YUST  /  Press-center  /  Analitics


Fighting against Money Laundering

Laundering of the proceeds from crime is one of the most dangerous phenomena in the framework of the organized crime. The world community is aware of the necessity to take urgent measures to solve the problem.

The first steps aimed at fighting against laundering of the proceeds from crime were undertaken at the European level in the early nineties, when the first directive was adopted aimed at “efficient fighting against the money laundering, and, consequently, the organized crime, which is”, as it follows from the directive, “the main threat for communities of EU members - states“ (91/308/EEC of 10 June, 1991). Later another two additional directives were adopted (2001/97/EC of 4 December, 2001 and 2005/60/EC of 26 October, 2005).

These three directives express the willingness of the European Union to:

1) increasing spectrum of offences related to the laundering of the proceeds from crime: the first directive urged the members of the European Union to assume certain obligations in the financial field; first of all, drug traffic became an offense as a result of which proceeds generated could be considered the subject of money laundering. The second directive and the third directive extended the process and qualified corruption and financing of terrorism as grave offences as a result of which proceeds generated could be also related to the activity of money laundering.

2) increasing a range of persons who are bounded to report on money laundering’s facts, which have been leaked out to them due to their professional activity: according to these directives, not only financial institutions, but also legal professions – “notary, and members of independent and legal professions” if they are a party of some operations defined by the directives, have been defined as specialists, who may face the problem.

Note that the third directive has consolidated further the system of fighting against money-laundering (for further information, please refer to E.R. Zhilin. The Third EU Directive on combating Money-Laundering and financing Terrorism as a New Barrier for Proceeds from Crime //

The European Union members - states have a responsibility to fit the domestic legislation with normative acts, adopted at all-European level. This problem is especially serious, where it touches upon provisions related to the protection of the lawyer’s duty of confidentiality.

Struggling for the Protection of Professional confidentiality

The issue of protection of professional duty of confidentiality within frameworks of increasing intensive control over legalization of the proceeds from crime was reflected in several decisions made in the European Union states.

To a certain extent, these directives (91/308/EEC and 2001/97/2001/CE) have already limited the activities, which are subject of standard requirements of disclosure of information and co-operation with state institutions with respect to the legal professions. Firstly, the directives specify the list of activities which are concerned with and the conditions of lawyers’ involvement in deals on the financial issues or real estate’s issues; secondly, these directives do not affect lawyers’ activities within the framework of court proceedings – “prior to, during and after court proceedings” and “while preparing legal opinion on a legal case for a client”.

But nonetheless, some of important clarifications have been made in the court decisions of the European Union members - states as part of fitting domestic legislation with the named directives.

– On 26 June, 2007 the European Court of Justice based in Luxembourg adopted a decision on “prejudicial issue” regarding compliance of the first directive and the second directive to the article 6 of The Convention on the Protection of Human Rights and Fundamental Freedoms (right to a fair trial). The Court ruled that, since lawyers when acting as a part of the “court proceedings” were not affected in the money laundering directives, these directives did not breach article 6 of the Convention.

–Later in the decision dated 23 January, 2008 on the complaint of the National Bar of Belgium and the Bars of Europe’s Council about the law of Belgium on fitting the domestic legislation with the directives, which, accordance to their opinion, did not tallied with international legislation, the Constitutional Court of Belgium expressed its position on this issue. The decision has acknowledged the principle of prevalence of the lawyers’ duty of confidentiality, because of the specificity of the profession with regards to the conditions of becoming a lawyer or to the status of barrister.

The named decision implies that for the purpose of client’s defence his confidence in the lawyer is essential and this confidence cannot be insured without guarantee that all information reported by the client to the lawyer will be confidential.

Afterward the Constitutional Court of Belgium ruled that infringement of lawyer’s duty of confidentiality should be “proportionate” and justified and only be used in extreme cases.

Besides, the text of the directives contained a moot for the plaintiffs point: there was, to their point of view, some ambiguity in paragraph 17 of the second directive with respect to lawyer’s commitments during his “legal advice”.

The Constitutional Court of Belgium interpreted these commitments in positive for the protection of the lawyer’s duty of confidentiality sense, based on the fact that in case of restrictions of the human rights it should be a narrow interpretation. The court found that “a legal advice” provided by a lawyer, even beyond court proceedings, was incorporated in the activities, which were not regulated by provisions of directives binding lawyers to report to the competent authorities in the event of suspicion in money laundering.

