FINANCIAL INSTITUTIONS ACT (SAFEGUARDING OF FUNDS) REGULATIONS (safeguardingoffunds)

SUBSIDIARY LEGISLATION 376.04

FINANCIAL INSTITUTIONS ACT

(SAFEGUARDING OF FUNDS) REGULATIONS

30th April, 2011

LEGAL NOTICE 191 of 2011, as amended by Legal Notices 71 of 2020

and 67 of 2025.

Part 1

Preliminary

(1) The title of these regulations is the Financial

Institutions Act (Safeguarding of Funds) Regulations.

(2) The provisions of these regulations, insofar as they apply

to financial institutions issuing electronic money in terms of the

Third Schedule to the Act, shall be deemed to have come into force

on the 30th April, 2011.

(1)

Deleted by Legal Notice 71 of 2020.

(2) For the purposes of these regulations, unless the context

otherwise requires

"the Act" means the Financial Institutions Act;

"business day" means a day on which the relevant payment

service provider or electronic money issuer of the payer or the

payment service provider or electronic money issuer of the payee

involved in the execution of a payment transaction is open for

business as required for the execution of a payment transaction;

"electronic money institution" means a financial institution

issuing electronic money in terms of the Third Schedule to the Act;

"financial institution" means a payment institution as defined in

these regulations and, or an electronic money institution;

"funds" mean banknotes and coins, scriptural money and

electronic money as defined in the Act;

"payment institution" means a financial institution providing

payment services as referred to in paragraphs 2(a) to (f) of the Second

Schedule to the Act;

"Payment Services Directive" means Directive (EU) 2015/2366 of

the European Parliament and of the Council of 25 November 2015 on

payment services in the internal market, amending Directives 2002/65/

EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/

2010, and repealing Directive 2007/64/EC, as may be amended from

time to time and includes any implementing measures, implementing

technical standards, regulatory technical standards and similar

measures that have been or may be issued thereunder;

"the Commission Delegated Regulation" means the Commission

Deleg ated Regul at ion (EU) 20 15/61 of 10 October 2014 to

su pplem ent Reg ulati on (EU ) No 575 /201 3 of the European

Parliament and the Council with regard to liquidity coverage

requirement for credit institutions, as amended from time to time;

(3)

Deleted by Legal Notice 71 of 2020.

(4) Words and expressions used in these regulations which are

also used in the Act, but which are not defined herein, shall have the

same meaning as in the Act.

Part 2

General

(1) A financial institution in receipt of funds from a payment

service user, or through another payment service provider for the

execution of payment transactions, or from an electronic money holder

in exchange for electronic money that has been issued, shall hold such

funds solely for and on behalf of and in the interest of that payment

service user or electronic money holder.

(2) Notwithstanding the provisions of article 1894 of the Civil

Code or any other law, or the agreement entered into between the

financial institution and the payment service user or electronic money

holder, or the fact that the payment service user’s funds or electronic

m o n e y h o l d e r ’s f u n d s h e l d b y t h e f i n a n c i a l i n s t i t u t i o n a r e

registered in the name and title of or are otherwise vested in the

financial institution, such funds shall be deemed to constitute a

distinct patrimony, separate from that belonging to the financial

institution.

(3) Notwithstanding the provisions of any other law, and except

as expressly provided in the agreement entered into between the

financial institution and the payment service user or electronic

money holder, the control of funds belonging to a payment services

user or electronic money holder by a financial institution shall not

give or be deemed or construed to give to the financial institution

any rights over such funds; nor shall it create any form of loan or any

other similar credit facility between the financial institution and the

payment service user or electronic money holder notwithstanding

the nature of the funds or the rights or obligations of the financial

institution in relation thereto.

(1) Notwithstanding the provisions of any other law, a

payment service user or electronic money holder whose funds are

held by the financial institution enjoys a right of ownership over

such funds notwithstanding that they may be registered in the name

and title of, or are otherwise vested in, the financial institution.

(2) Any records, accounts and other statements held or issued

by the financial institution shall, saving any proof to the contrary,

constitute evidence of their contents and of the right of ownership

of the payment service user or electronic money holder.

(1) Notwithstanding the provisions of any other law, the

creditors of a financial institution shall have no claim or right of

action on or against the funds held by the financial institution for

and on behalf of and in the interest of any payment services user or

electronic money holder, and such funds shall not be affected in

any manner by the provisions of laws and regulations in force

regulating the insolvency or bankruptcy of the financial institution.

(2) In the event of any such insolvency or bankruptcy or related

order or resolution, or in the event that the competent authority so

requires, the financial institution or any administrator or receiver or

other officer appointed to represent it by any court or otherwise

shall, on demand of any payment service user or electronic money

holder or of the competent authority, immediately transfer the

control, possession and title to all funds held by or in the name of

the financial institution on behalf of the payment service user or

electronic money holder to another financial institution or to such

other person as may be instructed by the payment service user or

electronic money holder or by the competent authority.

