Lawyers should not be `blinded by the beauty of a deal' and let clients who are either money laundering or seeking tax evasion slip through the net, because they could face legal action themselves, according to one of the Island's top lawyers.

Speaking at the Society of Trust and Estate Practitioners, Bermuda branch conference last week, Barrie Meade, QC, the compliance officer at Appleby Spurling and Kempe said that lawyers had to be particularly careful to make sure that their clients were clean, and so avoid litigation because they may be liable due to negligence.

`Don't be blinded by the deal' -- Meade tells law conference The former solicitor general told the group of legal professionals: "It can happen to you, to me, to us all, particularly in respect of the laundering of the proceeds of fraud and of tax evasion.'' He said that it was often the case that the advisor to a trust fund was unlikely to be told of the source of the funds was from a company or shareholders the person had defrauded.

"Circumstances may rise which could lead to the advisor to suspect the unlawful origin of the funds in question. An honest man would not close his eyes to them. The important thing in such cases it to be vigilant, if one's suspicions are aroused, one should make such inquiries as a prudent man would.

"You could be blinded by the beauty of the deal. The important thing is to be vigilant.'' He added that this would not always be the case in tax cases and that it was possible that in some older trusts the international laws were not the same as they are today.

"Some older trusts... were created with for the express purpose of evading the payment of tax.'' The Proceeds of Crime (Money -Laundering) Regulation of 1998 exempts pre-existing customers from the new requirements to verify the origin of the funds.

Mr. Meade said problems arose for the lawyers when a prosecution had resulted in the conviction of an advisor or a trustee, the money would go automatically to the Bermuda Government.

But if the overseas tax authority had lost money due to tax evasion, they may look to the trustees or advisors of the fund as a way of getting their money back. But he added on a lighter note that it would be unlikely that they would succeed because it would have to be proven that a `constructive' trust -- an unlawfully set up trust.

"A trust or estate practitioner may be involved in a money laundering scheme deliberately, through wilful blindness or inadvertently. If such involvement arises deliberately, liability will be direct and a constructive trust may arise. If such involvement arises through wilful blindness, liability is also likely to be visited upon the potential defendant through the vehicle of a constructive trust. If such involvement occurs through inadvertence, liability as negligence may still arise, but it is unlikely that a constructive trust will be deemed to have been created.'' Taxing issues: Tax and legal professionals gathered at the Society of Trust an Estate Practitioners conference on `Trusting the Future' last week. From left, Monica Jones from AS&K, Sharon Lamb formerly of Bank of Butterfield, Barrie Meade of AS&K, and Robert Dumont of Deloitte & Touche LLP.

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