Ethics and the Gatekeeper Initiative: What Are My Obligations?
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ETHICS AND THE GATEKEEPER INITIATIVE: WHAT ARE MY OBLIGATIONS?
By Kevin L. Shepherd†
Client due diligence is not a novel concept. Referred to as “CDD,” most lawyers undertake CDD to confirm clients’ ability to pay fees charged by their lawyers and to determine the absence of ethical conflicts of interest. But should lawyers undertake or, more precisely, must lawyers be required to undertake, a risk-based analysis to determine whether their clients present a risk of money laundering or terrorist financing? This is not an academic question.
On May 23, 2013, the ABA Standing Committee on Ethics and Professional Responsibility (“ABA Ethics Committee”) issued a formal opinion discussing a lawyer’s ethical obligations to fight money laundering and terrorist financing, including the interaction of the Model Rules of Professional Conduct (“Model Rules”) and the ABA’s Voluntary Good Practices Guidance to Detect and Combat Money Laundering and Terrorist Financing (“Good Practices Guidance”).1 This article will discuss the domestic and international backstory that gave rise to the opinion, analyze the opinion, and suggest how practitioners can heed the important advice given in the opinion.
FATF and the Forty Recommendations
About a quarter century ago, in 1989, the major industrialized nations of the world formed an international body to develop and promote national and international policies to combat money laundering and, later, terrorist financing. Known as the Financial Action Task Force (“FATF”), FATF is a global standard setting organization for anti-money laundering (“AML”) and counter-terrorist financing (known as “CFT” and not “CTF”) policies. Member countries, including the United States,2 strive to
†† Kevin L. Shepherd, past chair of the ABA Section of Real Property, Trust and Estate Law, is a partner at Venable LLP in Baltimore, Maryland, and is chair of the ABA Task Force on Gatekeeper Regulation and the Profession and a member of the ABA House of Delegates. Mr. Shepherd is a past president of the American College of Real Estate Lawyers. © 2014. All rights reserved.
An abbreviated version of this article appeared in the September/October 2013 issue of Probate & Property, a publication of the American Bar Association’s Section of Real Property, Trust and Estate Law.
1 http://www.americanbar.org/content/dam/aba/migrated/leadership/2010/annual/pdfs/116.authcheckdam.pdf . All URL citations in this article were last visited on January 1, 2014. For a discussion of the development of the FATF Recommendations, see Gary W. Sutton, “The New FATF Standards,” 4 GEO. MASON J. INT’L COM. LAW 68 (2013). A recent book by a former Treasury Department official provides insights into the financial warfare being waged by the United States against its enemies, including the role of FATF in that effort. Juan Zarate, TREASURY’S WAR: THE UNLEASHING OF A NEW ERA OF FINANCIAL WARFARE (2013).
2 The FATF currently comprises 34 member jurisdictions and 2 regional organizations, representing most major financial centers in all parts of the globe. A complete list of these jurisdictions and organizations is located at http://www.fatf-gafi.org/pages/aboutus/membersandobservers/#d.en.3147. The United States has been a FATF member since 1990, and it is represented at FATF by the U.S. Department of Treasury. comply with FATF’s “Forty Recommendations,” which represent a comprehensive action plan to combat money laundering and terrorist financing. FATF initially adopted the Forty Recommendations in 1990 and they have undergone several revisions since their original adoption. Most recently, in February 2012, the Forty Recommendations, known formally as the “International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation - the FATF Recommendations,” underwent a significant overhaul.3
Part D of the current version of the Forty Recommendations, which focuses on preventive measures and contains Recommendations 9 through 23, is of significant interest to the legal profession. Recommendation 10 deals with customer due diligence (or CDD in the context of a client, not customer, relationship), Recommendation 20 deals with the reporting of suspicious transactions (the so-called “suspicious transaction reporting” [“STR”] requirement),4 while Recommendation 21 addresses the no-tipping off (“NTO”) concept.5 Under the STR requirement, if a financial institution suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity, or are related to terrorist financing, the financial institution must report its suspicions to a “financial intelligence unit,” which is most typically a governmental law enforcement entity. The NTO concept prohibits the financial institution from disclosing to its customer (or client) that it has filed an STR against the customer (or client).
