The client account isn’t always the safe option. It can be the riskier one
Most law firms treat holding client money as the conservative, responsible choice. The SRA’s own enforcement record suggests otherwise.
In the last few years: a £64m shortfall at Axiom Ince. Wingate and Johal. Metamorph Law. APP fraud losses running into millions across the profession. While each case differs, they share a common structural feature: the exposure that comes with holding client money in the firm’s name.
The SRA recognised this problem when it formally created the Third-Party Managed Account (TPMA) route in November 2019. Under Rule 11.1 of the SRA Accounts Rules, a firm can direct clients to pay into an FCA-authorised TPMA provider instead of a firm client account. The firm retains full authority over how and when funds move.
What changes is who operationally safeguards the money on a day-to-day basis, while the firm remains responsible for acting in the client’s best interests and directing its use.
This isn’t a workaround. It’s a regulated alternative introduced by the SRA in recognition of the risks inherent in holding client money.
For firms that make the switch, the practical effects are immediate. No Annual Accountant Report on TPMA funds – a direct saving typically in the region of £3,000-£10,000+ per year.
Automated KYC and payment verification controls, including Confirmation of Payee where applicable. Ring-fenced funds held with prudentially regulated banking partners under FCA safeguarding rules. More than 40 of the UK’s top 100 law firms have already made this change.
The question most managing partners haven’t yet asked is a straightforward one: if the SRA built this route specifically to address the risks in the client account model, why is holding client money still the default?
It doesn’t have to be.
Read more: shieldpay.com/blog/why-uk-law-firms-no-longer-need-to-hold-client-money
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