Risk Update

Risk Webinars to Watch — Lateral Hire Risk Management, AML/Client Due Diligence Panel

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From Clyde & Co: “Webinar: Lateral Hires – Issues to Consider” (Monday, March 21, 3PM ET) —

  • “In this webinar we will consider some key issues around the hiring and integration of new partners, including disclosure of confidential business and client information, data protection, restrictive covenants and on-boarding considerations.”
  • “Lateral hires are a key part of business growth for law firms, and yet there is a natural conflict to overcome between the information required for a partner’s move to a new firm, elements which will help a move be successful, and a partner’s obligations – both to their current firm and regulatory obligations.”
  • “There is also a natural conflict between a partner’s desire to be a success in their new firm, and their obligations to their current firm to act in its best interests (and to abide by restrictive covenants).”
  • “In this session we will consider some key issues around the hiring and integration of new partners, including disclosure of confidential business and client information, data protection, restrictive covenants and on-boarding.”
  • “Agenda:
    • The basic obligations of partners
    • Regulatory obligations relevant to lateral hires
    • What a recruitment process may look like
    • What a lateral hire move may look like and the issues involved
    • Issues seen in lateral hires based on our experience
    • Key rules of the road
    • Who may be impacted by regulatory issues”

From Intapp: “An Expert Panel Discussion on Risk Assessment, AML, and CDD” (Thursday, March 3 at 9AM ET) —

  • “One of the many ever-increasing challenges firms currently face is ensuring proper due diligence while managing their risk assessment processes. Firms are constantly seeking out new ways to address this issue and implement best practices for conducting necessary checks throughout the client and matter opening processes.”
  • “We will speak with two leading subject matter experts on risk-related issues such as Solicitors Regulation Authority (SRA) expectations and expanding risk awareness.”
  • Panelists:
    • Emma Oettinger, Head of Financial Crime and Risk, Ashurst
    • Amasis Saba, Head of Business Acceptance for U.K., CE, and MENA, Freshfields Bruckhaus Deringer
    • Daragh McLaughlin, Practice Group Leader, Risk and Compliance, Intapp
Risk Update

Political, Public Figure Conflicts Allegations — Wells Fargo, Trump

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Wendy Williams hires ex-husband Kevin Hunter’s lawyer after Wells Fargo freezes account” —

  • “Wendy Williams is using her ex-husband Kevin Hunter’s legal team to fight Wells Fargo over her frozen bank account amid ongoing health issues. ‘The Wendy Williams’ star will be represented by Florida attorney LaShawn Thomas of Miami Entertainment Law Group. The same legal firm that handles all of Kevin Hunter’s businesses, including Hunter Publishing and Head Hunter Productions.”
  • “Attorney LaShawn in an interview with Page Six on Tuesday, February 15, insisted that Williams doesn’t see the law firm’s involvement in Kevin Hunter’s business as a conflict of interest. The attorney explained, ‘Kevin did not request that I represent Wendy…I actually began representing Wendy approximately two years prior to their divorce. I represented neither party during their divorce proceedings… I am representing Wendy because no one should be barred from accessing their own money.'”
  • “LaShawn also told The Sun that ‘whatever is going on with Wendy, I don’t disclose to him [Kevin Hunter]… I believe in protecting the attorney-client privilege…I’m not representing Wendy and Kevin in an adversarial proceeding, and Kevin is not that kind of guy.”
  • “LaShawn went on to claim that the relationship between Wendy and her ex-husband is now good. ‘People think that they don’t get along with each other, which is not true,’ she said.”

