I was pondering (as you do) whether the profession was ready for ABS licensing and client accounts. Back in February we were all told Rule 11 meant we had to have our client accounts open and ready for 2015. See my post at the time.I was pondering because I happened to notice a few days ago, on the SRA Question of Ethics page, a note about the operation of client accounts and how evil it was to have the interest paid into the client account because the interest on a general account is office money (at least in SRA land it is - IPREG may have other ideas but I doubt it). In any event the interest on the overpaid sum of £35 that came from an Australian client and which would have been lost in exchange rate differences and banking fees if I had paid it back was going into my client account. Oh woe! Now don't worry that client account has always been IPREG regulated so I wasn't about to get hung drawn and quartered as promised by the helpful Ethics police at the SRA. Even so I got in touch with my Bank (Barclays fortunately not a Building Society) and they have made me honest by directing the interest to my office account. OK so if you have set up your client account in readiness you too might want to check where the interest will go.
Meanwhile the Bar Standards Board have started an escrow service BARCO regulated by the Financial Conduct Authority. If you use that they charge you 1% but it seems to be capped at £250 per transaction. Presumably you have to pay that out of your funds rather than the client's so I'm not thinking of using BARCO myself for that overpaid £35. If you charged the £250 to the client would that be "protecting client money" - the tenth SRA principle.?
Next I heard from ITMA via their Chief Executive's Bulletin today (4 December 2014):
Unfortunately the current banking practice only allows true client accounts to be opened by a profession included in Schedule 3 of the Money Laundering Regulations 2007 and currently the IP profession is not included in this schedule making it difficult for those bound by the new rules to comply. The new Rules are due to come into force on 1st January 2015 and we have written, together with CIPA, to IPReg to request they delay bringing into force the new rules until it is possible for our relevant members to fully comply. We will advise as soon as we have any further information on this matter.Its very easy to blame "banking practice" and I would be interested if others have found difficulty with the mainstream banks. I didn't and all litigators have needed to have client accounts for a while.
I was surprised to hear that postponement of the rules was being requested on my behalf. The bar has managed to prepare itself and given that we nearly always deal with business clients we should be able to manage a client account or credit risk by now. Moreover delaying the new regime would presumably knock back those who are ABS and want to offer more co-ordinated business and IP advice to their clients.
Anybody know more about this? Please comment
Hi Barbara
ReplyDeleteI don't know what IPREG proposes, but we have as patent attorneys run a client account for our small practice for several years (We never wanted to confuse client money with our own). I am astonished to learn the interest is on the client account is "office money" for solicitors under SRA rules. I have always thought of that interest as "client Money" to be apportioned to each client, Now, the amounts we handle are small and the interest is not large, so de minimis would probably apply to us. But its still not our money in my head, and we had intended to include in our "terms and conditions" a section saying, we would round up to the nearest £100 and donate the interest to charity. Not sure if this is possible now.
Why on earth is interest on client money, not the client's money? Have I missed something?
I think the reasonining is that if its a general client account with funds belonging to several clients you would not know to whom to allocate the pennies. My terms state that deposits do not attract interest so reasonably the pennies are mine. Think of it this way. If you had to pay to safeguard the money so if you were using the bar scheme whose money would that come out of? Even so the idea of making a small donation to the CIPA benevolent fund seems like a worthy use of the pennies and provided a client consents totally unobjectionable. We have to safeguard the client's assets but I dont think we are obliged to grow them.
DeleteI am delighted you have been able to run your client account without banking practice stopping you. I hope or representative bodies will facilitate the anonymouse question and answer of issues like this instead of trying to evade the inevitable.
Sorry Barbara, not sure I follow what you mean by ........
ReplyDeleteThink of it this way. If you had to pay to safeguard the money so if you were using the bar scheme whose money would that come out of?
I think the bank was well used to having client accounts, the bank accounts (our own and the client account), took around 30 mins to open!
As to how to allocate the interest, I think its just maths (amount, days rate of interest). We don't want to do this as its not worth the effort for the sums involved. I like the idea of the CIPA benevolent fund, but we think our clients would appreciate more donations to the local hospice.
My bank -- HSBC, hardly a hole-in-the-corner banking operation -- is refusing to open a client account for me. They say they "don't recognise IPReg", which is consistent with IPReg not being included in Schedule 3 of the Money Laundering Regulations 2007. I think that delaying bringing into force the new rules until it is possible for patent and trade mark attorneys to comply is not only the right thing but also the obvious thing to do to avoid a Kafkaesque bind.
ReplyDeleteAlso got ours opened fine - just asked bank manager for 'the same as solicitors have'. The whole thing is ridiculous. How much would it increase our PAMIA insurance to add insurance for clients losing funds? I suspect about 1% (literally) of what it's going to cost the profession to run these accounts, pay bank charges on these accounts, fill in forms, calculate pennies of interest.
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