Dive Brief:

• Lawyers are to conduct due diligence on whether a client or potential client is trying to use their services as part of a criminal effort, the American Bar Association says in an update to its model rules it approved this week.
• The ABA concluded its annual meeting in Denver earlier this week. The updated rule is intended to give lawyers explicit instructions to ensure their legal work doesn’t inadvertently help clients who are trying to act illegally. 
• The change, the ABA said, “strengthens a lawyer’s obligation to decide — before accepting or maintaining representation — whether a client seeks to use the lawyer’s services to further a crime or fraud.”

Dive Insight:

The rule change says nothing about how the due diligence should be conducted or what standard should apply in determining whether the client is trying to use the lawyer for criminal purposes.

It only says the lawyer should “assess the facts and circumstances” before and during representation and that a client committing a “crime or fraud” is an explicit reason for a lawyer to withdraw from representation. 

To flesh out what an assessment should entail, a discussion draft of the rule includes a comment that says it should factor in things like how familiar the lawyer is with the client and the jurisdiction in which the attorney-client relationship takes place. A jurisdiction might be considered high risk for money laundering or terrorism financing, for example.   

Pressure to act

The ABA has been under pressure to strengthen its rules in this area, The Wall Street Journal reports. Congress has been talking about extending its anti-money laundering reporting laws to include lawyers, which, if it did, could require them to report suspected criminal activity to federal agencies. 

The ABA has been resisting on the grounds it would open lawyers to violating attorney-client privilege. Last year, it argued against a bill called the Enablers Act that would have extended financial services anti-money laundering reporting requirements to lawyers. 

The ABA House of Delegates’ 216-102 vote this week on the rule change reflected conflict within the organization’s membership, with some saying the change will expose lawyers to liability if their due diligence fails to expose a client’s criminal intent.

“The presumption will be that the lawyer should have known that the lawyer’s services were being used to commit a crime, had the lawyer just delved a little deeper into the facts and circumstances,” Paul Lion, a delegate for the ABA’s Business Law Section, said before the vote, the Journal reported.

Others said the change doesn't go far enough to stop Congress and regulators from trying to extend anti-money laundering reporting requirements to lawyers.  

“We ignore [what the federal government wants] at our peril,” said Kevin Shepherd, the ABA’s Treasurer, according to the Journal report. 

The update is to the part of the ABA’s model rules, 1.16, that apply to declining or terminating representation.