Lawyers need to be very careful they don't become embroiled in money laundering, says Reuben Guttman of Grant & Eisenhofer.
BOSTON, MASS -- At the melting pot of nation and culture that is the 2013 International Bar Association Convention, participants at a panel on money laundering debated the obligation of lawyers to make reports of illegal conduct to regulators.
Stephen Revell of Freshfields in Singapore noted that the question of a lawyer's obligation to disclose suspicious activity that could involve money laundering is a question for transactional lawyers and not criminal defense lawyers who are defending those accused of money laundering.
For the transactional lawyer, said Enide Perez, a Professor of Law at The Hague, there is a "risk of the lawyer becoming involved in the laundering."
Under ethics rules covering most US jurisdictions, a lawyer is permitted to disclose the potential for unlawful conduct to regulators only after an effort has been made to address the problem internally within the organization. The policy behind the rule is to allow, in certain circumstances, disclosures necessary to prevent substantial injury to an organization. If, however, the lawyer’s services are being used in furtherance of the violation, the lawyer is allowed to disclose confidential information and may be required to withdraw from representing the organization.
Mauro Wolfe of U.S.-based Duane Morris agreed that as an international norm, lawyers should give their clients an opportunity to "purge corruption out of the transaction." And Wolfe suggested that attorneys "should have a discussion with the client" to determine whether the suspicion is well founded.
While money laundering has varying definitions, its purpose is to hide the proceeds of crime. Panelists described how cross-border money laundering schemes involve the conversion of cash into big tickets assets - including jets and yachts - which can be sold and converted back to cash. "Once crooked money becomes an asset it gets lost" to investigators, noted Revell.
Thirty-four countries, including the United States and the United Kingdom, have been working together to create standards to promote effectively effective implementation of legal, regulatory, and operational measures to combat money laundering, terrorist financing, and other related threats to the international financial system through the Financial Action Task Force (FATF) for the past three decades. The standards created by this inter-governmental agency are used by more than 180 governments to combat money laundering and other financial crimes and were most recently updated in February 2012.
In addition to participating in the formulation of international standards for legal protections against money laundering though the FATF, Mouro noted that that US Department of Justice (DOJ) has treaties with foreign nations for the cooperation in investigating matters of money laundering. If the wrongful conduct touches the US, Mauro opined that "at least 20 US Attorney offices would be interested" in investigation.
And does a lawyer walk away from a client whose conduct may involve suspicious activity? "Sacking the client may only pass the problem to another lawyer," opined Revell.