Regulators have once again reminded law firms that they cannot act as en effective bank account for clients wanting a safe space to hold money. The Solicitors Regulation Authority is concerned that many practitioners are still not getting the message that they are risking misconduct proceedings.
Solicitor accounts rules state that only money linked to an underlying legal service should go through a client account.
The restrictions apply because otherwise law firms risk assisting money laundering, helping someone avoid their obligations in insolvency proceedings, or improperly hiding assets in a commercial or matrimonial dispute. Criminals target law firms because they can offer a veneer of credibility to questionable investment schemes.
Paul Philip, SRA chief executive, emphasised that law firms are not regulated to operate their client accounts as a banking facility for clients, and they should not trade on their reputation to provide banking facilities. ‘Our rules are not intended to prevent usual practice in traditional work undertaken by solicitors such as conveyancing, company acquisitions, the administration of estates or dealing with formal trusts,’ he added.
‘Money passing through the client account can be entirely legitimate where there is a clear legal service being provided, but we will continue to take action against those who cannot justify their actions, put their clients at risk and undermine public trust in the profession.’
In the past 12 months, the SRA has prosecuted 20 solicitors and three firms at the SDT for breaches in this area. Three solicitors were struck off and two more suspended, while the SDT also levied £763,000 of fines, including the highest fine ever of £500,000.
The regulator has published 11 case studies to help law firms understand the types of instances when paying money into the client account may or may not be acceptable.