In late 2016, and in the light of the controversies relating to the Panama and Paradise Papers, a joint Task Force on The Role of Lawyers and International Commercial Structures was established by the Secretariat of the Organisation for Economic Co-operation and Development (OECD) and the International Bar Association (IBA).
The Task Force reported at the end of May 2019 and identified eight Principles which it recommended to governments and/or national bar associations and law societies, with a view to them being adopted and for "their role and their importance in ensuring the proper administration of justice and in upholding the rule of law".
From the perspective of lawyers in the Channel Islands, there is little new in the Principles (for example, Principle 3 concerns "Client due diligence" and states that a lawyer should undertake and document all reasonable and proportionate enquiries in order to identify and verify a client.) However what may come as a surprise is that there are still places in the world where there are no existing rules preventing a lawyer from facilitating illegal conduct (Principle 1) and that there is clearly still a significant amount of work to be done across the globe to ensure a level regulatory playing field.
While the crown dependencies already comply with most of the recommendations, there is a seemingly minor point in Principle 7, which could have major repercussions: "A lawyer should obtain and maintain up-to-date beneficial ownership information and take reasonable measures to verify its accuracy in relation to the lawyer’s client(s)."
Obtaining the material at a certain point in time is one thing, but maintaining it as accurate and current at all times, long after the retainer has come to an end, is quite different. The concept of "once a client, always a client" has implications far beyond the intended scope of this report.
In addition, the suggestion that "domestic laws should provide for the disclosure of ultimate beneficial ownership of any corporation, trust or other legal entity formed within that country’s jurisdiction" potentially changes the basis of our whole global approach to anti-money laundering, corruption and terrorist financing from the current duty on a service provider to ascertain, to an obligation on the (possibly, foreign) entity to disclose. Quite how regulators and others will react to that recommendation remains to be seen, but this would be a significant, global change in approach.
This report will clearly be of interest to lawyers but also to clients involved in multi-jurisdictional transactions. The Principles show the possible future direction of regulatory development. Clients should therefore consider these now, if only to give themselves justifiable answers in future.
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