What should you do if funds arrive into your trust account with no explanation and for no legal reason?
It is recommended that you immediately contact your bank and ask them to fully investigate the deposit and report to you as to who originated the deposit and how the deposit was made. You may wish to ask the bank whether the deposit was a wire transfer sent via the Bank of Canada’s Lynx system (formerly the Large Value Transfer System (LVTS)), an electronic payment, or a cheque or bank draft deposited directly to your trust account.
Any transfer into your account other than a wire transfer sent via the Lynx system is revocable and can be pulled back from your account. Not all wires are sent via Lynx.
From a risk management perspective it is extremely risky to allow clients to deposit cheques or drafts directly into your trust account, as you have no opportunity to assess the authenticity of that cheque or bank draft.
Never write a cheque back or otherwise automatically repay a company or individual who calls and tells you that they have deposited monies to your account in error.
If funds have been deposited in error, it should be the sender who deals with the issue through his/her/its’ bank with yours, to remedy any problem.
Make sure the bank keeps you advised as the investigation progresses and writes a letter to you confirming what has happened. You should keep this letter with your trust account reconciliations and also notify the Nova Scotia Barristers’ Society of the incorrect deposit and how the bank dealt with it. Visit the NSBS Trust Accounts page for more information.
Trust account tips
If you have a corporate credit card, check with the bank to confirm that the bank does not have this linked in any way to your trust account profile. Banks may be doing this without your knowledge or consent.
As well, if you give instructions to close out a trust account, get confirmation in writing yourself from the bank that this in fact has been done. Shred all unused cheques to avoid them being used for fraudulent purposes by someone else.