Recommendations 22 and 23 deal with “designated non-financial businesses and professions” (“DNFBPs”), which category includes lawyers,6 accountants, trust and company service providers, dealers in precious metals, casinos (including internet and
3 http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF_Recommendations.pdf. The 2012 version of the FATF Recommendations contains, by no coincidence, forty recommendations. FATF thus achieved one goal of preserving forty recommendations, although the recommendations themselves were substantially reorganized and modified. The introductory portion of the 2012 version contains a useful conversion table reflecting the former and current numbering of the recommendations.
4 As noted later in this article, STRs are known as “suspicious activity reports” (“SARs”) in the United States. For a more detailed discussion of SARs and the situations in which they are required to be filed, see http://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_015.htm.
5 Regulations in the United Kingdom, for example, specifically deal with the NTO rule under The Terrorism Act 2000 and Proceeds of Crime Act 2002 (Amendment) Regulations 2007. See http://www.lawsociety.org.uk/Advice/Anti-money-laundering/documents/POCA-Regulations-2007/.
6 In-house counsel, however, are expressly excluded from the definition of “lawyers” under the FATF Recommendations. This exclusion also includes professionals working for government agencies. FATF reasons that these lawyers may already be subject to AML/CFT measures. See the General Glossary of the FATF Recommendations. ship-based casinos), and dealers in precious stones. These provisions obligate FATF member states to impose many of the CDD and record-keeping requirements that apply to financial institutions to DNFBPs. In essence, DFNBPs, including lawyers, are treated on the same plane as financial institutions.
Part E of the Forty Recommendations is also of particular interest to the legal profession because it addresses transparency and beneficial ownership of legal persons and arrangements. Beneficial ownership issues, particularly in the context of formation of legal entities, have been the focus of intense interest at the FATF and on the US federal legislative level for well over a decade.7
The Gatekeeper Initiative
The on-going effort by countries to fight money laundering and terrorist financing is not a solitary campaign. Recognizing that certain professions serve as “gatekeepers” to the international financial system by providing services that facilitate financial transactions, the G-8 Finance Ministers adopted a communique at a meeting in Moscow in 1999 that sought to enlist these professionals in the global fight against money laundering and terrorist financing. Known as the Moscow Communiqué, this policy statement asked countries to consider various means to address money laundering through the efforts of professional gatekeepers of the international financial system, including lawyers, accountants, company formation agents, and others. This effort is known as the “Gatekeeper Initiative.” Lawyers, in their capacity as DNFBPs, are viewed as important gatekeepers to the world’s financial system.8
The Risk-Based Approach
Financial institutions are required to employ a risk-based approach (“RBA”) to determine whether a customer presents a risk of money laundering or terrorist financing. The RBA is grounded in the premise that the limited resources (both governmental and
7 The most recent manifestation of this legislative effort is the Incorporation Transparency and Law Enforcement Assistance Act (S. 1465 and H.R. 3331). These bills contain, among other provisions, a definition of beneficial ownership that reads as follows: “A natural person who, directly or indirectly, exercises substantial control over a corporation or limited liability company or has a substantial interest in or receives substantial economic benefits from the assets of a corporation or limited liability company.” The ABA and others have criticized this definition as unworkable and unwieldy. For the text of S. 1465, see http://www.google.com/url? sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&cad=rja&ved=0CCkQFjAA&url=http%3A%2F %2Fwww.hsgac.senate.gov%2Fdownload%2F%3Fid%3D66EE26BA-2D4B-4CD8-B062- 66002C197446&ei=qDnDUrv_OKqtsASngIHwDA&usg=AFQjCNHX-Oj0kAn1uOcuImOWpYrTlvIp4A. The National Associations of Secretaries of State has published a detailed critique of S. 1465 and its predecessors. See http://nass.org/index.php?option=com_content&view=article&id=113&Itemid=401.
8 For a more detailed discussion of the historical background of the Gatekeeper Initiative, see Kevin L. Shepherd, “Guardians at the Gate: The Gatekeeper Initiative and the Risk-Based Approach for Transactional Lawyers,” 43 REAL PROP. TRUST & EST. LAW J. 607 (Winter 2009).
