PS25/12 and CASS 15: The FCA Safeguarding Requirements Explained

PS25/12 is a policy statement. It is the FCA's account of the feedback it received and the rules it decided to make, published on 7 August 2025. A policy statement is not itself a source of obligation. What binds a firm is the Handbook text the policy statement introduced, and for this regime that text lives in four places: CASS 15, which sets the day-to-day safeguarding requirements; CASS 10A, which governs resolution packs; SUP 16.14A, which creates a new monthly safeguarding return; and SUP 3A, which introduces an annual external safeguarding audit report.

The distinction matters operationally because compliance teams sometimes treat 'PS25/12 compliance' as a single checklist item, when in reality it is four separate rulebooks with different triggers, different frequencies and different evidence requirements. A firm can be well advanced on CASS 15 reconciliation and still miss the SUP 16.14A return deadline, because they are different obligations tested in different ways.

It is also worth being precise about what PS25/12 did not settle. The FCA's proposals for an end-state statutory trust over relevant funds, which would give customers a proprietary interest ahead of general creditors on insolvency, are a separate and later-stage piece of work. As things stand they are proposals, not rules. Firms should build to the CASS 15/10A regime that is actually in force, not to a trust model that has not been made.

For a Head of Compliance building or auditing a safeguarding programme, it is worth walking the CASS 15 obligations in the order a supervisor or auditor would actually test them, rather than treating the chapter as an undifferentiated block of rules. Each obligation has its own trigger, its own evidence standard and, usually, its own failure mode.

Scope comes first. CASS 15 applies to relevant funds: broadly, sums received from or for a payment service user to execute a payment transaction, and sums received in exchange for e-money issued, held by authorised and small payment institutions, authorised and small e-money institutions, and e-money-issuing credit unions. Getting the population of relevant funds right is the foundation everything else sits on; a firm that under-scopes what counts as relevant funds will pass every downstream control while still being non-compliant.

Segregation is next, and it is a timing rule, not merely a location rule. Relevant funds must be placed into a designated safeguarding account, or an equivalent safeguarding method such as insurance or a guarantee, by the close of the business day following receipt, the D+1 deadline. A firm that segregates correctly but two or three days late has not met the requirement, even though the funds end up in the right place. Our guide at CASS 15 Safeguarding Reconciliation: Daily Requirements and Evidence covers the reconciliation mechanics behind meeting D+1 consistently rather than as an occasional best effort.

Records and accounts come third. CASS 15 requires records sufficient to distinguish, at any point and without delay, the relevant funds held for one payment service user from those held for another, and from the firm's own money. The 'without delay' standard is doing real work here: a record that has to be reconstructed or assembled on request does not meet it, however accurate the reconstruction turns out to be. This is the requirement that most exposes firms running month-end reconciliation processes on spreadsheets, because the underlying data exists but not in a form that answers the question immediately.

Reconciliation is the fourth and most operationally demanding requirement. CASS 15 requires both an internal reconciliation, which tests whether the firm's own ledger is internally consistent with what it believes it is safeguarding, and an external reconciliation, which tests that internal position against balances independently confirmed by every safeguarding institution and third party actually holding relevant funds. Where a reconciliation identifies a shortfall or an excess, the firm must correct it promptly, which for firms with material relevant funds flow the FCA expects to mean each business day. The correction itself needs to be evidenced: what was identified, when, the amount funded or withdrawn, and who authorised it.

Fifth, CASS 10A resolution pack currency. Although CASS 10A is a separate chapter, it is inseparable in practice from CASS 15 compliance, because the pack is built from the same underlying safeguarding data: current safeguarding account and bank mandate details, current counterparty and agent relationships, and a current description of the safeguarding method in use, kept current enough that an insolvency practitioner could act on it without first reconstructing the firm's records.

Sixth, the SUP 16.14A monthly safeguarding return. Firms safeguarding relevant funds under CASS 15 must file this return within 15 business days of each calendar month end, on the form at SUP 16 Annex 29BR. In RegData the return is identified as REP027. It is a recurring, dated regulatory submission in its own right, and late or incomplete filing is a reporting breach independent of whether the underlying safeguarding position was sound. Our detailed guide to that obligation sits at The CASS 15 Monthly Safeguarding Return (REP027): Filing and Board Packs.

Seventh, the SUP 3A annual external safeguarding audit. An external auditor reports to the FCA on whether the firm maintained systems and controls adequate to comply with the safeguarding rules throughout the period under review, not only at the reporting date. That period-wide opinion means the auditor samples across the year, so the completeness of the population a firm can produce, not just the quality of individual records, is usually the pivotal issue.

