A safeguarding account is a bank account that a payment institution or electronic money institution (EMI) uses only to hold customer money, kept apart from the firm's own money so that it can be returned to customers if the firm becomes insolvent. It is the account at the centre of the segregation method of safeguarding, which most UK payment and e-money firms use.
The legal requirement comes from regulation 23 of the Payment Services Regulations 2017 and regulation 21 of the Electronic Money Regulations 2011. Customer money still held at the end of the business day after the day it was received must be placed in a separate account with an authorised credit institution or the Bank of England, or invested in secure, liquid assets held in a separate account with an authorised custodian. The account must be designated to show that it is held for safeguarding relevant funds, and used for nothing else. Relevant funds are the sums received in exchange for e-money and the sums received from or for customers, or from other payment providers, to carry out payment transactions.
Since 7 May 2026, CASS 15 of the FCA Handbook has added detailed rules on how safeguarding accounts are selected, documented, reviewed and reconciled. This guide explains what the account must satisfy, what banks look for, and how to obtain one. For the full safeguarding rulebook, see our CASS 15 explainer.
| Firm type | Position |
|---|---|
| Authorised payment institution holding customer money | Must safeguard; a safeguarding account is needed unless it uses insurance or a guarantee for all relevant funds |
| Authorised EMI | Must safeguard; separate pools for e-money and unrelated payment services |
| Small EMI | Must safeguard |
| Small payment institution | Not required; needs one if it opts in to safeguarding |
| Payment initiation or account information firm only | Not required; it holds no customer money |
Firms applying to become an authorised payment institution or EMI must describe their safeguarding arrangements in the application, including the method and the institution that will hold relevant funds. The FCA expects a credible plan for the account at submission, and the account itself must be in place before the firm starts holding customer money. Opening the account is a separate onboarding decision by the bank, so it should run in parallel with the application from the start. Our UK EMI licence guide sets out the full application.
CASS 15 turns the account from a simple legal requirement into a documented, reviewed control. The table summarises what the firm must do and what it needs from the bank.
| Requirement | Rule | What the firm needs from the bank |
|---|---|---|
| Due diligence on the bank before appointment and periodically | CASS 15.6.1R to 15.6.4G | Information on the legal entity, its capital, creditworthiness and regulatory status |
| Acknowledgement letter for each account, in the FCA template | CASS 15.7.3R to 15.7.6R | A countersigned letter, signed by an authorised signatory, with the fixed text unchanged |
| Letter review at least annually and on any change | CASS 15.7.12R | Prompt countersignature of replacement letters |
| Daily external reconciliation, currency by currency | CASS 15.8.42R and 15.8.47R | Daily statements or data feeds for every account and currency |
| Separate e-money and payment services pools | CASS 15 | Separate designated accounts where the firm runs both |
| Diversification reviewed periodically | CASS 15.6.5R | Willingness to work alongside a second safeguarding bank |
| Resolution pack retrievable within 48 hours | CASS 10A | Executed agreements, side letters and named contacts |
For every safeguarding account, the firm completes and signs a letter identifying the account and sends it to the bank to countersign and return. The letter must use the template in CASS 15 Annex 1. The firm must not change the fixed text and may only adjust the variable text in square brackets in ways that do not change the fixed text's meaning. In the letter the bank confirms that the money is held for safeguarding, that it has no right of set-off or counterclaim against it and that it will not combine the account with any other. The firm must use reasonable endeavours to check that the person countersigning had authority to do so, and keep each letter for five years after the last related account closes.
A bank that wishes to amend the fixed wording cannot be accommodated; the letter would be an inappropriately redrafted letter under CASS 15.7.8R. Agreeing the template with the bank at the start of onboarding avoids a late delay. Letters obtained before 7 May 2026 in the form set out in the FCA's Approach Document can continue to be relied on, but they are subject to the same review and replacement rules.
CASS 15.6 requires the firm to exercise all due skill, care and diligence in selecting and periodically reviewing the bank. The review must focus on the specific legal entity, not only its wider group, and must consider its expertise and market reputation and any legal or regulatory practices that could affect customers' rights. Where relevant the firm should also consider the bank's capital, the share of its deposits the firm's money would represent, creditworthiness and any deposit protection. The grounds for selection and each review must be recorded on the day they are made.
The regulations allow relevant funds to be held with an authorised credit institution or the Bank of England. In practice, firms use three routes.
Firms handling several currencies often need more than one institution, because not every bank offers designated safeguarding accounts in every currency the firm receives. Each currency account is reconciled separately and needs its own acknowledgement letter.
