Understanding AAT's Clients' Money Policy: How Telleroo Fits Into Your Accountancy Practice

If you're an AAT member managing payments on behalf of clients, knowing where your obligations begin and end isn't just a compliance exercise, it's fundamental to protecting your clients and your firm.

This article breaks down AAT's Clients' Money Policy (version 1.0, issued 1 July 2025) and explains why firms using Telleroo will typically fall outside the traditional definition of holding client money altogether.

What is AAT's Clients' Money Policy?

AAT's Clients' Money Policy is designed to protect clients by keeping their funds separate from a firm's own business or office accounts, safeguarding against misuse or misappropriation. Every AAT member must comply with the policy in full.

The policy is closely modelled on ICAEW's Clients' Money Regulations with their permission. If you've already read ICAEW's guidance on this topic, the principles carry across almost directly.

The policy applies to:

• Every AAT member engaged in public practice; whether as a sole practitioner, partner, LLP member, or director.
• UK and Channel Island offices of those firms.
• The firm's Principals personally, not just the firm as an entity.

Where a firm is FCA-authorised and the money relates to investment business, the FCA Handbook takes precedence. Non-compliance can lead to investigation and action under AAT's Disciplinary and Licensing Regulations.

What counts as Clients' Money, and what you must do if you hold it

Under the policy, clients' money is any money, in any currency (whether cash, cheque, draft, or electronic transfer), that a firm holds or receives for or from a client and is not immediately due to the firm for its own account. It includes money held as stakeholder, but excludes fees paid in advance for agreed work, or cheques made payable directly to the client or a third party.

If your firm holds clients' money, the policy sets out clear obligations:

• A separate client bank account in the firm's name, with the word "client" in the title. If you receive clients' money, you must open one immediately.
• Written notice to the bank confirming the money belongs to clients and cannot be offset against the firm's other accounts. The bank must acknowledge this in writing within 20 business days, or the account must be closed and funds moved elsewhere.
• Client identity verified before any money is held, with the account used only for lawful transactions connected to your engagement.
• A designated account for larger balances. Any amount exceeding £10,000 for a single client, held for more than 30 days, must sit in a dedicated account for that client.
• Interest paid to the client where it would be material, unless alternative terms are agreed in writing in the engagement letter.
• Strict rules on withdrawing fees. Funds can only be used to pay your fees once the amount is agreed, calculated under an agreed formula, or 30 days have passed since an uncontested fee statement.
• Reconciliations at least every five weeks, with records kept for six years.
• An annual compliance review by a Principal, ideally one not involved in day-to-day client money handling, with significant breaches reported to AAT.
• An alternate arrangement for single-member firms, so clients can access their money if that member dies or becomes incapacitated. This is confirmed at every licence renewal.
• Personal responsibility. Every Principal is liable for any breach by the firm unless they can demonstrate that another Principal was entirely at fault, and fines are joint and several.

For firms, this is a substantial regulatory and administrative overhead. That's precisely why understanding what falls inside and outside the policy is so important.

How Telleroo fits into your payment process

With Telleroo, your firm can set up an e-money account for each client. The key distinction is ownership: every account is opened in the client's business name and belongs to the client, not your firm. Any funds held in that account are the client's, controlled by the client.

In a typical set-up, your team prepares pay runs for suppliers or payroll and recommends them for client approval. The client tops up their own account and approves payments directly. Your firm never receives the money, never holds it, and never makes the final decision to send it.

AAT's position on operating a client's own account

AAT's policy addresses this scenario directly. Paragraph 7 recognises that a firm may sometimes have power or control over a client's own account, and confirms this does not strictly meet the definition of clients' money. However, two conditions apply:

• The firm must hold the client's specific written authority, acknowledged by the bank, before exercising that authority.
• The firm must maintain adequate records of all transactions it undertakes.

This mirrors ICAEW's guidance on payments from a client's own account: the activity should be administrative and non-discretionary, payments should only be made on the client's specific instructions, and the accountant should not initiate transactions or make management decisions.

The practical test for AAT members is straightforward. If the client owns the account and approves every payment, your firm has no power or control over the funds and paragraph 7 isn't engaged. If your firm is set up as an approver, you may have power or control, and the written-authority and record-keeping conditions in paragraph 7 will apply.

Why Telleroo generally falls outside the scope of the policy

Because Telleroo accounts are client-owned and client-controlled, money moving through Telleroo is not "clients' money" as defined by the policy. Your firm never holds or receives it. There's nothing to pay into a client bank account, nothing to reconcile every five weeks, and no interest to account for.

The exception arises when a member of your firm is set up as an approver of the client's pay runs. Telleroo recommends against this: once your firm can release payments, you may have the kind of power or control that paragraph 7 describes. In that case, you'd need the client's specific written authority and full transaction records to support it. Keep the client as the approver, and the arrangement stays clean.

Practical safeguards to keep in place

Even where the policy doesn't apply, good practice protects both you and your clients:

• Keep the client as the approver of all pay runs.
• Set out the service clearly in your engagement letter, including that the client owns the account and authorises every payment.
• Maintain records of what your firm prepared and when the client approved it. This aligns with the record-keeping expectation in paragraph 7. You can easily export a full transaction history from Telleroo, which tracks this automatically.
• Never let client funds pass through your firm's accounts. The moment they do, paragraphs 10 and 15 of the policy require you to open a client bank account and pay the money in immediately.
• Continue to meet your AML obligations. Client due diligence applies to the engagement regardless of how payments are processed.

Final thoughts

With Telleroo, responsibility for funds sits with the client, not your firm. As long as the client owns the account and approves every payment, the arrangement generally falls outside AAT's Clients' Money Policy. That means no client bank account to open, no five-weekly reconciliations, no interest to account for, and no additional reporting burden.

If your firm's situation is more complex, or you're unsure whether any part of your service gives you power or control over a client's account, check with your professional indemnity insurer and refer to AAT's clients' money guidance and review checklist at aat.org.uk.

Telleroo is built to help accountants and bookkeepers streamline supplier and payroll payments; securely, efficiently, and without adding unnecessary regulatory complexity. It's a smarter way to support your clients while keeping your firm firmly on the right side of the rules.

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This article is general guidance based on AAT's Clients' Money Policy v1.0 (issued 1 July 2025) and does not constitute legal or regulatory advice.