03-02 : Manual Wire Transfers and Electronic Funds Transfers

Law Society Rule 5-44(2)(a) requires approval from the Chief Executive Officer to disburse trust money without use of a cheque. Such approval for various forms of cheque alternatives can be obtained by following the requirements in this Practice Direction.

For the purposes of this Practice Direction:

• a “manual” wire transfer refers to a wiring of funds based on written instructions requesting the savings institution to send funds;
• an “electronic” wire transfer refers to a wiring of funds that is completed using an online banking platform; and
• Electronic funds transfer or (“EFT”) means an online banking service through a savings institution that includes various forms of electronic payments such as electronic wire transfers, Interac e-transfers, bill payments and account to account transfers.

For many years, in accordance with this Practice Direction, manual wire transfers have been allowed by the Law Society provided a member or law firm followed one of two processes. The first option involves pre-submitting an approval form through the Member Portal on the Society’s website for each transfer before it is sent. The second option involves requesting and thereafter receiving approval of member or law firm procedures from the audit department such that the Member Portal process would not be needed. This is known as blanket manual wire transfer approval.

However, now there is a third option for conducting wire transfers. Members or law firms interested in using online banking through their savings institution’s online banking platform can apply to the Law Society audit department through an approval process similar to that for blanket manual wire transfer approval. However, unlike blanket manual wire transfer approval, electronic wire transfers are just one payment option under electronic funds transfer, and blanket EFT approval from the Society encompasses various forms of EFT. Specifically, in addition to being able to conduct electronic wire transfers, EFT for the purposes of Law Society requirements includes other forms of electronic payments such as Interac e-transfer and account to account transfers.

Options for obtaining approval to disburse trust funds without use of a cheque are as follows:

• Member Portal form: Firms that only occasionally need to wire funds and do not wish to use any form of EFT must pre-submit an approval form for each wire – which is based on manual instructions to the savings institution requirements outlined later in this Practice Direction – through the Member Portal on the Society’s website;
• Approval of firm procedures may be requested from the Audit Department by the trust account supervisor for one of two forms of blanket approval:
  • Blanket manual wire transfer approval: Firms that want to regularly send manual wire transfers without needing the Member Portal process for each transaction can request blanket manual wire transfer approval; or
  • Blanket EFT approval: In order to use online banking for one or more forms of EFT, firms can request blanket EFT approval.

The below requirements are designed to address the many forms of fraud or misdirection of funds which can occur irrespective of the use of electronic funds transfer, a manual wire process, or even a trust cheque. As such, all lawyers and firms must have strong policies for risk prevention and control environment elements for the protection of trust funds.

In addition, all staff involved in the transaction, be it a manual wire transfer or an EFT, must apply cautious diligence and a high level of scrutiny to each transaction, being wary of unusual circumstances or situations that cause a sense of discomfort – a ‘red flag’. These circumstances or situations need to be investigated and resolved before proceeding with any manual wire transfer or EFT.

In addition to the approval process noted above, Law Society requirements regarding manual wire transfers and EFTs are as follows:

1. Confirmed Available Funds

As with any disbursement from trust, funds to be sent with a manual wire transfer or via an EFT must first be confirmed to be available. This involves:

• verifying that funds are available in the client trust ledger;
• ensuring the receipt has been deposited to the pooled trust bank account;
• investigating any ‘red flags’ that may occur at any point in the confirmation process; and
• only initiating a payment from the trust account once one of the below has occurred:
  • the deposited funds have specifically been confirmed, in writing, by your savings institution as having been cleared; or
  • The deposited funds have been held long enough to comply with the firm’s confirmed available funds policy, which was determined through consultation with your savings institution.

It is important to note that the above processes should already currently be in place for each disbursement from trust, regardless of the method of payment to be made.

