CASS 15 Payment services and electronic money: relevant funds

Regulation 20 of the Electronic Money Regulations and regulation 23 of the Payment Services Regulations require safeguarding institutions to safeguard relevant funds. The rules and guidance in this chapter supplement those requirements.

This chapter applies to the following persons that receive or hold relevant funds:

1. (1) authorised payment institutions;

2. (2) small payment institutions that voluntarily safeguard under regulation 23 of the Payment Services Regulations; 

3. (3) electronic money institutions; and

4. (4) credit unions that issue electronic money.

This chapter applies with respect to the provision of payment services or issuance of electronic money that is within the scope of the Payment Services Regulations or Electronic Money Regulations.

PERG 15 provides guidance on the territorial scope of the Payment Services Regulations. Funds received by safeguarding institutions that relate to transactions that are not in scope of the Payment Services Regulations or Electronic Money Regulations do not need to be safeguarded and, where the safeguarding institution uses the segregation method, such funds must be kept separate from relevant funds.

One of the effects of CASS 15.1.3R is that CASS 15 does not apply where payment services are being provided to both the payer and the payee from outside of the UK (eg, a transfer between an account operated by a PSP from a branch in Japan to an account operated by another PSP from a branch in Hong Kong). Funds received for these transactions should not be mixed with relevant funds, even if funds are routed through a correspondent PSP in the UK.

1. (1) Electronic money institutions and credit unions may execute payment transactions that are not related to the issuance of electronic money. They must safeguard relevant funds relating to such transactions separately to relevant funds relating to the issuance of electronic money, and should apply the provisions of CASS 15 accordingly. 

2. (2) Paragraph (1) will be relevant where the safeguarding institution provides payment services that are independent from its electronic money products. The requirement to separately safeguard relevant funds will not apply where the safeguarding institution simply transfers funds from an electronic money account, such as where a customer uses electronic money to pay a bill.

If a small payment institution makes an election pursuant to regulation 23(16) of the Payment Services Regulations to voluntarily safeguard, the rules and guidance in this chapter will apply to the small payment institution as if it were an authorised payment institution.

If a small electronic money institution or a credit union makes an election pursuant to regulation 23(16) of the Payment Services Regulations, as applied by regulation 20(6) of the Electronic Money Regulations, to voluntarily safeguard, the rules and guidance in this chapter will apply to the small electronic money institution or credit union as if it were an authorised electronic money institution.

A safeguarding institution must, when holding relevant funds, maintain adequate arrangements to safeguard the client's rights and prevent the use of relevant funds for its own account.

An effect of CASS 15.2.1R is that a safeguarding institution should consider how to clearly identify relevant funds that are not held in a relevant funds bank account. That includes those segregated in accordance with regulation 21(1) of the Electronic Money Regulations or regulation 23(5) of the Payment Services Regulations but not yet placed in a relevant funds bank account. The word ‘safeguarding’ should be included in account names wherever possible.

A safeguarding institution that is also a firm subject to other chapters of CASS must ensure it has adequate policies and procedures in place to identify and determine under which activity it is holding funds.

1. A safeguarding institution must allocate to a single director or senior manager of sufficient skill and authority responsibility for:

2. (1) oversight of the institution’s operational compliance with the relevant funds regime; and

3. (2) reporting to the institution’s governing body in respect of that oversight.

1. (1) A safeguarding institution must allocate any relevant funds it receives to an individual client: 

2. (a) promptly and in a way that enables it to meet its obligations under the Payment Services Regulations and, where relevant, its obligations under the Electronic Money Regulations; and 

3. (b) in any case, no later than the end of the business day following the day of receipt (or where, after the receipt of funds, it has identified that the funds, or some of them, are relevant funds under CASS 15.2.9R, no later than the end of the business day following that identification).

4. (2) Pending a safeguarding institution's allocation of a relevant funds receipt to an individual client under (1), it must record the received relevant funds in its books and records as ‘unallocated relevant funds’.

CASS 15.2.1R requires a safeguarding institution to promptly identify the client to whom a relevant funds receipt relates. Once identified, the receipt of relevant funds must be recorded and allocated to the client in the safeguarding institution's accounts. Where the crediting of these accounts amounts to the crediting of a payment account, it must be carried out within the time periods required by the Payment Services Regulations.

Where the safeguarding institution receives relevant funds on behalf of a payee who does not have a payment account with the safeguarding institution, the relevant funds may need to be allocated immediately so that they can be made available to the payee immediately after they have been credited to the safeguarding institution's account in accordance with regulation 87 of the Payment Services Regulations.

Where the receipt of relevant funds relates to the issuance of electronic money, the relevant funds may need to be allocated without delay so that the safeguarding institution can comply with its obligation to issue electronic money without delay under regulation 39 of the Electronic Money Regulations.

1. If a safeguarding institution receives funds (whether in a relevant funds bank account or another account) which it is unable to immediately identify as relevant funds or other funds, it must:

2. (1) take all necessary steps to identify the funds as either relevant funds or other funds; and

3. (2) record the funds in its books and records as ‘unidentified relevant funds’ while it performs the necessary steps under (1).

CASS 15.2.5R and CASS 15.2.9R recognise that it might not always be possible to identify whether funds are relevant funds and, if they are, the client to which they relate. Where a safeguarding institution is able to identify that the funds have been received from a client to execute a payment transaction or in exchange for electronic money but is unable to identify the client entitled to the funds it has received (for example, because they do not have the correct unique identifier), the funds must still be treated as relevant funds and recorded as ‘unallocated relevant funds’.

If a safeguarding institution is unable to identify funds that it has received as either relevant funds or other funds, it should consider whether it would be appropriate to return the funds to the person who sent them (or, if that is not possible, to the source from where it was received – for example, the bank). 

A safeguarding institution should have regard to its obligations under the Electronic Money Regulations and Payment Services Regulations when considering whether to return funds under CASS 15.2.11G.

Where a payment service user provides an incorrect unique identifier, the safeguarding institution will also need to consider the steps it is required to take under regulation 90 of the Payment Services Regulations.

1. (1) The segregation method is the method of safeguarding relevant funds described in regulation 21 of the Electronic Money Regulations or regulations 23(5) to (11) of the Payment Services Regulations.

2. (2) An effect of regulation 20(6) of the Electronic Money Regulations is that where an electronic money institution or credit union receives relevant funds for the execution of payment transactions that are not related to the issuance of electronic money, it must keep those funds segregated from relevant funds relating to the issuance of electronic money.

A safeguarding institution that receives mixed remittances must maintain a written policy for the purpose of demonstrating its approach to complying with regulation 20(3) of the Electronic Money Regulations and regulation 23(2) of the Payment Services Regulations.

A safeguarding institution that segregates relevant funds in a different currency from that in which they were received or in which the safeguarding institution is liable to the relevant client must ensure that the amount held is adjusted each day on which it performs an internal safeguarding reconciliation to an amount at least equal to the original currency amount (or currency in which the safeguarding institution has its liability to its clients, if different), calculated at the previous day's closing spot exchange rate.

