Unclosed CASS compliance breaches are a concern in COVID-19 crisis | AutoRek

Originally Published 23-Apr-2020 by Alex Davidson, Thomson Reuters


The Financial Conduct Authority (FCA) has said it knows some firms will be unable to progress plans to improve compliance with the client money (CASS) rules during the COVID-19 outbreak. Firms should consider reporting such delays to it and, where relevant, keep FCA CASS contacts notified of progress toward compliance, the regulator said in a statement on client assets and the coronavirus. Industry sources said that in this context firms should be alert particularly to unclosed compliance breaches.

"In scenarios where the FCA has requested to be kept informed, it is likely that the improvement plans in question are aligned to actions to allow the closure of an open CASS breach," said Jessica Porter, CASS consultant at AutoRek.

The CASS oversight function can be difficult to cover during an absence, she said. "My advice is to ensure the person responsible for CASS oversight is regularly communicating with the wider management team, so that everyone has a reasonable understanding of the CASS position of the firm."

Firms should ensure their CASS Resolution Pack is up-to-date with current arrangements, she said. They could include changes in personnel, contacts at third parties, CASS processes and how information should be accessed, she said.

Another important consideration is due diligence on third parties and oversight of third-party administrators, she said. "If, for instance, a third-party administrator is struggling with staff levels or remote working, a consideration is whether there is anything the firm needs to do to make sure that outsourced processes happen."


Fraud risk

With an increased number of employees working from home, another requirement is senior oversight. "A reconciliation tool with built-in workflow functionality including an audit trail that cannot be edited promotes virtual supervision," Porter said.

Though processes may have changed, and more logistical difficulties have arose, firms will be made accountable, as in situations like this, there may be a higher temptation to commit fraud.  

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