2. Receipt of Instructions

Instructions received by the firm to initiate the manual wire transfer or EFT must be received in writing, including:

• Authorization: After being educated about the risks so that an informed decision can be made, the client must authorize the use of a manual wire transfer or any form of EFT, except for transfers to the general account to pay a statement of account already issued to the client;
• Account details: Recipient information and bank account details;
• Verbally confirmed written instructions: If written instructions are being provided in any way other than delivery in person by the recipient whose identity you have verified [refer to Rules 5-116 to 5-131], the information must be confirmed verbally in person or by phone using pre-existing contact information for the recipient – not the contact information accompanying the instructions. False contact information accompanying false written instructions is a common fraud technique.
• Instructions from the client must be typed in a clear font and provided with a void cheque or similar source, as information the client obtains directly from their savings institution, in printed form, minimizes chances of error. This is especially critical for international destinations as there are additional codes, such as a SWIFT code, required. Consider also setting up a unique password with each client which they would later need to provide for any future verbal financial instructions or confirmations to combat deepfakes or other fraud efforts.

3. Authorizing the Transaction:

As with all forms of withdrawals from trust, each and every manual wire transfer or EFT must be supported by a source document for review by the authorizing member before affixing their signature to the instructions or authorizing the EFT, respectively.

Each person involved in the transaction has a role to play to ensure the accuracy of the transfer of payment instructions. From the individual filling out the requisition to the lawyer providing the last level of approval for manual wire transfers or EFT, each individual must, at a minimum, carefully check:
(i) Recipient name;
(ii) Each number in all recipient account numbers, including the transit number and, if applicable, all the SWIFT or other codes for international payments;
(iii) Name and address of receiving savings institution; and
(iv) The dollar amount.

For large dollar, recipients outside of Manitoba, or all international transactions, consider sending an early test transaction of a small amount such as $10. This allows the recipient to confirm receipt of the funds – with contact initiated by law firm staff, utilizing existing contact information in the client file – to ensure the test funds reached their desired destination before the full amount is sent later with the same payment instructions.

4. Completing the Transaction:

The requirements for completion of the transaction will vary based on the type of withdrawal:

a. Manual Wire Transfers

The firm must provide written instructions to its savings institution to complete the manual wire transfer, including:

• Authorization: The letter or requisition must authorize the use of a manual wire transfer by signature of one or more lawyers in the firm with signing authority on the trust account;
• Account details: Recipient information and bank account details; and
• Method of delivery of instructions: Firms who do not have blanket approval from the Society of procedures for manual wire transfers must have the authorizing lawyer attend the savings institution to complete the transaction. Firms with blanket manual wire transfer approval that use any delivery method of written instructions other than in person by the authorizing lawyer must have a process set up with their savings institution that requires verbal confirmation of the authorizing lawyer’s instructions using pre-existing contact information. Contact information accompanying the written instructions to the savings institution is not to be used.
  [or]

b. EFTs

• All online banking users must use multi-factor authentication, with a minimum of two factors. In addition, there must be a minimum of two users to process each withdrawal – one to initiate the withdrawal and the other to approve it. Each user must have, and keep private, unique IDs or access codes and passwords. A non-lawyer support staff can be set up to initiate the EFT, however only a practising lawyer can approve the transaction; and
• For all forms of EFTs, an EFT requisition form must be prepared and filled out with all the required information to complete the withdrawal. A lawyer requesting the withdrawal must sign the requisition form. A sample of a requisition form is available from the Law Society.

5. Confirmation

• Like the return of a cleared cheque, the savings institution must provide some form of confirmation that the manual wire transfer or EFT has been carried out as authorized.
• Confirmation of the withdrawal must be received from the savings institution by no later than the following business day and must include the following minimum information:
  (i) The date of the withdrawal;
  (ii) The source trust account name and account number;
  (iii) The destination name and account number, savings institution, and address;
  (iv) The identity of the person initiating the withdrawal;
  (v) The identity of the member approving the withdrawal; and
  (vi) The amount of the withdrawal.
• The information in the manual wire transfer instructions or EFT requisition form must be compared to the details in the confirmation received from the savings institution forthwith and any anomalies investigated and resolved immediately. Thereafter, these documents must be filed together as described in Section 7 below.

6. Update of Accounting Records

Manual wire transfers and all forms of EFTs must be recorded in the accounting records at the time the transaction takes place. Note that the completion of the withdrawal as described in Section 4 above is akin to signing a trust cheque and therefore the updating of the accounting records must occur no later than at this point and not wait until the confirmation in Section 5 is received.

7. Documentation

All documentation referred to in this Practice Direction that is related to the manual wire transfer or EFT must be maintained and stored with the accounting records as well as on the related client file.