The Voluntary Gatekeeper: Money Laundering, Terrorist Financing and Client Due Diligence
On May 23, 2013, the ABA Standing Committee On Ethics And Professional Responsibility issued Formal Opinion 463, which examines the contours of a lawyer’s ethical obligations under the Model Rules of Professional Conduct to detect and combat money laundering. The opinion notes that “The Model Rules neither require a lawyer to fulfill a gatekeeper role, nor do they permit a lawyer to engage in the reporting that such a role could entail.” The opinion further states that, “It would be prudent for lawyers to undertake Client Due Diligence…in appropriate circumstances to avoid facilitating illegal activity or being drawn unwittingly into a criminal activity.”
Client Due Diligence is described in the August 2010, ABA adoption of the Voluntary Good Practices Guidance for Lawyers to Detect and Combat Money Laundering and Terrorist Financing, which defines Client Due Diligence as (1) identifying and verifying the identity of each client; (2) identifying and verifying the identity of anyone ultimately controlling the client; and (3) obtaining enough information to understand a client’s circumstances, business, and objectives.
The opinion acknowledges that the importance of risk-based controls may differ depending upon the identity of a client and the nature of the representation. However, the opinion suggests that the best practices goal is for lawyers to develop an increased awareness and an intake and monitoring process for dealing with high-risk situations. The opinion concludes that,
“When in a lawyer’s professional judgment aspects of the contemplated representation raise suspicions about its propriety, that lawyer’s familiarity with risk-based measures and controls will assist in avoiding unwitting assistance to unlawful activities. Indeed, the usefulness of the Good Practices Guidance is an example of the declaration in the Model Rules that “[t]he Rules do not … exhaust the moral and ethical considerations that should inform a lawyer….”
Judge’s Facebook Friendship Challenged in Texas Criminal Case
The Court of Appeals for the Fifth District of Texas joins a small number of appellate courts to opine on the propriety of a judge’s use of Facebook. (Click here to see our post on a recent Florida decision.) The court found that a judge’s Facebook friendship with the victim’s father in a criminal case and the father’s attempt to engage the judge in an ex parte communication on Facebook failed to establish grounds for a new trial where the judge had refused to respond to the father, had reported the contact to both parties in the case and filed a copy of the communication in the court file.
In the Texas case, William Scott Youkers was sentenced to eight years in prison for assaulting his girlfriend. Youkers filed a motion for a new trial based in part upon the trial judge’s Facebook friendship with his girlfriend’s father and a communication on the social media site between the two men. The girlfriend’s father had sent a message to the judge asking the judge to be lenient in sentencing Youkers. The judge responded to the message by explaining that it was an impermissible ex parte communication and that he would not engage in such a discussion with the father. The judge informed the parties and filed a copy of the Facebook exchange in the court file. Youkers’ motion for a new trial,based partially upon this evidence, was denied by the trial court. Youkers appealed the denial of a new trial.
The appeals court affirmed the denial of a new trial and ruled that the friendship was permissible in this case because the judge and father had no special relationship in real life and the judge refused to respond to the father’s communication, choosing instead to file the communication in the court file and inform the parties. The court cited the recent ABA Opinion 462 concerning judges on Facebook (see our prior post about the opinion here) and Judge Gena Slaughter and John G Browning’s article, Social Networking Do’s and Don’ts for Lawyers, in support of the proposition that judges should not be entirely prohibited from using social media sites. However, the court was quick to point out that judges should always remember their duty to remain unbiased and impartial.
Groupon or Groupoff? Arizona Opines on the Ethics of Attorney Advertising on Groupon
Arizona has joined several other states that have issued opinions on the validity of Groupon or discount coupon attorney advertising. After listing the many ethics issues at play in this online approach, such as competence, confidentiality, impermissible fee sharing, conflicts, and misleading advertising, Arizona concludes that the permissibility of Groupon advertising will depend upon the specific facts of the situation, but cautions that it will be difficult to use a Groupon approach and adhere to all of the rules. Click here for the opinion. Click here for our prior Groupon post and links to other state opinions.
Wrongful Conviction Results in Arrest of Former State Prosecutor
In 1989, Michael Morton was convicted of murdering his wife. The prosecutor was Ken Anderson.
Fast forward to 2013…Michael Morton has been released as a result of DNA litigation and a Public Information Act request that revealed that the prosecution withheld exculpatory evidence during the original trial.
