Banking for Regulated Professional Firms: Client Accounts and Compliance

Regulated professional firms face a banking requirement that has no equivalent in ordinary business banking: the mandatory separation of client money from office money. This obligation exists across multiple regulatory regimes — for solicitors under the Solicitors Regulation Authority, for FCA-regulated investment firms under the Client Assets Sourcebook, and for other regulated professionals handling client funds.

Finding a bank that understands, and will formally acknowledge, the client account relationship has become increasingly difficult as mainstream banks have de-risked away from professional services due to compliance complexity. This guide explains the obligation, the legal framework, and the practical banking solutions available.

The client account obligation

The principle behind client account rules is consistent across regulatory regimes: money belonging to clients must be held separately from the firm's own money, and must be protected from the firm's creditors in the event of insolvency.

Without client account segregation, a professional firm's clients would be unsecured creditors of the firm in insolvency — competing with trade creditors, banks, and HMRC for whatever remains of the firm's assets. Since those clients often have no commercial reason to assess the credit risk of a small professional firm before trusting it with their funds (a home-buying client does not choose their solicitor based on credit analysis), regulatory protection substitutes for market discipline.

SRA Accounts Rules for solicitors

The Solicitors Regulation Authority's Accounts Rules govern how UK solicitors handle client money. The key requirements include:

Maintaining a designated client account: client money must be held in a separate client bank account at an authorised institution. The account must be clearly labelled as a client account. Most law firms maintain one or more general client accounts (for multiple clients' funds) and sometimes designated client accounts for specific large transactions.

The role of interest: interest earned on client funds must be accounted for — either paid to the client (if above a de minimis threshold) or held in a client account. The SRA's interest rules require that clients receive fair allocation of interest earned on their money.

Reconciliation: the SRA requires monthly three-way reconciliation between the cashbook, the bank statement, and the client ledger. Discrepancies must be investigated and resolved promptly. Breach of reconciliation obligations is a regulatory matter.

Residual balances: where a transaction completes and the client has not provided instructions for residual client funds (often small amounts), the firm must make reasonable attempts to return the money and, if unsuccessful, pay unclaimed residual balances to a charity (under the SRA's prescribed process).

The bank's obligations: critically, the bank at which the client account is held must acknowledge the account as a client account and must agree to waive any right of set-off — that is, the bank cannot apply a firm's client account balance against the firm's own indebtedness to the bank. This is a formal written acknowledgement from the bank and is a prerequisite under the SRA Accounts Rules.

FCA CASS requirements for investment firms

The FCA's Client Assets Sourcebook (CASS) applies to FCA-regulated firms that hold client money. The regime is divided into:

CASS 7 (Client Money): applies to firms that receive or hold money from or on behalf of clients. Requires client money to be held in designated client bank accounts, segregated from the firm's own money. The bank holding client money must be assessed and approved by the firm under written criteria. Client money is held on statutory trust — it does not form part of the firm's estate in insolvency.

CASS 6 (Custody Assets): applies to firms that safeguard financial instruments (shares, bonds) belonging to clients. Custody assets must be registered separately from the firm's own assets and held in designated client custody accounts.

CASS 10 (CASS Resolution Pack): requires CASS-governed firms to maintain a resolution pack enabling an insolvency practitioner to identify and return client assets efficiently. This documentation must be regularly updated and tested.

The CASS regime is more prescriptive than the SRA Accounts Rules in some respects — particularly around the assessment of banks holding client money, daily reconciliation for larger firms, and reporting obligations (CMAR returns to the FCA for larger CASS firms).

The challenge of finding a compliant bank

The mainstream banking sector's retreat from professional services client account banking is a well-documented problem. The reasons are familiar:

• The bank must provide a written acknowledgement of client account status and waive set-off rights — this creates legal obligations that many banks prefer to avoid
• Professional services client accounts often have high transaction volumes and low average balances, making them commercially unattractive relative to the compliance burden
• The AML obligation to understand the beneficial ownership of funds held in client accounts is complex when the clients may be numerous and frequently changing

The practical consequence is that small professional firms — a sole practitioner solicitor, a small IFA partnership — increasingly find that mainstream banks are unwilling to open or maintain client accounts.

Banks that are actively serving the market as of 2026:

Lloyds Commercial Banking has a dedicated professional services team and is active in solicitor and accountant client account banking. It has invested in client account-specific processes.

Metro Bank built early market share in professional client accounts, particularly for law firms. Its banking-as-a-service model and extended opening hours attracted professional services firms.

CAF Bank (Charities Aid Foundation Bank) specialises in banking for charities and professional organisations, and offers client account facilities.

Handelsbanken operates a relationship banking model with decentralised decision-making. It has been more willing to accommodate professional services relationships, including client accounts, than some of the larger high-street banks.

NatWest and Barclays both retain professional services client account banking capabilities, but the accessibility varies by region and relationship.

The internationally mobile regulated professional

A particular complexity arises for regulated professionals who have moved their practice to an overseas jurisdiction while continuing to serve UK clients:

A UK-qualified solicitor practising from Cyprus who handles UK property transactions, or an FCA-authorised IFA practising from Dubai who manages UK client portfolios — both face questions about where client accounts must be held, which regulatory regime governs them, and whether a UK bank will serve them as a non-resident business.

The answers depend on the specific authorisations held:

• SRA-regulated solicitors practising outside the UK: may need to comply with the home country's professional rules as well as SRA rules. The SRA expects client money to be held in accordance with the SRA Accounts Rules regardless of where the solicitor is physically based.
• FCA-regulated firms with overseas managers: the CASS regime applies based on the firm's FCA authorisation, not the physical location of management.

For internationally mobile professionals, the banking relationship for client accounts may need to be maintained in the UK even if the firm's operational banking is in the overseas jurisdiction. Specialist advice from a regulatory compliance solicitor is essential before restructuring a regulated practice across jurisdictions.

Practical due diligence when choosing a bank

Before opening a client account, professional firms should:

1. Obtain a written acknowledgement from the bank confirming the client account nature of the account and the waiver of set-off rights. This document is often called a "client acknowledgement letter" or similar.
2. Verify that the bank is an "authorised institution" as required by the relevant regulatory regime (for SRA purposes, this is a bank or building society authorised by the FCA/PRA).
3. Confirm the bank's interest calculation and payment process for client account interest.
4. Understand the bank's reporting capabilities — can they produce client account transaction reports in a format compatible with your case management or practice management software?
5. For CASS-governed firms, assess the bank under your firm's written criteria for banks holding client money.

How Global Investments can help

Global Investments works with internationally mobile professional firm owners and partners who face the intersection of professional regulatory requirements and international mobility. Whether you are a solicitor with offices in the UK and UAE, an IFA practising from Cyprus, or a fund manager with operations across multiple jurisdictions, we can help you think through the banking structure that meets both regulatory requirements and operational efficiency.

We can also introduce you to specialist compliance advisers and banking relationships experienced with professional services client account requirements. The regulatory landscape for internationally mobile professional practices is complex, and the banking is just one element — but it is an element where getting it wrong has immediate regulatory consequences.

This guide reflects our understanding of the SRA Accounts Rules and FCA CASS requirements as of June 2026. Regulatory requirements change. Always seek advice from a qualified solicitor or compliance consultant before establishing or modifying client account arrangements.