1. (1) Regulation 21(2)(b) of the Electronic Money Regulations provides that safeguarding institutions may invest relevant funds received in exchange for electronic money in secure, liquid, low-risk assets. Assets are liquid if approved as such by the FCA.

2. (2) Regulation 23(6)(b) of the Payment Services Regulations provides that safeguarding institutions may invest relevant funds received for the execution of payment transactions unrelated to the issuance of electronic money in such secure, liquid assets as the FCA may approve.

1. Subject to CASS 15.4.3G, the FCA has approved the following assets for the purposes of regulation 21(2)(b) of the Electronic Money Regulations and regulation 23(6)(b) of the Payment Services Regulations:

2. (1) items that fall into one of the categories set out in Article 114 of the UK CRR for which the specific risk capital charge is no higher than 0%; or

3. (2) units in a UCITS which invests solely in the assets in (1).

The FCA may, in exceptional circumstances, determine that an asset falling within CASS 15.4.2G is not secure and liquid.

1. Where a safeguarding institution wishes to seek approval of assets that do not fall within CASS 15.4.2G, it must submit an application in writing to the FCA that demonstrates:

2. (1) how the consumer protection objective of safeguarding will be met by investing in the assets in question; and

3. (2) how liquidity risks will be managed.

A safeguarding institution must take reasonable steps to ensure that investment in relevant assets conforms with the general principles and conditions in CASS 15.4.6R and CASS 15.4.7R.

1. The general principles which must be followed are:

2. (1) there must be a suitable spread of investments;

3. (2) investments must be made in accordance with an appropriate liquidity strategy; 

4. (3) the investments must be in accordance with an appropriate credit risk policy;

5. (4) any foreign exchange risks must be prudently managed; and

6. (5) the policies and procedures for complying with the general principles in (1) to (4) must be reviewed at least annually.

1. The general conditions which must be satisfied in the segregation of relevant assets are: 

2. (1) subject to (2), any redemption of an investment must be by payment into a relevant funds bank account of the safeguarding institution; and

3. (2) where a safeguarding institution appoints a third party to manage the relevant assets, the mandate should provide for the proceeds from the sale of any relevant assets to be promptly reinvested in other relevant assets or paid into the safeguarding institution'srelevant funds bank account.

A safeguarding institution may only appoint a third party to manage relevant assets if the third party is a firm with permission to carry out the regulated activity of managing investments.

1. A safeguarding institution that appoints a third party to manage relevant assets must:

2. (1) exercise all due skill, care and diligence in the selection, appointment, and periodic review of the third party and the arrangements for managing the relevant assets; 

3. (2) ensure that the mandate given to the third party prevents the third party from making investment decisions that are inconsistent with the Electronic Money Regulations, the Payment Services Regulations or the requirements in this chapter; and

4. (3) ensure that the arrangements with the third party require the third party to provide the safeguarding institution with information on the number of relevant assets held. Such information should be provided or made available at least every business day and relate to the close of business on the previous business day.

When a safeguarding institution makes the selection, the appointment and conducts the periodic review of the third party it must take into account the expertise and market reputation of the third party with a view to ensuring the protection of clients' rights.

1. (1) A safeguarding institution must make a record of:

   1. (a) the grounds upon which it satisfies itself as to the appropriateness of its selection and appointment of a third party under CASS 15.4.8R and CASS 15.4.9R; and

   2. (b) each periodic review of its selection and appointment of a third party under CASS 15.4.8R, its considerations and conclusions.

2. (2) A record under (1) must be made on the date the selection is made or the review completed (as the case may be).

A safeguarding institution that appoints a third party pursuant to CASS 15.4.8R remains responsible for ensuring that the relevant funds are only invested in accordance with the relevant funds regime.

A safeguarding institution is not required to appoint a third party to manage relevant assets but, if it does, it must comply with CASS 15.4.8R.

This section applies when a safeguarding institution elects to protect some or all relevant funds using the insurance or guarantee method.

A safeguarding institution can protect relevant funds through an insurance policy if the policy complies with the conditions in CASS 15.5.4R.

A safeguarding institution can protect relevant funds through a guarantee if the guarantee complies with the conditions in CASS 15.5.4R.

1. The conditions are:
2. (1) the proceeds of the insurance policy or guarantee must be payable upon an insolvency event of the safeguarding institution;
3. (2) there must be no condition or restriction on the prompt paying out of the insurance or guarantee, other than the certification of the insolvency event;
4. (3) a certification requirement for the purposes of (2) must be no more onerous than is practically necessary;
5. (4) the terms of the insurance policy or guarantee must provide for the proceeds of the insurance policy or guarantee to be promptly paid into a relevant funds bank account of the safeguarding institution; and
6. (5) the terms of the insurance policy or guarantee must not permit or enable the provider to cancel the policy or guarantee prior to its expiry, unless:
   1. (a) such cancellation is due to the non-payment of the premium; and
   2. (b) the provider has given the safeguarding institution and the FCA at least 3 months' notice of its decision to cancel the policy or guarantee.

• (1) An effect of CASS 15.5.4R is that the insurance policy or guarantee must pay out the full amount of any claim regardless of why the insolvency event occurs. This includes, but is not limited to, where the insolvency event is caused by:

(a) any fraud or negligence on the part of the safeguarding institution or any of its directors, employees or agents; or

(b) something outside the control of the safeguarding institution.

• (2) CASS 15.5.4R also means that there must be no level below which the insurance policy or guarantee does not pay out.

• (3) CASS 15.5.4R(4) requires the proceeds of an insurance policy or guarantee to be payable into a relevant funds bank account. In practice, this means that the safeguarding institution will need to maintain such an account at least for the full term of the insurance policy or guarantee.

A safeguarding institution may use more than one insurance policy or guarantee, or a combination of insurance policies and guarantees. However, the effect of the condition in CASS 15.5.4R(2) is that the terms of each insurance policy or guarantee must not enable the insurer or guarantor to refuse to pay out, in whole or in part, on the basis that relevant funds are covered by another insurer or guarantor.  

A safeguarding institution must notify the FCA at least 2 months before it intends to: 

1. (1) rely on the insurance or guarantee method for the first time;

2. (2) change the amount of cover provided by its insurance policies or guarantees; or

3. (3) change its insurer or guarantor.

The notification under CASS 15.5.7R must set out:

1. (1) the person providing the insurance policy or guarantee;

2. (2) how the insurance policy or guarantee complies with the conditions in CASS 15.5.4R;

3. (3) when the insurance policy or guarantee expires, and if it renews automatically;

4. (4) whether the safeguarding institution has alternative arrangements in place instead of renewal;

5. (5) an assessment by the safeguarding institution as to whether the use of the insurance or guarantee method or the change to the safeguarding arrangements will lead to any increase in operational risk;

6. (6) an explanation of how the assessment in (5) was carried out; and

7. (7) a statement as to how the safeguarding institution will mitigate any increased operational risk.

