Tax crime, legal professional privilege & the Fourth Directive: a minefield for suspicion

Differing approaches to legal professional privilege across the 27 EU member states risk creating an unlevel playing field, at least, a minefield at worst, in suspicious activity reporting of tax crimes under the Fourth EU Money Laundering Directive. Jonathan Fisher QC explains.

Jonathan Fisher QC is a practising barrister and a visiting professor of law at the London School of Economics, www.jonathan-fisher.co.uk

The inclusion of tax crimes for the first time as a designated category of criminal offence by the Financial Action Task Force (FATF) in its revised Recommendations published in February 2012 will highlight the discordant application of legal professional privilege in anti-money laundering (AML) compliance. The recommendation will be adopted by the 4th EC Directive on Money Laundering prior to its implementation in member States. This is because, unlike the position with other persons in the regulated sector such as bankers, estate agents and corporate service providers where the client relationship does not engage principles of legal professional privilege, the position of accountants and tax advisers is entirely different. For in many countries, including the United Kingdom, confidential information passing between an accountant or tax adviser and a client is covered by legal privilege, and invariably where criminality is involved, the nature of the suspicion concerns the commission of a tax crime. The international nature of tax crime brings into sharp focus the prospect of AML reporting requirements arising in different countries.