Latham & Watkins Prior Work for Perkins Coie Could Pose Conflict in Ex-Partner’s Trial, Government Says” —

  • “Special counsel John Durham is asking a judge to examine potential conflicts of interest in Latham & Watkins’s defense of former Perkins Coie partner Michael Sussmann.”
  • “The issue stems from Latham’s prior representation of Perkins Coie and another of its former partners, Marc Elias, on issues also related to Durham’s probe that may be relevant in Sussmann’s upcoming trial, according to a motion filed by Durham’s prosecutors.”
  • “Sussmann, a former cybersecurity partner at Perkins Coie, was indicted in September as part of the Durham investigation for allegedly lying to the then-general counsel of the FBI during a 2016 meeting about purported ties between then-Republican presidential nominee Donald Trump and Russia. Sussmann allegedly told the FBI that he was not meeting with the bureau on behalf of a client, when he was actually working with both Hillary Clinton’s 2016 campaign and a technology executive that was conducting opposition research on Trump.”
  • “Sussmann’s defense team, led by Latham partners Sean Berkowitz and Michael Bosworth, has denied the allegations and called the prosecution politically motivated. His lawyers told the government that Sussmann intends to waive any possible conflicts, according to Durham’s filing.”
  • “‘Moreover, it is possible that the defendant, having recently resigned from his partnership at [Perkins Coie], is currently or will become in an adversarial posture with his former employer. Latham–through its prior representation of [Perkins Coie]—likely possesses confidential knowledge about [Perkins Coie]’s role in, and views concerning, the defendant’s past activities,’ the motion states. ‘Accordingly, the government believes that potential conflicts of interest may exist or arise from Latham’s prior representations of [Elias] and [Perkins Coie] in this investigation.'”
Risk Update

Public Conflicts Rules — Texas on Lateral-driven Public/Private Conflicts, Election Challenge Conflicts Complexities

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Texas Lawyer Can Migrate Conflicts from Public Work at Old Firm” —

  • “A Texas lawyer who works for public entities at a private firm will create conflicts of interest for other attorneys if he moves to another firm that is routinely in opposition to those public entities, the State Bar of Texas said.”
  • “The bar’s Professional Ethics Committee was asked if a lawyer who regularly represents municipalities can join an adverse firm without creating a conflict for other attorneys at the new firm. Secondarily, the committee was presented a question about whether the public entities’ open meetings and records could help avoid conflicts.”
  • “The committee said in a February opinion that, under Rule 1.09 of the Texas Disciplinary Rules of Professional Conduct, a migrating lawyer is prohibited from representing any client if the matter is adverse to a client the lawyer personally represented before in related matters. If the migrating lawyer is personally conflicted under Rule 1.09, the committee said, ‘all lawyers in the hiring law firm will share the same conflict while the migrating lawyer remains in the firm.'”
  • “The committee also rejected the notion that the ‘generally known’ exception to a lawyer’s confidentiality obligations under Rule 1.05 would allow the hiring firm to avoid the migrating lawyer’s conflicts because of the public entities’ generally open meetings and records.”
  • The opinion: Texas Bar Ethics Advisory Comm., Op. No. 693, 02/22

Ethics Forum: Questions and Answers on Professional Responsibility” —

  • “I have been contacted by my state representative to represent him in a challenge to his election opponent once the circulation period is finished. The challenge will not be brought by him, but brought by a registered voter in his district. Who do I represent?”
  • “Although the state representative had asked you to bring the challenge and perhaps is paying for it, the person represented is the voter whose name is going to appear on the petition to challenge the nominating petition of the opponent of the state rep.”
  • “At times, there can be differences or conflicts between the person bringing the challenge and the person paying the fee.”
  • “Despite the fact that the petitioner has a very limited role other than being the registered voter that is needed to bring these challenges, this person is still the client. It is probably a good idea to have a fee letter under Rule 1.5(b). The letter would indicate who is paying, but also note that the lawyer represents them, not the political people who asked them to do this challenge. Also, the election might reflect that there is a waiver of any attorney-client privilege so, at least, the matters can be discussed with the person paying.”
  • “There still can be potential conflicts in this situation. One potential conflict could be if the state rep wants the matter to be withdrawn, but the person bringing the challenge wants it to continue. There could also be a conflict if there is a difference of opinion as to whether an appeal should be taken if the challenge is initially denied.”
  • “A real conflict could arise if there are sanctions. In the Election Code under 25 P.S. 2937, costs and sanctions can be imposed, though it is rarely done. The person who would be sanctioned would not be that state rep who had the initial idea for the challenge, but it would be the individual voter who had agreed to do so. That could create a problem if the state rep wants the matter pursued even though it was lost below, but the voter may not want to, or may have some concern about sanctions going against them. This would create a real conflict.”
  • “Therefore, there could be a real conflict in these situations if one is not careful. Every lawyer should be aware of the potential conflict and who they represent in these election cases.”