3 private sector) available to combat money laundering and terrorist financing should be used and allocated in the most efficient manner possible so that the sources of the greatest risks receive the most attention. The RBA is intended to ensure that measures to prevent or mitigate money laundering and terrorist financing are commensurate with the risks identified, thereby facilitating an efficient allocation of this limited pool of resources. By contrast, a “rules-based” approach ignores risk and mechanically applies the governing standards in an across-the-board, box ticking manner.
The proportionate nature of the RBA means that higher risk areas should be subject to enhanced risk-based procedures, such as enhanced CDD and enhanced transaction monitoring. By contrast, simplified, modified, or reduced risk management procedures may apply in lower risk areas. An effective RBA involves identifying and categorizing money laundering and terrorist financing risks and establishing reasonable controls based on the risks identified.
FATF’s Lawyer Guidance and ABA’s Good Practices Guidance
FATF has been active in developing risk-based guidance for financial institutions and DNFBPs, including legal professionals. In June 2007, FATF adopted risk-based guidance for financial institutions.9 In October 2008, after intensive negotiations between the world-wide legal profession and FATF, FATF adopted the “RBA for Legal Professionals (“Lawyer Guidance”) at its plenary in Rio de Janeiro.10 Guidance for each of the other DNFBP sectors was published separately in 2008.11 The Lawyer Guidance is a complex document that addresses different audiences (e.g., private sector and public authorities), undertakes to identify the AML/CFT issues specific to the legal profession, and outlines the risk factors that lawyers need to consider in developing a risk-based system.
Development of Good Practices Guidance
The Lawyer Guidance, self-styled as “high level guidance,” is of little usefulness to U.S. lawyers. The risk factors lack elaboration, the Lawyer Guidance itself is laced
9 See http://www.fatf-gafi.org/documents/documents/fatfguidanceontherisk- basedapproachtocombatingmoneylaunderingandterroristfinancing-highlevelprinciplesandprocedures.html.
10 See http://www.fatf- gafi.org/documents/documents/riskbasedapproachguidanceforlegalprofessionals.html.
11 For casinos, see http://www.fatf-gafi.org/documents/documents/fatfguidanceontherisk- basedapproachforcasinos.html; for accountants, see http://www.fatf- gafi.org/documents/documents/fatfguidanceontherisk-basedapproachforaccountants.html; for dealers in precious metals and stones, see http://www.fatf-gafi.org/documents/documents/fatfguidanceontherisk- basedapproachfordealersinpreciousmetalsandstones.html; for real estate agents, see http://www.fatf- gafi.org/documents/documents/fatfguidanceontherisk-basedapproachforrealestateagents.html; and for trust and company service providers, see http://www.fatf-gafi.org/documents/documents/rba-tcsps.html. with often impenetrable jargon, and no practical insights are offered into the application of the risk factors to real life CDD scenarios. In light of these shortcomings and taking a cue from the Lawyer Guidance suggesting that the legal profession develop good practices guidance, the American Bar Association’s Task Force on Gatekeeper Regulation and the Profession (“Gatekeeper Task Force”), formed in February 2002 to address certain issues arising from the Gatekeeper Initiative, and representatives from other ABA sections and specialty bar associations, collaborated to develop the Good Practices Guidance.12 Dated April 23, 2010, the Good Practices Guidance is designed to implement the Lawyer Guidance by providing practical and understandable guidance to the legal profession for the development of an RBA to CDD. The goal of the Good Practices Guidance is to assist members of the legal profession in the United States in designing and implementing an effective RBA consistent with the broad contours of the Lawyer Guidance. The ABA House of Delegates, the policy making body of the ABA, endorsed the Good Practices Guidance as official ABA policy at the 2010 annual meeting in San Francisco. The ABA has encouraged state and local bar associations to post the Good Practices Guidance and the related “frequently asked questions” on their websites.13
The ABA Ethics Committee Opinion
On May 23, 2013, nearly three years after the ABA’s adoption of the Good Practices Guidance, the ABA Ethics Committee issued its first formal opinion on issues arising out of the Gatekeeper Initiative.14 Known as Formal Opinion 463 (“Opinion”),15 the Opinion is important for what it says—and for what it does not say. In essence, the
12 The Task Force’s website is located at http://www.americanbar.org/groups/criminal_justice/gatekeeper.html. The website contains materials dealing with the Gatekeeper Initiative.
