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Insolvency clause in Moneybookers
Thread poster: Spiros Doikas

Spiros Doikas  Identity Verified
Local time: 16:40
Member (2002)
English to Greek
+ ...
May 5, 2005

I saw the following notice in my Moneybookers account, which is rather worrying.

Issuing e-money is a 'regulated activity' under the Financial Services and Markets Act 2000. Moneybookers Ltd. is regulated by the Financial Services Authority (FSA) of the United Kingdom. The entire balance of your Moneybookers account is protected by regulation in regard to capital, liquidity and float management requirements. We are required to keep the funds received in exchange for e-money in pre-defined low-risk assets and to hold at any time sufficiently liquid assets to be able to redeem all e-money issued. We are legally obliged to make our customers aware that (1) the Financial Services Compensation Scheme (FSCS) does not apply to funds stored on your Moneybookers account; (2) if Moneybookers Ltd. becomes insolvent the funds stored on your Moneybookers account may become valueless and unusable; and (3) consequently, if Moneybookers Ltd. becomes insolvent you may lose the funds stored in your account.

By checking this box you acknowledge the above written warning. If you do not acknowledge this warning you may continue to use Moneybookers but we cannot allow your account balance to exceed GBP 1000 or the equivalent in your account currency.


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Ralf Lemster  Identity Verified
Germany
Local time: 15:40
English to German
+ ...
Moneybookers is not a bank May 5, 2005

Hi Spiros,
Thanks for pointing this out - probably not everyone is aware that Moneybookers is not a financial services provider or credit institution, and hence does not fall within the creditor protection of the banking system.

Best regards,
Ralf


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Spiros Doikas  Identity Verified
Local time: 16:40
Member (2002)
English to Greek
+ ...
TOPIC STARTER
I guess we should not worry then? May 5, 2005

Thank you for your prompt answer. Unfortunately, there is no easy way for laymen to cut through the legalese and get to the crunch!

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Ralf Lemster  Identity Verified
Germany
Local time: 15:40
English to German
+ ...
I didn't say that... May 5, 2005

If you keep any significant sum within a system that is not covered by a depositor-protection scheme, you are exposed to the risk that the system will go bankrupt - to quantify that risk, you would need to analyse that system's financial position, strength and exposure. As this is hardly realistic, it's prudent not to keep a major amount within such system.

Note that this not only applies to Moneybookers, but to most non-bank payment schemes, as well as to offshore banks.

The clause you refer to is standard wording such operators are obliged to include, to warn users about the potential risks. (No points for guessing how many people actually read what's in there...)

A very common judgment error is to look at banks only in terms of fees charged - their financial strength and soundness is just as important.

Best regards,
Ralf


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Edward Potter  Identity Verified
Spain
Local time: 15:40
Member (2003)
Spanish to English
+ ...
Hire Ralph May 5, 2005

Extremely well explained, Ralph. You are the type of person who gives credence to the name of this web site.

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