How Should Payment Firms Reconcile Customer Balances in Several Currencies?

Key takeaways

• A multi-currency reconciliation compares what a firm owes customers with what it holds, separately for every currency, before any figure is converted into a reporting currency.
• A single converted total can show a surplus while one currency is short, because a surplus in one currency hides a shortfall in another.
• In the UK, CASS 15.8.47R requires the external safeguarding reconciliation to compare balances currency by currency, and CASS 15.3.3R requires funds held in a different currency to be topped up daily at the previous day's closing spot rate.
• In Luxembourg, paragraph 214 of Circular CSSF 26/906 recommends holding users' funds in the currency owed and requires extra foreign exchange protection where a firm does not.
• Every currency conversion a firm books should be matched to the liquidity provider's confirmation and to both bank legs, and any rate or amount difference treated as a break with a recorded cause.

What are the key facts on multi-currency reconciliation?

Reconcile every currency in its own currency first; convert only to report.

What is multi-currency reconciliation?

It is the daily check that, for each currency, the money a firm holds agrees with the money it owes customers and with what its banks and partners report.

A payment firm, e-money issuer or platform that holds customer balances in pounds, euros, dollars and other currencies keeps a ledger: its own record of what each customer is owed. It also holds money in bank accounts and, for some firms, with liquidity providers (the banks or dealers it buys and sells currency with) and in stablecoin wallets. A multi-currency reconciliation compares these records currency by currency. A difference that cannot be explained at once is called a break.

Foreign currency reconciliation and FX reconciliation are often used for the same work. In this guide, FX reconciliation means the narrower task of checking each currency conversion: that the amount sold left one account, the amount bought arrived in another, and the rate agreed with the provider's confirmation. The rules on where and how customer money must be held in each currency are covered in our guides to safeguarding in more than one currency and multi-currency safeguarding for payment firms. This guide is the operating method for the finance team.

Why must each currency be reconciled in its own currency?

Because a converted total lets a surplus in one currency cancel a shortfall in another, so the total can look covered while customers in one currency are not.

Customers are owed money in a particular currency. A customer with a balance of EUR 10,000 is owed euros, not the sterling or dollar value of euros on a given day. The only test that answers whether that customer is covered is a euro test: euros owed against euros held. A total converted into the firm's reporting currency mixes currencies, applies a rate to each, and adds them together. Two errors then disappear: a shortfall in one currency is offset by a surplus in another, and a rate movement changes the total even when no money has moved.

The reconciliation is therefore built in three steps. First, compute the amount owed in each currency from individual customer balances. Second, compare it with the amount held in that currency, account by account, against bank and partner statements. Third, and only then, convert each result into the reporting currency. A group with several regulated companies runs these steps for each company separately, since one company's surplus cannot cover another's shortfall.

How can a converted total hide a shortfall?

In this worked example, a converted total shows a surplus of GBP 281,000 while the euro pool is short by EUR 400,000.

Nexus Payments, a UK e-money institution, owes customers GBP 20.0 million, EUR 8.0 million and USD 6.0 million. It holds GBP 20.4 million, EUR 7.6 million and USD 6.3 million in its safeguarding accounts. For reporting it converts at GBP 0.8600 per euro and GBP 0.7500 per dollar.

Converted into sterling, the firm owes GBP 31,380,000 (20,000,000 plus 6,880,000 plus 4,500,000) and holds GBP 31,661,000 (20,400,000 plus 6,536,000 plus 4,725,000), an apparent surplus of GBP 281,000. Currency by currency, the euro pool is short by EUR 400,000. Under CASS 15.8.47R the external reconciliation compares balances currency by currency, so the shortfall is visible, and under CASS 15.8.50R it must be paid in by the end of the day the reconciliation is performed. The sterling and dollar surpluses do not cure it unless the firm converts them into euros or relies on CASS 15.3.3R, which requires the amount held in another currency to be at least equal to the euros owed at the previous day's closing spot rate, adjusted every reconciliation day.

A shortfall can also appear without any payment error: if the euro cover were held in sterling, a rise in the euro would increase the sterling needed overnight. The fix is the same: test each currency in its own currency, and treat any converted cover as a deliberate, funded decision.

