Monday, August 1, 2016

AML — Anti-Money Laundering (or Ask Me Later)?



Earlier this year, many were abuzz about "that 60 Minutes segment" on AML. Now from the Wall Street Journal: "Law Firms a 'Weak Spot' in Money Laundering Detection" --
  • "What’s a lawyer to do if he or she suspects that a client is using them to help shuffle illicit funds? That’s the question posed this week by the series of civil complaints filed by the Justice Department seeking the seizure of a staggering $1 billion in assets tied to Malaysian economic development fund 1Malaysia Development Bhd., or 1MDB. The court filings offer painstaking detail on how money that was allegedly siphoned from the fund was passed through a trust account at the law firm Shearman & Sterling LLP on its way toward buying luxury real estate, private jets and casino nights."
  • "To be clear, Shearman isn’t accused of any wrongdoing. But the filings call into question how law firm trust accounts are used and what steps law firms can take to avoid getting in a tricky situation."
  • "Speaking generally and not about Shearman, legal ethics expert Stephen Gillers explains that ‘Lawyers can unwittingly provide a smoke screen for people who want to launder money.’ U.S. lawyers aren’t ethically obligated to trace the source of money being used by clients to fund deals and other projects. But legal ethics experts say attorneys should know generally where client funds come from and look out for red flags to avoid serving as an intermediary for dirty money."
  • "Richard Painter, a professor at the University of Minnesota Law School and a former chief White House ethics counsel under George W. Bush, said he and others have long thought that 'law firms have been a weak spot in the regulatory regime; in regard to money laundering."
Bloomberg notes that this activity “renews questions about whether a lack of regulations on lawyers encourages money laundering by their clients,” in: "Malaysian Fund Pilfering Claim Shines Light on Law Firm’s Role" --
  • "Still, the case exposed what lawmakers say is a soft underbelly in U.S. efforts to combat money laundering. While bankers are required by law to ask questions about their customers, inquire about the source of their money and report suspicious activity, lawyers are exempt from such regulations, shielded by attorney-client privilege. Voluntary guidelines adopted by the American Bar Association encourage lawyers to follow its 'good practices guidelines’' on combating money laundering and terrorist financing."
  • "That guidance, adopted in 2010, counsels lawyers to conduct due diligence on each client, understanding their circumstances and the source of their money. Lawyers are encouraged to be satisfied that they’re not abetting fraudulent or criminal conduct. The ABA says that the oversight of the 50 state supreme courts, and the threat of prosecution, is enough. Some lawyers are dubious."

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