Earlier this month, a senior City partner, speaking at an informal press lunch, teased journalists about recent stories concerning lawyers and money laundering.

Why was it, he asked, if the City was so awash with money laundering lawyers, no-one had yet been able to name a single firm?The first reports, emanating from the National Criminal Intelligence Service (NCIS) last month, suggested only half a dozen law firms were under surveillance for possible links with drug cartels and organised crime.

Then, a fortnight later, The Times put the figure at 60.

But NCIS says that it will confirm neither numbers nor identities of firms.However, what is clear is that NCIS is growing increasingly unhappy at the small number of suspicious transaction being reported by law firms.

Last August, Simon Goddard, of NCIS's strategic and specialist intelligence branch, claimed solicitors were failing to meet their 'legal and moral obligations' in this regard.

The accusation followed publication of the latest figures for the reporting of suspicious transactions by solicitors and accountants which showed that solicitors alerted NCIS on just 236 occasions last year.

This represents a drop of 20% from 300 the previous year.At the time, Mr Goddard added: 'Just like banks and building societies, accountants and solicitors, too, have an obligation to ensure they are not assisting criminals to hide the proceeds of their crimes.'Barrie Mayne, the Law Society's fraud intelligence officer, says he 'could not be sure' which City law firms NCIS was referring to.

He says that in the past year, the Offfice for the Supervision of Solicitors (OSS) has been aware of 16 solicitors in London suspected of connections with money laundering, both unwittingly and knowingly.

Steve Jam es, head of the monitoring and investigation unit at the OSS, says these firms are not 'household names; they are much more likely to be sole practitioners.George Staple, the former director of the Serious Fraud Office and now a partner at Clifford Chance, argues that the public has the right to know whether or not the NCIS claims involve substantiated cases.

If so, they should be 'thoroughly investigated'.

But the public also has the right to know whether the NCIS reports amount to nothing more than a 'slur' on the legal profession.

'NCIS has not named one firm nor cited any evidence.

If this is only a matter of intelligence [gathering], then they should go through the proper procedures,' Mr Staple adds.Mr James also notes that since the current money laundering regulations came into force on 1 May 1994, not one law firm has been charged with an offence.

Nor, said Mr James, was he aware of any solicitor being in breach of the solicitors' accounts rules or the investment business rules because of a money laundering matter.

Mr Mayne adds: 'It is only a small minority of law firms involved in money laundering.

We encourage members of the profession to report transactions whenever they are suspicious.'While the OSS enjoys 'excellent relations' with NCIS both Mr James and Mr Mayne say they would have liked to have been given prior warning about the recent publicity NCIS had given to the problem.

They stress that during the past two years, the OSS and the Law Society have redoubled their money laundering awareness campaign which has included the issuing of green and red guidance cards.Paul Carratu, the managing director of corporate fraud investigators Carratu International, suggests that it might suit NCIS to let law firms worry whether they are one of the 60.

'I've got law firm clients who would dearly love to know whether they are on the list,' he said.

Mr Carratu specialises in carrying out money laundering due diligence for business and City institutions.

Two of his clients are top 50 law firms, one in the top ten.

However, Mr Carratu's own experience confirms law firms can get themselves into trouble.He says the practice among City law firm of always asking for large retainers up front makes many firms vulnerable to money laundering.

A typical scenario will involve instructions from an individual or organisation in former Soviet Union which eventually come to nothing.

The law firm accepts the retainer but the client then decides not to proceed with instructing the law firm.

The law firm is then obliged to return the retainer to the client in the form of one its own cheques guaranteed by its own bank.

In this way, says Mr Carratu, dirty money has been cleaned, with the law firm left thinking the client has either pulled back from its original commercial business or has found a cheaper firm of solicitors to act on its behalf.The company's top ten law firm client recently found itself in a similar situation when Russian businessmen interested in investing in commercial property in the UK turned up at the solicitors' offices with two suitcases full of cash.

'Fortunately, the law firm was immediately suspicious, alerted the authorities and then gave the money back,' says Mr Carratu.

Since then, the firm has set up early warning systems identifying transactions which potentially might be covers for money laundering operations.Carratu International encourages clients to refer transactions to it for due diligence investigations when the money involved reaches a set level and the new client matches a certain profile.

'Compared with banks and other financial institutions, I'm always surprised for the lack of [due diligence] take-up with law firms.

Some of them won't do anything until two men enter their office wearing black shirts and carrying large suitcases.' In one law firm, says Mr Carratu, a suspicious transaction only came to light because one partner was bringing in too much business and the other partners became jealous.

He adds: 'The burden of proof has to be quite high before a law firm rejects a client.

They do tend to rely on the maxim innocent until found guilty.'Christopher Cardona, a partner at Wilde Sapte and an expert on Latin American money laundering cases, says solicitors are put in a difficult position.

'The problem is that the current reporting system is subjective.

Only if the solicitor concerned is suspicious himself is he obliged to report.

The net result, despite a number of attempts on the part of the Law Society to issue guidance, is that the already grey line between transactions which should be reported and those that need not, is shaded further into abstraction.' Mr Cardona suggests the answer is for government to make a better effort of defining a solicitor's duties.