Interest received on our clients designated deposit accounts that we hold with our bank (for probate/trust matters) is currently the same rate as received on our General Client account. The rate is an enhanced rate negotiated by us due to the aggregate funds held with the bank.
Funds held in General Client account and recorded on the client ledgers are paid interest calculated as per our interest policy, at a lower (but fair and reasonable) rate than what we receive (and with a deminimus applied).
Interest received on the deposit accounts are credited direct to the accounts and recorded on the client deposit ledgers.
The bank have offered a service called Client Monies Services which is a virtual account system that helps manage third party funds for our designated deposit accounts. We can set the rate of interest paid to the individual virtual accounts and effectively take a turn on the interest income. It would be similar to how we manage general client account and interest paid thereon.
Our risk group are concerned this is unethical. What are others views please and is anyone familiar with this service or use something similar?
