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Guide · 12 min read
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Companion guide to CASS 15 Safeguarding Reconciliation: Why Matching the Numbers Is Not Enough.
Safeguarding customer funds is one of the most important responsibilities of a payment or electronic money institution.
Under the Financial Conduct Authority’s (FCA) CASS 15 framework, effective from 7 May 2026, firms must maintain accurate safeguarding records, carry out internal and external reconciliations and address discrepancies in accordance with the applicable requirements.
But what does an effective reconciliation process actually look like?
The answer goes beyond checking whether two balances match.
A reliable safeguarding reconciliation needs to establish how much the firm must protect, verify the available safeguarding resources, identify differences, determine corrective actions and retain evidence of what happened.
This guide explains how to structure that work into ten practical steps.
Step 1: Define the scope and ownership of the reconciliation
Before performing calculations, establish exactly which funds, accounts, legal entities and safeguarding arrangements belong within the process.
A payment firm may operate different products, currencies and payment flows. Some funds may be held directly in safeguarding bank accounts, while others may be held through permitted alternative arrangements. The reconciliation needs to reflect the firm’s actual safeguarding obligations.
What to do
Identify all relevant funds and customer liability records.
Document the safeguarding method or combination of methods used.
Maintain an inventory of relevant safeguarding bank accounts, assets and applicable third-party arrangements.
Distinguish separate safeguarding asset pools where required.
Assign operational responsibility for preparation, review, corrective action and escalation.
Establish a documented reconciliation policy.
Evidence to retain: Approved policies, account inventories, responsibility assignments, methodology documentation and change records.
Regulatory reference: CASS 15.2.4 and CASS 15.8.1.
CASS 15.2.4 requires responsibility for safeguarding oversight and reporting to the governing body to be allocated to a single sufficiently skilled and authorised director or senior manager.
Step 2: Establish a consistent reconciliation point
A reconciliation can produce an artificial difference when the records being compared represent different points in time. For example, a payment processor may report transactions using UTC, while a safeguarding bank provides statements using a local end-of-day cut-off.
CASS 15.8.21 requires firms to select consistent reconciliation points for their internal safeguarding reconciliations.
What to do
Define the reconciliation calendar and the relevant reconciliation point.
Document how the process handles time zones, weekends and bank holidays.
Identify the reporting cut-off used by each data source.
Establish controlled procedures for timing adjustments.
Ensure calculations use the correct records for the selected point.
Determine whether additional intraday reconciliations are appropriate for the firm’s transaction volume and risk.
Evidence to retain: Reconciliation calendar, cut-off specifications, source timestamps and documented timing adjustments.
Regulatory reference: CASS 15.8.19–22 and CASS 15.8.40–42.
Internal and external reconciliations generally must be performed at least once on each reconciliation day, and more frequently where necessary, subject to the applicable exceptions.
Step 3: Calculate the safeguarding requirement
The safeguarding requirement represents the amount the institution is required to protect.
Under the standard internal reconciliation method, this includes the total of individual safeguarding balances, ignoring negative balances, plus relevant funds received but not yet allocated to an individual client. The calculation must reflect the underlying customer entitlements rather than relying on an unexplained aggregate ledger balance.
What to do
Extract the relevant customer balance and transaction records.
Include relevant receipts that have not yet been allocated.
Apply only deductions permitted under the applicable rules.
Check that executed payments, redemptions and charges are treated correctly.
Exclude negative individual safeguarding balances from the required sum.
Preserve the customer-level detail underlying the final calculation.
Evidence to retain: Customer liability extracts, calculation outputs, unallocated-funds records, supporting transactions and adjustment records.
Regulatory reference: CASS 15.8.29–34 and CASS 15.2.5.
Unallocated relevant funds must not disappear from the safeguarding calculation simply because the firm has not yet identified the individual customer entitled to them.
Step 4: Calculate the safeguarding resource
Once the safeguarding requirement has been established, the firm needs to determine what resources are available to satisfy that obligation.
Under the standard method in CASS 15.8.26, safeguarding resource incorporates applicable balances held in relevant funds bank accounts, segregated relevant funds not yet placed into such accounts or invested, relevant assets and qualifying insurance or guarantee protection. The calculation must follow the firm’s approved safeguarding arrangements and the applicable valuation rules.
What to do
Identify each component of safeguarding resource.
Retrieve the corresponding bank, account and asset records.
Verify account identities and the dates of the underlying balances.
Apply the relevant valuation and calculation requirements.
Check for duplicate or omitted components.
Document the final resource calculation and supporting evidence.
