The need for the prosecution to disclose suspicious activity reports during criminal proceedings is putting the lawyers who make them at risk of financial ruin and even physical reprisals, senior solicitors warned last week at the International Bar Association's annual conference in Prague.

Christopher Murray, head of criminal law at City firm Kingsley Napley and chairman of the Law Society's criminal law committee, told a session on anti-money laundering that professionals including lawyers, when acting in the regulated sector, risked damage to their reputation and with it their business - and possibly endangered their personal safety and that of their employees - by the compulsion to report suspicions about their clients.


With the prosecution in a criminal trial required to disclose all material that might reasonably be considered capable of undermining its case or assisting the defence case, the defence could in certain circumstances come into possession of the report. 'If you are a solicitor in a small firm, imagine what will happen if it gets out that you have reported a client?' Mr Murray demanded.


He said his committee and the Law Society's money laundering task force have raised this issue with the government. But both he and Robin Booth, a partner at London firm BCL Burton Copeland and chairman of the task force, conceded there is no obvious solution.


Removing the obligation to disclose reports risks miscarriages of justice because the defence does not have access to all the material to which it is entitled by statute, while there is no sign that the government would countenance an end to compulsory reporting.


The Home Office is currently consulting on how reports can be protected, but Mr Murray said that while the prosecution would take all steps it could to prevent it, ultimately disclosure might be ordered if the case were to continue.


Considerable concerns were also raised in Prague at the prospect of the Third Money Laundering Directive, which EU states have until September 2007 to implement.


Mr Booth's predecessor, Louise Delahunty of London law firm Peters & Peters, said the fear is that by transferring what is currently in guidance in the UK into legislation, the system would become too rigid. It could also make inroads into the privilege defence to the tipping-off offence, she said.


Law Society President Kevin Martin said Chancery Lane would lobby the government to ensure that implementation is proportionate and does not increase the already heavy burden on practitioners.


However, John Carlson, principal administrator of the Financial Action Task Force - whose recommendations prompted all three European directives - insisted that the intergovernmental organisation recognised the special role lawyers play in society and that was why reporting requirements were circumscribed and privilege respected.


But Diane Bourke, director-general of the Federation of Law Societies of Canada, called on lawyers to take a stronger stand to ensure they do not become 'agents of the state'. Canadian lawyers successfully challenged anti-money laundering legislation in the courts, she said, and the federation is now working with the government on a way forward.