Concerns over Client Confidences Spur ABA to Oppose Bill in Senate Judiciary

Later today, the Senate Judiciary Committee will hold a hearing related to S.1454, the True Incorporation Transparency for Law Enforcement (“TITLE”) Act.  TITLE is an anti-money laundering bill.  Per the text, the Act’s purpose is:

• “to ensure that persons who form corporations in the United States disclose the beneficial owners of those corporations, in order to prevent the formation of corporations with hidden owners, stop the misuse of United States corporations by wrongdoers, and assist law enforcement in detecting, preventing, and punishing terrorism, money laundering, tax evasion, and other criminal and civil misconduct involving United States corporations, and for other purposes.”

Last week, the ABA issued a press release announcing that ABA President Hilarie Bass sent a letter to the Senate Judiciary Committee in which she expressed concerns over provisions in the proposed legislation.

The letter is here.  The ABA Journal has the full story here.

Initially, President Bass expressed concern that TITLE “would improperly subject many lawyers and law firms to the anti-money laundering (AML) and suspicious activity reporting (SAR) requirements of the” Bank Secrecy Act.”  She argued that “[t]his would undermine the attorney-client privilege, the confidential lawyer-client relationship, and traditional state court regulation of the legal profession.”

Citing Rule 1.6 of the ABA Model Rules of Professional Conduct, and equivalent state rules, President Bass submitted that:

• “Such aggressive reporting requirements may be appropriate for banks or certain other financial institutions, but requiring lawyers to report confidential client information to the government—under penalty of harsh civil and criminal sanctions—is plainly inconsistent with their ethical duties and obligations established by the state supreme courts that license, regulate, and discipline
  lawyers. These requirements would also seriously undermine the attorney-client privilege, the confidential lawyer-client relationship, and the right to effective legal representation by discouraging full and candid communications between clients and their lawyers.”

President Bass went on to cite other concerns, including “costly, and unworkable new regulatory burdens on small businesses, their agents who help them form corporations or LLCs, and the states.”

Might be something to keep an eye on to the extent that your practice includes business formation and advice to business entities.