FCA Approach Document v8: safeguarding regime consolidated, May 2026
In short: The FCA Approach Document version 8 sets the supervisory expectation for the safeguarding regime that took effect on 7 May 2026. UK PSPs and EMIs must operate segregation, daily reconciliation, monthly returns and an annual audit under CASS 15, CASS 10A, SUP 16.14A and SUP 3A. A designated senior individual is accountable for the regime.
For a PSP or EMI compliance team that has just lived through the 7 May 2026 commencement of the supplementary safeguarding regime, version 8 of the FCA Approach Document, published the same day, is the operational text that anchors how the FCA will supervise that regime. The Approach Document does not change the rules. It sets out how the FCA reads them in supervision: what the FCA expects to see on segregation, daily reconciliation, the resolution pack, the safeguarding audit and the designated senior individual.
Where the FCA Approach Document sits in the rule stack
The statutory safeguarding obligation sits in regulation 23 of the Payment Services Regulations 2017 (PSRs 2017) and regulations 20 to 22 of the Electronic Money Regulations 2011 (EMRs 2011). The duty is to safeguard relevant funds, by segregation in a designated account with an approved credit institution, or by an insurance policy or comparable guarantee.
The FCA’s Policy Statement PS25/12 (7 August 2025) tightened the operational discipline. From 7 May 2026, a firm using the insurance or guarantee method must satisfy the conditions in CASS 15.5.4R, and must notify the FCA at least two months before it intends to rely on the method for the first time, change the amount of cover, or change its insurer or guarantor (CASS 15.5.7R). A firm continuing an existing, unchanged arrangement has no two-month notification duty under that rule: it must instead decide, at least three months before its policy or guarantee expires, whether to continue, and notify the FCA of that decision (CASS 15.5.10R). Segregation in a designated account remains available as the alternative primary method. Firms must hold an acknowledgement letter from the account bank, reconcile relevant funds against customer liabilities daily, submit monthly safeguarding returns to the FCA, obtain an annual third-party safeguarding audit, maintain a resolution pack, and designate a senior individual with safeguarding accountability. The rule chapters carrying these obligations are CASS 15 (safeguarding), CASS 10A (resolution packs), SUP 16.14A (monthly returns) and SUP 3A (auditors’ safeguarding reports). Our compliance checklist and earlier brief on the regime set out the rule architecture.
What version 8 of the FCA Approach Document adds
The FCA Approach Document is non-binding guidance. It does not create obligations; it sets out the FCA’s reading of obligations the rules already impose. That makes it the supervisory text the FCA will measure firms and auditors against when the FCA opens a supervisory dialogue, requires a skilled-person report under section 166 of the Financial Services and Markets Act 2000 as applied by regulation 122 of, and Schedule 6 to, the PSRs 2017, or escalates to enforcement under Part 9 PSRs 2017.
Version 8 is the first consolidating revision of the FCA Approach Document since the November 2024 version 6. The March 2026 version 7 covered the contactless payments exemption under the SCA-RTS and did not touch the safeguarding chapter. Version 8 records changes to chapters 1, 2, 3, 4, 10 and 13 of the Approach Document, and amendments to chapter 8 to align with the new contract termination rules in regulation 51 PSRs 2017. The substantive safeguarding additions track PS25/12: the safeguarding and resolution pack chapters draw out how the FCA expects firms to operate the CASS 15 daily reconciliation, the CASS 10A resolution pack and the SUP 16.14A returns, and what the FCA expects the safeguarding audit to cover.
Three points carry the operational weight on safeguarding. First, the acknowledgement letter must follow the template in CASS 15 Annex 1, and the firm must not amend its fixed text (CASS 15.7.5R and 15.7.6R). Because the fixed text cannot be amended, the core terms of the letter are not open to negotiation with the account bank. Second, version 8 expresses the FCA’s expectation that the resolution pack is a continuously maintained mapping between every recorded customer balance and the corresponding safeguarded funds, in a form an external insolvency practitioner can use without prior knowledge of the firm’s systems. Third, version 8 frames the safeguarding audit as a substantive control test, not a procedural sign-off. The new contract termination workstream sits in chapter 8 and is covered separately.
| Theme | Position before 7 May 2026 | Position from 7 May 2026 (and as version 8 reads it) |
|---|---|---|
| Safeguarding methods | Three methods available: segregation, insurance policy, or comparable guarantee (PSRs 2017 reg 23, EMRs 2011 regs 20 to 22). | Segregation and the insurance or guarantee method both remain available; a firm using insurance or guarantee must satisfy the CASS 15.5.4R conditions, and must give the FCA two months’ notice before relying on the method for the first time, changing the amount of cover, or changing its insurer or guarantor (CASS 15.5.7R). A firm continuing an existing, unchanged arrangement must decide at least three months before expiry whether to continue, and notify the FCA of that decision (CASS 15.5.10R). |
| Reconciliation | No prescribed reconciliation cadence in the rules. | Daily reconciliation against customer liabilities, with topping-up where a shortfall is identified (CASS 15). |
| Returns to the FCA | No standing safeguarding return; ad-hoc supervisory information requests. | Monthly safeguarding returns to the FCA (SUP 16.14A). |
| Audit | No mandatory third-party safeguarding audit. | Annual third-party safeguarding audit (SUP 3A). |
| Resolution | No standing resolution pack obligation. | Continuously maintained resolution pack mapping customer liabilities to safeguarded funds (CASS 10A). |
| Accountability | Safeguarding sat with general internal accountability frameworks. | A single director or senior manager of sufficient skill and authority responsible for oversight of safeguarding compliance and for reporting to the governing body (CASS 15.2.4R). |
What the FCA Approach Document means for compliance teams
For an incumbent PSP or EMI, the question the FCA will ask at the next supervisory touchpoint is whether the firm’s operational state matches the version 8 reading. The most demanding item is the resolution pack. A pack that lists where the safeguarded funds are held, without a continuously maintained mapping to customer liabilities at the line level, will not enable an insolvency practitioner to return funds within the timeframes the FCA expects. Firms that built their resolution pack to a literal reading of the rule in advance of 7 May 2026, without the FCA’s operational gloss, should expect the audit and the supervisory dialogue to push them further.
