Since 2004, lawyers have been subject to various anti-money laundering obligations. Lawyers have an important responsibility in the fight against money laundering and the financing of terrorism. They must comply with the obligations of the Law of 18 September 2017 on the prevention of money laundering and terrorist financing and on the restriction of the use of cash (the Anti-Money Laundering Law, hereinafter: the ‘AML Law’).
In this blog post, we discuss the anti-money laundering obligations of lawyers, why these obligations exist, and how lawyers can comply with them without compromising the relationship of trust with their clients.
Why do lawyers have anti-money laundering obligations?
Money laundering is the process by which illegally obtained funds are converted into legal income. This can happen, for example, through complex financial transactions, the purchase of real estate, or through dummy structures. Lawyers can become involved in this because they assist with financial transactions, advise on corporate structures, or handle real estate transactions. This can lead to sanctions within the preventive framework, but also to criminal prosecution.
Scope of application
Lawyers are covered by the AML Law, but only in specific cases, namely for the so-called ‘targeted activities’. Article 5, §1, 28° of the AML Law stipulates that lawyers must comply with the AML Law:
“28° lawyers:
- a) when they assist their client in preparing or executing transactions related to:
- i) the buying and selling of real estate or businesses;
- ii) managing their money, securities or other assets;
iii) the opening or management of bank, savings or securities accounts;
- iv) organizing the contributions necessary for the creation, operation or management of companies;
- v) the creation, operation or management of fiduciaries or trusts, companies, foundations or similar structures;
- b) or when they act in the name and on behalf of their client in any financial or real estate transactions;”
In addition, lawyers fall under the law if they carry out financial transactions in the name and on behalf of a client through their third-party account, regardless of whether this involves a targeted activity.
Anti-money laundering obligations for lawyers
1. The general risk assessment
Lawyers must carry out a general risk assessment to identify the risks of money laundering and terrorist financing. This includes assessing the clients, the services offered, and the geographical areas in which the firm is active. An assessment of the overall risk allows the lawyer to take appropriate measures.
2. Know Your Customer (KYC) – the individual risk assessment
An essential part of anti-money laundering is the ‘Know Your Customer’ (KYC) principle. Lawyers must gather detailed information about their clients in order to verify their identity and assess the risks. This process includes identifying the client, establishing the source of funds, and evaluating the client’s intentions. The individual risk assessment also helps in detecting atypical transactions.
3. Detecting atypical transactions
Lawyers must be vigilant for unusual or suspicious transactions that could indicate money laundering. These are transactions that are not in line with the client’s usual activities, large cash payments, or complex structures that serve no clear economic purpose. Timely detection of these transactions is essential in the fight against money laundering.
4. The vigilance obligations
Lawyers must remain constantly vigilant throughout the business relationship with the client. This means they must regularly monitor their clients and the transactions they execute. In the event of changes in the client’s risk profile (e.g. new business activities, changes in ownership structures,…), the risk assessment must be reviewed and the necessary additional measures must be taken.
5. Awareness and training
It is important that lawyers and their staff are aware of the anti-money laundering obligations and can recognize the signs of money laundering. Law firms must therefore provide regular training and education. Awareness helps to strengthen compliance with legal obligations and ensures that everyone at the firm is alert.
6. Reporting obligation
When lawyers suspect that a transaction is related to money laundering or terrorist financing, they are obliged to make a report to their President of the Bar. Failure to comply with this reporting obligation can have serious consequences, such as complicity in money laundering offences.
Balance between confidentiality and responsibility
One of the biggest challenges for lawyers is finding a balance between their legal obligations and the relationship of trust with their clients. Lawyers are bound by professional secrecy, which means they cannot simply share sensitive information about their clients. This is the reason why a report is not made directly to the FIU, but rather to the President of the Bar.
Practical tips for lawyers:
- Stay informed about the legislation: ensure that you, as a lawyer, are always up to date with the latest changes and obligations of the AML Law and other relevant regulations;
- A solid anti-money laundering policy: ensure that you, as a lawyer or law firm, implement a written and comprehensive anti-money laundering policy that is adhered to by all lawyers within your firm;
- Regular training and education: As a lawyer or law firm, regularly attend courses on money laundering prevention and ensure awareness within the firm;
- Communication with clients: ensure that you, as a lawyer, are clear with your clients about your legal obligations. Explain to them why certain information is needed, and why and for how long it is kept.
Do you need help developing and implementing a solid policy on the prevention of money laundering? Contact our team for assistance.