By Sanette Viljoen
All attorneys have a trust account in which all moneys of clients are deposited, by virtue of legislation. The money in the trust account also enjoys certain protection through the Loyalty Insurance Fund, should the attorney or his personnel steal it. The Fund was established as a statutory body and is regulated by the Legal Practice Act, no. 28 or 2014, and provides professional indemnity insurance to attorneys, should they face claims of theft.
Exactly for this reason many clients use the attorney’s trust account to deposit money during business transactions, so that the money can be in safekeeping there until the transaction has been completed. The client has peace of mind because this account enjoys protection and the other party also has peace of mind knowing that it’s a trust and the money is in safekeeping there.
Consequently, many large amounts are channelled through an attorney’s trust account for a variety of transactions that are concluded daily. These include the sale of farms and homes, deposits for tasks the attorney still has to execute etc.
Due to its nature, a trust account is often the target of “hot money” and is used by criminals as the vehicle through which to turn “hot” money “cold”. Usually this is money that is not divulged to the Receiver and did not go through the correct channels to pay tax, or was obtained through criminality.
The legislator therefore took various steps to eliminate this kind of fraud. One thereof is the Financial Information Centre Act (FICA). If you deposit money with your attorney, he is obliged to meet his FICA responsibilities. The parties’ identities have to be divulged and verified. The attorney is obliged to report large amounts of money to the authorities. If the attorney does not do so and does not honour his FICA responsibilities, he is guilty of an offence and can be sentenced to 15 years’ imprisonment and receive a R10 million fine.
It is also important to know that the Loyalty Fund insists on all trust accounts being audited annually. The possession of a Loyalty Fund certificate is also a prerequisite for an attorney to be able to practise.