Law Firms Provide Smoke Screen For Money Launderers

“Lawyers can unwittingly provide a smoke screen for people who want to launder money,” legal ethics expert Stephen Gillers told the Wall Street Journal. The Justice Department is investigating whether that was the case for Shearman & Sterling LLP. The firm has not been accused of any wrongdoing, but may have served as the method of transport for billions in money siphoned illegally from the Malaysian economic development fund. Court filings document how the money passed through a trust account at the law firm before being used to buy luxury real estate, private jets, and casino nights. Though U.S. lawyers are not ethically obligated to trace the source of money being used by clients to fund deals and other projects, legal experts say attorneys should generally know where client funds come from, and look for red flags that clients are dealing in dirty money. But even if lawyers discover evidence of possible wrongdoing, whether or not they should go to external authorities remains a source of debate. “Law firms have been a weak spot in the regulatory regime” on money laundering, Richard Painter, law professor and former chief White House ethics counsel under George W. Bush, told the Wall Street Journal.