I'm about to start a review of all the banks Iolta Accounts we have. I was wondering if anyone could give me a heads up for the type of red flags I should be looking for, other than large cash deposits, structuring, and money laundering issues. Thanks in advance.

Random thoughts --
1. Overdrafts. Theoretically, of course, they should not appear. But money transfers might be delayed. So watch for ODs and see if there is any hint of a problem.
2. Related to overdrafts, see if any checks drawn on the account have been returned, and if so, whether any required notice was given to the agency or organization overseeing IOLTA accounts. Some IOLTA rules require that a report be filed for bounced checks.
3. Verify that interest credited to the account has been re-directed to the appropriate recipient to ensure the law firm isn't benefiting from it.

John
Those are all good points to review, I have also read that State Bar Associations usually govern these accounts and that the rules are possibly different in every state. Is there a lead you can give me as to where to find State Bar Association information on Iolta account rules?
Thanks

You should have some documentation from one of the attorneys that may identify the agency in particular. In Massachusetts there is a court-supervised non-profit committee in charge, and the rules are issued by the court itself.

I would suggest contacting bank counsel or any other attorney that might have an IOLTA with your bank and pose the question. Your state Bankers Association should also have the info.

Try this, found with a quick Google search:

http://www.raisingthebar.org/iolta/IOLTAFinancialInstitutions.asp

http://www.ladb.org/
Rule 1.15

Thank you both so much.

I just did something similar to be sure all interest was being reported - and paid - properly. Discovered a problem with two accounts that had been handled manually by an employee who retired in 2005. You guessed it - once she retired, no one else was manually debiting the account and sending funds to the Bar Foundation. It took our Legal Department contacting the attornies to recover over $2100 in back interest that was owed to the Foundation. Some states also require separate reporting for OD's. In Michigan and California, we had to set up separate addresses for notifications.

Good luck!

While you're at it, look for potential misuse of the funds; e.g. attorneys sometimes "borrow" monies from these accounts to meet their business expenses and "put it back" later. Overall, catching that sort of activity is not your responsibility, but if you are taking the extra step of reviewing these accounts, it's just prudent to pay attention to transactions that do not fit the mold.

Another state-specific issue that we review for is to make sure that the IOLTA is not grouped with the attorney's operating account within Account Analysis. While there is no difference in remittance of interest paid, many states (such as the three we occupy), specifically indicate that the attorney cannot benefit from the funds in any manner.

A second review to consider at the same time is looking at your pooled Real Estate Trust Accounts (RETAs) that are setup in much the same fashion. These many times must have interest remittance to a state housing authority or other agency focused on home ownership.

Ken - we have an IOLTA account that is misusing the funds for the attorney's personal debts, etc. I have been trying to find specifically what we are required to do, but have not had any luck. I know that it is not the bank's responsibility to catch this activity, but since we are aware, what to do? Any recommendations? Thanks so much.

As long as you are aware of the suspicious transactions, file a SAR.

Find out which organization or body regulates attorneys' use of IOLTAs in your state. It may be the bar association or an arm of the state's top court. That body may also have rules requiring the reporting of perceived abuses of IOLTA funds.