Taken together, these seven obligations describe a programme that runs continuously rather than one that is assembled for a deadline. Firms that treat CASS 15 as a series of point-in-time deliverables tend to pass the first audit and struggle at the second, once the auditor starts sampling dates the firm did not choose. Evidence generated automatically from the underlying reconciliation and safeguarding data, of the kind described in our guide at CASS 15 Resolution Packs and Evidence: What Regulators and Auditors Expect, is the practical way to keep that period-wide standard met without a manual scramble each time a supervisor or auditor asks.

The regime binds firms that hold relevant funds while providing payment services or issuing electronic money: authorised and small payment institutions, authorised and small e-money institutions, and credit unions that issue e-money. Relevant funds are, broadly, sums received from or for a payment service user to execute a payment transaction, and sums received in exchange for e-money issued.

It is worth being clear about what CASS 15 does not touch. CASS 6 and CASS 7 remain the client asset rules for investment firms holding custody assets and client money, and CASS 5 remains the regime for insurance intermediaries. Safeguarding under CASS 15 and CASS 10A is the payments and e-money analogue of those regimes, built for a different funds flow and a different failure mode, not an extension of them.

There are real differences in how the obligations bite between a payment institution moving funds through acquirers, schemes and agents, and an e-money institution holding customer balances as issued e-money. Those differences are covered properly in our dedicated guides at Payment Institution Safeguarding: Obligations, Reconciliation and Evidence and How Safeheld Automates PS25 Compliance for E-Money Institutions, rather than repeated here. The remainder of this guide covers what is common to both.

The supplementary safeguarding regime came into force on 7 May 2026. From that date, CASS 15, CASS 10A, SUP 16.14A and SUP 3A are live rules, not forthcoming ones. Firms that treated the period between publication in August 2025 and the in-force date as planning time should now be operating the regime, not building toward it.

A simple way to hold the timeline in mind: 7 August 2025 is when the FCA told the market what the rules would be. 7 May 2026 is when those rules started applying. The two dates get conflated in casual conversation, and the gap between them is exactly the period firms had to get systems, governance and evidence in place.

The statutory trust end-state remains the open item. The FCA has consulted on requiring relevant funds to be held on statutory trust, which would change creditor priority on insolvency. That is not part of the regime that came into force on 7 May 2026, and firms should not represent it to boards, auditors or customers as current law. When and if it does progress, it will need its own implementation timeline, separate from the one covered here.

CASS 15 requires two distinct reconciliations, and treating them as one exercise is the most common structural error firms make. The internal reconciliation compares the firm's own record of what it owes payment service users against what it believes it is safeguarding. It tests whether the firm's own arithmetic is internally consistent. The external reconciliation compares that internal position against the balances independently confirmed by every safeguarding institution and third party actually holding relevant funds. It tests whether the outside world agrees.

The FCA's expectation, consistent with the approach long taken under CASS 7 for client money, is that both reconciliations happen each business day for firms with material relevant funds flow. That is a materially higher cadence than many firms ran under the pre-PS25/12 principles-based expectation, and it is the single change that drives most of the operational rebuild firms are undertaking.

Where a reconciliation identifies a shortfall, meaning the firm holds less than it should, the difference must be paid into the safeguarding account from the firm's own resources immediately. Where it identifies an excess, meaning the firm holds more than it should, the excess must be withdrawn, because firm money sitting inside a safeguarding account defeats the purpose of segregation just as surely as a shortfall does. Both directions of error need to be evidenced: what was identified, when, by whom, and what correction followed. Our guide at CASS 15 Safeguarding Reconciliation: Daily Requirements and Evidence covers the mechanics of daily reconciliation and detection windows in more depth than is useful to repeat here.

SUP 16.14A introduces a monthly safeguarding return, identified in RegData as REP027, submitted using the form at SUP 16 Annex 29BR, within 15 business days of the relevant month end. This is a new, recurring, dated regulatory submission, and it is separate from anything firms may already be doing for other reporting lines.

It is important not to confuse this with FSA056, also known as the CMAR, which is a different return under SUP 16.14 for CASS medium and CASS large investment firms holding client money and custody assets under CASS 6 and CASS 7. The two returns sit in adjacent parts of SUP, cover different populations of firms, and serve different regimes. A payment institution or e-money institution completing a safeguarding return under SUP 16.14A is not doing the same exercise as an investment firm filing an FSA056, and the figures, thresholds and forms are not interchangeable. Our guide at The CASS 15 Monthly Safeguarding Return (REP027): Filing and Board Packs deals with that reporting distinction and with turning reconciliation data into both the regulatory return and internal board packs, including the operational detail behind REP027 that a Head of Compliance needs day to day.