Blog + Webinar Recording — Integrated Lateral Intake, Evaluation & Conflicts Clearance (Sponsor Spotlight)

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In this month’s sponsor spotlight, Intapp is highlighting two resources on lateral hiring: a blog post summary and a recording of their earlier product demo webinar. (I attended that webinar live and could not remember the last time I attended a session that had such a high level of audience Q&A participation…)

Blog post: “Integrated Onboarding and Conflicts Clearance” —

  • “Although lateral hiring and onboarding workflows vary significantly across law firms, most of these processes share one thing in common: they’re hampered by an inability to quickly capture data. As firms face the most active period of lateral lawyer movement in history, firm leaders must consider investing in technology that can help them create faster, more seamless processes that also protect them from potential conflicts.”
  • “During a poll, a majority of the webinar attendees reported that their firm’s onboarding success rate had been negatively impacted because of lengthy workflows. Additionally, as Bowen revealed, risk and compliance teams are facing increasing pressures concerning firm expansion, finances, strategic alignment, complex regulations, and client demands. Bowen explained that, without the proper technology to holistically evaluate risk and onboard laterals, firms will soon find themselves overwhelmed.”
  • “‘Beyond analyzing whether a firm can take on the business [that lateral bring with them], firms are actually starting to assess whether they should take on the business,’ said Bryn Bowen, Practice Group Lead for Legal Risk at Intapp. ‘To make these decisions, firms need to communicate effectively, with all relevant background information at hand. The need to onboard these laterals quickly, efficiently, and in a compliant matter compounds the stress.'”
  • “‘We’ve worked with our clients to develop a solution based on best practices across the industry,’ said Bowen. ‘The lateral hire solution is an out-of-the-box, low-impact, implementation-friendly tool for efficiently evaluating and onboarding laterals. Our lateral hire clearance solution provides … a central place for all the firm’s internal stakeholders and decision-makers to view and evaluate the full package of information.'”
  • “‘The tenant is independent of your environment, allowing you to invite external users to come in, fill out a form, and give you the information required,’ said Kristian Uggla, Senior Sales Engineer at Intapp. ‘It will go through integration points and push that data into your environment. External users will feel like they’re in your environment, but they will in fact have no access to your information whatsoever.'”

For the video overview and product demo, see: “Expediting Lateral Hiring: Integrated Onboarding and Conflicts Clearance” —

  • “To streamline these processes, Intapp offers lateral hiring and onboarding tools as an add-on to Intapp Conflicts and Intapp Intake. The software provides a prebuilt, configurable, internal and external workflow that helps firms onboard new candidates and clear portable new business.”
  • “This session will highlight these new lateral hiring and onboarding features:
    • Lateral Submission — Let lateral candidates submit their history and verification information and documents securely
    • AI-Assisted Conflicts Clearance — Streamline the onboarding team’s review of the AI-categorized search results to clear or resolve potential conflicts of interest
    • Sponsor and HR Review — Help the firm sponsor or HR and recruiting professionals review the candidate and clearance information using an interactive workflow
    • New Business Intake — Prepopulate new business intake forms with cleared portable client and matter details integrated with the FMS”
Risk Update

Bank Conflicts Cause Law Firm Frustration — “Weaponized,” “Ridiculous,” “Career Death”

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Bank Experience is Conflicting Juniors Out as Litigation Firms Struggle to Hire” —

