Lawyers can now make large trust withdrawals electronically
On February 7 the Benchers approved changes to Law Society Rule 3-56 to allow BC lawyers to make trust withdrawals of over $25 million electronically under specified conditions. Rule 3-56 had previously required that lawyers make all trust withdrawals by cheque.
As amended, Rule 3-56 effectively allows lawyers to make trust payments through the "Large Value Transfer System (LVTS)" of the Canadian Payments Association (CPA). The LVTS is the CPA's electronic same-day settlement system for wire payments. Since February 3, the CPA has required that all payments for sums in excess of $25 million CDN be made by electronic transfer through this system, rather than by cheque, bank draft or other traditional paper-based payment instrument. While the CPA has apparently extended a grace period (to August 3) for financial institutions to comply with the new requirement, lawyers should check with their own financial institutions to determine in what way this grace period is extended to customers.
Law Society Rule 3-56(3.1) now provides that a lawyer may make or authorize the withdrawal of funds from a pooled or separate trust account by electronic transfer, provided specified conditions are met.
The first condition is that the transfer must be for more than $25 million. [Note: Rule 3-56 continues to require that a lawyer's withdrawal from trust of an amount less that $25 million be by trust cheque.]
Second, the transfer system must be one that will produce, not later than the next banking day, a confirmation form from the financial institution. That form should confirm the details of the transfer, including:
1) date of the transfer;
2) source trust account information, including account name, financial institution and account number;
3) destination account information, including account name, financial institution, financial institution address and account number;
4) name of the person authorizing the transfer; and
5) amount of the transfer.
As a final condition, the lawyer must complete and personally sign a requisition for the transfer in a form approved by the Discipline Committee (a Large Value Transfer System (LVTS) Electronic Transfer Form), submit the original requisition to the appropriate financial institution, retain a copy of the requisition in the lawyer's records, obtain the confirmation from the financial institution, retain a hard copy of the confirmation in the lawyer's records and, immediately on receipt of the confirmation, verify that the money was drawn from the trust account as specified in the requisition.
BC lawyers who may be involved in trust transactions of over $25 million are urged to review the full text of Law Society Rule 3-56, as amended, and a copy of the LVTS Electronic Transfer Form.
Questions can be directed to Don Terrillon, Auditor, (email@example.com) at the Law Society office.