By Legal Futures Associate Kord
Pooled client accounts are under more regulatory and legislative pressure than at any point in recent years, and Kord’s latest webinar set out to explain why. Client money on trial: Are you ready for TPMAs? brought together Kord’s commercial and compliance specialists to discuss third-party managed accounts, or TPMAs, and what they mean for law firms across conveyancing, litigation, and beyond.
Panellists traced the rising interest in TPMAs to three pressures: increased SRA scrutiny following high-profile firm failures, including the collapse of Axiom Ince and PM Law Group, the mounting operational cost of running a compliant client account, and growing exposure to both external and internal fraud.
Two routes for fraud
On fraud specifically, the session drew a clear distinction between two risks. Authorised push payment fraud sees a fraudster intercept email correspondence and swap in altered payment details, illustrated by a recent case in which more than £400,000 was diverted before completion.
Internal misuse, by contrast, involves someone with legitimate access moving funds incorrectly, and the panel referenced a case in which two directors of a law firm were struck off after making unauthorised payments from a client account exceeding £90,000.
Kord’s architecture is designed to close down both routes. Payment requests replace bank details entirely, so there is nothing in an email for a fraudster to alter, and every payment out requires approval from someone other than the person who raised it.
Legal underpinnings
The panel also set out the legal principles underpinning a TPMA. Funds must be held on trust, ring-fenced from a firm’s own creditors, and attributable to a specific client and matter at all times. Kord enforces this through an account hierarchy, with a single client wallet account sitting above individual matter accounts, each holding a static, ring-fenced balance that never touches another client’s funds.
A significant part of the discussion focused on legislation within the legal sector. The panel addressed the proposed split of the COFA and COLP roles, expected to affect the majority of firms holding client money by April 2027.
On client account interest, the panel cautioned that the Ministry of Justice’s proposal to redirect 75% of interest earned to its general budget is often misunderstood: the remaining 25% is not a straightforward gain for firms, since it must still cover any fair sum obligation owed to clients. Panellists argued that the underlying cost pressures, reconciliation, specialist accounting systems, and personal liability under the SRA Accounts Rules, remain regardless of how the interest question is resolved.
The biggest challenges
Live polling during the session found that manual reconciliation remains the single biggest challenge firms report with client money, ahead of reporting and oversight and time and resource pressures, a signal of how much of the current administrative burden still sits with firms’ own finance teams. Aside from polls, participants had the opportunity to ask questions directly to the panelists.
The full recording, including the panel’s Q&A and poll reaction is available to watch on demand.