(3) Notwithstanding the provisions of any other law, in the event

that any funds held by the financial institution for and on behalf of and

in the interest of any payment service user or electronic money holder

are, at the request of any creditor of the financial institution, made

subject to any precautionary or executive act or warrant granted by

a n y C o u r t i n t e r m s o f t h e C o d e o f O rg a n i z a t i o n a n d C i v i l

Procedure, the payment service user or electronic money holder on

whose behalf and in the interest of whom such funds are being held,

the financial institution on behalf of the payment service user or

electronic money holder or the competent authority may, by

application to the Court, request the release of the funds from such

act or warrant and the Court shall, on production of evidence as it

may deem fit, accede to the application without undue delay.

(1) The delivery of the funds of a payment services user or

electronic money holder to a financial institution and from a

financial institution to a payment service user or electronic money

holder or another financial institution for the purpose of

safeguarding the funds in terms of these regulations shall not be

deemed to constitute a chargeable transfer for the purposes of the

Duty on Documents and Transfers Act and for the purposes of

article 5(1) of the Income Tax Act, where the delivery of such

funds does not constitute a change in the beneficial owner of the

funds.

(2) For the purpose of this regulation, "beneficial owner"

means a person who is the real owner of, or who is otherwise

beneficially entitled to, the funds held under control by the

financial institution, as provided in regulation 4.

Part 3

Safeguarding of Funds

(1) A payment institution shall, for the purpose of article

10B of the Act, safeguard all funds in either of the following ways

(a) funds shall not be commingled at any time with the funds

of any natural or legal person, other than payment service

users on whose behalf the funds are held. Where the

funds of payment service users are held in a common

account, the funds belonging to each payment service

user shall be identifiable at all times. Where funds are

still held by the payment institution and not yet delivered

to the payee or transferred to another payment service

provider by the end of the business day following the day

when the funds have been received, they shall be

deposited in a separate account in a credit institution or in

a central bank at the discretion of such central bank, or

invested in secure liquid low-risk assets, as defined in

sub-regulation (1A). Funds shall be insulated in

accordance with these regulations in the interest of the

payment service users against the claims of other

creditors of the payment institution, in particular in the

event of insolvency; or56

(b) funds shall be covered by an insurance policy or some

other comparable guarantee from an insurance

company or a credit institution, which does not belong

to the same group as the payment institution itself for

an amount equivalent to that which would have been

segregated in the absence of the insurance policy or

other comparable guarantee, payable in the event that

the payment institution is unable to meet its financial

obligations.

(1A) For the purpose of this regulation

(a) secure, low-risk assets are

(i)

asset items falling into one of the categories set

out in Table 1 of Article 336(1) of the CRR for

which the specific risk capital charge is no

higher than 1.6% but excluding other qualifying

items as defined in Article 336(4) of the CRR; or

(ii)

units in an undertaking for collective investment

in transferable securities (UCITS) which invests

solely in assets referred to in sub-paragraph (i)

Provided that in exceptional circumstances and

with adequate justification, the competent

authority may, based on an evaluation of

security, maturity, value or other risk elements

of the assets referred in sub-paragraphs (i) and

(ii), determine which of those assets do not

constitute secure, low-risk assets for the purpose

of sub-regulation (1).

(b) secure, low-risk assets shall be deemed to be liquid if

they fall within the criteria set out in a Financial

Institutions Rule.

(1B) Where a payment institution is required to safeguard funds

pursuant to article 10B of the Act and a portion of those funds is to

be used for future transactions, with the remaining amount to be

used for non-payment services, that portion to be used for future

transactions shall also be subject to the requirements of the said

article. Where that portion is variable or not known in advance, the

payment institution shall safeguard a representative portion

assumed to be used for payment services, provided that such a

representative portion can be reasonably estimated on the basis of

historical data to the satisfaction of the competent authority.

(1C) An electronic money institution shall safeguard funds

which have been received in exchange for electronic money that

has been issued in accordance with sub-regulations (1), (1A) and (1B),

and the said provisions shall be applied and interpreted mutatis

mutandis

Provided that funds received in the form of payment by

payment instrument need not be safeguarded until they are credited

to the electronic money institution’s payment account or are

otherwise made available to the electronic money institution in

accordance with the execution time requirements laid down in the

Payment Services Directive, where applicable. In any event, such

funds shall be safeguarded by not later that five business days after

the issuance of electronic money.

(1D) Sub-regulations (1) to (1B) shall also apply to electronic

money institutions undertaking the activities listed in paragraph

2(a) to (f) of the Second Schedule to the Act that are not linked to

the activity of issuing electronic money.

(2) A financial institution shall carry out any other functions

and duties as may be prescribed in a Financial Institutions Rule.

(1) A financial institution in receipt of funds belonging to

payment service users or electronic money holders shall be liable for

any loss or prejudice suffered by the payment service users or

electronic money holders due to the financial institution’s fraud, wilful

default, misconduct or negligence including the unjustifiable failure

to perform in whole or in part the financial institution’s obligations

arising under these regulations, the terms and conditions of the

agreement entered into with the payment service users or electronic

money holders, the conditions of any financial institutions licence

or such other requirements as may be laid down by the competent

authority.

(2) For the purposes of this regulation, "financial institution"

includes such other financial institutions to whom functions or duties

may be delegated or to whom funds are entrusted in terms of these

regulations and any applicable Financial Institutions Rules issued

under the Act.

Deleted by Legal Notice 67 of 2025.

Deleted by Legal Notice 71 of 2020.