Reminder of anti-money-laundering rules
Lawyers restricted from accepting $10,000 or more in cash
Under Law Society Rule 3-51.1, which took effect May 7, 2004, BC lawyers are prohibited from accepting $10,000 or more in cash, other than:
- from a law enforcement agency;
- pursuant to a court order;
- in the lawyer’s capacity as executor of a will or administrator of an estate; or
- as professional fees, disbursements, expenses or bail.
Lawyers are reminded that the rule defines a cash transaction as the receipt of $10,000 or more in cash in a single transaction or the receipt of two or more cash amounts in a 24-hour period that total $10,000 or more. Clients who wish to deposit $10,000 or more with a lawyer must convert the cash into negotiable instruments through a financial institution before depositing the money with a lawyer.
This limitation on cash transactions is the first of its kind in Canada. Following the lead of BC, however, law societies in Alberta, Saskatchewan, Ontario, Newfoundland and Labrador and the Northwest Territories have since passed similar rules, helping to ensure that Canadian lawyers are at the forefront of the fight against money laundering. The remaining law societies, along with Quebec’s Chambre des Notaires, are expected to pass their own anti- money-laundering rules soon.
While the rules (and proposed rules) differ from province to province in certain details, they all prohibit lawyers from accepting cash over a prescribed amount from clients, except in certain permitted circumstances.
Rule 3-51.1 is part of the legal profession’s response to the fight against money laundering in Canada.
While the Proceeds of Crime (Money Laundering) and Terrorist Financing Act require professionals who accept $10,000 or more in cash to report the transaction to the Financial Transactions and Reports Analysis Centre (FINTRAC), lawyers are currently exempt from PC(ML)TFA reporting requirements.
In 2001 BC and the Federation of Law Societies argued that PC(ML)TFA violated the constitution because it required lawyers to report privileged client matters to the government, contrary to the concept of an independent legal profession, and the BC Supreme Court ordered that lawyers be exempt from the reporting requirements of this legislation until the constitutional issue could be heard. The BC Court of Appeal upheld the decision, and the superior courts in several other provinces granted similar injunctions.
The federal government later agreed to be bound by the exemption in all Canadian jurisdictions until the court case is concluded.
The Law Society of BC, along with the other Canadian law societies, take the commitment to combat money laundering seriously. For that reason, the Society urges lawyers to familiarize themselves with Rule 3–51.1 and ensure they are in compliance. While very few lawyers would knowingly launder money on behalf of criminal or terrorist organizations, all lawyers should guard against money laundering or against serving as a dupe to facilitate fraudulent schemes.