  • “Quinn Emanuel and several U.K. litigation specialists say lawyers are being conflicted from joining because of time spent advising banks early on in their career.”
  • “According to Richard East, the founder and senior partner of Quinn’s London office, the firm is struggling to find good lawyers to recruit who are not already conflicted from litigating against major banks.
  • “Most litigation lawyers spend at least some time advising banks early on in their career, according to East, meaning they are inadvertently conflicted from ever acting against those same banks in the future.”
  • “‘Many financial institutions, including the banks and private equity houses, have for some years now, been restricting the law firms they engage and preventing them from taking adverse positions in disputes” according to Natasha Harrison, formerly of Boies Schiller Flexner and now founder and managing partner of Pallas Partners. “As a consequence, much of the City, including the major U.S. and U.K. firms, have been conflicted out of being adverse to banks.'”
  • “It’s a situation CYK [litigation boutique, Cooke, Young and Keidan] has first hand experience of. Around 2016, the firm employed an ex-Clifford Chance lawyer who’d done work for Royal Bank of Scotland. CYK was involved in litigation against RBS and it was claimed the lawyer in question would have had access to confidential RBS documents while at Clifford Chance. The claim was enough to make the client jump to a different adviser for the case.”
  • “Quinn Emanuel’s East believes such moves are unfair, saying: ‘The idea we would hire an associate who’s got a few hours’ worth of basic knowledge and information and then use it and breach our professional obligations is ridiculous.'”
  • “One litigation firm partner said: ‘Being placed on a [bank] investigation as a junior lawyer is a death to your career.'”
  • “One solution some firms have used to get around the issue is to seek waivers from the clients in order to be able to hire with the promise that individual lawyer will not litigate against them, but this is also proving difficult as banks simply don’t want to aid the development of firms that will potentially litigate against them.”
  • “‘More often than not banks won’t give you a written waiver.’ commented East, ‘It doesn’t matter whether the lawyer’s worked on something for 10 or 100 hours, they don’t even look into it, they simply say no. On a number of occasions that has prevented moves.'”
  • “Meanwhile one London partner has gone as far as threatening to sue, saying to the bank: ‘You either sign the waiver or I’ll go to court and seek a declaration myself that this person doesn’t have any conflicting interests.’ That’s worked on a couple of occasions.'”
  • “Banks can also use appointments to their sizeable panels as a weapon, according to some. CYK’s O’Callaghan said: ‘We were acting against one particular retail bank in hard fought and aggressive litigation and I remember hearing through the grapevine that the bank had said that it would look to put us on its panel going forward as a means of removing us as opposition on future cases. Needless to say that we had no intention of ever agreeing to the appointment.’ She continued: ‘You often hear stories of large firms that are put on panels and are given hardly any work.'”
  • “This ultimately has an impact for clients too, who may find they cannot work with their usual trusted advisors if a conflict dispute is a risk. ‘Clients are understandably not keen on the prospect of a tactical challenge which can end up being an expensive sideshow to the main litigation.’ commented one London partner.”
Risk Update

Law Firm AML Updates — Upcoming Webinars (in the UK), Emerging Pot(ential) Challenges (in the US)

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For those not off this President’s Day, or other otherwise interested in law firm anti-money laundering, here are two events and an article of interest:

SRA Webinar: “AML officers: what they need to know” (February 23) —

  • “Everyone in a law firm has a responsibility to keep the proceeds of crime out of circulation. Some, however, have a greater responsibility than others. This free webinar will look at what it means to be a Money Laundering Compliance or Reporting Officer – key roles in the fight against financial crime.”
  • “Join us to learn more about:
    • what our thematic review and visits to firms found
    • the practical aspects of both roles
    • what guidance is available for both new and experienced AML officers.
  • You can send us questions when you book your place, or you can ask them during the webinar.
  • Speakers: Ross Gillson, AML Regulatory Manager, SRA, Susannah Eaton, AML Investigation Officer, SRA
  • Registration Link

