Explainers

When an EMI Fails: How UK Special Administration Works

Dmytro Medvid, Founder · October 20, 2026 · 11 min read

Fyora cover: how UK special administration returns safeguarded customer funds when an EMI fails

Key takeaways

Customers of a failed UK payment or e-money institution are not covered by the FSCS; they rely on safeguarding and on special administration under the Payment and Electronic Money Institution Insolvency Regulations 2021.
Special administrators must return relevant funds as soon as reasonably practicable, using bar dates and a court-approved distribution plan, and can transfer customers to a solvent institution.
Customers rank ahead of other creditors over the asset pool, the firm's own assets top up a shortfall, but the costs of distributing the funds are paid out of the customers' money.
The FCA found an average 65% shortfall in client funds at payments firms that failed between 2018 and 2023; poor records make shortfalls and costs worse.
Since 7 May 2026, CASS 15 requires daily reconciliations, a monthly safeguarding return, annual audits (with a small-firm exemption) and a resolution pack retrievable within 48 hours.

When a UK payment or e-money institution fails, its customers are not covered by the Financial Services Compensation Scheme. What protects them is the firm's safeguarding, and a special administration in which court-appointed insolvency practitioners try to return the safeguarded money. In practice they often get back less than they were owed, and it takes years. On 15 October 2026 ePayments Systems Limited entered special administration, four years after it ceased customer trading. Here is how the process works and what it means for anyone who runs, or relies on, an EMI.

This guide covers the regime step by step, the court decisions that settle who gets paid and in what order, and what the FCA's new safeguarding rules (in force since 7 May 2026) change about how a failure plays out.

What happened at ePayments

ePayments Systems Limited (EPS) is authorised by the FCA to issue e-money under the Electronic Money Regulations 2011. In 2020 the FCA's review of its anti-money-laundering controls led to a freeze on all customer accounts and a ban on new accounts; the firm said in 2022 that it would not return to full operations and would focus on refunds, telling customers their funds remained in safeguarded accounts. According to the joint special administrators at Opus Restructuring, EPS ceased all customer trading in September 2022, and its directors have now concluded the company is no longer viable.

The administrators' first job is to take control of the relevant funds and reconcile the safeguarded accounts against what customers are owed. Their notice says: "the timing and quantum of any return to customers is uncertain", and distributions depend on what is left in the customer funds account and the cost of returning it.

EPS is not an isolated case. Monevium, an FCA-authorised payment services provider offering euro IBAN accounts and SEPA payments, entered special administration in June 2026. The pattern is common enough that the FCA rebuilt its safeguarding rulebook around it.

The numbers behind the FCA's safeguarding reforms

In its consultation paper CP24/20, the FCA reported that 12 payments firms that safeguarded relevant funds became insolvent between Q1 2018 and Q2 2023, and that firms failing in that period had an average shortfall of 65% in funds owed to clients. According to DLA Piper's summary of the FCA's analysis, where there was money to distribute, it took an average of 2.3 years to pay it out.

The amounts involved are growing: Grant Thornton puts relevant funds safeguarded by UK e-money institutions at £11 billion in 2021 and £26 billion in 2024.

How special administration works

Before 2021, a failed payment firm went through ordinary administration or liquidation, which were not designed to return customer money quickly. The Payment and Electronic Money Institution Insolvency Regulations 2021 (SI 2021/716) created a special administration regime from 8 July 2021, with procedural rules (SI 2021/1178) following on 12 November 2021 (Grant Thornton).

The three objectives

Under regulation 12, the special administrators pursue three objectives:

Return relevant funds to customers as soon as reasonably practicable.
Engage in good time with payment system operators, the Payment Systems Regulator, the Bank of England, HM Treasury and the FCA.
Rescue the firm as a going concern, or wind it up in the best interests of creditors.

The FCA can direct the administrators to prioritise one or more objectives (regulation 38) where that is necessary in the public interest, for example for financial stability, confidence in payment and e-money markets, or protection of customers. The administrators are officers of the court, and the firm can stay FCA-authorised during the process, as EPS has.

What the regime adds to ordinary insolvency

Bar dates (regulations 20–22). A soft bar date invites customer claims by a deadline. A hard bar date, which needs separate court approval, lets the administrators distribute without holding back money for late claims. The court must be satisfied that all reasonable steps were taken to contact claimants and that there is no reasonable prospect of further claims.
Distribution plans. Customer money goes out under a plan approved by the court as fair and reasonable.
Transfer arrangements (regulations 24–34). Customers' funds and accounts can be moved to a solvent institution instead of being paid out.
Continuity of supply (regulation 36). Suppliers of key services cannot simply walk away, which keeps the systems needed to identify customers running.

