Lawyers: don’t force us to betray clients

By Peter Chapman

Date: 04/11/04

LAWYERS are demanding radical changes to draft EU money-laundering rules that force them to betray their clients to the authorities.

The profession has sent EU governments a harsh analysis of the European Commission proposals, due to be discussed by diplomats next Monday (8 November).

The 'third money-laundering directive' proposals are intended to update legislation approved three years ago in the wake of the 11 September attacks on the US and the subsequent fight against terrorism.

They incorporate recommendations endorsed by a task-force of international experts at the Paris-based Organization for Economic Cooperation and Development.

The financial clamp-down will continue to force lawyers to report 'suspicious transactions' to law enforcement agencies, weakening long-held principles of lawyer-client confidentiality.

This requirement is seen as an essential safeguard against terrorists and gangsters. They often hide funds in seemingly legitimate transactions with the help of legally trained professionals - who may have not been told of the criminal intentions behind the deals.

The rules will apply to lawyers and notaries in five areas: the buying and selling of real estate or businesses, managing of client funds or assets, opening or managing of bank or investment accounts, organization of funds needed to set up, operate or manage companies.

The Council of the Bars and Law Societies of the European Union (CCBE) warns: "[We] cannot stress enough that requirements on a lawyer to report suspicions regarding the activities of clients based upon information disclosed by clients in strictest confidence is a violation of a fundamental right."

The group, which represents more than 700,000 lawyers and barristers in the EU, says the decision to propose revising the law was taken without a study of the impact of the 2001 legislation - a promise when that law was adopted.

Such a study, they insist, would have highlighted huge disparities in the way the rules are being applied from country to country - a practical problem for firms and clients operating in several member states. An analysis of the current situation would have unearthed widespread dissatisfaction.

Reports showed that in the UK, the 2001 rules have led to lawyers reporting far too many innocent transactions, for fear of punishment.

The French Bars handed MEPs a petition against the disclosure rules last year and the Belgian Bars have launched a legal challenge against a national law implementing the 2001 directive.

The CCBE points out that Canadian barristers have successfully challenged similar provisions in Canadian law.

The lawyers recommend changes that would mitigate the effects of the legislation without undermining governments' law enforcement goals. They suggest inserting a €50,000 cash limit for suspicious transactions, below which they do not need to inform financial crime watchdogs.

Lawyers say the directive applies to them "even if only €1,000 is managed".

"There is no empirical basis that money-laundering appears particularly during the buying and selling of property below the amount of €50,000," the CCBE says.

But the lawyers face an uphill struggle in the Council of Ministers. A document containing member states' suggested amendments, seen by European Voice, offers little comfort to the sector.

Only France suggests lifting the requirements on lawyers and notaries.

Diplomats insist that the discussions could evolve in the coming months.

MEPs must also give their verdict on the proposals.

Article reports that lawyers are demanding radical changes to draft EU money-laundering rules that force them to betray their clients to the authorities. European Commission proposals on the third money-laundering Directive, due to be discussed on 8 November 2004, are intended to update legislation approved three years earlier in the wake of the 11 September attacks on the US and the subsequent fight against terrorism. They incorporate recommendations endorsed by a task-force of international experts at the Paris-based Organization for Economic Cooperation and Development (OECD). The financial clamp-down would continue to force lawyers to report 'suspicious transactions' to law enforcement agencies, weakening long-held principles of lawyer-client confidentiality.