13 See http://www.americanbar.org/content/dam/aba/uncategorized/GAO/2013jul31_abaformalopinion463_l.authc heckdam.pdf. The “frequently asked questions” is located at http://www.americanbar.org/content/dam/aba/publications/criminaljustice/gatekeeper_faq.authcheckdam.p df
14 The Task Force initially requested that the ABA Ethics Committee promulgate a specific model rule describing a lawyer’s ethical obligations under the Gatekeeper Initiative and CDD. The ABA Ethics Committee declined this overture, stating that if it adopted model rules for this specific issue, it would face pressure to do so under other circumstances for similarly important issues. The ABA Ethics Committee was thus not inclined to festoon the Model Rules with specific rules tailored to narrow interests or issues. For the same reason, the ABA Ethics Committee was not inclined to issue commentary to the Model Rules on Gatekeeper issues. As a result, the only viable option available to the Task Force was to request the ABA Ethics Committee to issue a formal opinion on the Good Practices Guidance and CDD.
15 See http://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/formal_opinion_4 63.authcheckdam.pdf.
5 Opinion harmonizes the Good Practices Guidance and the Model Rules by concluding that the Good Practices Guidance is consistent with ethical principles, including loyalty and confidentiality. The Opinion states that lawyers should adopt client intake and monitoring procedures, such as risk-based control measures, that are designed to ensure that lawyers do not unwittingly engage in providing legal services that facilitate money laundering or terrorist financing.16 By implementing these procedures, lawyers can thus avoid aiding money laundering and terrorist financing activities in a manner consistent with the Model Rules.
The Model Rules contain thin gruel for those searching for detailed guidance on the ethical dimensions for client intake and on-going monitoring procedures. The Model Rules do not discuss whether a lawyer should evaluate a client—potential or actual—for the risk of money laundering or terrorist financing. Despite the absence of a specific Model Rule on point but relying on a 1981 informal opinion by the ABA Ethics Committee, the ABA Ethics Committee states that “[i]t would be prudent for lawyers to undertake [CDD] in appropriate circumstances to avoid facilitating illegal activity or being draw unwittingly into criminal activity.”
The Opinion makes clear that the Model Rules do not mandate that a lawyer perform a gatekeeper role in deterring their clients from engaging in wrongdoing. In that regard, the Opinion notes that a mandatory STR obligation (which, in the United States, is referred to as a “suspicious activity report”) would run afoul of Model Rules 1.6
16 Shortly after the issuance of the Opinion, FATF issued a report describing the vulnerabilities of the legal profession to money laundering and terrorist financing. See http://www.fatf- gafi.org/documents/documents/mltf-vulnerabilities-legal-professionals.html (“FATF Typologies Report”). The legal profession expected the FATF Typologies Report to describe those situations where lawyers unwittingly facilitated money laundering or terrorist financing by their clients, since a discussion of those situations would be of enormous educational benefit to the legal profession. The FATF Typologies Report, however, fell well short of those expectations and was severely criticized by the legal profession, including the ABA. See http://www.americanbar.org/content/dam/aba/uncategorized/GAO/2013may8_gatekeeperregfatf_l.authchec kdam.pdf (criticizing an earlier draft of the FATF Typologies Report). In response to these shortcomings, the ABA, the International Bar Association, and the Council of Bars and Law Societies of Europe are co- sponsoring a project that will culminate in a publication that will discuss situations where a lawyer unwittingly assisted a client in a money laundering or terrorist financing scheme. These organizations believe this type of publication will go far in educating the global legal profession about the red flags and warning signs inherent in these types of situations. (Confidentiality of Information)17 and 1.18 (Duties to Prospective Clients)18 and that the NTO rule would violate a lawyer’s ethical obligations under Model Rule 1.4(a)(5) (Communication).19 Indeed, as the Opinion notes, the Model Rules do not permit a lawyer to engage in the reporting (i.e., STR) that a gatekeeper role could entail. For over a decade, the ABA House of Delegates has opposed any law or regulation, such as a mandatory SAR obligation, that would compel lawyers to disclose confidential information to government officials or otherwise compromise the lawyer-client relationship or the independence of the bar. ABA House of Delegates Resolution 104 (February 2003).20
The Opinion underscores the fundamental point in the Model Rules that a lawyer cannot knowingly counsel or assist a client to commit a crime or fraud. Model Rule 1.2(d). To comply with this obligation, the ABA Ethics Committee states that the
17 Model Rule 1.6 provides as follows:
(a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b). (b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary: (1) to prevent reasonably certain death or substantial bodily harm; (2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer's services; (3) to prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client's commission of a crime or fraud in furtherance of which the client has used the lawyer's services; (4) to secure legal advice about the lawyer's compliance with these Rules; (5) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client; (6) to comply with other law or a court order; or (7) to detect and resolve conflicts of interest arising from the lawyer’s change of employment or from changes in the composition or ownership of a firm, but only if the revealed information would not compromise the attorney-client privilege or otherwise prejudice the client. (c) A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.
