Tightening up on the intermediaries - an update
In 2008 we blogged a determination by the New York State Bar Association, which said that lawyers should not counsel or assist clients in conduct they know to be illegal or fraudulent "in New York or any other jurisdiction." (We did a re-run of this yesterday on the Financial Task Force blog.)
That last part in parenthesis is crucial - for it addresses a common offshore loophole - helping someone else commit an illegal act in a foreign jurisdiction may not be illegal in the home jurisdiction. This loophole has allowed tax haven intermediaries to assist foreign criminality, fraud and other illegality, with impunity. The New York State Bar Association, to its credit, disagreed.
David Spencer, who originally brought this to our attention, now provides an update. Since that determination was issued by the New York State Bar Association, New York has adopted the relevant provision of the American Bar Association Model Rules of Professional Conduct, which reads, in the relevant part, as follows:
"A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law."
In other words, the "in any other jurisdiction" clause remains valid, which is a good thing, but the but the professional ethics rules in New York State are now narrower because they now refer to "conduct that is criminal or fraudulent." (To be clear -- "illegal" included civil law and criminal law.)
What we now need to see, far more widely around the world, is professional associations - be it lawyers, accountants or whatever - being directly asked specific questions like this: notably whether a local practitioner, in assisting offshore illegality, is engaging in local illegality.
In fact this ought to be one of the great questions of our globalised age. And yet who ever asks it?
That last part in parenthesis is crucial - for it addresses a common offshore loophole - helping someone else commit an illegal act in a foreign jurisdiction may not be illegal in the home jurisdiction. This loophole has allowed tax haven intermediaries to assist foreign criminality, fraud and other illegality, with impunity. The New York State Bar Association, to its credit, disagreed.
David Spencer, who originally brought this to our attention, now provides an update. Since that determination was issued by the New York State Bar Association, New York has adopted the relevant provision of the American Bar Association Model Rules of Professional Conduct, which reads, in the relevant part, as follows:
"A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law."
In other words, the "in any other jurisdiction" clause remains valid, which is a good thing, but the but the professional ethics rules in New York State are now narrower because they now refer to "conduct that is criminal or fraudulent." (To be clear -- "illegal" included civil law and criminal law.)
What we now need to see, far more widely around the world, is professional associations - be it lawyers, accountants or whatever - being directly asked specific questions like this: notably whether a local practitioner, in assisting offshore illegality, is engaging in local illegality.
In fact this ought to be one of the great questions of our globalised age. And yet who ever asks it?
posted by TJN at 8:08 am
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