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Anti Money Laundering Initiatives and Lawyers: What We Need to Know - May 2, 2014


Last Friday I was lucky enough to attend a Symposium at New York Law School entitled "Combating Threats to the International Financial System: The Financial Action Task Force."1

The Financial Action Task Force (FATF) is an international task force established in 1989 which now has representatives from 36 countries, including the United States, Canada, the European Union countries, China, Japan and others.

The FATF mission is to establish international standards for combating money laundering from illegal transactions and to prevent financing of terrorist activities.  Since its inception in 1989, the FATF has instituted many recommendations of steps countries can take, in the form of law or regulations, to prevent the use of our financial institutions and systems, for laundering monetary proceeds of illegal activities.

After September 11, 2001, the FATF charge was expanded to include the prevention of terrorist financing as a primary goal of the task force.  New York Law School is located in lower Manhattan, in TriBeCa, less than a 10 minute walk from the World Trade Center.  It was so very appropriate that this Symposium was held in such close proximity to the WTC.

The introductory speaker, Duncan Osborne, of Austin, Texas2, not only gave a background of the FATF’s efforts to recommend enforcement measures to member countries, but he gave a thought provoking critique of the effectiveness of those measures and the price to be paid, in terms of loss of individual liberties, upon national implementation of certain of the FATF recommendations.

It is hard to argue against measures that are intended to prevent the ‘legalization’ of monetary proceeds of illegal activities such as the drug trade and human trafficking.  It is even more difficult to question any laws that are intended to prevent the financing of terrorist activities, especially when the cost of terrorist activities is not the loss of funds, but the loss of life.

Unfortunately, however, not all well-intended actions are effective.  And others have the potential effect of seriously depriving individuals of their liberty, particularly when the FATF recommended actions impose serious regulations on the legal profession.

This includes requiring lawyers to report certain client monetary activity to government or quasi-governmental authorities.  In addition, there is a proposed requirement that lawyers report to the authorities when there is a suspicion of such activity by clients or potential clients.  Such reporting must be done without notifying the client of the reporting, which is called the “no tipping off” rules.

Mr. Osborne pointed out that not only do such laws and regulation run afoul of the personal liberties granted to individuals through the legal systems of the various countries, but the effectiveness of the rules in the jurisdictions that have adopted them has been questionable.

Although these types of rules (which are also applicable to casinos and dealers in precious metals and stones) have not been adopted for lawyers in the United States, the FATF does bring pressure on the various jurisdictions to pass legislation to that effect.

Mr. Osborne’s presentation was an appropriate beginning to the subsequent panels discussing the FATF’s work, which will be the subject of future articles.

1. The Symposium was planned and hosted by Professor William P. LaPiana, the Rita and Joseph Solomon Professor of Wills, Trusts, and Estates, Director of Estate Planning Studies for the Graduate Tax Program at New York Law School and the New York Law School Law Review.

2. Mr. Osborne, the immediate past president of the American College of Trust and Estate Counsel (ACTEC) has served as the ACTEC delegate to the FATF for more than 10 years and is a writer and frequent speaker on the topic of anti-money laundering and anti-terrorist financing efforts.