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Rules of Professional Conduct, ethics rules, and general regulations don’t seem to be keeping pace with technology, and nowhere is this clearer than in how law firms handle client funds. In this episode of Financially Legal, Emery Wager and Jayne Reardon explore how firms can transition from paper checks to digital disbursements without crossing ethical lines (and while actually improving client service and firm efficiency).
Paper Checks and Fraud
Paper checks aren’t just slow, they’re risky. About 0.3% of checks suffer from fraud, and clients waiting for settlement funds or refunds can face delays that hurt trust and your firm’s reputation.
Meanwhile, electronic payments are faster, traceable, and can improve your firm’s cash flow. But many lawyers are hesitant, worrying that the Rules of Professional Conduct, drafted decades before electronic payments were a thing, might restrict them from adopting new payment methods.
Here’s the good news: the rules are designed to protect client funds, not to stop you from using modern technology.
What Do the Rules Say About Digital Disbursements?
In short, not much. Model Rule 1.15 focuses on safeguarding client funds and ensuring confidentiality, but doesn’t specifically mention electronic payments.
The spirit of the rule is clear:
- Protect client funds
- Avoid commingling
- Ensure disbursements are authorized and properly documented
If a method improves efficiency while meeting these requirements, you can, and should, leverage it.
Digital Disbursements Checklist for Law Firms
If you’re ready to move away from checks, use this checklist to ensure compliance and client trust:
- Authorization: Each disbursement should be approved by a supervising lawyer and made to the correct recipient.
- Client Agreement: Confirm expenses and disbursement methods in your engagement letter or settlement documentation.
- No Commingling: Keep client funds separate and track disbursements meticulously.
- Data Security: Use secure payment systems that protect client confidentiality and personal information.
- Document Everything: Maintain clear records for each transaction to show compliance if questions arise.
Why Now Is the Time to Transition
Checks are rapidly becoming a liability, not just an inconvenience. As clients increasingly expect the ease of digital transactions, continuing to send paper checks can erode client trust and may even become an unethical practice if safer, more effective methods are available.
By moving to digital disbursements, you:
- Improve client experience
- Reduce payment delays
- Lower the risk of fraud
- Modernize your firm’s operations without compromising ethical obligations
The Bigger Picture: Ethics, AI, and Tech
Digital disbursements are just one example of how technology can help your firm modernize while remaining ethical. Generative AI and other tools can increase efficiency, but firms need to remain vigilant about confidentiality and proper billing practices.
The key is to embrace technology thoughtfully, ensuring it aligns with your professional obligations while positioning your firm to thrive in the future.
Going Further
If you’re considering digital disbursements but are unsure where to start, Confido Legal can help while also offering compliance support so your firm can modernize with confidence.
To learn more about digital disbursements, visit confidolegal.com, check out our article Can Law Firms Disburse Money Electronically?, or connect with us on LinkedIn.
And don’t forget to subscribe to Financially Legal for more conversations about the business of law.
Let us help reduce the cost and improve the client experience associated with accepting payments.
