Belgium

CENTRAL AUTHORITY FOR REPORTING

The Cellule de Traitement des Informations Financières (CTIF) / Cel voor Financiële Informatieverwerking (CFI) (Belgian Financial Intelligence Processing Unit)

For lawyers it is obligatory that intervention is made through the Bâtonnier / Stafhouder (President of the Bar)

ANTI-MONEY LAUNDERING REGULATOR(S)

The Belgian Financial Intelligence Processing Unit and the Bar Associations.

HAS THE THIRD EU MONEY LAUNDERING DIRECTIVE BEEN IMPLEMENTED? IF NOT, WHEN IS IT EXPECTED TO BE IMPLEMENTED?

Draft legislation is not available to the public yet. The handling of the (pre-)draft statute was delayed due to the break down of the new government formation process. Although there were some preliminary discussions regarding the implementation of the Third Directive among the responsible parties, there is no text available regarding these discussions.

When the new legislation comes into force, it is expected to contain a "client acceptance policy", whereby the risk profile of clients can be evaluated on the basis of a Q&A form designed by individual law firms. The CDD requirements can be made more severe or more lenient depending on the specific client. Relevant factors may include nationality, corporate form, activity, etc. of the client. It is also anticipated that larger law firms will be required to appoint a compliance officer for ML who will have to report to the authorities on a regular basis.

The Second EU Directive was implemented through the following legislative materials: Law of 12 January 2004, amending the Law of 11 January 1993, Act on the Prevention of the Use of the Financial System for the Purpose of Money Laundering and the Financing of Terrorism, Law of 22 March 1993 on the Status and the Supervision of Credit Institutions, and the Law of 6 April 1995 on the Status and the Supervision of Investment Companies. (the ‘AML Acts’).

The Belgian anti-money laundering statute of 11 January 1993, was most recently amended by the Loi Programme / Programmawet (Program Statute), which is a general framework statute containing various provisions on different areas of law, of 27 April 2007, published in the Belgian Official Gazette on 8 May 2007, and effective as of 18 May 2007.

The Program Statute extended the reporting requirement to the (possible) suspicion of money laundering resulting from "serious and organised tax fraud where complex mechanisms or procedures at an international level are used". A list of indicators was introduced to help people determine when such serious tax fraud might be involved in a Royal Decree of 3 June 2007, published in the Belgian Official Gazette on 13 June 2007,

First Belgian Bar Challenge

The Program Statute was challenged before the Cour d’Arbitrage / Arbitragehof (Court of Arbitration) by various Belgian bar associations, including the Association of French and German speaking Bars (OBFG), the Association of Dutch speaking Bars (OVB) and the French and Dutch speaking Brussels Bar Association. In their view, the duty to report imposed by the anti-money laundering legislation infringes upon the duty of professional secrecy and a lawyer's independence; principles that are safeguarded by the Belgian Constitution and the Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR).

The Court of Arbitration, in its decision 13 July 2005, as a result of its doubts as to the validity of the implementing law, referred to the European Court of Justice the question of whether the Second EU Directive, in including reporting obligations on lawyers, violated the right to a fair trial.

The European Court of Justice issued its opinion on 26 June 2007 and decided as follows:

"The reporting obligations apply to lawyers only in so far as they advise a client in the preparation or execution of certain transactions - essentially those of a financial nature or concerning real estate - or when they act on behalf of and for a client in any financial or real estate transaction. As a rule, the nature of such activities is such that they generally take place in a context with no link to judicial proceedings and, consequently, those activities fall outside the scope of the right to a fair trial. Moreover, as soon as lawyers acting in connection with a financial or real estate transaction are called upon for assistance in defending a client or in representing such client before the courts, or for advice as to the manner of instituting or avoiding judicial proceedings, those lawyers are exempt from the reporting obligations, regardless of whether the information has been received or obtained before, during or after the proceedings. An exemption of that kind safeguards the right of the client to a fair trial.

Since the Second EU Directive makes a clear distinction between, on the one hand, the assistance or representation in court and all the related activities, and, on the other hand, the other activities of lawyers, the Court came to the conclusion that the right to a fair trial is not infringed."

