On Sept. 26, 2024, the Law Society’s Benchers approved amendments to the Rules of the Law Society of Alberta to align with the Federation of Law Societies of Canada (FLSC)’s updated Model Rules regarding Client Identification and Verification (CIV Rules). 

CIV Rules are a critical part of both the FLSC’s and the Law Societies’ strategy to address the risks of money laundering and terrorism financing activities present in the practice of law. 

As many of the provincial legal regulators opted to relax their CIV rules during the pandemic, the FLSC recognized that some form of permanent remote digital verification would be required and began work to amend the national rules for client identification and verification, as well as develop accompanying guidance. These changes also align with changes made by the Federal Government to their anti-money laundering and terrorist financing regulations. 

As virtual verification technology has become increasingly available, the Law Society is ready to align with the FLSC’s CIV Rules. 

For the Law Society of Alberta, this means amendments to Rule 119.50, as well as amendments to update cross-referencing in Rules 119.50, 119.51 and 119.53. It also means ending the temporary exemption that was given during the COVID-19 pandemic to the requirements for in person verification of client identification.  

The amended CIV Rules will come into force on Jan. 1, 2025.

While more guidance regarding the CIV Rules will be provided in the coming months leading up to Jan. 1, 2025, the amendments can be summarized as follows: 

• Document Authentication: In the previous version of the Rules, lawyers were required to verify their clients’ identification by reviewing their valid, original and current government-issued photo in-person.The revised Rules allow lawyers to verify their clients’ identification by reviewing a valid, authentic and current government-issued photo identification virtually using verification technology and follow the company’s defined procedures to confirm the ID is genuine. The technology can compare the ID to known characteristics, security features or markers to determine if it is an authentic document. 

• Use of Agents: The revised Rules clarify the use of agents to verify the identity of a client. In short, an agent can be used at any time by a legal professional who is required to verify the identity of a client, provided that the agent, through a written agreement with the lawyer, agrees to verify client identification in accordance with the Rules. The use of an agent is no longer mandatory for specific situations that were previously set out in the Rules. 

Beginning Jan. 1, 2025, lawyers will have four ways to verify a client:  

• Government-issued photo identification method: 
  • In-person (when the individual is physically present): You or your agent may view the original document in the presence of the individual to ensure that their name and photograph match the features of the individual before you and that the document security features are present. 
  • Virtual (via technology platform): You or your agent may virtually meet and verify a client’s identity using verification technology. Following the company’s defined procedures to confirm the ID is genuine, the technology can compare the ID to known characteristics, security features or markers to determine if it is an authentic document. 
• Credit file: You verify a client’s identity by referring to information that is in their credit file. 
• Dual-process: You collect information from two different, reliable and independent sources that contain the individual’s name and address, date of birth or the individual’s name and confirmation they have a deposit account, credit card or other loan with a financial institution. 

Money laundering, mortgage fraud, and identity fraud continue to be serious concerns and the risks have increased post-COVID pandemic. To avoid becoming involved in this type of illegal activity, lawyers must manage risks in their practice and remain highly vigilant. If not managed properly, these risks can result in financial and data loss and may harm your and your firm’s reputation.  

The requirement to authenticate in the context of virtual verification exists because:  

• it is an effective tool to manage risks of fraud, including synthetic identity theft, by leveraging technology to confirm an individual is who they say the are and there is a real person behind their actions; and,  
• it aligns with the requirement under the Rules that all documents and records used for verification purposes be authentic, valid, and current.    

For an overview of how technology is used to verify identity, see this resource from Payments Canada. 

Like all people in Canada, lawyers are subject to the Criminal Code, but they are exempt from the Proceeds of Crime (Money Laundering) and Terrorist Financing Act due to solicitor-client privilege. 

Lawyers must comply with obligations (Code of Conduct) imposed by their law society to ensure they are not facilitating money-laundering and terrorist financing. The rules and regulations exist to address the conduct of lawyers and by adhering to these fundamental principles, lawyers help prevent crime and maintain public trust in the justice system. 

