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Wire or Email Transfer from Trust Bank Accounts: Compliance and Best Practices

By: Keith Hill Jr.

 

Today, lawyers are increasingly transferring funds electronically from their Trust accounts. Specific requirements must be followed to ensure the security and integrity of these transactions. Lawyers can use wire or email transfers for these electronic fund transfers, provided they adhere to the procedures established by the Law Society of Ontario (LSO). Section 12 of the LSO’s By-Law 9 outlines the necessary steps and precautions for compliance. Let's explore these requirements in detail.


Wire Transfers

 

  1. Initiation with Form 9A: The process begins with a requisition form (Form 9A) signed by the licensee.

  2. Transaction Confirmation: The transfer system must generate a transaction confirmation, which the licensee must compare with Form 9A to ensure accuracy.

 

Email Transfers

 

Email transfers into Trust accounts are straightforward, while transfers out require additional steps:

 

  1. Client Authorization: Obtain the client's preferred email address for transferring funds.

  2. Form 9A Details: Include the recipient’s email address and method of payment on Form 9A, noting the reference number in the email message field for reconciliation.

  3. Recordkeeping: Save or print the email confirmation of the transfer, attach it to Form 9A (or keep it electronically), and maintain these records for at least 10 years.

 

Considerations for Trust Account Deposits

 

While depositing funds into a Trust account electronically is permissible, several factors need consideration:

 

  1. Account Information Security: Be cautious about providing your Trust account details (e.g., financial institution name, branch number, account number) to clients or third parties to prevent unauthorized deposits or withdrawals.

  2. Clearance Period: Determine an appropriate clearance period before disbursing funds, considering the transmitting, and receiving financial institutions' guidelines.

  3. Service Fees: Ensure that any service fees are drawn from your General account, not your Trust account. Discuss with your financial institution how these fees will be handled.

 

Recordkeeping and Compliance

 

To meet your financial recordkeeping obligations, ensure that the client or third-party payor provides a copy of the confirmation documents when funds are transmitted. These documents should detail:

 

  1. Source and Destination Accounts: The financial institutions and accounts involved in the transfer.

  2. Transaction Amount and Timing: The amount deposited and the date and time of the transmission.

 

Wire Transfer Fees

 

Understanding and managing wire transfer fees is crucial for compliance:

 

  1. Outgoing Transfers: Fees for sending wire transfers are typically deducted from the sending licensee’s account.

  2. Incoming Transfers: Fees for receiving wire transfers are usually deducted by the receiving institution in transit, reducing the transferred amount.

 

Steps for Managing Wire Transfer Fees


  • Fee Assessment: Determine the fees associated with wire transfers and how they will be deducted.

  • Account Services Agreement: Review your agreement with your financial institution to understand the fee structure.

  • Client Communication: Inform clients about any wire transfer issues and potential fees.

  • Compliance: Ensure that wire transfer fees are deducted from your General account. If this is not possible, consider charging the fee to your client as a disbursement or switching financial institutions to ensure compliance.

 

Special Circumstances

 

  • EFT Restrictions: A lender cannot execute an EFT to withdraw Trust funds. However, lawyers can transfer Trust funds electronically to a lender if they comply with Section 12 of By-Law 9.

 

In conclusion, while electronic transfers from Trust accounts offer convenience, they require meticulous adherence to prescribed procedures and careful management of associated risks and fees. By following the guidelines set out in By-Law 9, lawyers can effectively leverage modern banking technologies while maintaining the integrity and security of their Trust accounts.

 

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Keith Hill Jr. is the Principal at Bookkeeping Matters Inc (BMI). For over a decade, Bookkeeping Matters has been fulfilling bookkeeping needs for lawyers throughout Ontario and other provinces. As a former Legal Accounting professor, Keith has also positioned BMI as a premier provider of online legal accounting training. Specializing in several practice management software, Keith and his team can be contacted at: info@bookkeepingmatters.ca / 1-800-893-2820 / www.BookkeepingMatters.ca

©2024 Bookkeeping Matters Inc. All rights reserved. Reproduction with credit is permitted.

 

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