The government's crackdown on money laundering includes steps to stop solicitors turning a 'wilful blind eye' to the underlying activities of their clients.The move is part of an across-the-board initiative announced by Treasury minister Helen Liddell at the national financial investigators conference earlier this month, which involves ambitious plans to get tough with money launderers and those who assist them.

Ms Liddell told the conference that one way of making lawyers and accountants more aware of the problem was to extend the concept of 'should have been suspicious'.

This will have serious consequences for the legal profession.

Solicitors are already under an obligation to make disclosures regarding certain clients' financial transactions to the National Criminal Investigations Service (NCIS), which traces the proceeds of criminal activities.Of the 16,000 total disclosures made to the NCIS last year, only about 320 were made by solicitors.

John Leek is an intelligence officer in the economic crimes unit of the NCIS and organised the conferenc e at which Ms Liddell announced her plans.

Mr Leek says it has already been proved that solicitors are unwittingly or sometimes knowingly involved in money laundering.

What he would now like to see is more solicitors making disclosures rather than hiding behind client confidentiality.Says Mr Leek: 'It's the same solicitors who tend to make disclosures -- there are many who have not made a single disclosure.

It's like at a road traffic accident; people don't want to give their name and address.' But solicitors who fail to make such disclosures can be guilty of offences under the Drug Trafficking Offences Act 1986, the Criminal Justice Acts 1998, 1990 and 1993, the Prevention of Terrorism (Temporary Provisions) Act 1989 as well as the money laundering regulations.Helen Liddell has already stated her intention to rid the City of those firms which are not taking proper steps to honour their obligations.

She told the conference: 'I am quite clear that any regulated firm which does not have adequate anti-money laundering systems in place is not fit and proper to be in the industry.'Specifically identifying lawyers and accountants, Ms Liddell said: 'We need to look closely at wilful blindness so that lawyers and accountants and other professional advisers who assist money launderers find it harder to turn a blind eye.'Kingsley Napley partner Michael Caplan is advising the Cayman Islands' Law Society and the Association of Registered Agents in the Virgin Islands on the extension of the UK's money laundering legislation.

Mr Caplan says: 'I am sure most solicitors are vigilant and aware of the requirements under the money laundering legislation.' He takes the view that more work needs to be done on how the money laundering law is working in relation to solicitors before a substantial overhaul is carried out.The solicitor, says Mr Caplan, is increasingly being asked to perform the role of unpaid policeman.

This is a theme taken up by Monty Raphael, the senior white collar crime partner at London firm Peters & Peters.

'Today lawyers have become part of the criminal justice apparatus and have to get used to being open to the same sort of scrutiny as the financial institutions,' he maintains.

Mr Raphael says there is already an obligation on solicitors to report suspicious transactions if they wish to avoid any wrong doing.

'As long ago as the 19th century, in a case called Cox v Railton, it was established that if a lawyer was instructed to participate in a criminal enterprise then the retainer contract was tainted and privilege could not attach to it.

Lawyers should be more curious and more cautious about what commercial undertaking they are asked to advise upon or execute.'However, Mr Raphael maintains that it is important to strike a balance between civil liberty issues and the proper surveillance of money launderers.

'It might sound good in principle to extend the state powers but how will it be carried out in practice?' There are already practical problems for solicitors who comply with the law on disclosure.

Once a disclosure regarding a financial transaction has been made, the solicitor has to wait for NCIS clearance before any action can be taken.

This can take time while the NCIS makes the proper checks before it is satisfied that there is no wrong doing.

All this time the solicitor has to make excuses for the delay to the client's business.

If the transaction turns out to be wholly innocent then the solicitor risks damaging the relationship with the client.

Says Mr Caplan: 'There are a number of concerns for reputable solicit ors.

I think it would be useful to consult the profession to see what practical problems there are.'But Mr Leek says many accountants and solicitors will accept a client's explanation of a transaction if it relates to a tax matter.

'Sometimes people put a set of circumstances together to make it look like fiscal but really it's criminal.' He thinks one or two professional advisers regard 'diddling the tax man' as acceptable.

Mr Raphael comments: 'If the client objects to having his motives questioned he will have to go elsewhere.

I don't think any self-respecting commercial lawyer would have any problem with the concept of not furthering a criminal enterprise.'And it should be pointed out that solicitors are better at making disclosures than accountants, who account for just half of 1% of the total annual disclosures.

Mr Leek accepts that part of the reason for this is the Law Society's guidance.

Alison Matthews, the investment business executive at the Law Society, says guidance has been issued to every senior partner in the country and a money laundering warning card was first launched as far back as 1994.Says Ms Matthews: 'There has been a lot of guidance issued to try to raise the profile.

My understanding is that solicitors' disclosures were always very good.

Nine out of ten cases reported were groundless.' And this year the NCIS expects the number of solicitor disclosures to increase.

Says Mr Leek: 'It does seem to be getting better.'-- A money laundering information pack is available from the Law Society's professional ethics division; tel: 0171 242 1222THE JOINT MONEY LAUNDERING STEERING GROUP -- A COALITION OF 13 FINANCIAL SECTOR TRADE ASSOCIATIONS -- HAS UPDATED ITS GUIDANCE NOTES ON MONEY LAUNDERING.

READ THEM, URGES DIANE BURLEIGHTough money laundering legislation has been in place since the Criminal Justice Act 1993 and the money laundering regulations came into effect.

The publication by the Joint Money Laundering Steering Group of its revised Money laundering guidance notes for the financial sector -- originally produced in 1993 -- is timely.

The indications are that the law enforcement agencies are getting tougher on those who claim ignorance of the law's provisions, and research indicates that not all solicitors are yet upto speed.Originally published as three separate booklets, the guidance notes have been substantially updated and brought together in one loose-leaf folder.

Updating and adding to the text is simple.

The print size means it is very legible, and there is a lot of 'white space' so reading what is inevitably dry text is not tiring.

It is divided into well labelled sections which, after a description of the legislation and regulations, provide detailed guidance on the regulations relating to internal controls, reporting suspicious transactions, record keeping, and education and training.

The important topic of identification of client is split into sections addressed to different financial sectors -- mainstream bank lending and deposit taking, wholesale institutional and private client investment business, and insurance and retail investment products.

The emphasis on identification and the importance of getting the procedures right should be a lesson to all solicitors.As well as providing a clear explanation of the law and regulations,and advice on good industry practice, the guidance notes have an invaluable appendix containing practical information such as a list of countries with equivalent legislation, investment exchanges, financial sector regulators, and offshore group of banking sup ervisors.

There is also a clear National Criminal Investigations Service disclosure form which will photocopy much more easily than the one in the Law Society's own guidance notes.

This is a must for all solicitors who undertake investment business or who are concerned to protect their firms against money laundering.-- A copy of the Money laundering guidance notes for the financial sector can be requested by contacting Sue Thornhill of the Joint Money Laundering Steering Group; tel; 0171 216 8863