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62005J0305:EN:HTML (the ECJ’s judgment in English)

Second Belgian Bar Challenge

In November 2007, the Belgian bar associations launched a second challenge to the implementation of the Second EU Money Laundering Directive. In the judgment discussed above, the European Court of Justice declined to resolve the bar associations’ contention that the Program Statute obliges lawyers to work with the government, and thus breaches the right to privacy provided in article 8 of the European Convention on Human Rights.(2)

In its judgment on 23 January 2008, the Belgian Constitutional Court ruled as follows:

1. The Program Statute remains applicable to lawyers.
2. The notification duty for lawyers must be interpreted in the following way:
   1. Information obtained by a lawyer in the course of activities which are essential to the legal profession, including matters relating to financial, corporate and real estate transactions, involving (i) a client's defence or representation in court and (ii) the provision of legal advice, even outside the scope of litigation proceedings, is covered by professional secrecy and therefore must not be notified to the authorities, and
   2. If a lawyer performs an activity in relation to financial, corporate or real estate matters that goes beyond the essential services of (i) defending or representing a client in court and (ii) providing legal advice, only then does the lawyer have a duty to comply with the notification duty and disclose information to the authorities.
   
   
3. After the initial notification of money laundering facts or suspicions by the Bar President, the CTIF/CFI may request from the lawyer any "additional information" that is necessary for the CTIF/CFI to perform its investigation. Lawyers must disclose this additional information to the President of the Bar of which they are a member and not to the CTIF/CFI directly. It is then the responsibility of the President of the Bar to decide whether to pass the information on to the CTIF/CFI [3]
4. Any obligation on employees or representatives of a lawyer to inform the CTIF/CFI whenever such lawyer does not comply with the notification duty conflicts with the lawyer's professional secrecy duty and is therefore void. The Belgium bar associations and lawyers were successful in preventing law enforcement authorities from compromising the relationship between lawyers and their clients. The court stated unambiguously that lawyers were subject to ethical rules that made them different from other professions. [3]

The Court gave a very broad interpretation to "providing legal advice", being one of the essential and specific activities of the lawyer's profession, namely: "to inform the client about the status of the legislation applicable to his or her personal situation or to the transaction he or she envisages carrying out or advising the client on how to execute this transaction within the legal framework".
The Court explicitly stated that in exercising the essential activity of “providing legal advice”, even on matters for which the law imposed a notification duty (such as assisting the client in financial, real estate and corporate transactions), the lawyer remained bound by his or her professional secrecy duty and therefore could not disclose the information obtained on this occasion to the authorities.

http://www.const-court.be/public/n/2008/2008-010n.pdf
http://www.const-court.be/public/f/2008/2008-010f.pdf

According to an European Union press release of 5 June 2008 (Ref: IP/08/860), the European Commission (EC) is pursuing infringement actions against 15 member states, including Belgium, for failing to adopt and implement the Third EU Money Laundering Directive into national law by the deadline of 15 December 2007. Upon receiving the formal request, the infringing nations will have two months to provide an acceptable response or the EC may refer the issue to the European Court of Justice.

LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS

• Law of 11 January 1993 on the prevention of the use of the financial system for the purpose of money laundering and the financing of terrorism (as amended).
• The AML Acts mentioned above.
• Royal Decree of 11 June 1993 on the composition, organisation, operation and independence of the Financial Intelligence Processing Unit.
• Article 505 of the Criminal Code, which lays down the criminal offence of money laundering and targets the laundering of the proceeds of any unlawful activity. (5)

ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?

Under the Belgian Judicial Code, on the basis of the freedom of services, EU Member State lawyers (persons entitled to carry a title corresponding to the lawyer's title in their country of origin) are, in principle, entitled to exercise in Belgium the same professional activities as members of the Belgian bar associations. For certain activities, like the representation and defence in court of clients, they must act in cooperation with a Belgian bar member and must be introduced to the President of the Bar or the Court by a Belgian bar member.

EU lawyers who temporarily exercise the legal profession in Belgium are subject to the rules, of whatever source, which apply to the legal profession in Belgium, except for any condition regarding residence or registration.

For activities, other than the representation and defence of clients in court, EU lawyers are, in addition to the professional conditions and rules of their country of origin, subject to the rules which in Belgium apply to the legal profession; provided that:

• It is practicable for a non-Belgium resident to comply with the rule;
• This is justified as a guarantee for the correct exercise of the lawyer's professional activities, the dignity of the lawyer's profession and compliance with the rules on conflicts/double deontology.

