What constitutes ‘managing client funds’?

One of the activities that capture a law firm or accounting practice as a reporting entity under the AML/CFT Act is “managing client funds, accounts, securities, or other assets”. This does not include sums paid as fees for professional services.

The Department’s view is that, with the exception of payments for your professional fees, any instance where you receive or hold client funds and control the payment of those funds will be captured as ‘managing client funds’. 

The key determining factor is whether you have control over the flow of funds – if you do have control, your activity is captured. This is likely to include all circumstances where you hold funds for a client in your trust account or where you have authority over a client’s bank account(s). This may also include other circumstances, for example, if you have control and direct the flow or transfer of funds for your client.

Accountants - I provide tax accounting services. Is managing a customer’s tax transfers, payments and credits with the IRD considered ‘managing client funds’?

The Department’s view is that you may be ‘managing client funds’ in various circumstances where you have control the flow of funds for your client. This may include circumstances where you are involved in transferring funds on behalf of your customer within the IRD system. (Via DIA Guidance)