SRA Accounts Rules: Rule 3.3 “Improper use of client account as a banking facility”

1. Ensure there is a sufficient underlying regulated activity

The key word here is “sufficient”. It might not be enough simply to say that you’re still working for the client and therefore it is acceptable to continue to hold money in client account. For example, a firm held money on account of a conveyancing transaction which had since completed, and a small sum of money remained in client account. The client requested that the residual sum of money should continue to be held because they intended to enter into another purchase or sale. This was not permitted under rule 3.3 because work on the new conveyancing transaction hadn’t started.

2. Make all reasonable efforts to return money to clients

We see residual balances on old matters quite regularly and, generally speaking, firms are proactive in returning monies to clients at the end of a matter. Sometimes their efforts stall because the clients they are trying to reach have not responded and so the law firm might not know how or where to return the monies.  We have seen various examples where firms have sent regular emails to clients, advising them that they’re holding money on account and requesting bank details to send it on to. Email isn’t the only form of communication!  If clients don’t respond to multiple email attempts, the SRA will still expect the law firm to try other reasonable methods to contact them. This should include exhausting all details obtained during the initial KYC/AML checks that were carried out when the firm first engaged with the client: postal address (via driving licence, for example); landline and mobile number; search engine; LinkedIn etc. Law firms are known for being able to find difficult-to-trace people (for example in the case of Will bequests) so the SRA expects them to make reasonable efforts that extend beyond sending a few emails.

If your law firm is looking to strengthen its compliance with SRA Accounts Rules or requires guidance on managing client accounts effectively, we're here to help. Understanding and adhering to Rule 3.3 is critical to avoiding costly penalties and maintaining the integrity of your practice. For tailored advice or to discuss any upcoming changes, please reach out to Claire Watkins, Head of Buzzacott’s Professional Practices Group, at watkinsc@buzzacott.co.uk or on 020 7556 1482.