The Rules also protect the public’s right to independent legal counsel and ensure solicitor-client privilege. 

No. Identification and verification are separate but related concepts. While Identification requires gathering information about the client, Verification of identity is the process of confirming that the client or third party is who, or what, they say they are. 

Identification refers to the basic information in Rule 119.47 that you must obtain and record with the applicable date about your “client” (widely defined in Rule 119(h)) at the time that you are retained to provide legal services. You can obtain the information by phone, in a form that you ask the client to complete, by email, a video conference or other means of communication. 

If your client is an individual, you must obtain and record with the applicable date:  

• the client’s full name; 
• home address and telephone number; 
• occupation; and,  
• the address and telephone number of the client’s place of work or employment, where applicable.  

If your client is acting for or representing a third-party individual, you must also obtain the above information from the third party.  

To assist in complying with the above requirements, consider recommending the use of the Law Society’s Client Identification and Verification form.  

If your client is an organization, you must obtain and record with the applicable date:  

• the client’s full name, business address and business telephone number; 
• the organization’s incorporation or business identification number and the place of issue of its incorporation or business identification number, if applicable;
• the general nature of the type of business or businesses or activity or activities engaged in by the client, where applicable; and, 
• the name, position and contact information for the individual authorized to provide and give instructions to the lawyer with respect to the matter for which the lawyer is retained. 

If your client is acting for or representing a third-party individual, you must also obtain the above information from the third party.  

Rule 119.46(b) requires this additional information unless the organization is a “financial institution,” “public body” or “reporting issuer” as defined in the Rule. 

To assist in complying with the above requirements, consider recommending the use of the Law Society’s Client Identification and Verification form.  

You must identify any individual or organization who has retained you to provide legal services. If your client is acting for or representing a third party, you must obtain identification information about the third party.  

When you obtain an individual client’s occupation, “unemployed” or “retired” are not occupations. Obtain more descriptive information (e.g, retired AB lawyer). For other vague descriptions (e.g., self-employed, investor, consultant, entrepreneur, manager, promoter), obtain information that identifies the nature of the individual’s work and the industry involved. 

If the client or third party is an organization, you must also identify each individual that is authorized to give instructions on behalf of the organization with respect to the matter for which you are retained. If you are also engaged in or giving instructions in respect of the receipt, payment, or transfer of funds, you must identify the directors and beneficial owners of the organization. 

Some limited exceptions to the requirement are set out in Rule 119.46 (3).  

Subject to limited exemptions, you must identify your client or third party whenever you are retained to provide legal services. Identification can be done in conjunction with your firm’s conflicts check. 

Verification involves confirming that your client is who they say they are by using one of the verification methods in Law Society Rule 119.50 (6). When client verification is required, you must also obtain and record information about the client’s source of money for the financial transaction.  

If the client is an organization, you must verify the identity of the individual instructing you on the organization’s behalf and obtain and record the information required by Rule 119.50 (11) b).  

Some exceptions to the requirement are set out in Rule 119.49.  

No. There are several exceptions included in the rule.  

You do not have to verify the identity of the client (nor obtain and record information about the source of funds for the financial transaction) if:   

• the client or third party is a financial institution, public body, or reporting issuer;
• the funds are transferred using an “electronic funds transfer” as defined in the rules; or,  
• the funds used in the transaction are:   
  • received for professional fees, disbursements, or expenses;   
  • paid by or to a financial institution, public body, or reporting issuer;  
  • received from the trust account of another legal professional;  
  • received from a peace officer, law enforcement agency, or other public official acting in their official capacity;  
  • received to pay a fine, penalty, and/or bail; or,   
  • transferred by a wire transfer. 

When a client’s matter involves more than one financial transaction and there is an exemption from the verification and source of funds obligations with respect to one of the transactions, the other transactions will be subject to the obligations unless there are exemptions that apply to them.  

