August 2006 Top Story:
**MLI ARCHIVE***
Confidentiality still a sticky point
There is one area in the redrafted bill which looks as if it will run and run. The very difficult point of legal privilege. Despite strong submissions from the Law Council of Australia to the government, there is no sign of it being resolved any time soon.
Lawyers want part of the draft legislation changed so that when the bill is enacted, client confidentiality is not threatened.
As it stands, the draft bill appears to require lawyers to make an assessment of their clients’ activities to determine whether any suspicious transactions have occurred and report evidence of suspicious transactions to the regulator responsible for administering the new laws, Austrac.
Lawyers are saying the requirement to report evidence of suspicious transactions poses an unacceptable threat to lawyer/client confidentiality. They want the bill amended so that lawyers are not required to review their clients’ activities for suspicious transactions, thus removing the threat to client confidentiality in the current draft.
“[This clause] entirely cuts across the requirement of confidentiality and will seriously weaken the basis on which lawyers operate,” says Tim Bugg, the new president of the Law Council of Australia.
“We say the legislation is incompatible with our duty to maintain client confidentiality and don’t believe money laundering provisions should apply to lawyers as currently proposed.”
Anna Lenahan, a partner at law firm Allens Arthur Robinson, shares Bugg’s concerns that client confidentiality is not protected.
Lenahan said other jurisdictions such as Canada have ensured their AML legislation protects privilege. In Canada, a number of the country’s law societies banded together to legally challenge the AML legislation in the Canadian High Court, and were successful in having the parts of the legislation that remove client/lawyer confidentiality repealed.
At this stage, only lawyers who provide a “designated service” will need to comply with the new legislation. There are 75 different types of designated services in the current draft of the bill, most of which are related to banking activities, trading securities such as shares and trading currency. Most lawyers won’t need to comply with money laundering and counter terrorism laws until the second tranche of the legislation is complete.
The timing of the release of the second tranche of the legislation is unclear, although according to Lenahan “there are rumours it could be as close as 12 months away”.
The timetable for the release of the second tranche may depend on whether the government is prepared to release a draft of it during the implementation stage of the first tranche, or whether it wants to wait until the first stage is properly bedded down before moving on to phase two.
DelMonte Publications Aug 2006
