Client Money & Assets Return (CMAR) Reporting

The collapse of Lehman Brothers (2008) and the subsequent international financial crisis prompted the Financial Conduct Authority (FCA) to enforce a mechanism to protect clients’ money and assets, especially during insolvency. Hence, the FCA created the Client Assets Sourcebook (CASS) and mandated CASS firms to submit a Client Money and Assets Return (CMAR) report monthly.

While the requirement of CMAR reporting is essential for maintaining trust and transparency, many CASS firms face significant operational challenges in compliance and meeting these obligations.

If you work in a CASS firm, you’re probably familiar with one or more of these challenges: 

• You don't know how to build a tailored CMAR module to be CASS compliant.
• Manual reconciliation process wastes time, causes data entry errors, and leaves no audit trail.
• You are missing CMAR submission deadlines and risk FCA penalties.  
• Your reconciliation process is fragmented, causing a lack of visibility among teams and inconsistencies in your records. 

Keep reading to learn more about how CMAR reporting works and how to comply with the CMAR reporting requirements.    

If you want to simplify reconciliation and CMAR reporting, book your demo today. 

What is Client Money and Assets Return (CMAR) 

Client Money and Assets Return (CMAR) is a monitoring tool that helps the FCA to regularly oversee CASS firms’ client money and assets positions. The goal is to proactively ensure that clients’ finances in CASS firms are safe and can be returned promptly in cases of insolvency or bankruptcy. 

Understanding the FCA’s Client Money and Asset Return (CMAR)

In 2024, 23,872 registered UK companies became insolvent. Without establishing processes to distinguish and protect clients' funds, insolvent CASS firms might fail to return clients' money and assets. To mitigate risks, the FCA mandates medium and large CASS firms to submit an accurate CMAR report within 15 business days after each month ends.

This ongoing monitoring enables the FCA to hold CASS firms and their executives accountable for client money and assets management practices.  

Why CMAR reporting matters for regulated firms? 

The FCA created CMAR as a regulatory instrument to prevent a repeat of the 2008 financial crisis - an outcome which everyone views as important to avoid. Among other reasons, CMAR reporting is important for regulated firms in particular because it:

• Protects clients' finances: By ensuring that firms segregate their funds and other clients’ funds from individual client money and assets, client funds will be safe during insolvency.
• Lets the FCA monitor CASS firms: CMAR reports provide information on the current state of client finances, allowing early detection of inconsistencies before they escalate and disrupt the market.
• Helps CASS firms stay CASS compliant: It helps firms to avoid heavy FCA fines, reputational damage, and operational disruptions. 

“Any discrepancies or inaccuracies can signal potential risks to client protection and may trigger regulatory scrutiny. Ultimately, consistent and accurate CMAR submissions help maintain trust in firms and uphold the integrity of the UK financial system.”

Dylan Bird, Head of Professional Services at Aurum

Who needs to submit a CMAR? 

Businesses classified as medium and large CASS firms under the Client Assets Sourcebook (CASS) rules must submit a CMAR. This classification depends on the amount of clients' money and assets that a firm holds.  

Each year, the FCA mandates CASS firms to fill a categorisation questionnaire, which determines the value of client assets held by firms and what category they fall into. 

Firms that fall under the CMAR obligation

Only large and medium CASS firms fall under the CMAR obligation. According to the FCA, CASS firms are grouped into three main categories:

• Large CASS firms: Financial institutions that exceeded thresholds of £1 billion in client money or £100 billion in custody assets at any point during the previous calendar year.
• Medium CASS firms: Financial institutions whose highest holdings ranged between £1 million and £1 billion in client money or between £10 million and £100 billion in safe custody assets during the last calendar year. 
• Small CASS firms:  Financial institutions holding less than £1 million in client money or less than £10 million in safe custody assets during the last calendar year.

Large and medium CASS firms must send a monthly CMAR report and have a designated director or senior manager who will oversee the firm’s CASS compliance. Small CASS firms are not obligated to complete a monthly CMAR report. 

