Legislation in Scotland and England brought in during the last decade, coupled with increasing life expectancy, mean that more and more accounts will be subject to management under powers of attorney and court appointed guardians. Financial institutions must understand key elements of the law for attorneys and guardians. To do otherwise will risk reputational, regulatory and financial consequences.
The risks fall broadly into three interconnected categories: reputational, regulatory and financial.
There may be reputational issues associated with the services offered to those managing accounts under a power of attorney or guardianship. Families may feel there are unnecessary barriers to using accounts and facilities (such as online services), that there are avoidable delays in accessing accounts or carrying out dealing and that the requirements differ widely from organisation to organisation. The attention of the media and parliament has also been directed to these issues.
Of course, protection and security for accounts and portfolios are important and it is right that appropriate procedures are in place to ensure the right people, with the right reasons, are seeking to manage accounts.
The Equality and Human Rights Commission has a role to play in this area due to the potential for disability discrimination issues to arise. The Commission has the power to take action to challenge potentially discriminatory procedures.
Banks must also consider their responsibilities under anti-money laundering and data protection rules when dealing with powers of attorney.
With more powers of attorney in operation now (and the number likely to significantly rise in the coming years), together with the value of accounts, products and portfolios being managed by attorneys increasing, there are risks associated with delay in allowing an attorney to transact with an account, obtain information and/or give instructions. A failure to understand powers of an attorney can and does lead to financial loss for clients, which can lead to the bank / financial institution requiring to compensate for that loss. Such risks can be avoided with a clearer understanding of the law and then communicating key requirements within organisations and to clients.
There are also financial implications of having to redesign processes in light of regulatory and other challenges to internal procedures.
England and Scotland: what's in a name?
Two different regulatory systems
Scotland has had bespoke "incapacity law" and regulation since 2000. The modern English law appeared in 2005. Confusingly, the two different regulatory bodies in Scotland and England have the same name: the Office of the Public Guardian.
Sometimes, the rules in the two jurisdictions are opposite. There can be risks from requesting information based on one set of rules that does not exist in the other. This can lead to delay, unnecessary barriers to access and frustrated clients and families.
Appreciating the differences and similarities in the two systems will help avoid risk.
How we can help
We have built up significant experience in advising individuals and other organisations in relation to powers of attorney and guardianships. We bring together trusts and estates expertise, tax specialism and incapacity law experience to offer a genuinely rare blend of knowledge and insight to the issues in this area. The team's credentials include Law Society of Scotland specialist accreditation in trust law, membership of the Society of Trust and Estates Practitioners and membership of the Law Society of Scotland's mental health and disability law committee. This is in addition to our experience in banking and financial services. We also have experience of providing in-house training to financial institutions on these and other private client issues.
For further information, please contact;
0141 271 5322
0141 271 5375
0141 271 5335
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This briefing is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to any particular matter.