Trust account vigilance – Law Society Rule 3-58.1 and BC Code rule 3.2-7
The Benchers recently adopted an amendment to BC Code 3.2-7, commentary [3.1] to include a direct link to Law Society Rule 3-58.1(1), which prohibits funds from being paid into or withdrawn from a trust account unless the funds are directly related to legal services provided by the lawyer or law firm.
BC Code rule 3.2-7, commentary [3.1] requires lawyers to make reasonable inquiries of clients who may seek to use your trust account without requiring substantial legal services or who promise unrealistic returns on their investment to third parties who have been invited to place money in your trust account. A lawyer’s trust account must only be used for legitimate commercial purposes directly related to legal services provided by the lawyer or law firm.
Be on guard to prevent your trust account from being used to facilitate any dishonesty, crime or fraud, including money laundering. Make a record of the results of inquiries of clients who seek to improperly use your trust account (Commentary [3.2] of Code rule 3.2-7). Read the Law Society’s Discipline Advisories including Country/Geographic Risk, Securities fraud: Micro-cap stocks, Private lending, and Lawyer are gatekeepers.
Discipline Advisory – Country/ Geographic risk
In the course of knowing one’s client and understanding the facts relevant to your retainer, be on the lookout for country/geographic risks that might raise suspicion. Geographic risk, may not, on its own, determine a transaction’s legitimacy; but it may require further inquiries to determine if it is prudent to proceed.
Geographic risk may arise in a number of ways, including:
- The clients, including the instructing individuals, or other parties to the transaction reside in or have a material connection to a high risk country (e.g. the jurisdiction in which a corporate entity was created or in which it purports to operate).
- The transaction associated with the legal services being sought is in a high risk country. The funds received by the lawyer for the retainer or the transaction arise from or are to be distributed to a high risk country.
See the Discipline Advisory – Country/Geographic risk, for more information on identifying high risk jurisdictions and risks.
Confidentiality of complaints against lawyers
The Benchers also approved a change to Law Society Rule 3-3 related to the confidentiality of complaints. The rule change recognizes that the Law Society must treat as confidential all information and records that form part of an investigation of a complaint or the review of a complaint by the Complaints Review Committee. In some cases, the Law Society may still require a lawyer to keep complaint information and records confidential under Rule 3-3(1.1). Even when this confidentiality requirement is not imposed, lawyers should take care before disclosing any complaint information and records, keeping in mind their obligations including:
- the duty of confidentiality to the client as set out in BC Code section 3.3
- sections 87 and 88(3) of the Legal Profession Act
- any applicable express or implied undertakings
Questions? Lawyers who have questions regarding any information in this Notice are welcome to contact a practice advisor at practiceadvice@lsbc.org or 604.443-5797.