Risk Update

Anti Money Laundering (AML) — New Guidance for Lawyers, ABA Pushback & More

Kevin Shepherd, partner at Venable, writes: “Inside The New Anti-Money Laundering Guidance For Attys” —

  • “Over a decade ago at its plenary meeting in October 2008, the Paris-based Financial Action Task Force [FATF] issued a guidance paper for the global legal profession on how to detect and prevent money laundering and terrorist financing. “
  • “At its June 2019 plenary meeting, FATF adopted an updated ‘Guidance for a Risk-Based Approach — Legal Professionals.’ The 2019 guidance bears structural similarities to the 2008 guidance, but contains several significant changes. This article will provide an overview of the 2019 guidance and highlight several of these changes that may be of most interest to U.S. lawyers.”
  • “In addition to identifying broadly the specified activities covered by the 2019 guidance, the 2019 guidance lists 15 areas that may — or may not — fall within the category of a specified activity.”
  • “Unlike the 2008 guidance, the 2019 guidance devotes six paragraphs[16] to legal professional privilege and professional secrecy, and recognizes that these concepts present challenges in implementing a risk-based approach.”
  • “The analogous concept of legal professional privilege is known in the United States as the attorney-client privilege, and the 2019 guidance notes that the United States recognizes a ‘crime-fraud’ exception to the attorney-client privilege.”
  • “Supervision of Risk-Based Approach in the U.S. Recommendation 28 of the FATF standards requires that legal professionals be subject to adequate AML/CFT regulation and supervision. Section IV of the 2019 guidance provides detailed guidance to supervisors, much of which is inapplicable to the U.S. given its ‘alternative supervisory system.’ In recognition of this different system, the FATF included a text box in Annex 4 focused on the U.S., which the FATF recognizes as the country with the largest number of lawyers subject to such a system. The lengthy text box describes the fit and proper requirements in the U.S., including the entry and ongoing requirements for lawyer licensing.”

In the US, see: “The American Bar Association is fighting Washington’s efforts to tackle money laundering” —

  • “The body representing America’s lawyers has staked out an eye-opening position in recent years—lobbying against efforts in Congress to close a loophole that enables terrorism, human trafficking, money laundering, and a host of other crimes.”
  • “Unlike banks, law firms don’t legally have to do due diligence before taking on clients—the closest thing they have to regulation is ABA guidelines.”
  • “When the Financial Action Task Force (FATF), an international anti-money laundering organization, analyzed 106 global cases of the owners of illicit money hiding their identities, it found that most schemes used either lawyers, trust or corporate service providers, or accountants. Lawyers were the most likely of those three to be used in the real estate schemes outlined in the Global Witness sting, FATF found.”

And for those looking for some training, I found a consult’s webinar recording on law firm compliance: “Anti Money Laundering – Ask me anything! Join me for this AML update webinar, where you can ask me anything you’ve always wanted to know about AML.”

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