The Role of Lawyers and Notaries in Money Laundering and Terrorist Financing
The Vulnerability of Professionals to Misuse
Lawyers and notaries play a crucial role in the money laundering and terrorist financing (ML/TF) process due to their expertise, access to legal loopholes, and ability to provide services such as company incorporation and bank account facilitation. These professionals are exposed to misuse by criminals, taking advantage of their position to facilitate illicit activities.
The European Commission’s Perspective
The European Commission highlights the high-risk exposure of notaries and lawyers due to:
- Ease of access: Lawyers and notaries often have direct access to sensitive information and financial transactions.
- Legal professional privilege: Confidentiality and secrecy are guaranteed, making it challenging for authorities to gather evidence.
- Right to a fair trial: The legal profession is protected by strong safeguards, which can hinder investigations.
Country-Specific Variations
Confidentiality, legal professional privilege, and professional secrecy vary from country to country, affecting the requirements for suspicious transaction reports (STRs), investigative actions, and information exchange.
Croatia’s Experience
In Croatia, there was initially limited awareness of ML/TF obligations among lawyers. However, a 2018 questionnaire by the Croatian Financial Intelligence Unit (FIU) showed an increase in risk perception due to changes in legislation and supervisors’ activities promoting ML/TF threats faced by the legal profession.
Report 2020 Findings
The Report 2020 identified a medium-risk of ML/TF in the sector, with the most risky transaction being assistance in planning and conducting transactions related to real estate purchase and sale. Notaries were recognized as a high-risk category due to their involvement in creating, operating, or managing trusts, companies, foundations, or similar structures.
Regulatory Actions
The Financial Inspectorate filed four indictments during supervision of the sector, mainly for irregularities such as:
- Determining beneficial owner
- Data and records keeping
- Due diligence measures
- Risk assessment
- Suspicious transaction reports (STRs)
- Monitoring
Online Activity
The report also noted that 37% of lawyers did business with high-risk customers and 16% conducted business solely online.
Conclusion
The text emphasizes the importance of awareness and education among lawyers and notaries to prevent ML/TF activities in their sector. By promoting knowledge and best practices, these professionals can play a crucial role in combating financial crime and maintaining the integrity of the legal system.