Third party managed client accounts (TPMAs) may reduce the risk of cybercrime and money laundering, a study has revealed.
The finding forms part of new research published by payment processor Shieldpay ahead of plans to allow licensed conveyancers to use outsourced client account services.
While Solicitors Regulation Authority (SRA) regulated solicitors have been able to hold money in TMPAs since 2017, the Council for Licenced Conveyancers (CLC) has only just released proposals to allow licensed conveyancers to benefit from such services.
According to the study, TPMAs are most popular among sole practitioners and law firms with up to five partners, with benefits ranging from reduced insurance premiums to increased cybersecurity.
TPMAs hold the potential to cut insurance premiums and contributions to the Solicitors Compensation Fund because money held in a TPMA does not fall under the definition of ‘client money’ in accordance with Solicitors Account Rules.
And as the client accounts are managed off-premises and on a separate network, they are less likely to be breached or leaked by internal employees or cybercriminals.
Commenting on the benefits of TPMAs, Shieldpay director Geoff Dunnett said: “Apart from residential conveyancers, nobody wants to hold client money. The interest rates are low and the risks high.”
“The intent of the SRA and Council for Licensed Conveyancers could not be clearer. Regulators think TPMAs are a worthwhile alternative to handling client money. It is a matter of time before more and more firms start doing it.”
Simon Blandy, Director of Regulatory Standards at the CLC, added: “Misuse of client money is one of the key risks to consumer protection. Effective mitigation of this risk continues to be a priority for the CLC. The changes we intend to make will provide greater clarity for CLC Lawyers and Practices, making sure there is a clear focus on the real risks to client money.”
The CLC also revealed in April that it would cut the time limit for delivering an accountant’s report from six to three months and launch a new self-certification scheme for ‘aged balances’ of up to £50.
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