Edward Nally welcomes the ruling in Bowman V Fels - but warrns that the third money laundering directive poses further problems for lawyers

I will always support the government's desire to take effective measures in tackling organised crime and terrorism - but in ways that respect the very human rights the measures are intended to protect and that safeguard our essential democratic institutions. That is the perspective from which I view the anti-money laundering regime - and I suspect many other solicitors share that view.


While I support the rationale behind the provisions, part 7 of the Proceeds of Crime Act 2002 (POCA) and associated regulations have serious implications for the independence of the legal profession, client confidentiality and for our ability to conduct business efficiently and effectively in the interests of our clients.


The UK has gone much further in the reporting obligations imposed on lawyers and other sectors than is required by the second European money laundering directive; we have a much more stringent regime than other European jurisdictions.



The Court of Appeal judgment in Bowman v Fels (see [2005] Gazette, 10 March, 1) stemmed from a Law Society decision to intervene in the case. It represents an important step forward for lawyers, especially those involved in litigation work, but there remains much to be done to improve the legislation and its implementation.



The Law Society's approach to this is threefold: lobbying through European institutions; working to bring about a more proportionate and less intrusive regime at the domestic level; and assisting the profession in meeting its obligations.


At the European level, we began lobbying through the Law Society's Brussels office in 1999 when it became apparent that the second directive would include lawyers in its parameters.


Now there is a third money laundering directive that has been prepared by the commission and is currently being debated within the European Parliament. It goes further than its predecessor, for example, broadening the definition of crimes from which criminal property can be deemed to derive, and again, putting the privilege exemptions under threat.


From the outset, we have campaigned vigorously and unilaterally on the third directive. We have also joined with other professional organisations. We have already helped secure useful changes in the directive, for example in securing recognition of the need for sufficient flexibility for member states to implement a risk-based approach. But the focus now is on working with MEPs to secure further changes and to press for delay in adopting the third directive, pending a proper evaluation of the effectiveness of the second directive.


At the domestic level, POCA has imposed reporting obligations in respect of 'all crimes', no matter how small and including regulatory offences. Its reporting requirements have had a real impact on the work of solicitors in many different types of practice. At their most trivial level, the requirements are plainly nonsensical.



The volume of reporting from the regulated sector has been such that, according to the joint criminal justice inspectorates' report, Payback Time, the law enforcement agencies have had difficulty in coping. Some officers were quoted as remarking that many reports received had little investigative merit. How is that furthering the fight against organised crime and terrorism?



The Law Society is using every opportunity to press for a more proportionate reporting regime. We will seek delivery of Gordon Brown's commitment in his Budget speech to reduce the burden of regulation and avoid gold-plating of European directives when implemented here. Last month, I met with Home Office minister Caroline Flint to press for legislative change that would take lesser offences out of the reporting requirements, thus relieving the burden on the regulated sector. I also impressed on the government the importance of those reports that are made being treated with due respect for their confidentiality - not least to ensure the security of solicitors who have made the reports.


The government is listening, as is demonstrated by the amendments to POCA - introduced in the Serious Organised Crime and Police Bill - in relation to transactions with an overseas element and confirming the protection of privilege for nominated officers. But we will continue to press for more proportionality, working with other sectors and through a range of routes.


We will pay particular attention to any plans to implement the third money laundering directive.



After our success with Bowman, we will be on the look-out for other cases where intervention might help clarify the responsibilities imposed by this complex body of legislation and define the limits of the requirements on the regulated sector.



While we are pressing for change, we will help solicitors operate within the law as it stands. We have issued comprehensive pilot money laundering guidance and are about to issue sector-specific material and supplementary guidance on the implications of Bowman.



I recognise the degree of concern that there is within the profession about this issue and the Law Society will continue to afford it the highest priority.



Edward Nally is the Law Society President