ABA-513
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| (Recent changes to ABA Model Rule 1.16 make explicit what has always been an implicit “duty to inquire into and assess the facts and circumstances of a representation” (as previously described in ABA LEO 463 (5/23/13) and ABA LEO 491 (14/29/20)). ABA Model Rule 1.16(a)’s now-explicit duty applies “more broadly” than just to the type of transactions that may involve a “lawyer facilitation of criminal transactions such as money laundering and terrorist financing”. The duty exists when any representation begins, and also “continues throughout the course of the representation.” As explained in the earlier ABA LEOs, the new ABA Model Rule 1.16(a) provision requires lawyers to “conduct an inquiry and assessment, appropriate to the circumstances, to avoid counseling or assisting in the client’s fraudulent or criminal conduct.” The assessment must take “[a] risk-based approach [which] incorporates the concepts of reasonableness and proportionality.” ABA Model Rule 1.16 cmt. [2] identifies “five non-exclusive factors” that lawyers might consider when undertaking the risk-based analysis. The ABA Model Rule 1.16 amendments “anticipated that only certain representations would necessitate only a significant inquiry, namely, those where there appeared to be a heightened risk of crime or fraud typically because of the nature of the representation or because of the appearance of ‘red flags’”. Lawyers must decline a representation if they have “actual knowledge” that their services will be improperly used. Otherwise, lawyers must “conduct a reasonable risk-based inquiry, not a perfunctory one and not one that involves a dragnet-style operation to undercover every fact about every client.” Thus, “lawyers must conduct a reasonable inquiry and assessment, proportionate to the risks presented by the facts and circumstances.” The assessment does not involve a “‘zero failure’ approach” – and “the lawyer’s judgment should be evaluated as the time it was made, not with the benefit of hindsight.” Lawyers should focus on representations that have heightened risk of misuse – such as those involving “purchasing and selling real estate,” representations where clients “use time pressure to rush a lawyer’s work, hoping to achieve their misconduct before the lawyer (or anyone else) has time to discover it,” and representations that involve “transferring large sums of cash” – especially funds “originating outside the United States” (because experience has shown that “[a] higher risk of participating in money laundering or terrorist financing exists when the lawyer ‘touches the money’”. In connection with conducting such a necessary inquiry, “[t]he lawyer need not resolve all doubts” – “if some doubt remains even after the lawyer has conducted a reasonable inquiry, the lawyer may proceed with the representation as long as the lawyer concludes that doing so is unlikely to involve assisting or furthering a crime or fraud.” |