Client Money - Fiduciary - Thematic Review 2024

Summary

This is a GFSC thematic review report summarising findings from a 2024 review of Client Money controls at primary fiduciary licensees (trust and corporate service providers). It sets out what the Commission found when testing compliance with the existing Fiduciary Rules and Guidance, 2021 on safeguarding client money, highlights good practice, and flags areas needing improvement. It does not create new rules but reiterates and clarifies existing Fiduciary Rules requirements and expects licensees to self-assess against them.

• Account classification: Some licensees misunderstood the distinction between Client Bank Accounts (held in the licensee's name) and Client Entity Bank Accounts (held in the client's name); the Commission expects correct classification and titling per the Fiduciary Rules.
• Reconciliation: Pooled Client Bank Accounts should be reconciled at least monthly, and other Client Bank Accounts and Client Entity Bank Accounts at least annually, with frequency matched to transaction activity.
• Overdrawn accounts: Licensees should maintain adequate oversight and banking communication to prevent Client Bank Accounts becoming overdrawn, commonly caused by bank charges or transaction timing.
• Controls and audit: An annual independent review of controls over Client Bank Accounts is required, and CMP or internal/external audit testing must be properly scoped against the Fiduciary Rules requirements.
• Approved Banks: Client Money must generally be held at Approved Banks meeting the Fiduciary Rules criteria; if held elsewhere, the licensee must submit a detailed modification or derogation request to the Commission.
• Benefits from client money: Licensees must not retain commissions or benefits from holding Client Money accounts; any such benefits must be passed on to clients.

The report closes with a set of self-assurance questions that licensees are encouraged to use to test their own Client Money arrangements against the Fiduciary Rules, and notes the Commission will follow up with licensees identified as non-compliant (e.g. on account titling or use of non-Approved Banks).

Key obligations

• Reconcile pooled Client Bank Accounts at least monthly and all other Client Bank Accounts and Client Entity Bank Accounts at least annually, with frequency adjusted to transaction activity, per the Fiduciary Rules
• Obtain an annual independent review (via CMP, internal audit, or independent third party) of controls over Client Bank Accounts, correctly scoped against the Fiduciary Rules
• Hold Client Money only at Approved Banks meeting the Fiduciary Rules criteria; if using a non-Approved Bank, submit a detailed, well-reasoned modification or derogation request to the Commission
• Correctly classify and title Client Bank Accounts and Client Entity Bank Accounts in accordance with the definitions in the Fiduciary Rules
• Do not retain commissions or benefits arising from holding Client Money accounts; pass any such benefits on to clients
• Maintain adequate oversight and banking relationship management to prevent Client Bank Accounts from becoming overdrawn

Applies to

primary fiduciary licensees, trust and corporate service providers (TCSPs)