ABA House of Delegates Releases Important Formal Opinion
In August 2024, the ABA’s Standing Committee on Ethics and Professional Responsibility (“Standing Committee”) published a new ethics opinion, Formal Opinion 513 (“Opinion 513”), discussing the impact of recent amendments made to Model Rule 1.16: Declining or Terminating Representation (“Rule 1.16”) and its associated comments. According to the Standing Committee, the “impetus for these amendments was lawyers’ unwitting involvement in or failure to pay appropriate attention to signs or warnings of danger” related to representations which may be used to “facilitate possible money laundering and terrorist financing activities.”¹ It is important for all attorneys, particularly those in high-risk practice areas, to familiarize themselves with their obligations under the new rule in order to best protect themselves and their clients.
As amended, Rule 1.16(a) provides that: “A lawyer shall inquire into and assess the facts and circumstances of each representation to determine whether the lawyer may accept or continue the representation.” Opinion 513 addresses the rule as amended and analyzes how its requirements track decades of ABA precedent construing multiple Model Rules, including Rule 1.16, to impose an ongoing duty for lawyers to reasonably assess and investigate the risk that their services may be being used in the furtherance of criminal activity or fraud.² As Opinion 513 explains, the language of Rule 1.16(a) “now explicitly requires a lawyer to (1) inquire into and assess the facts and circumstances of each representation to determine whether the lawyer may accept or continue the representation; and (2) reject or continue the representation” as appropriate.³
The updated Comment [2] to Rule 1.16 adopts a risk-based analysis to determine “the required level of a lawyer’s inquiry and assessment” which will “vary for each client or prospective client” based on the particular facts and circumstances of the representation.⁴ It provides a non-exhaustive list of five potentially relevant factors: “(i) the identity of the client, such as whether the client is a natural person or an entity and, if an entity, the beneficial owners of that entity, (ii) the lawyer’s experience and familiarity with the client, (iii) the nature of the requested legal services, (iv) the relevant jurisdictions involved in the representation (for example, whether a jurisdiction is considered at high risk for money laundering or terrorist financing), and (v) the identities of those depositing into or receiving funds from the lawyer’s client trust account, or any other accounts in which client funds are held.”⁵
The first four of these enumerated factors were also identified as relevant to attorneys’ duties to inquire under Model Rules 1.1, 1.3, 1.4, 1.13, 1.16, and 8.4 in Formal Opinion 491 (“Opinion 491”), published in April 2020.⁶ Opinion 491 also advised lawyers to consider “the likelihood and gravity of the harm associated with the proposed activity” in a given representation and “the nature and depth of the lawyer’s expertise in the relevant field of practice.”⁷ Formal Opinion 463 (“Opinion 463”), published in May 2013, similarly advocated for a risk-based approach to what it described as “Client Due Diligence.”⁸ That opinion also cautioned attorneys to carefully assess “clients or legal matters associated with countries that are subject to sanctions or embargoes issued by the United Nations, or those identified by credible sources as having significant levels of corruption or other criminal activity.”⁹
Importantly, Formal Opinion 513 clarifies that when there are unresolved questions of fact after an initial inquiry, the lawyer must make additional efforts to resolve those questions by conducting further reasonable inquiry, but that a lawyer “need not resolve all doubt. Rather, if some doubt remains even after the lawyer has conducted a reasonable inquiry, the lawyer may proceed with the representation as long as the lawyer concludes that doing so is unlikely to involve assisting or furthering a crime or fraud.”¹⁰ Additionally, the rule states that the obligation is to “conduct a reasonable risk-based inquiry, not a perfunctory one and not one that involves a dragnet-style operation to uncover every fact about every client.”¹¹
In sum, it is not only important, but wise, for attorneys in high-risk practice areas such as general and white-collar criminal defense to be conversant with Rule 1.16 as amended and with each of these ABA Opinions calling for a fact-specific, risk-based analysis of any representation he or she undertakes but does not require conducting an interrogation aimed at eliminating “all doubt.”
¹ ABA Standing Comm. on Ethics & Prof’l Responsibility and ABA Standing Comm. on Prof’l Regulation, Revised Resolution 100 and Revised Report to the ABA House of Delegates, Report at 2 (revised Aug. 2023)
² See ABA Standing Comm. On Ethics & Prof’l Responsibility, Formal Op. 513 (2024), at 5–7.
³ Id. at 2–3.
⁴ ABA Model Rule 1.16, Comment [2].
⁵ Id.
⁶ ABA Standing Comm. On Ethics & Prof’l Responsibility, Formal Op. 491 (2020), at 1.
⁷ Id.
⁸ ABA Standing Comm. On Ethics & Prof’l Responsibility, Formal Op. 463 (2013), at 3.
⁹ Id.
¹⁰ ABA Standing Comm. On Ethics & Prof’l Responsibility, Formal Op. 513 (2024), at 13.
¹¹ Id. at 7.