Attorneys and the AML Landscape
As Daniel Glaser, principal, Financial Integrity Network, noted during his ACAMS 2017 Keynote earlier this fall, anti-money laundering (AML) efforts were born out of efforts to stem the influence of narco traffickers in the mid-1980s. While AML policies and efforts have expanded in scope and complexity since then, regulators are looking across other professions, including lawyers, to join the effort.
According to the Financial Action Task Force (FATF), the U.S. legal profession needs to implement comprehensive, preventative measures aimed at combating money laundering; a call that goes beyond the current American Bar Association (ABA) recommendations.
While it’s true that there are ethical and even criminal considerations for an attorney who knowingly engages directly or in the furtherance of criminal activity, these considerations imposed may mitigate the risk to a limited extent, they don’t address concerns arising from comprehensive preventive measures. In short, U.S. lawyers have no legal obligation to report a client whose activities with the lawyer raise a suspicion of money laundering… at least for now.
House Democratic Representative Carolyn Maloney is sponsor of the Corporate Transparency Act of 2017, which as of June, is with the House Committee on Financial Services. This bill would direct the Treasury Department to issue regulations requiring corporations and limited liability companies formed in the United States to file information about their beneficial ownerships with either a state or the federal government. It’s another step towards domestic transparency in financial transactions and an expansion of Anti-Money Laundering (AML) efforts and reporting. The implications for attorneys are interesting: if a lawyer directly performs the formation of a business entity, they would, like financial institutions, need to implement an effective AML program, and failure to do so would lead to considerable fines and possible censure.
With growing concerns surrounding AML, the ABA has published the Model Rule of Professional Conduct, advising attorneys and law firms on the dangers of money laundering and terrorist financing. In fact, the opening remarks of the guidelines state:
Money laundering and terrorist financing represent serious threats to life and society and result in violence, fuel further criminal activity, and threaten the foundations of the rule of law (in its broadest sense). Given a lawyer’s role in society and inherent professional and other obligations and standards, lawyers must at all times act with integrity, uphold the rule of law and be careful not to facilitate any criminal activity.
However the guide is, well, a guide and “not a ‘manual’” and is designed to provide attorneys and firms with practical guidance to develop their own risk-based AML practices. More importantly, though, the model rule does not impose civil or criminal sanctions, but rather strengthens the traditional ethical considerations for attorneys to follow.
With heightened attention and possible regulation, attorneys are concerned that legislation will undermine attorney-client privilege as well as impose significant cost. For that reason, the ABA Task Force on Gatekeeper Regulation and the Profession has strongly opposed suggested legislation.
While it’s clear that there are significant concerns about AML within the attorney/law firm environment, and mounting political pressure to pass legislation in some form, it is unclear what sort of requirements, if any, might be imposed. Time will tell, but it’s clear that attorneys should be paying attention, if not considering the adoption of specific rules, to get ahead of the issue while also potentially preventing reputational harm.
This post was written by Eric Molitor, a specialist with Court Express.