Safeguarding is one of the most important obligations placed on payment institutions, e-money firms and money service businesses. Client money must be held separately from the firm’s own funds, and you must be able to prove it — continuously, not at audit.
The obligation in practice
Segregation. Relevant client funds in designated safeguarding accounts, separate from operating money.
Reconciliation. The balance held must match the sum of what you owe clients. Every day.
Records. You must be able to show the position at any point in time, not just today.
Prompt posting. Funds must reach the safeguarding account without delay — a rule that manual processes routinely miss when someone is on leave.
Why the reconciliation is the hard part
Segregation is a decision you make once. Reconciliation is work you do every single day, and it involves matching money movements across banks, trading systems and the ledger.
Do that by hand and two things happen. It consumes a compliance person’s morning, and it produces a number that is only as current as the last time someone ran it. Neither is a good place to be when a regulator asks.
Making the reporting a by-product
The workable answer is for safeguarding posting and reporting to be a consequence of normal operations rather than a separate task. When trading, payments and finance run in one system, the safeguarding position is derived from the transactions as they happen.
That is precisely what Foreign Currency Direct needed when they moved to our isCT platform: safeguarding posting and reporting managed accurately and easily, from trading through to finance. Read the case study.
Auto reconciliation
Bank reconciliation is where automation pays back fastest here. Straight Through Processing with automatic bank reconciliation means the match happens continuously, and only the genuine breaks need a person.