EEA Safeguarding Information
Safeguarding: How Modulr keeps customer funds safe
Who is Modulr?
Modulr enables thousands of businesses of all sizes across the UK and Europe to efficiently pay-in, collect and disburse funds instantly into a range of accounts, wallets and cards. We’ve created an industry-leading platform, connected to an expanding network of accounting and payroll platforms. Our payments expertise and extensive product capability also enables us to solve specific problems for a growing portfolio of hundreds of clients in a range of industry verticals.
Is Modulr a bank?
Modulr is not a bank, we’re an Electronic Money Institution (EMI). An EMI is an organisation that has been authorised by the regulator to issue e-money accounts and provide payment services. In the EEA, we're regulated by De Nederlandsche Bank.
How is Modulr different from a bank?
One of the main differences between Modulr, an EMI, and a bank is that banks lend money, whereas EMIs are prohibited from lending money. Specifically, banks receive deposits from customers that they use to lend money out and make a profit on the difference. By contrast, an EMI such as Modulr does not lend any customer funds or offer interest on balances. Our payment services however are regulated by the same payments regulations that apply to banks.
How does Modulr protect customer funds?
Modulr is required by law to use a process called Safeguarding to protect customer money. This means we ensure that the funds we receive in exchange for e-money are segregated from all other funds that we hold and they cannot be used for any other purposes. The funds we safeguard are therefore completely separate from the additional funds that Modulr holds to meet its corporate obligations and run its business. These safeguarded funds are held at credit institutions (banks) in specially designated accounts belonging to Stichting Custodian Modulr Finance, an entity whose sole purpose is to ensure the safeguarding of funds for Modulr customers. Furthermore, as an EMI, we must also hold an additional amount equal to 2% of the total value of safeguarded client funds in our own funds, which are held separately to those client funds. The purpose of the 2% additional funds is to ensure that, in the case of any problems with our business, there are enough funds to support an orderly business wind-down and the process of returning of client funds. Combining this ‘2%’ requirement with safeguarding means that there is a protection mechanism to help ensure an orderly wind-down and return of customer funds if ever required.
What is the DGS and is it applicable to Modulr?
The DGS is the Deposit Guarantee Scheme, which protects money in Dutch bank accounts up to a maximum of €100,000 per person, per bank. DNB and the Deposit Guarantee Fund (DGF) are jointly responsible for the DGS. The DGS is not applicable to EMIs such as Modulr. However, as mentioned, our safeguarding requirements mean that all customer money held at Modulr, regardless of the amount, is segregated from all other funds that we hold and cannot be used for any other purpose. So, while the DGS is not applicable to e-money, the regulatory requirements outlined above are designed to protect the balance of customer funds, as opposed to only compensating up to a maximum limit, as is the case with the DGS.
Where is money safeguarded?
Modulr must deposit the value of all the e-money it has issued to customers at a credit institution (bank). These safeguarded funds are held at credit institutions (banks) in specially designated accounts belonging to Stichting Custodian Modulr Finance, an entity whose sole purpose is to ensure the safeguarding of funds for Modulr customers, in line with Dutch legislation.
What would happen in the event of Modulr’s insolvency?
In addition to our safeguarding obligations and the requirement to maintain an additional 2% of corporate funds as regulatory capital, we’re also required to prepare orderly wind-down plans. These plans are a regulatory requirement and include the early identification of a potential insolvency event and the return of your funds before an insolvency process commences, if possible.
In the event that Modulr becomes insolvent, your funds are separate from the funds of Modulr and therefore the creditors of Modulr (other third parties that are owed money from Modulr) are not able to make a claim against safeguarded funds and would not affect your entitlement to your funds. An independent insolvency professional (referred to as an ‘insolvency practitioner’) would be appointed to return your funds to you. However, where an insolvency practitioner is unable to take their costs of sending the funds to you from elsewhere (for example, the general pot of Modulr funds remaining or from the additional 2% own funds described above) they are entitled to take their costs from safeguarded funds which would include your funds. In this unlikely circumstance, you may not receive the total value of your funds.
Who regulates Modulr in the EEA?
Modulr Finance B.V. is licensed and regulated by De Nederlandsche Bank (Relatienummer R182870) as an Electronic Money Institution.