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Improper use of client account as a banking facility
SRA Case Study: Holding unconnected money in a client account
Scenario
A law firm acts for an energy board and a partner at the firm is also a clerk to the board. The board holds fluctuating cash deposits, which could be more than £2 million at any one time.
At present the board receives bank interest at 0.05% per year. If this money was held in the firm‘s client account, the firm’s bank would pay 0.7% per year. The partner‘s view is that this would be of great benefit to the board to hold money in the firm’s client account and the firm agrees to accept the funds on that basis.
SRA's View
The firm is carrying out or facilitating banking activities which are prohibited by rule 14. 5.
The law firm is not acting on any underlying transaction or providing any service other than holding the money. There are clear risks that would need to be considered here, that rule 14.5 is intended to prevent, such as involvement in fraud, money laundering and possible insolvency issues. If a firm's client account is used improperly, they may also be in breach of the SRA Principles.