The gatekeepers: lawyers, agents and dealers.

Why these businesses are in scope

Banks do not create companies. They do not conveyance property, hold client money in a pooled account, draft a trust deed or sell a kilogram of gold for cash. Those things are done by other professions — and a laundering scheme usually needs several of them.

The gatekeeper idea. Certain professionals stand at the entrance to the financial system and to the legal structures that hold value. A company has to be formed by someone. A property transfer has to be executed. A trust needs a trustee. If those gates are open without question, the controls a bank applies later are applied to something already dressed as legitimate: a company with a registered address, a lawyer's letter, a completed purchase, and a bank account opened in a name that now has paperwork behind it.

This is why the standards reach outside finance. Not because these professions are suspect, but because they are structurally positioned where the rest of the system cannot see.

The FATF's illustration of the role. Its guidance for legal professionals describes civil law notaries as acting as gatekeepers — by drafting and ensuring the legality and certainty of instruments and the authenticity of their content, and in some jurisdictions performing a public fiduciary function as trusted third parties. It notes they are obliged by law to remain impartial, fair and independent between the parties they advise, including bearing in mind any disparity of power between them.

Who is covered. The FATF term is designated non-financial businesses and professions, and the categories are:

• Casinos.
• Real estate agents.
• Dealers in precious metals and dealers in precious stones.
• Lawyers, notaries, other independent legal professionals and accountants.
• Trust and company service providers.

The crucial point, which is widely misunderstood: it is the activity, not the profession. A lawyer is not inside the AML framework for every minute of practice. The obligations attach when they carry out particular activities for a client. A solicitor conducting litigation is doing something the standards do not reach; the same solicitor forming a company is doing something they do.

Why that distinction matters practically. A firm that believes it is "a regulated business" and applies due diligence to everything will exhaust itself and annoy its clients. A firm that believes it is "a law firm, not a bank" and applies it to nothing will be in breach for a defined subset of what it does. Knowing exactly which engagements cross the line is most of the compliance work in these sectors.

What Recommendations 22 and 23 require

Two Recommendations carry the obligations, and they divide the work.

Recommendation 22 extends customer due diligence and record-keeping to these businesses, in clearly defined situations. The situations differ by sector:

• Casinos — when customers engage in financial transactions at or above a designated threshold.
• Real estate agents — when involved in transactions for a client concerning the buying and selling of real estate.
• Dealers in precious metals and stones — when engaging in cash transactions with a customer at or above a designated threshold.
• Trust and company service providers — when preparing for or carrying out transactions in relation to the services they provide, such as acting as a formation agent, as a director or secretary, providing a registered office or address, acting as a trustee, or acting as a nominee shareholder.
• Lawyers, notaries, other independent legal professionals and accountants — when preparing for or carrying out transactions for a client concerning a specific list of activities.

That list, which is worth knowing exactly. The FATF's guidance sets out the activities for legal professionals as: buying and selling of real estate; managing client money, securities or other assets; management of bank, savings or securities accounts; organisation of contributions for the creation, operation or management of companies; and the creation, operation or management of legal persons or arrangements, and the buying and selling of business entities.

Read that list as a description of a laundering lifecycle and it becomes obvious why those five. Each one either moves value, holds value, or creates the vehicle that holds it.

Recommendation 23 applies the remaining obligations — reporting suspicious transactions, internal controls, and attention to higher-risk countries — to the same businesses. For legal professionals and accountants, the reporting duty arises when, on behalf of or for a client, they engage in a financial transaction in relation to the activities in that list.

Proportionality is built in. The FATF's explanatory material on applying these requirements to groups is explicit that they are designed to be proportionate and risk-based. A sole practitioner is not expected to run a bank's programme, and a standard that demanded it would simply be ignored.

National differences are real. The guidance notes that while jurisdictions have closely followed the Recommendations, differences exist, and professionals need to consider carefully the laws, rules and regulations of their own jurisdiction. Thresholds vary, the scope of covered activities varies, and in several countries the obligations are more extensive than the international standard. Advice that ignores local rules is useless here.

The sectors, and what each actually faces

Lawyers and notaries. The highest-value target, because what a lawyer provides is not only a service but apparent legitimacy. A transaction that has passed through a law firm carries an implication of scrutiny that may never have occurred. Specific exposures: client accounts used as a banking facility with no underlying legal work; conveyancing where the source of funds is unexamined; company and trust formation; and advice structured to obscure rather than to achieve a lawful end.

The FATF describes the two roles distinctly. Civil law notaries are assigned functions of a public nature, act as public office holders, are obliged to remain impartial and independent as between parties, and typically do not act for one party in an advisory capacity. Common law lawyers act for a client, adversarially. The control problem is not the same in both, and a single approach serves neither well.

Accountants. Exposure sits in company formation and administration, audit and assurance giving comfort to a structure, tax advice shading into concealment, and acting as a registered office or nominee. An accountant frequently sees the whole financial picture of a client that no bank sees in part — which makes them well placed to notice, and valuable to someone who needs the picture assembled plausibly.

Trust and company service providers. Structurally the most exposed category, because the service is the vehicle. Forming companies, acting as director or trustee, providing registered addresses, acting as nominee shareholder — each function can be entirely legitimate and each is also precisely what a concealment structure requires. The nominee arrangement is the sharpest case: its purpose is that the name on the register is not the person in control.

