Am I permitted to accept credit card or debit payments from clients?
Am I permitted to use automated bank machines (ABM) in operating my trust account?
Am I permitted to use my financial institution's Internet banking software to transfer funds from my trust account?
Am I permitted to accept a direct deposit to my trust account by client or a third party? Are deposits by way of electronic or wire transfer permitted?
Q: Am I permitted to accept credit card or debit payments from clients?
A: You may accept credit card and debit payments from clients as long as payments for future fees and disbursements are deposited directly to your trust account, and payments for services rendered for which a fee bill has been delivered are deposited directly to your general account. All merchant discounts and service charges must be charged to your general account. You will likely be required to set up two machines, one for trust deposits and one for general deposits, to comply with the requirements ofBy-law 9. It is not acceptable to make all deposits to one account then transfer the appropriate amounts to the other account. For further information see Use of Credit Cards in the Legal or Legal Services Practice section of the Law Society's Lawyer Bookkeeping Guide or the Paralegal Bookkeeping Guide.
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Q: Am I permitted to use automated bank machines (ABM) in operating my trust account?
A: You may not use automated bank machines to withdraw or transfer funds from a trust account. Funds drawn from a trust account must only be by way of cheque or by use of electronic trust transfer systems that meet the requirements of section 12 of By-law 9.
However, it may be acceptable for you to arrange for deposits into trust by use of automated banking machines. To do this, you must arrange to have all convenience or banking cards that will be used to access the trust account encoded to allow for deposits only. Before making arrangements to use ABMs for trust deposits, you should review the banking agreement related to automated banking machines very carefully and discuss it with a representative of your financial instituion to ensure that funds deposited at an ABM are at no greater risk than if deposited in person with a teller.
Once you have satisfied yourself concerning the above, you still need to use and maintain your deposit book. Complete the deposit slip with the required details: date, source of funds, related client and amount. The receipt generated by the bank machine must be stapled to your copy of the deposit slip and maintained in your deposit book as a source document required by section 18(10) of By-law 9.
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Q: Am I permitted to use my financial institution's Internet banking software to transfer funds from my trust account?
A: Lawyers and paralegals are permitted to use this type of technology to electronically transfer funds from trust accounts, provided that minimal precautions are put in place. Section 12 of By-law 9 stipulates the minimum requirements. The process must be initiated by a prescribed requisition form (Form 9A ) to be signed by the lawyer or paralegal. Thereafter, the software must require two persons to effect the transfer; one person (identified by a password or other means) to input the transaction details and a second person (identified by a different password) to authorize the transaction. The system must generate a confirmation of the details of the transaction which the lawyer must compare with the corresponding Form 9A to confirm that the particulars of the transaction were properly conveyed to and received by the financial institution. Please consult Form 9A for the complete procedure.
Even if you do not plan to transfer funds from your trust account electronically, you may want to take advantage of Internet banking to be able to view your trust account on line at any time and to assist you in completing your monthly trust comparisons on time.
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Q: Am I permitted to accept a direct deposit to my trust account by client or a third party? Are deposits by way of electronic or wire transfer permitted?
A: Though there is nothing in By-law 9 that prohibits you from allowing funds to be deposited to your trust account by these methods, there are several considerations. Before permitting a third party payor to deposit funds to your trust account directly by personally attending a financial institution, or by way of electronic transfer (e.g. Internet banking) or by way of wire transfer, you should first consider
- the risks associated with providing to the third party payor details about your trust account necessary to facilitate the deposit (e.g. the name of your financial institution, branch or transit number, account number) and the method by which you are asked to provide them (e.g. void trust cheque)
- whether providing these details about your trust account will permit the third party payor to make future deposits, without your prior knowledge or permission
- whether providing these details about your trust account will permit the third party payor to remove funds from your trust account
- the appropriate clearance period to apply before disbursing from these funds, considering the periods suggested by both the transmitting institution and your financial institution
- whether your financial institution will charge a service fee for such a deposit and, if so, that the fee will be drawn from your general account and not your trust account; if the service charge will be deducted from the funds being advanced, you must inform the third party payor to add the service fee to the amount that will be transmitted
- whether the deposit will generate the source documents you require to fulfill your financial books and record keeping requirement under By-Law 9
Often, funds deposited by these methods do not generate adequate source documents on the receiving end. To fulfill your financial record keeping obligations, you should obtain from the third party payor a copy of the confirmation documents generated when the funds are transmitted. The confirmation should document the financial institution and account from which the funds were sent, the financial institution and account in which the funds were deposited (i.e. your trust account), the amount deposited, and the date and time of the transmission of funds.
Prior to accepting a third party deposit to your trust account you should confirm in advance and in writing that you are permitting the deposit of funds for that particular instance, and that the third party agrees to provide you with a copy of their transmission confirmation as described above.
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