Evidence to retain: Account balance records, asset valuations where applicable, supporting statements and the complete resource calculation.
Regulatory reference: CASS 15.8.25–28.
A figure without a clearly identifiable source, account and relevant date is difficult to verify independently.
Step 5: Perform the internal safeguarding reconciliation
The next step is to compare safeguarding resource with safeguarding requirement. The internal reconciliation establishes whether the firm’s recorded resources meet its safeguarding obligations at the selected reconciliation point.
Under the standard method, firms must also perform the applicable D+1 segregation comparison required by CASS 15.8.35, subject to the relevant exceptions. This is a distinct control and should not be confused with the obligation to allocate relevant-funds receipts promptly to individual customers.
What to do
Compare safeguarding resource with safeguarding requirement.
Identify the amount and direction of any discrepancy.
Perform the applicable D+1 segregation requirement and resource comparison.
Determine whether discrepancies require corrective action under CASS 15.8.50 or CASS 15.8.51.
Preserve the original calculations before recording subsequent corrections.
Evidence to retain: Internal reconciliation results, D+1 comparison where applicable, original discrepancies and details of corrective action.
Regulatory reference: CASS 15.8.10, 15.8.35 and 15.8.50–51.
A completed reconciliation should distinguish the position initially identified from the position after corrective action.
Step 6: Perform the external safeguarding reconciliation
The external reconciliation tests the accuracy of internal records against independent information from the relevant third parties holding funds or assets. It is not simply another calculation of the firm’s total safeguarding obligation.
Under CASS 15.8.47, the external reconciliation involves comparing internal account records against statements or confirmations, including account balances currency by currency and relevant assets investment by investment.
What to do
Obtain current statements or confirmations from the relevant safeguarding banks, custodians and other third parties.
Compare each relevant account with the corresponding internal records.
Perform the required comparisons by currency or investment.
Identify missing transactions, incorrect entries and unsupported balances.
Distinguish properly evidenced timing differences from other discrepancies.
Investigate differences that cannot be explained through the approved methodology.
Evidence to retain: Third-party statements, internal account records, comparison results, timing adjustments and investigation records.
Regulatory reference: CASS 15.8.39–47.
Where third-party records cannot be aligned precisely with the internal reconciliation point, the firm’s policies should explain how its external reconciliation still achieves its purpose.
Step 7: Investigate and classify discrepancies
Finding a discrepancy is not the same as understanding it.
A difference may arise because of delayed settlement, an unallocated customer payment, an incorrect transaction posting, an unsupported adjustment or another underlying issue. Each situation can require a different response.
What to do
Record each discrepancy individually.
Investigate its underlying cause.
Distinguish supported timing differences from genuine errors or shortfalls.
Identify which funds, accounts and customers may be affected.
Assign an owner and next action.
Establish escalation procedures appropriate to the issue.
Track the case until the required resolution has been documented.
Evidence to retain: A discrepancy register with reference, amount, currency, cause, owner, dates, supporting records, action taken and final status.
Regulatory reference: CASS 15.8.50–57.
For external reconciliation discrepancies, CASS 15.8.56 requires investigation and reasonable steps to resolve discrepancies without undue delay, except where the discrepancy arises solely from the specified accounting timing differences.
A discrepancy should not be marked as resolved merely because it has been assigned to another team.
Step 8: Take corrective action and assess escalation requirements
When a reconciliation identifies a shortfall, the firm must act according to the applicable requirements rather than leaving the difference for the next reconciliation cycle.
Under CASS 15.8.50, a safeguarding resource shortfall must generally be remedied as soon as possible and no later than the end of the day on which the reconciliation is performed, subject to the specified insolvency exception. Excess safeguarding resource must also be withdrawn in accordance with the rule.
Additional requirements apply to D+1 segregation discrepancies and unresolved external reconciliation discrepancies.
What to do
Determine which regulatory corrective-action rule applies.
Initiate the required funding, investment, withdrawal or other corrective action.
Use the appropriate approvals and authorisations.
Verify that the action was completed.
Record the corrected position without overwriting the original result.
Assess whether the circumstances trigger internal escalation or FCA notification.
Evidence to retain: Decision records, payment or transfer confirmations, approval records, corrected calculations and any escalation or notification documentation.
Regulatory reference: CASS 15.8.50–60.
CASS 15.8.60 requires the FCA to be informed in writing without delay in specified circumstances, including certain material failures involving reconciliation, records or discrepancy resolution.
Not every reconciliation difference automatically triggers an FCA notification. The obligation must be assessed against the actual conditions in the rule.