How are currency conversions reconciled?

Each conversion the firm books is matched to the provider's trade confirmation and to the two bank movements it should produce, the currency sold leaving and the currency bought arriving.

A conversion creates three records that must agree: the firm's own booking (the rate quoted to the customer or agreed internally), the liquidity provider's confirmation (the trade the provider says it executed), and the bank statements for the account debited and the account credited. Conversions often settle a day or more after they are agreed, so the reconciliation also tracks open trades: agreed but not yet settled. An open trade explains a difference for its expected settlement date; after that date it is a break.

A small worked case shows the method. Nexus Payments books a conversion of USD 1,000,000 into euros at 0.9200, expecting EUR 920,000. The provider's confirmation shows 0.9194, and EUR 919,400 arrives. The EUR 600 difference is a break until its cause is recorded, for example an agreed spread not reflected in the booking, or a booking error. Until it is resolved, the euro ledger and the euro bank balance disagree by EUR 600. Our guide to break management covers how to work such breaks to a cause and evidence the resolution.

Which exchange rates should be used, and when?

Use one documented rate source and one cut-off time for every currency, and keep the rate used for each figure with the reconciliation record.

Different rates exist for the same currency pair at any moment: the rate the provider dealt at, the rate the bank applied, and published closing rates. A reconciliation that converts with one source while the ledger used another will show differences that are not real. For the UK adjustment, CASS 15.3.3R fixes the rate: the previous day's closing spot exchange rate. Elsewhere the rule is set by the firm's policy and its accounting standard; the IFRS Foundation's summary of IAS 21 notes that the principal issues in foreign currency accounting are which exchange rates to use and how to report the effects of changes in them.

Timing matters as much as the source. Bank statements in different time zones close at different hours, and a market holiday in one currency stops its payments from settling. The firm should set a reconciliation point (the time to which every balance is measured), keep a holiday calendar for each currency, and record for each figure the rate, the source and the time used. Then any reviewer can repeat the conversion and get the same answer.

What is the difference between realised and unrealised FX differences?

A realised difference comes from a conversion that has settled; an unrealised difference comes from restating a balance still held in a foreign currency at a new rate.

Both affect the firm's accounts, but they mean different things in the reconciliation. A realised difference, such as the EUR 600 in the earlier case, is a real movement of money that must be explained: a spread, a fee, or an error. An unrealised difference is a change in reported value only. A euro balance in an entity that reports in sterling is worth more or less in sterling each day, but the euros held, and the euros owed, have not changed.

Keeping the two apart stops a common error: a reconciliation run only in the reporting currency treats rate movements as breaks, and teams learn to clear them as noise, until a real shortfall is cleared the same way.

What do regulators require on currency?

The UK requires currency-by-currency external reconciliation and a daily top-up for cover held in another currency; Luxembourg recommends holding the currency owed; US state law tests permissible investments at market value and requires virtual currency to be held in kind.

In the UK, CASS 15.8.19R requires at least one internal safeguarding reconciliation each reconciliation day, CASS 15.8.42R an external reconciliation as often as necessary and at least once each reconciliation day, and CASS 15.8.47R that the external reconciliation compare balances currency by currency against bank and other statements. In Luxembourg, Circular CSSF 26/906 requires controls that identify unprotected funds at any time and without delay (paragraph 202), based on daily reconciliations (paragraph 203), and paragraph 214 recommends holding users' funds in the currency owed to them, with additional foreign exchange protection where a firm does not. Our Luxembourg guide covers the wider regime.

In the United States, the Money Transmission Modernization Act, the model law published by the Conference of State Bank Supervisors and enacted by states in whole or in part, requires a licensee to hold permissible investments with a market value, computed under US generally accepted accounting principles, of not less than its outstanding money transmission obligations (Section 10.03). Cash at foreign depository institutions counts only up to 10% of total permissible investments, and only if conditions are met (Section 10.04). A licensee holding virtual currency for customers must hold each type in amounts sufficient for customers' entitlements to that type (Section 13.05), so a stablecoin balance owed is covered in that stablecoin, not its dollar value. State texts differ; our guide to permissible investments by state sets out each one.

