Kevin L. Shepherd, Real Estate Practice Group co-chair and member of the ABA Task Force on Gatekeeper Regulation and the Profession, was quoted in a January 11, 2010 National Law Journal story on the "Gatekeeper Initiative" and Senate bill 569. The bill, called the Incorporation Transparency and Law Enforcement Assistance Act, could bring lawyers and others who are compensated for helping form corporations and limited liability companies under federal anti-money laundering requirements and subject them to potential criminal penalties for providing false information.
State treasurers and other opponents of the bill also say it will federalize state incorporation practices and impose costly and onerous administrative burdens on the states and small business.
"How you go about forming corporations and limited liability companies is a matter of state prerogative," said Kevin Shepherd, who testified before the U.S. Senate in November on S. 569. "That's not an area the federal government historically has been involved in. We think there are less intrusive ways of getting this information," he said.
As reported in the article, the bill includes lawyers in the definition of a "formation agent" under the Bank Secrecy Act. Those agents would be required to know their customers and refrain from doing business with suspect clients. They also would be required to establish anti-money laundering programs.
Shepherd said that including lawyers as "formation agents" would treat them, in effect, like banks. Lawyers would have to designate a compliance officer and develop an ongoing employee-training program and an independent audit function to test programs, among other requirements, he said.
Shepherd added that the bill also would give Treasury the ability to impose suspicious activity reporting requirements on lawyers, which the ABA long has opposed because it would create inherent conflicts between lawyers and their clients and erode the attorney-client privilege and the duty of client confidentiality.
"The ABA and other specialty bar associations have been developing voluntary, good practices guidance for U.S. lawyers to identify and detect money laundering and terrorist activities," Shepherd said. "We don't need federal legislation in this area."