Electronic banking has become common for law firms, but proper procedures must be followed to avoid errors. While there is no ethical prohibition on online transfers, bank confirmations alone do not provide a clear audit trail. Firms must implement procedures to document details of each transfer such as date, amount, reason, and authorizing person. This helps prevent accidental duplicate transfers and overdrawing of trust accounts. Proper supervision of staff is also needed to ensure funds are not improperly accessed or transferred.

1. Online Banking and IOLTA
Posted 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 don’t record the transfer, you may not remember it. If you don’t
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
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2. ◾ 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 firm’s 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 lawyer’s 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 lawyer’s 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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Page 2 of 3Online Banking and IOLTA | Oregon Law Practice Management
6/5/2015http://oregonlawpracticemanagement.com/2015/04/13/online-banking-and-iolta/