Reconciliation of Client Funds

Circular
Reconciliation of Client Funds

CIRCULAR:
7/2013
DATE:
17.07.2013
THE CIRCULAR APPLIES TO:
Insurance intermediaries
Fund management companies for securities funds Securities companies Foreign debt collection companies Branches of foreign debt collection companies E-money institutions Payment institutions

FINANS TILSYNET
Postboks 1187 Sentrum
0107 Oslo

Reconciliation of Client Funds
2 | Finanstilsynet

Entities that hold client funds must be able to document that the client funds are at all times sufficient to cover the client liability. They must regularly reconcile the client funds against the client liability. The Financial Supervisory Authority will in its supervisory practice assume that the following routines are followed:

Reconciliation of the client funds against the client liability according to the accounts shall cover four amounts:

1. Client funds according to bank statements and/or other institution*
2. Client funds according to the accounts
3. Client liability according to the accounts
4. Client liability according to the subsidiary ledger (customer/supplier specification)

The four amounts shall be reconciled with a minimum frequency of monthly as follows:

1. Client funds according to bank statements and/or other institution* (1) shall be reconciled against client funds according to the accounts (2). Discrepancies between the amounts shall be explained.
2. Client funds according to the accounts (2) shall be reconciled against client liability according to the accounts (3). Discrepancies between the amounts shall be explained.
3. Client liability according to the accounts (3) shall be reconciled against client liability according to the subsidiary ledger (4). Discrepancies between the amounts and negative balances in the subsidiary ledger shall be explained.

These three reconciliations shall be documented. Such documentation shall also include the underlying documentation for the amounts.

The Financial Supervisory Authority clarifies that client funds also include advance payments from customers/clients to cover fees (e.g., court fees), other payments to client account(s) that cannot easily be attributed to the entity's clients and/or agreements or case numbers, as well as payments to client account(s) related to non-matured monetary claims (invoice claims).

• cf. the capital requirements regulation § 1-2 (1) letter w

Contact persons for debt collection companies: Stein Tore Næprud tel. 22 93 98 07, e-mail: stein.tore.naeprud@finanstilsynet.no Contact person for insurance intermediation companies: Hege Bogstrand tel. 22 93 99 72, e-mail: hege.m.bogstrand@finanstilsynet.no Contact person for securities companies and fund management companies: Anders Hauglund, tel. 22 93 99 87, e-mail: anders.hauglund@finanstilsynet.no Contact person for payment and e-money institutions: Beate Norberg tel. 22 93 96 78, e-mail: beate.norberg@finanstilsynet.no

This circular replaces circular 23/2011 and 34/1997.

Reconciliation of Client Funds
Finanstilsynet | 3

FINANS TILSYNET
Postboks 1187 Sentrum
0107 Oslo
POST@FINANSTILSYNET.NO
WWW.FINANSTILSYNET.NO