22 July 2022
Lawyers as Money Laundering Enablers? An Evolving and Contentious Relationship
Lawyers as Money Laundering Enablers? How the Legal Profession Fits into Modern Laundering Networks
Why lawyers matter in money laundering is not just a rhetorical question. They sit at the intersection of legal structures, corporate vehicles, financial flows and reputational defence. Michael Levi’s review of case studies and datasets from the Global North and South shows that lawyers sometimes play decisive roles in the concealment, movement and legitimisation of contested wealth. Yet the picture is far from straightforward: much lawyer involvement is routine, lawful and legitimate; proving criminal intent or culpable knowledge is hard; and regulatory responses are uneven and contested.
The forms of involvement: from routine services to active facilitation
Lawyer involvement in potentially illicit flows ranges across a spectrum. At one end are routine services that are lawful in themselves: company incorporations, trust formation, acting as nominee signatories, drafting complex cross-border agreements, or representing clients in litigation. These services can be crucial to legitimate commerce. At the other end are situations where lawyers knowingly or recklessly assist in disguising criminal proceeds by setting up opaque ownership structures, using pooled client accounts as transactional conduits, or repeatedly re-structuring assets to frustrate tracing and recovery. Between those poles lie many ambiguous interactions: high-fee clients who generate repeated transactions, firms that accept suspicious instructions while claiming no actual knowledge, and firms that consciously manage reputational risk by passing risky clients to other practitioners.
A useful taxonomy separates legal practice into
(a) retail firms doing commonplace transactional work that can nevertheless be exploited for hiding assets;
(b) bespoke or “wealth management” practices, including family offices, that build structures specifically aimed at asset protection and secrecy; and
(c) litigators and criminal defence teams whose skills enable clients to resist investigations and asset recovery.
Each category raises different risks and control challenges. For example, small “boutique” firms may be disproportionately present in grand corruption cases, while large firms can also provide pooled client accounts and intermediary services that become conduits for large flows.
Case evidence: patterns, not simple causation
Levi surveys many emblematic cases: the 1MDB scandal, Odebrecht, payments to Nigerian politicians, transactions tied to Equatorial Guinea’s elites, and the Panama/Paradise/Pandora leaks. A recurrent pattern is the use of corporate vehicles, trusts and nominee arrangements created and administered through legal and trust service providers. That pattern appears across jurisdictions: the US, UK (including Crown dependencies), Canada, the Caribbean, Switzerland and a range of Global South countries. Professional intermediaries — lawyers, notaries, trust company personnel — are commonly part of the servicing chain.
But the presence of lawyers in these chains is not conclusive evidence of criminal intent. Often the legal service provided is lawful and standard. Frequently, there is no “smoking gun” showing that a lawyer knew funds were criminal in origin. In many cases the evidence shows lawyers were involved as intermediaries who shielded communications or structured ownership, not as originators of corruption or fraud. Sometimes lawyers did act dishonestly or were prosecuted (for example, a small number of high‑profile convictions of solicitors who helped embezzle funds), but in most grand corruption investigations the culpability of lawyers is ambiguous and contested.
Why proving culpability is hard
Two structural features make attribution difficult.
First, legal professional privilege and attorney–client confidentiality are strong protections in many democracies; surveillance of lawyer–client communications is constrained and permitted only when there is independent, strong reason to suspect the lawyer. That makes direct evidence of knowingly facilitating laundering rare.
Second, many services lawyers provide are legitimate: forming companies, advising on regulatory risk, negotiating deals, or representing clients in court. Where the client’s wealth is opaque for legitimate reasons (complex corporate ownership, poor record-keeping, or high privacy norms), a lawyer’s involvement in establishing or administering a legal vehicle is not proof of criminal facilitation.
Consequently, the boundary between lawful client protection (including defence of reputations and assets) and wrongful enabling of laundered proceeds is a grey area. It is especially difficult to distinguish wilful blindness from negligent or inadequate due diligence. Because mens rea standards for money laundering often require actual knowledge of criminal origins, proving criminal liability for many lawyers remains challenging.
Regulatory responses: uneven, contested and politically charged
Internationally, the FATF has placed legal professionals squarely within AML frameworks, notably through Recommendation 22. That guidance expects legal professionals to perform client due diligence and record keeping when engaged in specific activities. But implementation is patchy. The UK, as a founder FATF member, has developed detailed guidance, mandatory MLROs, and a comparatively high level of suspicious activity reporting by lawyers. By contrast, the US and Australia have been more reluctant to regiment lawyers’ reporting duties; many U.S. state bar regimes historically resisted creating mandatory SAR/STR obligations for lawyers. Offshore and secrecy jurisdictions vary widely: some regulate gatekeepers tightly on paper but enforcement has been weak, and in several cases lawyers successfully resisted reporting reforms.
