Controlled Money Accounts: Authority and Records

Confirm the Controlled Money Direction

Obtain the written direction before placing money in a controlled money account. Under section 128 of the Legal Profession Uniform Law, controlled money is money received or held with such a direction. The account is separate from the practice’s general trust account and must be held with an authorised deposit-taking institution (ADI).

A general trust account can hold money for several clients, with separate client ledgers. A controlled money account holds money exclusively for the person on whose behalf it was received. Calling an account a controlled money trust account does not establish the required written authority.

Identify the entitled person and their capacity to instruct. Record the matter, amount, nominated institution, account type and permitted terms. Address who receives interest and when money can be released. For broader distinctions between account categories, use the guide to trust accounts.

If instructions are missing, identify the correct treatment of the receipt before proceeding. The Victorian regulator explains that cash or a cheque payable to the practice goes into general trust pending written instructions. Where the cheque names the client as payee, deliver it to them or return it to its drawer as transit money.

Check NSW and Victorian Requirements

Apply the Uniform Law and General Rules to the legal practice, then use the relevant regulator’s procedures for its jurisdiction.

NSW Legal Practices

For a controlled money account in NSW, section 139 governs placement and disbursement. Rules 61 to 64 govern account naming, receipts, withdrawals and the register. The Law Society of NSW’s Legal Accounting Handbook explains their operation.

The institution must be an ADI. It need not have the additional approval required for a general trust account. Match it to the client’s direction. The account name must contain the practice’s name, a permitted controlled-money designation and enough particulars to distinguish its purpose.

Victorian Legal Practices

The Victorian Legal Services Board and Commissioner’s controlled-money guidance also applies section 128 and rules 61 to 64. It confirms the ADI requirement and distinguishes it from Board approval for general trust accounts.

For a Victorian solicitor’s file, retain the written direction and a separate movements record for each account. Keep the supporting bank records and payment authorities. Assign monthly review to a principal authorised to receive trust money, with evidence of that review on the statement.

Use the practice’s Victorian procedures and regulator materials for local administration. A NSW handbook example is not a prescribed Victorian form. Licensed conveyancers have a separate regime, so their monetary thresholds do not determine a solicitor’s controlled-money obligations.

Place the Money Under Written Authority

Place the money in the specified account as soon as practicable after receipt, as section 139 requires. Use the following sequence to connect receipt to confirmed placement.

1. Record receipt. Identify the payer, entitled person, matter reference and amount. Make out the controlled-money receipt under rule 62. For a direct deposit, act on notice or confirmation from the ADI.
2. Check the direction. The responsible solicitor confirms entitlement and the permitted placement terms before staff initiate the deposit. Resolve any difference between the direction and proposed account.
3. Establish the account. Verify its name, number and BSB against the bank’s account-opening confirmation. Retain the signatory mandate and the practice’s authority for those signatories.
4. Deposit the money. Match the deposit amount and transaction reference to the receipt and individual movements record. Keep the bank confirmation.
5. Confirm placement to the client. Identify the account, deposited amount and applicable terms without treating a proposed deposit as completed.

Retain evidence of interest entitlement and any permitted charges with the direction. Interest-bearing placement does not itself authorise the practice to choose an investment strategy. Keep office funds separate under the practice’s legal practice accounting procedures.

Authorise and Record Each Withdrawal

Match each withdrawal to the original written direction or a valid later written direction before release. Section 139 also recognises court orders and authority given by law. Withdrawal for legal costs requires the applicable rule 42 process.

Rule 63 permits payment by cheque or electronic funds transfer. It puts an authorised principal first in the withdrawal-authority hierarchy. When unavailable, the rule specifies successive authorised practitioner options, then jointly authorised associates. A bank signatory mandate alone does not resolve that hierarchy.

As a payment-control measure, confirm destination details through a known contact channel independent of the payment request. Record who checked the details and who approved release. Keep the transaction number, amount, payee or receiving account, client and matter, payment reason and authorising person with the withdrawal record.

For example, a new email asking for payment to a different account requires an authority and destination check. An incomplete direction or disputed entitlement pauses release while the responsible solicitor determines the lawful next step. Preserve the earlier direction and the later instruction so the change remains traceable.

Reconcile Interest and Close the Arrangement

Match the individual movements record to bank activity throughout the arrangement. Rule 64 requires the register to record interest and other income once the practice receives notification. Keep ADI statements and interest notices as supporting records.

Within 15 working days after each month, prepare the required account listing. Show each account’s name, number and balance, the entitled person, matter description and preparation date. The authorised principal’s evidenced review is a separate step from preparing it.

Consider this hypothetical record. The client directs placement of $80,000. The account earns $240 interest and incurs an authorised $20 charge. An authorised interim payment of $30,000 leaves $50,220. Match every entry to its bank record and authority before treating $50,220 as available for final payment.

1. Resolve differences between the movements record and bank balance, including outstanding payments and any final interest or charges.
2. Obtain authority for the final distribution, including the allocation of interest. Confirm the recipient and destination details.
3. Record the completed payment and obtain the final bank evidence. A payment instruction alone does not prove completion.
4. Give the required client trust account statement and retain evidence of delivery. Rule 52 covers statements on completion and on reasonable request.
5. Retain closure confirmation and the final movements record. Preserve the written directions for seven years under section 139, alongside the applicable trust-record retention requirements.

Close the arrangement only when the bank and movements record reconcile to zero after completed payments, and the client accounting explains the full distribution.