About This Template
Safeguarding is one of the most operationally demanding compliance obligations for FCA-regulated payment institutions (PIs) and e-money institutions (EMIs). Under the Payment Services Regulations 2017 (PSR 2017) and the Electronic Money Regulations 2011 (EMR 2011), firms must ring-fence relevant funds — the money belonging to payment service users that has been received but not yet delivered to the payee or released. The obligation requires firms to either segregate those funds into a dedicated safeguarding account or obtain insurance or a guarantee covering equivalent amounts. Whichever method is used, firms must be able to demonstrate at all times that the safeguarded balance matches or exceeds the total relevant funds.
This template was built to give compliance, treasury, and finance teams at PIs and EMIs the structure to perform and evidence that daily reconciliation. It is directly relevant for any firm that holds customer money overnight — even briefly — and therefore sits under the safeguarding requirement. It is especially important for firms preparing for FCA supervision visits, those in the process of applying for authorisation or registration, and those that have received a Dear CEO letter or supervisory engagement on safeguarding adequacy.
The template covers a full calendar month of daily reconciliation with breach detection, summary analytics, and a separate reconciliation workings sheet that ties customer-level balances to the safeguarding bank account. It is designed to be print-ready and audit-ready: each row includes a sign-off column and notes field so that any shortfall day can be documented with the explanation and remediation action taken.
What's Included
- Instructions sheet — Overview of the FCA safeguarding framework, definition of relevant funds, explanation of the segregation and insurance/guarantee methods, and a reference guide to the template's three sheets
- Daily Reconciliation sheet — 30 daily rows covering one complete calendar month, with columns for: Date, Opening Relevant Funds (£), New Funds Received (£), Funds Released (£), Closing Relevant Funds (£), Safeguarded Balance (£), Surplus / (Shortfall) (£), Breach (Y/N), Sign-off, and Notes. A summary section below the data rows automatically calculates average daily balance, maximum single-day balance, days in breach, and breach as a percentage of total days
- Reconciliation Workings sheet — 20 rows for granular customer account balance tracking, with columns for: Customer Account, Outstanding Balance, Timestamp, Included in Relevant Funds (Y/N), Reason if excluded. A footer row sums all included balances to produce the total relevant funds figure, which reconciles to the safeguarding bank statement balance
How to Use This Template
- Set the month and opening balance. In the Daily Reconciliation sheet, enter the first date of the month in the Date column of Row 1. The subsequent dates auto-populate. Enter the opening relevant funds balance — this should be the total of customer balances held at the close of the prior day, drawn from your ledger system.
- Complete the Reconciliation Workings sheet first each day. Before completing the Daily Reconciliation row, populate the Reconciliation Workings sheet with each customer account's outstanding balance as of that date. Mark whether each balance is included in relevant funds — balances that have been fully settled, returned, or are otherwise outside the safeguarding perimeter should be marked N with the reason noted. The sum of included balances is your total relevant funds figure.
- Enter the safeguarded balance from your bank statement. The Safeguarded Balance column should be populated from your safeguarding bank account's end-of-day balance, not from an internal ledger. This is the balance that the FCA will expect to see evidenced by bank statements in any audit.
- The Surplus / (Shortfall) cell calculates automatically. The formula is: Safeguarded Balance minus Closing Relevant Funds. A positive figure means you have a surplus — which is acceptable. A negative figure means a shortfall — which is a breach of the safeguarding requirement and must be remediated the same business day where possible.
- Flag breach days immediately. If the Breach column shows Y, complete the Notes field with: the cause of the shortfall (timing lag, system error, unexpected inflow, etc.), the time at which the shortfall was identified, the action taken to remediate, and the time at which the safeguarded balance was restored. This documentation is essential for your regulatory file.
- Obtain daily sign-off. The Sign-off column should be completed by the designated safeguarding responsible individual — typically the MLRO, Head of Compliance, or CFO. An empty sign-off cell is itself an audit finding.
