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In August 2023, the American Bar Association (ABA) adopted changes to the ABA Model Rule of Professional Conduct (MR) 1.16 regarding withdrawal. The amendments require an attorney to determine whether the lawyer’s legal services would be used to commit a crime or fraud. Specifically, the ABA changes focus on withdrawal based on suspected usage of the lawyer’s services for crime, fraud, or money laundering. The ABA amended Model Rule 1.16 as a response to growing concerns about the use of lawyer services for money laundering and other criminal activity. The 2016 Financial Action Task Force Report on United States’ Measures to Combat Money Laundering and Terrorist Financing urged that additional guidance was needed to curb the substantial risks within several professions, including the legal profession, for money laundering to occur. The confidentiality in client relations and virtual universality of attorney-client privilege makes attorneys an attractive target for money laundering operations.

The amendment to ABA MR 1.16 clarifies a lawyer’s responsibility to inquire into and assess the facts and circumstances of a matter before accepting a new representation, and, under some circumstances, before continuing the representation. This is not a new obligation; the amended rule provides more guidance on obligations already entwined within the Rules of Professional Conduct. For example, lawyers are required to develop sufficient knowledge of the facts and the law to understand the client’s objectives and the means to pursue them under ABA MR 1.2(a), and ABA MR 1.2(d) requires that lawyers “not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent[.]”

The new ABA Model Rule language helps to educate lawyers to be vigilant about potential misuse of their services, protecting both the integrity of the legal profession and public trust. Lawyers must inquire about the facts and circumstances at the outset and throughout the representation. They should identify any red flags or changes in the client’s behavior that may indicate misuse of legal services. The focus of these proposed amendments utilizes a risk-based approach, where the level of inquiry and assessment depends on various reasonable factors, such as the nature of the client’s business, the jurisdictions involved and the lawyer’s familiarity with the client. For instance, a lawyer’s obligations to inquire about a longtime client would not be as extensive as the lawyer’s duty to inquire about a new client who is an international holding corporation with whom the lawyer has never interacted.

The Legal Ethics Committee (LEC) reviewed the new ABA Model Rule 1.16 language and recommends the following amendments to Oregon’s RPC 1.16(a) to mirror the ABA’s changes. The LEC adjusted the language to add “reasonably” to clarify the risk-based approach at the level of inquiry undertaken by an attorney. As Oregon does not have comments, lawyers may not immediately understand that they are not required to undertake a complex scope of inquiry for all clients, but that the inquiry is dependent on the representation. The addition of “reasonably” helps to clarify the level of inquiry required.