The International Bar Association (IBA) and the Organisation for Economic Co-operation and Development (OECD) have set up a task force to develop standards and guidance to help international trade lawyers combat corruption.
The ‘OECD-IBA task force on the role of lawyers and international commercial structures’ was created partly in response to the Panama Papers money laundering scandal of 2016, which showed that lawyers advising clients on international transactions were at risk of helping them conceal or launder money.
The organisations argue that the recommendations of the Financial Action Task Force (FATF), while providing a valuable framework on how to conduct due diligence, are not enough to protect lawyers, as their implementation varies between countries. Instead, since the Panama Papers were released, governments have increased reporting requirements for lawyers, who are having to balance this need for transparency with their confidence obligation towards clients.
The task force will attempt to develop the guidance keeping these two competing interests in mind, helping lawyers form international commercial structures in a transparent way while respecting their confidentiality clauses.
It will look at issues such as what the legal profession’s role is in combatting corruption, money laundering and terrorism financing considering lawyers’ professional duties and the rule of law, what steps lawyers can take in the event that a previously legal act or transaction becomes illegal as a result of a change of law, what liability lawyers have for inadvertent breach of client confidentiality, and potential government action to improve transparency while respecting professional secrecy.
This pioneering work will not substitute or conflict with existing international and national requirements. Nicola Bonucci, OECD
IBA president David Rivkin says: “To ensure that they do not unwittingly facilitate economic crime, it is imperative that lawyers ask the right questions of their clients, vet them sufficiently, understand who are to be the ultimate beneficiaries of their client’s actions, and have an understanding of sovereign laws.
“In practice, inevitably complications arise. For example, what are a law firm’s obligations when conflicting sovereign laws apply in cross-border transactions? Recent events have shown that existing international and professional standards may not provide sufficiently clear guidance to lawyers who handle such transactions. Recent actions also present the danger that in their anti-corruption activities, governments may ignore the need for lawyers to advise their clients in confidence.”
Nicola Bonucci, OECD director for legal affairs, adds: “Mere formal respect of the law is a necessary but not always sufficient condition and experts from the OECD and from the IBA will confront their point of view and work together in order to ensure that these professional standards meet the expectations of the various stakeholders. This pioneering work will not substitute or conflict with existing international and national requirements and will complement other ongoing OECD work on the role of tax intermediaries.”
The project will be led by Bonucci and Rivkin’s successor Martin Solc, who begins a two-year tenure as president of the IBA on January 1, 2017. The task force will include lawyers and policy leaders from the IBA and the OECD, from common law and civil law jurisdictions, experienced in professional ethics, taxes, anti-money laundering, anti-corruption, financial services, trade and government affairs.