Legal Eye webinar: AML update 2022” (March 10) —

  • “The first Legal Eye webinar of 2022 will talk all things Anti-Money Laundering (AML), from independent audits to the challenging roles of MLCO and MLRO.”
  • “AML processes within the legal sector are under more scrutiny from regulators than ever before. It is imperative that law firms understand the role that they play; from the latest requirement for independent audits under Reg 21 to the key roles of a firms’ MLCO and MLRO and the challenges of these roles.”
  • “In this AML update, Legal Eye will discuss:
    • Commentary from the recent SRA Thematic Report on the roles of the MLCO and MLRO
    • What they are finding in their Independent AML Audits of Firms
    • Client & Matter Risk Assessment
    • Regulatory compliance around Data Protection and a mention on S43 Orders”
  • “Join in to gain some valuable insight on some of the current topics in the industry and enjoy some practical working examples.”
  • Registration Link

Pot Attys Org. Enters ABA Debate On Money Laundering Rules” —

  • “The proposed changes would broadly extend lawyers’ due diligence obligations to be more proactive in verifying the legality of clients’ activities and could require them to withdraw representation if they become aware of unlawful money laundering.”
  • “‘We fear that the unintended consequences of the proposed comments will force states that have implemented adult-use and medical cannabis regulatory regimes to decline to adopt this guidance, as it discourages or denies legal services to those in the state-legal adult and medical cannabis industry,’ INCBA’s [International Cannabis Bar Association] comment said.”
  • “According to INCBA’s comment, the ABA’s language does not take into account emergent industries that exist in a legal gray area — such as cryptocurrencies and nonfungible tokens, or NFTs — and does not acknowledge the conflict between federal and state cannabis laws.”
  • “‘The proposed language prohibits lawyers from representing cannabis-industry market participants — and could even create barriers for attorneys who represent state and local governments that license operators, or that accept fees or tax payments from those operators,’ the INCBA comment said.”
  • “The association warned that adoption of the proposed language would force state bars to either reject it or accept it in whole or with caveats. Any outcome would make it difficult for attorneys to take on cannabis clients and would further exacerbate differences between states’ ethical standards with respect to cannabis law, the INCBA comment said.”
Risk Update

Law Firm Conflicts — Clashes in the News, Information Flow, Standing and Tactical Disqualification Debate

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Bill Freivogel notes recent decisions:

 L.D. v. Seymour, No. 8:20-CV-1203 (N.D.N.Y. Jan. 3, 2022).

  • “Plaintiff appears to be suing several local government entities arising out of an alleged sexual assault by an individual defendant (‘Seymour’). Law Firm represents one of the entities (‘County Services’), which evidently was Seymour’s employer. Plaintiff moved to disqualify Law Firm in this case because some twenty-five years earlier Law Firm had represented Plaintiff in ‘a matrimonial action.'”
  • “In this opinion the magistrate judge denied the motion. Lawyers who represented Plaintiff in the matrimonial action (‘Team One’) are still with Law Firm, but they are not the lawyers (‘Team Two’) working on this case.”
  • “On balance, the magistrate judge seemed to feel that the information, if any, that might flow from Team One to Team Two, would not prejudice Plaintiff in this case. The court alludes to the New York Rules of Professional Conduct, screening, the substantial relationship test, notions of confidentiality, etc. It cites a potpourri of New York federal court cases, many of questionable relevance here, and most of which predate New York’s adoption of the Rules.”

Diagnostic Affiliates of N.E. Hou, LLC v. United Health Grp., Inc., No. 2:21-CV-00131 (S.D. Tex. Jan. 18, 2022).

  • “Plaintiff seeks to recover ‘payments for COVID-19 testing and related services’ from three groups of defendants, totaling dozens of entities. Law Firm seeks to represent all the defendants. Plaintiff moved to disqualify Law Firm because of conflicts among the defendants. Standing is an issue.”
  • “In this opinion the court followed those authorities that recognized the right, in some instances, of parties to raise conflicts of law firms that never represented the moving parties. However, the court found that, on balance, the possible conflicts here were not substantial enough, or real enough, (our characterizations) to interfere with the defendants’ right, as a matter of strategy, to continue with one law firm.”
  • “[Our note: The relationships among the defendants are not clear to us from the opinion, so we are unable to articulate why the conflicts are not substantial enough, or real enough to justify disqualification.]”

