The Voluntary Good Practices Guidance is risk-based and not rule-based. Rather than imposing a specific standard of care on lawyers, the Voluntary Good Practices Guidance provides a resource for lawyers and law firms to develop riskbased approaches tailored to the work of the individual lawyer or firm. Those approaches may vary from law firm to law firm based on factors such as geography, type of practice, size of firm, and types of clients. Because the Voluntary Good Practices Guidance is risk-based, simpler protocols can be used for lower-risk situations and more rigorous protocols for higher-risk situations.
the legal community takes seriously the threats of money laundering and terrorist financing and the role of the profession in helping to combat those risks within the bounds of our professional responsibility to our clients. This effort then allows the ABA to resist the pressures from FATF, Treasury, and Congress, to impose a federal regulatory scheme on the legal profession. Among other groups, ACMA, ACREL, ACTEC, ACCFL, the ABA Taxation Law Section, the ABA Real Property, Trust and Estate Law Section, and the Delaware State Bar Association, among other state bars, have endorsed the Voluntary Good Practices Guidance.
The Voluntary Good Practices Guidance touches a large number of lawyers, not just those involved in real estate transactions. Lawyers who “prepare for or carry out” one or more of five “specified activities” are covered by the Voluntary Good Practices Guidance. These specified activities include buying and selling real estate, commercial real estate financings, managing client accounts, managing client assets, managing contributions to companies, and creating companies.
ABA Takes Action
The focus of the risk-based approach is the due diligence for evaluating a client or a transaction, whether a new client or an existing client. Under the Voluntary Good Practices Guidance, different levels of client due diligence can be used depending on the applicable risk factors for the client and the transaction. For example, if the lawyer is contacted by a new client from out of state who wants the lawyer to help close the purchase of a convenience store with the client’s winnings from Las Vegas, the lawyer might do more inquiry than merely run a conflict search. Most of the risk factors are intuitive and consistent with most firms’ existing client intake procedures. The individual task force members of the professional organizations involved in this effort have sought the endorsement by their respective organizations of the Voluntary Good Practices Guidance. This process is important, as successful endorsements by the major professional groups in the legal community will demonstrate to Treasury and Congress that
The final step in having the Voluntary Good Practices Guidance receive the broadest possible endorsement was for the Guidance to be endorsed by the ABA itself. Although the ABA House of Delegates previously adopted resolutions supporting the principles behind the Voluntary Good Practices Guidance, the Guidance itself had not been presented to the House of Delegates. But, on August 10, 2010, the House of Delegates approved Resolution 116 adopting the Voluntary Good Practices Guidance. This action of the House of Delegates means that the Voluntary Good Practices Guidance is now official ABA policy. Recently, the ABA Standing Committee on Ethics and Professional Responsibility issued its Formal Opinion 463 on the Voluntary Good Practices Guidance. Periodically, this ABA Committee issues ethics opinions to guide lawyers, courts and the public in interpreting and applying the ABA Model Rules of Professional Conduct to specific issues of legal practice, client-lawyer relationships, and judicial behavior. Formal Opinion 463, issued May 23, 2013, finds that the model rules and the Voluntary Good Practices Guidance are consistent in their ethical principles, including loyalty and confidentially. By implementing the riskbased measures set out in the Voluntary Good Practices Guidance, where appropriate, a lawyer can avoid aiding illegal activities in a manner consistent with the model rules. Moreover, the opinion states
that “lawyers should be conservative with the risk-based measures and controls . . . and use these for guidance” as the lawyer develops client intake and client monitoring processes. What’s Next The next task of the profession is to educate the legal community in the Voluntary Good Practices Guidance. For the Delaware State Bar Association, that will mean having CLE programs and pursuing other means of educating our fellows as to the Guidance and the risks it is designed to minimize. The Delaware State Bar Association expects to remain at the forefront in these efforts and will be launching various initiatives to educate our lawyers about the Guidance and how best to manage the risks to our society of money laundering and the financing of terrorism. Robert J. Krapf is a director and the president of Richards, Layton & Finger, P.A., and can be reached at krapf@RLF.com.
Is there a major milestone in your future, or the future of your law firm? An anniversary, a memorial or a celebration? Consider a tax deductible gift to the Delaware Bar Foundation Endowment Fund, a gift that will continue to give to those most in need.
Melissa Flynn Executive Director Phone: (302) 658-0773 www.delawarebarfoundation.org
DSBA Bar Journal | September 2013
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