The assessment referred to in CASS 15.5.8R(5) should consider operational risks such as:

1. (1) the insurance policy or guarantee not being extended or renewed, and the safeguarding institution not:

2.     (a) being able to find an alternative insurer or guarantor; or

3.     (b) having sufficient liquid assets to safeguard using the segregation method on the expiry of the insurance policy or guarantee; and

4. (2) adverse impacts on the institution’s short-term liquidity caused by restrictions on accessing funds that would otherwise be available if they were protected using the segregation method, contrary to regulation 6(5) of the Electronic Money Regulations and regulation 6(6) of the Payment Services Regulations.

1. A safeguarding institution must:

2. (1) decide whether it intends to continue to use the insurance or guarantee method in good time and at least 3 months before the expiry of its existing insurance policy or guarantee; and

3. (2) notify the FCA of its decision.

If a safeguarding institution decides to continue to use the insurance or guarantee method, but there are changes to the insurer or guarantor, or to the amount of the cover, it will also need to comply with CASS 15.5.7R.

A safeguarding institution should decide whether to continue using the insurance or guarantee method in good time before the expiry of the policy or guarantee. In practice, this means that a decision should be made while there is sufficient time to enable the safeguarding institution to make alternative arrangements to meet its obligations to customers. The greater the amount of cover provided by the insurance or guarantee method, the sooner a decision should be made. The safeguarding institution should keep the FCA informed at all stages in accordance with Principle11.

• CASS 15.5.14R applies where a safeguarding institution:
• (1) has less than 3 months remaining on an insurance policy or guarantee taken out for the purposes of safeguarding by the insurance or guarantee method; and
• (2) does not have a replacement for, or renewal of, the insurance policy or guarantee in place.

The safeguarding institution must: 

1. (1) make a plan as to how it will use the segregation method to safeguard the funds that would have been protected by the insurance policy or guarantee if that policy or guarantee had been renewed or replaced; and

2. (2) provide the FCA with the plan referred to in (1).

If the safeguarding institution is a small payment institution, small electronic money institution or a credit union that voluntarily safeguards under regulation 23 of the Payment Services Regulations (including as applied by regulation 20(6) of the Electronic Money Regulations) it may, alternatively, cancel its election to safeguard.

(1) If a safeguarding institution is unable to use the segregation method to protect funds that were previously covered by an insurance policy or guarantee, it should consider its financial position and take any appropriate steps (such as placing itself into administration) in good time before the lapse of the policy or guarantee so that a claim can be made.

(2) Where a safeguarding institution is required to safeguard, it is a condition of its authorisation or registration that it takes adequate measures for the purpose of doing so. If it does not have adequate measures in place to protect relevant funds in good time before the expiry of an insurance policy or guarantee, the FCA may consider whether it is appropriate to use its supervision powers to protect the interests of clients, including, but not limited to, its powers to apply to court to appoint an insolvency practitioner.

1. (1) A safeguarding institution must exercise all due skill, care and diligence:

2. (a) in the selection, appointment, and periodic review of third parties that provide:

3. (i) accounts where relevant funds are received, deposited or otherwise held;

4. (ii) accounts where relevant assets are deposited or otherwise held; or

5. (iii) insurance or a guarantee for the purpose of the insurance or guarantee method; and

6. (b) in the arrangements for the holding or protection of relevant funds or relevant assets.

7. (2) The safeguarding institution must consider the need for diversification as part of its due diligence under (1).

Safeguarding institutions should ensure that their consideration of a third party focuses on the specific legal entity in question and not simply that person'sgroup as a whole.

1. When a safeguarding institution makes the selection, the appointment and conducts the periodic review of a third party, it must take into account:

2. (1) the expertise and market reputation of the third party with a view to ensuring the protection of clients' rights; and 

3. (2) any legal or regulatory requirements or market practices relating to the holding of relevant funds or relevant assets or the provision of insurance or a guarantee that could adversely affect clients' rights.

1. In complying with CASS 15.6.3R, a safeguarding institution should consider, as appropriate, together with any other relevant matters:
2. (1) the capital of the third party;
3. (2) the amount of relevant funds or relevant assets placed, insured or guaranteed as a proportion of the third party’s capital and (where relevant) deposits;
4. (3) the extent to which relevant funds or relevant assets that the safeguarding institution deposits or holds with any third party would be protected under a deposit protection scheme or other compensation scheme;
5. (4) the creditworthiness of the third party;
6. (5) to the extent that the information is available, the level of risk in the investment and loan activities undertaken by the third party and affiliated companies; and
7. (6) the arrangements referred to in CASS 15.2.1R (Protection of relevant funds).

A safeguarding institution must:

1. (1) periodically review whether it is appropriate to diversify (or further diversify) the third parties with which it deposits, holds, invests, insures or guarantees some or all of the relevant funds it is required to safeguard; and

2. (2) whenever it concludes that it is appropriate to do so, make adjustments accordingly to the third parties it uses and to the amounts of relevant funds or relevant assets deposited or held with them or covered by them.

In complying with the requirement in CASS 15.6.5R to periodically review whether diversification (or further diversification) is appropriate, a safeguarding institution should have regard to:

1. (1) whether it would be appropriate to deposit relevant funds in relevant funds bank accounts opened at a number of different approved banks;

2. (2) whether it would be appropriate to limit the amount of relevant funds or relevant assets the safeguarding institution holds with third parties that are in the same group as each other;

3. (3) whether risks arising from the safeguarding institution's business model create any need for diversification (or further diversification);

4. (4) the market conditions at the time of the review;

5. (5) the outcome of any due diligence carried out in accordance with CASS 15.6.1R; and

6. (6) the arrangements referred to in CASS 15.2.1R (Protection of relevant funds).

• (1) A safeguarding institution must make a record of:

(a) the grounds upon which it satisfies itself as to the appropriateness of its selection and appointment of a third party under CASS 15.6.1R;

(b) each periodic review of its selection and appointment of a third party under CASS 15.6.1R, its considerations and conclusions; and

(c) each periodic review that it conducts under CASS 15.6.5R, its considerations and conclusions.

• (2) A record under (1) must be made on the date the selection is made or the review completed (as the case may be).

The main purposes of an acknowledgement letter are:

1. (1) to put third parties on notice of a safeguarding institution's client's interests in relevant funds or relevant assets that have been deposited or invested with them;

2. (2) to ensure that a relevant funds bank account or relevant assets account has been opened in accordance and in compliance with the relevant funds regime, and is distinguished from any account containing funds or assets that are not relevant funds or relevant assets; and

3. (3) to ensure that a third party understands and agrees that it will not have any recourse or right against funds or assets standing to the credit of a relevant funds bank account or relevant assets account in respect of any liability of the safeguarding institution to the third party (or a person connected to the third party), except to the extent provided for by the Electronic Money Regulations or the Payment Services Regulations, as the case may be.

CASS 15.7.3R does not apply to the type of relevant funds bank account specified in regulation 21(4A) of the Electronic Money Regulations or regulation 23(9) of the Payment Services Regulations (Bank of England settlement accounts). 

