Clients’ money bank account
The regulations state that clients’ money must be paid into, and held in, a specially set up client bank account. Despite this, we still find that some firms use their office account to hold clients’ money. You can find guidance on opening a client bank account in Regulation 9 of the Clients’ Money Regulations.
No bank letter acknowledging trust status
This issue is the most common compliance problem we see relating to clients’ money. When you set up a client bank account, you need to ask the bank to confirm some things in writing, including that it has no right of combination or set-off. Without this confirmation you can’t be sure that the funds in the account are protected. Our clients’ money FAQs contain some advice if you are struggling to receive this confirmation from your bank.
No annual compliance review
Carrying out an annual clients’ money compliance review is mandatory. These reviews help firms and individuals ensure they continue to meet their regulatory obligations. They are also closely aligned to the areas we will look at during a monitoring review, so they are a useful tool. The Clients’ Money Regulations Compliance Review Helpsheet contains a checklist you could use.
Breaches relating to designated accounts
If you are expecting to hold £10,000 or more of clients’ money for longer than 30 days, the money must be separated into an account specifically designated for that client. Non-compliance with this requirement is another common issue that we see.
Regulation 8a
Payments into and out of the firm’s client bank account must relate to an accountancy service that is being (or has been or will be) provided by the firm. A firm’s client bank account should not be used as a banking facility for clients. ICAEW Guidance on Regulation 8a is available on our website.
Considerations for probate practitioners
Money received in connection with authorised probate work must be kept separate from other clients’ money accounts. We have recently seen an increase in probate firms not carrying out this step, which has seen firms put forward to our Legal Services Committee.
Five-weekly reconciliations
If you hold clients’ money, you need to reconcile the client bank account at least every five weeks and ensure the reconciled balance agrees with the total balances on each client’s ledger.
Interest
If a client bank account earns interest, you must pass this on to the client. The Clients’ Money Regulations do not include a de minimis limit, but a client bank account need only be interest bearing if ‘material’ interest is likely to accrue (see Regulation 14 and explanatory note 5 of the Clients’ Money Regulations for guidance on the definition of ‘material’). The regulations do allow a client to agree in writing to an alternative treatment, for example, accounting for interest only over a certain amount. You could get their agreement to this in your engagement letter.
Alternate (sole practitioner/director of corporate practice)
Sole practitioners/directors need to arrange with someone to manage their clients’ money account in the event of their death or incapacity. This person does not have to be a chartered accountant. You need to tell us about this arrangement in writing. You can do this by using the standard form.
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