What should a multi-currency reconciliation include?

These checks make a multi-currency reconciliation complete and defensible.

• Amount owed computed for each currency from individual customer balances, before any conversion.
• Amount held compared with the amount owed in the same currency, account by account, against each bank, partner and wallet statement.
• Each regulated company reconciled separately, with no offset between companies.
• Every conversion matched to the provider confirmation and to both bank legs, with open trades tracked to their settlement date.
• One documented rate source and reconciliation point, with the rate and time stored against each converted figure.
• A holiday calendar for each currency, used to set reconciliation days and expected settlement dates.
• Realised differences treated as breaks; unrealised revaluation reported separately and never cleared as a break.
• Any cover held in a different currency tested daily and topped up, with the decision recorded in the safeguarding policy.
• Stablecoin and other virtual currency balances reconciled in kind, unit for unit.
• Converted totals produced last, for reporting only, and agreed back to the currency-level results.

How does Safeheld help?

Safeheld matches bank statements, processor and partner reports, ledgers, custody and blockchain wallet records every day, and keeps one position per company in its own currency, never offset against another company in the group.

Breaks are raised the day they appear, timing differences are cleared by rule and others are worked to a cause with evidence recorded. Funding needs are forecast over 24 hours, 7 days and 30 days per entity and currency, and the regulatory returns are prepared from the same reconciled figures. See daily reconciliation.

Frequently asked questions

What is multi-currency reconciliation?

It is the daily comparison, separately for each currency, of the money a firm owes customers, the money it holds, and what its banks, partners and wallets report. Converted totals are produced afterwards for reporting only.

Why is a converted total not enough?

Because a surplus in one currency can offset a shortfall in another. A firm can show a surplus in its reporting currency while customers in one currency are not fully covered.

What is FX reconciliation?

It is the check that each currency conversion agrees across the firm's booking, the liquidity provider's confirmation, and the bank statements for the currency sold and the currency bought, including rate, amounts and settlement date.

Does CASS 15 require reconciliation in each currency?

Yes. CASS 15.8.47R requires the external safeguarding reconciliation to compare balances currency by currency. CASS 15.3.3R requires funds held in a different currency to be adjusted each internal reconciliation day to at least the amount owed at the previous day's closing spot rate.

What does the CSSF require on currency?

Paragraph 214 of Circular CSSF 26/906 recommends holding users' funds in the currency owed to them. A Luxembourg institution that does not must put additional foreign exchange protection in place.

Which exchange rate should a reconciliation use?

One documented source and cut-off time, applied to every currency and stored with each converted figure. For the UK CASS 15.3.3R adjustment, the rule sets the previous day's closing spot exchange rate.

Are unrealised FX differences reconciliation breaks?

No. An unrealised difference changes the reported value of a balance still held in a foreign currency, not the money held. It belongs in the converted view, not in the currency-by-currency test.

How are stablecoin balances reconciled?

In kind, unit for unit. Under Section 13.05 of the Money Transmission Modernization Act, a licensee holding virtual currency for customers must hold each type sufficient for customers' entitlements to that type.

References

• FCA Handbook, CASS 15.3 Segregation (including CASS 15.3.3R, segregation in a different currency)
• FCA Handbook, CASS 15.8 Reconciliation (including CASS 15.8.19R, 15.8.47R and 15.8.50R)
• CSSF, Circular CSSF 26/906 on central administration, internal governance and risk management (20 January 2026, PDF), paragraphs 202 to 214
• Conference of State Bank Supervisors, Money Transmission Modernization Act (PDF), Sections 10.03, 10.04 and 13.05
• Conference of State Bank Supervisors, Money Transmission Modernization Act (MTMA)
• IFRS Foundation, IAS 21 The Effects of Changes in Foreign Exchange Rates

About Safeheld

Safeheld is reconciliation and regulatory reporting software for regulated firms that hold client money, across countries, currencies and regulators. It reconciles each company and each currency separately every day, raises breaks the day they appear and prepares regulatory returns from the same reconciled figures. To discuss your reconciliation operations, contact us at safeheld.com/contact.

This article is general information on multi-currency reconciliation and is not legal or regulatory advice.