The Financial Conduct Authority (FCA) published CP24/20 on 25 Sept 2024 to propose changes to the safeguarding regime for payments and e-money firms. The consultation closed on 17 Dec 2024 and the FCA will publish feedback on responses and issue a Policy Statement which is expected in the first half of 2025.

A brief outline of expected changes to safeguarding requirements for payments and e-money institutions in 2025. 

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The consultation paper, CP24/20, outlines changes to safeguarding rules for payments and e-money firms in two stages.

Interim rules - to support greater compliance with existing requirements as set out in the PSRs/EMRs through supporting more consistent record keeping and enhanced reporting and monitoring to identify and correct shortfalls in relevant funds.

Stage 1

End state rules - these will replace the existing safeguarding requirements of the EMRs and PSRs with a ‘CASS’ regime.

Stage 2

Upon issued of the interim rules, firms will have 6-months transition period to implement the interim rules, taken into account the expected date of the publication, it is likely the implementation has to be completed by the end of 2025 or beginning of 2026. 

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The interim rules will introduce comprehensive rules to ensure firms carry out accurate and consistent reconciliations, including introduction of the resolution pack. 

The CASS resolution pack will be a new requirement for payments and e-money firms to maintain when CASS 10A is inserted into the Client Assets Sourcebook. 

The primary purpose of CASS resolution pack is to ensure that, in the event of insolvency of the safeguarding institution, it is able to retrieve information maintained in the pack that would be helpful to assist an insolvency practitioner in achieving a timely return of relevant funds to its clients. 

When CASS 10A come into force, it specifies the types of documents and records that must be maintained in a safeguarding institution’s CASS resolution pack and the retrieval period for the pack.

In relation to each document in its CASS resolution pack, a safeguarding institution must put in place adequate arrangements to ensure that an administrator, receiver, trustee, liquidator or analogous officer appointed in respect of it or any material part of its property is able to retrieve each document as soon as practicable and in any event within 48 hours of that officer’s appointment.

The safeguarding institution should also ensure that it is able to retrieve each document in the CASS resolution pack as soon as practicable, and in any event within 48 hours, if requested by the FCA or Bank of England.

FCA specifically highlight that the safeguarding institution should not use the retrieval period to start producing these documents.

Be Prepared...

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