CMAR Reporting Guidelines

Maintaining CASS compliance is challenging, but these demands are minimal compared to the consequences of non-compliance. Follow the FCA's guidelines - some of which are laid out below - to strengthen your position, remain compliant, and avoid regulatory scrutiny.

FCA Requirements 

Here are some of the FCA's CMAR requirements:

• Large and medium firms must submit a complete CMAR report to the FCA within 15 business days after the end of the month.
• Firms are required to keep an up-to-date record and maintain it for five years.
• The FCA doesn’t prescribe any particular methodology or frequency for valuing safe custody assets for the CMAR report. 
• All CMAR figures must be reported in GBP (sterling). Money or assets in other currencies are converted using the previous day’s closing spot exchange rate. 
• CMAR reports must be submitted electronically using the FCA’s system (GABRIEL).

Key Components of the CMAR Form

The FCA collects and tracks relevant client finance data regularly using a CMAR form. Some of the key components of the CMAR form include:

• number of acknowledgement letters
• reconciliation breaks
• value of client assets 
• value of client money 
• outsourcing arrangements
• highs and lows during the period
• auditors
• number of clients
• notifiable breaches during the period 

Frequency and Reporting Timeline

The FCA requires large and medium CASS firms to submit a complete CMAR report within 15 business days after the end of each calendar month.

CASS firms must also be mindful of following other regulatory timelines though. For instance, they must conduct daily internal client money reconciliation (ICMR). These internal reconciliations should cover the firm’s records at the close of business on the previous business day.

The firms must also calculate the total client money held for each client within two business days of deciding to check clients’ money balances or receiving a request from the FCA. 

Ready to automate CMAR reporting? Request a demo now.

CMAR Reporting Deadline 

CMAR reporting involves complex data collection from different sources and in various formats, often leading to missed deadlines. To prevent this, CASS firms can automate data entry, data integration, matching, spotting exceptions and reporting by using reconciliation software like Aurum which automates the entire end-to-end process.

How Late Submissions Are Treated by the FCA

FCA penalties escalate as the delay’s duration increases. Submission delays under 28 days attract financial sanctions. Repeat delayed submissions that are perceived as being deliberate or reckless receive higher penalties. Submissions exceeding 28 business days, with no exceptional circumstances justifying the delay, attract higher financial penalties, with other disciplinary actions on the approved persons responsible for reporting. 

“All firms should be clear after Lehman that there is no excuse for failing to safeguard client assets.”

Tracey McDermott, FCA Director of Enforcement

Note: The FCA may treat a report as not received if it is materially incomplete or inaccurate or submitted through non-compliant methods. 

The Relationship Between CMAR and CASS 

CASS functions like the safety manual of a complex machinery, while CMAR is the logbook that operators keep to show compliance with the stipulated safety standards.

What Is CASS and Why Does It Matter?

Client Assets Source (CASS) is a regulatory body that governs how firms manage customers' money and assets. It mandates firms to separate clients' funds and protect their assets during insolvency. 

This prevents CASS firms from prioritising profits over safeguarding clients’ assets and boosts clients' confidence in the financial system. It instils a culture of accountability and responsible profitability in firms that handle client finances. 

"The prize for all of us in that will be a vibrant and innovative financial services sector, underpinned by a strong sense of accountability, that aims to build and maintain the trust and confidence of society, and is thus able to meet society’s needs.”

Tracey McDermott, FCA Director of Enforcement

CMAR as a Compliance Mechanism Under CASS 6 and 7

The Financial Conduct Authority’s (FCA) CASS 6 and CASS 7 set the rules that financial firms must follow in the UK to protect client assets and money.

CASS 6 (custody rules) dictates everything relating to safe custody of assets, which requires that firms keep clients’ custody assets separate from their own while maintaining accurate records. These rules make sure that clients' assets are protected in the event of firm insolvency. 

