Top 4 Mistakes to Avoid when Safeguarding Requirement for E-Money Institution
Running a business that deals with e-money requires special requirements to ensure that the customers are protected. Most people often end up not getting licensed, or their license gets provoked due to failure to follow the laws. When starting, you need to ensure that you get your e-money institution license from a reputable body. This helps avoid fines that could be costly later. Most e-money institutions often fail to comply with the regulatory obligation on safeguarding due to a lack of knowledge about what is required and the mistakes they should avoid. This blog post will explore common mistakes to avoid when safeguarding E-money institution requirements.
Failure to Define Rights of Third Parties over Funds
When designating safeguarding accounts, there should be merit for a third party to be considered. Ensuring that the money held explicitly belongs to the institution’s customer is critical. The best way to do this is to provide the word safeguarding and the payment name. However, renaming the account can lead to some technical issues. You can procure the acknowledgement letter that states that the funds are held for the benefit of the clients and not EMI. In addition, ensure that the safeguarding credit institution has no rights over the funds in these accounts.
Failure to Screen the Third Patties
Any e-money institution is mandated to ensure that their customers’ funds and details are well secured. Most companies are confused when choosing third-party institutions as custodians, insurers, or credit institutions. Before relying on another institution, the firms must exercise due diligence on all risks. The third company they choose should be reliable to protect its customer’s funds. Constantly monitor safeguarding counterparties daily to ensure that no risk could imposedby the third company. In addition, ascertain their financial position, credit ratings and the reputation of the custodians, credit institution or insurer. Furthermore, the planned review should be documented and conducted at least once every year to help reveal the approach that was taken by the payment when relying on a third party.
Failure to Allocate Funds
One of the major mistakes most companies make is failing to identify the beneficiary of the funds. This often happens when there is an error when stating the account number. The institution will usually fail to dispatch since it will not be considered relevant funds. When the funds are referred to this, they fail to be protected; hence, the chances of many getting lost are high. There should be adequate protection for the client’s assets such that even if the institution fails to identify the customer on time, their money will still be considered relevant funds and hence protected. Furthermore, if the institution fails to identify the customer on time, the funds should be returned to the payer.
Time to consider Safeguarding Requirement!
If you are starting an e-money institution, ensure you have the licenses from the authorized body. When you plan to get insured, this license is critical so that an insurance policy can cover the relevant funds. Avoiding the above mistakes helps you earn more trust with your clients and ensures their money is safe. Always ensure that what is considered relevant funds in terms of safeguarding is well defined to avoid any misunderstanding.
