THOUGHT LEADERSHIP
Client Money Is Not a Back-Office Problem: Why CASS 5 Belongs on the Broker’s Board Agenda
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5 min read
What CASS 5 asks of a broker
CASS 5 sets out the client money requirements for insurance distribution, including how money is protected, recorded and reconciled.
Client money is not the broker’s money. It may be a premium on its way to an insurer, or a claim payment or refund returning to a policyholder. Client money arrangements protect customers if an intermediary cannot pass the money on.
Brokers protect these funds through risk transfer, segregation under trust, or a combination of both:
• Risk transfer: Under a written agreement, the broker receives premium as the insurer’s agent. Once the customer pays, the insurer bears the risk if the broker fails. CASS 5.2
• Segregation under trust: Money is kept separate from the firm’s own funds. The statutory trust is the default. A non-statutory trust permits credit advances to clients, but carries additional requirements. These include a trust deed, current auditor confirmation of adequate systems and controls, and a designated manager. Where retail client money is handled, at least £50,000 of capital resources is also required. CASS 5.3 and 5.4
Those structures depend on accurate records. Key operational obligations include:
Obligation | Timing | Reference |
Segregate client money received | As soon as practicable; the FCA normally expects payment into a client bank account by the next business day | CASS 5.5.5R / 5.5.6G |
Remove the firm’s share of a mixed remittance | As soon as reasonably practicable; no later than 25 business days after clearance, or the client money calculation if earlier | CASS 5.5.16R |
Calculate the client money position | As often as necessary for accurate records; no more than 25 business days between calculations | CASS 5.5.63R(1) |
Fund an identified shortfall | By close of business on the calculation day | CASS 5.5.63R(1)(b) |
Reconcile each client bank account to the bank | Within ten business days of the calculation | CASS 5.5.63R(2) |
Notify the FCA of failure or inability to perform the calculation | Immediately | CASS 5.5.76R |
Notify the FCA that a shortfall may not be made good in time | Immediately on becoming aware | CASS 5.5.77R |
Source: FCA CASS 5.5.
These processes need clear governance. Boards need to know who is responsible, which differences remain unresolved and whether controls work throughout the year. For non-statutory trusts, CASS 5.4.4R specifically requires a designated manager and current auditor confirmation of adequate systems and controls.
Where a client assets report is required, the auditor considers whether systems were adequate throughout the period, rather than only at year end. Reports generally cover no more than 53 weeks. General insurance intermediaries are not routinely required to submit them to the FCA unless the auditor provides an adverse opinion. SUP 3.10, FCA audit guidance
The fragmented reality
At a typical mid-sized broker, client money records are spread across:
• Several bank accounts: Trust, designated, currency and office accounts, often held with different banks.
• Several policy systems: Legacy platforms from acquired books, alongside binder and managing general agent (MGA) portals.
• Many counterparties: Insurers, Lloyd’s settlement, premium finance providers, payment gateways and direct debit bureaux, each with different remittance formats and timings.
• The general ledger: Often containing summary postings rather than the policy-level detail needed to explain a balance.
• Spreadsheets and inboxes: Where teams match transactions, record judgements and explain the links between records.
Consider a broker settlement covering several policies across different lines of business. Commission has been deducted, and the payment differs from the expected amount. The team investigates, allocates and posts it, but the explanation remains spread across the remittance, a spreadsheet and an email thread.
A month later, a reviewer can see the entries but must reconnect the sources to understand them. If the original investigator has moved on, a routine review becomes another investigation.
This pattern repeats for the client money calculation, reconciliation, audit sample, board report and capacity provider’s query. The transaction is processed once, but its explanation is rebuilt whenever someone new asks.
Posting a transaction does not, by itself, preserve the reasoning behind it.
Why consequences extend beyond workload
When a firm fails, its records become the basis for returning money to customers:
• Money is pooled. A primary pooling event triggers the notional pooling of client money held at failure for distribution according to clients’ entitlements.
• Shortfalls are shared. Clients receive a proportionate share of the available pool and may become unsecured creditors for amounts not recovered.
• Distribution costs reduce returns. Costs attributable to distributing client money are deducted from the pool.
• Records determine the work required. The insolvency practitioner must establish customers’ entitlements. Poor controls and record keeping can contribute to shortfalls. Fragmented evidence makes those entitlements harder to reconstruct.