Since the AML Acts concern public order and also apply to the legal profession in Belgium, they will normally apply to both Belgian bar association members and visiting EU lawyers who temporarily exercise their profession in Belgium. Since visiting EU lawyers are not members of a Belgian bar (and so do not have a responsible Bar President), cooperation of a Belgian bar member may be needed in order to comply with the reporting requirement (or alternatively they should report to their local authority under similar AML regulations).

EU Member State lawyers who, on the basis of the freedom of establishment, exercise their profession in Belgium on a permanent basis, under their original professional title, are also subject to the professional rules of whatever source. These rules apply in addition to the professional and conduct rules to which such lawyers are subject in their respective country of origin.

LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE

Guidance

• Recommendation from the National Bar Association of 1 February 1996.
• Recommendation from the OBFG of 12 March 2007, including an overview of the client identification requirements for various types of clients.
• Various deontological recommendations from the OVB of 28 January 1999, August 1999, 23 February 2002 and 9 December 2002.
• Circular Letter from the Antwerp Bar Association of 12 November 2007.

Communications

In addition to the above guidance, the OBFG, the OVB, and the local bar associations communicate on a regular basis with their members and externally through various publications (internal newsletters, press communications etc.). For example, both the OBFG and the OVB have communicated on their recent victory obtained before the Constitutional Court (decision of 23 January 2008).

IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?

Yes, the Belgian Bar Association is involved in supervising and enforcing the AML requirements. In Belgium, it is compulsory that money laundering facts or suspicions be reported to the President of the Bar, not directly to the CTIF/CFI. This is true for the initial notification of ML facts or suspicions and for any additional information lawyers are required to provide (see recent decision of the Constitutional Court).

It is the responsibility of the President of the Bar to verify whether the notification complies with the AML rules, and if so, must immediately inform the CTIF/CFI.

Additionally, it is important to note that lawyers have a duty to cooperate with the CTIF/CFI; for example, by responding to its requests for information. (5)

The AML Acts provide for administrative fines to be imposed by Bar associations only in the case of non-compliance with the verification and reporting requirements (amounts ranging from EUR 250 to EUR 1,250,000). There are no other sanctions.

DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS

When CDD must be undertaken - Legal requirement.

The terms of the AML Acts apply to lawyers, but only:

1. Where they assist a client in the preparation or execution of operations in connection with:

   1. The purchase or sale of real estate properties or businesses;
   2. The management of money, securities or other assets;
   3. The opening or management of bank, savings or securities accounts;
   4. The organising of capital contributions necessary to the founding, operation or management of companies;
   5. The founding, operation or management of trusts, companies or similar structures;
   6. Where they act in the name of and for the account of their client in financial or property transactions.

Only in these cases (article 2ter AML Act) is a lawyer obliged to identify his/her client.
In all publications by lawyers on behalf of the Belgian bar associations on the AML Acts, it is stressed that ‘advising’ a client (only) in connection with the abovementioned transactions does not trigger the identification (and reporting) requirement.

In addition to his/her general identification obligations, a lawyer must also note:

1. Where the service relates to the purchase or sale of property: the nature and other unique characteristics of the properties concerned;
   
2. Where the service relates to the management of money, securities or other assets: the size, nature, origin and intended use of the assets concerned;
3. Where the service relates to the opening or management of bank, savings or securities accounts: the size, nature, origin, intended use and other unique characteristics of the assets concerned;
4. Where the service relates to the organising of a capital contribution necessary to the founding, operation or management of companies: the identity of the companies, persons and legal entities concerned;
5. Where the service relates to the founding, operation or management of trusts, companies or similar structures: the identity of the companies, trustees and legal entities concerned.

It is pointed out by the legislator that when a lawyer acts in the name of and for the account of a client in financial or property transactions as referred to in paragraph 2. above such services do not constitute the core business of a lawyer.
For 'existing' clients – individuals or legal entities with whom the lawyer has a business relationship on the date the AML Acts became effective, i.e., 2 February 2004, the identification or identity control had to be completed before 2 February 2005 (one year after the Act became effective).

