Cash handling in the legal profession comes with its own set of challenges and obligations, especially for lawyers and paralegals in Ontario. The Law Society of Ontario (LSO) has laid out clear guidelines under By-Law 9 to ensure that cash handling is both transparent and compliant with legal standards. Let’s delve into these requirements to understand how to manage cash receipts, maintain proper records, handle refunds effectively, and navigate cash limits and exceptions.
Accepting Cash: A Choice, Not a Mandate
As a lawyer or paralegal, you might wonder whether you are obligated to accept cash from your clients. The good news is, you have the autonomy to decide. The Rules of Professional Conduct and the Paralegal Rules of Conduct, along with the By-Laws, do not compel you to accept cash. This decision is entirely at your discretion. It’s wise to inform your clients about your preferred methods of payment at the beginning of your engagement, ideally including this information in your retainer agreement to avoid any confusion later.
Defining Cash
Understanding what constitutes “cash” is crucial when it comes to complying with cash handling rules. According to By-Law 9, cash includes:
- Current coin within the meaning of the Currency Act (Canada)
- Notes intended for circulation in Canada issued by the Bank of Canada
- Current coin or bank notes of countries other than Canada
Bank drafts, money orders, and electronic or wire transfers of funds are not considered cash under By-Law 9.
Managing Cash Limits
A licensee may accept more than $7,500 Canadian cash in connection with:
- A department or agent of Her Majesty in right of Canada or of a province or territory where the department or agent accepts deposit liabilities in the course of providing financial services to the public
- Fees, disbursements, or expenses, provided that any refund out of such receipts is also made in cash.
- Paying a fine, penalty, or bail.
- Receiving cash from a peace officer, law enforcement agency, or other agent of the Crown acting in an official capacity.
- Receiving cash from the following entities:
- A public body
- An authorized foreign bank within the meaning of Section 2 of the Bank Act (Canada) in respect of its business in Canada or a bank to which the Bank Act (Canada) applies
- A cooperative credit society, savings and credit union, or caisse populaire that is regulated by a provincial or territorial Act
- An association that is regulated by the Cooperative Credit Associations Act
- A financial services cooperative that is regulated by An Act respecting financial services cooperatives (Quebec) or An Act respecting the Mouvement Desjardins (Quebec) and that is not a caisse populaire, a credit union central, or a federation of credit unions or caisses populaires that is regulated by a provincial or territorial Act
- A company that is regulated by the Trust and Loan Companies Act (Canada)
- A trust company or loan company that is regulated by a provincial or territorial Act
If you are handling foreign currency, ensure it does not convert to more than $7,500 CAD unless it falls under the exceptions mentioned.
Recording Cash Transactions: Ensuring Compliance
If you decide to accept cash, By-Law 9 mandates specific record-keeping practices when it comes to cash handling. TrustReq can help you decide whether or not you can accept a particular cash transaction. You need to maintain a book of duplicate receipts for every cash transaction. Each receipt should clearly state:
- The date the cash was received
- The person from whom the cash was received
- The amount received
- The client for whom the cash was received
- Any associated file number
- Signatures from both the receiver (you or your authorized personnel) and the payer
Additionally, you must record the cash receipt in either your trust receipts journal or your general receipts journal, depending on where the cash was deposited. This dual recording ensures a comprehensive audit trail, vital for transparency and accountability.
No Prescribed Formats: Flexibility with Guidelines
While there is no fixed format for maintaining these records, the LSO provides guidelines and examples in their Bookkeeping Guide. These resources offer practical insights into setting up your book of duplicate cash receipts and organizing your trust and general receipts journals. Embracing these guidelines can help streamline your bookkeeping processes and ensure compliance.
Duration of Record Maintenance
It’s crucial to understand the retention periods for these records. The book of duplicate cash receipts must be kept for at least six years preceding your most recent fiscal year-end. The general receipts journal follows the same retention period, whereas the trust receipts journal needs to be maintained for at least ten years. These retention periods ensure that your records are available for any audits or reviews, providing a clear financial history of your practice.
Handling Refusals to Sign Receipts
There might be instances where the person providing the cash refuses to sign the receipt. In such cases, By-Law 9 requires you to make reasonable efforts to obtain the signature. Explain your obligations under the By-Law and your duty to prevent fraud or money laundering. If the individual still refuses, you can accept the cash but must note the refusal on the receipt. Documenting your efforts is essential for demonstrating compliance.
Refunding Cash Payments
Refunding cash payments can be straightforward if you follow the guidelines. Section 6(d) of By-Law 9 allows for refunds for cash payments to also be made in cash, and the most efficient way to handle this is through a withdrawal slip at your financial institution. Ensure you obtain a duplicate slip and note the client file number and purpose of the withdrawal. This method provides a robust audit trail and ensures that your financial records remain accurate and compliant.
While it’s prohibited to write a trust cheque payable to “cash” or use an ABM for trust fund withdrawals, you can withdraw cash from your general account and reimburse from the trust account if necessary. Always have the recipient sign a receipt for the refund. If they refuse, ensure a witness is present to document the transaction.
