ABA Says Lawyers Must Assess Would-Be Clients for Crime Risk

Lawyers must inquire and assess potential clients before undertaking representations in order to reduce the risk of assisting criminal or fraudulent activity, the American Bar Association said in an ethics opinion released Friday.

Attorneys don’t need to remove every concern they may have that clients aren’t using their advice to commit crime, the ABA said.

When a lawyer’s initial inquiry leaves them with unresolved questions about whether the current or prospective client wants to use the lawyer’s services to commit a crime or fraud, the lawyer first “must make additional efforts to resolve those questions through further reasonable inquiry,” the ABA said. “The lawyer need not resolve all doubts.”

The opinion is the latest guidance from the group to make sure lawyers aren’t being used by clients to enable crime and fraud—and to address concerns from federal and intergovernmental law enforcement groups that attorneys aren’t unwittingly being used to help clients commit money laundering and finance terrorism.

ABA implemented a formal opinion in 2013 in an effort to combat money laundering. Even after that guidance, agencies including the US Department of Treasury and the Organization for Economic Development said more was needed to help US lawyers become tougher client screeners.

In August of 2023, the ABA added amendments to Model Ethics Rule 1.16 to make clear what was described as a “previously implicit duty to inquire and assess the facts and circumstances” of representations.

The ABA said Friday’s new opinion was needed to add additional guidance.

The text of the rule now explicitly requires lawyers to inquire into and assess the facts and circumstances of each representation, and to reject or discontinue the representation if the client seeks to use the lawyer’s services to commit or further a crime or fraud, the ABA said.

If the lawyer has “actual knowledge” that the lawyer’s services will be used to commit or further criminal or fraudulent activity, the lawyer must decline or withdraw from the representation, the ABA said.

The comments to the rule also were amended to make clear that this responsibility continues throughout the course of the representation.

The ABA used the opinion to make it clear that the changes do not affect other parts of the model rules that prohibit counseling or assisting clients in conduct the lawyer knows is criminal or fraudulent, and that permit lawyers to withdraw from a current representation if he or she “reasonably believes” they would be assisting in a crime or fraud.

The opinion tells lawyers to apply “some level” of inquiry and assessment before undertaking each representation. But it says the scope and extent of assessments will vary, informed by the level of risk that the client may seek to use the attorney’s services to commit crime.

ABA provides two hypothetical scenarios involving potential representations in the opinion. In the first, an investor based outside the United States contacts a real estate lawyer seeking representation regarding the proposed purchase of an office building in the lawyer’s city.

In the second hypothetical, an extension of the first, the client contacts the lawyer to say that a similar building is for sale in the same city. The client wants to buy it quickly. To expedite the closing, the client would like to purchase the building using money transferred from a bank account in the client’s country of residence.

The opinion advises attorneys to use a “risk-based approach that incorporates the concepts of reasonableness and proportionality.”

A comment on the rule offered more specific advice on what factors a lawyer should weigh when assessing the risk posed by accepting, or continuing, a particular representation. They include the identity of the client, including who owns the client if it’s an entity; the nature of the requested legal services; and the relevant jurisdictions involved in the representation, including whether a jurisdiction is considered at “high risk” for money laundering or terrorist financing.

Implicit in the rule “is an obligation to conduct a reasonable risk-based inquiry, not a perfunctory one and not one that involves a dragnet-style operation to uncover every fact about every client,” the opinion said.