New Rules For Lawyers To Curb Money Laundering

Source : The Straits Times, July 31, 2007

They will have to scrutinise potential clients' profiles, sources of funds By K.C. Vijayan, Law Correspondent

LAWYERS will soon be barred from holding funds from unnamed sources, and will have to check their clients' backgrounds before agreeing to represent them.
The rules, which were published under the Legal Profession Act recently, will kick in on Aug15 and are meant to prevent lawyers from being used by their clients to launder 'dirty money'.

These rules will apply to legal work done in areas such as real estate, securities accounts management or mergers and acquisitions.

They also apply to matters related to the amount of money to be held, the complexity of the case, and the business or risk profile of the client or parties with controlling interest over the client.

Lawyers will have to be satisfied that there is nothing untoward in the business relationship, or between the client and any other party to the case.

A lawyer who comes up against a cagey client is obliged to drop the case. If a lawyer suspects illicit activity linked to drug trafficking, corruption or serious crimes, he has to report this to the Commercial Affairs Department.

The Law Society's governing council, as enforcer of these rules, can ask a lawyer to produce documents or an explanation if a complaint is filed.

The society's spokesman said last Tuesday that the rules have been put in place to enable Singapore to play its part as a member of the Financial Action Task Force, an inter-governmental body set up to develop, promote and monitor policies that fight money laundering and the funding of terrorism.

No known cases have been reported so far of unsavoury characters who park gains from shady businesses with lawyers to give the funds an appearance of respectability.

The rules have been seen as a landmark move by lawyers here, who liken them to measures in place for banks.

Just as banks follow KYC or Know Your Customer checklists before accepting client transactions, these rules will forbid lawyers from accepting monies from clients with fictitious names.

Due-diligence checks may involve database searches and inquiries, which will require a prospective client to show he has a legitimate business and that his funds are coming from lawful sources.

Lawyer Amolat Singh said: 'In a way, lawyers are like part-time bankers in that they, too, hold deposits for clients. The new laws make explicit the need for checks to protect them from being a conduit for illicit funds.'

With the rules in place, an overseas client will no longer be able to deposit monies here with a lawyer for a specified purpose and then cancel the deal months down the road and move the funds to third country without a satisfactory reason, he added.

Drew & Napier LLC director Wendell Wong described the rules as a 'paradigm shift' that subjects professional and commercial interests to national interest and public-policy considerations.

He said: 'While for lawyers, it means more work has to be done, it is in the interests of good governance and it is a good start, bearing in mind we are up against organised syndicates involved in money laundering.'