Directive: customer due diligence proposals too strict

Proposals in the EU's third money laundering directive published last month will place an 'onerous and disproportionate burden' on law firms - which should be exempted from some of the requirements, lawyers said last week.


A dedicated group set up by the International Bar Association (IBA) to examine the proposals warned that customer due diligence rules were too strict for firms, when 'the overwhelming percentage of customers/clients will pose absolutely no threat with respect to money laundering or the funding of terrorism'.


Under the proposals, firms would have to conduct checks into any beneficial owners of their client company, as well as the client itself.


Stephen Revell, co-ordinator of the IBA's anti-money laundering implementation group and partner at City firm Freshfields Bruckhaus Deringer, said: 'There is a lack of clarity over what lawyers are going to have to do to verify not only their client, but also all the beneficial owners of the client. You could have a structure where there are several companies owning a particular client, who will in turn have shareholders. There will be a multiple number of clearances that a lawyer will have to make.


'This will impact all lawyers, not just the larger firms, and in fact the IBA is particularly concerned about the effect on smaller firms.'


He added: 'The third money laundering directive is now published and final, but some parts are still in consultation. There is a lot of work to be done on the lobbying front in terms of getting the European Commission to give greater clarity on the intention of the legislation.


'The second directive is already costing lawyers a significant amount of time and money. Number three will exacerbate that.'