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Money laundering - deja vu

18 July 05

EU is to adopt third directive on money laundering despite opposition from professional bodies

The EU is to adopt the third Money Laundering Directive despite a call from the Presidents of the UK Law Societies, and their EU counterparts, for a delay pending an evaluation of the impact of the existing legislation, on the legal profession in particular. Lobbying by the Law Societies and the CCBE did result in a commitment to review the treatment of lawyers and other professionals within the next four years.

The directive brings in a host of new definitions, covering diverse concepts such as terrorism, beneficial owner, politically exposed persons (PEPs), serious crime and business relationship. It introduces considerable details about procedures for the identification and verification of clients, and an obligation to understand the underlying ownership of any property or assets by identifying beneficial owners and depending on the level of risk, verifying their identity. 

The directive concedes that lawyers should be able to dissuade their client from engaging in illegal activity, without falling foul of the tipping-off provisions. A new recital states that the provisions against tipping off cannot interfere with legal professional privilege. 

The discontent with the operation of the second directive, in particular its erosion of lawyers’ ethical duties, is evidenced by the legal challenges mounted in various EU member states.