A court challenge to the recently implemented money laundering regulations could soon be launched, the newly installed President of the Law Society told the Gazette at last week’s American Bar Association annual conference.


Speaking in Atlanta, Edward Nally said Chancery Lane recognised growing unease among practitioners over the onerous nature of the regulations. He criticised the regime for being too Draconian and failing to crack down on serious crime.


‘The time is now right for a possible challenge,’ he said. ‘The concerns about the regulations are maturing nicely. The unexpected reach of the regulations and their proportionality are becoming much more clear.’


Any Law Society-backed test case would have events in Canada to draw on. In March 2003, following court challenges brought jointly by the Canadian Bar Association (CBA) and the Federation of Law Societies of Canada, the Ottawa government agreed to redraft anti-money laundering legislation, removing references to lawyers.


Mr Nally’s comments came against the backdrop of Law Society figures showing the level of uncertainty and concern among practitioners about the regulations. The Society’s ethics department currently receives more than 40 calls a day from solicitors concerned about breaching the regulations.


The president told a group of multi-national delegates at the conference that the team was on target to deal with more than 11,000 calls this year from a profession worried about the complexity and the all-encompassing nature of the regime.


He also said that while the National Criminal Investigation Service was ‘guarded’ about releasing full statistics, it was thought that solicitors were responsible for more than 80% of money laundering reports. The majority are thought to come from family law solicitors concerned following the P v P [2003] EWHC Fam 2260 ruling last year.



Mr Nally attacked the regulations for causing an onerous financial burden, while the authorities had failed to prove that they actually achieved their purpose.


He cited an unnamed City law firm that had recently recruited 25 staff exclusively to deal with money laundering regulation compliance issues.



He said an emerging view within the UK legal profession was that the regime was disproportionate, and ‘wasn’t tackling the original problem’.


He added: ‘Even UK-based clients may be driven to instructing overseas lawyers to avoid the regulations.’


Louise Delahunty, a partner at City white-collar fraud law firm Peters & Peters and chairwoman of the Law Society’s money laundering task force, cast doubt over whether such a harsh climate for lawyers was what ministers had intended. She told delegates: ‘Originally, the government wanted help from the legal profession. It must realise that we want to continue our careers as lawyers — most of us do not want to be money launderers.’


Simon Potter, immediate past CBA president, said: ‘This is nothing to do with a gatekeeping role. Governments are attempting to turn lawyers into conscripted agents of the state.’


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