U.S. authorities on Friday announced a settlement with Vadian Bank AG, the second institution to reach a deal under a program that allows Swiss banks to come clean on American tax dodgers in exchange for avoiding prosecution.

The deal is the latest example of the increasingly tough line Washington has taken on Swiss secrecy, which U.S. officials contend makes the country a haven for hidden money. But when it comes to America’s own regulations designed to flag dirty money, critics say there’s a big blind spot: lawyers.

Regulators have effectively deputized U.S. bankers in the fight against money launderers and international terrorists, imposing increasingly stringent requirements that institutions know their customers and report suspicious activities, but critics say lawyers have received a pass.

U.S. regulators have expressed concern that anonymous corporate shell entities, sky-high real estate markets and rocketing art prices have made the U.S. an attractive destination for money laundering.

Most of those transactions need to go through banks, which are required to report their suspicions -- for example a foreign politician with a reported income of $50,000 depositing $50 million for the purchase of a New York condo. Indeed, banks that feign ignorance of criminal activities of customers have faced record penalties in recent years.

But most of these deals also require attorneys, who have no such requirement, argues Heather Lowe, director of government affairs for Global Financial Integrity, an organization that advocates for tougher laws to combat money laundering. “Lawyers are considered one of the gatekeepers of the financial systems,” Ms. Lowe said. “We need to be more responsible within that role.”

Unlike the U.S., countries across the European Union have imposed laws requiring attorneys to report suspicious transactions. In the U.K., in the 12 months prior to September 2013, the legal industry filed 3,935 suspicious activity reports with authorities, according to the U.K. Solicitors Regulation Authority

For years, U.S. legislators have introduced proposals that would impose some reporting requirements on the industry, but have made little progress amidst heavy opposition from lawyer groups.

The American Bar Association has said the proposals are an attack on a bedrock of the U.S. legal system: attorney-client privilege. The ABA argues that putting such requirements on lawyers would dissuade clients with potential legal issues from seeking advice, making them more likely to break the law. “You want a client to have a full frank discussion with his attorney so he can be told how to comply with the law,” said Kevin Shepherd, a partner at Venable LLP and the chair of an ABA task force that opposes attorney AML reporting. “If [a client] thinks that the lawyer is going to squeal on him, the client isn’t going to be very frank.”

Instead, the ABA says attorneys should follow voluntary guidelines that recommend they abandon clients they suspect are breaking the law. “If a lawyer thinks the client is involved with criminal conduct you don't have to squeal on your client -- you withdraw from the client,” Mr. Shepherd said.

But proponents of lawyer AML requirements say that attorney-client privilege often doesn’t cover the kinds of transactional advice that might trigger AML concerns. That’s because attorney-client confidentiality is usually considered waived if a third party, such as the buyer or seller in a real estate transaction, is part of the discussion, said Ross Delston, a Washington,D.C.-based AML specialist.

The attorney-client privilege argument is a “knee-jerk” response, he said. “Lawyers in commercial transactions do all sorts of things that involve third parties being present,” Mr. Delston said. “Real estate transactions, setting up a company -- all of those typically involve a third party and therefore there is no privilege.”

Write to Joel Schectman at joel.schectman@wsj.com