Banking Facilities

[Jonathan]

Evening everyone.

I’m hoping someone can help.

We have a commercial client who completed on a sale on 20th Oct. When we went to send the sale proceeds to the company bank account, we found it had been deactivated because of lack of use. The bank has said they would reactivate. It’s now 13th December and the client has been chased every 2 weeks and the bank have still not activated the account awaiting further documentation. I have told them I do not want these monies in the client account over Christmas. Whats everyone’s view on this? It’s best part of £400k.

Thank you

Jon

[Geoff]

There are a number of speculative reasons why this has become an issue.

My advice would be to seek guidance from the SRA.

I might also have been inclined to refer the matter to the Serious Fraud Office under their reporting procedures.

Bear in mind that a report to the SFO can be based on suspicion and does not have to be based on fact. Additionally you must not inform the party you are referring that you have done so since this constitutes a “tipping off” criminal offence for which you may be sanctioned.

[Darren Whelan]

Hi Jon,

I agree with Geoff. More questions need to be asked here.

I have heard recently that banks are doing this when there is no activity but that said, £400k – why is there no urgency in getting this money back?

I’m assuming we’ve carried out due diligence here and there’s no insolvency issues? Any winding up petitions against the client? Banks usually remove facilities in this situation.

What evidence do we have from the client?

Have we spoken to Ethics?

Just my initial thoughts.

It doesn’t smell right.

[Kate]

Totally agree with Geoff and Darren here. Also working from the standpoint all relevant and any enhanced checks were carried out it does seem very off.
That said I’m working with a firm who went into administration, well working for the administrators and out of the blue the bank have cut the access to online banking for the client t account, no rhyme or reason and we still have balances to pay away. The bank know it’s client money so can’t go to the administrators. I’m just thinking change of staff and more junior people etc etc.

Ethics just say the access has to be restored! So yes but not that helpful, waiting on the round robin of administrators dealing with the bank.

Try Ethics but I think they will just say you need to send it back and must try harder.

Interesting to set what other have to say and so let us know how this pans out

[Tanya]

Hi Jon,
If I were faced with this dilemma I would definitely reach out for support. You dont seem comfortable with it, and nor would I be. My first steps would be to review all due diligence, AML checks, and the justification from the fee earner as to where this matter sat on the risk scale initially. I would then likely consult ethics and possibly SRA with my findings plus the potential red flag, and seek for further guidance (while documenting everything). Hopefully the steps will be ‘overkill’ and you will find a plausible reason for the problems you face, but let’s face it if you were to uncover something more sinister you be glad you did. Transparency is key. I would be stepping up the due diligence now and obtaining further checks. Best of luck, for your own sake. Document everything, and do keep us posted.

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