Treasury raises hope of protection over fraud

The Treasury this week gave solicitors hope of greater protection from the risk of having to disclose to clients internal memos which voice suspicions of money laundering.

The Treasury's financial crime branch has issued guidance on the Data Protection Act 1998, which indicates that solicitors may enjoy more protection than was previously thought.

The Law Society sought clarification after officials at the Information Commissioner's office said the Act requires reports made by lawyers to internal money laundering reporting officers (MLROs) to be considered on a case-by-case basis for disclosure to clients who request them (see [2002] Gazette, 24 January, 1).

The commissioner's office said that where such reports are passed by MLROs to the National Criminal Intelligence Service (NCIS), there may be protection from disclosure under section 29 of the Act, at least in cases where disclosure might tip off clients.

That protection did not extend to other reports, which must be considered individually for disclosure, it said.

But the financial crime branch has now issued guidance stating that section 29 can cover reports regardless of whether they are handed to NCIS.

But it said each report must still be considered case by case.

Monty Raphael, managing partner of London fraud firm Peters & Peters, said firms will be making many more internal reports when the Proceeds of Crime Bill and the second European money laundering directive come into force this year.

He said: 'Given that, when considering section 29, an MLRO has to judge whether or not disclosure could constitute tipping off, there will be a tendency to err on the side of caution and invoke the statutory defence more often than not.'

However, Alison Crawley, the Society's head of professional ethics, said the guidance was not too helpful.

'We think section 29 should apply to all reports not sent to NCIS,' she said.

Jeremy Fleming