Regulated custody
The holding of customer money by a licensed financial institution under formal regulatory conditions, separate from the operating accounts of the business arranging the transaction.
Definition
The holding of customer money by a licensed financial institution under formal regulatory conditions, separate from the operating accounts of the business arranging the transaction. On BuildFair, project funds sit in regulated custody with the banking partner Kobble (AFSL 545391, Yondr Money Pty Ltd); BuildFair holds the verification and release authority, not the cash.
Why it matters
Where customer money is held determines what happens to it if the business arranging the transaction fails. When funds sit in a company's own operating account, they are exposed to that company's creditors. When they sit in regulated custody with a licensed institution, separate from the arranging company's operating accounts, a failure of the arranging company does not put the funds at risk in the same way. The distinction matters most in a sector like residential construction, where business failures are common.
How it works in practice
A licensed financial institution holds the funds under the conditions attached to its licence. The business arranging the transaction sets the rules for release but does not hold or have free access to the cash itself.
On BuildFair, the split is explicit: the banking partner Kobble (operating under AFSL 545391, Yondr Money Pty Ltd) holds the money, and BuildFair authorises releases when the project rules are met. BuildFair does not hold customer funds in its own operating account and so is not required to hold its own AFSL.
Common misconceptions
The platform holds the money
On BuildFair it doesn't. The banking partner holds the cash under its own licence; the platform holds the verification, the audit trail, and the release authority.
Regulated custody is the same as a bank guarantee
They are different. Regulated custody is about where and how the money is held and who can release it. A bank guarantee is a separate promise to pay if a party defaults.