The Advisory: Volume 9, Issue 3, December 2011
“No-Cash” and “Know-your-Client” Rules are Key in Fighting Money Laundering
A September 27, 2011 decision by the British Columbia Supreme Court of Canada states that the Rules of Canada’s law societies to fight money laundering are effective.
The Federation of Law Societies of Canada recently launched several initiatives to combat the threat of money laundering and terrorist financing, while also maintaining the public interest in a strong and independent legal profession. New client identification and verification rules along with “no-cash” rules are in place at the Law Society of Alberta.
In its judgment, the Court said the application of the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act and related regulations for the legal profession violate Section 7 of the Canadian Charter of Rights and Freedoms, and is therefore unconstitutional.
The Federation argued that federal legislation is unnecessary because Canada’s law societies have already implemented rules requiring lawyers to identify their clients, and to not accept large amounts of cash from clients except in certain circumstances.
The Law Societies’ “no cash” rules restrict lawyers from receiving cash in amounts over $7,500. The Federation developed a “no cash” model rule, in recognition of the importance of anti-money laundering initiatives. Lawyers are also bound by strict “know-your-client” rules to ensure they are providing advice only to bona fide clients whose identity can be reliably ascertained.
Law Societies recognize that the legal profession must not be used to facilitate money laundering activities. Canada’s law societies promote these two objectives by adopting rules which protect the public and put clients first, while respecting basic constitutional values.
For more information on the Law Society’s client identification and verification and “no cash” rules, visit: http://www.lawsociety.ab.ca/lawyers/client_id.aspx
More information about the BC Supreme Court decision is available from the Federation at www.flsc.ca
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