For a long time, the honest answer to “why is client cash held with this bank?” was allowed to be “it’s always been with this bank.” That answer used to be sufficient. It is becoming less so, and the shift explains something broader about how due diligence in this industry actually works now.
Outcome-based to process-based
Due diligence reviews, whether they are internal, auditor-led, or part of a regulatory review, used to focus heavily on outcomes: was the client’s money safe, was it accessible, was nothing obviously wrong. Increasingly, the focus has shifted towards process: can you show the reasoning behind the decision, not just the fact that the decision hasn’t (yet) caused a problem. An outcome that happens to be fine is no longer treated as equivalent to a decision that was actually made well.
Why cash is the clearest example
Cash placement is one of the starkest illustrations of this shift, because it’s an area where “it’s always been fine” and “it was actively managed” have historically looked identical from the outside, until someone actually asks for the file with evidence of the decisions and oversight. A provider with a genuinely reasoned cash policy and one that simply inherited a banking relationship years ago look the same on the surface, right up until a review asks for evidence of the former.
What “evidence of process” actually means
This doesn’t mean an elaborate paper trail for its own sake. It means being able to point to something concrete: a periodic review of counterparty concentration, a documented rationale for where balances sit, some record that rates and risk were actually considered rather than assumed. The bar isn’t sophistication. It’s evidence that a decision, however simple, was actually made.
The cost of getting caught without it
Being unable to produce that evidence during a review doesn’t necessarily mean anything was done wrong. But it reads as though nothing was actively managed, which is increasingly treated as the finding itself. It is a governance gap, not a factual error. That’s a harder position to be in than most providers realise, right up until they’re actually asked the question.
The shift from outcome-based to process-based review isn’t unique to cash, but cash is where it will be tested first for most providers, because it’s the one holding nearly every file has and the one most likely to have never been formally reviewed. Building the evidence trail before the review asks for it is considerably easier than reconstructing a rationale after the fact.