By American Bar Association
Corporate transparency and the unauthorized practice of law are among the hot topics that lawyers have a responsibility to know how the issues apply to them and their clients, according to a panel of legal ethicists at the American Bar Association 2024 Annual Meeting in Chicago.
“Issues From the Frontlines: Hot and Emerging Legal Ethics and Professional Responsibility Issues That Lawyers Should Know About,” presented on Aug. 1, was one of the sessions of the ABA’s CLE in the City series, which offered meeting attendees exclusive access to programming organized by well-known law firs in downtown Chicago.
The Corporate Transparency Act, known as the CTA, became effective Jan. 1, 2024, and is an important issue for lawyers in a number of ways, including client due diligence, said Tyler Maulsby of Frankfurt Kurnit Klein & Selz and president of the Association of Professional Responsibility Lawyers.
The CTA requires certain business entities to file beneficial ownership information with the Financial Crimes Enforcement Network of the U.S. Department of the Treasury in an effort to combat money laundering and other financial crimes. Lawyers and law firms are often involved in the incorporation of the entity and may be held responsible for filing the information. But lawyers are not exempt from adhering to CTA requirements.
Also, law firms need to inform their clients of the CTA’s beneficial ownership information reporting requirements and be prepared to advise them on compliance. Failure to flag it at all to the client can have real consequences for the lawyer — and the client.
“A lot of lawyers are not paying attention to (the CTA) that much,” said Trisha M. Rich, a partner at Holland & Knight. And the stakes are high for those who fail to comply.
“Because of the stakes here, a lot of people don’t want to touch it,” Tyler said. “If you get it wrong it could be a federal offense.”
The biggest risk of the CTA is for the solo practitioner who tries to do everything, Tyler said. Also, a firm that has a corporate department that can file the necessary paperwork but has a client who tries to get around it also faces risk, he said. A way to avoid liability is to clearly outline the scope of services in engagement letters to define who is the client. Panelists also advised sending termination letters to formally end their services to clients in order to prevent being held accountable later. Lawyers also should consider disengaging from clients who are unwilling to disclose required information.
Another hot topic among legal professionals is the unauthorized practice of law, known as UPL, which came into the spotlight during COVID. The pandemic changed the way — and where — lawyers work and prompted the question, “Should we regulate lawyers this way?” Rich said.
David Majchrzak, a lawyer with Klinedinst, said the Association of Professional Responsibility Lawyers and the ABA have proposed changes to Model Rule 5.5, which governs UPL and multijurisdictional practice. Changes to the rule are needed because it is a barrier to lawyer mobility and client choice, and it requires costly multiple bar applications and licenses.
However, potential issues arise with the unauthorized practice of law, such as who pays for client protection fund claims and how regulatory resources are allocated to address investigations and discipline.
(https://www.americanbar.org/news/abanews/aba-news-archives)
Corporate transparency and the unauthorized practice of law are among the hot topics that lawyers have a responsibility to know how the issues apply to them and their clients, according to a panel of legal ethicists at the American Bar Association 2024 Annual Meeting in Chicago.
“Issues From the Frontlines: Hot and Emerging Legal Ethics and Professional Responsibility Issues That Lawyers Should Know About,” presented on Aug. 1, was one of the sessions of the ABA’s CLE in the City series, which offered meeting attendees exclusive access to programming organized by well-known law firs in downtown Chicago.
The Corporate Transparency Act, known as the CTA, became effective Jan. 1, 2024, and is an important issue for lawyers in a number of ways, including client due diligence, said Tyler Maulsby of Frankfurt Kurnit Klein & Selz and president of the Association of Professional Responsibility Lawyers.
The CTA requires certain business entities to file beneficial ownership information with the Financial Crimes Enforcement Network of the U.S. Department of the Treasury in an effort to combat money laundering and other financial crimes. Lawyers and law firms are often involved in the incorporation of the entity and may be held responsible for filing the information. But lawyers are not exempt from adhering to CTA requirements.
Also, law firms need to inform their clients of the CTA’s beneficial ownership information reporting requirements and be prepared to advise them on compliance. Failure to flag it at all to the client can have real consequences for the lawyer — and the client.
“A lot of lawyers are not paying attention to (the CTA) that much,” said Trisha M. Rich, a partner at Holland & Knight. And the stakes are high for those who fail to comply.
“Because of the stakes here, a lot of people don’t want to touch it,” Tyler said. “If you get it wrong it could be a federal offense.”
The biggest risk of the CTA is for the solo practitioner who tries to do everything, Tyler said. Also, a firm that has a corporate department that can file the necessary paperwork but has a client who tries to get around it also faces risk, he said. A way to avoid liability is to clearly outline the scope of services in engagement letters to define who is the client. Panelists also advised sending termination letters to formally end their services to clients in order to prevent being held accountable later. Lawyers also should consider disengaging from clients who are unwilling to disclose required information.
Another hot topic among legal professionals is the unauthorized practice of law, known as UPL, which came into the spotlight during COVID. The pandemic changed the way — and where — lawyers work and prompted the question, “Should we regulate lawyers this way?” Rich said.
David Majchrzak, a lawyer with Klinedinst, said the Association of Professional Responsibility Lawyers and the ABA have proposed changes to Model Rule 5.5, which governs UPL and multijurisdictional practice. Changes to the rule are needed because it is a barrier to lawyer mobility and client choice, and it requires costly multiple bar applications and licenses.
However, potential issues arise with the unauthorized practice of law, such as who pays for client protection fund claims and how regulatory resources are allocated to address investigations and discipline.
(https://www.americanbar.org/news/abanews/aba-news-archives)
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