Key takeaways
- Relevant funds are funds received in exchange for e-money issued, and sums received from or for a payment service user, or from another payment service provider, to execute a payment transaction.
- The definition comes from regulation 20(1) of the Electronic Money Regulations 2011 and regulation 23(1) of the Payment Services Regulations 2017, and is repeated in the FCA Handbook Glossary.
- The duty to safeguard starts when the firm is entitled to the funds, and funds still held at the end of the next business day must be in a safeguarding account or invested in approved assets.
- Mixed remittances, card receipts and funds for unrelated payment services each have their own treatment.
- The amount to safeguard is the sum of positive client balances plus unallocated receipts, calculated under CASS 15.8.30R.
What are the key facts on relevant funds?
Relevant funds are the customer money that a UK payment or e-money firm must protect from its own creditors.
| Item | Position |
|---|---|
| Rule | EMRs regulation 20(1), PSRs regulation 23(1), CASS 15 |
| Regulator | Financial Conduct Authority |
| Applies to | Authorised payment institutions, e-money institutions, credit unions issuing e-money and small payment institutions that opt in |
| Timing | Segregate on receipt; place in a safeguarding account or approved assets by the end of the business day after receipt |
| Last checked | 11 October 2026, against the FCA Handbook and PS25/12 |
What counts as relevant funds?
Relevant funds are money a firm receives either for e-money it issues or to carry out a payment transaction.
The FCA Handbook Glossary defines relevant funds by reference to regulation 20(1) of the Electronic Money Regulations 2011 and regulation 23(1) of the Payment Services Regulations 2017. There are three limbs:
- funds received in exchange for electronic money that has been issued;
- sums received from, or for the benefit of, a payment service user for the execution of a payment transaction; and
- sums received from a payment service provider for the execution of a payment transaction on behalf of a payment service user.
The test is about the purpose of the money, not the account it lands in. A customer top-up paid into an operating account is still relevant funds. A merchant settlement received from an acquirer for onward payment to the merchant is relevant funds under the third limb, because it comes from another payment service provider for a payment transaction.
CASS 15.1.2R applies the chapter to authorised payment institutions, electronic money institutions, credit unions that issue e-money, and small payment institutions that elect to safeguard under regulation 23(16) of the PSRs. A small payment institution that opts in is treated as if it were an authorised payment institution (CASS 15.1.7R).
When does the duty to safeguard start?
The duty starts as soon as the firm is entitled to the funds, which is often when they are credited to an account in its name.
That is the FCA's own description on its safeguarding requirements page. From that moment the firm must keep the funds segregated from its other money (EMRs regulation 21(1); PSRs regulation 23(5)). If it still holds them at the end of the business day following the day of receipt, they must be in a separate account with an authorised credit institution or the Bank of England, or invested in secure, liquid assets the FCA approves and held in a separate account with an authorised custodian (EMRs regulation 21(2); PSRs regulation 23(6)). Our guide to D+1 segregation timing covers the deadline in detail.
Funds collected through an agent or e-money distributor are the firm's relevant funds, and the firm stays responsible for them. Where they are segregated but not yet in a safeguarding account, they still count towards the safeguarding resource: CASS 15.8.27G gives funds held by agents as an example of item B. Our guide to safeguarding through agents and distributors sets out the controls.
E-money institutions have one specific concession. Under EMRs regulation 20(4), funds received by payment instrument, such as a card, need not be safeguarded until they are credited to the firm's payment account or otherwise made available to it, but they must be safeguarded by the end of five business days after the date the e-money was issued.
How are mixed remittances treated?
Where only part of a receipt is for payment services or e-money, the relevant funds are a reasonable estimate of that part, based on historical data and acceptable to the FCA.
Both EMRs regulation 20(3) and PSRs regulation 23(2) allow this estimate where the payment portion varies or is not known in advance. The Handbook calls a receipt that is part relevant funds and part other money a mixed remittance. CASS 15.3.2R requires any firm that receives mixed remittances to keep a written policy showing how it complies with those regulations. A marketplace that collects a single amount covering both the seller's sale proceeds and its own service charge is the common example.
The estimate should be refreshed as the business changes. A percentage set at authorisation and never revisited is difficult to defend once volumes, pricing or the product mix have moved.
Which funds are not relevant funds?
Money that is not received for e-money or a payment transaction, or that falls outside the territorial scope of the regulations, is not relevant funds.
| Money received | Relevant funds? | Why |
|---|---|---|
| Customer top-up for e-money | Yes | Received in exchange for e-money issued (EMRs regulation 20(1)) |
| Payment order funds from a customer | Yes | Received for the execution of a payment transaction (PSRs regulation 23(1)) |
| Acquirer settlement owed to a merchant | Yes | Received from a payment service provider for a payment transaction |
| Funds for a currency exchange carried out independently of any payment service | No | PS25/12 confirms these do not have to be safeguarded; keep evidence such as the customer's instruction |
| Payment where both payer and payee are served from outside the UK | No | Outside the scope of the regulations (CASS 15.1.5G); keep it apart from relevant funds |
| Fees already due from the customer to the firm | No, once due | Deducted from the client's safeguarding balance under CASS 15.8.33R |
| The firm's own capital and revenue | No | Must not be mixed with relevant funds, except own funds paid in to correct a shortfall |
CASS 15.1.4G adds that funds for transactions outside the scope of the regulations do not need to be safeguarded, but a firm using the segregation method must keep them separate from relevant funds. In practice the safest design keeps out-of-scope money in different accounts altogether.
