Lawyers’ professional secrecy and money laundering  

Diego Cabezuela Sancho, President of the Inlaw Alliance of Law Firms,  October 22, 2024

Lawyers’ professional secrecy is not living its best years. The fight against money laundering is also putting it on the ropes, imposing on us the obligation to control our clients, monitor their business and even report their suspicious actions.    

Generally speaking, no one doubts that lawyer-client confidentiality and professional secrecy are key elements of justice in a democratic system. However, the systems for combating money laundering, which are becoming more and more invasive and are less and less careful, have already opened up a number of loopholes in this general principle.  

The legal fight against money laundering in Europe began with a Directive as long ago as 1991. This has been followed by four more, and recently by an EU Regulation, extending it to more activities, persons and entities, creating new control duties, and toughening sanctions. 
         
The strategy of these regulations is based on considering persons or entities that carry out activities likely to be used, or to be used, as a vehicle for money laundering as regulated entities, and imposing strict control obligations on them. Typically, financial institutions, casinos, insurance companies, lottery traders, foreign exchange, crypto-currencies, etc. and a large group of professionals, including, since 2001, lawyers. All of us are obliged to identify clients, investigate the beneficiaries of each operation, know/follow their business, report any irregularities, etc., and, naturally, much riskier burdens when it comes to clients or operations with so-called high-risk countries. 

The obligated parties are thus, by force, a kind of government agents, or money laundering surveillance agents, exposed to heavy penalties in case of non-compliance. In Spain, many law firms have been fined by the Financial Authority in recent years.       

For European lawyers, the second Directive, published in 2001, was a real earthquake as it included us for the first time.  Until then, the lawyer-client relationship dwelled in a sacred and secure space of confidentiality, which no one dared to question. But times had changed and, after the attacks on the Twin Towers, the fight against money laundering and the financing of terrorism had become global security priorities, forcing us to sacrifice many values that, until then, we had considered untouchable.   

In Latin America, the FATF and GAFILAT Recommendations on money laundering have pushed and are pushing the States in the same direction. Although not binding, these Recommendations have become universal guidelines of conduct, which no country dares to ignore. Despite the resistance of lawyers’ groups, most countries have already incorporated them into their national legislation. Argentina did so only a few months ago; it is an irreversible and unstoppable process. 


The issue is not a simple one. Leaving aside corporatism, no one can deny the intervention of lawyers in the management of clients’ businesses which, by their nature, can be perfect covers for money laundering. In fact, business management is not even a genuine activity of lawyers, nor is it part of the hard core of the right of defense. In practice, they are often carried out or collaborated in by other professionals. Nor can we ignore the obvious fact that some lawyers, business managers, collaborate, with full knowledge, in illegal activities of their clients, of money laundering and also of worse crimes.   

On the other hand, the professional secrecy of lawyers has suffered severe setbacks in recent years, and not only on account of the fight against money laundering.  

The hacking of the Panamanian law firm Mossack & Fonseca in April 2016, opened the door and marked a before and after. Eight years after that, the documentation stolen from that firm has been used by most of the Prosecutor’s Offices and Courts, without making no bones about its origin. It is true that some of the facts discovered were extremely serious, and it was hard to let them go unpunished, but the tools of criminal investigation, in Panama and in the rest of the free world, must always be lawful. In the fight against crime there is no room for shortcuts, and professional secrecy is an essential pillar of our penal system, built up over many centuries of civilization.  After the Panama Papers, there have been other hacks to law firms, propitiated by journalists’ organizations (Football Leaks, also in 2016, Pandora Papers, in 2021, where the files of no less than 14 law firms were invaded) and the subtracted documents have also been used to judge and convict their clients.  

A defendant/defendant is under no obligation to provide data or documents to a prosecution that may be prejudicial to him. In Europe it is considered an extension of the right not to testify against oneself, born of the European Convention on Human Rights. But what a short future awaits this right if the documents that the accused does not have to provide can simply be stolen from his lawyer.   

In Spain, episodes of recorded conversations between lawyers and their clients appear in the media with regrettable frequency. In 2011, a judge of the Audiencia Nacional went so far as to videotape an interview in the prison’s call rooms between some defendants, linked to the opposition party, and their defense lawyers, the so-called "Gürtel case". Our Supreme Court did not hesitate and condemned the Magistrate for prevarication, but the pressures to the Court, propitiated from the Government, in the weeks prior to the trial, were despicable and unworthy of a democratic State. In Germany, in 2018, the Public Prosecutor’s Office went so far as to demand from a bank the current accounts of a lawyer to trace possible payments or income of his client, of money from a fraud. 

Professional secrecy is under permanent threat. It must be defended without any hesitation, in any country and before any court. It is not a privilege of lawyers, but a right of citizens, which guarantees their defense and protects their legal security.   
 
From this complex panorama, and returning to the obligatory incorporation of lawyers in this universal fight against money laundering, it must be acknowledged that the rules, both European and national, have addressed the issue in a reasonably balanced manner. 
Money laundering and its intimate relationship with terrorism are terrible realities of our time, which seriously threaten our security and whose neutralization requires, whichever way you look at it, some profound changes, even in vital matters. This is why these rules have made, or are effectively extending to lawyers the obligation to control and, if necessary, inform on our clients, in all matters related to the management of their business (e.g. real estate transactions, corporate transactions, investment funds, trusts, financial transactions, etc.), when they enter dangerous terrain. This farewell to confidentiality is the price, high or low, that we have to pay in exchange for this collective search for security.   

However, these same rules keep intact, until now, the professional secrecy in everything that involves the traditional legal advice of lawyers and the defense in court of our clients. Including - and this is of the utmost importance - advising and assisting them, with absolute freedom, in the face of any possible legal risk, in a current, future, or simply potential legal proceeding, and whatever the implications of the case in terms of money laundering. Also, of course, if the proceeding, investigation or accusation against the client deals precisely with, or includes, money laundering. 
In short, the rules safeguard the most important aspects of the right of defense itself, without restrictions and in the broadest sense. 

Business management goes a different way. Each anti-money laundering regulation is tougher than the previous one, adding new behaviors, controls and sanctions to this kind of global crusade. But, so far, they are all slowing down in the face of the red lines that, as of today, mark the perimeter of this territory free of the right of defense. 

We’ll see for how long, but we’d better be on our guard, because professional secrecy is still a target.