Lawyers welcome ruling on money laundering

[FaGal]

Lawyers welcome ruling on money laundering
news.ft.com - By Nikki Tait, Law Courts Correspondent - March 9, 2005


Money-laundering regulations do not require lawyers to report any suspicions of illegality that arise during litigation, senior judges ruled yesterday.

The Law Society, representing solicitors in England and Wales, hailed the "radical judgment" which "will eliminate confusion and potential disruption for thousands of clients and lawyers involved in litigation".

Janet Paraskeva, chief executive, said: "The Law Society intervened because we believed that the current interpretation of money-laundering legislation was too wide-ranging."

She added: "An earlier ruling meant that once a solicitor had a suspicion, however small, he or she could not continue with the case until the National Criminal Intelligence Service had given consent. As a result, thousands of family cases, for example, were affected because of possible minor tax evasion. This is not what the legislation intended."

The National Criminal Intelligence Service said it was considering the decision and would "not necessarily" try to appeal further.

The legal profession's disquiet about the practical implications of the 2002 Proceeds of Crime Act and of 2003 money-laundering regulations has been brewing for months.

The new rules require professional advisers to report any suspicions or suspect transactions to the NCIS or risk prosecution. The result has been a torrent of disclosures - about 150,000 in 2004 - of which about four-fifths have come from lawyers. But lawyers have complained about the burden, worried about the extent to which client-lawyer privilege was being undermined.

As Lord Justice Brooke noted in yesterday's decision, at the heart of the appeal was "an issue of public law of very great importance which is causing great difficulties in solicitors' offices and barristers' chambers and in the orderly conduct of contested litigation".

The test case involved Jennifer Bowman, who was claiming a share in property from a builder, William Fels, with whom she lived.

Her solicitors became suspicious that Mr Fels had included the cost of work on the property in his business accounts and VAT returns, even though this was unconnected to his business.

The solicitors reported this to NCIS and took the view that they should stop working on the case as well.

But yesterday three Appeal Court judges said they did not believe the act was intended to cover "the ordinary conduct of litigation by legal professionals".

[FaGal]

Law Society intervention reduces burden of reporting on money laundering
www.lawsociety.org.uk - March 8, 2005


An Appeal Court ruling today benefits consumers of legal services and the legal profession by clarifying the circumstances in which solicitors have to report a suspicion of money laundering.

The Court of Appeal judgment in Bowman v Fels provides valuable protection for legal professional privilege. It makes it clear that lawyers involved in litigation owe a primary duty to the court and to their client and it exempts them from making money laundering reports.

The Law Society intervened in Bowman v Fels to establish what steps solicitors must take when suspicions of money laundering arise when they are acting for a client in litigation.

Janet Paraskeva, Law Society chief executive, said:

“This radical judgment will eliminate confusion and potential disruption for thousands of clients and lawyers involved in litigation.

“The Law Society intervened in this case because we believed that the current interpretation of money laundering legislation was too wide ranging. An earlier ruling meant that once a solicitor had a suspicion, however small, he or she could not continue with the case until NCIS [National Criminal Intelligence Service] had given consent. As a result, thousands of family cases, for example, were affected because of possible minor tax evasion. This is not what the legislation intended and it has created uncertainty both for solicitors and their clients.

“We welcome the importance this judgment places on legal professional privilege. The Appeal Court believes that legal professional privilege can only be eroded by clear parliamentary legislation and not simply by interpretation of current legislation.

“For the last five years, the Law Society has been actively lobbying at EU and domestic level for a more proportionate approach to money laundering legislation.”

Ms Paraskeva added: “Solicitors want to play their part in the fight against international fraud and terrorism, but the current legislation is merely clogging up the system. We will continue to press for changes to the current law to bring about more targeted provisions that focus on rooting out money laundering.”


Notes to editors

1. Around 12,500 reports were made by solicitors during 2004, making solicitors the biggest reporting group outside the financial institutions. 80 per cent of reports made by solicitors were made by family lawyers. Solicitors make around 80 per cent of all appropriate consent requests received by NCIS.

2. The appeal is the first time that the money laundering provisions of Part 7 of the Proceeds of Crime Act 2002 (POCA) have been considered by the Court of Appeal. It examined the extent of legal advisers' duties under POCA. One of the issues is the correct interpretation of comments made by Dame Elizabeth Butler-Sloss in P v P that, once a report or disclosure has been made to the National Criminal Intelligence Service (NCIS), a person must not take any substantive steps in relation to legal proceedings until notice of consent has been obtained or is deemed to have been given at the expiry of statutory time limits.

3. However, the Bowman v Fels judgment does sound a note of caution for those wishing to misuse the services of lawyers in order to launder money as it says that there would be different considerations for litigation created as a sham to facilitate money laundering. It should also be remembered that if courts become aware of financial irregularities they retain discretion to report to the authorities themselves.

4. The Law Society received approximately 7,700 enquiries from solicitors in 2004, relating to money laundering legislation.

5. The Law Society regulates and represents the solicitors’ profession in England and Wales and has a public interest role in working for reform of the law. Solicitors in Scotland and Northern Ireland are represented by the Law Societies in Scotland and Northern Ireland respectively.


For more information call the Law Society Press Office on 020 7320 5884.