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Money laundering again... and again
Monday 16 April 2012 by Jonathan Goldsmith
In the calm of the Easter break, the European commission has published an important report on anti-money laundering, which could eventually have a significant impact on solicitors’ duties. (When reviewing the topics I have written about in these blogs over nearly three years, money laundering is probably the most frequently covered - but that is hardly surprising given that it is European legislation which binds solicitors with such profound effect.)
The new report was long-awaited. It was preceded by an announcement in February by the relevant European commissioner, Michel Barnier of the Internal Market, welcoming the adoption of revised international standards by the Financial Action Task Force (FATF), and committing the commission to take steps to ensure that the revised standards would be rapidly incorporated into the European legislative framework. (Why ‘rapidly’ I don’t know, since major players in the FATF - including important competitors of the EU, like the USA, Japan and Canada - have not implemented the original FATF recommendations in relation to lawyers and reporting duties at all. The EU seems keen to remain the most eager pupil in class, with no apparent compensating benefit.)
The new report follows an earlier study commissioned by the EU, and undertaken by Deloitte, to look at lawyers’ duties under the existing money laundering legislation, before a new draft money laundering directive is published in autumn of this year. There is a long section in the report just issued by the commission devoted to lawyers. I shall give the bad news first: after a relatively detailed analysis of the various problems afflicting lawyers, the report concludes: 'It may not be necessary to fundamentally revise the treatment of lawyers in the new directive. However, it may be appropriate to give further consideration to the under-reporting of STRs [suspicious transaction reports].'
So, all the proposals made by lawyers for some years on the profound impact on our core values will probably have no effect, but governmental authorities’ laments that lawyers in all EU member states other than the UK have a low reporting rate must be seen to immediately!
The report rehearses the problems faced by lawyers: professional secrecy, suspicious transaction reporting, the definition of a transaction, and customer due diligence. As an example of its conclusion that nothing should be done, it says under professional secrecy: ‘The European Court of Justice has ruled on this issue [that is a reference to the Belgian case of the Ordre des Barreaux Francophones et Germanophones and others (Case-305/05)]... Based on this ruling, it can be considered that the AML [anti-money laundering] obligations imposed on legal professionals do not infringe the right to a fair trial as guaranteed by Article 47 of the EU Charter of Fundamental Rights and Article 6 of the ECHR [European Convention on Human Rights].’
However, this apparently authoritative conclusion does not take account of the latest news. As I wrote earlier this year, there is now a challenge to the principle underlying the reporting duty in the money laundering directives before the European Court of Human Rights in Strasbourg, principally under Article 8 of the ECHR, although also under Articles 6 and 7 - Patrick Michaud against France (case 12323/11). This has been followed by another challenge to lawyer reporting to the same Court, but a different section of it, by the Monaco Bar: Ordre des Avocats Défenseurs et Avocats près la Cour d’Appel de Monaco against Monaco (case 34118/11).
The Council of Bars and Law Societies of Europe (CCBE) has been given permission to intervene in the Michaud case, and has applied to intervene in the Monaco case. Given that Monaco is not a member of the EU, that case is not on the money laundering directives, but on Monaco’s equivalent. The outcome of these cases could have an impact on the commission’s conclusions, particularly since it says in its new report that, when preparing its revision to the directive, it will give consideration to the impact on fundamental rights.
I have concentrated only on the parts specifically devoted to lawyers, but the major thrust of the report is to consider a number of changes - among others, a more risk-based approach, an extension of the scope of the rules to include tax crimes, and the need to take account of changes at EU level to data protection law. Publication of the new report will be followed by a consultation, with a deadline of 13 June 2012. The CCBE has obviously not yet had a chance to look properly at the report, and will doubtless be submitting its comments in due course. The saga goes on...
Jonathan Goldsmith is secretary general of the Council of Bars and Law Societies of Europe, which represents about one million European lawyers through its member bars and law societies. He blogs weekly for the Gazette on European affairs