A third-party managed account, usually shortened to TPMA, allows a law firm to arrange for client-related payments without receiving or holding the money itself.
Instead, an FCA-regulated payment provider receives, safeguards and distributes the funds under an agreement involving the provider, the law firm and the client.
For some firms, a TPMA can provide a practical alternative to operating a conventional client account. For others, it may be useful only for particular transactions or types of work.
It is not simply an “outsourced client account”, however. The contractual structure, regulatory protections and division of responsibility are different. Law firms considering a TPMA need to understand exactly what is being transferred to the provider—and what remains firmly with the firm.
What is a third-party managed account?
A TPMA is an account held at a bank or building society in the name of a regulated third-party provider. The provider receives and makes payments on behalf of the law firm and its client under agreed terms.
The money does not pass through an account controlled by the law firm. As a result, the firm does not itself receive or hold the client’s money.
That distinction matters. The SRA explains that money held in a TPMA does not fall within the definition of client money in the SRA Accounts Rules because it has not been received or held by the solicitor or firm.
This does not take the arrangement outside regulation altogether. Rule 11 of the SRA Accounts Rules governs how SRA-authorised firms may use TPMAs. The provider will also be subject to the relevant financial-services regulatory framework.
A TPMA can be:
- used instead of the firm operating a client account;
- used alongside an existing client account;
- adopted across an entire practice; or
- reserved for particular transactions, clients or departments.
The right model depends on the firm’s work and how money needs to move in practice.
How does a TPMA work?
The detail varies between providers, but the basic structure is usually as follows.
The firm selects a suitable TPMA provider and agrees with the client that the arrangement will be used. The provider, firm and client enter into the required contractual terms.
Money is then paid directly to the facility operated by the provider. It does not pass through the law firm’s client account.
The provider holds and safeguards the funds and maintains the payment records. Payments are released in accordance with the agreed authorisation process. Depending on the arrangement, this may require approval from the firm, the client or both.
The firm receives statements and transaction information so that it can supervise the matter, confirm that payments are correct and maintain its own audit trail.
The precise mechanics matter. Firms should not assume that all TPMAs provide the same level of control, speed or functionality.
What does Rule 11 require?
Rule 11.1 permits a firm to use a TPMA to receive or make payments in respect of regulated services delivered to the client, provided that two central conditions are met.
First, the arrangement must not result in the law firm receiving or holding the client’s money.
Second, before accepting instructions, the firm must take reasonable steps to ensure that the client understands:
- the contractual arrangements governing the TPMA;
- how the provider’s charges will be paid;
- who will bear those charges;
- the client’s right to terminate the agreement; and
- the client’s right to dispute payment requests made by the firm.
Under Rule 11.2, the firm must also obtain regular statements from the provider and ensure that they accurately reflect all transactions on the account.
The SRA’s TPMA guidance adds further practical expectations. Firms should maintain an overview of transactions, keep appropriate records and make sure that money is used only for its designated purpose.
The decision to use a particular provider must also be appropriate for the individual client and matter. A firm cannot treat a TPMA as a standard administrative arrangement without considering whether it serves the client’s interests.
Does the firm need SRA permission?
No. A firm does not need to obtain the SRA’s prior approval before using a TPMA.
It must, however, notify the SRA when it starts using one.
The notification identifies:
- the law firm and its SRA number;
- the TPMA provider;
- the provider’s FCA authorisation number; and
- the date on which the firm intends to start using the arrangement.
A separate notification is not generally needed each time the same provider is used for another client. The firm should notify the SRA if it engages an additional provider, switches provider or stops using an existing one.
Notification is not the same as endorsement. The fact that the SRA has been told about an arrangement does not mean that it has approved the provider or confirmed that the arrangement is appropriate.
Is money in a TPMA protected in the same way as money in client account?
No. The protections are different, and clients must be told this.
A conventional solicitor’s client account is operated within the SRA’s client-money framework. Depending on the circumstances, clients may also have access to protections such as the SRA Compensation Fund.
A TPMA provider is regulated under the relevant financial-services regime. The firm must verify that the provider satisfies the SRA definition and has the necessary FCA status. Its authorisation should be checked against the Financial Services Register.
Payment institutions are required to safeguard relevant customer funds. Broadly, safeguarding is intended to keep those funds separate from the provider’s own money so that they are available to be returned if the provider fails.
The FCA strengthened its safeguarding regime from 7 May 2026. The requirements include more frequent reconciliation, reporting, audit and failure-planning measures.
Safeguarding should not be confused with protection under the Financial Services Compensation Scheme. Payment services are not generally covered by the FSCS. If a payment provider fails, there may still be delay, cost or a shortfall while safeguarded funds are identified and returned.