When CDD must be undertaken - Agreed policy

Many Belgian-based international law firms jointly agreed to identify "all" new clients, regardless of the nature of the services provided.

CDD requirements

The AML Acts state that lawyers must identify their clients and their legal representatives and verify their identity through a "document with evidence value."

For the identification of clients as individuals, an identity card or passport meets the definition of “document with evidence value”. Such identification and verification must include the first name, family name and address of the client. A copy of this document must be retained either on paper or electronically. The Law does not require that any form of certification of the identity document be issued. 

For the identification of clients as legal entities, the information to be verified includes: corporate name, registered office, directors and the provisions of the articles of association or by-laws governing how the entity can be legally bound. This information is usually obtained through publicly available information, such as the deed of incorporation or latest articles of association (by-laws), annual accounts and publications in the Belgian Official Gazette regarding the appointment of directors. The legal representative of the legal entity will be identified in the same way as would be done for individuals. 

Finally, the AML Acts also require, in the case of legal entities, verification of the identity of beneficial owners, namely the individuals (natural persons) that ultimately control such legal entities. The beneficial owner will be identified in the same way as would be done for individuals, or alternatively, by all reasonable means.

DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?

No, not currently, but it may be imposed by the measures implementing the Third Directive.

ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?

No, see previous section.

ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?

The identification and verification requirement of the beneficial owners of legal entities does not apply to listed companies.

ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.

No. By law, financial institutions alone may use intermediaries or third-party introducers to fulfil customer-related diligence requirements. [4]

WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?

The information that follows has since been qualified by the recent decision of the Belgian Constitutional Court discussed above.

Like the identification requirement, the obligation for lawyers to report suspicious transactions only applies to the following limited activities (article 2ter AML Act):

1. Where a lawyer assists a client in the preparation or execution of operations in connection with:

   1. The purchase or sale of real estate properties or businesses;
   2. The management of the client’s money, securities or other assets;
   3. The opening or management of bank, savings or securities accounts;
   4. Organising capital contributions necessary for the founding, operation or management of companies; or
   5. The founding, operation or management of trusts, companies or similar structures;
   6. Where they act in the name of and for the account of a client in financial or property transactions.

If, in the exercise of such activities, lawyers become aware of facts they know or suspect relate to money laundering (or the financing of terrorism, including money laundering resulting from serious tax fraud), they must immediately report those facts to the Bâtonnier (Head) of the Bar they are a member of (article 13 §3 AML Act).

There is debate about the meaning of the term “suspicion”. To trigger a reporting duty, is it sufficient that the facts do not exclude the possibility of money laundering or is it necessary for the most likely explanation of those facts to be that money laundering is involved? Because of a lawyer’s professional secrecy duty, the representatives of the bar authorities unanimously reject the former interpretation.

The AML Acts define the different activities or behaviours involving money or assets of an illegal origin that constitute “money laundering” for the purpose of the application of the Acts (article 3 §1 AML Acts). It is important to note that this definition does not fully correspond with the criminal offence of money laundering under the Belgian Criminal Code.

The AML Acts further define what is understood by “money or assets of an illegal origin,” by providing a list of criminal offences resulting in illegal money or assets (article 3 § 2 AML Acts). Thus, it is argued that a lawyer’s reporting duty only applies to suspicions of money laundering where the illegal financial gains result from one of the listed criminal offences.

Finally, there is one exception to the reporting duty (even if all the above conditions are met). Lawyers will not report the abovementioned information (article 13 §3 second paragraph AML Acts) if the information is provided to them by one of their clients or if they receive the information about one of their clients:

1. When ascertaining their client’s legal position, or
2. When defending or representing their client in or in connection with legal proceedings, including advising their client to start or avoid legal proceedings, regardless of whether the information is obtained before, during or after such legal proceedings.

The Bâtonnier determines whether all the conditions for the reporting of suspicious transactions have been met, and if so, he will immediately report the information to the Financial Intelligence Processing Unit.

Provided all the conditions thereto are met (activities of article 2ter, criminal offences of article 3 and conditions of article 13 §3), the reporting by the lawyer of suspicious transactions will not be considered as a breach of his or her professional secrecy duty.

The Financial Intelligence Processing Unit may request additional information if needed from both the Bâtonnier and the lawyers (but from the latter only through the Bâtonnier).

