In certain cases, the law imposes duties on law firms, bar associations, and lawyers to organize and conduct initial financial monitoring. Should the terms of conducting this monitoring be included in the legal assistance agreement?
The general form and content of the legal assistance agreement are defined in Art. 27 of the Law on Advocacy and Legal Practice and Arts. 14, 15, 16 of the Rules of Professional Ethics. Usually, this agreement is concluded in a simple written form, complying with the general requirements of contract law as defined in Chapters 52, 53, 63 of the Civil Code.
The content of any contract consists of conditions (clauses) determined by the parties and agreed upon by them, as well as conditions that are mandatory under civil legislation acts. However, under any circumstances, the content of the legal assistance agreement cannot contradict the Constitution and laws, the interests of the state and society, its moral principles, the attorney’s oath, and the Rules of Professional Ethics (part 5 of Art. 27 of the Law).
Experienced lawyers advise including the following sections in the legal assistance agreement: 1) subject of the contract; 2) attorney’s powers; 3) fee and payment terms; 4) rights and obligations of the parties; 5) provision of general reports and documents; 6) reservations regarding results; 7) reservations on combating corruption and bribery; 8) basic liability terms; 9) force majeure circumstances; 10) confidentiality terms; 11) entry into force and effect of the contract; 12) special conditions.
Although the Law and Rules of Professional Ethics do not contain direct requirements for informing or specifying in the legal assistance agreement information about financial monitoring, an attorney may include a relevant section in the contract at their own initiative. Such client awareness regarding initial financial monitoring can further contribute to resolving disputed legal relationships between the parties.
The issue of initial financial monitoring is regulated by the Law on Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Financing of Terrorism, and Proliferation of Weapons of Mass Destruction.
According to it, law firms, bar associations, and lawyers engaged in individual legal practice are subjects of initial financial monitoring.
The performance of duties as a subject of initial financial monitoring is ensured if a person participates, acting on behalf and/or on behalf of the client, in any financial transaction and/or assists the client in planning or conducting an operation regarding:
- purchase-sale of real estate or property management in housing construction financing;
- purchase-sale of business entities and corporate rights;
- asset management, securities, or other client assets;
- opening and/or managing a bank account or securities account;
- raising funds necessary for the creation of legal entities and funds, ensuring their activities or managing them;
- establishment, ensuring activities, or management of legal entities, funds, trusts, or other similar legal entities;
At the same time, part 3 of Art. 10 of the Law on Financial Monitoring states that law firms, bar associations, and lawyers may not perform duties to carry out proper client verification and not report to the authorized body about their suspicions when providing services for client defense, representation of their interests in judicial bodies and in pre-trial dispute resolution cases, or providing consultations on client defense and representation.
Defense and representation are the essence of legal practice. It is worth noting that defense involves ensuring the protection of the rights, freedoms, and legitimate interests of a suspect, accused, defendant, convicted, acquitted person, a person for whom the application of coercive medical or educational measures is envisaged or the issue of their application is being decided in criminal proceedings, a person for whom the issue of extradition to a foreign state is being considered, as well as a person subject to administrative liability in administrative offense cases. Representation involves ensuring the realization of the rights and obligations of the client in civil, commercial, administrative, and constitutional proceedings, in other state bodies, before individuals and legal entities, the rights and obligations of the victim during the consideration of cases of administrative offenses, as well as the rights and obligations of the victim, civil plaintiff, civil defendant in criminal proceedings.
According to the decision of the Bar Council of Ukraine dated 03.07.2021 No. 51 “On approval of explanations on certain issues of fulfilling the duties of a lawyer as a subject of initial financial monitoring,” if a lawyer does not participate in the preparation and implementation of the above-mentioned legal acts, then there is no obligation to register with the State Financial Monitoring of Ukraine and comply with all other requirements of the Law on Financial Monitoring.
Therefore, it is considered that an attorney should inform the client about the terms of conducting initial financial monitoring by including a relevant section in the legal (law) assistance agreement and explain the issues for which the attorney should carry out such monitoring and inform the state authorities about it.
The material was published in the publication “Legal Newspaper”.