Beringer: Gap in money laundering rules
There are no rules that require law firms to take on clients outside of criminal work and so they need to be willing to justify their choices publicly, the former senior partner of Allen & Overy said this week.
Guy Beringer KC (Hon) told the profession that this was part of the deal for which they received privileges, like a monopoly over certain types of work.
Mr Beringer, who left the firm before it became A&O Shearman, has been chairing the Institute of Business Ethics’ taskforce on business ethics and the legal profession, set up in September 2023 and due to report next month.
He was speaking at an event on the role of lawyers as professional enablers of corruption, organised at the Houses of Parliament on Tuesday by the All-Party Parliamentary Group on Anti-Corruption and Responsible Tax, and campaign group Spotlight on Corruption. We reported part of it yesterday.
The taskforce has been focused on the basis on which solicitors’ firms take on new clients who are associated with kleptocracy.
“The first major issue we found was that there in fact no regulatory, legal or professional rules which require a law firm or a solicitor to take instruction from a particular client. It’s a choice, it’s a discretion.
“There’s a professional consensus that in criminal matters everybody’s entitled to representation. So actually there is a duty to take people on irrespective of what you think of them. That is not the case on transactional matters and commercial matters.”
This meant the so-called ‘neutral actor’ principle – that lawyers should not be associated in any way with the character or actions of their clients – was “not true” in civil matters. “And if you made the discretionary choice, I don’t think you can complain about that.”
Then there was the “gap” in money laundering laws that meant they did not catch funds whose origin was not technically or provably criminal, but was “nonetheless the product of kleptocracy or grand corruption”.
This would be countries where questionable deals were legal because the institutions that would otherwise control them were under state control.
For Mr Beringer, “the fundamental answer to the problem does not lie in more and better laws and regulations” – unexplained wealth orders, for example, have struggled to make an impact “because of technical challenges of enforcement or evidence” – but in greater transparency.
“If you expose people to public opprobrium, many things will happen. They won’t like that for a start, but actually they’ll find it difficult to employ people. They’ll find it difficult to get new clients…
“We don’t say that further legislation can never be contemplated, but [this should be] the starting point.”
He described this as a ‘legitimate provenance of wealth’ test. Even if a firm does thorough due diligence and finds no evidence of tainted funds or wrongdoing, “that’s not the end of the story”. The absence of illegality was not enough.
This was a “non-justiciable” test that meant a firm’s management “must come to a credible and satisfactory explanation as to the overall wealth of the potential client standing in front of the”.
Further, this must be a judgment that a firm “has got to be prepared to defend publicly” – this was already in Mr Beringer’s mind when he spoke to Legal Futures after taking on the role.
He linked all of this to the paper published last November by Professor Stephen Mayson that argued lawyers were in a ‘public’ profession where their duty to the public always outweighs any conflicting duty to the client.
In return for this, Mr Beringer went on, the profession gets “a privileged position” in relation to the reserved legal activities, those areas of legal work that only authorised lawyers can handle. Or, put another way, barriers to entry to other people.
“That’s why the profession is very profitable,” he said. “If you are taking all the benefits of being a public profession, you’ve got to take some of the responsibilities.”
Mr Beringer warned that if the profession did not keep up its part of the bargain, the public – through Parliament – would intervene.
Leave a Comment