Proceeds of crime update

Constitutional challenge adjourned to November, 2004

The Federation of Law Societies and the Law Society of British Columbia have agreed to adjourn their constitutional challenge of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to November 1, 2004.

The BC Supreme Court ordered the adjournment by consent of the Federation, the Law Society and the Attorney General of Canada on April 15, subject to a number of conditions agreed upon by the parties, including an agreement on costs. The adjourment follows the federal government's decision in March to repeal several regulations that purported to subject Canadian lawyers to the recording and reporting requirements of Part 1 of the PCMLTFA.

The repeal of the regulations in fact had no practical implications. BC lawyers have been exempt from recording and reporting on suspicious and large cash transactions under Part 1 since November, 2001 when the BC Supreme Court granted interlocutory relief in the constitutional challenge brought by the Federation and the Law Society. In granting its interlocutory order, the BC Supreme Court noted the requirements on lawyers to report on clients under Part 1 constituted "an unprecedented intrusion into the traditional solicitor-client relationship."

After several Canadian courts followed BC's lead in granting interlocutory orders, the federal Attorney General reached agreement with the Federation (on behalf of the provincial and territorial law societies) in May, 2002 to exempt all Canadian lawyers and Quebec notaries from Part 1. It was agreed this exemption would remain in effect until the constitutional challenge was heard in BC Supreme Court and the Court had decided the case on the merits.

With the adjournment of the constitutional challenge, the Attorney General has now agreed to reimburse the parties for all "costs thrown away" in relation to proceedings for interlocutory relief across the country, including all appeal processes.

Despite relieving lawyers from Part 1 of the PCMLTFA, the federal government has announced that it still intends for Canada's anti-money laundering and anti-terrorist financing regime to cover all entities that act as "financial intermediaries," including lawyers and law firms. The government has, however, agreed to consult with the Federation of Law Societies before enacting the new regulations. If those new regulations are unacceptable to the Federation or other parties involved in the constitutional challenge, the federal government has agreed to defer enactment and to consent to injunctions exempting lawyers and Quebec notaries from the PCMLTFA until the constitutional challenge is resolved. This agreement applies to any appeals to the BC Court of Appeal and the Supreme Court of Canada if necessary.

Maurice Laprairie, QC, who chairs the Federation's task force on money laundering legislation, said the Federation could not have proceeded in the constitutional challenge without the leadership of the Law Society of BC.

Canadian lawyers remain subject to the provisions on cross-border movement of currency and monetary instruments under Part 2 of the PCMLTFA, which took effect on January 6, 2003. However, those reporting requirements typically fall on clients, as the exporters of currency, not on their lawyers.