Aviva Fined $10.5 Million by U.K. FCA Over Outsourcing

  • Aviva failed to ensure oversight of third-party providers
  • Penalty is FCA’s second action in two years for life insurer

Aviva Plc was fined 8.2 million pounds ($10.5 million) by the U.K. markets regulator for failures related to its use of outsourcing, the second penalty for the insurer from the watchdog in two years.

The Financial Conduct Authority said Wednesday Aviva had failed to properly oversee third parties used for administrative tasks involving client money and the reconciliation of client assets between January 2013 and September 2015. As a result, customers’ money wasn’t always separated correctly, with deficits of as much as 74.4 million pounds at its worst.

The penalty is the latest for Aviva from the FCA after the insurer was fined 17.6 million pounds in 2015 for failing to manage conflicts of interest among funds in its fixed-income business. The company also paid 132 million pounds in compensation to clients related to the same issue in 2014.

“Other firms with similar outsourcing arrangements should take this as a warning that there is no excuse for not having robust controls and oversight systems in place," Mark Steward, FCA director of enforcement and market oversight, said in a statement. "Firms are reminded that regulated activities can be delegated but not abdicated."

The FCA said while the issue was serious, there was no loss of client money. The company received a 30 percent discount on a proposed 11.8 million-pound fine for settling the matter at an early stage. It’s the first penalty the watchdog has issued under its Client Assets Sourcebook, or CASS, rules in relation to oversight of third parties.

“This should not have happened and we are sorry," Andy Briggs, chief executive officer of Aviva U.K. Life, said in a statement. "We have made improvements to ensure we have clear oversight of the processes undertaken on the adviser platform, and remain vigilant in our continued monitoring through a dedicated and expert team.”

(Corrects number of FCA actions in first and third paragraphs.)
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