Treasury department proposal could affect client trust accounts

May 9, 2012
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The American Bar Association is asking the U.S. Department of Treasury to reconsider possible rule changes announced in February that are aimed at tackling money laundering and terrorist financing. The bar association believes the proposals would impose “unreasonable and excessive” burdens on law firms.

The ABA sent a letter to the treasury department’s Financial Crimes Enforcement Network May 4, urging FinCEN not to proceed with proposed rules on customer due diligence requirements for financial institutions. The proposed rules would establish a categorical requirement for financial institutions to indentify beneficial ownership of their accountholders, subject to risk-based verification and pursuant to an alternative definition ownership as described in the proposals. The question of beneficial ownership can arise in the context of accounts created by an individual or entity, which could include a law firm or accounting firm, in which these firms could be acting on behalf of another person without disclosing that fact.

The proposals, according to the ABA, would require law firms that have client trust accounts at financial institutions to disclose the identity and other ownership information regarding the clients.

“If adopted in their current form, those proposals could impose unreasonable and excessive burdens on many law firms with client trust accounts and could undermine both the confidential lawyer-client relationship and traditional state court regulation of lawyers,” wrote Kevin L. Shepherd, chair of the ABA’s task force on gatekeeper regulation and the profession.

He cites the ABA’s Voluntary Good Practices Guidance for Attorneys to Detect and Combat Money Laundering and Terrorist Financing that the ABA House of Delegates adopted in August 2010 as a way for attorneys to address the issues raised in the proposals without following “burdensome and rigid ‘one-size-fits all’” rules.

Shepherd believes the proposals would undermine the client-lawyer relationship and confidentiality under ABA Model Rule 1.6 and corresponding state rules.

FinCen announced last week it has extended its comment period on these proposals. Follow this link  to learn how to submit comment.
 

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  1. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

  2. During a visit where an informant with police wears audio and video, does the video necessary have to show hand to hand transaction of money and narcotics?

  3. I will agree with that as soon as law schools stop lying to prospective students about salaries and employment opportunities in the legal profession. There is no defense to the fraudulent numbers first year salaries they post to mislead people into going to law school.

  4. The sad thing is that no fish were thrown overboard The "greenhorn" who had never fished before those 5 days was interrogated for over 4 hours by 5 officers until his statement was illicited, "I don't want to go to prison....." The truth is that these fish were measured frozen off shore and thawed on shore. The FWC (state) officer did not know fish shrink, so the only reason that these fish could be bigger was a swap. There is no difference between a 19 1/2 fish or 19 3/4 fish, short fish is short fish, the ticket was written. In addition the FWC officer testified at trial, he does not measure fish in accordance with federal law. There was a document prepared by the FWC expert that said yes, fish shrink and if these had been measured correctly they averaged over 20 inches (offshore frozen). This was a smoke and mirror prosecution.

  5. I love this, Dave! Many congrats to you! We've come a long way from studying for the bar together! :)

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