- Review the monthly summary statistics. The summary rows at the bottom of the Daily Reconciliation sheet show average daily balance, maximum balance day, total breach days, and breach percentage. These numbers feed directly into your monthly safeguarding report to the board or risk committee.
Frequently Asked Questions
What are "relevant funds" for safeguarding purposes?
Relevant funds are funds received from, or for the benefit of, a payment service user in connection with the execution of a payment transaction, which have been received but not yet delivered to the payee or released back to the payer. In practice, this means the total of customer balances sitting in your payment float at any given point in time. Funds that have been successfully transmitted to their destination are no longer relevant funds and should not be included in the safeguarding calculation. Funds held for your own account, or fees due to your firm, are similarly excluded — they must be segregated away from the safeguarding pool, not mixed into it.
What should I do if I discover a safeguarding shortfall?
The first priority is to remediate the shortfall as quickly as possible by transferring your own funds into the safeguarding account to make it whole. Document the shortfall immediately: note the exact amount, the time of discovery, the cause, and the remediation steps taken. Notify the senior individual responsible for safeguarding (typically the CFO or compliance officer) without delay. Assess whether the shortfall is a one-off timing issue or a symptom of a structural problem — for example, a ledger system that does not update in real time, or a process whereby funds briefly pass through an operational account before reaching the safeguarding account. If the shortfall is material, recurrent, or potentially systemic, you should consider whether voluntary disclosure to the FCA is appropriate.
How long do I need to keep safeguarding reconciliation records?
The FCA's Approach Document requires firms to retain safeguarding records for at least five years. This means your completed reconciliation sheets — including the daily sign-offs, breach notes, and supporting Reconciliation Workings — should be archived securely and remain retrievable on request for that entire period. In practice, many firms retain records for longer, particularly where there are ongoing regulatory relationships or the firm is going through a change of ownership or authorisation status. Store records in a format that cannot be altered after sign-off — a locked PDF of each completed month's reconciliation sheet is one practical approach.
What happens during an FCA safeguarding audit?
An FCA safeguarding review — whether as part of a routine supervisory visit, a skilled persons review (s166), or a targeted examination — will typically request: your written safeguarding policy and procedure; at least three months of daily reconciliation records; bank statements for the safeguarding account(s) for the same period; evidence of board or risk committee oversight of safeguarding (board minutes, risk reports); and evidence that all responsible individuals are aware of and trained on the safeguarding requirements. Reviewers will compare your reconciliation records to the bank statements day by day, test that your relevant funds calculation methodology is correct and consistently applied, and look for any patterns of shortfalls. Gaps in sign-off, missing notes on breach days, or mismatches between the reconciliation figures and bank statements are the most common findings.
Can I use this template if I use the insurance or guarantee method rather than segregation?
Yes, with modifications. If you use the insurance or guarantee method, the Safeguarded Balance column should be replaced with the guaranteed or insured amount that is available at any given time. The surplus or shortfall calculation then compares available cover against total relevant funds. The daily reconciliation obligation is the same — you must still demonstrate each day that the cover is sufficient. You should also document the policy or guarantee reference, the counterparty, the coverage limit, and the expiry date in the Instructions sheet. Note that the FCA has expressed a clear preference for the segregation method and has heightened scrutiny of firms using insurance or guarantee arrangements that are not robust or that lapse without notice.
Who should be responsible for completing this reconciliation daily?
The reconciliation should be completed by a member of the finance or treasury team who has direct access to the safeguarding bank account and the payment ledger. It should be signed off by the designated safeguarding officer — in most firms this is the CFO, the MLRO, or a nominated compliance officer. The sign-off must not be performed by the same individual who populated the data rows, as this undermines the control. For smaller firms where team separation is difficult, at minimum the sign-off should be done by a senior person who reviews the completed sheet rather than the person who prepared it. The FCA will look for evidence of genuine review, not just a rubber stamp.
