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 has over 50 years’ experience in the insurance business, as insurer, owner/director of an insurance broking firm which ultimately employed 36 people and which was sold in 2001. Subsequently he was a co-founding director of RWA, alongside Robin Wood and Kate Foreman.

His years spent as a broker made Ian ideally placed to empathise with brokers over the requirements and needs of their firms in terms of FSA/FCA compliance.

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