BarTalk April 2001
Volume 13, Number 2

New duties and requirements of all lawyers

by Greg DelBigio

Proceeds of crime laws are of concern to all lawyers, not just to those who practise criminal law. Criminal lawyers may encounter the laws more frequently than lawyers who practise in other areas simply because it is typically criminal lawyers who are retained to assist those who have been charged with proceeds of crime related offences. Apart from this, however, it is those who are retained to provide services in areas such as securities, real estate dealings and other financial transactions that must be particularly cognizant of the laws for it is through these types of transactions that money laundering might possibly occur.

The international war (as it has come to be known) that is being waged against organized crime and narcotics trafficking is increasingly being focused upon the proceeds of crime. While a great deal has been written on the connection between crime and profit, it is generally accepted that criminal enterprise generates enormous profits which must then be laundered or converted in order that the profits may be used without detection. The specific ways in which profits might be concealed or converted are only limited by the imagination of those who are intent upon engaging in these tasks.

There are a number of laws which currently exist and which are designed to address the problems which are associated with the proceeds of crime and, more importantly, there are significant amendments on the horizon which will fundamentally affect the practice of law.

Part XII.2 of the Criminal Code, R.S.C. 1985, c. C-46 includes the provisions that relate to the proceeds of crime. As seen below, section 462.31 of the Criminal Code broadly defines the offence of money laundering and brief reflection upon this provision reveals that it is a definition that lawyers should be aware of.

462.31 (1) Every one commits an offence who uses, transfers the possession of, sends or delivers to any person or place, transports, transmits, alters, disposes of or otherwise deals with, in any manner and by any means, any property or any proceeds of any property with intent to conceal or convert that property or those proceeds, knowing or believing that all or a part of that property or of those proceeds was obtained or derived directly or indirectly as a result of:

• the commission in Canada of an enterprise crime offence or a designated substance offence; or

• an act or omission anywhere that, if it had occurred in Canada, would have constituted an enterprise crime offence or a designated substance offence.

Whereas Part XII.2 of the Criminal Code attempts to address money laundering activities through criminalizing those activities as well as through various forfeiture provisions (and the deterrent value which is believed to attach to criminalization and forefeiture), the new amendments, and contemplated further amendments to the Proceeds of Crime (Money Laundering) Act, S.C. 2000, c.17 are proactive and attempt to stop money laundering before it happens by preventing it from occurring.

The stated objective of the Money Laundering Act is comprehensive and includes detecting and deterring money laundering, facilitating the investigation and prosecution of money laundering, responding to the threat of organized crime and fulfilling Canada’s international obligations in combating transnational crime. In turn, these legislative objectives are to be accomplished through the creation of an agency that will be responsible for receiving, analyzing and, in appropriate cases, disseminating information relating to specified financial transactions to law enforcement agencies. The agency, known as the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), is now in existence.

Numerous professions and financial entities will be subject to the new provisions and lawyers are specifically included in this group. It is important to note that the objectives of the Act are to be accomplished through comprehensive mandatory reporting requirement in which lawyers, and others, will be required by law to provide the agency with detailed information in respect of certain financial transactions. The requirements of the Act will include record keeping and reporting of:

• cash transactions in excess of $10,000;

• international electronic fund transfers; and

• transactions in respect of which there are reasonable grounds to believe that the transaction is related to the commission of a money laundering offence.

Other anticipated provisions include:

• entities which are covered by the Act will be required to have a compliance regime;

• authorized persons will be permitted to enter business premises for the purpose of examining records and inquiring into the affairs of the business or entity for the purpose of ensuring compliance with the Act;

• prosecution for non-compliance may be by way of summary conviction or indictment and penalties might include significant fines and, or imprisonment; and

• an officer, director or agent of a person who commits an offence under the Act may be guilty of the offence if the commission of the offence was directed by, authorized, assented to or acquiesced in by the officer, director or agent.

Though it is anticipated that monies which are received or paid in respect of legal fees, disbursements or bail will be exempt from the application of the Act, and therefore will not have to be reported upon, the Act will capture the purchase or sale of securities, real property, business assets or entities and the transfer of funds or securities that a lawyer might conduct on behalf of a third party.

It is of concern that the law could compel a lawyer to provide client information to the agency and that the information could ultimately serve as the foundation for a criminal investigation or prosecution of that client. And though an unproclaimed section of the Act provides that legal counsel will not be required to disclose any communication that is subject to solicitor-client privilege, the Act fails to recognize that the integrity of the solicitor-client relationship is premised upon the protection of both privilege and confidentiality. The Act could apparently compel the disclosure of confidential information.

Through the operation of the Criminal Code lawyers are already prohibited from engaging in financial transactions that constitute money laundering. Professional practice standards would also prohibit a lawyer from facilitating a suspicious transaction on behalf of a client. In light of this, it is disappointing that it was deemed necessary to include lawyers within the scope of the Act. With lawyers now being included, it is of great concern that the operation of the Act will reduce the trust that must exist between a lawyer and his or her client, and thereby undermine the solicitor-client relationship.

Given the significant ways in which this law will affect the profession, lawyers will be well advised to consider, at an early stage, how to ensure compliance with the Act, and how to balance compliance against the apparently competing interests of the maintenance of privilege, confidentiality and duty to one’s client.

Our thanks to Greg DelBigio for providing this article. Greg DelBigio practises criminal law and is a past Chair of the Criminal Justice-Vancouver Section. He was a representative of the National Criminal Justice Section in its submissions to the Federal Government in the formation of the Act.

This article was published in the April 2001 issue of BarTalk and is subject to the copyright by the British Columbia Branch of the Canadian Bar Association, 2005, all rights reserved.