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October 31, 2022

ABA Urges Senators to Oppose ENABLERS Act Amendment to Defense Authorization Bill

Provisions Would Impose Harmful Bank Secrecy Act Regulations on Lawyers

The ENABLERS Act Amendment would change the BSA’s definition of “financial institution” to include lawyers and law firms.

The ENABLERS Act Amendment would change the BSA’s definition of “financial institution” to include lawyers and law firms.

On October 5, ABA President Deborah Enix-Ross sent letters to Senate leaders and all other Senators urging them to oppose the ENABLERS Act amendment to the FY 2023 National Defense Authorization Act (NDAA), H.R. 7900 and S. 4543, that would regulate lawyers as “financial institutions” under the Bank Secrecy Act (BSA) and could require them to report attorney-client 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 near, sponsors of unrelated bills often seek to attach them to the NDAA in hopes of expediting passage of those measures.

The ENABLERS Act amendment, sponsored by Sen. Sheldon Whitehouse (D-RI), would change the BSA’s definition of “financial institution” to include lawyers and law firms that provide legal services to clients involving company formation, trust services, acquiring or disposing of interests in those entities, and other specified financial activities.

The amendment would also require the Treasury Department to issue new regulations that could subject lawyers and their law firms to some or all of the BSA’s requirements for financial institutions, such as submitting Suspicious Activity Reports (SARs) on clients’ financial transactions; identifying and verifying clients’ accounts; establishing due diligence policies that could conflict with state supreme court rules; creating costly and burdensome new anti-money laundering programs; and undergoing periodic or random audits to assess compliance.

A similar amendment sponsored by Rep. Maxine Waters (D-CA) was previously added to the House version of the NDAA before that bill passed the House on July 14.

In her October 5 letters to Senators, ABA President Enix-Ross expressed serious concerns over the ENABLERS Act amendment and urged Senators to ensure that it is not included in the final version of the NDAA that Congress is expected to enact this year.

“The principle of client confidentiality promotes trust in the lawyer-client relationship and encourages clients to seek legal assistance and then candidly discuss sensitive matters with their lawyers,” Enix-Ross explained. “But if lawyers are required to submit SARs on their clients’ financial transactions or divulge other privileged or protected client information to the government,” she added, “this will discourage clients from consulting frankly with their lawyers and jeopardize lawyers’ unique ability to prevent money laundering and other illicit activities before they occur.”

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

“Congress should not even consider enacting such sweeping and far-reaching changes to federal and state law without full hearings by the relevant committees of jurisdiction and very careful consideration,” Enix-Ross cautioned.

The Senate is expected to begin debate on the NDAA and vote on amendments shortly after the November 8 midterm elections.

Please join us in urging the Senate to reject the ENABLERS Act amendment to the NDAA here.

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