The American Bar Association House of Delegates has adopted new rules regarding due diligence obligations for US lawyers. The proposed changes to Model Rule 1.16 will explicitly outline lawyers’ due diligence obligations to inquire about and assess the facts and circumstances of a matter, helping them avoid unknowingly getting involved in clients’ criminal and fraudulent conduct.
The changes will also assist lawyers in identifying and responding to “red flags” that may indicate potential criminal or fraudulent activity.
By demonstrating the legal profession’s commitment to performing client due diligence, the proposed amendments will show government entities – such as FATF – and the public that lawyers take their obligations seriously in preventing involvement in criminal and fraudulent conduct. This includes money laundering, terrorist financing, human trafficking, tax-related crimes, sanctions evasion, and other illicit activities.