Aviva has been hit with an £8m FCA fine for oversight failures in relation to more than £74m of client assets outsourced to third party administrators.
Aviva Pension Trustees UK and Aviva Wrap UK were fined a total of £8,246,800 for breaches of Client Assets Sourcebook (CASS) rules designed to protect client money and custody assets if a firm becomes insolvent.
Aviva breached the FCA’s CASS Rules and requirements that firms should have adequate management, systems and controls (Principle 3) and properly safeguard clients’ assets (Principle 10) between 1 January 2013 and 2 September 2015.
Aviva was found to have failed to sufficiently challenge the internal controls, competence and resources of their TPAs. Aviva also failed 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, said the regulator.
The FCA also found deficiencies with Aviva’s internal reconciliation process, which resulted in the under- and over-segregation of client money. During the period from 10 February 2014 to 9 February 2015 under-segregation peaked at £74.4m.
The administrative problems meant that Aviva failed to submit accurate client money and asset returns and maintain an adequate CASS resolution pack.
Aviva agreed to settle at an early stage, qualifying for a 30 per cent discount, without which the fine would have been £11,781,262.
The FCA says there was no actual loss of client money or custody assets.
FCA director of enforcement and market oversight Mark Steward says: “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. 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.”
