Jonathan Goldsmith is secretary general of the Council of Bars and Law Societies of Europe, which represents about one million European lawyers through its member bars and law societies. He blogs weekly for the Gazette on European affairs Well, at least one of my predictions from last week for 2013 has come true: the draft of the fourth money laundering directive was published a few days ago, as reported by the Gazette last week. It will have important consequences for lawyers. I will just flesh out a few of those possible consequences now, since it is still too early to be certain of the exact meaning and impact of the new articles. Two proposals were published at the same time, one the expected directive, and the other a regulation on information accompanying transfers of funds to secure “due traceability” of those transfers. Both are based on the latest Recommendations of the Financial Action Task Force (FATF), and – worryingly – the European Commission boasts that it goes further than the FATF in a number of fields. The EU has always been the keenest pupil in the FATF’s class, for instance introducing lawyer reporting when other important FATF members, like Japan, Canada and the US, have resisted it. This time it is proud that it has gone beyond the FATF by lowering the limit of cash allowed for payment of goods (like furs or diamonds) before triggering the provisions of the directive, from €15,000 to €7,500. The commission says that the new directive will, among other things, improve clarity and consistency of the rules across the member states, provide a clear mechanism for identification of beneficial owners, and extend the scope of the directive (for instance to gambling, and to cover tax crimes). There are some interesting new aspects regarding lawyers and our reporting duties. I make no approving or disapproving comments at this stage, because the organisation I represent, the Council of Bars and Law Societies of Europe (CCBE), is still crawling through the clauses carefully. The main new article relating to lawyer reporting is Article 33.2, which corresponds to the old Article 23.2 of the third money laundering directive, and lays out the scope of the reporting duty. Much of it appears to be the same as before. However, words have been added to highlight that the exemption to reporting in relation to lawyers applies ‘only to the strict extent that such exemption relates to information’ acquired in the listed ways, which appears to be more stringent than before. And it now also becomes mandatory for member states, and not just optional, to apply this exemption for lawyer reporting. The most interesting aspect of the draft directive for lawyers might turn out to be the attempt by the commission to codify the recent Michaud case (12323/11) before the European Court of Human Rights. That was the case which raised the question of whether a lawyer’s duty to report suspicious transactions under the money laundering legislation breached the European Convention of Human Rights, in particular Article 8 (right to respect for private and family life). The Court found, in the particular circumstances of France, that – among other things – the reporting which took place through the filter of the president of the bar was sufficient protection for professional secrecy. Just to clarify for those unfamiliar with the French system: in France, lawyers do not report suspicious transactions directly to the Financial Intelligence Unit (FIU), but rather to the president of their bar, who decides whether the report should be transmitted onwards to the FIU. Now recital 27 of the draft directive states that: ‘In line with the case law of the European Court of Human Rights, a system of first instance reporting to a self-regulatory body constitutes an important safeguard to uphold the protection of fundamental rights as concerns the reporting obligations applicable to lawyers.’ And there is an article which captures the point later in the new draft. The question – and it is no more than that at this stage – is whether the French system of reporting suspicious transactions through the president of the bar will now spread to other bars. It is already in use beyond France. Would the UK, for instance, think of implementing it? Is it safer all round, more protective of professional secrecy, than direct lawyer reporting? Does it put what might turn out to be an unbearable responsibility on the president of the bar? Of course, the exceptionally high number of reports in the UK compared to other member states might make this way forward in any way impractical, regardless of the principle of whether it is a good thing. As you can see, there is likely to be a spirited struggle ahead, as happened with previous directives on the same topic. We will need time to absorb and discuss its nuances. Lawyers, be warned.
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