Federation highlights law society anti-money laundering measures at Senate committee

The President of the Federation of Law Societies of Canada has affirmed the proactive role played by law societies to fight money laundering and called on the Senate committee responsible for reviewing changes to Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act to ensure that any amendments preserve the independence of the bar and protect solicitor-client privilege.  

When the legislation was enacted in 2001, lawyers and Quebec notaries were required to report suspicious transactions of their clients. “The Federation and law societies challenged the application of that legislation on the grounds that it would interfere in a fundamental way with the relationship between lawyer and client and the solicitor-client privilege, which is a principle of fundamental justice in this country” John Hunter, Q.C. said in a presentation to the Senate Banking, Trade and Commerce Committee on April 4, 2012. 

Instead, the Federation developed a model rule for the regulation of the profession, later
adopted by all of Canada’s law societies. “Our rule prevents lawyers from receiving more than $7,500 in cash for a financial transaction,” Mr. Hunter said. The Federation took additional measures in 2008 to develop a Model Rule on Client Identification and Verification Requirements that was adopted by all of Canada’s law societies.

The government introduced similar rules and wants to apply them to the legal profession, but
the Federation has challenged their constitutionality. “The government rules required law firms
to take steps to identify and verify the identity of their clients, to prepare reports of financial trans-actions and to keep those reports in case law enforcement wanted to access them” Mr Hunter explained.

“We took exception because we do not want lawyers writing reports about their clients for the government.  We do not think that is the appropriate role, given the importance of the solicitor-client relationship.”  The Federation President said that Canada’s law societies and legal profession remain supportive of all initiatives to prevent money laundering and terrorist financing. 

He noted that Canada’s law societies have stepped up to the plate in a way that exceeds what other legal regulators around the world have done, “and put in place rules and regulations that should resolve – to the extent that rules can – the prospect that lawyers may unwittingly be used as dupes by clients by putting cash into their accounts.” 

The issue will also be heard in the B.C. Court of Appeal later in 2012. The federal government is appealing a decision of the British Columbia Supreme Court issued in September 2011 that found that the regulation of the legal profession by Canada’s law societies provides an effective and constitutional approach to fighting money laundering and terrorist financing.

The Federation’s submission to the Senate Banking, Trade and Commerce Committee is here.