Bid To DQ BB&K Is ’11th Hour Litigation Tactic,’ City Says”

  • “A California city that sits on an island off the coast of Los Angeles fought efforts to disqualify its counsel from litigation over contamination on school property, urging the court to reject the ‘eleventh-hour litigation tactic’ because it was no secret that Best Best & Krieger LLP advised the local school district years ago.”
  • “The city of Avalon and its attorneys from BB&K told the court Monday that the Long Beach Unified School District’s motion to disqualify is out of turn and uncalled-for. The city told the court that the school district has always been aware that BB&K attorneys — one of whom left the firm well over a decade ago — represented the district in an ‘exceedingly limited scope’ regarding contamination at the Avalon School.”
  • “The district’s claims that it only recently became aware of the apparent conflict are not true, the city argued, saying ‘the district has known every fact it now alleges in support of its motion since 2012.'”
  • “The city argued the district cannot now use information it has been sitting on to seek disqualification, saying the prior representation does not pose a conflict of interest, but even if it did, precedent dictates that litigants can’t hold off on seeking disqualification until it is convenient for them. The city called the district’s disqualification bid ‘a litigation tactic aimed at depriving the city of its chosen attorneys who have been successful in this litigation,’ which should be denied.”
  • “In its disqualification motion, the school district further argued that the timeliness issues central to the court’s ruling in August were directly related to the law firm’s past work advising the school district. The district argued the law firm ‘injuriously affected its former client’ since it successfully argued many of the district’s claims were time-barred.”
Risk Update

Law Firm Risk Trends — Perspectives on AML, Data Security, Reputation Risk, Compliance & More

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In this Law Gazette feature, “Joanna Goodman looks at the everyday perils that give compliance officers sleepless nights.” — “The watchful hours”

  • “Law firms need to manage risk and compliance effectively to meet their legal, financial and professional obligations, to keep their – and their clients’ – money and data secure and protected from fraud. Achieving that will safeguard their reputation and professional status.”
  • “As legal processes and resources have moved online, not least with the introduction of government portals, the compliance burden has grown more complex…The key message from the SRA conference, and from compliance officers across the sector, is that compliance is a shared responsibility across the firm and all its stakeholders. Good policies, systems and processes, which are the domain of compliance officers, need to be supported by awareness and action across the legal services supply chain.”
  • “Cybercrime is the top threat keeping compliance officers, partners and managers awake at night, attendees at the SRA conference heard. Law firms are targeted by cybercriminals because they manage the financial element of transactions and hold valuable corporate and financial data.”
  • “COLPs are worried about loss of data through hacking, phishing and ransomware, and even the biggest firms are not immune. DLA Piper’s high-profile ransomware attack in 2017 was down to third-party vulnerability, underlining the significance of managing supplier risk.”
  • “While the SRA does not take enforcement action against firms which report incidents, it emphasises the need for firms to assess and manage transactional risks and avoid breaches that are distressing to victims and damage the reputation of firms and their clients.”
  • “Chun Wong, partner and COLP at consumer litigation firm Hodge Jones & Allen, deems cybersecurity even more important in today’s hybrid world, as lawyers and clients working from home may be more exposed to risk. As cybercriminals are becoming increasingly sophisticated, it is impossible to eliminate risk entirely. ‘When you get so many emails every day, you need external help: investment in IT and third parties supports seamless hybrid working, systems security and compliance.'”
  • “To some extent, anxiety around risk and compliance is holding back digital transformation. While some regulations have been relaxed temporarily to allow for online identity checking and electronic witnessing and signature, firms are evaluating how much to digitise from a risk management perspective. ‘We accept electronic signatures for some legal documents, such as client care letters, but we decided the risk was too high to witness wills over Zoom, because we are not prepared to take the risk when large estates are involved,’ explains Wong.”
  • “For larger firms, risk and compliance can be integrated into core policies, processes and systems. Weightmans, which handles both volume and bespoke work, has incorporated compliance and risk into the firm’s governance model.”
  • “Partner and business services and innovation director Stuart Whittle heads the risk and compliance team. He explains that over the past two years, the audit risk committee chaired by one of the firm’s executive directors has developed a risk register to evaluate the severity and potential impact of different risks. Whittle’s team then decides on a course of action: to accept the risk, to insure against it, or to take mitigating action. The biggest consequence of risk is professional indemnity insurance, where premiums have increased significantly over the past year. ‘In a hardening insurance market, insurers want to understand your policies and processes for managing risks,’ he adds.”
  • “Additionally, Weightmans’ quality standards team remotely audits a selection of files across all teams against criteria including statutory and regulatory requirements, AML, KYC and so on, and reports back to each team manager with recommendations for corrective action if this is needed. Whittle’s IT and innovation teams follow a detailed procurement process, which includes a data protection impact assessment (DPIA).”
  • “Reputation risk is becoming a higher priority. ‘Solicitors trade on their professional reputation for honesty, integrity and client confidentiality, and compliance measures that protect client data and funds are critical to that,’ observes Whittle.”
  • “The fallout of investigations into the Pandora Papers highlighted the need for firms to balance protecting the right of individuals and organisations to legal representation against their own risk of being associated with certain people and industries.”
  • “Law firm risk management is starting to reflect the flipside of ethical consumerism, in that a firm might have to decide whether to represent particular clients on the grounds of its own reputational consequences, in terms of its ability to attract clients and talent.”
Risk Update

