Client funds

Understanding what money is client funds, and how to deal with it properly is an essential professional obligation.

If an adviser never receives fees or disbursements from a client in advance of having provided a service they do notneed to have a separate client account. If an adviser receives fees or disbursements in advance of having provided a service theymust establish a separate client account.

A separate client account is a bank account established for holding client funds paid in advance and should be easily identifiable as a client account. More than one client account is not needed.

If an adviser takes money in advance, the Authority may ask to see the client account bank statements for the last three months and a related ledger on inspection.

A client account ledger may take the form of an accounting system, an electronic ledger or a hard copy ledger.

It is helpful for your client account ledger to include:

the date of each transaction
the type of each transaction
the amount of each transaction
the client name
the purpose of each transaction
the related invoice number.

The following pages show some examples of the steps that could be taken if an adviser chooses to take money in advance, and the steps that could be taken if an adviser chooses to take money after the services have been provided. These are not the only steps that could be taken and are intended as guidance only.

Choosing to have the client pay up front for services

Choosing to have the client pay after completion of services

Funds remain property of client

Clause 25(a):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

recognise that these client funds remain the property of the client until payable and invoiced

The Immigration Advisers Complaints and Disciplinary Tribunal has expressed the view that client funds are held on trust and an adviser in this situation is seen as a trustee. If a trustee takes property they know to be trust property, and use it as their own, they will be regarded as having dealt with the money dishonestly.

When any money held in the client account is due to be paid to the adviser, an invoice must be issued to the client before the money is transferred to the adviser.

Establishing and maintaining a client account

Clause 25(b):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

establish and maintain a separate client account for receiving and holding all client funds paid in advance

If taking payment for fees and/or disbursements in advance of being payable an adviser will need to set up a client account. To do this they will need to:

establish a separate account or add a separate suffix to the adviser’s current practice account
ensure the client account has the words “client account” in the account name or descriptions so that it is clearly identifiable .

Requirements for offshore advisers

Advisers working offshore mustcomply with the Code requirements in relation to the client account. If an offshore adviser cannot operate a separate client account, he or she may not receive payments in advance for disbursements or services.

Mixed funds

Clause 25(c):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

deposit any mixed funds (funds including payable payments and advance payments) into the client account at the outset and then as soon as practical withdraw from the client account the portion of the funds that were payable and for which an invoice has been issued

The following table sets out the definitions of the different types of funds that may be received from clients and the different bank account requirements that are attached to each of these.

	Client funds	Mixed funds	Practice funds
Definition	Advance payments received for fees and all money received for disbursements not yet paid.	Funds that include both client funds, and also disbursements paid and/or fees incurred which are due.	Funds that are due to the adviser.
Bank account requirements	Must be held in a separate client account.	All must be deposited into the client account at the outset. The portion of the funds which is due should be withdrawn from the client account as soon as practical.	Deposited into a practice account.

If an adviser receives mixed payments from a client, i.e. payments in advance and payments for services already supplied, these mixed funds must all be deposited into the client account at the outset. The portion of the funds which is due should then be withdrawn from the client account as soon as practical.

If there are no client funds received in advance those funds should be deposited directly into the practice account.

Administrative costs of client account

Clause 25(d):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

cover any administrative costs of maintaining the client account

Clause 25(d) requires the adviser to meet any administrative costs of the client account.

An adviser may comply with this clause by:

asking the bank to charge any costs relating to the client account directly to the practice account
if the bank can only take fees directly from the client account, maintaining a nominal amount in the client account to cover bank fees or other unanticipated charges.

Withdrawing funds only when payable and invoiced

Clause 25(e):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

withdraw client funds only when payments for fees and/or disbursements are payable and invoiced

The money held in a client account is being held on behalf of the client and remains their property until they receive an invoice telling them that the money is now payable to the adviser.

See the flow charts above for examples of the difference between invoicing a client when they have paid up front and the money is in the client account and invoicing a client after the completion of services.

Purpose of client funds

Clause 25(f):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

use client funds only for the purpose for which they were paid to the adviser

Client accounts should not be used to hold money simply for the purpose of service fee refunds or to earn interest. Money should be transferred out of the client account when it is due to be paid to the adviser and an invoice for the agreed services and/or disbursement(s) has been issued to the client.

Audits of business accounts

Clause 25(g):

A licensed immigration adviser must, if taking payment for fees and/or disbursements in advance of being payable and invoiced:

when requested by the Registrar of Immigration Advisers, have business accounts audited by a Chartered Accountant to show that any client funds taken in advance are held in a separate client account and only withdrawn when payments for fees and/or disbursements are payable and invoiced

The Authority recognises that having business accounts audited by a Chartered Accountant may come at a significant cost to advisers. The Registrar would not invoke this clause lightly. The results of such an audit may be used as evidence in an own motion complaint in which case the Tribunal would make a determination as to whether the adviser was in breach of the Code.

Here are some decisions from the Immigration Advisers Complaints and Disciplinary Tribunal that refer to client funds:

What has changed compared to the 2010 Code?

2010 Code – required advisers to:

establish and maintain a separate clients’ bank account for holding all clients’ funds paid in advance for fees and/or disbursements
withdraw funds held on behalf of clients only when payments for fees and/or disbursements fell due
use funds held on behalf of clients only for the purpose for which they were paid to the adviser

2014 Code – requires advisers, if taking payment for fees and/or disbursements in advance of being payable and invoiced, to:

recognise that these client funds remain the property of the client until payable and invoiced
establish and maintain a separate client account for receiving and holding all client funds paid in advance
deposit any mixed funds (funds including payable payments and advance payments) into the client account at the outset and then as soon as practical withdraw from the client account the portion of the funds that were payable and for which an invoice has been issued
cover any administrative costs of maintaining the client account
withdraw client funds only when payments for fees and/or disbursements are payable and invoiced
use client funds only for the purpose for which they were paid to the adviser, and
when requested by the Registrar of Immigration Advisers, have business accounts audited by a Chartered Accountant to show that any client funds taken in advance are held in a separate client account and only withdrawn when payments for fees and/or disbursements are payable and invoiced.

Client funds

Choosing to have the client pay up front for services

Choosing to have the client pay after completion of services

Funds remain property of client

Clause 25(a):

Clause 25(b):

Requirements for offshore advisers

Mixed funds

Clause 25(c):

Administrative costs of client account

Clause 25(d):

Withdrawing funds only when payable and invoiced

Clause 25(e):

Purpose of client funds

Clause 25(f):

Audits of business accounts

Clause 25(g):

J v Khetarpal

IAA v UKFE

Chaiyapoom v Hu

Yerbury-Wilson v Standing

Chen v Loh

Chen v Gu-Chang

LG v Hakaoro

What has changed compared to the 2010 Code?

Related documents

2014 Code of conduct

Worksheet for ethical deliberation

Model provisional licence supervision agreement

Make a complaint

Sample letter of non-engagement

New Zealand licensed immigration advisers professional standards

Written Agreement - Guidance and checklist for licensed advisers