For each relevant funds bank account, a safeguarding institution must complete and sign a safeguarding account acknowledgement letter clearly identifying the relevant funds bank account and send it to the approved bank with which the relevant funds bank account is, or will be, opened, requesting the bank to acknowledge and agree to the terms of the letter by countersigning it and returning it to the safeguarding institution.

For each relevant assets account, a safeguarding institution must complete and sign a safeguarding account acknowledgement letter clearly identifying the relevant assets account and send it to the firm with which the relevant assets account is, or will be, opened, requesting the firm to acknowledge and agree to the terms of the letter by countersigning it.

In drafting acknowledgement letters under CASS 15.7, a safeguarding institution must use the template in CASS 15 Annex 1.

When completing an acknowledgement letter, a safeguarding institution:

1. (1) must not amend any of the acknowledgement letter fixed text;

2. (2) subject to (3), must ensure the acknowledgement letter variable text is removed, included or amended as appropriate; and 

3. (3) must not amend any of the acknowledgement letter variable text in a way that would alter or otherwise change the meaning of the acknowledgement letter fixed text.

CASS 15 Annex 2 contains guidance on using the template for acknowledgement letters, including guidance on when and how safeguarding institutions should amend the acknowledgement letter variable text that is in square brackets.

1. (1) If, on countersigning and returning the acknowledgement letter to a safeguarding institution, the relevant person has also made amendments to:

2. (a) any of the acknowledgement letter fixed text; or 

3. (b) any of the acknowledgement letter variable text in a way that would alter or otherwise change the meaning of the acknowledgement letter fixed text,

4.      the acknowledgement letter will have been inappropriately redrafted and no longer comply with CASS 15.7.6R.

5. (2) Amendments made to the acknowledgement letter variable text in the acknowledgement letter returned to a safeguarding institution by the relevant person will not have the result that the letter has been inappropriately redrafted if those amendments:

6. (a) do not affect the meaning of the acknowledgement letter fixed text;

7. (b) have been specifically agreed with the safeguarding institution; and 

8. (c) do not cause the acknowledgement letter to be inaccurate.

A safeguarding institution must use reasonable endeavours to ensure that any individual that has countersigned an acknowledgement letter that has been returned to the safeguarding institution was authorised to countersign the letter on behalf of the relevant person. 

A safeguarding institution must retain each countersigned acknowledgement letter it receives from the date of receipt until the expiry of a period of 5 years starting on the date on which the last account to which the acknowledgement letter relates is closed. 

A safeguarding institution must also retain any other documentation or evidence it believes is necessary to demonstrate that it has complied with each of the applicable requirements in this section (such as any evidence it has obtained to ensure that the individual that has countersigned an acknowledgement letter that has been returned to the safeguarding institution was authorised to countersign the letter on behalf of the relevant person). 

A safeguarding institution must periodically (at least annually, and whenever it becomes aware that something referred to in an acknowledgement letter has changed) review each of its countersigned acknowledgement letters to ensure that they remain accurate.

Whenever a safeguarding institution finds a countersigned acknowledgement letter contains an inaccuracy, the safeguarding institution must promptly draw up a replacement acknowledgement letter and request that the new acknowledgement letter is duly countersigned and returned by the relevant person.

Under CASS 15.7.13R, a safeguarding institution should draw up a replacement acknowledgement letter whenever:

1. (1) there has been a change in any of the parties’ names or addresses or a change in any of the details of the relevant account(s) as set out in the letter; or

2. (2) it becomes aware of an error or misspelling in the letter.

If a safeguarding institution'srelevant funds bank account or relevant assets account is transferred to another person, the safeguarding institution must promptly draw up a new acknowledgement letter under CASS 15.7 and request that the new acknowledgement letter is duly countersigned and returned by the relevant person.

A safeguarding institution must establish, implement and maintain adequate policies and procedures sufficient to ensure compliance of the safeguarding institution (including in relation to any services provided through an agent or electronic money distributor) with the relevant funds regime.

In complying with the requirement in CASS 15.8.1R, a safeguarding institution should establish and maintain policies and procedures that include (but are not limited to): 

1. (1) the frequency and method of the reconciliations the safeguarding institution is required to carry out under this section;

2. (2) the resolution of reconciliation discrepancies under this section; and 

3. (3) the frequency at which the safeguarding institution is required to review its arrangements in compliance with this chapter.

1. (1) A safeguarding institution must keep such records and accounts as are necessary to enable it, at any time and without delay, to distinguish between relevant funds and other funds.

2. (2) Where an electronic money institution or credit union provides payment services that are unrelated to the issuance of electronic money, the provisions of CASS 15.8 shall be read as if they apply separately to the institution’s unrelated payment services asset pool and to its electronic money asset pool.

An effect of CASS 15.8.3R(1) is that a safeguarding institution that provides services that are not payment services or the issuance of electronic money must ensure it has adequate policies and procedures in place to identify and determine when it is holding relevant funds and when it is holding or in receipt of funds relating to its other activities.

The effect of CASS 15.8.3R(2) includes that: 

1. (1) the safeguarding institution will need to carry out a separate reconciliation of its unrelated payment services asset pool and of its electronic money asset pool; and 

2. (2) an electronic money institution or credit union must ensure it has adequate policies and procedures to distinguish between relevant funds received or held for the provision of payment services unrelated to the issuance of electronic money and relevant funds it receives in exchange for electronic money.

A safeguarding institution must maintain its records and accounts in a way that ensures their accuracy and, in particular, their correspondence to the relevant funds held for clients.

1. (1) The requirements in CASS 15.8.3R and CASS 15.8.6R are for a safeguarding institution to keep internal records and accounts of relevant funds. Therefore, any records falling under those requirements should be maintained by the safeguarding institution and are separate to any records the safeguarding institution may obtain from any third parties, such as those with which it may have deposited relevant funds.

2. (2) A safeguarding institution may use data that is received from third parties for the purpose of creating and maintaining such records where no other method could reasonably be employed (for example, where funds are applied automatically to client balances via application programming interfaces). 

3. (3) A safeguarding institution's records must cover all relevant funds held by an institution, including those not held in relevant funds bank accounts. 

1. (1) A safeguarding institution must maintain records so that it is able to determine the total amount of relevant funds it should be holding for each of its clients promptly and at any time.

2. (2) A safeguarding institution must ensure that its records are sufficient to show and explain its transactions and commitments for its relevant funds.

3. (3) Unless otherwise stated, a safeguarding institution must ensure that any record made under this chapter is retained for a period of 5 years starting from the later of:

4. (a) the date it was created; or 

5. (b) if it has been modified since the date it was created, the date it was most recently modified.  

For each internal safeguarding reconciliation and external safeguarding reconciliation the safeguarding institution conducts, it must ensure that it records:

1. (1) the time and date it carried out the relevant process;
2. (2) the actions it took in carrying out the relevant process;
3. (3) the outcome of its calculation of its safeguarding requirement and, where relevant, safeguarding resource; and
4. (4) where relevant, the outcome of its comparison of its D+1 segregation requirement and D+1 segregation resource.  

