Charities and internal investigations
In its recent decision Michaud v France dated 6 December 2012 (Requête No.12323/11), the European Court of Human Rights (the “Court”) confirmed that French advocates, like any other lawyers authorised to practise within the European Member States, must comply with certain obligations aimed at effectively detecting and fighting against money laundering activities.
This judgment follows the incredible 5 year legal battle initiated by a French advocate, not happy with what he considered to be disproportionate, detrimental and obscure anti-money laundering obligations, before the French Conseil d’Etat, the French government and the European Court of Human Rights.
It was surprising that the French advocate concerned was supported in his allegations by the French Bar, the Council of Bars and Law Societies of Europe (“CCBE”), the French Bar of Brussels, the European Bar Human Rights Institute (“IDHAE”) and others. It is also worth noting that this is not the first action of its kind, in 2005, the Belgian Bar also made similar allegations before the Court of Justice of the European Union.
This article only focuses on relevant key points. The lengthy judgment is available on the Court’s website.
The anti-money laundering obligations
The anti-money laundering obligations imposed on French advocates include for instance (but are not limited to) the obligations to remain alert, inform and train other colleagues/employees, adopt, actively apply and monitor internal policies, procedures and related controls aimed at effectively detecting suspicious activities and reporting them to relevant authorities and to report these activities without tipping off any of the concerned clients or related parties. Any breach of these obligations is said to lead to serious disciplinary sanctions including the potential withdrawal of the French advocates’ practising certificate.
Despite the fact that the French Bar supported the French advocate in his allegations, it had itself, back in July 2007, confirmed that all advocates registered to practise with the French Bar and involved in transactional work must comply with these anti-money laundering obligations.
The French advocate’s key arguments against the said obligations
In this case, the French advocate initially claimed before the French Conseil d’Etat that these obligations were against French advocates’ freedom/right to practise and the related rules which govern their profession. He also alleged that the French Bar had no regulatory power to take any such decision regarding anti-money laundering issues. The other main arguments were that these obligations go against French advocates’ independence, their right to the privacy of their correspondence and to privacy generally, the confidentiality of their legal advice and related privileged communications with clients as well as their clients’ right to a fair trial.
The French advocate refused to comply with these obligations which he found excessively burdensome and too vague in their definitions. He however did not challenge the importance of fighting against money laundering activities generally but considered that these specific obligations imposed on French advocates are disproportionate and that they go against the primary obligations that they owe to their own clients.
The Court’s confirmation that such obligations are in line with key European and national legal provisions
In its judgment, the European Court of Human Rights confirmed that these obligations are in line with several EU Directives (also adopted by Member States), the recommendations made by the Financial Action Task Force (“FATF” - one of the recommendations being the extension of the obligations imposed on advocates/lawyers to other professionals including notaries and accountants), the investigative/intelligence powers of Tracfin (operational unit of the French Ministry of Finances which centralises all suspicious transaction reports in France), a relevant Convention of the European Council, the French Monetary and Financial Code and other provisions.
The Court confirmed that advocates/lawyers, like financial institutions and other relevant entities/professionals, have an obligation to take appropriate steps and cooperate to fight effectively against anti-money laundering activities and other financial crimes.
It is surprising that some advocates within the European Union still attempt to challenge these important anti-money laundering obligations.
The importance of effective cooperation between relevant authorities and relevant professionals on a national, European and international level so as to fight against financial crime is crucial and is nothing new. The legislation and regulations on both a Member State’s level and a European level are abundant.
I do not believe that these anti-money laundering obligations imposed on advocates/lawyers (based in France, the UK or elsewhere in Europe), go against their independence, the confidentiality/legal professional privilege status of their advice/communications with clients, their clients’ right to a fair trial (particularly because these reporting obligations mainly apply to transactional work) or even just their primary duties to their clients.
If, from the outset or during the course of his instructions, a lawyer has any suspicion of money laundering activities, especially when requested to advise on a property, commercial/corporate or asset management transaction or related financial activities, he must follow certain prescribed steps and report his suspicions.
Refusing to take adequate anti-money laundering measures may be seen as being prepared to turn a blind eye on money laundering and may in some cases even be considered as potentially assisting/facilitating financial crime.
This is not acceptable for lawyers/advocates and would, for instance in England and Wales, where related anti-money laundering obligations are much stricter, be investigated. This is also particularly important in the UK where lawyers have clear duties not only to their clients but also to the Courts. They need to remain transparent and rigorous in the way they practise.
Lawyers, no matter where they are located and whether they are independent or work in-house, need to remain alert at all times, have effective internal systems, policies, procedures, controls and reporting systems in place and carry out effective risk assessments and monitoring to ensure that they are able to deter, detect, report and disrupt money laundering, fraud, bribery/corruption and other financial crimes.
They need to carry out effective checks of their client identity and structure (this is particularly important as corporate clients may have complex/obscure structures with group companies located in several countries), be able to understand not only the purpose of the transactions on which they are asked to advise but also the related movements of funds and the third parties with whom they may have to communicate/negotiate or who may have an interest in the transactions. When working on transactional work, they also need to ensure that any serious suspicion that they may have are reported to relevant authorities and that they follow the prescribed steps without risking tipping anyone off.
This applies no matter whether lawyers are instructed by their national/international clients or by foreign lawyers on behalf of other clients. Lawyers working on cross border matters need to be able to trust the procedures of the foreign lawyers with whom they may be working.
I suspect that lawyers in most jurisdictions, particularly those within the European Union, understand the importance of anti-money laundering obligations but, as this one case highlights, there are still unfortunately some exceptions.
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