Do the ethics rules make a lawyer a 'gatekeeper' who must report a client suspected of money laundering?
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This page answers the general question as of 2013. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.
Plain-English summary
The opinion responds to pressure from intergovernmental bodies urging that lawyers serve as "gatekeepers" to the financial system. It concludes the Model Rules do not impose that role: "the Model Rules neither require a lawyer to fulfill a gatekeeper role, nor do they permit a lawyer to engage in the reporting that such a role could entail." Mandatory reporting of client suspicion would conflict with the confidentiality duty in Rule 1.6 and the duties to prospective clients in Rule 1.18, and reporting without informing the client would conflict with Rule 1.4(a)(5).
The opinion then analyzes the ABA Voluntary Good Practices Guidance, adopted by the House of Delegates in August 2010, which endorses a "risk-based" approach drawn from FATF guidelines rather than a rigid rules-based one. It concludes the Guidance fits within the Rules: "the Committee believes that the advice derived from the Good Practices Guidance is consistent, and not in conflict, with the ethical obligations of lawyers under the Model Rules." Performing client due diligence (CDD) is consistent with Informal Opinion 1470's admonition that "a lawyer cannot escape responsibility by avoiding inquiry," and with Rule 1.2(d), which "prohibits a lawyer from knowingly counseling or assisting a client to commit a crime or fraud."
The opinion frames CDD as scaled to risk: "the level of appropriate CDD varies depending on the risk profile of the client, the country or geographic area of origin, or the legal services involved," with enhanced diligence for politically exposed persons or sanctioned countries. It notes lawyers remain subject to federal anti-money-laundering laws and should be mindful of the Treasury's Specially Designated Nationals list. If a lawyer comes to reasonably believe a client is engaged in criminal or fraudulent conduct, Rule 1.16(b)(2) permits withdrawal. The opinion situates the analysis in the Scope comment that the Rules do not exhaust the moral and ethical considerations informing a lawyer.
In practice
Under this opinion, a lawyer is not obligated under the Model Rules to report a client suspected of money laundering, and indeed may not engage in the reporting a gatekeeper role would require. The opinion holds it is nonetheless prudent to perform risk-based client due diligence proportionate to the client's risk profile, origin, and the services involved, that Rule 1.2(d) bars knowingly assisting a client crime or fraud, and that Rule 1.16(b)(2) permits withdrawal if the lawyer reasonably believes the client is using the lawyer's services in a crime or fraud.
Common questions
Q: Do the Model Rules require me to report a client I suspect of money laundering?
A: Per the opinion, no; the Rules do not impose a gatekeeper role, and mandatory reporting would conflict with Rules 1.6, 1.18, and 1.4(a)(5).
Q: Is the ABA Good Practices Guidance compatible with the Rules?
A: The opinion concludes yes; the Guidance is consistent, and not in conflict, with lawyers' ethical obligations under the Model Rules.
Q: How much due diligence should I do on a client?
A: The opinion says it varies with the client's risk profile, geographic origin, and the legal services involved, with enhanced diligence for politically exposed persons or sanctioned or high-corruption countries.
Q: What can I do if I come to suspect the client is involved in crime or fraud?
A: The opinion notes Rule 1.16(b)(2) permits withdrawal where the client persists in conduct involving the lawyer's services that the lawyer reasonably believes is criminal or fraudulent.
Background and rules framework
The opinion interprets Model Rule 1.2(d) (no knowing assistance of client crime or fraud) against Model Rule 1.6 (confidentiality) and Model Rule 1.18 (prospective clients), which it finds incompatible with mandatory reporting. It applies Model Rule 1.16(b)(2) (permissive withdrawal) and Model Rule 2.1 (the advisor's role), and frames the discussion through the Scope comment on the Rules' moral dimension.
Citations and references
Rules of Professional Conduct:
- ABA Model Rule 1.2(d) (crime or fraud)
- ABA Model Rule 1.6 (confidentiality); 1.18 (prospective clients)
- ABA Model Rule 1.16(b)(2) (withdrawal); 2.1 (advisor)
Other opinions and authorities cited:
- ABA Informal Op. 1470 (1981): no escaping responsibility by avoiding inquiry
- ABA Formal Op. 335 (1974): not accepting as true what one does not reasonably believe
- ABA Voluntary Good Practices Guidance (Resolution 116, adopted August 2010)
Cases:
- Federation of Law Societies of Canada v. Canada (Attorney General), 2013 BCCA 147
See also
- ABA Formal Op. 491: Avoiding Counseling or Assisting a Crime or Fraud
- ABA Formal Op. 513: Duty to Inquire Into Each Representation
- ABA Formal Op. 484: Client Fee Financing Companies
Source
- Landing page: ABA Formal Ethics Opinions index
- Original PDF: formal_opinion_463.pdf
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