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E-banking with a price

Stacie Rosenzweig, of Halling & Cayo in Milwaukee, advises lawyers who are planning to take advantage of new rules allowing them to accept electronic payments to still seek out help from professional accountants and record keepers. (Staff photo by Kevin Harnack)

Stacie Rosenzweig, of Halling & Cayo in Milwaukee, advises lawyers who are planning to take advantage of new rules allowing them to accept electronic payments to still seek out help from professional accountants and record keepers. (Staff photo by Kevin Harnack)

Although lawyers can now take advantage of new rules allowing them to accept electronic payments, they might still want to enlist the help of professionals when balancing their books.

It’s been only about a year since Wisconsin adopted new rules that, for the first time, let lawyers practicing in-state take electronic payments. Because of the change, lawyers can now receive wire transfers, electronic transfers and remote deposits.

The same set of rule changes also eased the state’s record-keeping requirements, at least to an extent. In particular, the state Supreme Court removed from its own rules some of the more complex requirements concerning what sorts of documents must be kept. The requirements are now guidelines issued by the Office of Lawyer Regulation.

The changes have had several effects. Lawyers, for instance, now need no longer bother with keeping paper records of documents such as client ledgers and transaction ledgers.

Keith Sellen, OLR director, said the new rules are still in their infancy and most of the agency’s efforts have been aimed at making sure lawyers know what the changes mean for them.

“My general sense is that the new rules are very well received because it provided a little more flexibility for lawyers and allows them to use e-banking,” he said. “We think we’ve made a good step forward, and it will be helpful in the long run.”

This is not to say, though, that the new-found flexibility has been without a price.

Both Sellen and professional-responsibility lawyers such as Stacie Rosenzweig at Milwaukee-based Halling & Cayo said there is at least one big risk that legal practitioners run when they choose to go paperless.

Practitioners who are asked by the OLR to produce records and don’t do so within a reasonable time are presumed to have violated a rule requiring them to hold money in trust. The presumption is rebuttable, but the exact definition of a “reasonable” time is unclear. Nor is it known what sort of evidence would be sufficient to rebut the presumption.

That’s partly why Rosenzweig says she still advises her clients to retain a non-lawyer for accounting and bookkeeping work.

“If you don’t have a background in bookkeeping and accounting or you don’t have time to do this, outsource this,” she said. “This isn’t your core competency. And it’s OK that it’s not your core competency.”

Rosenzweig warned that it could be easy for lawyers who decide to use e-banking to fall behind on monthly reconciliations. Performing those reconciliations many times requires having a snapshot of an account on a certain day.

What many lawyers might not know, however, is that banks often do not keep much information about particular transactions and might not provide online statements going back especially far in time. Banks may also charge extra for old statements – making it expensive for lawyers to get their hands on them, says Rosenzweig.

The best policy, then, is to get into the habit of taking account information and either printing it out or turning it into a PDF.

“Make sure you have a local backup and a backup of that backup,” Rosenzweig said.

But not every lawyer is likely to know that.

And there’s another consideration: Even though lawyers are excused by the new rules from retaining records in certain documentary forms, they still must be able to provide an accounting and a reconciliation of their accounts.

“Lawyers have to be cognizant of those basic fiduciary responsibilities,” said Sellen. “And I think lawyers generally call our trust account program if they have questions.”
Rosenzweig agreed.

“You do still need to have an ability to figure out who your clients are, where the money is, who owns the money that’s in your trust account and where it went,” she said. “You need to keep those records and be able to access them.”

Also, the new rules, even as they get rid of certain documentation requirements, do not eliminate lawyers’ obligation to retain records.

Nor are the record-retention rules necessarily any clearer now, says Rosenzweig. She noted that many lawyers think they need only keep records for six years after the end of a transaction. The actual requirement, though, calls for records to be retained for six years after the end of representation – a starting point that is much less clear-cut.

Another important thing to remember is that the OLR can ask for records at any time.

“There doesn’t have to be a disciplinary action or anything else leading up to it,” Rosenzweig said. “It’s just they’re allowed to request it. That said, they’re a busy office. They’re not just going to randomly call up and say, ‘Hey can you send me your trust accounting records for the last three years?’ on a Friday and expect them by Monday.”

About Erika Strebel, erika.strebel@wislawjournal.com

Erika Strebel is the law beat reporter for the Wisconsin Law Journal and a law school student at UW-Madison. She can be reached at 414-225-1825.

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