Client Identification

Per Rules 119.45 – 119.47 of the Rules of the Law Society of Alberta, when providing any legal service, lawyers are obliged to identify a client by obtaining the client’s name, address, phone numbers, and occupation. Lawyers must identify client organizations by obtaining the organization’s contact information, as well as information about the individual that instructs the lawyer on the organization’s behalf, and the nature of the client’s business. 

Lawyers have a duty to know their client. This includes:  

• knowing their client’s identity; 
• understanding the client’s financial dealings in relation to the retainer; and, 
• managing any risks arising from the retainer. 

As soon as they are retained, lawyers must obtain and record identifying information about:  

• their client,  
• third parties that the client is acting for or representing, and, 
• each individual authorized to provide and give instructions for an organization, if applicable. 

Information cannot be missing or left blank in client identification records. If there is a legitimate reason the information is not included, lawyers must record the reason.  

Exemptions from Identification

Lawyers are exempted from completing identification of their clients if they:   

• are in-house and corporate counsel since they only provide legal services to their employers; 
• provide legal services through a duty counsel program, except when giving instructions for receiving, paying or transferring funds; and/or,  
• act as an agent for another lawyer or when a matter is referred by another lawyer (provided the other lawyer has complied with the identification and verification requirements). 

Client Verification

Verifying identity is a foundational element of Canada’s anti-money laundering and anti-terrorist financing regime and is a key component of a lawyer’s relationship with their clients. It helps lawyers know who their clients are and to understand and assess any risk that may be associated with their transactions or activities. 

Per Rules 119.47 – 119.55 of the Rules of the Law Society of Alberta, more detailed verification of a client’s identity is required in the event the lawyer is engaged in, or gives instructions in respect of, the receipt, payment or transfer of funds on the client’s behalf. As part of this process, lawyers must obtain information about the source of the funds being transferred. 

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.  

When the retainer involves engaging in or giving instructions in the receiving, paying or transferring of funds (i.e., a financial transaction), lawyers must verify the identity of:  

• the client; 
• third parties that the client is acting for or representing; and, 
• in the case of organizational clients, every individual authorized to give instructions.   

Verification Methods

Lawyers can use one of the following three methods to verify an individual client: 

1. Government-issued photo identification: Verifying that the identification document is authentic, valid and current. This can be done either:  
   1. In-person (when the individual is physically present):The lawyer or their agent (see below for more information on the use of agents) may view the original document in the presence of the individual to ensure that their name and photograph match.  
   2. Virtual (via technology platform):The lawyer or their 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: Checking with a third-party credit bureau such as Equifax or TransUnion to confirm client identity. The credit file must be in existence for at least three years and obtained directly from the credit bureau and may be done without the individual being present.    
3. Dual process method: Allows the lawyer to refer to information from two different, reliable and independent sources that contain: 
   1. the individual’s name and address; 
   2. the individual’s name and date of birth; or, 
   3. the individual’s name and confirmation they have a deposit account, credit card or other loan with a financial institution. 

Use of Agents

Lawyers can also use an agent to verify the identity of an individual, including circumstances where the individual is not in Canada. The agent should provide the same information the lawyer would have gathered to verify the client’s identity. View the Guidance on Use of Agents for more information. 

The Model Rules do not specify who can act as an agent, so lawyers should ensure agents are reputable and must have a written agreement in place. 

Exemptions from Verification

Lawyers are not required to verify identify 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, or bail; and/or, 
• transferred by a wire transfer. 

Identifying Beneficial Ownership

Beneficial owners are the actual individuals who are the trustees or known beneficiaries and settlors of a trust, or those who directly or indirectly control 25 per cent or more of an organization, such as a corporation, trust or partnership. Concealing beneficial ownership information of accounts, businesses and transactions is a technique used in money laundering and terrorist financing schemes. 

Lawyers are required to make reasonable efforts to obtain information about the beneficial owners of an organization and about the control and structure of the organization. Identifying beneficial ownership is important to remove anonymity and identify the actual individuals behind a transaction.  

Collection and confirmation of beneficial ownership information is an important step in client identification and ensuring that lawyers are not assisting illegal transactions. You may obtain information establishing the organization’s structure or beneficial ownership from the organization, either verbally or in written form.  

Source of Funds

When a retainer involves a financial transaction, lawyers must obtain and record information from the client about the source of funds and keep dated records. This is as long as no exemption under the verification of identity requirements applies. The source of funds means where the funds came from 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).  

Assessing the Source of Funds

Lawyers must exercise their professional judgment and be on alert for red flags relating to the source of funds. Key questions to ask include:  

• 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?  

Lawyers must 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 

View the Source of Funds Guidance for more information. 

Ongoing Monitoring of Clients and Record Keeping

Lawyers must monitor all client relationships, to assess if information about the client’s activities and source of funds is consistent with the purpose of the retainer. Lawyers must maintain a record of the results of their inquiries. 

The purpose of monitoring is to assess if there is a risk that the client is engaged in fraud or other illegal conduct. Lawyers are obliged not to participate in, or facilitate, money laundering or terrorist financing. If a lawyer discovers the client is engaged in illegal conduct, the lawyer is obliged to withdraw from representing the client. 

View the AML Monitoring Guidance for more information.