Even where rules exist, practical constraints matter. Performing thorough beneficial‑ownership checks and source‑of‑fund enquiries is costly. Firms weigh the cost of sophisticated due diligence against potential fees. There are also intra‑firm dynamics: MLROs must balance business development demands and client relationships with compliance duties. Firms may pass “edgy” clients to smaller firms or other jurisdictions rather than refusing business; such market outsourcing complicates transparency and enforcement.
Global South contexts: local dynamics, international spillovers
Levi’s review also highlights lawyer roles in many Global South settings. Local lawyers may facilitate or resist land grabs, manipulate titles, or assist with domestic laundering; they can also be essential to kleptocrats who need both local concealment and access to international services. Often, small local firms — not the international elite firms — are the hands-on facilitators of corrupt schemes. International kleptocratic wealth, however, typically requires cross‑border networks of service providers, including offshore law firms and trust companies.
What works (and what doesn’t) in controlling lawyer facilitation
There is no simple checklist for success. The evidence base on what controls most effectively deter or detect lawyer involvement in laundering is thin. Possible elements that improve resilience include strong in‑firm MLRO functions, well-resourced public regulators with investigative teeth, transparent beneficial‑ownership registries, cross-border cooperation on asset recovery, and targeted enforcement where lawyers demonstrably went beyond lawful professional assistance into knowingly facilitating criminal proceeds.
But symbolic responses abound too: political rhetoric, naming entire professions as “enablers”, and invoking broad reforms without resources or clear enforcement strategies can produce control mimicry rather than substantive progress. Regulatory design matters: inconsistent international standards, strong lobbying by legal professions, and political sensitivities around legal privilege complicate harmonised solutions.
Policy implications and practical steps for financial‑crime practitioners
First, treat lawyers as a heterogeneous population. The profession includes sole practitioners, small boutiques, large international firms, notaries and trust service providers. Effective AML strategies must recognise differentiations in client types, services offered, and internal governance.
Second, invest in targeted evidence‑gathering. Leaks and investigative journalism have revealed architectures of concealment, but systematic data on how often lawyers reject clients, how often they escalate suspicions internally, and which firm practices most reliably prevent laundering are lacking. Mystery‑shopping, careful analysis of leaked datasets, and regulator-led file reviews can help fill the evidence gaps.
Third, strengthen cross‑sector cooperation. Banks, law firms, trust companies, and registries each hold parts of the puzzle. Reforms that improve verifiable beneficial‑ownership data and create safe, legal channels for inter‑professional reporting — without undermining legitimate privilege protections — would reduce opportunities for concealment.
Fourth, resource regulators and MLROs. Rules alone are insufficient if supervisory bodies lack the capacity to investigate, or if firm-level MLROs are under-resourced and subordinated to fee-earning priorities. Enforcement credibility requires measurable follow‑through: proportionate sanctions, strategic prosecutions where culpability is demonstrable, and visible asset recovery outcomes.
Fifth, address legal‑structural loopholes. National company law and registry practices that allow anonymous ownership or make verification optional remain powerful enablers. Reforms such as public or authoritative beneficial‑ownership registries, stronger “fit and proper” testing for trust service providers, and improved cross-jurisdictional information exchange would make it harder to convert corrupt gains into seemingly legitimate assets.
Conclusion: Balance, nuance, and better evidence
Lawyers can be part of money‑laundering chains, but the debate should avoid crude generalisations. Calling the profession uniformly “enablers” overstates the known facts and risks obscuring the forms of professional conduct that truly require sanction. Conversely, insisting that most lawyer activity is merely legitimate protection of client interests risks underestimating the ways legal services are intentionally exploited.
The policy challenge is to reduce the space where illicit actors can exploit legal structures and professional silencers, while preserving privacy, access to justice and legitimate client protections. That requires nuanced regulation, better enforcement resources, cross‑sector data integration, and a stronger empirical foundation about how lawyers actually behave in high‑risk, cross‑border cases. The costs of continuing with symbolic gestures and disconnected reforms will be measured in unrecovered assets, weakened public trust, and the continued attractiveness of secrecy jurisdictions to those seeking to hide illicit wealth.