A firm should therefore understand the provider’s precise safeguarding arrangements rather than relying on the words “FCA regulated”.
Does a TPMA remove the Accounts Rules burden?
It can remove much of the operational burden associated with the firm holding client money, but the answer requires some care.
Where a law firm uses only a TPMA and never receives or holds client money itself, many of the Accounts Rules governing a conventional client account will not apply to those funds.
For example, the firm will not be carrying out the same daily client-account bookkeeping and reconciliation processes. If the firm does not otherwise hold client money, operate a joint account or operate a client’s own account as signatory, the usual requirement to obtain an accountant’s report may not be triggered.
But Rule 11 still applies. The firm must:
- select an appropriate provider;
- explain the arrangement properly to the client;
- monitor the activity;
- obtain and check statements;
- keep suitable records; and
- maintain effective systems and controls.
The SRA can also require an accountant’s report where it considers this to be in the public interest.
It is therefore safer to say that a TPMA changes the firm’s Accounts Rules responsibilities. It does not eliminate regulatory responsibility.
TPMA compared with a client account
| Issue | Solicitor’s client account | TPMA |
|---|---|---|
| Who receives and holds the money? | The law firm | The third-party provider |
| Principal regulator | SRA framework applies to the firm’s handling of client money | Provider is regulated under the applicable FCA framework; Rule 11 and wider SRA duties still apply to the firm |
| Day-to-day administration | Managed by the firm and its cashiering function | Payment infrastructure and custody managed by the provider |
| Reconciliations and records | Firm must comply with the Accounts Rules | Provider maintains its records, but the firm must obtain and check regular statements |
| Payment control | Firm authorises payments under its own systems | Control follows the contractual approval process agreed with the provider |
| Accountant’s report | Usually required where Rule 12 applies, subject to exemptions | TPMA use alone does not ordinarily trigger Rule 12 because the firm does not hold the money |
| Protection if the account provider fails | Client-account and banking protections apply according to the circumstances | FCA safeguarding applies; payment services are not generally protected by the FSCS |
| Costs | Banking, cashiering, systems, audit, insurance and management time | Onboarding, platform, transaction, currency or other provider fees |
| Interest | Governed by Rule 7, the firm’s policy and any written agreement | Governed by the provider’s terms and the applicable regulatory framework |
The comparison should be based on the whole operating model, not merely the provider’s headline fee.
Is a TPMA the same as an escrow account?
The terminology overlaps, but the commercial uses can be different.
A TPMA is usually an ongoing payment arrangement used in connection with legal services. It may support multiple clients and matters under an established relationship between the law firm and provider.
A standalone escrow arrangement is more commonly established for a particular transaction. An independent party holds funds until specified contractual release conditions have been met.
The SRA definition of a TPMA refers to an account operated as an escrow payment service, so the regulatory concepts are related. In practice, however, providers may market and structure their escrow and TPMA services differently.
The label is less important than the underlying arrangement:
- Who owns and controls the account?
- What regulated activity is the provider undertaking?
- Who can authorise a payment?
- What conditions must be met before funds are released?
- Is the arrangement linked to regulated legal services?
- Who is responsible if the parties disagree?
A TPMA should not be used artificially to facilitate transactions that have no proper connection with the legal services being delivered. Where a firm is being asked to act simply as a neutral holder of funds, a separate escrow facility may be more appropriate.
Our related guide explains why law firms cannot act as pure escrow agents and what alternatives may be available.
What are the potential benefits of using a TPMA?
The strongest case for a TPMA is not that it makes compliance someone else’s problem. It is that it separates the custody of the money from the delivery of the legal service.
That may provide several benefits.
Less direct exposure to client-money risk
The firm does not itself receive or hold the money. That can reduce the risk of an internal error, unauthorised withdrawal or cyberattack resulting in money being taken directly from the firm’s client account.
It may also reduce the firm’s exposure if it suffers financial distress or an intervention.
Reduced client-account administration
A firm may avoid some of the infrastructure needed to operate its own client account, including cashiering processes, bank reconciliations and the routine administration associated with the Accounts Rules.
Whether this produces a genuine saving will depend on the firm’s scale and existing arrangements.
A clearer transaction record
Some platforms provide real-time visibility of balances, payment approvals and transaction history. This can create a useful audit trail for the firm and client.
Controlled payment authorisation
A TPMA can require approval from more than one party before money is released. This may add useful friction to higher-risk payments and make attempted fraud easier to identify.
Access to additional payment services
Depending on the provider, a TPMA may offer support for multiple currencies, high-value payments, complex distributions or payments to numerous recipients.
The availability and cost of those functions should be confirmed rather than assumed.
What are the disadvantages and limitations?
A TPMA introduces its own costs and dependencies.
