Insurance giant
Aviva has been hit with a significant fine by the Financial Conduct Authority (FCA) – but not for its insurance arm.
Instead, the company faces a £8,246,800 fine for failings in its oversight of its outsourced providers in relation to the protection of client assets for Aviva Pension Trustees UK Limited and Aviva Wrap UK Limited, which is a platform for financial advisors.
According to an FCA release announcing the fine, Client Assets Sourcebook (CASS) rules exist to protect client money and custody assets if a firm becomes insolvent and to ensure money and assets can be returned to clients as quickly as possible. Aviva is said to have breached the FCA’s CASS Rules and requirements that firms should have adequate management, systems and controls and properly safeguard clients’ assets between January 01, 2013 and September 02, 2015.
The release states that during this period, Aviva failed to put in place appropriate controls over Third Party Administrators (TPAs) to which they had outsourced the administration of client money and external reconciliations in relation to custody assets. As a consequence, the company failed to sufficiently challenge the internal controls, competence and resources of their TPAs while also failing to dedicate adequate resource and technical expertise to enable them to implement effective CASS oversight arrangements resulting in their delayed detection and rectification of CASS risks and compliance issues.
In addition, the FCA found deficiencies with Aviva’s internal reconciliation process which resulted in the under- and over-segregation of client money. During the period from February 10, 2014 to February 09, 2015 under-segregation reportedly peaked at £74.4 million.
“Aviva outsourced the administration of client money and external reconciliations in relation to custody assets, but failed to ensure that it had adequate controls and oversight arrangements to effectively control these outsourced activities,” said Mark Steward, director of enforcement and market oversight at the FCA. “With outsourced arrangements firms remain fully responsible for compliance with our CASS rules. Firms are reminded that regulated activities can be delegated but not abdicated.
“Other firms with similar outsourcing arrangements should take this as a warning that there is no excuse for not having robust controls and oversight systems in place to ensure their processes comply with our rules when CASS functions are outsourced.
“This is the first CASS case in relation to oversight failures of outsourcing arrangements and we will continue to take action against firms that fall short of our CASS Rules.”
Aviva agreed to settle at an early stage and in doing so it qualified for a 30% discount. Without the settlement discount, the fine would have been £11,781,262.
In response, Aviva issued a statement to
Insurance Business outlining that it worked closely with the FCA throughout the review and that customers’ money and assets are safe with Aviva. It outlined that it had taken the following actions:
1. Recruited and established a specialist team focusing solely on the oversight of the customer money and assets processes in place for the adviser platform.
2. Strengthened the governance and controls in relation to the administration of customer money and assets on the platform.
3. Conducted a rigorous review of all CASS processes.
4. External experts have supported Aviva in addressing the FCA’s findings.
Speaking about the findings, Andy Briggs, chief executive officer at Aviva UK Life, issued an apology while reiterating that there had been no loss to customers.
“We fully accept the findings of the FCA’s review,” he said. “This should not have happened and we are sorry. Aviva’s customers have not suffered any loss and there has been no impact on advisers. We have addressed and resolved the issues identified. We have made improvements to ensure we have clear oversight of the processes undertaken on the adviser platform, and remain vigilant in our continued monitoring through a dedicated and expert team.”
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