Proposed new anti-money laundering due diligence requirements would place a huge burden on solicitors ? and could put them at a disadvantage compared with their European counterparts ? lawyers warned this week.

Measures contained in the government?s draft implementation of the EU?s third money laundering directive will oblige solicitors to identify shareholders in international transactions though a ?reliable and independent source?. However, in many jurisdictions ? including France, Germany, Italy, Spain and the US ? that information is not available, because companies are not required to register their shareholders.

The legislation will also require solicitors to check the identity of trust beneficiaries ? a difficulty that lawyers in most other EU jurisdictions, which do not use the trust structure, will not face.

Nick Cray, money laundering reporting officer at City firm Lovells, said: ?Law firms will have to bear the cost of finding shareholder information, rather than passing it on to clients. Doing the search, and the administration of asking clients for information ? which they do not like ? costs us hundreds of pounds every time we have to do it. All law firms doing international business will be caught with this as a problem.?

He added: ?This requirement is in the European directive, and so all EU countries should be implementing it in a similar way, but in reality that does not always happen.?

Alison Matthews, money laundering reporting officer at national firm Irwin Mitchell and a member of the Law Society?s money laundering taskforce, added: ?The requirements in relation to trusts will have a bigger impact on UK lawyers, and that?s something that we need to explain to government. In relation to shareholders, it should in theory be a more level playing field with the rest of Europe, but having looked at the second directive, the reality is that different jurisdictions have implemented it in different ways. I suspect it will be the same for this one.?

However, lawyers were pleased that the proposals expressly preserve their right not to report suspicions where advising on litigation, as established in Bowman v Fels [2005] EWCA Civ 226. Law Society President Fiona Woolf said: ?The government accepted our arguments that legal professional privilege must be protected. We are also pleased that solicitors, unlike other advisers, would not need to sit new competency tests before they are allowed to administer trusts and estates.?

The Treasury?s consultation on the proposals closes on 20 October.