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A new report from the Norwegian Financial Supervisory Authority (Finanstilsynet) has identified areas of non-compliance in how payment and e-money institutions safeguard customer funds.
The report, based on a thematic review, shows that several firms have improperly commingled client funds with their own money, either on a temporary basis or for extended periods.
Finanstilsynet pointed out that this incurs serious risks to consumer protection, especially in the event of a firm bankruptcy.
Such practices, the regulator warned, may jeopardise customers’ right to reclaim their funds ahead of other creditors.
Finanstilsynet reviewed 25 institutions, asking them to detail their fund-handling procedures and provide evidence of compliance with safeguarding requirements under the Financial Institutions Act.
Although most firms acknowledged their obligations, the regulator found widespread shortcomings in how fees, interest and buffers are managed within client accounts.
Some institutions were found to be depositing fees into client accounts or deducting them directly from customer payments.
Others maintained so-called buffer funds, which involved using company money in client accounts to manage settlement delays, and many retained interest earned on these accounts without promptly transferring it to operational accounts.
Action required
Finanstilsynet was clear that such practices are not compliant with the legal requirement to segregate and identify customer funds.
“It is not sufficient in itself that the funds are placed in a client account; they must also actually be separated and identified so that there is no confusion with the undertaking's own funds,” the regulator said.
It has instructed firms to take immediate corrective action, stating that they must ensure that fees are either separated from client payments or invoiced separately.
In addition, firms must ensure that any buffers are held in separate operational accounts, while interest accrued on client funds needs to be transferred to an operating account without undue delay.
Finanstilsynet said it will continue to monitor compliance through ongoing supervision and follow-up inspections.
A wider problem
As referenced by the regulator, the findings echo similar concerns raised by the Danish Financial Supervisory Authority in 2023, following the collapse of a payment firm where the mixing of funds left customers unable to reclaim their money.
As covered by Vixio, regulators in Malta and Ireland have also raised concerns about the safeguarding of funds.
For example, in its Regulatory & Supervisory Outlook report for 2025, which was published in February, the Central Bank of Ireland said that despite improvements following supervisory interventions, payments and e-money firms still have significant deficiencies in their safeguarding arrangements.
As with their Nordic peers, these deficiencies include poor account reconciliation, co-mingling of funds and failures to properly designate safeguarding accounts.
