European Commission rejects lawyers’ pleas to reduce anti-money laundering burden

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By Legal Futures

17 April 2012


EU: lawyers say reporting rules violate confidentiality and the right to a fair trial

The European Commission (EC) sees no reason to accede to lawyers’ calls and reduce the burden of anti-money laundering (AML) rules on the legal profession, a new report has indicated.

However, the EC is to consider what steps might be necessary to deal with the under-reporting of suspicious transactions by lawyers.

A report published last week on the EC’s review of the third anti-money laundering directive concluded that “it may not be necessary to fundamentally revise the treatment of lawyers in the new directive” that will follow the work, as well as new AML recommendations from the Financial Action Task Force.

The report argued that despite concerns expressed by lawyers that the AML obligations imposed on them violate confidentiality and the right to a fair trial, European Court of Justice rulings were clear that this is not the case.

However, the report does not mention cases pending before the European Court of Human Rights over the compatibility of lawyers’ reporting requirements with the human rights convention.

The EC also dismissed lawyers’ requests for reform of the due diligence requirements, such as allowing them to be fulfilled within a reasonable time frame and not always at the start of a transaction, and removing the requirement to provide ‘on request’ information on the identity of beneficial owners in the case of pooled accounts held by lawyers.

However, it said the definition of ‘transaction’ – which triggers the AML obligations – could be given “a possible clarification”.

A 2010 study by Deloitte underpinning the review found particularly low levels of reporting of suspicious transactions by lawyers in some jurisdictions – although not the UK, whose lawyers made many more reports than the rest of the EU’s legal profession put together – and the report said “it may be appropriate to give further consideration to under-reporting”.

Among reasons identified by the EC for the high levels of reporting by UK lawyers are the high penalties for non-reporting; a “committed enforcement policy” from the authorities; the “very broad definition of criminal activity as predicate offence”, including no de minimis rule; and “certain ambiguity in the interpretation of national law with respect to the need to report in the context of litigation, the result being a high prevalence of precautionary reporting”.

More broadly, the EC said it would look at whether ‘tax crimes’ needed to be included as a specific category of serious crime, and whether to reduce the 25% threshold at which beneficial ownership becomes reportable to 20%.

 

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