The bill implementing the fourth European Anti-Money Laundering in, inter alia, the Dutch Money Laundering and Terrorist Financing (Prevention) Act [Wet ter voorkoming van witwassen en financieren van terrorisme] (Wwft) was published only recently, even though the term for implementing that Directive in national legislation expired in June.
Much has been said and written about the bill, the consultation documents that preceded it, and the Directive itself. Up to now, however, very little light has been shed on whether the Wwft applies to in-house counsel – lawyers who are employed by the companies they advise. These lawyers are subject to special rules and requirements. For example, given that they only have one permanent client – namely, their employer – that employer must sign a ’professional charter’ drawn up for the purpose of affirming the independence of the in-house counsel’s position. In addition, and unlike other corporate lawyers, in-house counsel are subject to disciplinary rules.
The Explanatory Memorandum published alongside the bill on 13 October 2017 states (in a new provision): “…In the case of lawyers, it is also conceivable that a lawyer will work for a company that does not qualify [as a law firm (note by author)] as such, meaning that it is only a lawyer who is employed by the company who can be considered an institution as meant in the Wwft. The obligations under the Wwft and the related supervision of compliance with those requirements can thus only be aimed at this individual lawyer in employment."
This passage seems to be a response to comments made by the Netherlands Bar Association on the draft implementation bill and accompanying draft Explanatory Memorandum dated 4 July 2016, both of which documents were subjected to the consultation process. Specifically, the latter included the following passage: “The phrase ‘natural person, legal entity, or company that independently performs professional or commercial work’ indicates that the obligations pursuant to this act may apply to natural persons who perform their work independently, as well as to legal entities. The obligations do not apply to professional practitioners who are employed by companies.…”
The Bar Association’s view was that the Wwft would not apply to lawyers who were employed by companies because the legislature that prepared the draft stated “that these lawyers would not be working autonomously and independently.” The Bar Association considered this reason to be “extremely strange”, given that ‘independence’ is one of the legal profession’s core values.
Where the Bar Association’s comments seem to be primarily aimed at the underlying motivation expressed by the legislature in the Explanatory Memorandum, the legislature opted, in the final version it published a year later, to declare that the Wwft would also apply to in-house counsel.
From our perspective, however, the question is whether that applicability to in-house counsel will be feasible in practice. The application of the Wwft to in-house counsel could, in certain cases , have extraordinary consequences.
Specifically, pursuant to Section 3 Wwft, lawyers must conduct client investigations, and, depending on the risks identified, monitor the client continuously. This could, for instance, present a significant challenge to a Dutch lawyer serving as in-house counsel for a multinational with branches in high-risk countries that is the subject of news reports containing allegations of fraud.
Another point meriting attention is the duty to report unusual transactions. If a lawyer serving as in-house counsel has reason (in accordance with the “subjective indicator”) to suspect that the transaction in question regards money laundering (for example, as a consequence of forgery or bribery), he/she must immediately report that transaction to the Financial Intelligence Unit (FIU). At the same time, the Wwft binds that lawyer to a duty of confidentiality concerning that report: a lawyer who is actually employed by his/her client may not inform anyone else – including his/her employer – about the report. The position of in-house counsel may become even more complicated if he/she is employed by an organisation that is considered to be “a Wwft institution”, such as a bank, insurance company, or accounting firm.
A third difficulty is presented by the second Wwft reporting mandate for cases in which a client investigation does not result in the intended outcome. If a lawyer employed by an international company cannot effectively monitor his/her international employer, he/she must not only report this to the FIU, but must, under certain circumstances, cease rendering services to his/her sole (!) client.
The turnaround the legislature made on the issue of the applicability of the Wwft to in-house counsel between the draft Explanatory Memorandum and the final Explanatory Memorandum has in any case given rise to complex questions that merit the legislature’s more express attention.