Some firms are not completing full “three-way” reconciliations for client accounts. While they may reconcile the cash book to the bank statement, they do not always reconcile this balance to the total client ledger balances. Without this, records may be incomplete and discrepancies may go undetected.
Firms that manage client accounts must have robust controls and systems in place to provide confidence to their clients.
Are you a RICS-regulated firm that holds client money? You must adhere to our client money standard, and join the Client Money Protection Scheme. This will give independent assurance and confidence to your clients that their funds are well protected and safe.
Firms that manage client accounts must have robust controls and systems in place to provide confidence to their clients.
Are you a RICS-regulated firm that holds client money? You must adhere to our client money standard, and join the Client Money Protection Scheme. This will give independent assurance and confidence to your clients that their funds are well protected and safe.
How Client Money Handling and Protection works
Notify us
Notify us your firm holds client money through your firm registration, annual return, or in your account.
Complete registration
You will be invoiced for the annual fee which covers the audit programme and a levy for the Client Money Protection Scheme.
Complete procedures
Read and comply with the Client Money Handling professional standard and ensure you have published the procedures required under the Client Money Protection Scheme.
Closing your scheme registration
If your firm no longer holds client money, deregister from the scheme.
Client money information, if your firm is currently, or is considering holding client money
Compliance and best practice
RICS routinely carry out regulatory review visits of firms that handle client money. This will include ensuring that the Rules of Conduct and the Professional Standard on Client Money Handling are being followed. Additionally. our team will provide advice and assistance, identify gaps and help regulated firms back into compliance.
Here are some of the common issues we find during our regulatory reviews:
Firms do not always evidence that reconciliations have been reviewed and approved by a Principal or senior independent staff member. Principals are responsible for ensuring client money is properly accounted for and should be involved. Reviews should check timing, accuracy, and unresolved items. Reconciliations must be signed and dated to confirm approval.
Client accounts and cash books should never show negative balances. If individual client ledgers are overdrawn, this creates a deficit and may mask a shortfall. Firms must correct this promptly and put funds in place while investigating. Any firm funds paid in become client money and cannot be withdrawn until replaced. Controls should prevent overdrawn positions.
Electronic payments are increasingly authorised by non-Principals, often without sufficient oversight. This increases the risk of misuse. Payment approval should be limited to Principals or senior staff independent of transaction processing. Others should only authorise payments with a second signatory.
Some firms rely on email alone to verify changes to bank details. Stronger checks are needed, such as telephone confirmation. Weak procedures increase the risk of fraud or misdirected payments.
Reconciling items should generally be cleared within three months (or six months for cheques). Receipts should be promptly recorded, including unidentified funds. Unrecorded bank entries should be investigated. Old items may indicate incorrect client balances.
If a bank account does not clearly include the word “client,” it may not be properly distinguished from office funds. This could affect protection in insolvency. Firms should ensure all client accounts include “client” and the firm name, and where relevant, the client name or property reference.
Suspense accounts for unidentified funds are acceptable but often overlooked. Firms must track balances, how long funds have been held, and steps taken to identify owners. If funds remain unclaimed after three years, they must be donated to charity, with a receipt and indemnity obtained.
Reconciliations should formally match the bank balance, cash book, and (for general accounts) client ledger balances, explaining any differences. These should be completed monthly and promptly after period end.
Donations to charity
If your firm has any unaccounted for, or surplus, client money in a client account, best practice is to:
- ensure that all efforts are made to trace the clients or owners of the money
- hold the surplus money in a client suspense account
- hold surplus money for at least three years.
If, after three years, the client or owner of the money has not been found and no true claimants to the money have come forward, it must be donated to a registered charity. A receipt must be obtained for this transaction so should a true claimant come forward to collect the money it can be made available to them. The receiving charity should offer the donating firm an indemnity to enable the firm to recover a donation in the event of a claim.
LionHeart
You can choose to donate surplus client money to RICS’ registered charity, LionHeart.
Any questions? Check our FAQs page or contact the regulation team on regulation@rics.org.
The regulatory functions of RICS are led and overseen by the Standards and Regulation Board (SRB).