Step 9: Complete the review and preserve the audit evidence
A reconciliation produces stronger control when someone reviewing it can understand the process without reconstructing calculations from individual spreadsheets and emails.
CASS 15.8.9 specifies information firms must record for internal and external safeguarding reconciliations, including the date and time, actions taken and relevant calculation outcomes. An effective operational process should preserve further supporting evidence needed to explain discrepancies and corrective actions.
What to do
Record when the reconciliation was performed.
Preserve the original source records and calculations.
Document discrepancies, investigations and corrective actions.
Apply defined review and approval procedures.
Confirm that unresolved matters remain visible and assigned.
Store records in accordance with the applicable retention requirements.
Evidence to retain: A complete reconciliation pack, including source data, calculation results, discrepancy records, corrective actions and review documentation.
Regulatory reference: CASS 15.8.8–9.
CASS 15.8.8 generally requires records made under the chapter to be retained for five years from the later of their creation or most recent modification, unless otherwise specified.
Step 10: Monitor recurring issues and improve the process
Reconciliation should not only establish whether today’s records are correct. It should also help firms understand why the same problems keep appearing.
Recurring timing differences, missing references and repeated allocation errors may reveal weaknesses in upstream payment or financial processes. A reliable operating model makes those patterns easier to identify.
What to do
Monitor the number and value of reconciliation discrepancies.
Track unresolved issues and their age.
Identify recurring root causes.
Review whether previous corrective actions prevented recurrence.
Assess whether existing controls remain appropriate as volumes and complexity increase.
Report relevant safeguarding risks and control weaknesses through the firm’s governance arrangements.
Periodically test the reconciliation methodology and exception procedures.
Evidence to retain: Reconciliation performance reports, recurring-issue analysis, documented control improvements and governance review records.
Regulatory reference: CASS 15.2.4, CASS 15.8.1–2 and CASS 15.8.55.
The objective is to reduce repeated failures, not simply process the same exceptions more quickly.
Practical checklist: Is your reconciliation process ready?
Use this checklist to assess the operational controls supporting your safeguarding reconciliation.
The safeguarding scope, methods and responsibilities are documented.
The reconciliation calendar and cut-off points are defined.
All applicable customer liabilities and unallocated relevant funds are included.
Safeguarding resources can be traced to the supporting accounts and records.
Internal safeguarding reconciliation is performed at the required frequency.
The applicable D+1 segregation comparison is performed.
External reconciliation uses independent third-party records.
Discrepancies have documented causes, ownership and required actions.
Required corrective funding, withdrawals and approvals can be evidenced.
FCA notification requirements are assessed when relevant.
Reconciliation records and supporting evidence are retained.
Recurring discrepancies are reviewed and underlying control weaknesses addressed.
A checklist alone does not demonstrate regulatory compliance. It provides a starting point for assessing whether the operational process can consistently produce the evidence and actions required.
The role of technology in stronger safeguarding operations
As payment volumes and operational complexity increase, maintaining these controls through manual processes can become increasingly difficult. Each reconciliation requires information from multiple sources, precise calculations, investigation of discrepancies and documentation of the outcome.
Technology can support this work by making data preparation, repeatable verification, exception tracking and evidence retention more consistent.
But the objective should be more than automating matching. A well-designed reconciliation process should help Finance teams understand what happened, determine what needs attention and move the required action towards completion.
At Valurec, this is how we think about reliable financial operations. We believe automation should be built around the actual systems, data, rules and responsibilities of an organisation.
AI can support the development and adaptation of those processes. Financial calculations and repeatable controls should operate through tested and approved rules, while the institution retains responsibility for its safeguarding decisions and obligations.
The result to work towards is not simply a higher automated matching rate.
It is a reconciliation process that produces reliable numbers, supports timely action and preserves the evidence behind the outcome.
Understand where your reconciliation process can improve
If your team still relies on manual data preparation, fragmented discrepancy investigations or separate evidence collection, it may be time to review the complete reconciliation process. Talk to Valurec about building more reliable, controlled and auditable finance operations.
Regulatory sources
FCA Handbook: CASS 15, Payment services and electronic money
FCA Handbook: CASS 15.8, Records, accounts and reconciliations
Important: This guide describes the standard reconciliation approach and relevant operational practices. Some requirements differ depending on the institution’s safeguarding method, structure and circumstances. In particular, CASS 15 provides specific exceptions and conditions for certain insurance or guarantee arrangements, non-standard reconciliation methods and insolvency events. This material is for general information only and does not constitute legal or regulatory advice.
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