Real estate. Property absorbs large sums, holds value, is hard to move and easy to explain. The agent sits between buyer and seller and typically sees both. The FATF's real estate guidance notes that legal professionals are often involved in these transactions, which is exactly why gaps appear: each participant assumes someone else in the chain performed the checks, and sometimes nobody did.

Dealers in precious metals and stones. High value, portable, and in many markets traded for cash. The obligations are generally triggered by cash transactions above a threshold — which makes threshold awareness and the recognition of structuring the central control rather than an afterthought.

Casinos. High volumes of cash and chips, the possibility of buying in and cashing out with minimal play, and in many markets a customer base of people who prefer not to be recorded anywhere.

The common thread. In every one of these sectors the person doing the work is a professional whose training was in law, accounting, property or gemmology, whose income depends on completing the matter, and for whom AML is an obligation added to a job that already existed. Designing controls that ignore that reality produces policies nobody follows.

Privilege and professional secrecy

This is the genuine tension in the framework, and it is routinely misrepresented in both directions — as a loophole by those outside the professions, and as an absolute shield by some within them.

What the protections are. The FATF's guidance explains the concepts carefully. Legal professional privilege is a common law concept, existing in jurisdictions such as England and Wales and the United States. Professional secrecy is a civil law concept, existing in jurisdictions such as Germany and France. The two differ in scope and purpose, and both aim to protect client information or advice from being disclosed.

Whose protection it is. The guidance is precise on a point lawyers sometimes blur: privilege or professional secrecy is a protection to the client, and a duty of the legal professional. It does not belong to the lawyer and is not theirs to waive for convenience. It is also not a commercial benefit of instructing a lawyer.

Why it exists. Both are founded on the nearly universal principle of the right of access to justice, and on the rationale that the rule of law is protected where clients are encouraged to communicate freely with their legal advisers. That is not a technicality. A person who cannot speak frankly to a lawyer cannot be properly advised, and a system in which legal advice is reportable is a system in which people stop seeking it.

How it interacts with reporting. The FATF standards permit countries not to require legal professionals, notaries and accountants to report suspicions where the relevant information is obtained in circumstances subject to professional secrecy or legal professional privilege. The protection therefore has real effect — but its boundaries are set in national law and are narrower than often assumed.

The distinction that does the work. Broadly, communications for the purpose of giving or receiving legal advice, and material prepared for actual or contemplated litigation, attract the protection. A lawyer acting as a conduit for funds, or executing a transaction, is generally doing something else — and in most jurisdictions the protection does not extend to information communicated with the intention of furthering a criminal purpose, whether or not the lawyer knows it.

What this means in practice. A firm needs to know, before the question arises, which of its work is protected and which is not; who decides a privilege question and on what basis; and how that decision is recorded. The failure mode in both directions is real. Reporting privileged material is a serious breach of duty to the client. Treating everything as privileged to avoid reporting is a breach of the firm's own obligations, and is the behaviour that gives the protection its poor reputation.

And one thing the protection never covers. It does not relieve a firm of customer due diligence. Knowing who your client is, and who ultimately owns the entity you are acting for, is not disclosure of anything. Privilege governs what may be reported, not whether you must know whom you are acting for.

Supervision, the gap, and what good looks like

This is the weakest-supervised part of the international framework, and that is not a controversial statement. Mutual evaluations have repeatedly found that countries implement the standards less effectively for these sectors than for banks: supervisors are under-resourced, many professionals are unaware they are in scope at all, registration is incomplete, and suspicious transaction reporting from these sectors is a small fraction of the total in almost every country — far smaller than their role in laundering would suggest.

Who supervises. Approaches differ. Some countries use a public supervisor; others rely on self-regulatory bodies — bar associations, law societies, accountancy institutes. Self-regulation has real advantages, including expertise and the ability to reach a dispersed profession, and a known weakness: a body whose members fund it, and whose primary purpose is representation, has an inherent tension in sanctioning them. Where self-regulation is used, it needs the same things any supervisor needs — adequate resources, a risk-based approach to which firms get attention, and the willingness to act.

Why the gap persists.

• Fragmentation. These sectors consist largely of small firms and sole practitioners, many with no compliance function at all.
• Awareness. A great many genuinely do not know which of their activities are in scope.
• Cost and proportion. A two-person firm cannot run a programme designed for an institution, and guidance written for banks does not translate.
• Professional culture. Client confidence and client service are the organising values. A duty that cuts against them is uncomfortable in a way it is not inside a bank.

What good looks like in a small firm, which is the realistic question:

• Know which engagements are in scope. A short, specific list for your actual practice, applied at the point of taking instructions rather than later.
• Identify the client and the beneficial owner, before the work that matters. For an entity that means the natural person who owns or controls it, not the person who instructed you.
• Understand the purpose. A structure or transaction whose commercial rationale cannot be explained is the single most useful indicator these professions have, because they see the rationale directly, which a bank does not.
• Watch source of funds in transactions you touch, particularly where funds pass through a client account.
• Know your reporting route and who in the firm decides, including how a privilege question is handled.
• Keep records that outlive the matter.
• Train for the work actually done. Generic AML training for a conveyancing team is close to useless.

The strongest point for anyone in these professions. You see things no bank can. A bank sees a payment; you see why it is being made, who asked, what structure was requested and what reason was given. The rationale behind a transaction is visible to you at the moment it is formed. That makes these professions potentially the most effective detection point in the entire system — and the least used one.

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