Thursday, March 08, 2012

Corruption Money and Lawyers Fee

Recently, I saw an interesting question on Twitter: Are lawyers allowed to receive payments from corruption money? My answer is yes, and there is a good reason for that.

Based on my personal observation, it seems that there is a belief by the public that lawyers should not represent suspects of corruption cases, and should therefore not receive their money, since it might be tainted with the corruption itself.

I find this argument to be ridiculous. First of all, under the prevailing laws, if you conduct a transaction with a third party, provided that you act in good faith, there is no need for you to know where the money is coming from.

From an economics point of view, it is an efficient rule. Imagine the costs to society if we need to know the source of income of all parties that transact with us. This kind of know-your-customer rule is generally applicable only for banking and securities transactions, where the potential of money laundering is high; but this rule should not be applied to the general public transactions.

Second, every criminal suspect has the right to be represented by a lawyer, whatever his criminal activities are, be it murder, rape, thievery, or corruption. Hating corruptors does not mean that lawyers cannot represent them or receive their money for payment of their service.

In one of my previous articles, I argued that lawyers have an absolute duty of confidentiality in assisting their clients. This means that the lawyer is prohibited from ever betraying his client, or jeopardizing the interest of his clients in any way. It is the only way to ensure that all criminal suspects will have the same position in front of the law to prevent abuse of power by legal enforcers.

By imposing such duty, even when the lawyer knows that his client is guilty, it does not mean that he can suddenly report his client to the relevant authorities. Once he represents the client, the duty must be applied at all times. It also means that when the lawyer receives the money and knows it’s coming from corruption, the lawyer should not be required to report the source of such payment to any authority, simply because that will defeat the entire purpose of client-attorney confidentiality.

At this point, readers might voice their protest over the above rule. How could we let corruption suspects use their money lavishly for paying their lawyers, which can also be used as a cheap tactic for money laundering. Don’t give up hope yet. There are many things that we can do to prevent such a thing from happening.

While the lawyers are not required to report the source of their payments, the authorities can always require them to report the amount of their fee. Doing so will allow the authorities to determine whether the payment is reasonable or whether it is being used for something suspicious. If it is used for a money laundering purposes, we can expect that the amount will be excessive. Furthermore, in the end, such money will still need to be returned to the corruption suspects. Of course, the authorities may interfere during the process of returning the money.

It is true that the lawyers are entitled to receive payment for their services, but it does not mean that they may assist their clients in another type of crime. At that point, we can impose liabilities upon the lawyers for abetting money laundering. This will provide less incentives for them to assist their clients in doing so, and the clients will also have less incentives to use the lawyers service for money laundering purposes.

As a result, we can expect that the payment made by the corruption suspects will only represent the lawyers fee. After all, if the lawyers cannot find a way to transfer the money back, the corruption suspects will never transfer an excessive amount of money to their lawyers in the first place.

I think this is a win-win solution for all parties to ensure that lawyers can represent their clients properly and protect the integrity of the criminal justice system, while also preventing abuse of the lawyer’s position to help the corruption suspects in securing their corruption assets.

In law and economics terms, we call this as a pareto efficient rule where we can maximize the welfare of the society without having to impose costs to other parties. And in my opinion, we should always strive for achieving that efficiency if we really care about society.


Anonymous,  Thursday, March 15, 2012 9:10:00 PM  

Your opinion too 'lawyer', bias

Anonymous,  Monday, December 01, 2014 6:30:00 PM  
This comment has been removed by a blog administrator.
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