Money laundering and terrorist financing is on the minds of both policy-makers and regulators this spring as the federal government carries out a statutory review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, and the Federation of Law Societies of Canada proposes amendments to its Model Rules dealing with the subject.
The CBA has a long history of advocacy on the issue: it was involved in the development of the first proceeds of crime legislation in Canada and has commented since on proposed legislative and regulatory changes, always asserting that the laws must protect solicitor-client privilege. The CBA was an intervenor in Canada (Attorney General) v Federation of Law Societies of Canada, in which the Supreme Court confirmed that the proceeds of crime legislation cannot impose duties on lawyers that undermine their duty of commitment to their clients’ causes.
In its letter commenting on the current statutory review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, the CBA notes that while it supports the government’s objective to prevent money laundering, its efforts must be carried out in the context of protecting individual rights and freedoms of all Canadians.
“Any law or regulation that requires lawyers to monitor and collect information about their clients for state purposes undermines the duty of loyalty owed by lawyers to their clients and significantly weakens the independence of the Bar,” the letter says.
“The CBA wants to preserve what has worked well to protect Canada’s freedoms and the administration of justice – the right of all people to speak to their lawyers in the confidence that what they say will go no further. This is essential for access to justice, so people can seek professional advice for a legal issue without fear of repercussions.”
Finance Canada and the Financial Action Task Force “have contended that lawyers are a weak link in the fight against money laundering,” but the CBA strongly disagrees with this stance, arguing that the overwhelming majority of lawyers “adhere to the highest legal and ethical standards” and that they should continue to do so as a self-regulated profession.
The letter notes that the CBA is involved in the FLSC’s “rigorous” review of its Model Rules relating to money laundering. To that end, the Association has written to the FLSC to comment on proposed amendments to the Model Rules on “No Cash” and “Client Identification and Verification,” and the new Model Rule on “Trust Accounting.”
The CBA recommends that the Model Rules on Trust Accounting not be so restrictive that they cannot be adopted across the country, noting that some provinces allow lawyers to use trust accounts when acting in a representational capacity, and points out areas where language needs to be clarified or adjusted. It also recommends changing the No Cash Model Rule to include cash received by a lawyer acting in a representative capacity.
When it comes to client identification and verification, the CBA makes a number of points about the specific amendments. Overall it argues for an approach that is “technology-neutral and device-agnostic.” Quoting a recent Competition Bureau study, it says, “Policymakers should aim to create regulation based on expected outcomes rather than on strict rules of how to achieve those outcomes.” Regulations should not be so proscriptive that they limit the possibility of innovation in a time of rapidly emerging technologies.
“We encourage the FLSC to move towards a modern, risk-based approach, allowing lawyers to use methods for client identification and verification that they find reasonable, knowing their accountabilities, rather than entrenching technologically bound and dated prescriptions.”