2. Types of Deposits
When money from a client or on behalf of a client is received by you in any form, you must deposit the trust money to the pooled trust account “as soon as practicable”, as required by Rule 5-44(1)(a).
In practice, “as soon as practicable” means within one or two days of the date of receipt.
Trust money can be received in a variety of forms.
If a client wants to provide trust money via Interac e-transfer, the firm may accept the money, although only if:
i) your online banking software – properly restricted to be ‘read only’ access – allows you to direct the receipt to your trust bank account. Trust money cannot pass, however briefly, through any account other than a trust account; and
ii) any related fees are charged only to your general bank account.
b) Credit/Debit Cards
There are many variations in firm practices in this area.
Some firms have policies that prohibit receipt of trust money by electronic payments and instead will only accept these payment methods for the general account.
It is permissible to accept both trust and general money by credit/debit card. Those firms that do, however, must follow these requirements:
i. If there is only one terminal or merchant number set up with your electronic payment service provider, 100% of all receipts must be deposited to your pooled trust account. For payments that belong to the general account, you must receipt and record it fully in the pooled trust account, followed by a trust cheque to pay it to your general account once you have confirmed that the deposit has been received in the trust account. Service fees are sometimes deducted from the amounts being deposited, so if you are charged 2 1/2 percent for every $100 deposited, most providers want to only deposit the net $97.50 for every $100. This is no different than any other bank charge that must not be made on the pooled trust account and must instead be directed to the general account.
ii. There may be a difference between processing individual transactions and then later submitting the batch to your service provider which will ultimately result in the money being deposited to your account. So, if you have a client come in on Monday and you process a debit card transaction for $200 for him, followed by another client for $300 the following day, but you do not submit the batch to your provider until Friday, you are in violation of the requirement to deposit trust money as soon as practicable [Rule 5-44(1)(a)], as you have been holding the $200 for 4 business days and the $300 for 3 business days without depositing them to your trust account.
iii. Depending on the provider and type of card (Visa vs. AMEX, for example), there may be a delay between submission of the batch and deposit of the money in your bank account. If you need to access the money quickly for a disbursement, or if the money is destined for the general account to pay an account you already rendered, you need to ensure the money has actually been deposited to the trust account before writing that cheque.
As a general precaution, due to privacy legislation it may be difficult to follow up with your service provider to obtain details regarding the transactions afterwards (such as the name of the related cardholder). Further, most terminals create those little pieces of paper as receipts which can be easy to misplace. You must be very careful in your office procedures if you are planning to receive electronic payments to address these risks.
c) Client Direct Deposit to the Trust Account
Firms are allowed to receive trust money by a client attending a branch of the firm’s savings institution and depositing money directly to the firm’s trust account. While only rarely done, a firm wishing to implement this practice should know that this practice is risky, as it complicates record keeping, you cannot physically assess the authenticity of the cheque or draft, and you must still ensure compliance with the cash limit rules even though it is being deposited directly to your trust account by the client. If you decide to allow it despite these drawbacks, you must:
a) Communicate clear instructions to the client before depositing the money:
- There will be a delay before the firm can make use of the funds, as the firm will need to follow up with the savings institution for each receipt (see below for more information);
- Cash over $7,500 in a single transaction or in the aggregate cannot be deposited to the trust account and any excess must be returned to the client in cash;
- The client must advise the firm immediately after the deposit has been made, preferably providing a copy of the deposit slip. Otherwise, it may be difficult to trace which client provided the money after-the-fact, particularly if more than one client has made a retainer deposit of the same dollar amount at a similar time.
b) This deposit method will not shorten the time of any waiting period to disburse funds that would otherwise apply. Confirm available funds before disbursing;
c) Follow up with the savings institution to trace the deposit and confirm the nature of the funds deposited (cash, cheque, bank draft, etc.), appropriately identify the payor of the funds, and recommend obtaining a copy of the instrument;
d) Return to the client in cash, with appropriate receipting, any cash in excess of the $7,500 limit received; and
e) Ensure the accounting records clearly identify the unique nature of this deposit, identifying it as a ‘remote client-initiated deposit’ or something similar.
d) Remote Deposit Capture
Remote deposit capture is a technology used by some firms to deposit money to a trust or general bank account without leaving their office.
For those who wish to adopt this technology, there are a number of requirements:
i. The system must use a specialized scanner approved or available through your savings institution. Scanning or taking a photo with a portable device such as a tablet or cell phone is not allowed;
ii. The system must use a secure platform for connecting between the law firm and the savings institution;
iii. For the pooled or restricted trust account, any fees must be charged directly to the general account and not deducted from the deposit;
iv. All supporting documentation must be printed and maintained in hard copy format or saved in a universally readable format; and
v. All remote deposits must be directed to the appropriate account – pooled, restricted, or general account.