TPMAs & Misappropriation Risk: How Law Firms Can Protect Client Funds in 2025
- Jon East
- Aug 6
- 3 min read
Updated: Aug 7
Beyond Client Accounts: The Future of Fund Management in Legal Services. An Interpolitan Money mini-series for law firms, private client teams, and regulated professionals.
 Written by Jon East |  Contributor Daniel Dunne | Latest edited Aug 2025 5 min read. |
Table of contents
Welcome to the first instalment of our mini 5 part series on Third Party Managed Account.
Introduction
Misappropriation of client funds remains one of the most serious breaches a law firm can face. In 2024, multiple high-profile cases highlighted just how fragile the traditional model of holding client money can be especially when governance breaks down.
As regulatory pressure intensifies and clients become more conscious of financial risks, Third Party Managed Accounts (TPMAs) have emerged as a safer, compliant, and forward-thinking alternative.
What Is a TPMA, and Why Does It Matter?
A Third Party Managed Account (TPMA) is a bank account managed by a regulated third-party provider such as Interpolitan Money on behalf of a solicitor and their client. The funds never sit in the law firm’s own accounts, reducing the risk of fraud, misappropriation, or accidental misuse.
Law firms instruct the TPMA provider to receive and disburse funds on their behalf, creating transparency, control, and an auditable transaction trail.
The Growing Regulatory Pressure
SRA’s Evolving Stance on Client Money
Since the introduction of SRA Accounts Rule 11, law firms have had the option to use TPMAs as a compliant alternative to holding client funds. But recent consultations suggest a shift in regulatory sentiment.
“The central issue is how to prevent solicitors from misappropriating clients’ money… The strongest proposal is mandating TPMA and prohibiting law firms from holding client accounts.” — Tom Hayhoe, Legal Services Consumer Panel (2024)
Following high-profile cases like Axiom Ince where over £60 million in client money was allegedly misused calls for structural reform are growing louder. The Consumer Panel even stated they “have no confidence that client money is being protected” under the current system.
How TPMAs Prevent Misappropriation
Funds are ring-fenced
TPMA providers, regulated by the FCA, are the only authorised entities permitted to hold and disburse client funds—law firms cannot access the money directly. At Interpolitan, all funds are securely held with a Tier 1 banking provider and are protected in the event of insolvency.
Independent verification and dual approval
Funds move only with mutual instruction and authorisation, reducing the risk of internal fraud or error.
Transparent audit trails and real-time reporting
Firms can access a live ledger showing balances, transactions, and withdrawal history—enabling clear financial oversight.
FCA safeguarding obligations
Who’s Watching? The FCA’s Role in Oversight
While the SRA governs legal practice, TPMA providers operate under the supervision of the Financial Conduct Authority (FCA). This dual framework adds a higher standard of oversight.
The FCA requires providers to:
Segregate client funds from operational capital
Maintain sufficient financial reserves
Implement safeguarding protocols in case of insolvency
These rules ensure greater resilience and transparency than the average client account.
Real-World Case Studies: Misappropriation & Risk in Legal Client Accounts - Axiom Ince (2023–2024) £60m+ in client money misused
What happened: The firm collapsed after it was revealed that one of the directors allegedly misappropriated over £60 million in client funds, much of which was used to finance the acquisition of other firms.
Regulatory outcome: The SRA intervened and closed the firm, triggering reputational damage across the sector.
Relevance to TPMA: This case has been heavily cited in SRA consultations as evidence that current controls are insufficient.
Source: Law Gazette
TPMA = Risk Mitigation + Compliance = Peace of Mind
Law firms today face growing exposure from cybercrime to regulatory scrutiny.
Adopting a TPMA model helps firms:
Safeguard client money against misuse or loss
Reduce exposure to compensation fund levies and indemnity risks
Demonstrate best practice to regulators and clients
Free up internal resources by outsourcing fund control to a regulated specialist
“TPMAs remove the temptation and risk of misappropriation. The funds are simply never in the solicitor’s control.” — Robin Bates - Assistant Vice President, Escrow, Interpolitan
“In 2025, it’s no longer enough to say ‘trust me’—clients expect fund security, not just promises.” — Daniel Dunne - Head of Legal Partnerships, Interpolitan
Ready to Protect Your Clients and Your Firm?
Interpolitan provides fully aligned FCA-regulated TPMA services for legal professionals across the UK and internationally. We help mitigate risk, simplify compliance, and future-proof your operations.
Next in our series:
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