Money Laundering: solicitors risk not being paid because of need for agreement

Transactional lawyers could lose out on substantial fees because of new guidance requiring them to obtain their client's consent before they can report money laundering suspicions, a solicitor warned this week.


Guidance issued by the Law Society last month means solicitors must get clients to agree to waive their privilege rights before they can make suspicious activity reports to the National Criminal Intelligence Service (NCIS). If the client does not consent, the solicitor must withdraw from the transaction - and risk not being paid for the work done so far.


Solicitors should only make NCIS reports without client consent where they believe their services are being misused, and there is criminal intention in using those services, according to the guidance, which was drawn up in response to the Court of Appeal judgment in Bowman v Fels [2005] EWCA Civ 226.


Frank Maher, a partner at Legal Risk in Liverpool, said: 'Bowman v Fels has done a lot of good things for lawyers, but the concern is that lawyers could be proceeding with a transaction and find after quite a lot of work that they are worried about it. They would need consent from NCIS before proceeding, but they won't be able to get that consent unless they report their suspicions, and they won't be able to report unless they get the client's consent.


'Where firms find they can't carry on acting, if they haven't got their terms right, they will not be able to charge for the work they have done.'


He added: 'Being able to report without the client's consent made life pretty easy for lawyers.'


Robin Booth, chairman of the Law Society's money laundering taskforce, said: 'Solicitors face difficult decisions following Bowman v Fels. Before, transactional lawyers faced a difficult, but simpler, situation. The guidance places greater emphasis on clients' rights and on the ability of, and need for, solicitors to consult their clients in many cases.


'This guidance is a thorough and carefully prepared document, which has been circulated to NCIS, law enforcement agencies and the prosecuting authorities as part of a continuing dialogue with the Society.'


Bowman v Fels established that solicitors are protected by legal professional privilege from making NCIS reports when advising clients 'in the course of litigation'.


For further information, visit: www.lawsociety.org.uk or contact the Law Society's professional ethics department, tel: 0870 606 2577.