On 26 March, we hosted a thought-provoking webinar focusing on Third-Party Managed Accounts (TPMAs) and their potential implications for solicitors. While the exact outcome of the SRA’s consumer protection consultation remains uncertain, this session provided an essential starting point for firms considering the potential future landscape.
Understanding TPMAs
Our expert panel clarified that TPMAs are essentially client accounts operated by regulated third-party providers, offering ring-fenced, safeguarded, and insolvency-protected handling of client funds. They provide an alternative to solicitors directly operating client accounts.
Significant technological advancements in TPMAs were highlighted, including enhanced visibility, improved transaction speeds, and robust audit trails. This modernisation addresses many traditional concerns associated with managing client money.
Regulatory context and compliance
Despite growing attention, it was emphasised that the SRA has not yet indicated TPMAs will become mandatory, certainly not in the short term. The ongoing consultation also covers critical issues such as residual balances, accountants’ reports, and the Compensation Fund. Firms should remain informed and attentive to developments, and there’s no immediate pressure to abandon traditional client accounts.
Benefits of TPMAs
However, potential benefits in reducing compliance burdens on COFAs were identified, given that TPMAs transfer direct control of client funds to regulated providers, significantly lowering the risk of breaching the SRA Accounts Rules.
TPMAs’ value in other areas of risk management was noted, including reductions in administrative burdens such as extensive source-of-funds checks, KYC verification, PEP and sanctions screening, and multi-currency payments.
The use of TPMAs will also reduce the cost of commissioning annual accountants’ reports and legal bookkeeping overheads, potentially resulting in substantial internal cost savings.
Risks and challenges
The panel acknowledged that TPMAs aren’t a complete solution to compliance challenges. Solicitors maintain critical AML responsibilities and must carefully consider cybersecurity risks. Additionally, current TPMA structures typically do not earn or pay interest, potentially affecting firm revenues and client returns, an issue possibly requiring further regulatory clarification.
Practical considerations and due diligence
Rigorous due diligence was recommended when selecting a TPMA provider, focusing on:
- FCA authorisation and appropriate banking licences
- Efficiency and reliability of service, especially in time-sensitive transactions
- Cybersecurity measures and internal control systems
- User-friendliness and accessibility of technology platforms for solicitors and clients
Interpolitan Money reassured attendees of its commitment to robust security and client protections, safeguarding client funds using reputable tier-one banks like Barclays.
Future outlook
Given the ongoing uncertainties regarding SRA’s future decisions, firms were advised to view TPMAs strategically, aligning potential adoption with their broader business goals rather than purely regulatory drivers.
Audience engagement and queries
Participants raised insightful questions addressing:
- Responsibility for residual balances
- Handling of interest on client money
- Fee structures, including setup and transaction costs
- Availability of out-of-hours transaction support, particularly relevant for conveyancing transactions
Watch the recording
The full recording of the webinar, complete with detailed panel responses and audience Q&A, is available free for the next 30 days – click here to watch (passcode: Pna?3+nC).
Conclusion
The webinar highlighted key considerations surrounding TPMAs, balancing their potential benefits against practical and regulatory challenges. Although traditional client accounts remain secure for now, more firms may increasingly explore TPMAs as a strategic business option.
Special thanks to our panel, including Daniel Dunne of Interpolitan Money, for sharing valuable industry insights and clarifying this evolving topic.
You may also be interested to register for a TPMA 101 session.
