Online Banking and IOLTAPosted on 04/13/2015

Electronic banking has become the preferred means of receiving, disbursing,

and transferring funds for many firms. Depositing or writing checks has

disappeared, much like the practice of sending letters.

Yet, there are lingering concerns.

Despite what some believe, there has never been an ethical prohibition against

moving funds online. The devil is in the details. Bank confirmations alone do not

generate a sufficiently clear audit trial of whose money was transferred and for

what purpose. Failing to document these additional details can lead to trust

accounting errors among them, duplicate transfers. If you withdraw funds

online and dont record the transfer, you may not remember it. If you dont

remember the transfer, you may take the funds again, believing you are paying

yourself for the first time. Eventually this practice results in overdrawing the trust

account.

The workaround is to create a procedure that captures the following details:

Date and time of transfer Amount of funds transferred Reason for transfer Name or signature of lawyer authorizing transfer

Oregon Law Practice ManagementPractice Management Tips for Oregon Lawyers

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Client and/or matter ID

The reason for transfer should be tied to proper documentation. Examples

include a receipt for an eFiling fee advanced by the firm or the firms invoice if

the transfer is in payment of a monthly billing. The reason for transfer should be

as specific and complete as possible.

Funds should never be transferred by law firm staff on a lawyers verbal say-so.

Always obtain written authorization in some form an email confirmation or

signature/initials on a request form. In a law firm, access to the trust account

should be restricted, based on a reasonable separation of accounting duties

designed to prevent theft. Additionally, if trust accounting is delegated to staff,

lawyers must provide proper supervision. See In re Strader, 27 DB Rptr 219

(2013) (stipulated suspension for failure to supervise an office manager who

embezzled nearly $500,000 from the lawyers trust account).

If your firm has a multi-jurisdictional practice, ensure that trust accounting

procedures meet the strictest applicable standard. For example, the Washington

Rules of Professional Conduct (Washington RPC) prohibit nonlawyers from

signing trust account checks: Only a lawyer admitted to practice law may be an

authorized signatory on the account. (Washington RPC 1.15A(h)(9)). By

reasonable extension, nonlawyers would not be permitted to disburse funds

electronically. Also of note is Washington RPC 1.15A(h)(5) which provides All

withdrawals must be made only to a named payee and not to cash. Withdrawals

must be made by check or by electronic transfer. (i.e., withdrawing funds via

telephone transfer is prohibited.)

All Rights Reserved [2015] Beverly Michaelis

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