There are three methods for verifying the identity of individuals, where applicable:   

1. Government-issued Photo ID – document must be authentic, valid and current;   
   1. In-person (when the individual is physically present): You or your agent may view the original document in the presence of the individual to ensure that their name and photograph match.  
   2. Virtual (via technology platform): You or your agent may virtually confirm a client’s identity using a digital authentication and verification technology, which allows clients to provide a digital copy or image to authenticate their identity. 
2. Credit File Method – credit file must be in existence for at least three years and obtained directly from the credit bureau; may be done without the individual being present.   
3. Dual Process Method – may be done without the individual being present – refer to any two of the following from a reliable source: information that contains:  
   1. the individual’s name and address;   
   2. the individual’s name and date of birth; or,   
   3. the individual’s name and confirmation of their account with financial institution. 

The Rule requirements may be fulfilled by you, or any partner, associate or employee at your firm. 

This exemption is meant to cover a financial institution’s own funds, for example those advanced pursuant to a mortgage or loan agreement. Cheques, whether regular or certified, bank drafts or other forms of payment that are provided by anyone other than the financial institution directly on its own behalf, are not included in the exemption.  

For the exemption to apply, the financial institution must be a bank regulated by the Bank Act, an authorized foreign bank, a credit union or trust company or must otherwise meet the definition provided in the rule. 

No, there is a difference between identification and verification.   

Identification refers to the basic information you must get about your client to know who they are whenever you are retained to provide legal services.  Information must be obtained and recorded, with the applicable date, including the client’s name, address, phone numbers, and occupation.    

Verification refers to the information you must obtain to confirm that your client is who or what they say they are. Verification is required only when you are acting for a client or giving instructions on behalf of a client regarding the receiving, payment or transferring of funds, i.e. a “financial transaction”.

Yes, as per Rule 119.50 (6), one piece of Government issued ID that is authentic, valid and current is sufficient for client verification. 

When the retainer involves a financial transaction and no exemption under the verification of identity requirements applies, lawyers must obtain from the client and record information about the source of funds and keep dated records. The source of funds means the origin of the funds used to carry out a specific transaction, and includes: 

• information about the economic activity generating the funds (e.g., client savings from salary, a bank loan, the sale of assets, a settlement, or inheritance);
• information that identifies the person or entity providing the funds, if the payor is a third party; and,   
• the relationship of the client to the person or entity providing the funds, if applicable.   

Lawyers are not required to obtain supporting documentation; however, this may be prudent in some situations (e.g., when a retainer involves a high value transaction, or red flags are present). Exercise your professional judgment and be alert for red flags relating to the source of funds.   

Key questions to ask in assessing the source of funds:   

• Is the source of funds consistent with your knowledge about the client’s profile and activity?
• Is there anything unusual about the source of funds in the context of the transaction?   
• Is someone other than the client providing information about the source of funds? You should confirm that the source of funds is reasonable and proportionate to the client’s profile consistent with the nature and purpose of the retainer and the transaction. 

In the absence of suspicious circumstances, a lawyer may accept a client’s explanation regarding the economic activity or action that generated the client’s source of money (e.g., inheritance, savings from salary, life insurance proceeds) without obtaining copies of the documents to support the client’s explanation.   

Where there are suspicious circumstances, lawyers must make further inquiries and assess the risk of participating in a financial transaction for a “client.”

Yes. There is no longer an exemption when monies are paid pursuant to a court order. You will have to verify the client’s identity and obtain the source of funds information unless another exemption applies. 

If you are required to identify your client or any third party, then you must obtain the information required by Rule 119.47. However, where a client or third party is unable to provide the information (for example, where they have no address because they are homeless or have no occupation  because they are unemployed), you should record these facts and, assuming there are no concerns of fraud or other illegal activity with respect to the client or the retainer, you may continue to act for the client.  

This situation should be distinguished from one in which your client refuses to provide the information required to comply with the identification requirements. In these situations, you should explain to the client, using clear and easy to understand language, that all lawyers are required to ask clients for this information, and the information is needed to properly represent and protect the client’s interests and rights. If the client still refuses to provide the required identification information, you must advise the client that failing to obtain this information puts you in breach of your professional obligations and, as a result, you cannot act or continue to act for them.  