18 Model Rule 1.18 provides:
(a) A person who consults with a lawyer about the possibility of forming a client-lawyer relationship with respect to a matter is a prospective client. (b) Even when no client-lawyer relationship ensues, a lawyer who has learned information from a prospective client shall not use or reveal that information, except as Rule 1.9 would permit with respect to information of a former client.
7 “essential prerequisites” for accepting a new matter or continuing a representation are an “appropriate assessment of the client and the client’s objectives, and the means for obtaining those objectives[.]” The Opinion suggests that in certain circumstances a lawyer can avoid the risk of the lawyer engaging in unlawful conduct by checking the client’s identity internally within the firm against the Specially Designated Nationals (“SDN”) List, which is a public list maintained by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) of those individuals or entities with whom it is illegal to do business (including providing certain types of legal services).21 The Good Practices Guidance specifically suggests that lawyers check the SDN List as part of their standard CDD and client intake protocol.
The Opinion essentially observes that a lawyer cannot, consistent with the Model Rules, engage in willful blindness in performing legal services in suspect situations. Based on the lawyer’s ethical obligation to act competently under Model Rule 1.1,22 a lawyer may have a duty, based on the then available facts, to inquire whether the legal
(c) A lawyer subject to paragraph (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except as provided in paragraph (d). If a lawyer is disqualified from representation under this paragraph, no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter, except as provided in paragraph (d). (d) When the lawyer has received disqualifying information as defined in paragraph (c), representation is permissible if: (1) both the affected client and the prospective client have given informed consent, confirmed in writing, or: (2) the lawyer who received the information took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client; and (i) the disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom; and (ii) written notice is promptly given to the prospective client.
19 Model Rule 1.4(a)(5) states that a lawyer shall “consult with the client about any relevant limitation on the lawyer's conduct when the lawyer knows that the client expects assistance not permitted by the Rules of Professional Conduct or other law.”
20 See http://www.americanbar.org/content/dam/aba/directories/policy/2003_my_104.authcheckdam.pdf.
21 The SDN List is located at http://www.treasury.gov/resource-center/sanctions/SDN- list/Pages/default.aspx. OFAC frequently updated the SDN List.
22 Model Rule 1.1 provides that “[a] lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.” services to be performed will abet fraudulent or criminal conduct. For example, if a prospective client domiciled in Nevada seeks a Minnesota-based lawyer to assist in the acquisition of real property located in New Hampshire with an entity created under Idaho law by using funds that are claimed to have been derived from gambling successes at a New Jersey casino, the lawyer may have an obligation to inquire into these facts to ensure that the lawyer’s services are not being used to facilitate criminal activity. Application of the RBA contained in the Good Practices Guidance should provide meaningful assistance to the lawyer in evaluating whether to accept this engagement.
