Aviva has been fined more than £8.2m by the FCA for not having appropriate controls over its outsourced providers to ensure client assets were protected.
The £8.25m fine for Aviva Pension Trustees UK and Aviva Wrap UK is the first the FCA has handed out for oversight failures in outsourcing arrangements for client assets.
The FCA says Aviva failed to put in place appropriate controls over third party administrators to which they had outsourced the administration of client money and external reconciliations in relation to custody assets.
The regulator says Aviva also failed to dedicate adequate resource and technical expertise to enable them to implement effective oversight arrangements, resulting in their delayed detection and rectification of client asset risks and compliance issues.
The rule breaches occurred between 1 January 2013 and 2 September 2015.
FCA enforcement and market oversight director 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 Client Assets Sourcebook rules. Firms are reminded that regulated activities can be delegated but not abdicated.”
He adds: “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.”
According to the FCA, Aviva failed to set aside funding for returned cheques in the reconciliation process, which meant that purchases could potentially be funded using other clients’ money. The regulator says this under-segregation of client money peaked at £74.4m between 10 February 2014 and 9 February 2015.
The FCA confirms there was no actual loss of client money or custody assets however, and Aviva says that it has now fixed the issues identified by the regulator.
Aviva UK Life chief executive Andy Briggs says: “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.”
Aviva was given a 30% discount on the fine for settling early. Otherwise, the insurer would have been fined £11,781,262.
The FCA also fined Aviva Investors, the insurance giant’s investment management arm, £17.6m last year for not having systems and controls in place to manage conflicts of interests fairly.