ESCROW PAYMENT SERVICE PROJECT AN UPDATE 29 Sep 2016
OLD PROBLEMS NEED NEW SOLUTIONS Problem: Fee security and speed of payment remains a real problem for most barristers, especially at the junior bar. But our dependence on solicitors means we have to compromise on both security and speed. What we want: Client funds held by a mutually trusted stakeholder as security for timely payment of professional fees and disbursements What we don t want: A trust account Mission: To build a safe, reliable and convenient on-line escrow payment service to secure and pay barristers fees, without requiring trust accounting
SECURING FEES IS A WIN-WIN OUTCOME FOR CLIENTS & SOLICITORS Solicitor When to use it has no trust account won t use trust account or would rather not Direct Access individual, corporate clients As mediator / arbitrator Litigation teams Barristers / chambers tendering to conduct litigation Why to use it Security Up front payment Speed faster payment Fewer disputes Separates your bill from the solicitor s Transparency know when funds are there A problem shared reduces cost, admin, risk for solicitors; a reason to brief you
UK BAR HAS SHOWN US THE WAY BARCO Est. 2012 by the Bar Council Piloted in 2013 by large chambers in London, Manchester & Leeds Acts as escrow agent Service structured to comply with rules prohibiting trust accounts for barristers Holds the financial services license No on-line balance reporting Fee of 2% of the value of payments up to a maximum of 250 Averages GBP 2.5m FUM (2014) Considering product offering to solicitors Bar Standards Board Rule C74 If you make use of a third party payment service for making payments to or from or on behalf of your client you must:.1 Ensure that the service you use will not result in your receiving, controlling or handling client money; and.2 Only use the service for payments to or from or on behalf of your client that are made in respect of legal services, such as fees, disbursements or settlement monies; and.3 Take reasonable steps to check that making use of the service is consistent with your duty to act competently and in your client s best interests. Providing the service but regulating for open competition will encourage uptake and new entrants
BUT WE CAN DO BETTER BARCO Association must fund and operate a licensed financial service provider Insurance / risk responsibility for Bar Client unfamiliarity with brand Off-line service Paper based payment requests Fax and Email Forms 6-business day wait for payments Paper statements New Escrow Payment Service Licensed NAB entity to act as escrow agent No risk of escrow agent default Well known financial services brand On-line service Electronic payment requests On-line (HTML) forms Immediate payment On-line, immediate access to balances An easier, faster, cheaper service will promote uptake and boost confidence in the service
ONE ACCOUNT HANDLES ALL MATTERS Conceptual Functional Overview (1) Step 1 Account Opening One-off step Barrister opens account with the Escrow Agent. Usual internet account opening forms 100 point ID check to establish and KYC the barrister Receive login access Step 2 Create New Matter Barrister / client agree to use the service Barrister creates matter on-line with client details NAB automatically emails client: BSB Account No. Matter number Login T&Cs Step 3 Client Deposits Funds Client transfers funds electronically No KYC required Online access Check balance Authorise payment Request return Change password Nominate account for return of funds Notification sent to Barrister
ALL TRANSACTIONS OCCUR ONLINE Conceptual Functional Overview (2) Step 4 Barrister Seeks Payment Barrister issues invoice (email) Goes online to generate payment request (or embed link with invoice) Bank sends email to client seeking approval for payment Step 5 Client Pays Client clicks on link in email from Escrow Agent or from Barrister Client approves payment (or adjusts funds) Bank pays Electronic transfer to Barrister s bank account Step 6 Excess Funds Return Client goes online Issues refund request Bank sends automatic email to barrister seeking consent Barrister clicks on link to approve Escrow Agent transfers funds to client s account
FUNCTIONALLY AND LEGALLY, NOT A TRUST ACCOUNT Key Terms & Conditions Bank owns the funds and the account no trust Bank is stakeholder (not agent / associate s.6 UL) Bank only transacts at parties request No payment to barrister without client direction No refund to client without barrister consent Funds held pending dispute A bespoke product developed in partnership ensures regulatory compliance through time
WE AIM TO DELIVER IN LATE 2017 2016 Project Start and Design Engagement Decision by Bar Council and NAB to advance the project (2015) Feasibility Discussions with prospective software provider(s) Interoperability Consideration of integration into bank systems (ongoing) Contracting selection of preferred software service provider (PromisePay) Regulatory Resolution of all KYC issues; legal opinions on structure Refine Product Design Focus Group to confirm design (To Be Done) 2017 Product development and launch Technology: Functional & Technical specification, software build Legal & Regulatory: Finalisation of terms and conditions Final legal sign off for compliance with Uniform Law Develop precedents for costs agreements (Costs & Fees Committee) Launch: Beta testing, Product Launch
National Australia Bank Agency and Trustee Services NAB has a long established relationship with the NSW Bar as a lender for chambers, wealth management and business banking. Agency & Trustee Services is within NAB s Capital Financing division, and forms part of NAB s integrated client offering and solutions team. The Corporate Trustee Services offering includes: A fully licensed (AFSL), independent statutory trustee company (National Australia Trustees Limited) Note trustee and trust manager roles Access to custodial services Escrow agent services One of NAB s escrow clients is PromisePay (promisepay.com), which already provides on-line escrow payment services for B2B and B2C marketplaces. We will be working with PromisePay to develop the record keeping, message handling etc. that sits behind this service. NAB is a leading provider of corporate trustee services
National Australia Bank Agency and Trustee Services Theo Gavrilos is Head of Corporate Services & ESG (Environmental, Government & Social) at NAB. Theo has over 15 years banking experience in Australia, New York and London. Prior to joining Agency & Trustee Services, Theo managed investment and fund manager clients as a Director in NAB s Financial Institutions Group and before that, spent a few years in NAB s Insurance and Fund Manager Relations team in New York. Murray Lord is a Senior Legal Counsel with NAB where his practice focuses on NAB s more complex transactional work including its security and corporate trustee services. Before joining NAB, Murray had over ten years as a banking lawyer at a leading national law firm. Murray has also spent a year working in a commercial role in NAB s Agency and Trustee Services team. NAB is a leading provider of corporate trustee services
YOUR IDEAS AND FEEDBACK ARE IMPORTANT TO US Feedback Questions 1) Would you use the service? 2) On some or most matters? 3) How would you (prefer to) use the service? 4) Would the funds sit as security for the whole matter, for the final bill or would you request a top up after each bill? 5) What features would you prefer to have - e.g. pay if not object, solicitor approval of bills, historic records and statements? 6) What would your solicitors think about you using the service? 7) What would your clients think about you using the service? 8) What would your solicitors think about also using the service? 9) What would help you explain the service to solicitors and clients? 10) Other ideas and suggestions? Discuss the service with your solicitors and how you could both make use of it