Safeguarding in the Spotlight: APIs & EMIs step up

The FCA is significantly overhauling the safeguarding requirements for Authorised Payment Institutions (APIs) and Electronic Money Institutions (EMIs).

This isn't just a minor tweak; it's a substantial upgrade, split into two stages, designed to bring these firms closer to the robust client money protection standards already expected of investment firms under the CASS framework.

The catalyst for this change? Recent insolvencies of EMI and API platforms revealed shortfalls in the protection of customer funds, highlighting a clear need for enhanced oversight.  The new regime aims to prevent such issues from recurring.

How will the changes be structured?

The first stage is the Supplementary Regime, which comes into effect on the 7^th May 2026. These new rules work with the existing requirements of the safeguarding provisions in the Electronic Money Regulations 2011 (EMRs) and Payment Services Regulation 2017 (PSRs) by improving key issues such as record keeping and reporting.

The second stage is referred to as the Post-Repeal Regime and will come into effect when the safeguarding requirements of the EMR’s and PSR’s are replaced by more stringent rules. We may then see API’s and EMI’s be required to meet more detailed CASS rules, such as the requirement to deposit safeguarded funds into designated safeguarding accounts with appropriate trust status.

While the FCA received significant feedback on proposals for the Post-Repeal Regime, the timing, nature and feasibility of this Regime depends on the Treasury’s approach to revoking the PSRs and the EMRs.

What's changing in the Supplementary Regime?

While the full comparison to CASS rules will become clearer as firms digest the Policy Statement (PS25/12), the FCA is clearly drawing from the established principles of client money safeguarding that apply to investment firms. Expect to see requirements that echo key elements of CASS, including:

• Reconciliation requirements

  This requires firms to undertake reconciliations at least once each day other than weekends, public holidays and days when relevant foreign markets are not open.

  
  

• Introduction of a "Resolution Pack"

  A significant new requirement, directly influenced by CASS 10, is the need for firms to prepare a Resolution Pack. This critical document will consolidate essential information for an insolvency practitioner or resolution authority, including:

  
  

  • Details of where relevant client funds are held.

  • A list of the firm’s agents and distributors.

  • The firm’s procedures for managing, recording, and transferring client funds and assets.

    
    

  The primary purpose of this pack is to provide a clear and comprehensive guide to locating, protecting, and ultimately returning client funds swiftly and efficiently in the event of a firm's failure.

  
  

• An annual audit

  Despite challenge from the industry, the FCA has stood by its decision to require firms safeguarding funds to have CASS audits undertaken by a qualified auditor.  It will however introduce an exemption for firms that have not safeguarded more than £100,000 of relevant funds over a period of at least 53 weeks.

Preparing for the 7 May 2026 Deadline

Firms will need to work towards implementing these new requirements well in advance of the May 2026 deadline.

This necessitates a proactive approach to understanding and adapting to the enhanced safeguarding standards.

Adempi possesses deep expertise in safeguarding client money and is ready to support EMIs and APIs through this transition. For example, we can assist with:

• Gap Analysis: Identifying the differences between your current practices and the new regulatory requirements.

  
  

• Process Updating: Refining your internal processes to meet the new safeguarding and reconciliation standards.

  
  

• Policy Writing and Reviews: Ensuring your safeguarding policies are comprehensive and compliant.

  
  

• Training: Equipping your safeguarding teams with the knowledge and skills needed to navigate the updated regime.

We've recently provided training to client money teams that has received excellent feedback, with clients noting how "practical, relevant, and easy to roll out" our sessions are, and appreciating "how you’ve connected the FCA/Finance aspects to the training".

Moving Forward

The upcoming changes to safeguarding rules represent a significant step up for payment and e-money institutions. Proactive preparation and a clear understanding of the new requirements will be key to ensuring compliance and maintaining the trust of your customers.

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Adempi is a regulatory consultancy that has deep

expertise in all things safeguarding and CASS. Our payments team have worked with EMIs and PIs, spanning both small business and large, complex institutions.

If you need support updating

your firm's infrastructure or enhancing your team's knowledge ahead of the changes let us know. You can reach the team on contact@adempi.co.uk or on 0203 925 4761.