Key takeaways
- CASS 15.2.5R requires relevant funds to be allocated to an individual client promptly and no later than the end of the business day after receipt.
- Until allocated, they must be recorded as unallocated relevant funds, and they count in full towards the safeguarding requirement under CASS 15.8.30R.
- Funds whose nature is not yet known must be investigated and recorded as unidentified relevant funds while that happens (CASS 15.2.9R).
- Money received for a payment or e-money is relevant funds even if the client cannot be identified, for example because of an incorrect unique identifier.
- Funds that cannot be identified should be considered for return to the sender or, failing that, to the source.
What are the key facts on unallocated funds?
Unallocated receipts are relevant funds that have not yet been credited to a specific client, and they must be safeguarded in full.
| Item | Position |
|---|---|
| Rule | CASS 15.2.5R to 15.2.13G; CASS 15.8.30R |
| Regulator | Financial Conduct Authority |
| Applies to | All safeguarding institutions |
| Deadline | Allocate no later than the end of the business day after receipt, or after identification |
| Last checked | 11 October 2026, against the FCA Handbook and PS25/12 |
What is the difference between unallocated and unidentified funds?
Unallocated funds are known to be relevant funds but not yet matched to a client; unidentified funds are receipts whose nature is still being established.
| Term | Meaning | Rule | Treatment |
|---|---|---|---|
| Unallocated relevant funds | Relevant funds received but not yet allocated to an individual client | CASS 15.2.5R | Recorded as unallocated; included in the safeguarding requirement |
| Unidentified relevant funds | Funds not yet identified as relevant funds or other funds | CASS 15.2.9R | Investigated and recorded as unidentified while that happens |
| Relevant funds with an unidentifiable client | Funds clearly received for a payment or e-money, but the client cannot be found | CASS 15.2.10G | Treated as relevant funds and recorded as unallocated |
The provisions are in CASS 15.2. The distinction matters for the records, but both categories belong in the safeguarding process: neither may be left in an operating account or treated as the firm's money while the question is open.
How quickly must receipts be allocated?
Promptly, and no later than the end of the business day after the day of receipt.
CASS 15.2.5R sets the deadline. Where a receipt first had to be identified under CASS 15.2.9R, the clock runs from the day of identification instead. CASS 15.2.6G explains that allocation means identifying the client and then recording the receipt against them in the firm's accounts.
Other duties can require faster allocation. CASS 15.2.7G and 15.2.8G point out that a payee's funds may need to be credited and made available quickly under the PSRs, and that an e-money institution must be able to redeem e-money under the EMRs, both of which depend on knowing whose money it is. The allocation deadline is separate from the segregation deadline, which is covered in D+1 segregation timing.
Do unallocated receipts count towards the safeguarding requirement?
Yes: the safeguarding requirement is the sum of client balances plus all unallocated receipts.
CASS 15.8.30R adds amounts received but not yet allocated under CASS 15.2.5R to the individual client balances. The monthly safeguarding return reports them as a separate component of the requirement in question 19. A firm that leaves unallocated receipts out of its calculation will understate its requirement by exactly the amount it has not yet sorted out, which is often the money with the highest operational risk.
A common design fault is a suspense account in which unallocated credits are netted against debits, such as unmatched refunds or chargebacks. Netting hides the gross amount owed to unidentified clients. The requirement should include each unallocated receipt in full, and debits should be treated as what they are, often a receivable from a client or a third party. A receivable is the firm's risk to manage from its own resources; it does not reduce what is owed to the senders of unallocated money.
Where do unallocated receipts usually come from?
Most unallocated receipts come from missing or wrong payment references and from batch settlements that do not break down to the customer.
| Source | Typical cause | Control |
|---|---|---|
| Bank transfers | Missing, truncated or mistyped payment reference | Match on payer name, account and amount; contact the payer |
| Card and wallet settlements | Batch totals that include items not yet in the ledger | Reconcile settlement files item by item to the ledger |
| Partner and agent remittances | One payment covering many customers with no breakdown | Require a remittance file with each payment |
| Corporate clients | Overpayments or payments ahead of an instruction | Agree how early funding is identified and allocated |
| Returned payments | Funds coming back from a payee's bank without the original reference | Link returns to the original outbound payment |
Each source has a different fix, so the unallocated ledger should record the source of every item. A firm that knows half its unallocated receipts come from one partner's remittances can solve the problem at the root.
How do unallocated receipts interact with D+1 and the return?
The segregation deadline applies whether or not a receipt has been allocated, and the return reports unallocated amounts separately.
A receipt sitting in a collection account because nobody knows whose it is must still be kept segregated and, if still held at the end of the next business day, moved to a safeguarding account. Leaving unidentified money behind until it is understood is one of the most common causes of a D+1 shortfall. In the monthly safeguarding return, question 19 splits the requirement into individual client balances and unallocated receipts, so the FCA sees the size of the unallocated figure at the last internal reconciliation of every month.
What should happen to funds that cannot be identified?
The firm should keep investigating and, if the client still cannot be found, consider returning the funds to the sender or, failing that, to the source.
CASS 15.2.10G accepts that identification will not always be possible, and CASS 15.2.11G suggests return to the sender, or failing that to the source. CASS 15.2.12G reminds firms to have regard to their obligations under the EMRs and PSRs when doing so. Where a payer gave an incorrect unique identifier, such as a wrong account number or payment reference, CASS 15.2.13G points to the steps the firm must take under regulation 90 of the PSRs. Until any return, the funds remain relevant funds and stay in safeguarding.
