The first step is to complete the application for the appointment of a responsible lawyer and/or operate an escrow account completed by the lawyer designated as the lawyer in charge of the firm. Once the application is approved with or without conditions, the law firm can create an escrow account. Beginning in early 2021, the Law Society engaged key stakeholders, including lawyers, accountants and accountants responsible for companies of different sizes and practice areas, to review key sections of the rules to align required reporting obligations with legal practice. After receiving this feedback, the Law Society readjusted the rules to better fit the lifecycle of an escrow account and incorporated modern practices and technologies used by Alberta law firms. Contact the financial institution and request a statement of zero balance for that month or a letter confirming that the bank account did not complete any transactions for that month. If the financial institution does not issue a statement or letter, a copy of the previous month`s statements for that month must be kept to prove that the balance has not changed for that period. If you are a law firm that does not have an escrow account, simply complete the relevant sections (Parts A and B) of the law firm`s self-declaration and not have an accounting report prepared. There is also an option if you have approved accounting software to upload your escrow accounting data to the Law Society instead of creating an accountant`s report. Two of the main purposes of the rule changes are to provide more clarity and make it easier to navigate the rules. To this end, the rules have been reorganized to follow the life cycle of an escrow account – from the approval of the operation of an escrow account to its operation and related reporting obligations, to the closure of the escrow account. To better fit the rules to the lifecycle, some rules were moved and their rule numbers were later reorganized. On average, $150 billion per year passes through the escrow accounts of Alberta lawyers The new rule in the fiduciary accounting model limits the use of lawyers` escrow accounts for purposes directly related to the provision of legal services.
This rule prevents the misuse of escrow accounts for money laundering purposes. To close an escrow account, the law firm must ensure that all escrow funds will be distributed to the parties authorized to do so, or make written arrangements for the transfer of funds to the escrow account of another law firm and the assumption by that law firm of the fiduciary duties applicable to those funds, or pay the money to the bar. A final self-report from the law firm and a report from the accountant (or a data transfer instead of the accountant`s report) must be submitted after the completion of the escrow account and prescribed financial records. There are two types of escrow accounts: group escrow bank accounts and separate interest-bearing accounts. The law firm said it will release tools to ease the transition to the new trust security rules, which will include an FAQ, a table for cross-references between the current rules and the new rules, and webinars in January and February 2022, which will include a detailed breakdown of the changes and a question and answer section. The Law Society Trust Security Team will work to support lawyers and help staff understand and adapt to the new rules. If the law firm is unable to set up two separate machines, these payments can be made directly to the law firm`s escrow account, with all related service fees paid from the law firm`s general bank account. Then, when funds are received as part of the payment of a bank statement, they must be promptly transferred from the escrow account to the general account.
Pitfalls that can arise when using an accounting firm include conflicts of interest that prevent the law firm from preventing the accounting firm from preparing the accountant`s report, and the speed of accounting transactions and preparing votes. Finally, the accounting firm must go to the law firm or obtain copies of the required documents, as the books and records can only leave the offices of the law firm if they are released by the general manager. Personal or remote audits will be required from time to time to assist lawyers in the proper administration, accounting and security of funds entrusted to the law firm. While the review process remains unchanged due to these rule changes, the improved clarity and airworthiness of the rules should help lawyers better follow them. The changes to the rules provide a clearer and more effective set of guidelines for lawyers while helping them manage their funds responsibly. The rules have been revised to fit the lifecycle of an escrow account to make the rules easier, more intuitive and easier to navigate.
