to make sure that they set a review point in advance of 3 months before the end of the policy. The FCA has stipulated that, no later than 3 months before the insurance policy or guarantee expires, firms must decide whether to continue using this method and notify the FCA. If it’s not going to continue with that method, it must submit a plan covering how it will move to the segregation method. The 3-month period also makes sure that, where firms need to, they have time to make a claim on the policy before the cover lapses.
What are the basics that firms should be looking at when they review their safeguarding framework?
Identification of relevant funds—so that you sufficiently record when and how the relevant funds are earned and are appropriately safeguarded.
Method of safeguarding—you must show compliance with your chosen method of safeguarding, whether segregation or insurance.
Internal and external reconciliations—ensuring you regularly review your safeguarding records to identify and resolve discrepancies.
Oversight and governance—you should have open policy regarding safeguarding oversight as well as which team member is in charge of monitoring. Firms must also formally appoint an individual with overall responsibility for safeguarding arrangements and notify the FCA of this appointment as and when required.
Training and awareness—to make sure appropriate personnel, including senior management, are aware of their safeguarding responsibilities and are prepared to answer auditor queries.
How can Neopay help guide businesses through the changes?
At Neopay, we deliver bespoke compliance solutions which help businesses to meet the FCA’s increasing safeguarding requirements. We provide:
- Safeguarding audits to evaluate current practices and identify areas for improvement.
- Workshops and training for staff to learn and apply the new requirements effectively.
- Ongoing advisory support to help firms align with the interim rules and transition smoothly to the end-state framework.
If anyone is uncertain about the changes or their current approach or needs support, we’re here to help.
Contact Neopay today to learn how our safeguarding solutions can support your business.
