Plans to offer solicitors the option of a “third-party managed accounts” instead of the traditional client account have divided opinions, with some criticising a lack of detail and questioning whether the move would reduce fraud.
Michelle Garlick, partner at Weightmans and head of Compli, said the SRA’s proposals were set out in only a few paragraphs of a combined consultation paper.
“While I’m in favour of exploring options and alternatives, they have provided very little information as to how this could work in practice,” she said.
“It may very well avoid some of the risks and costs to the profession of the existing system, but are we not just creating other risks through an escrow account?
“If solicitors are going to be dishonest, they will find other ways of defrauding the system. Let’s say you have a probate matter with false estate accounts and beneficiaries. What is an escrow account going to do about that?”
Frank Maher, partner at Liverpool law firm Legal Risk, said he was concerned that the proposal was a “red herring” and it needed to be explored further.
“The risk is that it will create bureaucracy which puts a disproportionate burden and cost in the way of normal transactions.
“I’m not dismissing it, but we must look at it long and hard to see if it’s worth going through with.”
Mr Maher added that it was “one thing to talk about it in generalities, another to examine the minutiae”.
Caroline Calverley, practice manager of north-west firm Chafes, said: “I don’t understand how they think putting the money somewhere else will protect it. Solicitors will still need to control how and when the money is moved around, otherwise how will they perform transactions for their clients?”
Ms Calverley said money in third-party accounts would still be vulnerable to anyone prepared to commit fraud or steal.
“On the subject of transactions we sometimes process client payments of as little as £1. Tell me which organisation will be prepared to do this for every legal transaction and provide the monitoring required.”
However, Ian Pryer, principal of Pryers Solicitors in York, said he was sure that an alternative to the traditional client account could work and make it easier for personal injury firms like his to operate, even if the same was not true for larger firms or those doing conveyancing and probate.
“The running of a traditional client account has a cost. Clients don’t make any money from it and the banks seems to be the only ones making the money. Once this comes in, we’ll wonder why it couldn’t have been done a few years ago.”