The City regulator has today slapped two Aviva businesses with a £8.2m penalty.
The Financial Conduct Authority (FCA) fined Aviva Pension Trustees UK and Aviva Wrap UK for failing to properly oversee work it had outsourced in relation to protecting client assets.
In particular, the FCA asserts that these failings were a breach of the Client Assets Sourcebook (CASS) rules, which are designed to protect client assets should a firm find itself in financial hot water.
The FCA discovered that, at one point, the third party Aviva had outsourced work to had failed to properly segregate as much as £74.4m of client money, although no client money was actually lost as a result of the rule breach.
"Aviva outsourced the administration of client money and external reconciliations in relation to custody assets, but failed to ensure that it had adequate controls and oversight arrangements to effectively control these outsourced activities," explained Mark Steward, director of enforcement and market oversight at the FCA.
"With outsourced arrangements firms remain fully responsible for compliance with our CASS rules. Firms are reminded that regulated activities can be delegated but not abdicated.
"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 to ensure their processes comply with our rules when CASS functions are outsourced."
Andy Briggs, chief executive of Aviva UK Life, added: "We fully accept the findings of the FCA’s review. This should not have happened and we are sorry."
Aviva's penalty could have been as much as £11,781,262, but it received a 30 per cent discount for agreeing to settle at an early stage.