Attorney Escrow Accounts, IOLA and Ethics: What Every New Lawyer Needs to Know

Attorneys holding client funds face a variety of ethical issues, complicated by the confluence of two apparently unrelated issues. On the one hand, state and federal statutes regulate the relationship between a bank and its customer, notably when it comes to the processing of checks. On the other hand, scam artists try to take advantage of the peculiarities of the check collection process by getting attorneys to release funds from an escrow account while the attorney’s exposure to a counterfeit or other bad check deposit has not expired.

Attorneys must follow a series of important steps in dealing with their escrow accounts. They must set the accounts up correctly. They must put client funds in the correct type of account and not commingle client funds with their own money. They must then exercise care in how they handle the accounts and disburse funds, and finally they must be vigilant against the many variations of scams targeting attorneys.

Jay L. Hack, a partner in the firm of Gallet Dreyer & Berkey, LLP and former Chair of the Business Law Section of the New York State Bar Association, calls upon his 39 years of practice representing banks and other financial institutions to help attorneys navigate the process of protecting both their clients’ funds and their own licenses to practice law. 

Learning Objectives:

I.     Understand how to establish an escrow account and whether funds belong in an Interest on Lawyer Account (IOLA) deposit versus a non-IOLA deposit

II.    Gain the ability to determine when funds can be safely disbursed from an attorney escrow account and how to disburse them

III.   Learn about the state and federal legal framework that affects how checks are processed and the effect of check processing on escrow account risks

IV.   Understand the “Bounced Check Rule” and the reporting requirements for attorney escrow accounts

V.    Learn to recognize scams targeting attorney escrow accounts and how to avoid them

This course originally appeared as a part of our October 2015 Bridge the Gap Event.