Is your Client Money at risk?

If like me, you keep up to speed with the insurance press, you will have read recently the horrendous case of the Hertfordshire family broking firm who lost everything following discovery that a trusted senior staff member had spent some £273,000 of client money, largely poured into the coffers of Bet 365, to feed his addiction.

Make no mistake, this was no opportunist who had been with the firm for 5 minutes. The miscreant had been with the firm for some 25 years and was elevated to a position where he had access to client funds, following a terminal cancer diagnosis to the firm’s principal.

Many of our client broker firms are proprietor run and of course everyone trusts everyone else. Our Compliance Risk Audit (Healthcheck) covers questions around DBS checking for Approved Persons, the separation of raising of debits and the payment of accounts.

However, the times in which we live and the pressures that some live under mean that there is a risk to funds, if someone with troubles in their personal life has access to these funds, particularly client money.

In writing this piece, I did a bit of research. Did you know that 10 of the 20 English Premier League clubs have shirt sponsors who are betting companies? Collectively they have invested some £36.3M to encourage football fans to bet with them. That’s before you think about the TV and newspaper advertising that continually bombards us.

That statistic alone tells you that a huge number of people are spending sizeable amounts with these and other betting firms and inevitably, some will get themselves into financial difficulty.

The purpose of this article is not to take any moral high ground. I have been known to have the odd £5 bet on Southampton to win a match (usually the kiss of death!) but our advice would be to ensure that you have robust systems in place which monitor all activity, as outlined above.

Don’t forget that the FCA will expect and assume that you have robust procedures in place and will take a dim view if you, as an Approved Person, are presiding over a firm where client money has been put at risk.

This must include a written client/insurer money procedure setting out who does what and why, with associated deputies and cross checking where needed. This should include a regular review to ensure it is being applied.

Don’t forget that from an HR point of view you also have a responsibility to consider your employees’ health and safety and this also includes their mental welfare.  Gambling addiction is an addiction like any other, so you should be aware of behaviour patterns and when they seem unusual; in many respects, this may be easier if you have known an employee for many years. We often hear of family broker firms who believe that they don’t need HR assistance because they have worked together for years and trust each other: often these are the hardest situations to resolve when things go wrong.

Food for thought….

About the author

Ian started his career as an insurer spending 12 years in various sales and development roles. He then founded a general and life insurance brokerage which became one of Southampton’s leading firms before its sale to what is now Bluefin, in 2000. At the date of sale, the company had grown to employ 36 staff. In 2002 he joined Robin Wood in incorporating the firm which has now evolved into the current RWA business.As former Managing Director of a mid range broking firm, he has the ability to both empathise with owner/managers and also to recognise the dangers that a firm can face, should it fail to embrace high standards of compliance and professionalism. His vast knowledge of the insurance business and the connections with senior people in all areas, positions him well to assist firms of all types and disciplines with their regulatory and business consultancy needs. Ian was an elected Council Member of the Insurance Brokers Registration Council (IBRC) from 1994 until its dissolution in 1999. The IBRC was the forerunner to the GISC which was ultimately replaced by the FSA, now the FCA, and so his appreciation of Regulation spans over 20 years.Ian is ACII qualified by examination.Ian is a past President of the Insurance Institute of Southampton (2000/2001) and remains an active member of Council. In 2014 he was invited to become a Vice President of the Insurance Institute (the national body) and as such, will represent the National President as and when required at formal events. Ian is also a Freeman of the Worshipful Company of Insurers.He is a contributor to the insurance press and a regular speaker at insurance events.

Ian Ritchie

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