Is the money in your trust account really there?

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In a nutshell

The Canadian Bar Association’s Real Property and Small, Solo and General Practice Sections are concerned about a persistent transparency gap in Canada's payments system. Payments Canada sets the rules for all financial institutions in Canada regarding fund transfers. For lawyers handling client funds, it is often difficult to determine whether an incoming payment is final and irrevocable, or only a provisional credit that may later be reversed. Clear, recipient-facing confirmation of payment status is essential if modern payment systems are to deliver certainty, efficiency and reliability.

Key concerns

As cheques and bank drafts become less common, and in some cases discouraged or discontinued, digital payment systems must offer a comparable level of certainty. The CBA highlights the following issues to tackle in Canada’s payments system:

1. Transactional risk for lawyers and clients: Lawyers experience risk daily when handling client funds. Financial institutions may place holds on incoming funds or fail to process wire transfers expeditiously, leaving lawyers unable to determine whether funds can safely be relied on to complete a transaction. These delays can complicate trust accounting, increase client risk, delay closings, and sometimes cause transactions to fail because funds do not arrive or become available in time.
2. Gap in Payments Canada system: Payments Canada presently has two systems to transfer funds, with a third under development. According to Payments Canada, the Automated Clearing Settlement System supports 99% of daily transaction volume, where funds are received as an instantaneous credit that is still being processed and may be settled later. Recipients are not given information about the progress of the processing or the ultimate settlement.

Why this matters

Canada’s current payments system may be technically fast, but not sufficiently transparent or reliable for the legal and commercial transactions that depend on it. This gap undermines our banking system and limits any benefit obtained by faster payments. Automatic, recipient-facing confirmation of payment status would reduce avoidable transaction risk, improve confidence in digital payments, and help lawyers better serve their clients across Canada.

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