Bar leaders have called on the European Union to apply the brakes to the controversial proposed third money laundering directive amid concerns that the damaging ramifications of its predecessor have not been fully analysed.

In an open letter to the three main branches of EU government, leaders representing 45 legal jurisdictions across Europe have demanded that implementation of the directive be delayed 'until a proper evaluation of the second money laundering directive has been carried out'.


The letter - which was agreed and signed at the annual pan-European bar presidents' conference in Vienna last week - expresses on-going concerns that the second directive has significantly eroded the principle of client confidentiality.


The second directive imposed reporting obligations on lawyers when acting in certain circumstances. In implementing the directive, the British government went further than many other EU jurisdictions, effectively introducing obligations on solicitors that force them to report their slightest suspicions in relation to potential clients to the National Criminal Intelligence Service.


The third directive confirms the second while creating tighter due diligence provisions and closing some of the options that had existed in the previous legislation. For example, the third directive would make tipping-off a mandatory offence across the EU.


In its letter - sent to the European Commission, Parliament and Council of Ministers - the bar leaders pointed out: 'There is growing evidence of the disparate ways in which the second directive has been implemented, leading to more severe reporting and due diligence burdens in some member states than in others, and to consequent administrative burdens in cross-border matters.'


The letter calls for research into which systems are more effective in meeting the stated aims of the second directive. Bernard Vatier, French president of the Council of Bars and Law Societies of the European Union, said the third directive 'should not be contemplated until proper assessment of existing directives as regards fundamental rights and civil liberties has been undertaken.'


Law Society President Edward Nally, who was also a signatory to the letter, said: 'We recognise the need for a pan-European approach to this issue. But there should be a full assessment of how recent reporting obligations have altered the solicitor-client relationship, the justice system and whether they have helped identify money laundering.'


Describing the legislation in the UK as 'heavy handed', Mr Nally said: 'To press on regardless would play into the hands of those who believe that EU institutions take little notice of the impact of what they do on the practicalities of business.'