Had taking into account such clarification and such interpretation, the Constitutional Court of Belgium came to a conclusion that the adopted law on the order of application of the first directive and the second directive was not conflicted to the provisions of the Convention on the protection of Human Rights and Fundamental Freedoms.

– In France the most recent decision on this problem is the decision passed by the Council of State of 10 April 2008 on the cancellation of two articles of the decree adopted on 26 June, 2006 regarding the application of law on 11 February, 2004, which is aimed to fitting french legislation with the second directive on fighting against money laundering.

The lawyers of France joined their efforts by their representative institutions, (Conseil National des Barreaux, Barreau de Paris, Conférence des Bâtonniers) in order to stop the European process, which increasingly affected lawyer’s duty of confidentiality in prospect of fighting against money laundering. This “coalition” lodged a complaint to the Council of State about this decree. The lawyers’ initiative seemed to be hopeless, but it played its positive role. As it was observed, two provisions of decree of 26 June, 2006, had been cancelled by the Council of State (For more details, please, refer to the article by Wickers. T. in La Gazette du Palais du 20–22 avril 2008. L’arrêt du Conseil d’Etat du 10 avril 2008: “un succès...mais le combat continue”!).

One of the cancelled provisions touched on relationships between the lawyer and the state institution regarding data processing and pursuing measures of repressing clandestine cash flows (TRACFIN for France). As well as the Constitutional Court of Belgium, the Council of State of France passed a decision that a lawyer should communicate with these institutions via Chairman of the Bar to which Bar a lawyer belonged only. By this decision it has acknowledged a great importance of “a filter” (the Chairman of the Bar) between individual lawyers and law enforcement authorities.

The second provision was related once more to interpretation of the wording “legal advice” and the issue as to how a lawyer should behave within the framework of “legal advice” beyond court proceedings. According to the decision made by the Council of State, it is not binding a lawyer “to inform of suspicion” or “to observe client’s activity”.

It is clear that these decisions and rules would not acquit lawyers from certain obligations. First of all, they must not participate in unlawful operations, related to money laundering and advise a client in money laundering operations. In such cases a lawyer will take the risk of disciplinary sanctions and penal sanctions in accordance with legislation of each European state.

The Lawyer’s Duty of Confidentiality is a Fundamental Right

Based on the analysis of various decisions passed with respect to complaints about the laws on fitting the directives with the domestic legislation, one can make the following conclusions.

When it comes to “traditional” types of lawyer’s activity, such as legal defence and representation of the client’s interests in court proceedings or provision of “legal advice” beyond the court proceedings, the lawyer’s duty of confidentiality is avouched as a fundamental right and prevail in the context that fighting against money laundering and financing of terrorist shall not be committed “at any price”.

But, wherever lawyers render their services as professional intermediaries especially in making of purchase – sale’s agreement, and in carrying out deals on financial issues and real estate’s issues, they shall be involved in fighting against money laundering in the course of work.

In case of arising any problems related to interpreting such activities and deals the lawyers should consult with the chairman of the Bar Chamber they belong to.

These passed decisions shall certainly influence the legislation of the European states and decisions, which will be adopted by them in the future. Such confidence is based on the fact that even at present it takes shape of striving of the European states to retain specific rules for the lawyer’s duty of confidentiality, and on the fact that such confidentiality has been acknowledged “a fundamental right ensured by the European Convention for the Protection of Human Rights and Fundamental Freedom” – article 6 (right to a fair trial) and article 8 (right to private and family life).

But the story is going on: The fighting led by lawyers has been incomplete so far.

There is the third directive. Under this directive EU members – states should fit their legislation with national legislations until 15 December 2007. However, the respective law has not yet been passed in France.

The French lawyers have got a positive argument, which is the decision of the Council of State.

In November 2008 it was already declared at the National meeting of lawyers that the draft of resolution on fighting against money laundering and financing of terrorism will release lawyers’ activities as part of “legal advice” from obligations with respect to fighting against money laundering.

Counselor to the Law Firm “YUST”

Source: “Novaya advokatskaya gazeta” No.10 (051) May, 2009

Back to list