Lawyers not to accept $7,500 or more in cash trust deposits

At their June meeting, the Benchers amended Law Society Rule 3-51.1 and related rules to stipulate that BC lawyers must not accept $7,500 or more in cash (down from the previous limit of $10,000 or more) in any one client matter or transaction.

Last year the Law Society of BC became the first law society in Canada to adopt a limit on trust funds that lawyers can receive in cash. This step demonstrated the legal profession’s commitment to guard against lawyers’ trust accounts being used in money laundering or fraudulent schemes.

It is critical for the legal profession across Canada to put in place strong anti-money laundering provisions. This is so because lawyers are the only professionals in the country who are exempt from the mandatory reporting to the federal government of large cash deposits and suspicious transactions.

The exemption has been in place since 2001, first by virtue of interim court injunctions to protect solicitor-client privilege, and then by agreement of the federal government pending final disposition of the issue in court. As noted in the President’s View in the April-May Benchers' Bulletin, the Federation of Law Societies of Canada is continuing discussions with government to resolve the issue and come to a long-term solution. The trial respecting the applicability of the money laundering legislation to lawyers has been adjourned so that the Federation and the federal government can pursue settlement options.

Because of the importance of preventing money laundering activities, and the likelihood that money launderers see lawyers as a desirable target, law societies and lawyers across the country must be on guard.

The Federation of Law Societies proposed a model rule to limit cash receipts for consistency across the country. BC’s provisions, as most recently revised, reflect the model rule.

BC lawyers are accordingly prohibited from accepting an aggregate amount of $7,500 Canadian or more in cash in one client matter or transaction, other than from a law enforcement agency; pursuant to a court order; from a financial institution or public body; to pay a fine or penalty; or (when acting as in-house counsel) on behalf of one’s employer. A lawyer is also permitted to receive $7,500 or more in cash for professional fees, disbursements, expenses or bail.

If a lawyer receives a cash retainer and subsequently refunds all or part of it, any refund of $1,000 or more must also be in cash. The intent of this provision is to dissuade any person from purporting to provide a lawyer with a large cash retainer and later demanding it be refunded in the form of a trust cheque. A person might do this to obtain a negotiable instrument (the trust cheque) from a lawyer that would not trigger reporting requirements when that person deposits it in a financial institution.

The Law Society requires lawyers to record the source and form of all funds received (Rule 3-60) and to keep records of all cash receipts and of any cash withdrawals (Rule 3-61.1).

The revised rules can be found on the Law Society website and in the enclosed Member’s Manual amendment package.