Lawyers need to be more 'hard-nosed' about reporting suspicious transactions by trusted clients and engage more positively with issues surrounding money laundering, the Attorney-General said last week.

Addressing the International Bar Association (IBA) conference in San Francisco, Lord Goldsmith QC said reporting suspicious transactions is not inconsistent with a lawyer's ethics - 'in such cases, the greater duty is to society'.

However, he bemoaned the small number of reports 'despite the volume of financial activity which goes through lawyers'.The Attorney-General's plea came as a leading London-based fraud specialist lawyer called for the creation of a tribunal or dedicated judge to help solicitors resolve dilemmas under money laundering legislation.

Lord Goldsmith said it is time for the profession 'to move beyond simply reacting, often, I have to say, negatively, to the steps governments are taking in this area to a position where you are constructively engaged in working with them in finding solutions'.

Law Society chief executive Janet Paraskeva reacted to Lord Goldsmith's speech: 'The invitation to the profession to engage more constructively in the debate on money laundering is most welcome.

The second European Money Laundering Directive puts the burden on reporting about clients firmly on solicitors, but a level of confusion still exists over how to apply that directive.

We need to agree with the government on the interpretation that will be implemented in the UK.'

Monty Raphael, a partner at London law firm Peters & Peters and chairman of the IBA's working group on corruption, told delegates that a special tribunal or dedicated judge was needed to assist solicitors.

Such a system, he said, would help those facing questions over whether they can avail themselves of privilege, and in resolving conflicts over whether they should report a suspicion.

Guidance would also useful, said Mr Raphael, in relation to tipping off clients that such a report had been made.

Mr Raphael complained that the current procedure of applying to the court for direction is 'long-winded' and raises issues of confidentiality and tipping-off.

He added that however helpful the National Criminal Intelligence Service was, it could not provide solicitors with sufficient comfort when making such a decision.

Also at the conference, City solicitors Richard Fleck, worldwide practice partner at Herbert Smith, Allen & Overy senior partner Guy Beringer and Stephen Revell, a senior Freshfields Bruckhaus Deringer partner, urged lawyers to involve the public in a debate about the future direction of the profession.

They said lawyers must recognise the right society has to be involved in that debate, rather than just fight defensively to preserve the status quo.

Mr Fleck said tough subjects have to be addressed.

He pointed to issues of whether ethical rules such as client confidentiality need to apply equally in the many different roles lawyers play.

For example, does a company lawyer filing a document need the same protections as a criminal defence lawyer?

But leading Spanish lawyer Ramon Mullerat warned that such an approach would signal the demise of a unified profession.

Mr Beringer said wider society was entitled to insist on allowing law firms, for example, to float on the stock market; however, the profession has to explain the consequences of doing so.

Mr Revell warned that lawyers 'underestimate the cost of compliance' with money laundering legislation 'at our peril'.

He stressed that firms have to invest properly in record keeping, and also annual staff training.

Failing to do so will mean facing possible prosecution.

Mr Revell added that using non-lawyers in a money laundering team means that firms will lose privilege.

He also said the inconsistent implementation of the European Money Laundering Directive across the continent was causing problems, as different countries have different 'know-your-client' provisions, while some - such as France - have yet to implement the directive.

He called for a 'passporting provision', which would allow a lawyer who has checked out a client to vouch for the client to another lawyer.

See Editorial, (see [2003] Gazette, 25 September, page 15)

By Neil Rose in San Francisco