The provider will carry out onboarding and financial crime checks. These may take time, particularly where a transaction involves complex corporate structures, overseas parties, unusual funds or higher-risk jurisdictions.
The law firm may not have the same immediate control over payment timing that it has with its own bank. Cut-off times, approval requirements or further provider enquiries may affect completion.
Clients may also be unfamiliar with the arrangement. Some may initially be less comfortable paying money to a provider whose name they do not recognise than to their solicitor.
There is also provider-concentration risk. If the platform is unavailable, the provider restricts the account or the provider itself fails, the firm needs a workable contingency plan.
Finally, a TPMA may be cost-effective for one firm and poor value for another. Firms should compare:
- provider onboarding and account charges;
- payment and transaction fees;
- currency-conversion margins;
- the cost of internal monitoring;
- the cost of maintaining any parallel client account;
- existing cashiering and audit costs;
- interest currently earned or retained; and
- the operational value of direct payment control.
The cheapest-looking option is not necessarily the lowest-cost operating model.
Does the provider take over AML and sanctions checks?
No.
The provider will carry out its own customer due diligence, sanctions screening and transaction monitoring to meet its obligations. That does not replace the law firm’s responsibilities.
The firm must still understand its client, the transaction, the source of funds and, where appropriate, the source of wealth. It must conduct ongoing monitoring and consider whether activity is suspicious.
The provider may ask for information the firm has already obtained. That duplication can be frustrating, but the provider must reach its own decisions. The law firm cannot instruct it to ignore a concern or release money before its checks are complete.
Before adopting a TPMA, the firm should map which checks each party will perform, what information may be shared and how discrepancies or concerns will be escalated.
Which law firms might benefit from a TPMA?
A TPMA may be particularly worth exploring where:
- a new firm wants to avoid building a complete client-account function;
- the firm holds client money only occasionally;
- client-account risk is disproportionate to the amount of money handled;
- a transaction involves complex or high-volume distributions;
- the firm wants additional payment approval controls;
- particular work requires support for several currencies or jurisdictions;
- the firm is finding it difficult to obtain suitable client-account banking; or
- the firm wants to reduce, but not necessarily eliminate, its use of client account.
It may be less suitable where the practice depends on extremely rapid, high-volume payments and the provider cannot demonstrate that its service can operate at the required speed.
Conveyancing is an obvious example. A TPMA may be capable of supporting property transactions, but the firm must test lender requirements, panel conditions, completion processes, cut-off times and contingency arrangements before relying on it.
Suitability should be assessed by reference to the firm’s actual payment journeys, not a generic product demonstration.
How should a law firm assess a TPMA provider?
The due-diligence exercise should go beyond checking that an FCA reference number exists.
Regulatory status
Confirm the provider’s exact legal name, FCA reference number and permissions on the Financial Services Register. Check that the entity signing the agreement is the entity that holds the relevant authorisation.
Understand whether the provider meets the SRA’s definition of a TPMA provider and how it safeguards funds.
Financial and safeguarding arrangements
Ask where the money will be held, which banking institutions are used and how funds are segregated.
The firm should understand:
- how often safeguarding reconciliations are conducted;
- whether the provider is subject to an external safeguarding audit;
- what insolvency arrangements are in place;
- whether costs could be deducted from safeguarded funds following failure; and
- how long it might take to return money.
Transaction capability
Test the provider against real scenarios from the firm’s work:
- maximum and minimum transaction values;
- supported currencies and countries;
- payment cut-off times;
- same-day or urgent payment capability;
- bulk or multiple-recipient payments;
- approval and authentication requirements;
- treatment of returned or rejected payments; and
- arrangements where the parties dispute release.
Financial crime controls
Clarify the provider’s onboarding requirements, expected timescales and risk appetite.
A provider may be technically capable of processing a payment but unwilling to accept the parties, jurisdiction, industry or source of funds involved.
Technology and operational resilience
Review cybersecurity, access controls, service availability, incident reporting, data protection and business continuity.
The firm should know what happens when the normal online process is unavailable. An emergency telephone number is not, by itself, a business-continuity plan.
Contractual terms
Read the actual agreement rather than relying on sales material. Pay particular attention to:
- payment authority;
- client approval rights;
- disputes;
- suspension and termination;
- complaints;
- liability limits;
- fees and foreign-exchange margins;
- treatment of interest;
- data use;
- record retention; and
- exit arrangements.
Practical support
Understand who will resolve an urgent problem. The quality of the operational team may matter more than the elegance of the platform when a substantial completion payment is held for review at 3.30pm on a Friday.
Common mistakes when implementing a TPMA
The most common mistake is assuming that appointing a regulated provider completes the compliance exercise.