CASS 7 (client money rules) outlines the requirements for safeguarding client money. It requires firms to segregate client money from their funds. It also ensures that financial firms conduct daily reconciliations while maintaining strict controls to ensure clients' money is protected and accounted for.

To ensure ongoing compliance with these rules, the FCA introduced the Client Money and Asset Return (CMAR) as a formal mechanism for firms to regularly report how they are managing and safeguarding client money and assets. 

CMAR reporting helps the FCA monitor firms' adherence to CASS 6 and 7 and take timely action where necessary.

Safeguarding Client Money and Assets

CASS firms use safeguarding to protect the funds they hold in trust for clients. Here are some safeguarding requirements of the FCA:

Segregation and Reconciliation Requirements 

CASS firms must periodically check and ensure that clients’ account balances meet the total amount their representatives and agents are reportedly holding for clients at any time. 

Within ten business days after each of these checking periods, the firm must compare the money it puts into the client bank account with the actual amount of client money held by each representative or agent. It must also add money to, or take money out of, the client's bank account to make sure the amounts match.

Role of Technology in Reducing Risk and Human Error

As regulations become more data-centric and transaction volumes rise with business growth, data overload and human errors are inevitable. Traditional reconciliation methods like Excel spreadsheets become cumbersome and lack the audit trails required by the FCA.

Reconciliation software is key in industries, such as asset management, that prioritise regulatory compliance. It enables automation, collaboration, accuracy, speed, and monitoring at high transaction volumes, allowing CASS firms to proactively monitor transactions, manage risks, and reduce human error.

Brands like Moneybox are creating fast and accurate CMAR reports with Aurum. Adam Burgess, Senior CASS Associate at Moneybox, shared his experience:

"Generating our CMAR reports directly within Aurum is a huge benefit because accuracy is assured, with the intel coming from just one trusted source instead of various different places."   

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Best Practices for Ongoing Compliance 

To comply with the FCA’s demands, here are some best practices to embrace:

• Always base CMAR figures on internal reconciliations you’ve performed at the end of the reporting period.
• Thoroughly cross-check figures and ensure that CMAR report data is traceable to source records.
• Automate compliance tasks like data entry, reconciliation, and reporting. 
• Continuously train your team. Teach them how safeguarding duties tie into your firm’s CMAR obligations.  They’ll handle clients' finances better when they know the CMAR rules.
• Maintain clear documented compliance procedures.

Penalties for Non-Compliance 

Non-compliance has a heavy price. You can prevent non-compliance penalties by maintaining an automated reconciliation process that supports accurate and timely CMAR reporting. 

Financial and Operational Risks

Non-compliance with CMAR reporting results in heavy FCA fines, which can soar up to millions and billions of pounds. Not to mention the reputational damage and expenses on legal fees that follow. For example, the FCA fined Charles Schwab UK £8.96 million over safeguarding and compliance failures. 

In some cases, the licences of defaulting CASS companies are suspended or revoked, hindering business activities and operations or revenue generation.

Mistakes in CMAR Reporting

Some common mistakes in CMAR reporting are:

• Firms collate multiple internal client money reconciliations and transfer the figures incorrectly to the monthly CMAR report.
• Inaccurate highest client money balance due to aggregation mistakes.
• Poor documentation leads to incomplete audit trails for reconciliations and CMAR data, which in turn cause reporting inaccuracies.

Automate CMAR reporting to minimise human errors with Aurum.

The Future of CMAR and Regulatory Reporting 

Here's how CMAR and regulatory reporting are changing:

A Shift Toward Real-Time and Automated Compliance 

CASS firms need real-time data traceability, accuracy, and processing speed to meet the FCA’s requirements for daily reconciliations, monthly CMAR report submissions, and resolution pack maintenance. 

Though the FCA doesn’t currently demand real-time CMAR reporting, it increasingly expects CASS firms to have robust reconciliation and data retrieval systems that can provide information on the state of clients' assets and money on an intraday and sub-48-hour basis.

Manual reconciliation processes can't effectively meet these demands, making automation necessary.