The Opinion discusses the point that “[t]he level of appropriate CDD varies depending on the risk profile of the client, the country or geographic area of origin, or the legal services involved.” Opinion, at 3 (footnote omitted). The Good Practices Guidance elaborates on these risk factors by identifying the three major risk categories for legal engagements: (a) country/geographic risk,23 (b) client risk,24 and (c) service risk.25 Lawyers need to determine their exposure to each of these risk categories. The relative weight to be given to each risk category in assessing the overall risk of money laundering and terrorist financing will vary from one lawyer or firm to another because of the size, sophistication, location, and nature and scope of services offered by the lawyer or the firm. Based on their individual practices and judgments, lawyers will need to assess independently the weight to be given to each risk factor. These risk factors are subject to variables that may increase or decrease the perceived risk posed by a particular client or type of work.
Once a lawyer performs CDD based on the factors identified within the three major risk categories described above, the lawyer needs to take into account a number of risk variables. These risk variables may either require the lawyer to perform enhanced
23 The Good Practices Guidance states that higher risk countries include those that are subject to sanctions, embargoes, or similar measures issued by certain bodies, such as the United Nations and those identified by “credible sources” as having significant levels of corruption or other criminal activity or a location from which funds or support are provided to terrorist organizations. Countries are also considered to pose a higher risk of money laundering when credible sources identify those countries as generally lacking appropriate AML/CFT laws, regulations, and other measures. “Credible sources” means information that is produced by well-known bodies that generally are regarded as reputable and that make such information publicly and widely available. Examples of credible sources include FATF, the International Monetary Fund, The World Bank, the U.S. Treasury’s Financial Crimes Enforcement Network, OFAC, and the U.S. Department of State.
24 Client risk means the risk of money laundering or terrorist financing that a client poses to the lawyer. Higher risk clients include politically exposed persons (or “PEPs”), who generally are individuals who are or have been entrusted with prominent governmental functions (domestic or foreign). Examples include heads of state or of government, senior politicians, senior government, judicial, or military officials, senior executives of state owned corporations, or important political party officials.
25 Service risk represents the risk that the providing of services by a lawyer will facilitate money laundering or terrorist financing. An example of a higher service risk are services requested by the client for which the client knows the lawyer does not have expertise excepting where the lawyer is referring the request to an appropriately trained professional for advice.
9 due diligence or lead the lawyer to conclude that standard CDD can be reduced. The risk variables include (a) the nature of the client relationship and the client’s need for the lawyer to provide certain legal services, (b) the level of regulation or other oversight or governance regime to which a client is subject, (c) the reputation and publicly available information about a client, (d) the regularity and duration of the relationship, and (e) the proportionality between the magnitude or volume and longevity of the client’s business and its use of the lawyer for its legal requirements, including the nature of the professional services sought.
Applying a RBA at the client intake stage is important, but equally important is monitoring the client relationship by reference to the RBA. Model Rule 1.16(b)(2) permits a lawyer to withdraw from representing a client if “the client persists in a course of action involving the lawyer’s services that the lawyer reasonably believes is criminal or fraudulent.” The lawyer does not need hard evidence that the client is engaged in criminal or fraudulent activities, but if “the lawyer has reason to believe that the client is engaging, or plans to engage, in such improper activities,” the lawyer has a right to terminate the client relationship. Opinion, at 3.
Finally, the Opinion states that lawyers should be “conversant with the risk-based measures and controls for clients and legal matters with an identified risk profile and use them for guidance as they develop their own client intake and ongoing client monitoring processes.” Opinion, at 4. The Opinion recognizes that the Good Practices Guidance is relevant to CDD and that lawyers need to understand it so that they can discharge their ethical obligations. To that end, lawyers should implement risk-based measures for their client intake and ongoing client monitoring processes, and Appendix A of the Good Practices Guidance is an excellent starting point for developing these protocols.
Conclusion
The Opinion is a welcome addition to the imperative that lawyers need to understand and embrace the RBA in their client intake processes and, thereafter, the ongoing monitoring of clients to ensure that the legal services are not being used to facilitate criminal conduct. The Good Practices Guidance is consistent with the Model Rules and a lawyer’s ethical obligations. Lawyers should thus heed the suggestions in the Opinion by voluntarily implementing these risk-based processes now before federal legislation mandates CDD, a prospect that should send shivers throughout the legal profession.