SUSPICIOUS TRANSACTIONS: solicitors do not have to share 'intention of furthering a criminal purpose' for defence to fail

Solicitors may be found guilty of the offence of telling clients that they plan to report a suspicious transaction where it could prejudice an investigation - because they are not aware that doing so would further a criminal purpose.

The fears follow publication of a position paper issued earlier this month by the National Criminal Intelligence Service (NCIS) into lawyers' disclosures of possible serious crimes - the first of its kind.

The paper sets out NCIS' 'good practice' for solicitors advising clients in relation to matters that might involve suspicious transactions.

The controversy surrounded the circumstances in which NCIS said solicitors may inform their clients before making a report.

Such disclosures are not permitted if the solicitor suspects that investigators, customs, the police, or the Asset Recovery Agency are acting or proposing to act in relation to the client.

However, there is a defence to doing so where the disclosure is made to the client or any person 'in connection with legal proceedings'.

This defence is not available where the disclosure is made 'with the intention of furthering a criminal purpose', and the paper said: 'NCIS takes the view that the legal adviser does not have to share or be a party to this intention (which may be held solely by the client) for the defence not to be available.' Solicitors said the wording is unclear and suggested that NCIS interpreted the defence extremely strictly.

Michael Potts, a white-collar fraud expert at niche City practice Byrne & Partners, said: 'There is now going to be a clear conflict of interests between solicitors and clients where a solicitor has an opportunity to inform the client, but in doing so would have to be sure he wasn't furthering the client's criminal purpose.

In reality, it makes solicitors very unlikely to make disclosures [to their clients].'

Adam Cowell, a partner with Irwin Mitchell, said: 'If that is NCIS' interpretation, it will render the defence nugatory...

the statement should have been expressed much more clearly.'

David Kirk, head of fraud at Simons Muirhead & Burton, said: 'This is Alice in Wonderland.'

A Law Society spokeswoman said: 'The Law Society is considering this statement and whether any further information or clarification would be helpful for solicitors.

Any solicitor unsure about how to balance their obligations should seek specialist legal advice.'

Meanwhile, NCIS' annual assessment of serious and organised crime threats to the UK, published last week, said that conveyancing was the legal service most in demand by money launderers in 2002.

It said: 'The number of suspicious activity reports generated from [conveyancing] professionals rose by 25% in 2002, although they still represent a very small percentage of the total.

There may be a lack of awareness or curiosity among some professionals who may be used to launder money, some may "turn a blind eye", or there may even be a degree of collusion.'

Louise Delahunty, a partner with Peters & Peters and chairwoman of the Law Society's serious fraud and money laundering task force, said: 'We note the acknowledged increase in the number of reports made by conveyancers, but must stress that if reports are to be made, it is essential that NCIS provides an urgent response.'

LINKS: www.ncis.co.uk/legaldisclosures.asp

See Gazette [2003] 29 August, 38

Jeremy Fleming