Lawyer Monthly Magazine - November 2018 Edition

NOV 2018 26 Special Feature www. lawyer-monthly .com The Rise of Fines and Prosecution: Better Handling of Client Money Both the SRA and FCA have controls and restrictions to stop the misuse of client money accounts and the breaches or abuse that has happened within the financial services industry. There have been a number of high profile cases recently which incurred fines or liquidation, highlighting that even financial services firms are still struggling with the correct operation of these accounts. Since 2003, Global Currency Exchange Network (GCEN) & their sister company Global Custodial Services (GCS) have been successfully helping clients with their money management requirements. Being authorised and regulated by the FCA, we speak to their Director, who touches on why law firms need to tread carefully when handling client money. Prior to the increased focus and tightening of regulation around the management and handling of client money, what were the most common ways in which these needs were serviced? More common than not, client’s funds were deposited into a law firm’s main client bank account until the appropriate time for the funds to be transferred, as per the client’s instruction. This was problematic for numerous reasons and the client funds were susceptible to misuse, for example: being used for transactions that were outside of the remit that a lawyer’s client account can be used for. The general lack of awareness of potential client money solution providers lead many to believe that banks were the only place to turn to, but often they were slow, inflexible and expensive to use. If using a bank was not an option, some would attempt to manage funds in- house without the knowledge or processes required to be regulatory compliant. How big is this risk and why is it so prominent? It is unsurprising that law firms are so susceptible to the sophisticated methods that criminal organisations employ to launder money; nowadays it is acknowledged as a global threat for the entire business world. Fulfilling ad-hoc payments on behalf of a client, which fall outside of the agreed legal representation may seem like a straight forward and value adding task and it often is, however this constitutes a breach of the SRA regulations. The client account must not be used as a banking facility, as not only does this present an Andrew Fundell, Director

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