AML efforts tend to move in one direction: more, greater, stronger, bigger – whatever the right adjective may be. Occasionally we see an unwinding (as when many jurisdictions removed general insurance business from the AML family) but for the most part, we tend to extend and increase. That said, the intended direction of travel can be halted – and sometimes by the most unlikely brake. Or maybe that’s my naivety talking; you might not find this unlikely at all.
The US is not a jurisdiction in which I work and so I hesitate to comment in any detail on their AML regime, except to observe that they do like to plough (sorry, plow) their own furrow (or should that be furrough?). What I do know – and what often surprises those new to the world of AML – is that under the American regime, lawyers are not subject to AML obligations. The AML obligations (CDD, record-keeping, etc.) are contained in the Bank Secrecy Act of 1970, which was significantly amended by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act) of 2001, and (putting it simply) these laws apply only to “financial institutions”. And no matter how broadly you define that term, it does not include lawyers.
Now call me an old cynic, but is that not crazy? Everyone know that lawyers are vulnerable to money laundering – either deliberately enabling schemes for baddies or failing to spot that they are being misused by clients who look like goodies but are in fact baddies. Just last month the FATF published updated guidance on the risk-based approach specifically for legal professionals, in which it states as accepted wisdom – which, come on, it is – that nearly every service offered by the legal sector can be used for money laundering, from holding client funds to advising on property sales, from forming companies and trusts to managing client affairs. So it would seem logical that the US would upgrade its AML regime pretty sharpish to do what nearly everyone else in the world has been doing for years: welcome their lawyers into the AML fold.
There are plenty of influential Americans who want this to happen. But they keep coming up against the most obstinate of opponents: the American Bar Association. Yes, the official American Bar Association. OK, so people are often a bit lukewarm about joining the AML family – UK lawyers were not cock-a-hoop about it either, I seem to recall. But the Law Society does not have the clout of the ABA, and common-sense prevailed on this side of the pond. The issue has come back into the headlines recently because the ABA is currently engaged in opposing the creation of a register of beneficial ownership. We’re not talking about a public register – they oppose any register on the grounds that it “would impose burdensome, costly, and unworkable new regulatory burdens on millions of small businesses and their lawyers” and “raises serious privacy concerns for small businesses and the many individuals who would be designated as beneficial owners”. You can read their full objections here. If I were a wealthy criminal and needed a lawyer to help me with a spot of laundering, I know where I would go, and I’d pay handsomely for the privilege [little legal joke there – very little]. And I’m not alone in suspecting that this is the real reason for all the objections to anything AML-ish which could in any way inconvenience any paying client.