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July 28, 2022

House Passes Sweeping Defense Authorization Bill Imposing Bank Secrecy Act Regulations on Lawyers

ABA Urges Congress Not to Include ENABLERS Act Provisions in Final Bill

The ENABLERS Act amendment would change the BSA’s definition of “financial institution” to include lawyers.

The ENABLERS Act amendment would change the BSA’s definition of “financial institution” to include lawyers.

The House passed its version of the FY 2023 National Defense Authorization Act (NDAA), H.R. 7900, on July 14 that would regulate lawyers as “financial institutions” under the Bank Secrecy Act (BSA) and require them to report privileged and other protected client information to the government.

The NDAA would authorize over $840 billion in national defense spending for the coming fiscal year. Because it is one of the few “must pass” bills considered by Congress each year, sponsors of unrelated bills often seek to attach them to the NDAA in hopes of expediting passage of those measures.

Prior to passing H.R. 7900, the House adopted numerous amendments, including an amendment by House Financial Services Committee Chair Maxine Waters (D-CA) containing a revised version of the ENABLERS Act legislation that was introduced last year as H.R. 5525.

The ENABLERS Act amendment would change the BSA’s definition of “financial institution” to include lawyers who provide legal services to clients involving company formation, trust services, acquiring or disposing of interests in those entities, and other specified activities. It would also require the Treasury Department to issue new regulations subjecting lawyers and other covered persons to the extensive suspicious activity reporting, anti-money laundering (AML), due diligence, and/or account identification and verification requirements of the BSA.

ABA Immediate Past President Reginald Turner sent letters to House and Senate leaders on July 5 expressing concerns over the ENABLERS Act amendment and urging them not to include those provisions in the final version of the NDAA that Congress is expected to enact this year.

“Robust lawyer-client confidentiality is essential to an effective AML regime,” Turner explained. “But if lawyers are required to submit suspicious activity reports on their clients’ financial transactions and divulge privileged or other protected client information to the government,” he added, “this will undermine the principle of lawyer-client confidentiality, discourage clients from consulting with their lawyers, and jeopardize lawyers’ unique ability to prevent money laundering before it occurs.”

The ABA’s letters also expressed concerns that the provisions would undermine the attorney-client privilege, the lawyer's ethical duty to protect client confidentiality, the right to effective assistance of counsel, and state supreme courts' well-recognized authority to regulate and oversee the legal profession. 

“Such sweeping and radical changes to federal and state law should not rushed through Congress and enacted without the benefit of hearings, a full debate, and very careful consideration,” Turner explained.

The Senate is expected to take up its version of the NDAA, S.4543, in September. However, the Senate bill does not yet contain the ENABLERS Act provisions.

For developments on this and other issues involving the attorney-client privilege, confidential lawyer-client relationship, and state court oversight of the legal profession, follow us on Twitter @ABAGrassroots.

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