“At present, CMAR remains a monthly reporting obligation, and there are no formal indications that this frequency will shift toward real-time reporting in the near term. However, firms should expect and prepare for internal pressures to automate and streamline the data-gathering process that underpins CMAR submissions. Given the volume and diversity of data points required—often drawn from multiple systems across the business—the process can be heavily manual, time-consuming and operationally demanding. When time is at a premium at the month, manually producing a CMAR report is the last thing you want to do. As such, automating CMAR reporting plus the daily data extraction and validation which informs it will be a key area of focus for many CASS firms looking to enhance efficiency, reduce risk, and improve accuracy in their reporting.”

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Role of Reconciliation Software in Future Proofing Financial Operations 

As large and medium CASS firms grow and transaction volumes increase, reconciliation software offers speed and ongoing monitoring that manual methods can’t provide. It enables growing CASS firms to proactively monitor transactions and flag inconsistencies, without hiring more talent. 

Payment and E-money firms will soon be required to provide CMAR-style reporting. When CASS 15 becomes a reality, they must submit safeguarding returns. The FCA will release the interim-state safeguarding rules by mid-2025 and allow payments and e-money firms 6 months to implement the rules.

Though these changes affect payments and e-money institutions, all finance firms should use reconciliation automation solutions like Aurum to prepare for future regulatory changes. 

Join the CASS firms that are simplifying CMAR reporting with automation today: Get started.

Why use Aurum for CMAR Reporting

Aurum is a flexible reconciliation software that collates financial data and automates reconciliation and CMAR reporting for small and enterprise teams. Here’s why you should make us your reconciliation partner:

Enjoy a tailored and flexible reconciliation solution

Aurum adapts to custom matching rules, allowing it to align with your firm's unique reconciliation needs. Our reconciliation software can be seamlessly integrated into your existing systems or run as a standalone module, offering a tailored approach to meet diverse operational needs. It’s versatile, letting you import varying data formats, including JSON, SWIFT, OLE/ODBC, and ACH in seconds.

Aurum reduces complexity and boosts operational efficiency in CASS compliance by solving both reconciliation and CMAR reporting needs. 

Scale boldly with predictable costs

Aurum adjusts to regulatory changes and a higher volume of data as your business scales. We don’t charge based on transaction volume, no matter how high it becomes. This means that as your company scales, your costs are stable and sustainable, leading to increased profitability.

Stay compliant with ongoing support

Aurum provides financial experts to support your CMAR reporting efforts, whether you are a large, medium or small CASS firm. We'll work with you to create a CMAR reporting process that works for your brand.  

Automate and speed up reconciliations with broad coverage

We offer over 600 integrations to connect you with PSPs, banks, platforms and systems. This means that once you use Aurum, you can start automating your reconciliation process immediately. 

With Aurum, you can create a fully audited and accurate CMAR report in minutes, saving time and sidestepping the manual effort needed to stay CASS compliant.

How Moneybox automated reconciliation and CMAR reporting with Aurum 

Moneybox is a UK based fintech company that's helping over 1 million people build secure financial futures through its investment and savings products including US stocks, shares, and ETFs. Founded in 2016, Moneybox grew to over £5bn assets under its administration by 2023, building a transactional volume too high for manual reconciliation processes and Excel sheets. Being a large CASS firm, Moneybox had to accurately track transactional data and promptly produce CMAR reports without hiring more talent to handle repetitive tasks, so it partnered with Aurum.  After deploying Aurum's reconciliation solution, Moneybox’s team sped up reconciliations and CMAR reporting and saved 11.3 hours daily amidst rising transaction volumes. 

Learn more about Aurum and Moneybox’s partnership.

Choose frictionless CMAR with Aurum

CMAR reporting ensures that the industry and its professionals maintain the highest standards in handling clients' finances held in trust. Invest in a reliable reconciliation software to stay CASS compliant, maintain profitability and build trust. We'll be happy to show you how to automate your reconciliation process. To begin, book your demo today.