An internal safeguarding reconciliation requires a safeguarding institution to carry out a reconciliation of its internal records and accounts: 

1. (1) to check whether:

2. (a) its safeguarding resource was equal to its safeguarding requirement, as at the reconciliation point (see CASS 15.8.21R); and

3. (b) the amount of relevant funds and relevant assets it is required to hold in relevant funds bank account and relevant assets accounts is held in such accounts (see CASS 15.8.35R); and 

4. (2) to promptly identify and resolve any discrepancies in accordance with CASS 15.8.50R and CASS 15.8.51R. 

• A safeguarding institution that uses the insurance or guarantee method to protect relevant funds (whether alone or in combination with the segregation method) and does so using an insurance policy or guarantee that is unlimited in the amount of cover it provides:

• (1) does not need to carry out an internal safeguarding reconciliation; but

• (2) must carry out a daily calculation of its safeguarding requirement and record:

• (a) the date it carried out the calculation;

• (b) the actions the safeguarding institution took in carrying out the calculation; and

• (c) the outcome of its calculation. 

Where an electronic money institution or credit union provides payment services that are unrelated to the issuance of electronic money, the provisions of CASS 15.8 apply to the safeguarding institution's unrelated payment services asset pool and electronic money asset pool separately, in line with CASS 15.8.3R(2).

A safeguarding institution is not required to carry out the reconciliation described in CASS 15.8.10R(1)(b) (the comparison in CASS 15.8.35R) if all of its relevant funds:

• (1) are held in a relevant funds bank account; or

• (2) were, before the last internal safeguarding reconciliation, invested in relevant assets. 

The purpose of CASS 15.8.10R(1)(b) is to check that the right amount of relevant funds has been paid into a relevant funds bank account or invested in relevant assets. If all relevant funds are received into a relevant funds bank account or were invested in relevant assets before the last reconciliation, this step is not required.

In carrying out an internal safeguarding reconciliation, a safeguarding institution must use the values contained in its internal records and ledgers (eg, the payment accounts it operates, its cash book or other internal accounting records) rather than the values contained in the records it has obtained from banks and other third parties with which it has placed relevant funds or relevant assets (eg, bank statements). 

In accordance with CASS 15.8.7G(2), CASS 15.8.15R does not prevent a safeguarding institution from using data obtained from third parties to create and maintain its internal records where no other method could reasonably be employed. 

1. An internal safeguarding reconciliation should:

2. (1) be one of the steps a safeguarding institution takes to arrange adequate protection for relevant funds when the safeguarding institution is responsible for them; 

3. (2) be one of the steps a safeguarding institution takes to satisfy its obligations under regulation 27 of the Electronic Money Regulations or regulation 31 of the Payment Services Regulations (as the case may be) and CASS 15.2 (Organisational requirements: relevant funds) to ensure the accuracy of the safeguarding institution's records; and

4. (3) check whether the amount of relevant funds recorded in the safeguarding institution's records as being safeguarded meets the safeguarding institution's obligations to its clients under the relevant funds regime.

CASS 15.8.19R to CASS 15.8.23R do not apply to a safeguarding institution that has entered special administration under the PEMII Regulations.

Subject to CASS 15.8.11R and CASS 15.8.23R, a safeguarding institution must perform an internal safeguarding reconciliation as frequently as necessary and no less than once each reconciliation day.

CASS 15.8.19R requires a minimum of one internal safeguarding reconciliation to be performed each reconciliation day. It does not prevent a safeguarding institution from deciding it is appropriate to perform internal safeguarding reconciliations on business days that are not reconciliation days due to the nature, volume and complexity of its business.

1. (1) A safeguarding institution must select reconciliation point(s) for every day on which it performs internal safeguarding reconciliations.

2. (2) The reconciliation point(s) must be at the same time(s) for every day on which the safeguarding institution carries out internal safeguarding reconciliations.

3. (3) Each internal safeguarding reconciliation must be based on the records of the safeguarding institution as at the corresponding reconciliation point.

1. A safeguarding institution must record, as part of the policies and procedures required by CASS 15.8.1R:

2. (1) the reconciliation point(s) referred to in CASS 15.8.21R; and

3. (2) the frequency with which it performs internal safeguarding reconciliations.

1. (1) Following an insolvency event, the safeguarding institution must:

2. (a) perform an internal safeguarding reconciliation that relates to the time of the insolvency event as soon as reasonably practicable after the insolvency event; and

3. (b) perform further internal safeguarding reconciliations as regularly as required under (2), based on the records of the safeguarding institution as at the close of business on the business day before the day on which the reconciliation takes place.

4. (2) A safeguarding institution must determine when and how often to perform an internal safeguarding reconciliation under (1)(b) so as to ensure that:

5. (a) the safeguarding institution remains in compliance with CASS 15.8.3R to CASS 15.8.9R (Records and accounts); and 

6. (b) the correct amounts of relevant funds are returned to clients.

• (1) The reference point for the internal safeguarding reconciliation under CASS 15.8.23R(1)(a) should be the precise point in time at which the insolvency event occurred.

• (2) When a safeguarding institution decides whether it is necessary at any particular point in time to perform an internal safeguarding reconciliation under CASS 15.8.23R(1)(b), it should have particular regard to the need to maintain its books and accounts in order to ensure that its asset pools are correctly composed and maintained.

• (3) Depending on the circumstances of the safeguarding institution and the scale, frequency and nature of activity after an insolvency event that affects relevant funds, a safeguarding institution may conclude that it is necessary to perform internal safeguarding reconciliations each business day for a period of time after the insolvency event.

• In carrying out its internal safeguarding reconciliation a safeguarding institution may:

• (1) follow the standard method of internal safeguarding reconciliation set out in CASS 15.8.26R to CASS 15.8.35R; or

• (2) if it complies with the requirements in CASS 15.8.37R and CASS 15.8.38R follow a non-standard method of internal safeguarding reconciliation.

1. The safeguarding resource is the sum of: 

2. (1) the aggregate balance of funds held in the safeguarding institution's relevant funds bank accounts (less any funds that are not relevant funds held in an account of the type described in regulation 21(4A) of the Electronic Money Regulations or regulation 23(9) of the Payment Services Regulations (Bank of England settlement accounts)) (‘item A’); 

3. (2) the aggregate balance of relevant funds that have been segregated but not placed in a relevant funds bank account or invested in relevant assets (‘item B’);

4. (3) the aggregate value of relevant assets held in the safeguarding institution's relevant assets accounts based on the safeguarding institution's records as at the close of business on the previous business day (‘item C’); and

5. (4) the aggregate value of relevant funds that the safeguarding institution has protected using the insurance or guarantee method (‘item D’).

Item B should include all relevant funds that have been segregated but are not held in a relevant funds bank account – for example, funds held as cash, funds held by agents and funds held in a segregated account that is not a relevant funds bank account. 

