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What is Safeguarding?

May 14, 2024August 27th, 2024No Comments
Safeguarding
Mariel Rhetta
Content Strategist at Rutland FX
Published on: (Updated ) - minute read

When using financial services companies, it is important to know and understand how your funds are protected, especially if you plan to hold balances with an institution. Different financial institutions protect your funds in various ways under different regulations and laws. For example, banks regulated by the Prudential Regulation Authority will protect your funds differently compared to an electronic money institution such as Currencycloud. In this article, we will explore what safeguarding is and how your funds are protected when making cross-border payments with Rutland FX.

What Is Safeguarding

Safeguarding refers to the regulatory measures put in place by the Electronic Money Regulations 2011 (EMRs) and the Payment Services Regulations 2017 (PSRs) to protect client funds held by financial institutions. These measures ensure that, in the event of an institution’s insolvency, the clients’ money is safe and can be returned to them. Safeguarding is a mandatory requirement for electronic money institutions, such as CurrencyCloud, and aims to maintain trust in the financial system while providing security to customers.

How Does Safeguarding Work?

Safeguarding in the context of financial institutions involves two primary methods, which are outlined by the Payment Services Regulations (PSRs) 2017 and Electronic Money Regulations (EMRs). These methods are the Segregation Method and the Insurance or Comparable Guarantee Method.

Segregation Method

This involves keeping customers’ funds in separate accounts, distinct from the institution’s own funds. By segregating customers’ funds, EMIs ensure they are readily available to fulfill customer obligations, even in the event of the institution’s insolvency. Financial institutions must maintain client funds in separate accounts, distinct from their operational accounts. This ensures that client money cannot be used to pay the institution’s debts and is protected from the claims of other creditors.

Insurance or Comparable Guarantee Method

Alternatively, EMIs may opt to secure customers’ funds with appropriate insurance policies or guarantees. This method provides an additional layer of protection, ensuring that customers’ funds are safeguarded against unforeseen risks. Institutions can use insurance policies or guarantees from third-party credit institutions to cover any potential losses of client funds, providing an additional layer of security.

It is important not to confuse safeguarding with the Financial Services Compensation Scheme (FSCS). Safeguarding is a completely different concept. Through safeguarding, 100% of the funds corresponding to electronic money are protected. This ensures that all customer funds are secured and available in case of the institution’s insolvency. The FSCS does not apply to electronic money institutions and their safeguarding measures. Therefore, while safeguarding ensures the full protection of customer funds, the FSCS has an upper limit for the amount it protects.

How are my Funds Safeguarded with Rutland FX

At Rutland FX, when funds are posted to your account, they are safeguarded in compliance with regulatory requirements by Currencycloud. This ensures that the funds shown in your payment account or e-wallet are held at reputable credit institutions, such as Barclays Bank PLC, or covered by an insurance policy. Most importantly, your funds are protected in the event of the insolvency of either Currencycloud or Rutland FX. Currencycloud ceases to safeguard your funds once they have been paid out of your account to your beneficiary’s account. If you require a breakdown of the exact amounts of funds safeguarded at each point in time, please do not hesitate to contact us. Regulatory bodies such as the Financial Conduct Authority (FCA) conduct regular audits and checks to ensure that institutions comply with safeguarding requirements.

It’s important to note that banks or authorised credit institutions have no entitlements over the funds in Currencycloud’s safeguarding accounts. Additionally, Currencycloud does not have any authority over our clients’ accounts, except as explicitly stated in the Terms and Conditions. This ensures transparency and accountability, providing customers with peace of mind when using our services.

Still not sure?

If you are still unsure or have any further questions, please call us on 0203 026 0112 or request a callback below to discuss your requirements.