Do e-money and unrelated payment services form separate pools?
Yes: an e-money institution that also provides payment services unrelated to its e-money must safeguard the two sets of relevant funds separately.
EMRs regulation 20(6) applies PSRs regulation 23 to funds received for payment transactions that are not related to issuing e-money. CASS 15.1.6G explains that this covers payment services provided independently of the e-money product, not a customer simply spending e-money to pay a bill. CASS 15.8.3R(2) requires records that treat the two pools separately, and the monthly safeguarding return has a separate set of sections for unrelated payment services.
How is the amount of relevant funds calculated?
The amount a firm must safeguard is its safeguarding requirement: the total of each client's positive balance plus any receipts not yet allocated to a client.
CASS 15.8.30R sets the formula. Each individual balance adds relevant funds received for the client and amounts credited to it, and deducts payments executed once paid to the payee or the payee's provider, e-money redeemed and sums due from the client to the firm, such as fees (CASS 15.8.33R). Negative balances are ignored rather than netted off (CASS 15.8.30R and CASS 15.8.34G). Receipts that have not yet been allocated to a client are added in full; see our guide to unallocated and unidentified receipts.
Worked example. An e-money institution that also offers unrelated payment services runs its internal reconciliation at 16:00. Its records show the following.
| Line | E-money pool (GBP) | Unrelated payment services pool (GBP) |
|---|---|---|
| Sum of positive client balances | 6,420,180.50 | 912,600.00 |
| Negative client balances (ignored, not deducted) | (3,410.00) | 0.00 |
| Fees due from clients, already deducted from balances | Included above | Included above |
| Receipts not yet allocated to a client | 18,240.00 | 4,950.00 |
| Safeguarding requirement | 6,438,420.50 | 917,550.00 |
The negative balance of £3,410.00 is a debt owed by one customer. It is a credit risk for the firm, but it does not reduce what the firm must hold for everyone else. Each pool is then compared with the money actually held for it in its own reconciliation.
A mixed remittance is handled before this calculation. If the same firm's marketplace business collects £250,000.00 in a day and its documented estimate, based on twelve months of data, is that 94% relates to payment transactions, it treats £235,000.00 as relevant funds and £15,000.00 as its own money, and records the basis for the split.
What should a firm check?
A short set of checks confirms that the firm has identified all of its relevant funds.
- Map every product and money flow, and record whether each receipt is relevant funds, out of scope or the firm's own money.
- List every account that can receive relevant funds, including collection and operating accounts that are not safeguarding accounts.
- Keep a written mixed remittance policy if any receipt combines payment funds with other money, and review the estimate regularly.
- Separate e-money and unrelated payment services funds in records, accounts and reconciliations.
- Confirm card receipts for e-money are safeguarded within five business days of issue at the latest.
- Document the evidence for any funds treated as outside scope, such as currency exchange instructions or territorial analysis.
- Test that fees are deducted only when they are actually due, and that negative balances are never netted.
How does Safeheld help?
Safeheld reconciles bank and ledger records for each entity and currency and calculates the requirement and resource for each pool of relevant funds.
Receipts that cannot be matched are raised as breaks for investigation, so unallocated amounts are visible every day. The same figures feed the monthly safeguarding return. See daily reconciliation and our complete guide to CASS 15 and PS25/12.
Frequently asked questions
What are relevant funds?
Relevant funds are funds received in exchange for e-money issued, and sums received from or for a payment service user, or from another payment service provider, to execute a payment transaction.
Where is the definition of relevant funds?
In regulation 20(1) of the Electronic Money Regulations 2011 and regulation 23(1) of the Payment Services Regulations 2017. The FCA Handbook Glossary repeats it for CASS 15.
When does a firm have to start safeguarding?
As soon as it is entitled to the funds. It must keep them segregated from receipt and, if it still holds them at the end of the next business day, place them in a safeguarding account or approved assets.
Are card receipts for e-money treated differently?
Yes. Under EMRs regulation 20(4) they need not be safeguarded until credited or made available to the firm, but must be safeguarded by the end of five business days after the e-money was issued.
Do funds for a currency exchange have to be safeguarded?
Not where the exchange is carried out independently of any payment service. PS25/12 confirms this and expects the firm to keep evidence, such as the customer's instruction.
Can a firm deduct negative customer balances?
No. CASS 15.8.30R requires negative balances to be ignored when calculating the safeguarding requirement, so they do not reduce the amount owed to other customers.
Do e-money and payment services funds need separate safeguarding?
Yes, where an e-money institution provides payment services unrelated to its e-money. The two pools are recorded, reconciled and reported separately.
References
- FCA Handbook Glossary, relevant funds
- The Electronic Money Regulations 2011, regulation 20
- The Electronic Money Regulations 2011, regulation 21
- The Payment Services Regulations 2017, regulation 23
- FCA Handbook, CASS 15.1 Purpose and application
- FCA Handbook, CASS 15.8 Records, accounts and reconciliations
- FCA, PS25/12: Changes to the safeguarding regime for payments and e-money firms (PDF)
- FCA, Safeguarding requirements for payment institutions and e-money institutions
About Safeheld
Safeheld is reconciliation and regulatory financial control software for regulated firms that hold client money. For UK payment and e-money firms it reconciles each pool of relevant funds daily, raises and resolves breaks, and produces the monthly safeguarding return and audit evidence from the same records. To discuss your safeguarding operations, contact us at safeheld.com/contact.
This article is general information on the UK safeguarding rules and is not legal or regulatory advice.