On 25 September 2024, the FCA launched a consultation (CP24/20) on proposed changes to the safeguarding requirements included in the Electronic Money Regulations and the Payment Services Regulations, ultimately replacing these with a CASS (Client Asset Sourcebook) style regime.

Over the past few years, the regulator has continued to express concern with poor safeguarding practices in the payments industry. This has culminated in the issue of its consultation paper, designed to improve the safeguarding regime.

The consultation period ended on 17 December 2024 and the FCA published its final interim rules with an accompanying policy statement PS25/12 on 7 August 2025. The timing of implementation of rules to create a CASS style regime for safeguarding is subject to the Government’s timetable for revoking the safeguarding requirements in the Electronic Money Regulations (‘the EMRs’) and Payment Services Regulations (‘the ‘PSRs’).

Below is a brief outline of milestones to date, followed by a summary of the key changes proposed.

Background – guidance to the proposed rules

• July 2020: The FCA publish their initial guidance highlighting the safeguarding requirements for firms. This included the expectation to arrange an annual audit of compliance with these standards.

• November 2021: Version 5 of the FCA’s ‘Approach’ document is released, giving updated guidance on the application of safeguarding requirements included within the EMRs and PSRs.

• March 2023: The FCA issue a Dear CEO letter, expressing concerns that many firms still didn’t have sufficiently robust controls and that many firms had not yet appointed auditors.

• 25 September 2024: The FCA issue a consultation paper (CP24/20) proposing rules designed to improve the safeguarding regime by strengthening the rules and making them clearer for firms.

• 7 August 2025: the FCA released its policy statement PS25/12, which summarises the feedback on its consultation as well as its approach to the Post-Repeal regime. It also sets out final rules and guidance to be included in the FCA Handbook.

Key changes payments and e-money firms should be aware of

To help you understand the key elements of the consultation process, we’ve summarised the significant changes proposed, to occur in two stages: the ‘interim’ and ‘end-state’ rules.

1) Interim rules

Some of these rules will confirm existing safeguarding requirements to be written into the FCA’s rulebook, but crucially, there are additional requirements. Key features of the interim rule proposals include:

• Improved books and records

• Enhanced monitoring and reporting

• Strengthening of elements of safeguarding practises

Another major proposed change is that the safeguarding audit regime will be written into these rules and will extend to all payments firms (other than payment initiation service providers and small payment institutions) and e-money firms. To comply with these rules, firms will be required to appoint an independent, qualified auditor. An assurance standard will also be issued by the Financial Reporting Council and the auditor will be required to submit the safeguarding audit report to the FCA within 4 months of the end of the period to which it relates.

2) End-state rules

The proposed end-state is to ultimately replace the safeguarding requirements included within the EMRs and PSRs with a CASS style regime included in the FCA Handbook. The proposals are informed by the regulator’s experience in regulating firms that safeguard client money or custody assets in other sectors (such as investment firms, general insurance intermediaries, debt management firms and claims management companies). Key features of the end state rule proposals include:

• Imposition of a statutory trust over relevant funds

• More robust requirements on how firms must segregate and handle relevant funds

• Additional detail around when the safeguarding obligation starts and funds become subject to the trust

Payments and e-money firms should understand the implications of the proposed changes to ensure they are prepared to comply with the final interim rules.