Lawyers and Notaries Exposed to Money Laundering Risks
A recent report has highlighted the significant risks faced by lawyers and notaries in Croatia when it comes to money laundering and terrorist financing. The European Commission’s 2015 directive requires these professionals to apply customer due diligence in certain transactions, including buying and selling of real property or business entities, managing customer money, and opening or management of bank accounts.
The Risks
The report notes that lawyers and notaries are often exposed to misuse by criminals involved in money laundering activities. For example:
- Engaging a lawyer can add respectability and an appearance of legitimacy to any activity, making it more difficult for authorities to detect suspicious transactions.
- Lawyers have the specialized knowledge and expertise to exploit legal loopholes and help criminals retain and legitimize the proceeds of crime.
The Role of Lawyers
The role of lawyers as third-party launderers is particularly concerning. They may:
- Provide services such as company incorporation, provision of resident or nominee directors, and facilitation of new bank accounts.
- Help criminals to launder money by exploiting legal loopholes and providing a legitimate appearance.
Challenges and Recommendations
The European Commission has emphasized that lawyers and notaries are highly exposed to the risk of money laundering and terrorist financing due to their ease of access and the legal professional privilege and right to a fair trial that they enjoy. However:
- Confidentiality, legal professional privilege, and professional secrecy vary from one country to another, making it important for authorities to monitor and regulate these professions closely.
- A recent survey found that 41% of lawyers and notaries believed they were obliged to implement anti-money laundering measures, up from just 5.5% in 2011 and 2012.
Regulatory Actions
The Financial Inspectorate filed four indictments against lawyers and notaries between 2014 and 2018 for various irregularities, including:
- Failing to determine the beneficial owner
- Maintaining inaccurate records
- Conducting inadequate due diligence measures
The report recommended that authorities continue to monitor and regulate these professions closely to prevent money laundering and terrorist financing.
A Comprehensive Approach
The risk of money laundering is not limited to lawyers and notaries. Other professionals, such as accountants and real estate agents, may also be at risk of being used by criminals to launder illicit funds. As such:
- It is important for authorities to take a comprehensive approach to preventing money laundering and terrorist financing in all industries.
- A combination of regulatory measures, training, and awareness programs can help to prevent these crimes and protect the integrity of the financial system.