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Safeguarding Audit

In light of the risks associated with Covid-19, the regulator has emphasised the importance of firms following the FCA safeguarding guidelines. This underlines the value of carrying out regular FCA safeguarding audits.

In May 2020, the FCA undertook a short consultation inviting interested parties to comment on additional FCA safeguarding guidelines introduced in response to the economic pressures that could face the payment services and e-money industry as a result of the pandemic.

The FCA’s Finalised Guidance on Coronavirus and safeguarding customers’ funds was published in July 2020. It includes additional temporary guidance on strengthening firms’ prudential risk management and their arrangements for safeguarding customers’ funds through the economic stresses of Covid-19.

Key topics covered in the updated FCA safeguarding guidelines include:

  • Record keeping, accounts and reconciliations
  • Safeguarding accounts and acknowledgement letters
  • Selecting, appointing and reviewing third parties
  • When the FCA safeguarding requirements start
  • Treatment of unallocated funds
  • The need for firms to carry out their own FCA safeguarding audit to check their compliance with FCA safeguarding guidelines
  • FCA safeguarding guidelines for Small Payment Institutions
  • Disclosure on the treatment of funds to customers on insolvency.

Firms should be confident they can describe and evidence the framework they have in place to support their safeguarding practices. This includes demonstrating how they are reducing the risk of customer harm when safeguarding clients’ funds – in line with PSR 2017 and other applicable FCA safeguarding requirements.

Our FCA safeguarding audit services help your firm comply with its mandatory requirement to undertake a safeguarding audit. This requirement applies to any authorised payment institutions and e-money firms who are required to audit their annual accounts under the Companies Act 2006.

We anticipate that the regulator will be undertaking continuous and thorough supervisory checks to ensure firms remain compliant with FCA safeguarding requirements. Its 2020/21 business plan specifically identified payment services and e-money firms as among its top priorities, so scrutiny is likely to be intense.

What to expect

We have created two options for firms looking to understand how effectively they are meeting their FCA safeguarding requirements:

    • A health check on your firm’s current safeguarding framework

Our health check option sees our expert consultants undertake a pre-audit review, also known as an internal audit. As part of this pre-safeguarding audit review, we will assess the effectiveness of your firm’s safeguarding controls and identify any shortcomings in your processes.

We will then advise you on how to implement any necessary mitigating controls and provide an action plan for introducing any changes required. If necessary, once the review is complete, we may advise you to undertake a full external audit to comply with the FCA safeguarding requirements.

    • FCA safeguarding audit

Our experts will carry out a formal FCA safeguarding audit of your firm’s safeguarding and compliance controls. As part of this process, we will review all policies, procedures and records of internal and external reconciliation processes.

Once this is complete, we will produce an audit report outlining our observations, including a RAG rating system to demonstrate your firm’s compliance with FCA safeguarding requirements. This report can be presented to the FCA on request.

How can we help you?

Our Payment Services team are experts in providing FCA safeguarding audits. On completion, we will provide you with a detailed report highlighting any areas of concern and the implications for your business. If you wish, we are always happy to present our audit findings to your board of directors or compliance committee.

For more information on our FCA safeguarding audit services, call 0207 436 0630 to speak to a member of our expert team or email info@thistleinitiatives.co.uk.


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