If reporting has been done in good faith, a lawyer is exempted from civil, criminal or other professional sanctions (e.g. for breach of his or her professional secrecy duty).

Non-compliance with the reporting duty may result in an administrative fine ranging from EUR 250 to EUR 1,250,000, in addition to other measures that may be imposed on lawyers on the basis of other laws or regulations.

DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?

Yes.

In its decision of 23 January 2008, the Constitutional Court clarified the scope of the reporting requirement for lawyers:

• Information obtained by a lawyer in the course of activities which are essential to the legal profession, including matters relating to financial, corporate and real estate transactions, involving (i) a client's defence or representation in court and (ii) the provision of legal advice, even outside the scope of litigation proceedings, is covered by professional secrecy and therefore must not be notified to the authorities;
• The Court gave a very broad interpretation to "providing legal advice", being one of the essential and specific activities of the lawyer's profession, namely: "to inform the client about the status of the legislation applicable to his or her personal situation or to the transaction he or she envisages carrying out or advising the client on how to execute this transaction within the legal framework";
• The Court explicitly stated that in the exercise of this essential activity of “providing legal advice”, even on matters for which the law imposed a notification duty (such as assisting the client in financial, real estate and corporate transactions), the lawyer remained bound by his or her professional secrecy duty and therefore could not disclose information obtained in this context to the authorities.

DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?

See above. If reporting has been done in good faith, a lawyer is exempted from civil, criminal or other professional sanctions (e.g. for breach of his or her professional secrecy duty).

ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?

If a lawyer notifies suspicions of money laundering regarding a client, the client must not be informed of the notification (the tipping off prohibition) and the lawyer must stop acting for that client. Failure to notify, if there is a legal obligation to notify, also constitutes a deontological breach.
In its decision of 23 January 2008, the Constitutional Court determined that:

• A lawyer who tried to convince his or her client to withdraw from a money laundering transaction or terrorism financing transaction, but did not succeed, must inform the President of the Bar, provided he or she is under an obligation to report (thus not when assisting the client in court proceedings or with legal advice). The President of the Bar will then inform the CTIF/CFI. In this scenario, the lawyer must stop acting for the client and there is no longer a confidential relationship between the lawyer and the client.
• However, if a lawyer succeeds in convincing a client to withdraw from the execution of or participation in an illegal transaction, the lawyer must not inform the authorities. In this scenario the confidential relationship between the lawyer and the client remains unaffected.

IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.

Yes, there is a tipping off prohibition.

DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT

Lawyers have to identify new clients and their beneficial owners when entering into the activities as described in article 1.2 of the Second EU Directive.

The CBFA, the body supervising financial institutions in Belgium, requires banks to ask any clients who are intermediaries, such as lawyers whose professional secrecy obligations prevent them from disclosing the identity of a client, to sign a written declaration regarding financial operations. The written declaration states that they must act for their own account or for the account of a third party. In the latter case, lawyers will have to state that, according to their knowledge, there is no money laundering involved with regard to the funds that will be handled by the bank.

Formal identification needs to take place before services can actually be rendered.

ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE

With respect to existing clients, lawyers were given one year after the ratification of the Program Law to identify such clients according to the provisions of the new law.

DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION

No information available.

HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?

No information available.

HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

Yes, in May 2005.

Information provided by:

Dominique Germanes
Allen & Overy LLP
Uitbreidingsstraat 80
B-2600 Antwerp
Tel: +32 (3)287 7222

_______
Sources

The Cellule de Traitement des Informations Financieres (Belgian Financial Intelligence Processing Unit).

1. Helen O'Gorman, "Belgian reporting objection case rumbles along", 10 January 2007,www.complinet.com.
2. Helen O'Gorman, “Belgian lawyers reject MLD on constitutional grounds”, 28 November 2007, www.complinet.com.
3. Helen O’Gorman, “Belgian bar victorious as court amends reporting rules for lawyers”, 25 January 2008, www.complinet.com.
4. FATF Summary of the Third Mutual Evaluation Report on Anti-Money Laundering and Combating the Financing of Terrorism, 9 May 2005, http://www.ctif-cfi.be/doc/en/fatf_eval/FATF_MER_Belgium-English_Summary.pdf
5. http://www.complinet.com/global/news/news/article.html?ref=103135&bulletin=pnote