CASS 15.2 Organisational requirements

A safeguarding institution must, when holding relevant funds, maintain adequate arrangements to safeguard the client's rights and prevent the use of relevant funds for its own account.

An effect of CASS 15.2.1R is that a safeguarding institution should consider how to clearly identify relevant funds that are not held in a relevant funds bank account. That includes those segregated in accordance with regulation 21(1) of the Electronic Money Regulations or regulation 23(5) of the Payment Services Regulations but not yet placed in a relevant funds bank account. The word ‘safeguarding’ should be included in account names wherever possible.

A safeguarding institution that is also a firm subject to other chapters of CASS must ensure it has adequate policies and procedures in place to identify and determine under which activity it is holding funds.

1. A safeguarding institution must allocate to a single director or senior manager of sufficient skill and authority responsibility for:

2. (1) oversight of the institution’s operational compliance with the relevant funds regime; and

3. (2) reporting to the institution’s governing body in respect of that oversight.

1. (1) A safeguarding institution must allocate any relevant funds it receives to an individual client: 

2. (a) promptly and in a way that enables it to meet its obligations under the Payment Services Regulations and, where relevant, its obligations under the Electronic Money Regulations; and 

3. (b) in any case, no later than the end of the business day following the day of receipt (or where, after the receipt of funds, it has identified that the funds, or some of them, are relevant funds under CASS 15.2.9R, no later than the end of the business day following that identification).

4. (2) Pending a safeguarding institution's allocation of a relevant funds receipt to an individual client under (1), it must record the received relevant funds in its books and records as ‘unallocated relevant funds’.

CASS 15.2.1R requires a safeguarding institution to promptly identify the client to whom a relevant funds receipt relates. Once identified, the receipt of relevant funds must be recorded and allocated to the client in the safeguarding institution's accounts. Where the crediting of these accounts amounts to the crediting of a payment account, it must be carried out within the time periods required by the Payment Services Regulations.

Where the safeguarding institution receives relevant funds on behalf of a payee who does not have a payment account with the safeguarding institution, the relevant funds may need to be allocated immediately so that they can be made available to the payee immediately after they have been credited to the safeguarding institution's account in accordance with regulation 87 of the Payment Services Regulations.

Where the receipt of relevant funds relates to the issuance of electronic money, the relevant funds may need to be allocated without delay so that the safeguarding institution can comply with its obligation to issue electronic money without delay under regulation 39 of the Electronic Money Regulations.

1. If a safeguarding institution receives funds (whether in a relevant funds bank account or another account) which it is unable to immediately identify as relevant funds or other funds, it must:

2. (1) take all necessary steps to identify the funds as either relevant funds or other funds; and

3. (2) record the funds in its books and records as ‘unidentified relevant funds’ while it performs the necessary steps under (1).

CASS 15.2.5R and CASS 15.2.9R recognise that it might not always be possible to identify whether funds are relevant funds and, if they are, the client to which they relate. Where a safeguarding institution is able to identify that the funds have been received from a client to execute a payment transaction or in exchange for electronic money but is unable to identify the client entitled to the funds it has received (for example, because they do not have the correct unique identifier), the funds must still be treated as relevant funds and recorded as ‘unallocated relevant funds’.

If a safeguarding institution is unable to identify funds that it has received as either relevant funds or other funds, it should consider whether it would be appropriate to return the funds to the person who sent them (or, if that is not possible, to the source from where it was received – for example, the bank). 

A safeguarding institution should have regard to its obligations under the Electronic Money Regulations and Payment Services Regulations when considering whether to return funds under CASS 15.2.11G.

Where a payment service user provides an incorrect unique identifier, the safeguarding institution will also need to consider the steps it is required to take under regulation 90 of the Payment Services Regulations.