The Bank of Canada is auditing payments companies to ensure they’re properly safeguarding user funds and following other rules, amid an ongoing scandal over millions in restaurant tips that went missing from the Everyday Payments platform.

Liza Akhvledziani Carew, CEO of Toronto fintech Chexy, and an executive from a second Canadian fintech who did not want to be named discussing sensitive regulatory matters told The Logic that the central bank has asked them to produce documentation proving they’re following its new rules, which are designed to safeguard users against company failures, hacks and other risks. Akhvledziani Carew said Bank of Canada officials told her Chexy is part of the institution’s first wave of compliance checks under the new regime.

Akhvledziani Carew said the audit costs her company time and money, but she understands it’s necessary. “It’s probably the right thing, especially for safeguarding end user funds,” she said. “I just hope the Bank of Canada goes through these audits as fast as possible.”

Last month, millions of dollars went missing from user accounts on the Edmonton-based Everyday Payments tip-pooling platform. Parent company XTM later revealed in a filing that it racked up a $19-million shortfall after funding operations with clients’ cash. XTM is registered under the Bank of Canada’s oversight regime for payments companies and had previously disclosed in public filings it was covering a shortfall in client funds with a loan, raising questions about whether the central bank should have caught the problem sooner.

The Bank of Canada has said that it didn’t check for compliance when it first started supervising payments companies last September, instead adding any company to its registry so long as it offered payment services to Canadians and passed a Department of Finance national security review. Currently, over 900 firms are registered, with a similar number of applications still pending, while the Bank of Canada has denied or revoked approval for 34 firms. The audits now underway provide a first glimpse into how the institution—which is new to regulating consumer fintechs—will flex its powers.

In an emailed statement, Bank of Canada spokesperson Akim Thibouthot declined to say how many payments companies the institution is auditing and how they were selected. She said all payments companies can expect to “periodically undergo” such audits, adding that the central bank will require them to correct any deficiencies it identifies and may also start to take enforcement action.

Akhvledziani Carew said Chexy, a Toronto fintech that expands the kinds of credit card transactions that are eligible for rewards points if users pay recurring bills early, has submitted documentation to the Bank of Canada about its compliance policies and proof that it’s keeping user funds safe. She said she believes the central bank was right to issue registrations before assessing firms’ compliance. 

“Otherwise, it would have taken a really long time,” she said. “If that meant restrictions on operations while you’re waiting… that would be destructive to business and innovation, and we certainly don’t want that.”