Ken Anderson, now a state court judge, has been arrested after being served with a warrant, which was issued because a Court of Inquiry, convened by the Texas Supreme Court at the request of the Morton’s attorneys, found sufficient evidence to require Anderson to answer for the alleged criminal conduct that resulted in the wrongful conviction and imprisonment of Michael Morton for 25 years.
In issuing a warrant for Judge Anderson’s arrest, Texas Judge Louis Sturns opined, “This court cannot think of a more intentionally harmful act than a prosecutor’s conscious choice to hide mitigating evidence so as to create an uneven playing field for a defendant facing a murder charge and a life sentence.”
To read more, click here and here.
Texting For Clients? Ohio Opines on the Ethics of Texting & Attorney Advertising
The Supreme Court of Ohio recently ruled that attorneys may use text messages to advertise, but emphasized that the Ohio Rules of Professional Conduct must be followed regardless of space limitation or advertising vehicle. Attorneys are using texting to contact prospective clients after obtaining their numbers from police and accident reports. Although the messages often contain a link to the lawyer’s website, the Court said that the link is not enough and the actual text must contain any language that is required by the advertising and solicitation rules, such as placing the words Advertisement Only or Advertising Material at the beginning and end of the text and other lengthier disclaimers if the lawyer knows that the prospective client is in need of legal assistance or has been recently injured.
The opinion distinguishes texting from impermissible, potentially coercive real time communication and analogizes texting to sending an email solicitation. The opinion also notes that a text message should not create any cost to the recipient, should not be sent to a minor and must be in compliance not only with attorney advertising rules, but also with applicable state and federal communication regulations.
Some of the disclaimer language required by the attorney advertising rules in Ohio is quite long for a text message, such as the language, which must be sent if someone has recently be injured in an accident. It is important to note that, unlike other states that require a thirty day waiting period before contacting an accident victim, Ohio permits contact with a victim within thirty days; however, the following “Understanding Your Rights” statement must be included regardless of whether the contact is via text message: THE SUPREME COURT OF OHIO, WHICH GOVERNS THE CONDUCT OF LAWYERS IN THE STATE OF OHIO, NEITHER PROMOTES NOR PROHIBITS THE DIRECT SOLICITATION OF PERSONAL INJURY VICTIMS. THE COURT DOES REQUIRE THAT, IF SUCH A SOLICITATION IS MADE, IT MUST INCLUDE THE ABOVE DISCLOSURE.
Whether sending all of the additional disclosure language in a text message defeats the goal of a streamlined texting advertising campaign remains to be seen, but clearly technology has provided yet another vehicle to drive in the controversial world of attorney advertising.
Click here to read the full opinion.
Is Your Client Data Safe?
Is your client data safe? According to the FBI, hackers have begun attacking law firms at an increasing rate as it is an optimal way to obtain economic, personal and personal security-related information. A recent article in the Texas Bar Journal entitled “Keeping Client Data and Your Law License Secure,” highlights the intense evolution of the practice of law in regards to technology and the security measures required to protect client data and maintain client confidentiality. Moreover, the ethics rules have evolved so that a competent lawyer is one who understands the benefits and disadvantages of technology. The article suggests that the use of encryption software is to protect law firm data and indicates that there are encryption tools available via the Internet that are easy to use and allow any attorney to encrypt all client data on his or her hard drive. Technology 101 may be a new course for lawyers, but it is certainly one in which we must all enroll!
Subsidizing Legal Relocation
In an age where there is no shortage of attorneys in most urban areas, certain rural communities remain under-served when it comes to access to legal services. South Dakota aims to change that in their state with a new law passed in March. Under the new pilot program, South Dakota will pay up to sixteen lawyers a $12,000 subsidy per year to practice in rural areas. As part of the arrangement, the attorneys will have to work in a county with a population of 10,000 or less and make a firm five-year commitment to the program.
South Dakota recognizes a problem that other states may also face with an overwhelming proportion of their attorney population residing in urban areas while a significant portion of the population reside in rural areas. Only two percent of lawyers nationwide practice in rural areas while close to 20 percent of the population resides in such areas. Access to legal services in rural areas is an issue that lawmakers continue to confront. While it remains to be seen whether South Dakota’s approach will be successful or adopted in other states, it is clear that at least one state is taking note of the shortage of lawyers in rural communities.
Click here to read more about the need for legal relocation.