Is a client using your legal services to commit a crime? New ethics opinion outlines your duty to inquire
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Lawyers have ethical duties to inquire whether a client is seeking to use their services to commit fraud or other criminal activity.
This duty to inquire extends beyond Model Rule 1.2(d), which prohibits a lawyer from advising or assisting a client with conduct the lawyer knows is criminal or fraudulent. The ABA’s Standing Committee on Professional Responsibility has issued Formal Opinion 491 to clarify this requirement in the wake of increased reporting of individuals using legal services for money laundering and terrorist financing.
The opinion states that “the legal professional has become increasingly alert to the risk that a client or prospective client might try to retain a lawyer for a transaction or other non-litigation matter that could be legitimate but which further inquiry would reveal to be criminal or fraudulent.”
In other words, a lawyer cannot simply turn a blind eye by claiming he or she wasn’t positive that the client was involved in criminal activity. If the facts “indicate a high probability” the client is using the lawyer to commit fraud or crime, the lawyer must inquire. The lawyer cannot “ignore the obvious.”
But the opinion notes that “Rule 1.2(d) is not the only source of a lawyer’s duty to inquire.” The ethical duties also involve the duty of competency under Rule 1.1; the duty of diligence under Rule 1.3; the duty to communicate with clients under Rule 1.4; the duty to avoid professional misconduct and avoid dishonesty under Rule 8.4(b) and (c); and the duty to withdraw under Rule 1.16. The opinion also cites Rule 1.13, which imposes a duty to inquire into the interests of an organization or entity the lawyer is representing.
If the client refuses to answer a lawyer’s questions or asks the lawyer not to evaluate whether a course of action or transaction is legal, the lawyer must still make an “appropriate inquiry.” If the client will not provide the necessary information to the lawyer, the lawyer must withdraw or decline representation.
If the lawyer can obtain information from sources other than the prospective client without breaching confidentiality obligations under Rules 1.6 or 1.18, the lawyer should seek the information. “Overall, as long as the lawyer conducts a reasonable inquiry, it is ordinarily proper to credit an otherwise trustworthy client where information gathered from other sources fails to resolve the issue, even if some doubt remains,” the opinion reads. For example, the lawyer may have represented the client previously or “know the client personally, professionally, or socially.”
The opinion also contains several hypotheticals drawn from the ABA Voluntary Good Practices Guidance for Lawyers to Detect and Combat Money Laundering and Terrorist Financing that explains when lawyers need to inquire further.