If a firm goes out of business, a liquidator would be appointed to distribute the firm’s assets.

For firms like Currencies Direct (Electronic Money Institutions) a process called ‘safeguarding’ means that client’s money is kept in separate bank accounts to our own money. And there are daily processes in place to look at the cash we hold and to identify how much of this belongs to our clients.

The liquidator would use those records to ensure that returning our client’s money gets first priority over all other creditors. (If we didn’t have enough money in our business to cover the cost of the liquidation process, then the liquidator could use clients’ money to recover their costs.

Safeguarding vs FSCS

The Financial Services Compensation scheme (FSCS) that applies, for example, to UK banks protects the first £85,000 per customer.

Safeguarding has no upper limit, but due to the litigation process, it could take longer to get your money refunded, than with FSCS.

You might find these helpful:

How is my money protected?
Safeguarding – the legal details
How is an EMI different from a bank?