The operational risk with the monthly return is not completing it, which is mechanically straightforward, but keeping it consistent with the daily reconciliations that underpin it. A return built from a separate finance extract, rather than generated from the same reconciliation runs the firm relies on day to day, will eventually diverge from those runs, and that divergence is visible to the regulator across successive submissions.

Relevant funds must be placed in a designated safeguarding account, and firms need a signed acknowledgement letter from each safeguarding institution confirming that the account is held for customers and is not subject to the institution's own set-off rights against the firm. An acknowledgement letter that was obtained years ago and never revisited when the account, the bank, or the institution's standard terms changed is a live gap, not a historic formality.

On governance, CASS 15.2.4R requires the firm to allocate responsibility for oversight of safeguarding compliance and reporting to a director or senior manager of sufficient skill and authority, who reports into the firm's governing body. There is no named FCA controlled function attached to this allocation. CF10a is a historic reference from an earlier regime and SMF18 is not a prescribed mapping for safeguarding oversight, so firms should resist the temptation to bolt this responsibility onto an existing SMF holder by default; it needs to be a deliberate allocation, minuted, with the individual able to demonstrate they actually exercised oversight rather than simply held the title.

CASS 15 requires records and accounts that let the firm distinguish relevant funds held for one payment service user from those held for another, and from the firm's own money, without delay. A record that needs to be assembled on request, rather than one that already exists in that form, does not meet that standard.

CASS 10A extends the same logic to insolvency. The resolution pack must let an insolvency practitioner identify relevant funds and the customers entitled to them quickly enough to make a distribution practicable. That means current bank mandates, current safeguarding account details, current counterparty and agent relationships, and a current description of the safeguarding method in use. A pack maintained as a document tends to describe how things used to be arranged rather than how they are arranged now, because nobody updates it the day an account changes; a pack generated from live operational data does not have that failure mode, because there is no static artefact to fall behind.

For the annual audit under SUP 3A and for supervisory requests generally, the evidence standard that matters is whether a record could have been altered after the fact. A spreadsheet or an exported PDF proves that a record exists now, not that it existed unchanged at the time it purports to describe. Our guide at CASS 15 Resolution Packs and Evidence: What Regulators and Auditors Expect covers what makes an evidence set defensible in more detail, and our overview of CASS 15 reconciliation and reporting tooling at CASS 15 Software for Payments Firms: Relevant Funds, Reconciliation and Records covers the systems side of meeting these standards.

The most frequent failure is collapsing the internal and external reconciliation into a single match against a bank statement. That removes the ability to tell whether a variance is an internal ledger error or a missing external confirmation, and that distinction is exactly what determines whether the firm has a shortfall requiring immediate funding or a data quality problem requiring a different fix.

The second is treating the monthly return as a standalone reporting task rather than a derived view of the daily reconciliation record. Firms that build the return from a separate extract create a second version of the truth that will eventually diverge from the reconciliations, and the divergence is the kind of thing that turns a routine submission into a supervisory conversation.

The third is a resolution pack that was correct when it was written and has not been touched since. Banking arrangements, agents and distributors change more often than compliance calendars get revisited, and a pack is only as good as its last update.

The fourth is confusing the SUP 16.14A safeguarding return with FSA056/CMAR, either by assuming a firm already filing one is exempt from the other, or by using processes and thresholds built for one to populate the other. They are different returns for different populations under different parts of SUP 16.14.

Safeheld runs the internal and external reconciliations CASS 15 requires as a continuous process rather than a periodic exercise, records each one as a sealed, date-addressable run, and attaches the correction of any shortfall or excess to the run that identified it. That gives a firm a single answer, at any date, to the question a supervisor or auditor actually asks: what was the safeguarding position, and how do you know.

The monthly SUP 16.14A return, the CASS 10A resolution pack, and the SUP 3A audit evidence set are generated from those same sealed reconciliation runs rather than assembled separately, which removes the divergence risk between what the firm reports and what its reconciliations actually show. For a deeper look at how this maps specifically to the payment institution or e-money institution setup, see Payment Institution Safeguarding: Obligations, Reconciliation and Evidence, How Safeheld Automates PS25 Compliance for E-Money Institutions, our software-focused guide at CASS 15 Software for Payments Firms: Relevant Funds, Reconciliation and Records, and our solutions page at /solutions/ps25.