In frontline of war on crime

Marilyn Stowe looks at the far reaching arm of money laundering legislation and finds that family lawyers have been thrown into the battle

Money laundering is a global crime on an epic scale.

The International Monetary Fund has said that the aggregate size of money laundering in the world could be between 2% to 5% of the global gross domestic product.

Figures from the US indicate that funds involved in global money laundering activities range between $590 billion and $1.5 trillion a year.

The lower figure equates roughly to the total annual economic output of a country like Spain.

Mention the phrase money laundering to most people and what comes immediately to mind are such crimes as drug trafficking, terrorism and pornography.

In the UK, the government has introduced the Proceeds of Crime Act 2002 to give new powers of investigation and confiscation in the fight against criminals washing 'dirty' money through the system to amass vast profits from illicit operations.

Doubtless, most lawyers working in the field of family law thought it was unlikely to have any significant impact on their day-to-day caseload.

How wrong they were.

Under the provisions of the Act, tax evasion is now viewed as major crime and part VII of the legislation changes significantly our relationship with clients.

Under the legislation, lawyers acting in a case in which they suspect that their client - or anyone else involved in the case - is guilty of tax evasion must report those suspicions to their firm's money laundering officer, and the National Criminal Intelligence Service (NCIS).

The legislation is complex and detailed and the draft regulations have not yet come into force.

However, it would seem that there are three broad options open to solicitors who suspect tax evasion:

- Persuade the client to make a full disclosure to the Inland Revenue.

You may still be obliged to make a report to NCIS and, therefore, err on the side of caution.

- Decline to take the case any further.

- Continue acting and report your suspicions to NCIS.

Await 'appropriate consent' to continue as normal.

This may not necessarily depend on whether NCIS or other law enforcement agencies progress an actual investigation.

You cannot tell your client about your actions.

The potential consequences of failing to report suspicions can be extremely serious, including imprisonment and disqualification.

There are those who say this new legislation shatters our proud traditions of client confidentiality and protection.

The lawyer must become an informer and the parties suffer the consequences.

But it is a case of the government judging that on the issue of money laundering, the public interest outweighs individual human rights.

Ministers say they have the balance right.

However, there is no de minimis element to the legislation.

This means that we currently have as much responsibility to report the window cleaner we suspect of dodging tax as we do the crooked businessman whose offshore fortune we believe to be accrued as result of major tax evasion.

No doubt we will have to wait and see whether the system can cope with the number of cases likely to be reported.

The new Act clearly - although I suspect unwittingly - put family lawyers on the frontline of the war against crime.

After all, it is often in the fall-out from a marital breakdown that questions are raised over the legitimacy or otherwise of financial assets - and the spouse is usually a reliable source.

Some will feel extremely uncomfortable about the obligations the new Act imposes.

None of us is above the law and for now solicitors, barristers and judges alike are just going to have to get used to operating in a different environment.

Marilyn Stowe is head of family law at Grahame Stowe Batson and chief examiner/chief assessor of the Law Society's family law panel