Client money protection: The refunds crisis has seen a growing clamour for trust ac


Trust accounts: ‘Refunds crisis spurring firms to protect money’


T


ravel firms are under increasing pressure from credit card companies and shareholders to use


trusts to protect customer money. A panel of experts on trusts


reported seeing more companies considering moving to a trust model in the wake of the holiday refunds controversy due to Covid-19. Chris Photi, senior partner at


White Hart Associates, said he had three significant clients with Atol renewals due in September who were asking him to propose a trust model. “All three have, of their own


volition, said ‘we need to look at operating a CAA trust account’,” Photi said. “So, people are making these decisions. Other options should be open to the travel industry, perhaps under a rebalancing of regulations in certain areas, but trusts are going to become more prevalent.” Photi conceded trusts are not


Sudheer Sharma


Credit card acquirers


have woken up to their exposure. Pressure will dictate that solutions are put in place


right for every firm and the transition is not easy, but firms unable to access merchant acquirer facilities, bonding insurance or supplier failure cover may have no option. Sudheer Sharma, director of


PT Trustees, said Covid-19 had exposed the risks in travel to owners, regulators, customers and, crucially, credit card merchant acquirers. “The acquirers have woken up to


what their exposure really is,” he said. “It’s a confluence of pressure from


all these stakeholders that will dictate that solutions are put in place. “Now is probably the worst time


to [switch to a trust model] from a cashflow point of view, but how to protect these monies should have been addressed a long time ago.” One of the objections to trust


accounts is that they are expensive to operate and will push up prices for consumers. But Daniel Landen, managing


director of Protected Trust Services, denied this. “It’s not just Covid-19, it’s


Thomas Cook, the ash cloud, 9/11, the financial crash, Monarch,” he said. “There’s going to be something


next year or the year after and owners and shareholders are asking ‘how exposed are we? Is using consumer funds as working capital good for the business?’ In reality, the cost saving on licensing, merchant services and accounting, done correctly, is more profitable, so why not protect yourself, save money and concentrate on profitability?”


Fraud: ‘Trusts are protected via independent trustees’


Modern trusts are no more vulnerable to fraud than other models and help firms to operate their businesses more profitably and more effectively, our expert panel claimed. Sharma said that during the Covid-19 crisis a


large tour operator client asked to use PT Trustees’ transaction reports to manage its refunds process because its own systems were found to be deficient. He said a properly set up trust with independent


oversight brings with it a level of understanding of company finances that can add real value to owners. “Examining transactions at a granular level surely has


to have a much higher value than just getting a bond and then nobody ever looking at their system,” he said. “To have somebody sitting outside, looking at your


records in a holistic manner, is really a great benefit.” Sharma believes the virus crisis will prompt


10 16 JULY 2020


“monumental change” in the sector and that trusts will ensure businesses introduce a level of discipline in how they manage cashflow not seen before. Photi said fraud concerns were valid prior to


regulatory changes in 2018 because before that company directors could also be trustees of the trust. “Any situation is open to fraud,” he said. “Abta and


the CAA cannot say they’ve not had failed operators outside of the trust arena where fraud hasn’t been committed. Fraud is a fact of modern life. But the whole independence aspect [of trusts] is a protection.” Landen agreed, saying PTS checks every bank detail,


sort code, account number and invoice prior to releasing funds from trust. “PTS are the trust providers but our trustees are


independent of PTS and act on behalf of the agent or the tour operator. You need to have that separation.”


travelweekly.co.uk


Chris Photi


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