Solicitors have narrowly avoided the spectre of criminal penalties for 'tipping off' clients under new anti-money laundering laws, after intense lobbying saw vital protection for the legal profession survive a vote in the European Parliament last week.

The substance of an amendment drafted by the Law Society to ensure solicitors will not be charged with tipping- off if they let clients know that a money laundering report has been made against them - which was ditched last month (see [2005] Gazette, 5 May, 1) - has made it through to the final version of the legislation in the form of binding guidance.


The guidance to the Third Money Laundering Directive, which went through the parliament last week, means solicitors can keep their legal professional privilege defence if they inform clients that a report has been made to the National Criminal Intelligence Service.


However, certain measures that solicitors had wanted - such as cross-border recognition of client identification measures, so checks on the same client do not need to be repeated in different countries - have probably been lost.


The directive was given a two-year time frame for implementation which solicitors believe will give them time to push for 'proportionate' implementation of the directive by the UK government.


Solicitors also won an undertaking from the European Commission that it would conduct a review of the impact of the legislation on the legal profession within two years of the directive's implementation. However, Jonathan Goldsmith, Secretary-General of the Council of Bars and Law Societies of Europe, said: 'We are sceptical, because a review of the legal profession [was included in] the Second Money Laundering Directive, which has not taken place.


Liberal Democrat Diana Wallis, a solicitor MEP, said she had secured a commitment that the second directive review would be completed next year.


Alison Matthews, money laundering reporting officer at national firm Irwin Mitchell and a member of the Law Society's money laundering taskforce, said: 'The result is not perfect but it's damn good.'


Law Society President Edward Nally said: 'I am delighted that the European Parliament has voted to recognise the critical importance of preserving legislation that protects legal professional privilege in EU member states.'