Must a lawyer who sets up a foreign entity for a client's fund transfer investigate the source of the client's funds?
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This page answers the general question as of 1998. 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 inquiry concerned the establishment of an entity in a foreign country on a client's behalf for the transfer of funds to that entity. The committee stated that it is not clear from the facts presented whether the duty of competent representation under RPC 1.1 requires the lawyer to inquire into the client's source of funds, or whether there may be claims against the funds, and that consequently the committee is unable to render an opinion on this specific point.
The committee cautioned the lawyer to review RPC 1.2(d) and 8.4 regarding criminal activity, fraud, deceit, or misrepresentation.
Currency note
This opinion was issued in 1998, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here. Washington's cited rules correspond to ABA Model Rules 1.1 (competence), 1.2 (scope of representation; subsection (d) bars counseling or assisting crime or fraud), and 8.4 (misconduct).
Common questions
Q: Does a lawyer who sets up a foreign entity have to check where the client's money came from?
A: The committee said it could not determine from the facts whether RPC 1.1 requires the lawyer to inquire into the source of funds, and so was unable to render an opinion on that specific point.
Q: What did the committee tell the lawyer to consider?
A: It cautioned the lawyer to review RPC 1.2(d) and 8.4 regarding criminal activity, fraud, deceit, or misrepresentation.
Background and rules framework
The opinion identified RPC 1.1 (competence), RPC 1.2(d) (counseling or assisting crime or fraud), and RPC 8.4 (misconduct) as the relevant rules, corresponding to ABA Model Rules 1.1, 1.2, and 8.4. The committee declined to decide whether competence required inquiry into the source of funds, and directed the lawyer to the crime-fraud and misconduct rules.
Citations and references
Rules of Professional Conduct:
- ABA Model Rule 1.1 (competence); Washington RPC 1.1
- ABA Model Rule 1.2 (scope of representation), subsection (d) (counseling or assisting crime or fraud); Washington RPC 1.2(d)
- ABA Model Rule 8.4 (misconduct); Washington RPC 8.4
See also
- WA Ethics Op. 1797: Advising on a Medicaid-Transfer Crime
- WSBA Ethics Op. 1070: Advising Interspousal Transfers
Source
- Landing page: https://ao.wsba.org/print.aspx?ID=999
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
Advisory Opinion: 1806
Year Issued: 1998
RPC(s): RPC 1.1; 1.2(d); 8.4
Subject: Establishment of an entity in a foreign country for client's transfer of funds
The Committee researched and reviewed your inquiry concerning the establishment of an entity in a foreign country [on a client's behalf for transfer of funds to that entity] and determined the following:
It is not clear from the facts presented whether the duty of competent representation under RPC 1.1 requires the lawyer to inquire into the client's source of funds or whether there may be claims against the funds. Consequently, the Committee is unable to render an opinion on this specific point. The lawyer is cautioned to review RPC 1.2(d) and 8.4 regarding criminal activity, fraud, deceit or misrepresentation
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