Anti-money Laundering — News, Developments and Concerns on the AML Compliance Front

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In the UK: “Why is it crucial for lawyers to identify and verify source of funds?” —

  • “The growing number of frauds, tax evasion, investment scams, and money laundering cases across the country has once again turned the spotlight on the importance of complying with anti-money laundering (AML) policies.”
  • “Nonetheless, financial institutions are not the only ones subjected to AML regulations. Law firms are also required to monitor and investigate the source of funds they accept from their clients in legal transactions.”
  • “As a lawyer, you may already have information about the bank account your client has been using to make payments. However, investigating the source of funds goes beyond collecting financial documents. Law firms must also determine how their client came to possess that money and where it was used.”
  • “According to the latest report by the Solicitors Regulation Authority (SRA), the officials received a total of 273 reports of potential AML violations in the past year. As a result, the authority visited 85 firms to offer guidance on tax-related issues, with more than 150 desk-based reviews taking place. Moreover, the SRA took 29 enforcement actions and issued £160,000 in fines. The officials also made more than 30 suspicious activity reports to the National Crime Agency.”
  • “It is no secret that law firms are among the biggest targets for money laundering. Lawyers who handle excessive amounts of funds confidentially are at the risk of non-compliance with the anti-money laundering regulations. It is also worth mentioning that their actions may weaken the public confidence in legal professionals.”

In the US: “Treasury Department Rules Could Help Strengthen AML Whistleblower Program” —