A bank opening a safeguarding account takes on regulatory and financial crime exposure, so its onboarding review is close to a full due diligence exercise on the firm. A complete, consistent pack is the single largest factor in how quickly an application moves.
| What the bank asks | What to prepare |
|---|---|
| Is the firm authorised, or how far is its application? | FCA reference number, or the application, submission date and status |
| Who owns and runs it? | Group structure, beneficial owners, directors, MLRO and compliance officer, with identity documents |
| What does it do and for whom? | Business plan, products, customer types, sectors and countries served |
| How does money move? | Flow of funds diagrams by product and currency, including agents and partners |
| What volumes and balances are expected? | Three-year projections of transaction volumes and average and peak safeguarded balances |
| How is financial crime controlled? | AML policy, business-wide risk assessment, customer due diligence and transaction monitoring |
| How is safeguarding run? | Safeguarding policy, relevant funds analysis, reconciliation process and the person responsible under CASS 15.2.4R |
| Is the firm financially sound? | Capital position, funding and recent accounts or forecasts |
Directors and people with significant control should also have completed Companies House identity verification, which became mandatory on 18 November 2025 with a 12-month transition for existing directors and controllers. Banks increasingly check this at onboarding. The firm's banking and payment processing team prepares this pack with clients and introduces them to banks whose criteria match their model.
Each bank sets its own pricing, and pricing changes, so firms should obtain current terms from each bank they approach. The structures commonly seen are:
When comparing offers, look at the total annual cost at the firm's projected volumes, the currencies covered, the availability of daily statement data for reconciliation and the bank's readiness to countersign the CASS 15 acknowledgement letter without amendment. A lower fee from a bank that cannot provide daily data adds cost elsewhere, in manual reconciliation work.
Each bank sets its own onboarding timetable, which depends on the completeness of the firm's pack, the bank's queue and how many follow-up questions arise. Firms should plan for the account to take several weeks at least, and start the process early enough that it does not hold back the launch.
The FCA's own service standard is to decide complete applications for authorisation within three months and incomplete applications within twelve months. The firm plans EMI and payment institution authorisations at six to eight months after submission. Starting bank onboarding when the application is submitted means the account can be ready, subject to authorisation, when the FCA's decision arrives.
Regulation 105 of the Payment Services Regulations 2017 requires credit institutions to give payment service providers, and applicants for authorisation or registration, access to payment account services on an objective, non-discriminatory and proportionate basis. A bank must state the criteria it applies when asked, and if it refuses or withdraws access it must notify the FCA with reasons. The rule does not oblige any particular bank to open an account, but it does mean a firm can ask for the criteria and understand the basis of a decision.
The firm's best protection is redundancy. A firm with one safeguarding bank should onboard a second before it needs it, because opening a replacement account takes time and relevant funds must be safeguarded every day without interruption. CASS 15.6.5R requires the firm to review periodically whether to diversify, and CASS 15.6.6G suggests considering accounts at several banks and limits on amounts held with banks in the firm's own group.
A written contingency plan should set out which institution would take the funds, how customer flows would be redirected, how the acknowledgement letter and reconciliation would be set up, and who would update the resolution pack within five business days. Our article on the CASS 10A resolution pack explains what must be updated.
Opening the account is the start of a daily control. Each reconciliation day the firm runs an internal reconciliation from its own records and an external reconciliation against the bank's statement, compares the amount that should be safeguarded with the amount held, and pays in any shortfall by the end of that day. The account must hold only relevant funds: the firm's own fees should be withdrawn once due, and bank charges should be debited from an operating account, not the safeguarding account.
Our guide to safeguarding reconciliations sets out the daily process, and the firm's safeguarding practice designs these controls alongside the account.
A designated account with an authorised credit institution or the Bank of England that holds only customer relevant funds, kept separate from the firm's own money so it can be returned if the firm becomes insolvent.
The application must describe the safeguarding method and the institution that will hold relevant funds. The account must be open before the firm holds customer money, so onboarding should run in parallel with the application.
Yes. An SPI is not required to safeguard, but if it opts in it must meet the same rules, including the acknowledgement letter and the monthly REP027 return.
No. CASS 15.7.6R prohibits amending the fixed text of the CASS 15 Annex 1 template; only the variable text may be adjusted, and only without changing the fixed text's meaning.
Yes, and many do. CASS 15.6.5R requires a periodic review of whether to diversify, and a second bank also provides continuity if one withdraws service.
Each bank sets its own pricing, typically a mix of onboarding due diligence fees, monthly fees, minimum balances and transaction fees. Firms should compare total annual cost at projected volumes and confirm daily data availability.
Under PSRs regulation 105 the bank must apply objective, non-discriminatory and proportionate criteria and notify the FCA of its reasons. The firm should apply to other banks whose criteria fit its model and keep a second institution in place.
Buckingham Capital Consulting has obtained FCA authorisations for payment and e-money firms including Nexpay, Dzing Finance and Hryze since 2013, and arranges the safeguarding and operating accounts alongside the application. Its banking team prepares the bank onboarding pack, agrees the CASS 15 acknowledgement letter and sets up the daily reconciliation data each account needs.
Speak to an expert: WhatsApp +44 7563 115980, Telegram @buckinghamcapital or info@buckinghamcapitalconsulting.co.uk.
This article is general information, reviewed against the regulator’s published requirements on the date shown. It is not legal advice; the regulator’s current publications take precedence.