Loyola University Chicago School of Law, J.D. Candidate 2025
The American Bar Association (“ABA”) recently passed Resolution 100 (“The Resolution”) to strengthen rules regarding due diligence toward clients. This resolution amends ABA Model Rule 1.16 to explicitly recognize an attorney’s duty to “assess the facts and circumstances of their representation”. The updated Rule reflects the goal of preventing attorneys from using their expertise to commit or further a scheme, with money laundering and terrorist financing being of particular concern.
The revised rule and its accompanying comments provide guidelines for lawyers to:
- Assess the facts and circumstances of each representation to determine whether to accept or continue it.
- Reject or discontinue a representation if the client seeks to use their services for criminal or fraudulent purposes.
- Withdraw from representation if the client persists in a criminal or fraudulent course of action.
The Resolution emphasizes the importance of a risk-based approach and flexibility in assessing each situation. Lawyers are encouraged to consider factors such as the client’s identity, their experience with the client, the nature of the requested legal services, relevant jurisdictions, and transactions involving client funds. To assist with the risk-assessment, the ABA has recommended lawyers to seek guidance from the Financial Action Task Force’s Guidance for a Risk-Based Approach for Legal Professionals and relevant ABA publications.
The Resolution reflects concerns expressed by the U.S Treasury Department and ABA that lawyers may inadvertently involve themselves in financial crimes, highlighting the need for attorneys to be vigilant in order to prevent their services from being used for illicit purposes.
The backdrop against which these changes were introduced include recent legislative and regulatory discussions regarding the legal professions role in countering money laundering. Earlier this year, the U.S. House of Representatives deliberated on the ENABLERS Act, which, if passed, could have subjected lawyers to certain provisions of the Bank Secrecy Act (“BSA”). The Act would require lawyers to, “file suspicious activity reports on their clients, and the lawyers would be forbidden to tell their clients that they have done so. While this Act did not ultimately pass, it reflects the ongoing scrutiny faced by the legal profession.
Additionally, legal cases such as United States v. Wise and United States v. Ravenell have highlighted the potential risks associated with lawyers inadvertently becoming involved in money laundering activities. In United States v. Wise, a New York lawyer pled guilty to one count of conspiring to commit international money laundering and agreed to pay a hefty fine of $210,000 after helping a Russian ogligarch fraudulently earn millions with U.S real estate. The ogligarch, Victor Vekselberg, has been blacklisted by the United States since 2018. In response, the New York State Attorney’s Office released a statement that read: “Admission to the bar carries with it a public trust that attorneys act with honesty and integrity – a trust that Robert Wise chose to betray in exchange for an easy, illicit paycheck”. These cases, while rare, have contributed to the growing public and regulatory pressure for enhanced oversight within the legal profession.
Further, the Treasury Department played a significant role in pushing for the resolution’s passage. Kevin Shepherd, the ABA’s treasurer and representative to the Treasury Department and the FATF, highlighted that a potential consequence of not passing the resolution could be federal regulation of the legal profession, potentially exposing lawyers to unwanted disciplinary action.
Impact on the Legal Community
The legal community will now need to adapt to these changes, with each state required to adopt the revised rule. State disciplinary bodies and courts will need to apply the new rule and provide their commentary on a case-by-case basis, ensuring that lawyers are diligent in preventing their services from being used for illegal or fraudulent purposes.
Ultimately, the passage of this Resolution helps maintain the existing state-based regulation of lawyers and reinforces lawyers’ ethical duty to withdraw from representations involving criminal or fraudulent activities. It also underscores the importance of a risk-based approach to assess each situation, offering clear ethical guidelines for lawyers navigating these complex issues. While the revisions may appear straightforward in principle, implementing them in practice can be complex. Lawyers must attempt to balance their ethical obligations with the need for zealous representation, client confidentiality, and loyalty.