Client money in the regulated sector - 10 common compliance pitfalls
29th July 2015 by Simon Martin
As would be expected, holding client money increases the compliance burden on an organisation. Problems can arise quickly and escalate if adequate internal resources are not committed to meeting the compliance levels required.
10 common issues which we have identified in FCA registered organisations are detailed below:
Opening of accounts
- The bank accounts holding client money were not distinguished in the name of the account.
- Some bank accounts were also opened by an associated group company and not the firm registered with the FCA.
- Insufficient records held to show that bank reconciliations have been carried out at least every 10 days and that any discrepancies have been corrected in a timely manner.
- Being unable to evidence that client money cheques were paid in no later than the next business day after receipt.
Client money reconciliations
- Insufficient records held to evidence that client money reconciliation calculations are carried out at least every 25 days, with any surpluses or deficits being remediated on the same day.
- Over complicated reconciliations are not aiding the transparency of the client money resource and requirement.
- Irrecoverable insurance debtors included within the client money calculations.
- Client money reconciliation calculation including unearned commissions. Commissions were recognised when the policy was booked without reference to when the premium was received.
- Signed agreements not in place with all of the insurers with whom business is conducted.
Where breaches do occur
- The FCA were not notified of the identified significant breach immediately.
A proactive approach is always advisable to ensure compliance with the client money rules within your sector. The Ensors Forensic Accounting team can provide a piece of mind review of your current systems or a historical review for a fixed fee. We can also advise on client money compliance in legal firms and other regulated sectors.
For further information on how our services can help your business please contact Simon Martin or Fiona Hotston Moore
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