In determining item C, a safeguarding institution must ensure that any valuation of the relevant assets is performed impartially and with all due skill, care and diligence.

The safeguarding requirement is the total amount a safeguarding institution is required to safeguard.

1. The safeguarding requirement is the sum of:

2. (1) individual safeguarding balances calculated in accordance with CASS 15.8.31R, ignoring any negative balances; and

3. (2) any amounts received but unallocated to an individual client under CASS 15.2.5R (Allocation of relevant funds receipts).

A safeguarding institution must calculate a client's individual safeguarding balance in a way which captures the total amount of all funds the safeguarding institution should be safeguarding for that client.

• A safeguarding institution may calculate either:

• (1) one individual safeguarding balance for each client, based on the totality of all the payment services or electronic money products provided to that client; or 

• (2) multiple individual safeguarding balances for each client, based on the individual payment services or electronic money products provided to that client.

1. When calculating an individual safeguarding balance for each client, a safeguarding institution must:

2. (1) include:

3. (a) all relevant funds received by the safeguarding institution for the client; and

4. (b) any amounts credited to the client's account by the safeguarding institution (for example, interest due and payable to a client on a payment account); and

5. (2) deduct:

6. (a) any payments executed for the client (provided the funds have been paid to the payee or the payee'spayment service provider); 

7. (b) any electronic money that has been redeemed; and

8. (c) any sums due and payable by the client to the safeguarding institution (eg, any fees and charges which are due and, under the framework contract, may be deducted from the funds held by the safeguarding institution).

For the purpose of CASS 15.8.33R(2)(c), a safeguarding institution must not take into account any payment or sums due and payable by the client to the extent those payments or sums create a negative balance on an account operated by the safeguarding institution for the client.

• In accordance with CASS 15.8.10R(1)(b), and subject to CASS 15.8.13R, a safeguarding institution must: 

(1) compare its: 

(a) D+1 segregation requirement; and

(b) D+1 segregation resource; and

(2) promptly identify and resolve any discrepancies in accordance with CASS 15.8.51R.

A non-standard method of internal safeguarding reconciliation is a method of internal safeguarding reconciliation which does not meet the requirements of the standard method of internal safeguarding reconciliation.

1. (1) Before using a non-standard method of internal safeguarding reconciliation, a safeguarding institution must:

2. (a) establish and document in writing its reasons for concluding that the method of internal safeguarding reconciliation it proposes to use will check whether:

3. (i)  the amount of relevant funds recorded in the safeguarding institution's records as being safeguarded meets the safeguarding institution's obligation to its clients under the relevant funds regime; and

4. (ii) the amount of relevant funds recorded in the safeguarding institution's records as being held in a relevant funds bank account or invested in relevant assets and held in a relevant assets account meets the safeguarding institution's obligation to its clients under the relevant funds regime; and 

5. (b) obtain a written report prepared by an independent auditor of the safeguarding institution in line with a reasonable assurance engagement and stating the matters set out in (2).

6. (2) The written report in (1)(b) must state whether, in the auditor’s opinion:

7. (a) the method of internal safeguarding reconciliation which the safeguarding institution will use is suitably designed to enable it to check whether:

8. (i)  the amount of relevant funds recorded in the safeguarding institution's records as being safeguarded meets the safeguarding institution's obligation to its clients under the relevant funds regime; and

9. (ii) the amount of relevant funds recorded in the safeguarding institution's records as being held in a relevant funds bank account or invested in relevant assets and held in a relevant assets account meets the safeguarding institution's obligation to its clients under the relevant funds regime; and 

10. (b) the safeguarding institution's systems and controls are suitably designed to enable it to carry out the method of internal safeguarding reconciliation the safeguarding institution will use.

11. (3) A safeguarding institution using a non-standard method of internal safeguarding reconciliation must not materially change its method of undertaking internal safeguarding reconciliations unless:

12. (a) the safeguarding institution has established and documented in writing its reasons for concluding that the changed methodology will meet the requirements in (1)(a); and

13. (b) an auditor of the safeguarding institution has prepared a report that complies with the requirements in (1)(b) and (2) in respect of the safeguarding institution's proposed changes.

1. A safeguarding institution must take reasonable steps to ensure that the auditor it appoints to prepare the report in CASS 15.8.37R(1)(b) has the required skills, resources and experience to perform their functions under the regulatory system and:

2. (1) is eligible for appointment as an auditor under Chapters 1, 2 and 6 of Part 42 of the Companies Act 2006;

3. (2) if appointed under an obligation in another enactment, is eligible for appointment as an auditor under that enactment; or

4. (3) in the case of an overseasrelevant institution, is eligible for appointment as an auditor under any applicable equivalent laws of that country or territory.

1. A safeguarding institution must conduct reconciliations between its internal records and accounts and those of: 

2. (1) the banks with which the safeguarding institution holds a relevant funds bank account; 

3. (2) the persons with which the safeguarding institution holds any other account in which relevant funds are held; and

4. (3) the authorised custodians with which the safeguarding institution holds a relevant assets account, and any third party that manages relevant assets on behalf of the safeguarding institution.

1. (1) The purpose of an external safeguarding reconciliation is to ensure the accuracy of a safeguarding institution's internal records and accounts against those of any third parties that hold relevant funds or hold or manage relevant assets.

2. (2) The records used for external safeguarding reconciliations should, so far as possible, relate to the same point in time as the reconciliation point(s) used for internal safeguarding reconciliations (see CASS 15.8.21R).

3. (3) If the records and accounts used for external safeguarding reconciliations cannot be aligned with the reconciliation point(s) referred to in (2), the policies and procedures referred to in CASS 15.8.1R should set out how the safeguarding institution will ensure its external safeguarding reconciliations achieve the purpose in (1).

CASS 15.8.42R does not apply to a safeguarding institution following an insolvency event.

A safeguarding institution must perform an external safeguarding reconciliation:

(1) as frequently as necessary and no less than once each reconciliation day; and 

(2) as soon as reasonably practicable after the date to which the external safeguarding reconciliation relates.

CASS 15.8.44R to CASS 15.8.46R do not apply to a safeguarding institution that has entered special administration under the PEMII Regulations.

Following an insolvency event, a safeguarding institution must perform an external safeguarding reconciliation that relates to the time of the insolvency event as soon as reasonably practicable after the insolvency event, based on the next available statements or other forms of confirmation after the insolvency event from: 

1. (1) the banks with which the safeguarding institution holds a relevant funds bank account;

2. (2) the persons with which the safeguarding institution holds any other account in which relevant funds are held; and

3. (3) the authorised custodians with which the safeguarding institution holds a relevant assets account, and any third party that manages relevant assets on behalf of the safeguarding institution.

The reference point for the external safeguarding reconciliation under CASS 15.8.44R should be the precise point in time at which the insolvency event occurred. 

