Kenneth Rijock

Kenneth Rijock

Sunday, October 2, 2011

CANADIAN COURT RULES LAWYERS ARE EXEMPT FROM AML/CFT REPORTING REQUIREMENTS


The Supreme Court of British Columbia, in a landmark decision* this week, has held that lawyers will not be required to maintain certain financial records on their clients in their offices, where they may be accessed by Canadian law enforcement or regulators, on constitutional grounds. The case, which was brought on behalf of the fourteen provincial & territorial legal societies that regulate the legal profession, will reportedly have national implications, due to a prior agreement with the Attorney General's office.

 The Proceeds of Crime (Money Laundering) and Terrorist Financing Act  of 2001, and subsequent regulations, required solicitors to maintain financial records, involving fee transactions with their clients, and to retain these records in their offices, where they could be subpoenaed by law enforcement agencies. Interlocutory injunctions were thereafter issued, in several provinces, staying lawyers' obligations under the law, pending a ruling by a court of competent jurisdiction.

The lawyers argued that compliance with the Proceeds of Crime law violated:
(1) The attorney-client confidentiality and privilege.
(2) A lawyer's duty of loyalty to their clients.
(3) The independence of the Bar.

The Court, speaking through Justice Laura Gerow, held that the anti-money laundering laws violated the Canadian Charter of Rights and Freedoms "as it applies to lawyers and law firms because, because it puts both lawyers and their clients' liberty interests in jeopardy by requiring lawyers to collect and retain information available to the government to aid in combating money laundering and terrorist financing."

It should be noted that the profession has had a "No Cash Rule" in effect since 2004; this limits cash fee payments to under C$7500, and mandates cash refunds to clients, if the amount is over C$1000.There is also a "Client ID Rule" which requires that client personal information be secured through proper identification documents.

Will this decision hinder Canadian money laundering and terrorist financing prosecutions ? We cannot say, but we will be paying close attention, in the future, to the actions of Canadian law enforcement agencies in money laundering investigations.
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*Federation of Law Societies of Canada vs. Attorney General of Canada, 2011 BCSC 1270. Opinion entered 27 September, 2011, Docket No.: L013117. 

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