Description

Client Funds Protection Policy for FSPs

The Client Funds Protection Policy and Procedures Pack is an editable downloadable template designed for Financial Services Providers that need a practical framework for the custody, administration, safeguarding, reconciliation and monitoring of client funds.

This Client Funds Protection Policy is suitable for FSPs that receive, hold, transfer or administer client money, as well as FSPs that do not receive client funds but need to clearly document their no-custody position and prevent staff from accepting funds outside approved channels.

For related compliance templates, you may also view our Fraud and Corruption Policy Pack, Segregation of Duties Policy and Business Continuity Policy and Procedures.

For official regulatory context, you can also visit the FSCA FAIS regulated entities page.

What Is Included In This Client Funds Protection Policy?

This template helps the FSP classify its client funds model and apply controls that match the way the business actually operates. It covers FSPs with no custody, limited receipt, ongoing custody or third-party custody arrangements.

The policy includes sections for:

• Policy review control sheet
• Policy review details and change log
• Training and implementation record
• Introduction, purpose and objectives
• Scope and application
• Regulatory framework
• Definitions, including client funds, custody, commingling, mandate and reconciliation
• Policy statement and guiding principles
• Client funds business model classification
• Custody arrangements and separate accounts
• Prohibited practices
• Procedures for receiving client funds
• Accidental receipt procedure where the FSP does not receive client funds
• Procedures for payments, transfers and withdrawals
• Reconciliations, statements and reporting
• Client communication requirements
• Third-party custodian and service provider controls
• Information security and POPIA controls
• Insurance, guarantees and risk controls
• Breach management and regulatory reporting
• Training, awareness, monitoring and review
• Ownership and approval

Client Funds Protection Policy Annexures Included

The Client Funds Protection Policy includes practical annexures that help the FSP evidence its client funds controls, whether the FSP handles client funds directly or uses product suppliers, insurers, platforms or third-party custodians.

The annexures include:

• Annexure A: Client Funds Applicability Assessment
• Annexure B: Client Funds Account Register
• Annexure C: Client Funds Receipt Register
• Annexure D: Payment, Transfer or Withdrawal Authorisation Form
• Annexure E: Reconciliation Checklist
• Annexure F: Third-Party Custodian / Service Provider Due Diligence Checklist
• Annexure G: Client Funds Breach Incident Report Form
• Annexure H: Client Funds Incident Register
• Annexure I: Client Communication Template – Payment Instructions / No Client Funds Held
• Annexure J: Annual Review and Controls Attestation
• Annexure K: Staff Acknowledgement and Declaration

Why FSPs Need a Client Funds Protection Policy

Client funds create significant conduct, fraud, operational and regulatory risk. If money is received into the wrong account, mixed with business funds, paid without authority, delayed, misallocated or poorly reconciled, the FSP may expose clients and the business to serious harm.

A written Client Funds Protection Policy helps the FSP show how client funds are received, recorded, safeguarded, transferred, reconciled and monitored. It also helps staff understand whether they may receive client funds at all, and what to do if funds are paid to the FSP by mistake.

This template helps address common weaknesses such as:

• No documented position on whether the FSP receives client funds
• No client funds applicability assessment
• No separate client funds account register
• No client funds receipt register
• No payment, transfer or withdrawal authorisation form
• No reconciliation checklist
• No accidental receipt procedure for FSPs that do not hold client funds
• No third-party custodian due diligence checklist
• No client funds breach incident report form
• No annual controls attestation

No-Custody and Accidental Receipt Controls

This pack is especially useful for FSPs that do not receive or hold client funds. The template allows the FSP to record its no-custody model and communicate clearly that clients must pay product suppliers, insurers, platforms or other approved recipients directly.

The accidental receipt procedure explains what must happen if money is paid to the FSP by mistake. It requires the matter to be treated as a control incident, escalated, recorded, returned or transferred lawfully, and supported by a full audit trail.

Receipt, Payment and Reconciliation Procedures

The Client Funds Protection Policy includes procedures for receiving funds, allocating receipts, investigating unallocated payments, processing transfers, approving withdrawals and saving proof of payment.

The reconciliation checklist helps the FSP compare bank statements, receipt registers, payment mandates, client allocations, outstanding items and supporting documents. This supports better oversight and reduces the risk of unreconciled client money movements.

Third-Party Custodian and Service Provider Controls

Where client funds are held or processed by a product supplier, insurer, platform, bank or other third-party custodian, the FSP still needs to understand the fund flow and disclose the arrangement clearly to clients.

The third-party due diligence checklist helps the FSP record the custodian’s legal details, authority, role in the client fund flow, data protection controls, service-level terms, complaint process, breach notification process and annual review date.

Who Should Use This Client Funds Protection Policy?

• Authorised Financial Services Providers
• FSPs that receive or process client premiums, contributions or investment amounts
• FSPs that do not hold client funds but need to evidence that position
• FSPs using product suppliers, insurers, platforms or third-party custodians
• Key Individuals responsible for client money controls
• Compliance officers assisting FSPs with risk governance and monitoring
• Business owners who need clear client payment and reconciliation controls

Editable and Customisable Client Funds Template

This Client Funds Protection Policy is editable and must be customised before use. The FSP must insert its name, FSP number, custody model, banking arrangements, authorised users, payment thresholds, approval process, reconciliation frequency, third-party custodians, client communication process and evidence storage location.

The template includes practical registers and checklists that should be completed before the final policy is approved and implemented.

Important Compliance Note

This Client Funds Protection Policy is a compliance support document. It does not replace legal advice, regulatory advice, accounting advice, audit review, product supplier requirements or a full custody arrangement assessment. Each FSP remains responsible for ensuring that the final policy is accurate, practical, implemented, monitored and aligned with its actual custody model, licence conditions, client mandates, banking arrangements and current regulatory obligations.