Solicitors have been issued with a stern warning not to provide banking facilities through a client account, whether to their client or others, after several prosecutions.
Last year, a firm was fined the Solicitors’ Disciplinary Tribunal’s (SDT’s) highest ever fine of £500,000 for processing money through a client account in breach of the rules.
The Solicitors Regulation Authority (SRA) this week issued a warning against the practice—professional rules state that firms should only have money going through their client account if there is a proper connection to a legal service that the firm has provided.
The risks involved include money laundering, improperly hiding assets in a commercial or matrimonial dispute and inadvertently giving credibility to questionable investment schemes.
In the past 12 months, the SRA has prosecuted 20 solicitors and three firms at the SDT for breaching the rules. Three solicitors were struck off and two more suspended, while the SDT also levied £763,000 of fines.
In its warning, the SRA provides 11 case studies illustrating what is and is not acceptable. A firm acting under a lasting power of attorney, for example, can make payments for the client’s personal living expenses and medical care. A firm instructed to hold commercial rental deposits until a lease ends would not be in breach but if that firm held the rent deposits indefinitely then it would breach the rules.
Paul Philip, SRA Chief Executive, said: ‘Our rules are not intended to prevent usual practice... money passing through the client account can be entirely legitimate where there is a clear legal service being provided.’
The SRA advises that firms cannot justify processing money through the client account due to having a retainer with a client. It cautions against firms holding funds to enable them to pay a client’s routine outgoings, for instance when based abroad.
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