What is a Safeguard Audit?

A Safeguard Audit is an assessment conducted to ensure that customer funds are properly protected, reconciled, and handled in accordance with safeguarding regulations. It checks whether policies, procedures and controls are in place and operating effectively.

Who needs to conduct a Safeguard Audit?

Small Payment Institutions (SPIs), Electronic Money Institutions or any entity required by regulation to safeguard customer funds must perform safeguard audits to comply with legal requirements.

What are customer funds reconciliation requirements?

The institution must maintain accurate reconciliations of customer funds regularly, ensure documentation is complete and transparent, and segregate customer funds from operational funds as required by regulation.

What policy and procedure elements are reviewed in a Safeguard Audit?

Policy and procedure elements include documentation for safeguarding, internal roles and responsibilities, record keeping, access controls, oversight, reconciliation procedures, and escalation of discrepancies.

Why is oversight and internal control important for safeguarding?

Strong oversight and internal controls help prevent misuse or misappropriation of customer funds, ensure accurate reconciliation and risk mitigation, and support trust with regulators and customers.

How are gaps identified and remediated in Safeguard Audits?

Gaps are identified by comparing actual practices to regulatory requirements or best practices. Remediation involves putting together a plan with responsibilities, timelines, controls to fill those gaps, and then verifying implementation.

Do Safeguard Audits require follow-up verification?

Yes. After implementing remediation actions, a follow-up verification ensures that changes are properly adopted, controls work as intended, and safeguarding is compliant in practice.

What happens if safeguarding controls are found deficient?

If deficiencies are found, a Safeguard Audit report outlines what needs to be corrected. It’s important for institutions to act promptly, document remediation, and evidence corrective controls to regulators where required.

Safeguard Audit | Risk Mitigation for Small Payment Institutions

Safeguard Audit

Proper safeguarding of client funds is a fundamental regulatory requirement for Small Payment Institutions (SPIs). The FCA expects firms to ensure that customer monies are protected, segregated, and fully reconciled, minimizing the risk of misappropriation, operational errors, or insolvency-related losses.

At ABM Global, our Safeguard Audit provides a thorough, independent assessment of how your SPI manages client funds, helping to strengthen operational integrity, regulatory compliance, and stakeholder confidence.

ABM’s Safeguard Audit Includes

1. Client Fund Segregation Assessment

Evaluation of systems and processes used to segregate client funds from the firm’s own funds, in compliance with FCA safeguarding rules
Verification that segregation mechanisms cover all payment accounts, custodial arrangements, and pooled accounts.
Assessment of internal controls to ensure that client money is protected under all operational and exceptional scenarios.

2. Reconciliation & Record-Keeping

Review of reconciliation procedures for client accounts, ensuring daily/periodic reconciliations are accurate, timely, and documented.
Verification of ledger integrity, transaction tracking, and exception handling processes.
Assessment of reporting mechanisms to ensure management and regulators have clear visibility of client fund balances.

3. Operational Controls & Risk Management

4. Compliance Alignment

5. Gap Analysis & Recommendations

6. Regulatory Inspection Preparedness

Assistance in preparing for FCA reviews or inspections related to safeguarding client funds.
Compilation of audit-ready documentation, evidence trails, and internal control reports to demonstrate compliance and best practices.
Guidance for staff and management on presenting safeguarding processes confidently to regulators.