Client Money: Your Responsibilities and The Risk That Can’t Be Ignored
3 December 2020
It is well known that under the Solicitors’ Accounts Rules, all firms have a regulatory obligation to ensure the protection of all monies that they hold on behalf of their clients.
Further, a firm also has a Regulatory obligation to assess and manage risk effectively, which includes having adequate protection for the risks that it faces.
The loss of client money is one that many firms have had to address in recent years, primarily driven by Cyber attack losses of various forms. Although this isn’t the only threat firms face, it has brought greater focus on the risk of client money loss and how firms deal with it
There are many ways that legal practices can mitigate the risk of losing client money and we have seen many good examples of effective risk assessment and management. As you will appreciate, we are happy to share that knowledge of good husbandry with our clients, to help improve the way that our clients deal with this high-risk business critical area.
This includes a recent enhancement to our services which provides an audit of your current client account arrangements and a comparison with your insurance protection, by FCA regulated experts in this area, who will compare and contrast the risks identified through your risk assessment and establish how they are dealt with through your insurance programme, or not as the case may be.
We know, from working with firms, that there is an assumption that, if their risk mitigation and control measures fail, their insurers will pick up the bill in a timely manner to meet their regulatory obligations.
This can be far from the reality and can only be established by asking the right questions with people who know what they are looking for, and, perhaps more importantly, know where gaps in cover tend to exist.
We can help you ensure that your control of this risk is as good as you would want it to be and that, if the worst happened,
1. you know how if and which of your insurers is likely to respond
2. you know how to deal with the SRA and your regulatory obligations
3. you know what options are available for you to deal with the strict timescales involved in replacing any missing funds.
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