Segregated Accounts

Segregated accounts, also known as separate accounts, are bank accounts where client funds are kept distinct from the financial institution’s own funds. Electronic Money Institutions (EMIs) and other financial services use segregated accounts to ensure the safety of client assets.

Why EMIs use segregated accounts:

1. Protection of Client Funds: If a financial company faces financial difficulties or goes bankrupt, client funds are protected since they are not mixed with the company’s operational funds.
2. Regulatory Compliance: Many jurisdictions require EMIs to keep client funds separate, reducing the risk of financial loss to clients.
3. Client Trust: Segregation of funds builds client trust, as they know their assets are not being used by the company for its own business purposes.
4. Ease of Funds Management: Segregated accounts make it easier to track and manage client funds and can contribute to more efficient accounting.

Maintaining client funds in segregated accounts is standard practice for EMIs and is one of the key aspects that help ensure transparency and security in the financial sector.