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CASS regulations: Are you compliant?

How can businesses best prepare to ensure that they comply fully with CASS regulations, and what are the implications of non-compliance?

Designed to protect client assets and money, CASS regulations have become particularly significant for both businesses and the Financial Conduct Authority since the collapse of Lehman Brothers in 2008. Securing client money, improving the integrity of the UK financial system, and fostering a competitive market are the key objectives of the regulation, in accordance with the FCA’s wider strategic goals.

CASS regulations have been developed in recent years, with the Financial Reporting Council tightening the CASS audit regime in 2016, increasing company obligations to implement secure systems and controls to protect client assets and money. Furthermore, the FCA is currently consulting on changes to its senior manager and certification regime (SM&CR), which requires firms to assess the suitability of its senior managers on an annual basis, certifying that they are capable of being held accountable for company conduct and risk.

So, how can businesses best prepare to ensure that they comply fully with CASS regulations, and what are the implications of non-compliance?

CASS audit regime

The CASS audit regime changes entered into force for reporting periods starting 1 January 2016, setting out new requirements for businesses holding client money. Key changes included a requirement for firms to carry out a risk assessment for CASS regulations, demonstrating that processes and controls had been implemented for all applicable rules set out under CASS, and an obligation for senior managers to actively promote ethical behaviour within company culture and establish relevant training processes for staff members.

Businesses that fail to maintain proper accounting records could be in breach of CASS regulations, leading to the breach being identified by the company’s auditor in a client asset report and sent to the FCA, possibly resulting in significant fines.

SM&CR regime

From 2018, all regulated firms will be subject to the SM&CR regime, rather than just banks, insurers and investment firms. As a result, all firms should have at least one senior manager, who must be FCA approved. Senior managers have a prescribed list of responsibilities and could be held accountable for any company breaches of FCA requirements, including CASS.

Firms must demonstrate that they have properly assessed the competences of the senior manager and meet regulatory reference requirements. If a firm fails to comply with the regulations under a senior manager’s responsibility, that senior manager may face enforcement action.

Ensuring compliance with technology

Maintaining proper operational accounting methods forms the foundations of complying with CASS regulations. Businesses may encounter significant challenges when attempting to meet the requirements under CASS 7, but the right technology can ensure that a company’s systems are prepared to create data required by the regulatory bodies.

The Cashfac Accounting Hub is one example of this. The system enables businesses to create accurate client money accounting records for all client money activity. The following are 10 ways the Accounting Hub can overcome the accounting challenges posed by CASS 7.

1. Client money calculation: Internal client money reconciliation calculation can be easily performed on a daily basis, as the calculation is made automatically from the general ledger and client product sub ledger accounts.

2. Prudent segregation: Analytical reporting tools allow for prudent segregations, as required.

3. Configurable to client preferences: The Accounting Hub can be configured to client preferences or for varying accounting requirements for businesses. The system can also prepare client money calculations in multiple currencies.

4. Inter bank account sweeping: The Accounting Hub automatically initiates the sweeping of funds between a company’s bank account and the client’s bank account in each currency.

5. Regulatory reporting: Reporting tools send all details needed about client money records to complete Client Money returns.

6. Financial management reporting: A real-time dashboard and management information allow businesses to review records and ensure good governance.

7. Software as a service model: The SAAS model can handle large transaction volumes and detailed data generation.

8. Segregation of duties: Users can see the accounts to which they have been granted access, allowing them to easily perform duties.

9. Client reporting: Sub-ledger accounts are created for each client product balance, aiding the performance of client money calculation.

10. Interest calculation and payment: Full banking functionality is available on the client money sub ledger account, including calculation and payment of credit and debit interest.

Find out more about how your business might be affected by CASS 7 and discover how you can overcome the challenges of CASS 7 compliance by downloading this white paper.


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