Money Laundering, Terrorism & Financial Institutions
Published by Civic Research Institute,

USA PATRIOT Act Monitor News Release: New FATF 40 Recommendations

The Financial Action Task Force held a plenary meeting in Berlin from June 18 to 20 and took a number of significant actions, including issuing a revision of the Forty Recommendations, admitting South Africa and the Russian Federation as full members, removing St. Vincent and the Grenadines from the list of Non-Cooperative Countries and Territories, and releasing an Interpretive Note regard one of the Special Recommendations on Terrorist Financing. The 2003 Recommendations now deal with terrorist financing as well as money laundering. The FATF indicates that changes to the Forty Recommendations include:

• specifying a list of crimes that must underpin the money laundering offence;
• enhanced measures for higher risk customers and transactions, including correspondent banking and politically exposed persons;
• extension of anti-money laundering measures to designated non-financial businesses and professions (casinos; real estate agents; dealers of precious metals/stones; accountants; lawyers, notaries and independent legal professions; trust and company service providers);
• extension of many anti-money laundering requirements to cover terrorist financing; and
• prohibition of shell banks.

A major issue in the U.S. will be the recommendations as to lawyers and accounts “when they prepare for or carry out transactions,” including:

• buying and selling of real estate;
• managing of client money, securities or other assets;
• management of bank, savings or securities accounts;
• organization of contributions for the creation, operation or management of companies;
• creation, operation or management of legal persons or arrangements, and buying and selling of business entities.

Under new Recommendation 16, lawyers, notaries, other independent legal professionals, and accountants “should be required to report suspicious transactions when, on behalf of or for a client, they engage in a financial transaction” of the sort listed above. Further, “[c]ountries are strongly encouraged to extend the reporting requirement to the rest of the professional activities of accountants, including auditing.” Fortunately:

Lawyers, notaries, other independent legal professionals, and accountants acting as independent legal professionals, are not required to report their suspicions if the relevant information was obtained in circumstances where they are subject to professional secrecy or legal professional privilege.

The interpretation of professional privilege, and who may do so, it seems, will become a crucial issue.



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