Client identification and verification: Are you ready?
July 21, 2008
Note: At their October meeting, the Benchers approved a start date of December 31, 2008 for the Law Society’s new client identification and verification rules. The Benchers granted a time extension to allow for further refinement the rules and consideration of suggestions received from members and others.
The Law Society's new client identification and verification rules take effect November 1, 2008. Are you ready for them?
The Benchers have approved in principle 12 new rules for client identification and verification. These rules were developed by the Act and Rules Subcommittee of the Executive Committee of the Benchers, based on a model rule adopted by the Federation of Law Societies of Canada. The rules are designed to codify the steps prudent legal counsel would take in normal course to verify the identity of a new client.
In 2000, the federal government passed legislation now known as the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Since then, the Federation of Law Societies of Canada has held discussions with the federal government regarding the appropriate anti-money laundering regime for the legal profession, and has developed a model client identification and verification rule for lawyers in Canada.
These new rules will ensure that lawyers contribute to the fight against crime, without compromising the independence of the profession, solicitor-client privilege or client confidentiality. All provincial and territorial law societies are expected to enact similar rules this year.
If you have any questions or need more information about the new client identification and verification rules, contact Barbara Buchanan, Practice Advisor, Conduct & Ethics at 604-697-5816 or firstname.lastname@example.org.
As of November 1, 2008, lawyers will be required to follow the client identification and verification procedures contained in Law Society Rules 3-91 to 3-102 when retained by a client.
Identification and verification are two distinct concepts. The client identification requirements apply whenever a lawyer provides professional services to a client. These requirements call for obtaining basic identification information about individual clients or organizational clients in every retainer, subject to certain exceptions.
The identity verification requirements are triggered where a lawyer receives, pays or transfers funds on behalf of a client or gives instructions for such activities on behalf of a client. A number of exceptions are included. For example, a lawyer is exempted from the verification requirements when money is paid to the lawyer by a financial institution, public authority, or public company, or received from the trust account of another lawyer.
Lawyers must keep a record of the information and documents obtained to identify and verify a client's identity. Lawyers must also retain a copy of every document used to verify the identity of any individual client or organizational client when providing legal services in respect of a financial transaction.
Frequently asked questions (FAQ)
The Law Society has developed a list of frequently asked questions that are meant to assist in explaining the client identification and verification requirements. More information may be added at a future date. Click here to access the full FAQ on the Law Society website.
1. The Rules talk about identification and about verification. What's the difference between them?
Identification refers to the basic information you need to obtain and record about your client to know who they are whenever you are retained: their name, address, telephone number, occupation, etc.
Verification refers to the information you need to 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 money.
When you are verifying a client's identity, you must obtain and retain a copy of every document used to verify the client's identity.
2. In what circumstances am I required to identify my client?
You must identify your client whenever you are retained to provide legal services, except:
(a) when you provide legal services to your employer, in respect of a financial transaction;
(b) when you are acting as an agent for another lawyer who has already identified the client; or
(c) when you are acting for a client who has been referred to you by another lawyer who has already identified the client.
3. I was acting for a client on a matter before November 1, 2008 and the matter is continuing. Do I have to identify this client?
Not as long as the matter is the same. But if you take on a new matter for the client you must comply with the identification and verification requirements regardless of whether the client is an existing client.
4. What are my obligations in determining whether a lawyer for whom I am acting as agent or a lawyer who has referred a client to me has taken the necessary steps to identify that client?
You are expected to exercise due diligence to satisfy yourself that the other lawyer has already identified the client. This would involve asking the other lawyer to confirm to you that he or she has complied with the requirements.
For further information about client identification and verification, please consult the following Law Society publications:
- "Practice Watch" (Benchers' Bulletin 2008: No. 3 July)
- "Anti-money laundering initiatives" (Benchers' Bulletin 2008: No. 2 May)
- "Know your client — draft anti-money laundering regulations" (Benchers' Bulletin 2007: No. 3 July)
If you have any outstanding questions or need more information about the new client identification and verification rules, contact Barbara Buchanan, Practice Advisor, Conduct & Ethics at 604-697-5816 or email@example.com.