When determining the frequency with which it will undertake further external safeguarding reconciliations after an insolvency event, a safeguarding institution must have regard to:

1. (1) the frequency, number and value of transactions which the safeguarding institution undertakes in respect of relevant funds;

2. (2) the risks to which the relevant funds are exposed, such as the nature, volume and complexity of the safeguarding institution's activities and where and with whom the relevant funds are held or invested; and

3. (3) the need to be able to verify that:

4.      (a) relevant funds within an asset pool have not been incorrectly distributed, transferred or dissipated; and 

5.      (b) the proceeds of any payments and transactions that settle after the insolvency event and which involve relevant funds have been received correctly.

1. An external safeguarding reconciliation requires a safeguarding institution to: 

2. (1) compare:

3.      (a) the balance, currency by currency, as recorded by the safeguarding institution, with the balance on that account as set out in the most recent statement or other form of confirmation issued by the person with which those accounts are held, for: 

4.           (i) each relevant funds bank account; and

5.           (ii) any other account in which relevant funds are held; and

6.       (b) the quantity of relevant assets, investment by investment, as recorded by the safeguarding institution for each account held with an authorised custodian, with the quantity set out in the most recent statement or other form of confirmation issued by the authorised custodian; and 

7. (2) promptly identify and resolve any discrepancies between those balances in accordance with CASS 15.8.56R and CASS 15.8.57R.

The reconciliation described in CASS 15.8.47R(1)(b) requires a safeguarding institution to reconcile the quantity of relevant assets, rather than the value of those assets. The relevant assets should be compared by asset type. For example, the safeguarding institution should compare its records of the number of units in a particular UCITS against the number of units as set out in the statements provided by the custodian of the units or issuer (as the case may be).

Insurance policies and guarantees are not subject to the external safeguarding reconciliation. However, safeguarding institutions using the insurance or guarantee method are reminded of their obligations in CASS 15.5 and the need to ensure that any insurance policy or guarantee provides appropriate cover at all times. 

When a discrepancy arises between a safeguarding institution'ssafeguarding resource and its safeguarding requirement, the safeguarding institution must determine the reason for the discrepancy and, subject to CASS 15.8.52R, ensure that:

1. (1) any shortfall is paid into a relevant funds bank account or invested in relevant assets as soon as possible and, in any case, by the end of the day on which the reconciliation is performed; or

2. (2) any excess is withdrawn from an account holding relevant funds or relevant assets.

1. (1) If a safeguarding institution'sD+1 segregation resource is lower than its D+1 segregation requirement, the safeguarding institution must:

2.      (a) determine the reason for the discrepancy; and

3.      (b) subject to CASS 15.8.52R, ensure that sufficient relevant funds are paid into a relevant funds bank account or invested in relevant assets to address the difference as soon as possible and, in any case, by the end of the day on which the reconciliation is performed.

4. (2) If it is not possible to use relevant funds to comply with (1), the safeguarding institution must use its own funds to do so, even if this leads to a discrepancy between its safeguarding requirement and safeguarding resource.

Following an insolvency event, a safeguarding institution is not required to make a payment, investment or withdrawal under CASS 15.8.50R or CASS 15.8.51R insofar as the legal procedure for the insolvency event restricts it from doing so.

CASS 15.8.50R and CASS 15.8.51R set out some of the steps that a safeguarding institution must carry out to ensure that it is segregating the right amount of relevant funds, and that it is holding the right amount of relevant funds in relevant funds bank accounts or as relevant assets. Where discrepancies are identified, safeguarding institutions are required to make payments, investments or withdrawals to remedy those discrepancies. 

CASS 15.8.51R(2) makes provision for a safeguarding institution that has a deficiency in its D+1 segregation resource but is unable to access relevant funds to remedy it. Such lack of access could be, for example, because of a delay in the release of relevant funds by a third party. In such circumstances, the safeguarding institution must top-up the shortfall from its own funds, even where this leads to a surplus in the safeguarding resource. The discrepancy will be resolved by subsequent reconciliations.

Where the discrepancy identified under CASS 15.8.50R or CASS 15.8.51R has arisen as a result of a breach of the requirements in this chapter, the safeguarding institution should ensure it takes sufficient steps to avoid a reoccurrence of that breach. 

If any discrepancy is identified by an external safeguarding reconciliation, the safeguarding institution must investigate the reason for the discrepancy and take all reasonable steps to resolve it without undue delay, unless the discrepancy arises solely as a result of timing differences between the accounting systems of the party providing the statement or confirmation and that of the safeguarding institution. 

If a safeguarding institution is unable to immediately resolve a discrepancy identified by an external safeguarding reconciliation, and one record or set of records examined by the safeguarding institution during its external safeguarding reconciliation indicates that there is a need to have a greater amount of relevant funds or relevant assets than is the case, the safeguarding institution must assume, until the matter is finally resolved, that that record or set of records is accurate and, subject to CASS 15.8.58R, pay its own funds into a relevant funds bank account or invest them in relevant assets. 

Following an insolvency event, a safeguarding institution is not required to pay its own funds into a relevant funds bank account or invest them in relevant assets under CASS 15.8.57R insofar as the legal procedure for the insolvency event restricts it from doing so. 

1. (1) CASS 15.8.52R and CASS 15.8.58R recognise that, following an insolvency event, a safeguarding institution is required to investigate discrepancies, but the extent to which it is able to resolve discrepancies may be limited by insolvency law, for example.

2. (2) CASS 15.8.52R and CASS 15.8.58R would not prevent any transfers being made in accordance with regulations 13 or 14 of the PEMII Regulations.

1. A safeguarding institution must inform the FCA in writing without delay if:

2. (1) its internal records and accounts of relevant funds are materially out of date, inaccurate or invalid so that the safeguarding institution is no longer able to comply with the requirements in CASS 15.8.3R, CASS 15.8.6R or CASS 15.8.8R(1);

3. (2) it will be unable to, or materially fails to, conduct an internal safeguarding reconciliation in compliance with CASS 15.8.10R and CASS 15.8.19R;

4. (3) it will be unable to, or materially fails to, pay any shortfall into a relevant funds bank account or invest it in relevant assets, or withdraw any excess from an account holding relevant funds or relevant assets so that the safeguarding institution is unable to comply with CASS 15.8.50R or CASS 15.8.51R after having carried out an internal safeguarding reconciliation;

5. (4) it will be unable to, or materially fails to, conduct an external safeguarding reconciliation in compliance with CASS 15.8.39R and CASS 15.8.42R; 

6. (5) it will be unable to, or materially fails to, identify and resolve any discrepancies under CASS 15.8.56R and CASS 15.8.57R after having carried out an external safeguarding reconciliation; or

7. (6) it becomes aware that, at any time in the preceding 12 months, the amount of relevant funds safeguarded was materially different from the total aggregate amount of relevant funds the safeguarding institution was required to safeguard under the Electronic Money Regulations or the Payment Services Regulations.

Safeguarding institutions are reminded that the auditor of the safeguarding institution must confirm in the report submitted to the FCA under SUP 3A.9 (Duties of auditors: notification and safeguarding report) whether the safeguarding institution has maintained systems adequate to enable it to comply with the relevant funds regime.

