Trust Account Risk Management

April 30, 2020

This is a reminder that opportunities for fraud/theft could proliferate in unprecedented times like this. Office closures combined with uncertainty of job/business security and external economic instability increases the pressure for people to act unethically.

A commitment to embracing, implementing and practising strong internal controls is integral to ensuring the protection of trust funds. Fraud risk assessment, management and response continue to be a high priority for Trust Safety.

What proactive measures can firms take now to prevent fraud? Here are the top five prevention strategies:

  • Monitor inactive accounts or client ledger accounts with high balances for unusual entries and transfers.
  • Make sure monthly bank reconciliations are being done. This is a key control that compares your book balances to your bank balance and ensures that it matches.
  • Separate duties or tasks. Tasks must be segregated so that a single person is not able to perpetrate the fraud and then cover it up. For example, the person who receives a payment should be different from the person who records the transaction in the system or performs the reconciliation/verification of the transaction. In smaller firms, segregation of staff duties may be more challenging. You should engage in other control measures in smaller firms, such as reviewing withdrawals from Trust Accounts to ensure they are for legitimate reasons.
  • Follow the money by performing audits to ensure the transactions make sense.
  • Pay attention to documents and the supporting paperwork. Remember that good documentation does not mean something happened, only that someone said it happened.

Visit our website for additional proactive measures and tips you can take now to reduce the risk of theft in your practice. Questions? Please contact Trust Safety via email. We are here to help.