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Why is the Law Society (and the Federation of Law Societies of Canada) concerned about money laundering and terrorist financing activities?
Money laundering is on the rise in Canada. The Federation and its member law societies have been actively engaged in the fight against money laundering and the financing of terrorist activities for more than 15 years.
Effective anti-money laundering and terrorist financing rules and regulations for lawyers continue to be a priority for all law societies in Canada.
Doesn’t Canada have federal legislation to prevent money laundering and terrorist financing activities?
Canada has enacted federal legislation to prevent these crimes through the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
The Act requires designated individuals and institutions to report information to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) about financial transactions of their clients, including large cash and suspicious transactions.
However, lawyers are exempt from this Act due to solicitor-client privilege.
Why does the Law Society need rules for lawyers around anti-money laundering and terrorist financing activities if there is federal legislation?
Like all people in Canada, lawyers are subject to the Criminal Code, but they are exempt from the Proceeds of Crime (Money Laundering) and Terrorist Financing Act due to solicitor-client privilege.
Lawyers must comply with obligations (Code of Conduct) imposed by their law society to ensure they are not facilitating money-laundering and terrorist financing. The rules and regulations exist to address the conduct of lawyers and by adhering to these fundamental principles, lawyers help prevent crime and maintain public trust in the justice system.
The Rules also protect the public’s right to independent legal counsel and ensure solicitor-client privilege.
Why are lawyers specifically targeted by people who are involved in money-laundering and terrorist financing?
As lawyers are exempt from the Proceeds of Crime (Money Laundering) and Terrorist Financing Act due to solicitor-client privilege, criminals may seek them out because communication with their lawyer, as part of legal advice, is protected.
Lawyers may be used to:
- give the appearance of legitimacy to illicit transactions;
- facilitate money laundering by creating a company or trust, or through the sale or purchase of a property; and
- eliminate the trail of funds back to the client through the use of a trust account.
Are the rules around anti-money laundering and terrorist financing the same for all lawyers across Canada?
The Federation approved Model Rules to prevent money laundering that are being implemented by a number of law societies and is under review by others.
Each of Canada’s law societies enforces an ethical code of conduct for lawyers in their jurisdiction. Lawyers are prohibited from assisting anyone to commit fraud or other illegal conduct.
The Federation Council recognized that a review was needed in light of a number of developments including amendments to federal anti-money laundering and terrorist financing regulations.
A working group (comprised of representative from Canadian law societies) gathered feedback in 2017 and 2018 on proposed amendments to the Client Identification and Verification Rules as well as on the introduction of a new Trust Accounting Model Rule.
These two Model Rules are the foundation of the initiatives undertaken by law societies in the fight against money laundering and terrorist financing.
Has the Law Society of Alberta implemented the amended Model Rules and the new Trust Accounting Rule?
The Law Society approved the rule amendments for the No Cash and Client Identification and Verification Model Rules as well as the new Trust Accounting Model Rule. The new rules will take effect on September 30, 2019 for Alberta lawyers.
The Law Society will work closely with Alberta lawyers to ensure they have implemented the Model Rules into their practice and will continue to monitor and support Alberta lawyers to ensure compliance.