The principle of law firms holding client money is again under scrutiny after it emerged that solicitors could be given access to a bar-run third party account.
Paul Mosson, director of Barco, an escrow provider owned and operated by the Bar Council, told the Gazette his company has an agreement in place to offer its services to solicitor firms.
Speaking at the SRA’s compliance conference last week, Mosson said Barco has secured approval from the regulator to issue a waiver from present accounts rules for any transaction on a case-by-case basis.
‘The SRA has seen the contracts in the scheme and has no concerns,’ he said. ‘There still needs to be a dialogue, but there is nothing about the Barco scheme that would prevent [solicitors] using it.’
Holding client money has long been a contentious issue in the legal profession. The SRA has recently highlighted the dangers associated with client accounts, particularly money laundering and bogus firms.
Mosson said the Barco scheme could in theory remove the need for a compensation fund, as it is separately insured and regulated by the Financial Conduct Authority. He claimed professional indemnity insurance costs may also fall if the risk of losing client funds is removed.
Under the Barco scheme, all funds received remain in segregated bank accounts until the two parties have agreed to a transfer. In the event of a dispute, monies are frozen until that is resolved and neither party can authorise a transfer without permission.
Barco charges fees of 1% for every £100,000 held, with a sliding scale for higher amounts.
Mark Stobbs, the Law Society’s director of legal policy, said the organisation is interested to hear the views of solicitors. But he voiced concern that a third-party arrangement could slow down transactions that need to be arranged immediately, particularly in conveyancing.