Confidentiality and privilege: Disclosing client information to investigators

Solicitors dealing with property transactions, and trust and company formation, are most at risk of exploitation by money launderers. As a result, they can find themselves embroiled in criminal investigations into current or former clients, and recipients of requests from law enforcement agencies to provide client information or documentation. A law firm must act with extreme care to ensure it does not breach its professional and regulatory obligations regarding client confidentiality and legal professional privilege (LPP). 

The process often begins with an investigator making an informal request for information to a law firm. Unless a client consents to disclosure, information or documentation that is confidential but not privileged cannot be disclosed voluntarily in response to an informal request – it must be compelled. The most common method of compelling material is for an investigator to apply to a court to issue a production order requiring the law firm to hand over relevant material. The order will specify the information and documentation that is required and a deadline for compliance. Where information is covered by LPP, a firm cannot be compelled to provide it to authorities under any circumstances, regardless of how relevant to an investigation it may be, unless the client agrees to waive privilege. A lawyer is not permitted to waive their client’s privilege unilaterally. The many statutory powers of compulsion available to investigators expressly exclude LPP material.

It is very likely that a solicitor’s client or matter file will contain LPP material, although not everything a solicitor holds relating to their client is privileged. In transactional matters that do not involve actual or contemplated litigation, only legal advice privilege is capable of being applied. Generally speaking, this will include not only communications with the client made for the dominant purpose of giving or obtaining legal advice, but also potentially draft documents, the solicitor’s own notes relating to the matter, the client’s annotations on documents, and other items. Every individual item must be considered separately – it is not possible simply to make a blanket assertion of LPP over everything in a client file or relating to a particular issue.

The potential risks for solicitors are significant. On the one hand, failure to protect client confidentiality or maintain LPP is a serious breach of a solicitor’s professional obligations and may result in disciplinary action. It is likely to have significant consequences for the client, especially in a criminal investigation, and may give rise to a separate civil claim by the client against the firm. On the other hand, failure to comply with a production order without reasonable excuse amounts to a criminal offence or, potentially, contempt of court. A proper understanding of the scope of LPP and the dividing line between confidentiality and privilege is therefore essential.

A further risk is that a solicitor may commit a criminal offence of ‘tipping off’ if they disclose information about the request to their client. The offence is committed if a person in the regulated sector (such as a solicitor involved in transactional work on behalf of a client) discloses to another person, such as their client, that a money laundering investigation is being contemplated or carried out, if the disclosure is likely to prejudice the investigation and the information on which it is based came to the person in the course of their business in the regulated sector. This means that it will often not be possible to obtain a client’s consent to disclose confidential material or to waive privilege.

In certain cases, an investigating authority may choose to execute a search warrant at a firm’s premises and seize relevant material rather than obtain a production order. This might be the case if there are concerns that evidence might be destroyed or interfered with if a production order is served on the firm. A number of provisions therefore allow for investigating authorities to apply to a court for search and seizure warrants. These authorise investigators to enter and search premises for specified material and seize it. As with the powers of compulsion, none of these powers authorise the seizure of privileged material. The only limited exception is if investigators exercise ‘seize and sift’ powers under the Criminal Justice and Police Act 2001 (CJPA), allowing material to be seized and reviewed or separated at a later stage. However, CJPA imposes strict obligations on returning or isolating any privileged material obtained under these powers.

Cases of this nature invariably raise complex issues relating to criminal law, regulatory obligations and LPP, with significant potential consequences for firms, lawyers and their clients if the issues are not handled correctly. It is essential that firms seek specialist legal advice as soon as possible after contact is made by law enforcement, especially since the timeframes imposed are usually tight.

Will Hayes is a legal director of Kingsley Napley’s criminal litigation team and co-author of Legal Professional Privilege in Criminal Investigations and Proceedings