The daily reconciliation discipline is the second pressure point. The reconciliation must compare recorded customer liabilities, outstanding e-money balances and payment-services obligations, with the actual safeguarded funds, identify any shortfall, and trigger a topping-up obligation within prescribed timeframes. In a high-velocity payments business that is a treasury-and-operations workflow, not a finance-team end-of-month exercise.
For new entrants in the application stage, chapter 3 of version 8 is the operative material. Firms should expect the FCA to assess the applicant’s safeguarding arrangements against the version 8 expectations on account designation, acknowledgement letters, reconciliation and resolution pack readiness. Authorisation is unlikely on a thin operational base. The supplementary regime sits inside the broader UK payments modernisation work and the FCA work programme 2026 push on payments firm conduct.
The designated senior individual is the accountability anchor. The FCA expects this person to be senior enough to bind the firm, and present at board level when safeguarding is discussed. The role is not a Senior Management Function under the Senior Managers and Certification Regime: SM&CR does not apply to PIs and EMIs by virtue of their PSRs or EMRs authorisation, as our SM&CR scope post sets out. CASS 15.2.4R speaks of a single director or senior manager of sufficient skill and authority; it marks accountability without extending SM&CR to a regime it does not reach.
Viewpoint
In supervision, the FCA will measure firms against version 8 of the Approach Document rather than the rule text alone. Firms that read CASS 15 in 2025 and built to its literal terms will find the supervisory expectation tighter on three points: the resolution pack must work as an operational artefact under stress, not as a document on a shelf; daily reconciliation must run from treasury, not from month-end finance; and the designated senior individual must own the regime end-to-end. The Approach Document does not create new obligations.
In our experience advising payments firms moving through authorisation and on safeguarding remediation, the area that catches most firms is the resolution pack mapping. A pack that reads well on paper but cannot be operated under stress is the failure mode the FCA is now positioned to identify, and identify quickly. Version 8 also carries a second substantive workstream on contract termination, which our companion post addresses.
Frequently asked questions
Is the FCA Approach Document binding?
No. The FCA Approach Document is non-binding guidance. It does not create obligations. It sets out how the FCA reads the rules in supervision. The rules sit in the PSRs 2017, the EMRs 2011 and the FCA Handbook (CASS 15, CASS 10A, SUP 3A and SUP 16.14A). The Approach Document is the operational manual the FCA expects firms and auditors to follow when applying those rules.
When was version 8 published?
Version 8 of the FCA Approach Document was published on or around 7 May 2026, the same date as the commencement of the supplementary safeguarding regime under CASS 15. The FCA’s key publications page for electronic money and payment services records version 8 as the current version. A draft text was published on 7 August 2025 alongside PS25/12; version 8 supersedes that draft.
Do small PIs and small EMIs need to comply?
Yes, where they hold relevant funds. CASS 15.1.2R applies the chapter to persons that receive or hold relevant funds: authorised payment institutions; electronic money institutions, a defined term that covers authorised and small EMIs alike; credit unions that issue electronic money; and small payment institutions that voluntarily safeguard under regulation 23 of the PSRs 2017. Only small PIs come into scope by opting in. Small EMIs are in scope as of right. Account information service providers that do not hold relevant funds are outside the regime. The FCA has carved out firms that hold less than £100,000 of customer funds from the audit obligation.
Does SM&CR apply to PIs and EMIs under the supplementary regime?
No. The Senior Managers and Certification Regime applies to firms authorised under section 31 of the Financial Services and Markets Act 2000. PIs are authorised under regulation 6 of the PSRs 2017 and EMIs under regulation 9 of the EMRs 2011. CASS 15.2.4R instead requires the firm to allocate oversight of safeguarding compliance to a single director or senior manager of sufficient skill and authority; the role is not a Senior Management Function.
What is in the safeguarding account acknowledgement letter?
The firm must use the template in CASS 15 Annex 1 (CASS 15.7.5R) and must not amend its fixed text (CASS 15.7.6R); if the bank amends the fixed text when it countersigns, the letter no longer complies (CASS 15.7.8R). Under the template the bank acknowledges that the firm holds the money in the account to meet the claims of its clients, agrees that it has no interest in, recourse or right against that money except as permitted by regulation 24(1) EMRs 2011 or regulation 23(14) PSRs 2017, agrees to title the account as stated, and agrees to release the money on demand on proper notice from the firm or its insolvency office-holder.
If you are mapping your safeguarding arrangements to version 8 of the FCA Approach Document, or preparing for the first audit cycle, contact Rob Bratby at Bratby Law. Our payments product, safeguarding and scheme governance page sets out our work for PIs and EMIs on the supplementary regime.
Correction, 12 July 2026: this post previously said insurance and guarantee methods withdrawn for new arrangements from 7 May 2026; table cell stated insurance and guarantee methods may not be used for new arrangements. That was wrong. The correct position is insurance and guarantee method remains available, subject to CASS 15.5 conditions and notification; table cell restated to show the method remains available subject to CASS 15.5 conditions and notification, verified against CASS 15.5, CASS 15.5.1R, CASS 15.5.4R and CASS 15.5.7R, FCA Handbook as at June 2026; CASS 15.5.4R and CASS 15.5.7R, FCA Handbook as at June 2026.