Other problems include:
- choosing a provider before mapping the firm’s payment requirements;
- treating all matters as suitable for the same arrangement;
- failing to distinguish the provider’s AML checks from the firm’s own;
- using generic client-care wording that does not explain the actual terms;
- failing to identify who bears the charges;
- not testing payment authorities and dispute processes;
- assuming that safeguarding is equivalent to FSCS protection;
- failing to review statements and transactions;
- having no contingency plan for provider or platform failure; and
- describing the provider as “SRA approved”.
The arrangement needs to work on an ordinary day and on the difficult day when a payment is delayed, disputed or potentially suspicious.
How to implement a TPMA
A proportionate implementation project should usually include the following stages.
1. Map the payment flows
Identify why the firm receives money, who sends it, how long it is held, who receives it and what authorisation is required.
This often reveals that some payments can be made directly without either a client account or TPMA.
2. Decide the scope
Determine whether the TPMA will replace client account, operate alongside it or apply only to selected work.
Record the rationale and the circumstances in which exceptions will be permitted.
3. Select and check the provider
Complete regulatory, financial, operational, contractual, technology and data-protection due diligence.
Keep a record of the assessment and approval.
4. Update the firm’s documents
This is likely to include:
- the office manual;
- accounts procedures;
- client-care documents;
- privacy information;
- AML and sanctions procedures;
- payment-authorisation processes;
- incident and business-continuity plans; and
- any referral or commercial-relationship disclosures.
5. Notify the SRA
Submit the relevant notification before the arrangement is used and retain evidence that it was made.
6. Train the team
Fee earners, finance staff and supervisors need to understand when the TPMA should be used, how payments are authorised, what must be explained to clients and what happens when the provider raises a concern.
7. Test before launch
Run realistic payment scenarios. Include an urgent payment, a rejected beneficiary, an attempted change of bank details and a transaction that requires further source-of-funds evidence.
8. Monitor the arrangement
Review statements, incidents, delays, complaints, costs and provider performance. The firm should periodically revisit whether the provider remains appropriate.
Frequently asked questions
Can a law firm use a TPMA and still keep its client account?
Yes. The SRA expressly recognises that a TPMA may be used alongside an existing client account.
A hybrid model may allow the firm to use client account for routine work while directing particular higher-risk, unusual or complex transactions through a specialist provider.
Does a TPMA completely remove the need for an accountant’s report?
Not necessarily.
If the firm never holds client money and does not otherwise fall within Rule 12, TPMA use alone will not ordinarily trigger the requirement. A firm that continues to operate a client account may still need an accountant’s report.
The SRA also retains power to require a report where it considers this to be in the public interest.
Can a TPMA be used for conveyancing?
Potentially, but this should not be assumed.
The firm must establish that the provider can meet the practical requirements of the transaction and any relevant lender or panel conditions. Speed, cut-off times, undertakings, contingency arrangements and the treatment of completion monies need particular attention.
Who pays the TPMA fees?
That depends on the commercial arrangement. The firm, the client or another transaction party may bear the cost.
Rule 11 requires the client to understand how the charges will be paid and who will bear them before the firm accepts instructions.
Who receives the interest?
This depends on the provider’s terms and the applicable regulatory framework. A firm should not assume that it or the client will receive interest merely because the underlying account generates it.
The wider treatment of interest on legal client money is also under policy review. The Government’s proposed Interest on Lawyers’ Client Accounts scheme has contemplated TPMAs falling within its scope.
What happens if the client disputes a payment?
The contractual arrangement should specify how payment requests are approved and challenged. Rule 11 requires the client to be informed of the right to dispute payment requests made by the firm.
The provider’s process should be understood before the first transaction, not discovered after a dispute has arisen.
Does the SRA approve TPMA providers?
No. The firm is responsible for checking that the provider has the appropriate regulatory status and that the arrangement is suitable.
Notifying the SRA that the firm uses a provider does not amount to an endorsement of that provider.
Is a TPMA right for your firm?
A TPMA can reduce the risks and administration associated with holding client money directly. It can also introduce new costs, dependencies and operational questions.
The decision is not simply between “safe outsourcing” and “risky client account”. Both models need proper governance. The real question is which arrangement fits the firm’s clients, work, systems and risk appetite.
For a new firm, that assessment should take place before client-account processes become embedded. For an established firm, a TPMA does not have to replace everything at once. Starting with a defined category of work may provide a more realistic way to test the model.
JBL Compliance can help firms assess whether a TPMA is suitable, map the proposed payment arrangements, review the regulatory and operational implications, prepare the necessary policies and client wording, support the SRA notification and make an introduction to an appropriate specialist provider where required.
Speak to us about escrow and third-party managed accounts.
This article provides general information for SRA-regulated firms in England and Wales. It is not a substitute for advice on a particular provider, contract or transaction.
