How much does a lawyer have to investigate a client before taking the matter to avoid assisting a crime or fraud, and when does that duty come up again later?

Plain-English summary

In August 2023 the ABA amended Model Rule 1.16(a) to state that a lawyer "shall inquire into and assess the facts and circumstances of each representation to determine whether the lawyer may accept or continue the representation." This opinion explains what that inquiry requires. According to the opinion, the duty to inquire was already implicit in Rules 1.1, 1.2(d), 1.3, 1.4, 1.13, 1.16, and 8.4; the amendment made the existing duty explicit and imposed no new obligations. The changes grew out of concerns raised by the U.S. Treasury and international bodies that lawyers can unwittingly facilitate money laundering and terrorist financing, but the duty applies more broadly than those transactions.

The opinion adopts a risk-based approach drawn from Comment [2] to the rule, incorporating reasonableness and proportionality. The required depth of inquiry varies by client and matter depending on the degree of risk. The opinion lists the comment's non-exclusive risk factors: the identity of the client, including the beneficial ownership of an entity; the lawyer's experience with and familiarity with the client; the nature of the requested legal services; the relevant jurisdictions; and the identities of those depositing into or receiving funds from the lawyer's trust account. The opinion notes that "a higher risk of participating in money laundering or terrorist financing exists when the lawyer 'touches the money,'" meaning the lawyer acts as a financial intermediary.

For most matters, the opinion says the initial inquiry will not exceed what lawyers already do at intake; significant inquiry is needed only where there is heightened risk or where red flags appear. The opinion states that "to reduce the risk of counseling or assisting a crime or fraud, some level of inquiry and assessment is required before undertaking each representation." If the lawyer has actual knowledge the services will be used for crime or fraud, the lawyer "must decline or withdraw from the representation." But the inquiry is bounded: it is "a reasonable risk-based inquiry, not a perfunctory one and not one that involves a dragnet-style operation to uncover every fact about every client," and the lawyer "need not resolve all doubts."

The duty is continuing. Per Comment [1], a lawyer need not continuously monitor clients, and the existence of changed facts does not by itself trigger further inquiry; the obligation arises when the lawyer becomes aware of a change that raises questions about the original risk assessment. The opinion is clear this is "not a 'zero failure' approach," and that a lawyer's judgment is evaluated as of the time it was made: per the opinion, "that a client uses the lawyer's services to commit a crime or fraud does not establish that the lawyer's inquiry and assessment was unreasonable, because the lawyer's judgment should be evaluated as of the time it was made, not with the benefit of hindsight."

In practice

Under this opinion, a lawyer satisfies Rule 1.16(a) by making a reasonable, proportionate inquiry at intake, scaled to the risk presented by the client, the services, the jurisdictions, and the flow of funds. The opinion holds that where unresolved questions of fact remain after the initial inquiry, the lawyer must make additional reasonable efforts to resolve them before accepting or continuing; where the client refuses to provide needed information, the lawyer must decline or withdraw; and where the lawyer seeks verification from other sources, the lawyer must observe the confidentiality duties of Rules 1.6 and 1.18. If after a reasonable inquiry some doubt remains, the opinion holds the lawyer may proceed so long as the lawyer concludes the representation is unlikely to involve assisting a crime or fraud.

Common questions

Q: Does Rule 1.16(a) require running a full background check on every new client?

A: No. The opinion describes a risk-based, proportionate inquiry, and says that for most representations the inquiry will not exceed ordinary intake. It expressly rejects a "dragnet-style operation to uncover every fact about every client."

Q: When does a lawyer have to dig deeper?

A: Per the opinion, deeper inquiry is needed when the matter presents heightened risk or when red flags appear, judged against factors such as the client's identity and beneficial ownership, the nature of the services, the jurisdictions involved, and whether the lawyer is handling the client's funds.

Q: If a client later turns out to have used my services for fraud, did I violate the rule?

A: Not necessarily. The opinion says the standard is not "zero failure," and the lawyer's judgment is assessed as of the time it was made, not in hindsight. A client's later misuse does not by itself show the inquiry was unreasonable.

Q: What if I have actual knowledge the client wants to use me for a crime or fraud?

A: The opinion is categorical: the lawyer must decline the matter or withdraw from it. Rule 1.0(f) allows actual knowledge to be inferred from the circumstances.

Background and rules framework

The opinion interprets Model Rule 1.16(a), as amended in August 2023, which directs a lawyer to inquire into and assess the facts and circumstances of each representation and to decline or withdraw where required. It reads that rule alongside Rule 1.2(d) (no counseling or assisting conduct the lawyer knows is criminal or fraudulent), Rule 1.1 (competence, including factual and legal inquiry), Rule 1.4 (communication), and Rule 1.6 and Rule 1.18 (confidentiality to clients and prospective clients when verifying information). The opinion builds on Formal Opinion 491 (2020), which addressed the duty to inquire in non-litigation settings, and Formal Opinion 463 (2013) on money-laundering risk.

Citations and references

Rules of Professional Conduct:

• ABA Model Rule 1.16(a) and 1.16(b)(2) (declining or withdrawing from representation)
• ABA Model Rule 1.2(d) and 1.2(c) (no assisting crime or fraud; limiting scope)
• ABA Model Rule 1.1 (competence), 1.3 (diligence), 1.4 (communication)
• ABA Model Rule 1.6 (confidentiality), 1.18 (prospective clients), 1.0(f) (knowledge)

Other opinions cited:

• ABA Formal Op. 491 (2020): duty to inquire when a client may use the lawyer's services for crime or fraud
• ABA Formal Op. 463 (2013): combating money laundering; the lawyer-as-gatekeeper theory
• ABA Formal Op. 510 (2024): inquiry needed to decide whether to represent a prospective client
• NYC Bar Formal Op. 2018-4: no uniform legal requirement of client due diligence

See also

• ABA Formal Op. 514: Advising Orgs on Constituent Risk
• ABA Formal Op. 512: Generative AI Tools
• CA COPRAC Op. 2021-205: Duties to a Prospective Client

Source

• Landing page: ABA Formal Ethics Opinions index
• Original PDF: aba-formal-opinion-513.pdf