Where customer money goes when an EMI fails

Day to day: customers load money, the firm records balances and keeps the matching funds in a segregated safeguarding account.
Failure: the FCA, the firm's directors or another eligible applicant asks the court for a special administration order. The court appoints special administrators.
The administrators take control of the safeguarding accounts, reconcile them against customer balances and set a bar date for claims.
Any shortfall is topped up from the firm's own assets if possible. The court approves a distribution plan, distribution costs come out of the pool, and customers are paid pro rata.

Simplified UK special administration. Real cases add tracing, disputes and interim distributions.

Who gets paid first, and why there is often less than expected

A Court of Appeal decision and two recent High Court judgments answer the main questions.

There is no statutory trust, but there is priority. In Re Ipagoo (March 2022), the Court of Appeal held that the Electronic Money Regulations do not create a statutory trust over customer funds. E-money holders still rank ahead of other creditors over the "asset pool", and the pool includes funds that should have been safeguarded but were not (Linklaters).

The firm's own money tops up a shortfall. Where safeguarded funds fall short, the company's own assets must be used to top them up before unsecured creditors see anything. Remaining shortfalls are shared pro rata among customers (Re Monneo [2025] EWHC 2818 (Ch), paras 12, 19–21).

Distribution costs come out of customers' money. Customer claims rank ahead of unsecured creditors and the general expenses of the administration, except the costs of distributing the relevant funds, which are paid from those funds. Re Monneo (paras 37–38) followed Mellor J in Re Rational Foreign Exchange [2025] EWHC 1958 (Ch) on this point.

That last rule is where poor records become expensive. Every month administrators spend rebuilding a ledger, chasing bank statements or tracing payments is paid for, in part, by the customers they are trying to repay.

A worked example: Monneo

Monneo Ltd, an authorised payment institution, shows how this works out in real numbers. The FCA issued a supervisory notice on 5 April 2023 after more than €8.7 million in unauthorised payments to the former CFO or connected entities. A special administration order followed on 30 May 2023. By the time the distribution plan reached court in October 2025, the administrators had recovered about €18.1 million against accepted customer claims of about €25.6 million, leaving a shortfall of about €7.5 million. The estimated top-up from the company's own assets was about €3.1 million, and the court approved a costs reserve of roughly 4.7 million (the transcript records it in pounds) (Re Monneo, paras 8–35).

A formal reconciliation of the safeguarding records was not possible, so the administrators identified and contacted customers one by one instead (para 16). Almost two and a half years passed between the order and the approved plan.

Use the calculator to see how the same mechanics apply to your own book. It is a simplification: real cases involve currency conversion, disputed claims, interim distributions and costs that change over time.

What would customers get back?

Customer balances owed(€m)

Safeguarded funds recovered(€m)

Firm's own assets available for top-up(€m)

Costs of distributing the funds(€m)

Shortfall before top-up: €8,000,000.00
Asset pool after top-up: €21,000,000.00
Available to customers after costs: €17,000,000.00
Recovery per €100 owed: 65%

Assumes distribution costs are paid from the pool and any remaining shortfall is shared pro rata, as in Re Monneo and Re Rational Foreign Exchange. Defaults are rounded figures in the range of the Monneo case.

Illustrative model of the UK asset-pool mechanics. Not a prediction for any firm.

With the defaults, customers get back roughly two-thirds of what they are owed. Set the safeguarded figure equal to the balances owed and halve the costs, and recovery rises above 90%. Good records and complete safeguarding make that difference.

What CASS 15 changes about a failure

The FCA's PS25/12 introduced a "supplementary regime" that took effect on 7 May 2026 for authorised payment institutions (other than those providing only account information or payment initiation services), authorised and small e-money institutions, credit unions that issue e-money, and small payment institutions that opt in. It is an interim step towards a later "CASS-style" post-repeal regime intended to replace the safeguarding provisions of the EMRs and PSRs. CP24/20 proposed a statutory trust over relevant funds for that end state, but the FCA has not taken it forward yet and plans to consult again. The rules aimed at the problems seen in special administrations are:

Daily reconciliation. Internal and external reconciliations at least once every reconciliation day, with any shortfall made good by the end of that day (Buckingham Capital Consulting).
A resolution pack. A set of records, including executed safeguarding account letters and agreements, that an insolvency practitioner can retrieve within 48 hours (Womble Bond Dickinson).
A monthly safeguarding return to the FCA, and an annual external safeguarding audit unless the firm has safeguarded no more than £100,000 for at least the past 53 weeks.
A named individual — a single director or senior manager responsible for safeguarding compliance — and documented due diligence on safeguarding banks, including periodically considering whether to spread funds across more than one institution.

None of this guarantees that customers are repaid in full. What it does is shorten the most expensive part of a special administration, the weeks or months in which administrators reconstruct who is owed what. If a firm's reconciliation and resolution pack are in order on the day it fails, the bar date can be set sooner and less of the pool goes on costs.