Weak records can delay the return of money and increase the costs deducted before customers are paid. CASS 5.6, FCA insolvency guidance, paragraphs 78–90
The regulator’s expectations extend across the chain. In July 2025, the FCA fined Barclays Bank UK £3.09m for opening a client money account without basic checks for a firm that was not permitted to hold client money. About £34m of client funds flowed through the account. Although the case did not involve an insurance broker, it shows the seriousness of client money failings and the need for those handling the money to understand whose it is. FCA Final Notice
For retail business, the Consumer Duty also requires firms to avoid foreseeable harm, including through their role in a distribution chain. Delayed refunds, premiums that fail to reach an insurer and claims held up in reconciliation can all harm customers. PRIN 2A.2
There are consequences across the business:
Area | Consequences of fragmentation | Who feels it |
Regulatory | Failure to perform the required calculation triggers immediate FCA notification. Auditors identify breaches rule by rule and assess systems throughout the period. | CASS compliance owners, board |
Capital and liquidity | Shortfalls require the firm’s own cash. Unexplained differences can encourage over-funding, while unreconciled mixed remittances leave commission tied up. | CFO, treasury |
Resolution | Client entitlements must be established when a firm fails. Poor records slow distribution, and the costs are deducted from the client money pool. | Customers, insurers, insolvency practitioner |
Fraud and control | Misdirected payments or misappropriation can appear to be routine reconciling items when supporting evidence sits in inboxes. | Customers, firm, bank |
Customer outcomes | Refunds and claims wait while teams investigate. Premiums that do not reach an insurer can create problems with cover. | Policyholders, complaints team |
Growth and value | Every binder, entity and acquired book adds balances to explain. An unclear client money position can lead to a discount or conditions on a deal. | CEO, investors, capacity providers |
Two risks deserve particular attention.
First, reliance on key people is a compliance risk. If only the two people who built the spreadsheet can explain the client money position, CASS compliance depends on their availability. The FCA expects firms to be able to wind down with minimal adverse impact on clients. That is difficult to plan for when essential knowledge sits with individuals rather than in records. Wind-down Planning Guide
Second, growth compounds the problem. Acquisitions add systems, entities and balances to explain. A process that depends on experienced people filling the gaps may work at one scale and fail at the next. Premium finance adds funded balances and recovery activity to the picture. The calculation may still be completed, even as the supporting evidence becomes less reliable.
What good looks like
The goal is a client money position that another person can understand from the records, on any day, without reconstructing it. Five principles help:
1. Record every money event once, at policy level. Capture premiums, claims, commission, fees and insurance premium tax as accounting events, rather than reconstructing them from summary postings.
2. Reconcile continuously. Match bank activity as it arrives and flag differences promptly, so the periodic calculation confirms a position the team already understands.
3. Keep the explanation with the number. Attach investigation notes, remittances and decisions to the relevant item, with a time-stamped history.
4. Connect the detail to the ledger. Tie policy-level balances to the general ledger so finance, compliance and auditors work from the same figures.
5. Give every exception an owner. Classify unresolved items, assign responsibility, track their age and escalate them when needed. This includes items that require assessment as a potential CASS breach.
Choose a client money balance at random. Could someone unfamiliar with it explain it from the records? Could an insolvency practitioner do the same?
The Diesta view
Client money is where a broker’s promise to customers becomes a balance on a bank statement. It deserves board attention because it affects financial control, customer outcomes and the firm’s ability to grow.
We built Diesta around that view. Diesta records accounting events for premiums, claims, commission and tax, and flags reconciliation differences for investigation as they arise. A time-stamped history preserves the audit trail, while the subledger links policy-level detail to the general ledger. Classification and task workflows help teams assign responsibility, track unresolved items and escalate concerns, including those that require assessment as a potential CASS breach.
The firm remains responsible for its controls and judgements. With connected evidence, the calculation, audit and board report can draw on the same records and explanations throughout the month.
Can your firm consistently explain its client money position to the board, auditor, FCA or capacity provider? Could it do so for an insolvency practitioner if the firm failed?
If explaining your balances means piecing together information from different systems, speak to Diesta about connecting premium and cash operations to support daily control, reporting and review. Email hello@diesta.co.uk or visit diesta.co.uk.
