Lawyers are comfortable with their age-old role as outward risk advisors, giving sage counsel to clients on how to avoid or mitigate risks. But recent developments should give lawyers pause as to whether they are sufficiently inward looking at the reputational risk they face from their own clients—particularly those seeking to misuse legal services to launder illicit funds.
To be sure, although bound by ethical obligations not to counsel or assist clients to engage in criminal activity, U.S. lawyers have no legal duty to affirmatively report a client whose activities with the lawyer raise a suspicion of money laundering. As criticized in a December 2016 report of the Financial Action Task Force (FATF)—focused on the United States’s anti-money laundering (AML) and counter-terrorist financing measures—U.S. lawyers are not subject to an AML reporting requirement, despite frequently playing a key role in handling financial transactions on behalf of clients. Characterizing this as a notable gap in the U.S. AML infrastructure, the report juxtaposed this situation with many western countries that do have such reporting requirements, such as the UK and France.
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