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….”

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