Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
BoC Publishes Final Guideline on Safeguarding End-User Funds
Retail Payments | Dec 12, 2024
Image: Freepik/wayhomestudio
The Bank of Canada Releases Final Guidelines for Safeguarding End-User Funds
The Bank of Canada (BoC) has published its final guideline on safeguarding end-user funds (24 page PDF), providing payment service providers (PSPs) with clear expectations and requirements under the Retail Payment Activities Act (RPAA). The BoC has also shared a summary of feedback from their consultation along with their responses (6 page PDF) that helped update the final guidelines.
See: RPAA Registration Deadline Passed See Who Applied
Key Consultation Insights
1. Trust Arrangements
- PSPs need to set up trust arrangements that meet three clear legal requirements under Canadian law.
- They don’t need separate trust agreements with each end-user, but they must clearly declare the trust arrangement.
- PSPs in Quebec must follow specific Civil Code rules, either by establishing a "trust" or acting as administrators of users' funds.
2. Segregation of Funds
- End-user funds need to be placed in safeguarding accounts as soon as they are received.
- If unavoidable delays happen, the funds must be moved to the safeguarding account by the next business day.
- Any delays must be documented and shared with the Bank and reported as a shortfall.
3. Indirect Arrangements
See: Key Findings from 2025 Advanced Payments and Fintech Survey
- Using intermediaries to safeguard funds can be problematic because they might not have the necessary authorizations to act as trustees.
- If an intermediary goes bankrupt, it can be difficult and complex to return funds to end-users.
- These issues make it hard for intermediaries to meet the Bank of Canada's safeguarding rules.
4. Insurance and Guarantees
- PSPs can safeguard end-user funds using insurance or guarantees.
- The guidelines don't specify how these products should be designed.
- Any insurance or guarantee used must meet RPAA rules, including ensuring users can access their funds if the PSP becomes insolvent.
5. Clarified Definitions and Scenarios
- Clear examples explain the difference between "holding funds" (money kept by a PSP) and "in transit" funds (money being transferred right away).
- The updated rules clarify that certain funds like those set aside for chargebacks do not need to follow safeguarding requirements.
⚠ Important Reminder
Registration Under RPAA is Mandatory
If you’re a PSP operating in Canada under the RPAA, you must apply for registration to continue your services legally.
Not yet applied? Assess if you’re subject to the RPAA.
Operating without registration could result in enforcement actions.
📅 Preparing for 2025
Risk management and reporting obligations come into effect on September 8, 2025. Prepare early to meet the requirements. Start now by comparing your current operations with RPAA requirements. Identify areas that need improvement to meet compliance and map out the steps to address any gaps.
Stay tuned for more updates and insights!
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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