On September 24th 2019, Global Elite members gathered at The Ivy Club in London to discuss the topic “Trusted advisor: As whistleblower, investigator, prosecutor and prisoner.”

Hosted by Jonathan Speck, Mourant, Jersey, the demographic of the group was split between private client litigators and planners, leading to an interesting contrast between the “need” to find certainty and avoid controversy in this provocative area of debate.

Th group at first assessed the dramatic changes that private client advisors have endured across their practice in recent years, with the heightened increase in global compliance and introduction of CRS rules. In particular, the impact that these measures have had on advisors (and their clients) within the EU. Has the EU moved the needle so far as to inadvertently ask advisors to “inform” on their clients? Suffice to say, the theme of “criminalisation” is making headway in the private client community.

Hosting a discussion with participants from the US, offshore, UK, Spain and Italy, to name but a few, meant that there were also some interesting (and at times, surprising) geographical comparisons to be made within the criminalisation of the private client profession.

The UK stood out as being, by far, the most stringent enforcers within this area. In particular, it was felt that it is hard to draw the line with regards to what could be classed as “tax avoidance.” In 2018, there were around 477,000 submissions for potential tax avoidance schemes, 90% of which were not relevant. However, money laundering advisors submitted their client’s schemes, “just to be safe,” in case they were penalised. In effect, this means that around 430,000 submissions were a breach of client confidentiality in 2018, due to the fear of criminalisation. Is this ethically right? If rules and regulations were clearer, would there would be less damage to client relationships?  Whilst no-one wanted to say the “B” word, what will happen to reporting standards after the 31st October 2019 deadline? Could everything change?

Elsewhere in the EU, Italy’s voluntary disclosure programme was reported as being large, but in practice, very unclear. It has taken a particular toll on small businesses, who are naïve and face a lack of understanding as to how rules and regulations are evolving. Similarly, in Spain, compliance rules have been widely implemented and have become consuming for law firms, in terms of resourcing. However, there is still some uncertainty as to the level of due diligence that lawyers have to carry out and the boundaries of reporting obligations, particularly regarding issues like privilege or the interconnection between money laundering and tax avoidance. In the US, the criminalisation of lawyers is certainly more guarded, but there are signs that they are taking note and following in Europe’s more stringent stead.

So what is “best practice” if you have an inkling that your client or potential client may be incriminating themselves and their advisor?

  • Turn clients away if they are too aggressive with their requests and/ or arrangements. Ask yourself: Everyone needs representation, but do you want to represent everyone?
  • If it is an existing client that you have a strong relationship with, it will be easier to provide instant solutions and let them know that the line has been crossed, including the impact of such if it is continued
  • For new clients, you need to immediately set out the parameters: Is the advice technical or reputational?

If you would like to find out more information about the Global Elite or join our  next discussion dinner, please contact Amy Glover at [email protected] to enquire about membership to the Global Elite. Our 2020 calendar can be found below:

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