A client money account is an account used to hold money belonging to clients separately from the service provider's own operating funds. Its legal treatment, safeguarding rules and permitted uses depend on the jurisdiction, regulated activity and account structure.
Why is client money separated?
- Distinguish client funds from operating cash
- Reduce unauthorized use or commingling
- Support allocation and reconciliation by client
- Meet contractual or regulatory safeguarding duties
- Clarify treatment during insolvency, subject to applicable law
How should the account be operated?
Define permitted receipts and withdrawals, restrict authority, maintain client-level ledgers and reconcile bank balances to client liabilities. Differences should be investigated promptly and handled under the applicable client-money rules.
Client money account vs. business bank account
A normal operating account holds the business’s own money. A client money account holds money attributed to clients under a special legal or contractual arrangement. A separate bank account does not by itself establish regulatory safeguarding.
What should a client verify?
Understand who legally holds the account, whether funds are pooled, how ownership is recorded, what protection applies, when funds can be released and which entity is responsible. Marketing terms such as “segregated” should be checked against the actual legal structure.
