FCA has written a Dear CEO letter to insurance intermediaries, Following its work on financial resilience and its concerns that some firms risked not having adequate financial resources, it carried out a review of how some intermediaries were complying with its CASS requirements. It has as a result identified a number of shortcomings.
It now requires firms to assess their policies, procedures and controls not only against the rules, but specifically against the letter’s findings, which are:
- calculating client money properly and in line with FCA expectations. It found many firms were not doing this in line with the Client Money Guide and some were not doing so as often as they should;
- withdrawing commission from client money accounts before a client money calculation is completed;
- failing to ensure they hold acknowledgement letters for every client bank account they operate and that the wording of the letters complies with CASS 5.5.49R;
- ensuring the client bank account remains a trust account at all times – and so the firm does not hold any money that is not client money in it except in specific defined circumstances;
- not having the insurer’s consent to co-mingle risk transfer money with client money;
- performing their own due diligence before having external audits on client money;
- ensuring they hold client money for the intended purpose; and
- reviewing permissions to check they have (or don’t) the appropriate client money permission.