Money Laundering, Lawyers, and Escrow: The Case for Voluntary Due Diligence

Though the popular television series Ozark romanticizes the underlying criminal conduct, money laundering and the manipulation of beneficial ownership are genuine issues confronting lawyers. This was, of course, highlighted in the joint 60 Minutes-Global Witness exposé entitled Lowering the Bar, which aired in 2016. Viewed by 9.3 million people, 60 Minutes effectively demonstrated how New York lawyers implicate themselves, wittingly and unwittingly, in money laundering. This exposé, and the ensuing Grievance Committee investigation that I co-prosecuted while with the First Department, resulted in two public censures. In re Koplik, 168 A.D.3d 163 (1st Dept. 2019); In re Jankoff, 165 A.D.3d 58 (1st Dept. 2018). The real value in the Committee’s investigation flowed, not from the sanctioning of lawyers, but in the identification of unresolved issues. Specifically, issues concerning the lawyer’s evolving practical and ethical role in the financial system and the lack of meaningfully specific obligations needed to avoid potentially violating the Rules of Professional Conduct (Rules) or worse—federal law. As discussed below, because an escrow account is a conduit for money laundering, lawyers should voluntarily enact due diligence protocols over the provenance of escrow deposits.

The Global Witness is an international organization dedicated to combating corruption. It teamed with 60 Minutes to create a ruse that was cleverly simple: an undercover operative arrived at a lawyer’s office and, while recording the conversation, indicated his connection to an undisclosed West African government minister intent on introducing millions into the U.S. financial system. This part of the narrative implicated a historically corrupt geographic region, a prominent government official, and assets disproportionate to that career. To varying degrees, the undercover implied, strongly suggested, or frankly conceded that the provenance of the minister’s money was illicit. And that a primary objective of any representation would be maintaining the minister’s anonymity in the introduction of this money into the financial system and subsequent conversion to capital items. This dubious narrative implicated the lawyer’s ability to lawfully advise and represent a client. It harmonized potentially illegal money with lawful, but contextually curious, legal objectives like anonymity in beneficial ownership. As most of the targeted lawyers were solo or small firms, which in my Committee experience occasionally lack the controls and safeguards of larger firms, this sub-group of practitioners was likely purposefully targeted. Lawyers like Koplik and Jankoff who provided information effectuating the minister’s aims violated Rules 1.2(d) (counseling a client in conduct known to be illegal or fraudulent) and 8.4(h) (conduct adversely reflecting on a lawyer’s fitness).