This annex contains guidance on the use of the template acknowledgement letter in CASS 15 Annex 1.

Under CASS 15.7.3R and CASS 15.7.4R, safeguarding institutions are required to request duly signed and countersigned acknowledgement letters for their relevant funds bank accounts and relevant assets accounts.

For each account a safeguarding institution is required to complete, sign and send to the approved bank or authorised custodian (‘the counterparty’) an acknowledgement letter identifying that account in the form set out in CASS 15 Annex 1 (Safeguarding account acknowledgement letter template).

When completing an acknowledgement letter using the appropriate template, a safeguarding institution is reminded that it must not amend any of the text which is not in square brackets (acknowledgement letter fixed text). A safeguarding institution should also not amend the non-italicised text that is in square brackets. It may remove or include square bracketed text from the letter, or replace bracketed and italicised text with the required information, in either case as appropriate. The notes below give further guidance on this.

A safeguarding institution is reminded that for each relevant funds bank account or relevant assets account it needs to request an acknowledgement letter. As a result, it is important that it is clear to which account or accounts each acknowledgement letter relates. As a result, the template in CASS 15 Annex 1 requires that the acknowledgement letter includes the full title and at least one unique identifier, such as a sort code and account number, deposit number or reference code, for each account.

The title and unique identifiers included in an acknowledgement letter for an account should be the same as those reflected in both the records of the safeguarding institution and the relevant counterparty, as appropriate, for that account. Where a counterparty’s systems are not able to reflect the full title of an account, that title may be abbreviated to accommodate that system, provided that:

1. (1) the account may continue to be appropriately identified in line with the requirements of CASS 15 (for example, ‘account’ may be shortened to ‘acct’ etc); and

2. (2) when completing an acknowledgement letter, such letter must include both the long and short versions of the account title

A safeguarding institution should ensure that all relevant account information is contained in the space provided in the body of the acknowledgement letter. Nothing should be appended to an acknowledgement letter.

In the space provided in the template letter for setting out the account title and unique identifiers for each relevant account, a safeguarding institution may include the required information in the format of the following table:

1. Where an acknowledgement letter is intended to cover a range of accounts, some of which may not exist as at the date the acknowledgement letter is countersigned by the counterparty, a safeguarding institution should set out in the space provided in the body of the acknowledgement letter that it is intended to apply to all present and future accounts which:

2. (1) are titled in a specified way; and

3. (2) which possess a common unique identifier or which may be clearly identified by a range of unique identifiers (eg, all accounts numbered between XXXX1111 and ZZZZ9999).

For example, in the space provided in the template letter in CASS 15 Annex 1 which allows a safeguarding institution to include the account title and a unique identifier for each relevant account, a safeguarding institution should include a statement to the following effect:

A safeguarding institution should ensure that each acknowledgement letter is signed and countersigned by all relevant parties and individuals (including where more than one signatory is required).

An acknowledgement letter that is signed or countersigned electronically should not, for that reason alone, result in a breach of the rules in CASS 15.7. However, where electronic signatures are used, a safeguarding institution should consider whether, taking into account the governing law and choice of competent jurisdiction, it needs to ensure that the electronic signature and the certification by any person of such signature would be admissible as evidence in any legal proceedings in the relevant jurisdiction in relation to any question as to the authenticity or integrity of the signature or any associated communication.

A safeguarding institution should use at least the same level of care and diligence when completing an acknowledgement letter as it would in managing its own commercial agreements.

A safeguarding institution should ensure that each acknowledgement letter is legible (eg, any handwritten details should be easy to read), produced on the safeguarding institution's own letter-headed paper, dated and addressed to the correct legal entity (eg, where the counterparty belongs to a group of companies).

A safeguarding institution should also ensure each acknowledgement letter includes all the required information (such as account names and numbers, the parties’ full names, addresses and contact information, and each signatory’s printed name and title).

A safeguarding institution should similarly ensure that no square brackets remain in the text of each acknowledgement letter (eg, after having removed or included square bracketed text, as appropriate, or having replaced square bracketed and italicised text with the required information as indicated in the template in CASS 15 Annex 1) and that each page of the letter is numbered.

A safeguarding institution should complete an acknowledgement letter so that no part of the letter can be easily altered (eg, the letter should be signed in ink rather than pencil).

In respect of the acknowledgement letter's governing law and choice of competent jurisdiction (see paragraphs (12) and (13) of the template acknowledgement letter in CASS 15 Annex 1), a safeguarding institution should agree with the counterparty and reflect in the letter that the laws of a particular jurisdiction will govern the acknowledgement letter and that the courts of that same jurisdiction will have jurisdiction to settle any disputes arising out of, or in connection with, the acknowledgement letter, its subject matter or formation.

If a safeguarding institution does not, in any acknowledgement letter, utilise the governing law and choice of competent jurisdiction that is the same as either or both:

1. (1) the laws of the jurisdiction under which either the safeguarding institution or the counterparty are organised; or

2. (2) as is found in the underlying agreement/s (eg, banking services agreement) with the relevant counterparty,

the institution should consider whether it is at risk of breaching CASS 15.6.1R or CASS 15.6.3R.

A safeguarding institution is required under CASS 15.7.9 to use reasonable endeavours to ensure that any individual that has countersigned an acknowledgement letter returned to the safeguarding institution was authorised to countersign the letter on behalf of the relevant counterparty.

If an individual that has countersigned an acknowledgement letter does not provide the safeguarding institution with sufficient evidence of their authority to do so, the safeguarding institution is expected to make appropriate enquiries to satisfy itself of that individual's authority.

Evidence of an individual's authority to countersign an acknowledgement letter may include a copy of the counterparty’s list of authorised signatories, a duly executed power of attorney, use of a company seal or bank stamp, and/or material verifying the title or position of the individual countersigning the acknowledgement letter.

A safeguarding institution should ensure it obtains at least the same level of assurance over the authority of an individual to countersign the acknowledgement letter as the safeguarding institution would seek when managing its own commercial arrangements.

If a safeguarding institution uses a third party administrator (TPA) to carry out the administrative tasks of drafting, sending and processing an acknowledgement letter, the text ‘[Signed by [Name of Third Party Administrator] on behalf of [safeguarding institution]]’ should be inserted to confirm that the acknowledgement letter was signed by the TPA on behalf of the safeguarding institution.

In these circumstances, the safeguarding institution should first provide the TPA with the requisite authority (such as a power of attorney) before the TPA will be able to sign the acknowledgement letter on the safeguarding institution's behalf. A safeguarding institution should also ensure that the acknowledgement letter continues to be drafted on letter-headed paper belonging to the safeguarding institution.

A safeguarding institution must ensure that each of its accounts is designated in accordance with regulation 21(3)(a) of the Electronic Money Regulations and regulation 23(7)(a) of the Payment Services Regulations.

All references to the term ‘Relevant Funds Bank Account[s]’or ‘Relevant Assets Account[s]’ in an acknowledgement letter should also be made consistently in either the singular or plural, as appropriate.