Risk Update

Ethics & AML News — Ethics Opinion on Client-Witness Conflicts Withdrawal, Law Firm AML Evolution and Opinions in Australia

Rhode Island Supreme Court Ethics Advisory Panel Op. 2024-05” —

  • “Where an attorney representing a client in a slip-and-fall case has learned that a material witness for the defendants is another current client in an unrelated workers’ compensation matter, the attorney must withdraw from representing both of the clients under the Rules of Professional Conduct.”
  • Full text of opinion.
    • “The inquiring attorney represents a client (the ‘Client’) in a third-party, work-related slip-and-fall case against the worksite general contractor and other entities. The defendants have disclaimed liability on the ground that they are not responsible for the Client’s injuries and/or the Client is responsible for his or her own injuries. In support of their position, the defendants have identified as one of their witnesses a safety coordinator who investigated the Client’s allegations on behalf of the defendants (the ‘Witness’).
    • “The inquiring attorney intends to depose the Witness. However, the inquiring attorney has learned that the Witness is in fact his or her current client with an unrelated workers’ compensation matter dating from 2016 with an open claim for medical benefits but no recent claim activity. Based on this revelation, the inquiring attorney has postponed the deposition and asks whether a conflict of interest exists such that he or she must withdraw from representing the Client and/or the Witness.”
    • “It is the Panel’s opinion that a conflict of interest does exist, such that the inquiring attorney must withdraw from representing both the Client and the Witness under the Rules of Professional Conduct.”
    • “Here, the inquiring attorney represents both the Client and the Witness in unrelated matters. However, the interests of the Client and the Witness are nonetheless directly adverse because the Witness is a material witness for the defendants in the Client’s slip-and-fall case, obligating the inquiring attorney to depose him or her on the Client’s behalf. This is a classic conflict-of-interest scenario under Rule 1.7(a)(1).”
    • “In this case, the Panel finds that the conflict is nonconsentable because the inquiring attorney’s coincident duties to zealously represent both the Client and the Witness are incompatible… On the one hand, the inquiring attorney’s duty to the Client obligates him or her to depose the Witness in an adversarial manner because the Witness is acting on behalf of the defendants who stand in opposition to the Client. This obligation extends throughout the litigation, as the inquiring attorney may be required to cross-examine the Witness at trial, impeach the Witness’ credibility, challenge the content of the Witness’ testimony, present contrary evidence, or otherwise confront the Witness in furtherance of his or her representation of the Client.”
    • “However, owing to the inquiring attorney’s simultaneous representation of the Witness, the Client may justifiably fear ‘that the [inquiring attorney] will pursue [the Client’s case less effectively out of deference to the [Witness], i.e., that the representation may be materially limited by the [inquiring attorney’s] interest in retaining the [Witness as his or her] client.’ … Such fear could impair the Client’s attorney-client relationship with the inquiring attorney and undermine the representation.”
    • “On the other hand, the inquiring attorney also owes the Witness the same duty of zealous representation in the Witness’ workers’ compensation matter. His or her actions when representing of the Client could irretrievably sunder this relationship due to the fundamentally adversarial nature of such advocacy as described above… As such, there is no way for the inquiring attorney to reconcile his duties to both the Client and Witness without prejudicing them… As such, it is functionally impossible for the inquiring attorney to adequately represent either the Client or the Witness under these limitations.”

Lawyers among professional services to be affected by proposed reforms to anti-money laundering regime” —

  • “The [Australian] government has conducted two rounds of consultation on its plans to modernise Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime.”
  • “The aim of the reforms is to make sure that the laws continue to deter, detect and disrupt money laundering and terrorism financing activities and to satisfy the international standards set by the Financial Action Task Force (FATF). Significantly, a major component of the reform is the expansion of the AML/CTF regime to ‘tranche two’ entities which includes lawyers, accountants, real estate professionals and other professional services. These entities presently do not fall under the AML/CTF regime.”
  • “Attorney General Mark Dreyfus recently told the National Press Club that Australia was ‘one of a handful of countries remaining in the world who have not legislated to bring in these kinds of entities.'”
  • “Speaking at the same National Press Club address, AUSTRAC CEO Brendan Thomas said the regime currently applies mainly to financial institutions.”
  • “Law firms will be required to understand their clients, the risk posed to their business and they will be required to adopt risk mitigation strategies. ‘It’s really about putting controls around risk and not turning a blind eye to crime that might be in front of you,’ said Thomas.”
  • “The Law Council of Australia is supportive of monitoring the risks that may support money laundering into Australia however the ‘legislation needs to be balanced and proportionate to the real risk, targeted and carefully drafted to ensure vital foundations of our legal system, including access to justice and client legal privilege, are not weakened,’ said Law Council of Australia President-Elect Juliana Warner.”
  • “Justin Wong, principal lawyer at Streeton Lawyers says ‘I think it’s wrong to suggest that law practices are largely unregulated and therefore susceptible to money laundering risks… [M]ore than any other industry, law practice trust accounts are highly regulated.'”
  • “As Wong points out, in NSW, law firms are subject to annual external audits and must comply with ongoing reporting and notification obligations in relation to each transaction.”
  • “The Law Council has released detailed Guidance Notes including the ‘National Legal Profession Anti-Money Laundering & Counter-Terrorism Financing Guidance‘ [June 2024] to assist the profession in understanding and navigating their professional obligations.”