What is a Safeguard Audit for SEMI?

A Safeguard Audit for SEMI is an assessment of how customer-fund safeguarding is implemented in practice, including reconciliation, policies, internal controls, oversight, and compliance with regulatory requirements to protect funds.

Why is customer funds reconciliation important in safeguarding?

Because reconciliation ensures that customer funds are fully accounted for, that balances match internal records, and that there are no misallocation, leakage or errors in handling these funds.

What internal policies and procedures are reviewed in a Safeguard Audit?

Typically, policies / procedures governing segregation of customer funds, access controls, oversight responsibilities, record keeping, incident escalation, and oversight of third parties or custodial arrangements if applicable.

How do you test operational controls & oversight?

By sampling transactions, checking reconciliations, verifying that policies are being followed, auditing access and permissions, examining management / board oversight, and reviewing audit trails.

What is involved in gap identification & risk assessment?

It involves comparing existing safeguarding practices with regulatory expectations and best practices, identifying deficiencies or missing controls, assessing the severity of risks, and prioritising remediation.

What deliverables come out of a Safeguard Audit?

You’ll receive a report detailing findings, identified gaps and risks, recommended remediation actions, timelines, responsibilities, and follow-up verification where necessary.

Safeguard Audit for Small Electronic Money Institutions

Safeguard Audit

Safeguarding customer funds is a fundamental regulatory requirement for Small Electronic Money Institutions (SEMIs) under the Electronic Money Regulations (EMRs). Proper segregation, reconciliation, and monitoring of client monies not only ensures regulatory compliance but also builds trust with customers and partners. ABM provides a thorough, independent Safeguard Audit designed to assess and strengthen your fund protection practices.

Segregation of Client Funds

We review the mechanisms in place to ensure that all client funds are fully segregated from the institution’s own money. This includes evaluating bank account structures, authorized signatories, and operational procedures to prevent co-mingling and unauthorized usage of customer funds

Reconciliation and Monitoring Processes

ABM examines your reconciliation procedures to confirm that daily, weekly, and monthly reconciliations of customer funds are accurate and complete. We assess how discrepancies are identified, investigated, and resolved, ensuring that client accounts reflect the true balance of safeguarded funds at all times.

Safeguarding Account Setup and Controls

Our audit verifies that safeguarding accounts are properly established, controlled, and monitored in line with EMR requirements. We review internal controls, access permissions, and transaction approvals to ensure robust protection against errors, fraud, or operational risks.

Regulatory Compliance Assessment

ABM ensures that all safeguarding arrangements comply fully with the FCA’s EMR guidance, including reporting obligations, fund protection measures, and internal audit expectations. We provide recommendations to address any gaps or weaknesses that could affect regulatory compliance or client trust.

Gap Analysis and Recommendations

Our team identifies deficiencies or operational inefficiencies in your safeguarding framework and provides actionable recommendations. This includes improvements in account management, reconciliation procedures, internal controls, and reporting practices to enhance overall compliance and operational integrity.

Inspection Readiness

We prepare your SEMI for regulatory inspections by reviewing documentation, processes, and reporting practices related to safeguarding. This ensures your institution can confidently demonstrate compliance with EMRs and FCA expectations during audits or on-site reviews.

Continuous Improvement Support

Beyond the audit, ABM offers ongoing advisory to maintain and strengthen safeguarding practices. This includes updates to internal policies, system enhancements, staff training, and adaptation to regulatory changes, ensuring your SEMI consistently meets fund protection obligations.