A key aspect of the legislation enacted in this country is the obligation of professionals in the regulated sectors to report to the relevant authority any information to which they become privy during the normal course of business.
The lawyer client relationship is the notable exception to this obligation, to which failure to comply is a criminal offence. It was recognized that the lawyer client privilege is so essential to business that to require lawyers to report on what transpires between them and their clients would effectively undermine and possibly destroy the very foundation upon which the financial system rests.
The Home Office of the United Kingdom, from which The Bahamas legal system evolved and whose laws serve as a model for the jurisdiction, has issued an ﾓinformal consultation paperﾒ seeking ﾓviews on whether, and if so how, the law on the obligations of accountants to report money laundering needs to be changed to bring it in line with European Law.ﾒ
According to the Home Office document the European 2nd Money Laundering Directive stipulates that if a Member State chooses to allow a privilege exemption from reporting money laundering for lawyers (notaries and independent legal professionals) that such provision should be extended to auditors, external accountants and tax advisers ﾓproviding directly comparable servicesﾒ when provided by professionals.
Discrimination is the fundamental issue for the accounting profession. As it stands a professional legal adviser who in the course of providing professional services to his or her client learns directly from the client, that the client has violated or is in violation of the relevant anti-money laundering legislation, the professional legal adviser is not obliged to report this information to the relevant authorities.
An accountant, auditor tax adviser or other adviser in a regulated sector in the identical set of circumstances and providing ﾓcomparable servicesﾒ, however, has to report what has been learnt, to the relevant authorities because the same defence afforded lawyers is not available to accountants or other professional service providers.
The British government acknowledges that having two different standards for professionals providing comparable service may not only ﾓbe in breach of the 2nd EC Money Laundering Directive but may also be ﾓcontrary to the European law principle of equal treatment.ﾒ
The accounting profession in the United Kingdom through its official body the Institute of Chartered Accountants of England of Wales, of which there are practicing members in The Bahamas, has challenged the current status of the law as it pertains to professional legal advisers and accountants.
Accordingly the Institute of Chartered Accountants has argued that not only is the treatment of auditors, external accountants and tax advisers under the Proceeds of Crime Act discriminatory but that under the European 2nd Money Laundering Directive, the ﾓprivilege exemption from reporting for lawyers (notaries and independent legal professionals) should be extended to auditors, external accountants and tax advisers ﾓproviding directly comparable servicesﾒ when provided by professionals.ﾒ
Although the British government accepts that professional legal advisers and the accountancy profession are treated differently, it argues that where there are ﾓobjective and proportionate groundsﾒ, European Union law allows such discrimination.
The British governmentﾴs position is that the European 2nd Money Laundering Directive gives a member state the discretion to establish ﾓprivilege exemptionﾒ and that having established such exemption of reporting for lawyers does not necessarily mean that such exemption should be extended to the accountancy profession.
Finally, given the firm commitment by governments to protect their individual financial systems from abuse by money launderers, the British governmentﾴs position is that there are ﾓobjective and proportionate reasonsﾒ as established in the relevant legislation ﾓto confine the defence to legal professional advisers.ﾒ
In itﾴs informal consultation document, the governmentﾴs position was stated as follows: ﾓgiven the importance which the government attaches to tackling money laundering, organized crime and terrorist financing, we believe that if an extension to the statutory defence is needed, it should be as limited as possible consonant with our obligations under the EU law.ﾒ
In practical terms governments are prepared to consider extending ﾓprivilege exemptionﾒ from reporting only to accountants, auditors and tax advisers ﾓwho are members of relevant professional associationsﾒ and only when ﾓthey are providing directly comparable services to lawyers.ﾒ
The ﾓrelevant professionalﾒ associations have until September 30, 2004 to respond to the ﾓinformal consultation paperﾒ. For their responses to win the day, the associations will have to prove that their members are providing ﾓdirectly comparable services to lawyersﾒ in order to gain ﾓprivilege exemptionﾒ from reporting.
Technical difficulties precluded communication with the Attorney General who was out of the country on yesterday (Sunday).
C. E. Huggins, The Bahama Journal
