Question

As part of federal anti-terrorism initiative, the federal government enacted the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Under the federal legislation, professionals and financial institutions are required to report suspicious transactions or large cash payments of $10,000 or more. An independent government agency (FINTRAC) investigates and analyzes reports and tracks cross-border movements of currency. Lawyers were among the professionals covered by the Act, and real estate lawyers were particularly affected since their work involves receiving large sums of money from their clients. The Federation of Law Societies of Canada launched a successful court challenge of the law. It argued that requiring lawyers to report on their clients was a violation of solicitor-client privilege and a breach of the constitutional right to independent counsel. The courts agreed with the Federation’s position and restricted the application of the new law. As a result, the Minister of Finance introduced amendments to the Act exempting lawyers from its reporting requirements. In recognition of the fact that preventing money laundering is a worthy goal, the Federation developed model rules for lawyers’ codes of professional conduct. The model “know your client” rule requires lawyers to confirm their clients’ identities with independent documents and collect information such as addresses and occupations. The model “no cash” rule prohibits lawyers from accepting cash payments of $7,500 or more.

Do you think law societies are in a better position to deal with money laundering than FINTRAC?

This is another example of a conflict between two worthy goals. What are the arguments that justify the priority of solicitor-client privilege?

Answer 1

Yes, of course the law societies are at far better positions to deal with cases of money laundering than FINTRAC. In the case, the Federal society of Canada launched a successful challenge to the court for the violation of solicitor client privilege which is a right in common law jurisdictions. To fight against Money Laundering and Terrorist Financing Act is important but breaching the privacy of clients by assigning lawyers is against the constitutional right independent counsel. This is a perfect example of conflict between two goals that is protection from money laundering and on the other side protection of privacy of clients. The new model “Know your client” where lawyers are required to confirm their client’s identities with independent documents are correct which also avoids bribery on the part of lawyers. No cash rule will restrict lawyers to accept payments of more than $7500 from clients which makes the law more clear and goal oriented. The Solicitor client privilege is an attempt in common law jurisdictions to protect all the communications and information between a lawyer or solicitor and his client so that no information can be disclosed without the permission of the client. The privilege will be given to the client and not the lawyer. The major purpose behind it is to protect individual’s information from the fear of any disclosure of information which may create problems for the client in future.