ABA issues new guidelines to help lawyers avoid unwitting involvement in client criminal activity
The ABA Standing Committee on Professional Responsibility on August 23 released Opinion 513, which offers detailed guidelines for detecting and avoiding involvement in a client’s criminal activity.
Opinion 513 Formal Opinion 513 (americanbar.org) addresses the latest revisions to Model Rule of Professional Conduct 1.16, which were approved in August 2023.
The revisions arose from concerns about lawyers “being pulled into clients’ criminal transactions, such as money laundering and terrorist financing,” the ABA noted in a statement.
More specifically, Opinion 513 notes that federal authorities expressed concern that Opinion 419, issued in 2020, did not go far enough.
“Even after the guidance, governmental and inter-governmental agencies in the U.S. and abroad — including the U.S. Department of Treasury, the Financial Action Task Force, (FATF), and the Organization for Economic Development — continued to urge that more was needed to help U.S. lawyers avoid unwittingly facilitating money laundering and terrorist financing.”
Model Rule 1.16, as revised, provides in part, “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.”
It also provides that “further inquiry” is required “when the lawyer becomes aware of a change in facts or circumstances relating to the representation that raises questions….”
Implicit in the latest version of Rule 1.16 “is an obligation to conduct 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,” the opinion states.
The opinion acknowledges the difficulties that a lawyer might face in determining whether a client or prospective client is seeking to use the lawyer’s services to commit or further a crime — and concedes that a lawyer “might have unresolved questions of fact concerning that possibility even after undertaking a reasonable inquiry and assessment.”
Opinion 513 concludes, in part, that the lawyer need not resolve all doubts.
“Rather, if some doubt remains after the lawyer has conducted a reasonable inquiry, the lawyer may proceed with the representation as long as the lawyer concludes that doing so is unlikely to involve assisting or further a crime or fraud.”
The opinion lists factors to consider when weighing the level of risk, including: 1) The identity of the client, such as whether the client is a natural person or an entity, and if an entity, the beneficial owners of that entity; 2) The lawyer’s experience and familiarity with the client; 3) The nature of the requested legal services; 4) The relevant jurisdictions involved in the representation, (for example, whether a jurisdiction is considered a high-risk for money laundering or terrorist financing); and 5) The identities of those depositing into or receiving funds from the lawyer’s client trust account, or any other accounts in which the client’s funds are held.
The opinion also offers two hypotheticals, based on a referral, by a well-known real estate attorney in another part of the state, of a client from outside of the U.S. who is seeking representation for a real estate investment. The hypotheticals are followed by lengthy discussions.
The opinion concludes, in part, that “The lawyer’s inquiry and assessment will be informed by the nature and extent of the risk that the current or prospective client seeks to use or to persist in using the lawyer’s services to commit or further a crime a fraud.”
