February 10, 2021

Country/Geographic risk

Feb 10, 2021

Be on guard against unwittingly facilitating any dishonesty, crime or fraud including money laundering. It is imperative to know your clients and understand the facts relevant to the retainer, including the source of funds sent or received and, where necessary, the source of the client’s wealth. Where there are suspicious circumstances, you must make reasonable inquiries to ensure, on an objective basis, that the transaction is legitimate prior to acting or continuing to act. 

One category of suspicious circumstances that you need to be on the lookout for is geographic risk. This Discipline Advisory discusses geographic risk, which may arise in a number of ways on a matter, including any of the following:

  • 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.

Identifying a geographic risk

It is important to recognize that the presence of a geographic risk may not, on its own, determine the legitimacy of the transaction. It may, however, require further inquiries before proceeding. Those inquiries should be documented in the client file.    

There is no exhaustive list of countries or jurisdictions that are considered to be higher risk. In assessing the risk posed by a country or jurisdiction, those falling within any of the following categories may pose a higher risk:

  • Countries with weak money laundering or terrorist financing controls, as identified by competent authorities, such as the Financial Action Task Force (“FATF”) or FINTRAC. See for example, FATF and FINTRAC Advisories.
  • Countries subject to economic sanctions, asset freezes, export and import restrictions, arms and related materials embargoes, financial prohibitions, technical assistance provisions or related measures. See for example, the Government of Canada’s website for types of sanctions, current sanctions against countries and listed persons and entities. Note that individuals and entities may also be subject to sanctions. 
  • Countries with a reputation for significant levels of organized crime, corruption, financial secrecy or criminal activity such as drug trafficking, human trafficking or illegal gambling.

The risk may be elevated in circumstances where the involvement of the foreign jurisdiction seems unduly complicated, doesn’t make sense or appears inconsistent with client’s known activities or profile. Offshore activities may be used by individuals to obscure the activities that generated funds or the beneficial owner of the funds.

Lawyers are encouraged to review additional information on the Law Society’s website including:

If you need advice on your ethical obligations, Law Society Practice Advisors are available to provide confidential advice to lawyers.  You may contact them at practiceadvice@lsbc.org or 604.443.5797.