  • “The U.S. Treasury Department is currently drafting proposed rules to implement the whistleblower provisions of the Anti-Money Laundering (AML) Act of 2020. These rules will help determine the future success of the newly created AML whistleblower program. By crafting commonsense regulations, the Treasury Department can strengthen the program, despite shortcomings in the law that need to be fixed by Congress.”
  • “The AML Act became law on January 1, 2021 as part of the massive National Defense Authorization Act. Included in the AML Act were provisions establishing a whistleblower reward program for individuals who report money laundering violations to U.S. authorities.”
  • “Modeled off the Dodd-Frank Act (DFA), which established the highly successful SEC Whistleblower Program, the whistleblower reward provisions of the AML Act were meant to establish a program which incentivized insiders to blow the whistle by offering anti-retaliation protections and monetary awards. However, the AML Act strayed from the model of DFA in a number of ways, creating devastating loopholes which are undermining the potential of the program.”
  • “Given these loopholes, which include the lack of a mandatory minimum award, the apparent inability for the Treasury Department to actually pay awards, even where justified, and the exclusion of all employees at FDIC insured financial institutions and credit unions from coverage under the law’s anti-retaliation provisions, urgent legislative reform is needed to make the AML Act effective.”
  • “The AML Act does not mandate regulations and thus there is no deadline for the Treasury Department to adopt them. It is expected, however, that they will do so this year. Currently, there are no regulations in place. Thus, the Treasury Department can draft rules without being restricted by any existing, outdated or ineffective regulations.”
  • “Money laundering was recently recognized by the Biden Administration as one of the key drivers facilitating international corruption, and its most harmful impacts, including terrorist and drug cartel financing, bribery, tax evasion, and undermining the rule of law. The Treasury Department must take advantage of the AML Act to administratively design the most effective transnational anti-money laundering whistleblower program consistent with the official United States Strategy to Countering Corruption.”


Risk Update

Lawyer Conflicts, DQ and Privacy Debates — Amazon’s In-house IP Attorney Gets a Conflicts Call, Law Professor Learns a Lesson

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Software Co. Wants Amazon Atty DQ’d From Patent Suit” —

  • “MasterObjects wants a California federal judge to disqualify Amazon’s in-house lawyer and its outside counsel in a suit accusing the e-commerce giant of infringing search engine patents, saying the company’s staff attorney once worked for the law firm that filed a MasterObjects patent application in the early 2000s.”
  • “Scott Sanford, a senior in-house patent lawyer at Amazon.com Inc. who is leading the company’s defense case, once worked for MasterObjects Inc.’s long-standing patent prosecution firm, Fliesler Meyer LLP, according to a memo to disqualify him filed Monday. The software company said it only recently and “serendipitously” discovered Sanford’s two-year employment at the boutique firm that began in 2000, a job MasterObjects said he neglected to disclose.”
  • “‘Despite having dozens if not hundreds of calls or meetings about MasterObjects and its patents, including motions to depose Mr. Sanford’s former Fliesler Meyer colleagues, Mr. Sanford not once said, ‘Oh, by the way, I worked at Fliesler Meyer when the firm drafted the MasterObjects parent patent,” the motion said. ‘Why on earth not?'”

Chapman University says it didn’t authorize law prof’s representation of Trump, yet work was on server” —

  • “Law professors often use school emails when representing clients, but they may want to rethink that, following a recent subpoena sent to Chapman University from the House Select Committee investigating the Jan. 6, 2021, U.S. Capitol attack, seeking documents from former faculty member John Eastman.”
  • “The Jan. 20, 2022, subpoena relates to the constitutional law professor’s legal representation of former President Donald Trump and the 2020 election, and includes emails, contact lists and calendar entries on the university server.”
  • “Eastman had no expectation of privacy on the university server, and a written school policy said as much, according to the government’s Jan. 21 motion opposing Eastman’s TRO request.”
  • “Also, when Eastman logged on to the Chapman network, he was greeted with a splash screen message, stating that use of the system constitutes consent his activities or information could be subject to monitoring, according to the government’s filing. Eastman is a former dean of the law school, and has served on the faculty for more than 20 years.”
  • “‘I suspect most law professors assume their emails are private. This surprises me a bit because I often comment publicly that people too frequently are lulled into carelessness about what they say in emails and then are shocked that emails are discoverable—in situations ranging from divorces to congressional subpoenas,’ Catherine Ross, a George Washington University Law School constitutional law professor, told the ABA Journal in an email.”
  • “He [Michael O’Brien, an Anchorage, Alaska-based partner at Perkins Coie who represents colleges and universities in employment matters] adds that universities usually vet any legal work a law professor wants to take on, and the process includes a conflict-of-interest check… Eastman has argued that this was a service component of his academic work. Based on my review, I doubt it was pitched that way.”