Striking the Balance: Anti-Money Laundering Reporting Obligation vs Legal Professional Privilege
The legal professional’s code of ethics comprises principles and rules that guide lawyers’ conduct to ensure they uphold the integrity of the profession, act in the best interests of their clients, and maintain public trust. These ethical codes cover key areas such as confidentiality, diligence, honesty, and the avoidance of conflicts of interest in dealings with clients, courts, and other legal professionals.
Violations of these ethical standards can result in disciplinary actions, including suspension or disbarment. International bodies such as the International Bar Association (IBA) and the United Nations, along with national legal associations, emphasize the importance of lawyer–client confidentiality and the protection of lawyers from undue interference.
Generally, lawyers are bound by strict confidentiality and are not required to disclose their clients’ actions to authorities. However, there are exceptions — such as when a lawyer becomes aware that a client is about to commit a crime or when disclosure is necessary to prevent serious harm. In such instances, client privilege may be limited.
Lawyers who suspect their clients of engaging in unlawful activities face difficult decisions about what information to report under anti-money laundering (AML) regulations — and whether they are legally permitted to report at all.
In line with best practice, lawyers, notaries, and other independent legal professionals are not required to report suspicious transactions if the information was obtained under circumstances protected by professional secrecy or legal privilege. Nonetheless, they are still expected to observe AML measures, including reporting suspicious transactions to competent authorities when they engage in certain activities, such as:
- Buying or selling real estate
- Managing client money, securities, or other assets
- Managing bank, savings, or securities accounts
- Organising contributions for the creation or operation of companies
- Creating, operating, or managing legal entities or buying and selling business entities
These measures also include conducting client due diligence, assessing money laundering risks, maintaining proper records, training staff, and using technology to strengthen compliance.
Competent authorities and Self-Regulatory Bodies (SRBs) must determine how often and how intensely to supervise legal professionals based on identified risks of money laundering or potential misuse of legal services. Countries are expected to demonstrate that there are adequate frameworks for lawyers to report suspicious activities while maintaining confidentiality.
Where lawyers are allowed to send Suspicious Transaction Reports (STRs) to their SRBs, there should be strong cooperation between these bodies and Financial Intelligence Units (FIUs). Similarly, if STRs are to be submitted directly to FIUs, mechanisms must be in place to ensure their effective implementation.
Legal professionals must carefully balance their AML reporting obligations with the duty of client confidentiality. Though exceptions exist for mandatory reporting of serious crimes, lawyers may still face ethical dilemmas in maintaining this balance.
They are also encouraged to be vigilant for warning signs of potential abuse of their services by criminals seeking to conceal illicit activities.
The writer is a financial crime specialist.
By Rita Yeboah Quayson
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