Safeguarding Customer Funds

1. Purpose of Policy

This policy (the “Policy”) outlines the procedures and requirements for safeguarding customer funds by A&B General (UK) Limited (the “Company”) as mandated by the Payment Services Regulations 2017 and the FCA’s PSD2 Approach Document. The aim is to ensure that customer funds are adequately protected in the event of insolvency and to maintain compliance with regulatory requirements.

2. Relevant Legislation and Guidance

• Payment Services Regulations 2017 (PSRs 2017)
• FCA PSD2 Approach Document – Chapter 10
• Electronic Money Regulations 2011 (where applicable)
• Financial Conduct Authority (FCA) Guidance on Safeguarding

3. Key Definitions

• Relevant Funds: Sums received from or for the benefit of a payment service user for the execution of a payment transaction, including any funds held temporarily until the payment is completed.
• Safeguarding Account: A separate bank account where client funds are held, segregated from the Company’s own funds, and protected in compliance with PSRs 2017.
• Material Discrepancy: A significant shortfall or other issue that poses a risk to client funds, including errors in segregation or reconciliation that could impact the safety of client money.

4. Safeguarding Method

The Company utilizes Segregation as its primary safeguarding method:

• Segregation of Funds: Relevant funds are placed in a separate client funds safeguarding account at an EEA-authorized credit institution, solely for holding client funds.
• Account Requirements: The safeguarding account must:
  • Be named as “A&B General (UK) Limited Client Funds Account”.
  • Be held directly with an EEA-authorized credit institution, including UK banks and building societies.
  • Include a no set-off letter from the bank, confirming that the bank has no right to deduct amounts owed by the Company from the safeguarded funds.

5. Start and End of Safeguarding Obligation

• Start of Obligation: Safeguarding obligations begin when the Company receives funds for the benefit of a customer. This includes:
  • Receipt of cash or bank transfers directly into the Company’s client funds account.
  • Settlement of card payments from a merchant acquirer.
• End of Obligation: Safeguarding ends when:
  • The payment transaction is completed, and funds have been transferred to the intended beneficiary.
  • Refunds are returned to the customer or returned to the sender of the funds.

6. Reconciliation of Client Funds

• Frequency of Reconciliation: A&B General (UK) Limited performs daily reconciliations of all client funds to ensure accuracy and transparency. The reconciliation process includes:
  • Comparing the total balance of client funds held in the safeguarding account against the sum of individual customer balances.
  • Investigating and correcting any identified discrepancies immediately.
  • Documenting each reconciliation with a reconciliation report, signed off by the Compliance Officer.
• Reconciliation Process:
  • The Compliance Team is responsible for conducting the reconciliation process.
  • If discrepancies are identified, they must be logged in the Reconciliation Discrepancy Log, and steps must be taken to resolve them as soon as possible.

7. Discrepancies and Escalation Matrix

• Identification of Discrepancies: All discrepancies identified during the reconciliation process must be recorded in the Discrepancy Log. Discrepancies may include:
  • Differences between calculated relevant funds and actual balances.
  • Delays in the segregation of funds.
  • Errors in crediting or debiting client accounts.
• Escalation Process:
  • Step 1: Immediate Reporting:
    • Discrepancies must be reported to the Compliance Officer immediately.
    • Discrepancies should be documented with details of the nature of the discrepancy and potential impact on client funds.
  • Step 2: Escalation to Senior Management:
    • If discrepancies remain unresolved after 24 hours, they must be escalated to the Director of Compliance and the Chief Financial Officer.
  • Step 3: Notification to the FCA:
    • Any material discrepancies that could pose a risk to client funds must be reported to the FCA within 24 hours. This includes shortfalls, unresolvable discrepancies, or potential risks to client money.
  • Step 4: Corrective Actions:
    • Immediate measures such as transferring company funds to cover shortfalls or adjusting records are required to correct discrepancies.

8. Record-Keeping and Audit Trail

• Documentation: The Company maintains records of all reconciliations, discrepancy logs, and corrective actions for a minimum of five years.
• Audit Trail: An audit trail is maintained for all transactions, including records of client fund movements, to ensure transparency and traceability.
• Annual Review: The Board of Directors reviews the safeguarding procedures annually to ensure ongoing compliance with regulatory standards.

9. Oversight and Responsibilities

• Board of Directors: Responsible for oversight of the safeguarding processes and ensuring compliance with the regulatory framework.
• MLRO/Compliance Officer: Oversees daily reconciliation, manages the discrepancy log, and ensures timely reporting to the FCA.
• Chief Financial Officer (CFO): Manages the safeguarding accounts and approves corrective actions related to client funds.
• Training: All staff involved in handling client funds receive regular training on safeguarding procedures, reconciliation, and reporting requirements.

10. Client Funds Investment Policy

• Investment Prohibition: The Company prohibits the investment of client funds. All funds must be held as cash balances in the safeguarding account, available for immediate withdrawal to settle customer transactions.
• Third-Party Providers: If third-party providers are used for handling client funds, they must meet the same safeguarding standards as the Company, and their processes must be regularly reviewed.

11. Reporting Non-Compliance

• Notification to the FCA: The Compliance Officer must notify the FCA in writing without delay if the Company is unable to meet safeguarding requirements or if a material discrepancy occurs that could affect client funds.
• Internal Reporting: All incidents of non-compliance must be recorded in the Non-Compliance Log, including details of the incident, corrective actions taken, and timelines for resolution.

12. Training and Awareness

All staff, particularly those involved in reconciling and managing client funds, receive training on:

• The requirements of the Payment Services Regulations 2017.
• Safeguarding obligations and responsibilities.
• Procedures for identifying and escalating discrepancies.
• Reporting obligations to the FCA.

13. Review and Updates

This Policy is reviewed annually or whenever there are changes to the regulatory framework or business model. The review ensures that all safeguarding practices remain compliant with FCA guidelines and industry best practices.

• The next review date is October 2025.

14. Policy Approval

This Policy has been approved by the Board of Directors of A&B General (UK) Limited on October 2024 and will be implemented by all relevant departments.