Safeguarding Requirements for the Receipt of Funds in Connection with the Provision of Payment Services and the Carrying-on of the E-Money Business

(1) Institutions that provide the payment services under section 1(1), second sentence, nos. 1 to 6, or carry on the e-money business, must safeguard, in accordance with method 1 or method 2, the funds that they have received from payment service users, or through another payment service provider, for the execution of payment transactions or the issuance of e-money. The funds
1.
a) may not at any time be commingled with the funds of any natural or legal person other than the payment service users or e-money holders for whom they are held,
b) must, where they are still in the institution's possession at the end of the business day following the day of their receipt and have not yet been handed over to the payee or transmitted to another payment service provider, be deposited in a separate account with a credit institution or in an account with the Deutsche Bundesbank or another central bank of a Member State of the European Union, at that central bank's discretion, or be invested in safe, liquid, low-risk assets in agreement with BaFin; BaFin may, in this connection, in the exercise of its due discretion, exclude in an individual case assets otherwise falling within the scope of section 1(31), where their categorical classification as safe, liquid, low-risk assets does not appear objectively justified having regard to the objective value stability of the security, in particular its maturity and other relevant risk factors, or
c) (repealed), or
2. must be covered by an insurance policy or other comparable guarantee from an insurance undertaking or credit institution which is authorised to carry on business within the territorial scope of this Act and which does not belong to the same group as the institution itself, in an amount corresponding to the amount that would have to be held separately in the absence of the insurance policy or other comparable guarantee, and that is payable in the event of the payment institution's insolvency. BaFin may, in the exercise of its due discretion, prescribe for the institution one of the two methods described in the second sentence. Where the institution safeguards the funds received under method 1 by depositing them or investing them in safe, liquid, low-risk assets, the funds deposited, or the safe, liquid, low-risk assets, are deemed, as against the institution's creditors, to belong to the customers.
(2) Where an institution must safeguard funds under subsection (1), and part of those funds is to be used for future payment transactions while the remaining part is to be used for services that are not payment services, subsection (1) also applies to the proportion of the funds that is to be used for future payment transactions. Where that proportion is variable or not known in advance, the first sentence applies on the basis that a representative proportion, typically used for payment services, is taken as a basis, provided that representative proportion can be estimated with sufficient certainty, to BaFin's satisfaction, on the basis of historical data.
(3) The institution must, during ongoing operations, demonstrate and prove to BaFin on request that it has taken sufficient measures to comply with the requirements set out in subsections (1) and (2). Where such proof is not provided, or the measures are insufficient, BaFin may require the institution to submit the necessary evidence or to take measures that are suitable and necessary to remedy the existing shortcomings; BaFin may set a reasonable period for this. Where the evidence or measures are not submitted or taken, or not submitted or taken in time, BaFin may take measures under section 21(2).