Before an estate's frozen-funds claim can be assessed, it helps to know what kind of counterparty is actually holding the money, and who sits behind it. Neither is complicated once laid out — but both are usually unfamiliar territory for a practitioner whose daily work is domestic.
Who actually holds the money
Four types of counterparty account for almost every case we see, and the distinction between them matters because it decides who is regulated, how, and by whom.
- Payment institution (PI). Authorised to provide payment services — processing, initiating, executing payments — without the electronic-money issuance function. Where safeguarding applies, client funds are held in accordance with the safeguarding arrangements the PI is required to maintain.
- Electronic money institution (EMI). Authorised to issue electronic money and provide payment services. Where an estate's funds sit as an account balance with the provider itself — rather than passing through to a separate bank account — an EMI is usually the counterparty, and safeguarding of that balance is a material issue in any insolvency of the EMI itself.
- Acquirer. The institution contracted to process the merchant's card payments and remit settlement, holding membership of Visa, Mastercard or other card schemes. Acquiring is performed by credit institutions in some jurisdictions and by specialist non-bank acquirers authorised as PIs in others.
- Bank / credit institution. Authorised to take deposits and grant credit, and — where it also acts as acquirer or account provider — subject to the prudential regime for banks rather than the payment-institution regime.
The category matters practically: an EMI's obligation to safeguard client funds, and what happens to that safeguarded pool if the EMI itself fails, is a different question from a PI's processing relationship, which is different again from a straightforward acquiring relationship with a bank. The first step in assessing any file is establishing which of these the counterparty actually is — the merchant services agreement usually says so, but the operative regulatory status is worth confirming against the relevant register, not assumed from the counterparty's marketing name.
Who regulates them, and why it is not one answer
Every authorised PI, EMI, acquirer and bank is supervised primarily by the competent authority of the state where it is authorised — its home state — even where it provides services cross-border into other EEA jurisdictions, under a national transposition of PSD2 and EMD2 (or, in the UK, the equivalent post-Brexit framework). The supervisory architecture is not uniform across jurisdictions. In some — Ireland is one — a single unified authority, the Central Bank of Ireland, supervises both prudential soundness and conduct of business. In others, the two are split between a central bank or prudential authority and a separate markets or conduct regulator: Cyprus, the Central Bank of Cyprus for prudential supervision and CySEC for market conduct; the Netherlands, DNB for prudential supervision and the AFM for conduct. The full table, jurisdiction by jurisdiction, is at our jurisdictions page.
Why this matters for an estate's claim: the supervisory architecture decides who a formal complaint or supervisory referral is actually addressed to, and what that authority can and cannot compel the counterparty to do. Addressing a complaint to the wrong authority, or missing a conduct/prudential split entirely, wastes time the estate's file often does not have. This is not a step to guess at from the counterparty's registered office alone.
Why the cross-border shape makes it hard to do alone
None of the individual elements is particularly unusual. What makes the position genuinely difficult for a local practitioner to run without support is that they all have to be assembled correctly, for a counterparty and regulator neither party has dealt with before, under time and cost constraints an estate's professional-costs budget was never sized for.
Three frictions recur in practice.
The counterparty answers to another jurisdiction's rules. Contractual terms, notice provisions, and the counterparty's own regulatory obligations are all set under a legal and supervisory framework foreign to the practitioner's own jurisdiction. Reading a Maltese or Lithuanian safeguarding obligation correctly, or knowing what a Central Bank of Ireland conduct referral can actually achieve, is not domestic-practice knowledge.
The counterparty has no local incentive to engage quickly. A payment institution facing a claim from an insolvent estate in another Member State, represented (if at all) by a domestic insolvency practitioner with no specialist payments counsel, has limited commercial reason to respond promptly. That calculation changes when the claimant of record is a specialist that pursues this class of claim as its ordinary business, with counsel of record already in place in the counterparty's own jurisdiction.
The estate's budget was not built for this. Engaging foreign counsel, corresponding in a second regulatory language, and running a supervisory referral in an unfamiliar system is expensive to do case-by-case, and an estate's professional-costs budget is finite and already committed elsewhere. A structure that requires no estate funding at all — see how the assignment or mandate works — removes that constraint rather than asking the estate to absorb it.
The cross-border shape of the problem is, in other words, exactly the reason a specialist with existing counsel relationships and regulatory familiarity across the EEA and UK can realise a claim a local practitioner might otherwise conclude is not economical to pursue. See our page for insolvency practitioners to arrange an initial conversation.
This article is for information purposes only and does not constitute legal advice.