There is a difference between identification and verification: 

• Identification refers to the basic information you must get about your client to know who they are whenever you are retained to provide legal services.
• Verification refers to the information you must obtain to confirm that your client is who or what they say they are. Verification is required only when you are acting for a client or giving instructions on behalf of a client regarding the receiving, payment or transferring of funds, i.e. a “financial transaction”.   

There are several exceptions included in the rule. You do not have to verify the identity of the client (nor obtain and record information about the source of funds for the financial transaction) if:   

• the client or third party is a financial institution, public body, or reporting issuer;
• the funds are transferred using an “electronic funds transfer” as defined in the rules; or,  
• the funds used in the transaction are:   
  • received for professional fees, disbursements, or expenses;   
  • paid by or to a financial institution, public body, or reporting issuer;  
  • received from the trust account of another legal professional;  
  • received from a peace officer, law enforcement agency, or other public official acting in their official capacity;   
  • received to pay a fine, penalty, and/or bail; or,   
  • transferred by a wire transfer.

The temporary relaxation of subrule 119.50(6) will end on Jan. 1, 2025 and all Alberta lawyers will be required to follow the new Rules. This means that if you meet a client via videoconference, you will be required to verify your client’s identity using verification technology and follow the company’s defined procedures to confirm the ID is genuine. The technology can compare the ID to known characteristics, security features or markers to determine if it is an authentic document. 

The FLSC notes that “A document is authentic if it is genuine and has the character of an original, credible and reliable document.” Guidance has been developed by the FLSC to further elaborate on this definition and provide examples of the differences between the two methods of verification.  

The Law Society doesn’t vet or endorse vendors or their products. There are several reputable companies that offer products that use authentication technology to verify identity in accordance with the virtual verification method.  

To assist individuals and organizations in identifying such solutions, the Digital Identification and Authentication Council of Canada (DIACC) has developed a certification process for providers.  DIACC “is a non-profit coalition of public and private sector leaders committed to developing a Canadian framework for digital identification and authentication”.   

Lawyers can seek out providers with this certification as a starting point when exploring digital authentication and verification technology options. 

Vendors’ charges to verify an individual’s identity vary (e.g. from around $4 to $25 per individual). Some offer a pay-as-you go service with no onboarding costs.  

It is important to note that, while there is a cost involved in using a company to perform digital authentication, lawyers are not required to use this method of verification. Lawyers may still choose to verify client identification in person.  

They will need to ensure that the identification provided is authentic, in accordance with the Rule.  

They may continue to review and verify original personal identification documents in the presence of the client or use an agent when the client is not present in the lawyer’s office. 

Lawyers may also continue to use one of the other two methods of verification (dual-process and credit file) provided for in the Rules. 

Lawyers should be aware of their verification technology provider’s security and data retention policies. Some retain the data for days or years, and it could be retained outside of Canada. One vendor does not retain the data; the data is retained entirely by the lawyer for a time period determined by the lawyer or law firm. 

The role of the Innovation Sandbox is, in part, to find areas of the Rules and Code that, when relaxed, support the safe and innovative delivery of legal services in Alberta. The specific change in the Rule amendments that allows for the digital authentication of identification is exactly the sort of provision of the Rules that the Innovation Sandbox was designed to identify and address.    

As a result of these Rule changes, several current Innovation Sandbox participants who offer digital verification technology now comply with the Rules without needing a specific relaxation under the Sandbox. After January 1, these service providers can leave the Sandbox and operate without continued oversight from the Law Society. Currently, all digital authentication providers in the Innovation Sandbox either have DIACC certification or are in the process of applying for it. 

More guidance will be developed for lawyers on what these amendments mean and information on how to implement the use of authentication technology. With just over three months’ notice, we believe that lawyers will have sufficient time to learn about the change, assess their work processes and implement any change they wish to make.  

Webinars with additional information will be offered in advance of the implementation date of the amended Rules.