Practical steps usually run in order: check the payer's details against existing clients, ask the sending bank for further information, contact the payer where details allow, and review the receipt with the team that owns the product. Each step and its outcome should be recorded against the item, so that the decision to return the funds, or to keep investigating, can be explained later.
How does an unallocated ledger work in practice?
The worked example shows the unallocated ledger of a payment institution at its reconciliation point on Thursday 8 October 2026.
| Receipt | Received | Amount (GBP) | Status | Within the deadline? |
|---|---|---|---|---|
| Bank transfer, reference missing | Wed 7 Oct | 12,400.00 | Matched to a client by amount and payer name on Thursday morning; allocated | Yes |
| Card settlement batch, one item unmatched | Wed 7 Oct | 860.00 | Unallocated; processor query open | Due by end of Thursday |
| Transfer quoting a closed account | Tue 6 Oct | 3,250.00 | Unallocated; client contact attempts under way | No, deadline passed end of Wednesday |
| Receipt from unknown payer, purpose unclear | Mon 5 Oct | 1,995.00 | Unidentified; investigation under CASS 15.2.9R | Clock starts on identification |
| Overpayment by a corporate client | Thu 8 Oct | 6,100.00 | Unallocated; awaiting instruction | Due by end of Friday |
At the reconciliation point the firm adds £12,205.00 of unallocated receipts (£860.00, £3,250.00, £1,995.00 and £6,100.00) to its client balances when calculating the requirement, treating the unidentified £1,995.00 as relevant funds while it is investigated. The £3,250.00 receipt breached the allocation deadline, so the firm records it, escalates it and reports it in the board pack. If the client cannot be traced, it will consider returning the funds to the sender under CASS 15.2.11G.
What do auditors and supervisors look for?
They look at the size and age of the unallocated balance and whether any of it has ever been treated as the firm's money.
- Ageing: how many receipts are older than one business day, and why.
- Completeness: whether every account that receives relevant funds feeds the unallocated ledger.
- Gross treatment: whether credits are netted against debits in suspense.
- Release: whether any unallocated amount has been moved to the firm's income or own funds.
- Returns: whether funds returned to senders followed a documented process with evidence.
Reviewers also test governance. They expect a named owner for the ledger, a daily ageing report, a documented escalation path for items past the deadline and a periodic review by the individual responsible for safeguarding oversight. Where the firm returns funds to senders, they expect each return to be approved and evidenced. Where the firm keeps investigating an old item, they expect to see why, and what has been tried, rather than an item that has simply been carried forward month after month.
A rising or ageing unallocated balance is an early sign that allocation controls are failing, and if records become materially inaccurate as a result it can trigger a notification under CASS 15.8.60R(1). See notifying the FCA of a safeguarding breach.
What should a firm check?
These controls keep unallocated funds small, visible and safeguarded.
- Record every receipt that cannot be allocated immediately in a single unallocated ledger, with date, amount, source and status.
- Include every unallocated and unidentified receipt in full in the safeguarding requirement.
- Age the ledger daily against the end of next business day deadline.
- Assign an owner to every item and escalate items that breach the deadline.
- Never net unallocated credits against debits.
- Keep a documented return-to-sender process, with regard to PSRs regulation 90 for incorrect identifiers.
- Report the unallocated balance and its ageing to the individual responsible for safeguarding.
How does Safeheld help?
Safeheld raises every receipt it cannot match as a break, ages it against the deadline and includes it in the safeguarding requirement.
AI investigation suggests the likely client from payer details and references, and a person confirms the allocation. See break resolution, what counts as relevant funds and our CASS 15 and PS25/12 guide.
Frequently asked questions
What are unallocated relevant funds?
Relevant funds that have been received but not yet allocated to an individual client. CASS 15.2.5R requires them to be recorded as unallocated until they are.
How long does a firm have to allocate receipts?
It must allocate promptly and no later than the end of the business day following receipt, or following identification where CASS 15.2.9R applied.
Are unallocated funds included in the safeguarding requirement?
Yes. CASS 15.8.30R adds all unallocated receipts to the client balances, and the monthly return reports them separately.
What are unidentified relevant funds?
Receipts that have not yet been identified as relevant funds or other funds. CASS 15.2.9R requires the firm to investigate and record them as unidentified meanwhile.
What if the client cannot be identified?
Funds received for a payment or e-money remain relevant funds. The firm should consider returning them to the sender or, failing that, to the source (CASS 15.2.11G).
Can unallocated funds be moved to the firm's income?
No. They remain relevant funds and must stay safeguarded until they are allocated or returned.
Can unallocated credits be netted against chargebacks or refunds?
No. Each unallocated receipt should be included in the safeguarding requirement in full; netting hides the gross amount owed.
References
- FCA Handbook, CASS 15.2 Organisational requirements
- FCA Handbook, CASS 15.8 Records, accounts and reconciliations
- The Payment Services Regulations 2017, regulation 23
- The Electronic Money Regulations 2011, regulation 20
- FCA, PS25/12: Changes to the safeguarding regime for payments and e-money firms (PDF)
About Safeheld
Safeheld is reconciliation and regulatory financial control software for regulated firms that hold client money. It raises unmatched receipts as breaks, tracks them against the allocation deadline and carries them in the safeguarding requirement until they are resolved. 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.