Client Fund Segregation & Protection

This criterion assesses the robustness of an organization's practices in safeguarding client funds, ensuring absolute segregation from the organization's own assets. It evaluates the legal and operational measures taken to protect client assets from misuse, commingling, fraud, insolvency, and operational risks. Key elements include the enforceability of trust status via bank acknowledgement letters, the rigor of daily reconciliations, and the strength of cyber-fraud controls (e.g., MFA, maker-checker). The organization must demonstrate a proactive approach to third-party risk management, insurance adequacy based on peak exposure, and comprehensive contingency planning (e.g., CASS Resolution Packs) for the swift return of assets in distress. Transparency is paramount; clients must be fully informed of how funds are held, the Shari’ah contract governing them (e.g., Wadi’ah, Wakalah), and the purification of any impermissible income. This criterion ensures adherence to the Islamic principles of Amanah (trustworthiness), Hifz al-Mal (protection of wealth), and Adl (justice).