Aviva has been hit with a £8.2m fine from the Financial Conduct Authority after its pension and platform arms failed to ensure clients' money was fully protected.
According to an update released today (5 October) by the FCA, Aviva Pension Trustees and Aviva Wrap UK must pay the penalty after they outsourced the administration of clients’ money without ensuring adequate safety controls were in place.
This resulted in Aviva failing to sufficiently challenge the internal controls, competence and resources of their third party administrators to ensure client money was always protected.
Aviva therefore broke rules set out in the Client Assets Sourcebook (CASS), which aim to protect client money and custody assets if a firm becomes insolvent, ensuring money and assets can be returned to clients as quickly as possible.
According to the FCA, the insurance giant also failed to dedicate enough resources and technical expertise to ensure it had effective oversight of third party arrangements, which meant there was a delay in detecting the risks and the compliance issues.
Mark Steward, director of enforcement and market oversight at the FCA, said: “With outsourced arrangements, firms remain fully responsible for compliance with our client asset rules. Firms are reminded that regulated activities can be delegated but not abdicated.”
He said other firms with similar outsourcing arrangements should take this as a warning, adding: “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.”
Mr Steward also pointed out this is the first CASS case in relation to oversight failures of outsourcing arrangements, and said the FCA will continue to take action against firms that fall short of the rules.
This should not have happened and we are sorry Andy BriggsThe FCA also found deficiencies with Aviva’s internal reconciliation process, which resulted in the under- and over-segregation of client money.
Between February 2014 and February 2015, under-segregation peaked at £74.4m.
Andy Briggs, chief executive of Aviva UK Life, said: “We fully accept the findings of the FCA’s review. 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.”