A wind-down that never finishes

warning

EPS stopped customer trading in September 2022 and entered special administration in October 2026. A solvent wind-down that drifts for years can still end in court, and customer money stays frozen for the whole period. Set clear triggers for when a wind-down becomes an insolvency appointment.

If you rely on someone else's EMI

Many fintechs do not hold their own licence. They run on an EMI partner's licence as agents, distributors or white-label programmes, which makes that partner's failure your customers' problem. Special administration freezes accounts while the administrators work, and your customers will call you, not them.

Questions worth asking any EMI or payment institution you rely on:

Which safeguarding method do you use (segregation or insurance/guarantee), and with how many credit institutions?
Can you show a recent reconciliation that maps our customers' balances to safeguarded funds?
Has your annual safeguarding audit been qualified, and has the FCA imposed any requirements on you? Check the Financial Services Register yourself.
If you fail, can our customer list and balances be produced from our own records, independently of your systems?

The last question is the most important. If your platform holds a complete, reconciled sub-ledger of your customers' balances, administrators can identify your customers quickly and a transfer to another institution becomes realistic. If it does not, your customers wait in the general queue.

And in the EU?

The EU has no harmonised special administration regime for payment and e-money institutions. Article 10 of PSD2 requires safeguarded funds to be insulated, under national law, against the claims of other creditors, in particular in the event of insolvency, but how quickly customers are repaid depends on each member state's insolvency procedures. The PSD3 compromise text adds requirements on concentration risk and wind-down plans. We covered these in PSD3 and the end of the EMI licence. For an EU group with a UK entity, the practical answer is the same on both sides: one reconciled ledger and a resolution pack that does not depend on the people who built the system still being there.

A fail-well checklist

Could an administrator return your customers' money in weeks, not years?

Every customer balance maps to safeguarded funds, daily
Internal and external reconciliations run every reconciliation day, with breaks investigated and shortfalls funded the same day.
Resolution pack retrievable within 48 hours
Account letters, safeguarding agreements, ledger extracts, system access instructions and key contacts, kept current.
Ledger exportable without your engineers
A stranger with read access can produce customer-level balances and transaction history.
Safeguarding spread across more than one bank
Documented due diligence on each institution and a plan if one withdraws.
Wind-down plan costed from real numbers
Staff retention, systems and customer communications for the full return period, not a desktop estimate.
Clear triggers for a formal appointment
When a solvent wind-down stops being credible, the board knows who to call and when.
Agents and white-label programmes ring-fenced in your records
Each programme's customers are identifiable on their own.
Audit trail of decisions
Reconciliation breaks, overrides and corrections logged with who approved what.

A practical self-check, not a regulatory checklist. Progress is saved on this device.

Our EMI technology checklist covers the systems behind these items, and compliance by design explains why the audit trail should live in the platform, not in spreadsheets.

This article explains public rules and court decisions and is not legal or insolvency advice; take advice from counsel and your regulator on your own arrangements.

Our view

In the cases above, how much money ends up missing was decided long before the administrators arrived. The shortfall and the cost of finding it both depend on records the firm kept, or failed to keep, while it was trading. CASS 15 puts that into rules, but the rules only set a minimum. The firms that will hold up in a failure are the ones whose ledger, reconciliation and audit trail are one system, so a stranger can read it on day one.

That is why Fyora's platform keeps customer accounts, transaction records, compliance decisions and the audit log in one back office rather than scattered across tools. Our engineering team builds the jurisdiction-specific reporting around it. If you want to test how your setup would look to an administrator, talk to us.

FAQ

Is money held with an e-money institution protected by the FSCS?

No. The FSCS does not cover payment services or e-money. Customer money is protected by the firm's safeguarding obligations, and if the firm fails, special administrators try to return the safeguarded funds.

What is special administration for payment and e-money institutions?

A UK insolvency regime created by the Payment and Electronic Money Institution Insolvency Regulations 2021. Court-appointed administrators must return customer funds as soon as reasonably practicable, engage with payment systems and authorities, and then rescue or wind up the firm.

How long does it take to get money back from a failed EMI?

It varies. According to DLA Piper's summary of the FCA's analysis, where funds were available it took an average of 2.3 years for firms that failed between 2018 and 2023. In Monneo, about two and a half years passed between the order and court approval of the distribution plan.

Who pays the costs of a special administration?

The costs of distributing the safeguarded funds are paid from those funds, following Re Rational Foreign Exchange and Re Monneo. So the longer and harder the distribution, the less customers receive.

What happened to ePayments Systems Limited?

Its accounts were frozen in 2020 after the FCA found weaknesses in its anti-money-laundering controls, it ceased customer trading in September 2022, and it entered special administration on 15 October 2026 with Opus Restructuring as joint special administrators.