UK Treasury Consultation: Implementation of EU Second Money Laundering Directive.

The UK Treasury has invited comments on new laws designed to combat money laundering. The Treasury's consultation document and the draft Regulations are at World Money Laundering Report: Resources.

The proposed Regulations amend the Money Laundering Regulations 1993 and the Money Laundering Regulations 2001. The Second Directive had a very rough passage. Germany, in particular, was adamant that it would not allow a reduction in confidentiality between a lawyer and his client. But the mood changed after 11 September 2001 and EU members rapidly reached a compromise. The Directive requires member countries to bring the Directive into force no later than 15 June 2003. The Second Directive is also available at World Money Laundering Report: Resources. In relation to lawyers, the compromise is defined in the Preamble: "

(16) Notaries and independent legal professionals, as defined by the Member States, should be made subject to the provisions of the Directive when participating in financial or corporate transactions, including providing tax advice, where there is the greatest risk of the services of those legal professionals being misused for the purpose of laundering the proceeds of criminal activity.

(17) However, where independent members of professions providing legal advice which are legally recognised and controlled, such as lawyers, are ascertaining the legal position of a client or representing a client in legal proceedings, it would not be appropriate under the Directive to put these legal professionals in respect of these activities under an obligation to report suspicions of money laundering. There must be exemptions from any obligation to report information obtained either before, during or after judicial proceedings, or in the course of ascertaining the legal position for a client. Thus, legal advice remains subject to the obligation of professional secrecy unless the legal counsellor is taking part in money laundering activities, the legal advice is provided for money laundering purposes, or the lawyer knows that the client is seeking legal advice for money laundering purposes.

The wording will cause some problems for both draftsmen and those responding to consultation.