The recent indictment against Paul J. Manafort, Jr. and Richard W. Gates, III has created a public discourse about the crime of money laundering. The allegation is that they received millions of dollars in payments from the Ukraine and its political parties and leaders to perform governmental lobbying services in the United States and that they laundered the money through domestic and foreign corporations, partnerships and banks in order to finance lavish life styles and avoid paying taxes.
Money laundering occurs when someone wants to turn illegally obtained money into money that appears to have been legally obtained or when someone possess money and secretly pays it into the hands of third persons or shell companies to acquire assets without detection of the source.
Frequently shell corporations or layers of shell corporations are used to conceal ill-gotten gains and money that is received or possessed in order to purchase assets for their beneficial use and escape taxation on the original money. Expensive real estate, homes, condominiums and luxury items are acquired.
In the vast majority of the states the formation of a corporate entity is inexpensive and simple without any requirement to identify the owners. Lawyers who create and service these anonymously owned business entities enable and facilitate criminal activity with impunity.
Congress because of the political discord has not recently enacted meaningful legislation. There is, however, bi-partisan identical Bills known as the Corporate Transparency Act of 2017 that are pending in the House Committee on Financial Services and the Senate Committee on Banking Housing and Urban Affairs. A similar bi-partisan Bill called the True Incorporation Transparency Law Enforcement Act is also pending in the Senate Committee on the Judiciary. If enacted into laws, States would be required to obtain information on the true owners of corporations and LLCs formed under State laws and to make the information available to law enforcement. Lawyers who perform the legal services and who fail to provide complete or updated beneficial ownership interests to a State where the entity is formed would be guilty of a criminal offense.
The impact of money laundering, domestically and globally, is immeasurable. It makes the myriad of theft crimes, fraud, drug trafficking sheltered from detection. When officials of foreign countries or domestic public entities pilfer the coffers they have a way of profiting. Terrorism and other illegal activities have a method of being financed.
These proposed laws should not be controversial however they are opposed by the U.S. Chamber of Commerce, the business lobby and the American Bar Association. Lawyers can now earn fees and individual and business clients are able to use and enjoy secretly sourced assets with plausible deniability of any underlying questionable activity. Particularly distressing is the continuing objections of the American Bar Association who pay lip service to supporting reasonable and necessary domestic and international methods to fight money laundering, while at the same time contends that the legislation would be excessively burdensome when rendering legal services and would intrude on confidentiality and the attorney-client privilege.
Money laundering services are not legal services. A lawyer is required not to counsel or assist a client in conduct that the lawyer knows is illegal, criminal or fraudulent and is required to reveal such information to the proper authorities as soon as and to the extent that the lawyer reasonably believes it is necessary to prevent the client or another person from committing a criminal, illegal or fraudulent act that is likely to cause substantial injury to the financial interest or property of another. Lawyers who are willfully blind as to their clients’ potential illicit activity and then render assistance should not avoid scrutiny or escape consequences.
The American Bar Association’s positions are ill-founded and are contrary to the public interest. Congress should expeditiously enact corporate transparency legislation.