On February 3, 2026, Gladius co-hosted a pivotal engagement session at the ICAEW Member’s Hall in London to dissect the future of safeguarding for the UK’s payment and e-money sector. With the Financial Conduct Authority (‘FCA’) set to launch the new Supplementary Regime on May 7, 2026, the industry is standing on the precipice of significant regulatory change.

The session, led by Gladius’s own Dennis Cheng in collaboration with the Regulatory Working Group of The Payments Association, focused on the Financial Reporting Council’s (‘FRC’) newly drafted Interim Guidance. This guidance serves as a critical “pre-cursor” for safeguarding auditors during the transition to a final assurance standard.

---

Bridging the Gap: The Transition Period

The “transition period” is defined as the time between the Supplementary Regime rules coming into force this May and the publication of a final FRC assurance standard, which is anticipated for H1 2027. During this time, safeguarding audits will be considered Public Interest Assurance Engagements, requiring auditors to adhere to the FRC’s Revised Ethical Standard 2024.

Key highlights from the FRC’s Interim Guidance discussed during the session include:

• The CASS Reference Point: While not a new performance standard itself, the Interim Guidance is heavily informed by the principles of the existing Client Asset (‘CASS’) Assurance Standard.
• A Dual Focus: Auditors will provide “reasonable assurance” on two fronts: the adequacy of systems throughout the period and compliance with relevant rules at the period end .
• The Insolvency Mind-set: Records must be maintained such that an insolvency practitioner could, at any time and without delay, distinguish relevant funds from other funds.
• IT & Controls: There is a heightened focus on IT General Controls (‘ITGCs’), including access to applications, data backup, and incident management.

Critical Timelines for Firms

For firms safeguarding more than £100,000 of relevant funds, the clock is ticking. While the new rules take effect on 7 May 2026, the FRC and FCA have offered a small breathing room for the first submissions:

• Extended Deadline: For audit periods ending within 12 months of implementation, the submission deadline is extended from four months to six months after the period end.
• First Submission Cut-off: The latest possible date for the first audit report submission under the new rules is November 13, 2027.
• Hybrid Opinions: Firms may elect for a “hybrid opinion” in the first period to cover both the legacy regime (pre-May 7) and the new Supplementary Regime (post-May 7) within a single report.

---

Preparing for May 7 and Beyond

The consensus from our session was clear: proactive engagement is non-negotiable. Firms are expected to undertake structured internal assessments, such as a gap analysis of current controls against the new CASS 15 rules.

At Gladius, we are committed to helping our clients navigate this “CASS-style” regime with clarity and confidence. By leveraging established CASS methodologies now, firms can ensure they are ready for the final safeguarding appendix expected in Spring 2027.

A Note on Breaches: Under the new regime, the concept of materiality does not apply to breach reporting. All identified breaches must be recorded in the Breaches Schedule, though their severity remains a factor in the auditor’s final opinion.

How is your firm currently mapping its existing safeguarding controls against the upcoming CASS 15 requirements for the May 7 implementation?

---

Your Feedback in Action

Following the discussions at our February event, Gladius and The Payments Association compiled and submitted a comprehensive community response to the FRC. This feedback highlighted industry concerns regarding implementation timelines, the interpretation of CASS 15 rules, and the practicalities of IT control testing.

We are pleased to share that since our session, the FRC has officially published the Interim Guidance on Payment and E-money Safeguarding Assurance Engagements on March 17, 2026. This guidance incorporates many of the principles discussed during our engagement and provides a steady path for firms as they prepare for the May deadline.

Access the Guidance

You can read the full official publication and related documents here: FRC News: Interim Guidance on Payment and E-Money Safeguarding Assurance Engagements