A cost and impact analysis of existing money laundering regimes should be conducted before the third European Directive is implemented, IBA delegates were told last week.

Law Society President Edward Nally said the effect of the Proceeds of Crime Act 2002 (POCA) - which implemented in the UK the second EU money-laundering directive - has been to cause an information overload at the National Criminal Investigation Service, as solicitors report every minor suspicion for fear of falling foul of the regulations.


City law firm Freshfields Bruckhaus Deringer illustrated the serious impact money laundering legislation was having on its practice. Partner Stephen Revell told delegates that the firm has a newly-formed 16-strong department, which is devoted exclusively to money laundering issues such as identification of both old and new clients.


Mr Revell said that clients were becoming increasingly frustrated by the anti-money laundering rules. 'We are already seeing client fatigue with the reporting regime,' he said. 'They are fed up with the due diligence - with having to go through the process in the various different jurisdictions. It is a major problem that you can't transfer a clearance from one jurisdiction to another.'


He was also critical of the European authorities for not harmonising the implementation of the second EU money laundering directive, which came into effect in 2001. 'Time may be the answer,' said Mr Revell. 'We may have to accept a lot of heavy application of the directive before things get better.'


Jonathan Goldsmith, secretary-general of the Council of the Bars and Law Societies of the European Union (CCBE), agreed. He described as 'absurd' the fact that a third directive was in train so soon after its predecessor, especially as the second directive had not yet been implemented in all 25 member states.


Mr Goldsmith highlighted the CCBE's objections to the provisions of the third directive, being especially critical of suggestions that it will apply to all transactions valued at more than €15,000 (£10,000). The CCBE says the regime should apply only to cash transactions exceeding €50,000 (£35,000).