FCA Safeguarding Audits

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From this year onwards, the Financial Conduct Authority has introduced strengthened safeguarding requirements for payment and e-money firms, increasing regulatory expectations around how customer funds are protected in practice

The FCA expects firms that safeguard customer funds to demonstrate that safeguarding arrangements are effective, well governed and consistently applied on a day-to-day basis

Firms must be able to evidence accurate safeguarding of relevant funds, including appropriate segregation or trust arrangements and robust reconciliation processes

Daily safeguarding reconciliations are now expected, with timely identification, investigation and resolution of any breaks

Firms are required to arrange an annual safeguarding audit carried out by a qualified independent auditor

Safeguarding audit reports must provide assurance that the firm has complied with safeguarding requirements throughout the audit period and must be submitted to the FCA within the required timeframe

The FCA will expect firms to maintain resolution packs to support the return of customer funds in an insolvency scenario

Ongoing safeguarding reporting and effective oversight of third-party banks, custodians and liquidity providers is required

A key focus for the FCA is verifying that firms are doing in practice what they say they do in their safeguarding policies and procedures

We carry out structured safeguarding gap analysis to assess existing arrangements against the new FCA requirements

We support remediation and audit preparation, including reconciliation processes, governance, documentation and reporting

We help firms identify and engage suitably qualified safeguarding auditors with relevant payments and e-money experience

We prepare firms for the audit process, including evidence collation and audit readiness reviews

We supervise and support the safeguarding audit through to completion, including review of draft findings and the final audit report

We assist with regulatory submissions and responses where safeguarding audit outcomes are shared with the FCA

We work with senior management to ensure safeguarding arrangements are robust, auditable and regulator-ready