After undergoing a CASS audit, a retail insurance intermediary was required to commission a Skilled Person to review the firm’s processes, controls and governance and assess their compliance with CASS 5 rules.
Responding to two key findings in the Skilled Person’s report, the firm then brought UKGI in to put together a CASS monitoring programme and assess the effectiveness of its ‘second line of defence’ activities.
What we did
Following initial discussions with the client, we agreed the first priority was for UKGI to document the firm’s risk and controls and assess its key client money processes. We reviewed and discussed the firm’s CASS audit and Skilled Person’s report so we could scope and cost this work. We then agreed detailed objectives, timescales, and outputs, and submitted a quote, which the client signed off.
Our expert team spent time on site interviewing staff at all levels and analysing the firm’s existing processes, control documents, governance framework, and Terms of Business Agreements. We also tested a sample of client money calculations and reconciliations.
In these interviews, we challenged employees’ understanding and identified knowledge gaps requiring attention before we moved on to the next step. This involved developing a tailored programme enabling the firm to take a proactive approach to its ongoing compliance with CASS 5 and SUP 3 rules.
We prescribed a comprehensive and proportionate programme of actions based on the specific risks arising from the firm’s activities, matched with an appropriate frequency of checks in each case.
Our programme strengthened the firm’s agency management controls around new facilities (CASS 5.1.5R), introduced an enhanced on-boarding and sign-off process for appointed representatives (CASS 5.1.5R), and implemented testing by the client’s Audit Risk Compliance Committee (ARCC) to ensure compliance with CASS 5.4.4R.
In the area of governance, the programme provided for assessment by the board of the ARCC’s effectiveness (CASS 5.4.4R), assessment of its regulatory capital position in the relation to the requirements in CASS 5.5.4R, and assessment of client money calculations at board and ARCC level to verify calculations being performed and actioned in line with CASS 5.5.16R and CASS 5.5.63R.
The programme also involved a wide range of process-related actions, including process enhancements around timely auditor engagement for the firm’s annual Client Asset Audit, contingency arrangements for the delegation of CASS responsibilities when necessary, manual client money calculation reporting to ensure commission is not taken prematurely, and a broad range of other specific measures.
As a result of UKGI’s involvement, the client now has a far more robust set of processes, systems and controls around its handling of client money. The programme we put in place, not only answered all the concerns identified as a result of the CASS audit and Skilled Person’s Report, went beyond to optimise the firm’s approach to client money on a broader front.
UKGI was subsequently engaged to review the client’s CASS Monitoring Programme one year on. Both this and the original project were achieved on budget and within deadline and added significant measurable value to the client’s business.
Benefitting from UKGI’s expert input, after the initial CASS audit put the it very much in the Regulator’s sights, played a crucial role in allaying external and internal concerns and restoring full confidence in the client’s approach to CASS compliance.