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Aviva handed £8.2m fine for failings on protection of client assets

Published 05/10/2016

The Financial Conduct Authority said Aviva did not have the right controls in place after outsourcing administration of its custody assets
The Financial Conduct Authority said Aviva did not have the right controls in place after outsourcing administration of its custody assets

Aviva has been slapped with an £8.2 million fine for failings linked to the protection of client assets.

The Financial Conduct Authority (FCA) said Aviva Pension Trustees UK and Aviva Wrap UK did not have the right controls in place after outsourcing the administration of its custody assets.

Mark Steward, the FCA's director of enforcement and market oversight, said: "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."

The FCA said Aviva breached the Client Assets Sourcebook (CASS) rules between January 1 2013, and September 2 2015.

It said the insurance giant failed to put in the place the right controls over third party administrators (TPAs) and did not "sufficiently challenge" the performance and resources of the TPAs.

Aviva was also delayed in discovering risk and compliance problems linked to the TPAs because it did not provide enough resources and technical expertise to enforce CASS rules.

The FCA said it had discovered issues with Aviva's internal reconciliation process, leading to under and over-segregation of client money.

It added that under-segregation peaked at £74.4 million between February 10 2014, and February 9 2015.

"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," Mr Steward said.

"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 was handed a 30% discount on its fine after reaching an early settlement with the FCA, meaning it will pay £8,246,800 instead of £11,781,262.

Aviva said it had tackled the problems with its UK life adviser platform and customers had not suffered any financial loss.

It added that it had strengthened governance and controls surrounding the administration of customer money and assets on the platform.

It has also carried out a review of all CASS processes and recruited a specialist team to focus on oversight of customer money and asset processes.

Andy Briggs, chief executive of Aviva UK Life, apologised and said the insurer had accepted the FCA's findings.

"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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