Practice Watch

by Felicia S. Folk, Practice Advisor
Common computer server in shared space

A lawyer's client information should not be stored in a common computer system that is shared with non-lawyers other than the lawyer's employees.

Recently the Securities Commission, acting under the authorization of a search warrant, seized computers, including a server, from an office where a lawyer was a tenant of non-lawyers. The lawyer - who was not the intended target of the investigation - shared the computer server that was seized by the Securities Commission.

In this incident, counsel for the Securities Commission informed the Law Society that steps were being taken to preserve solicitor-client privilege over the lawyer's files, but the problem would not have arisen had the lawyer and his secretary not shared a common server with non-lawyers. The computer system for the entire floor was operated through a common server. Although access to their files was limited to the lawyer and his secretary during normal work, the warrant authorized the seizure of the computer system, including the common server, which inevitably resulted in the lawyer's files being seized.

I strongly recommend that you take steps to ensure that your client information is not stored in any common computer server in order to avoid concerns with respect to client privilege and confidentiality.

Remember too that it is not only non-lawyers who may find themselves subject to a search and seizure of files. We are receiving increasing numbers of calls from lawyers receiving demands for information from CCRA and on PST audits, for example. However successful you may eventually be in having seized files returned to you unexamined, consider the inconvenience to your practice and to your clients should such a situation arise. Lawyers should establish a separate computer network when working in any shared office environment.

Money laundering

Lawyers in BC were vigilant about their own conduct and the use of their trust accounts well before the introduction of the impugned proceeds of crime legislation, and they remain so. I continue to receive calls from lawyers in BC to say that they have been asked, in effect, to be a conduit for money.

It may seem unnecessary to remind lawyers that there are sophisticated criminals purporting to be legitimate clients, but who in reality are looking for ways to launder money. However, there is no harm in repeating a warning, especially to newly called lawyers, about the possibility of encountering such requests.

The application of the Federation of Law Societies and the Law Society of British Columbia to challenge the constitutional validity of certain provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act will be heard in the BC Supreme Court during mid-2003. Although lawyers in BC will remain exempt from "suspicious transaction" and "large cash transaction" reporting requirements under the Act at least until after a decision on that matter, the exemption does not extend beyond what had previously been the law with respect to solicitor-client confidentiality and privilege.

The exemption does not alter the pre-existing legal and ethical prohibitions against assisting a client in the commission of a crime. The Criminal Code provisions that prohibit money laundering continue to apply to lawyers, as to all other persons in Canada. Money laundering is a crime and lawyers must not be complicit in it. That principle has not been changed by the exemption.

The offence, described in section 462.31 of the Criminal Code, is committed when a person deals with any property, or any proceeds of property, in any manner and by any means, with the intent to conceal or convert it, knowing or believing that the property or proceeds was obtained or derived as a result of a designated drug offence or an enterprise crime offence, designated in section 462.3 of the Code.

If you receive a request from a client for services that seem to mean that you are being retained to be the client's banker, or if you cannot precisely identify the legal services you are being retained to carry out, be vigilant to ensure that no person uses your trust account to deal with the proceeds of crime. Remember that a client who wants to bring you cash because the client has no bank account can instead purchase and then bring you a money order or bank draft. Please call the Law Society if you would like advice on how to deal with ambiguous requests for your services.

Lawyers as lobbyists

The Lobbyists Registration Act SBC 2001, c. 42 came into force on October 28, 2002. The Act requires that professional lobbyists register with the provincial Lobbyists Registry and list their contact information, the names of their clients and employers, details of their lobbying work and the names of government employees and politicians contacted. The information will be available online. For more information on the Registry see www.ag.gov.bc.ca/lra.

Lawyers in private practice and in-house counsel carrying out certain tasks may be defined as lobbyists under the Act. Every lawyer should review the provisions of the Act to determine whether it is necessary to register as a lobbyist before undertaking any communication with the Government of British Columbia. Penalties for non-compliance can include fines up to $25,000.

An amendment introduced November 1, 2002 under the Lobbyists Registration Amendment Act, 2002 (Bill 72) would allow the government to make regulations regarding different fees or fee waivers based on timing of the registration or on the class of lobbyist. The amending bill will also require lobbyists to register existing contacts regarding lobbying that began before the Act came into effect on October 28.

For more detail, see Practice Watch in the September-October, 2001 Benchers' Bulletin. Also, see the Act online (www.legis.gov.bc.ca/37th2nd/3rd_read/gov20-3.htm) and Amendment Act (www.legis.gov.bc.ca/37th3rd/1st_read/gov72-1.htm).

Clients, not their lawyers, required to make cross-border reports

In November, 2002, the Federation of Law Societies of Canada announced that the Government of Canada had published a final set of regulations on the cross-border movement of currency and monetary instruments under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and that these regulations would take effect January 6, 2003. The regulations require persons to report the importation or exportation of amounts of $10,000 or more of currency and monetary instruments in bearer form.

In accordance with the information the Federation originally received from the Government of Canada, the Law Society of BC and other Canadian law societies advised lawyers that they would have to comply with the reporting requirements of these regulations. That advice has now changed. The Government of Canada recently informed the Federation of Law Societies that lawyers are not required to report cross-border transactions when such transactions are carried out on behalf of clients. (A lawyer would have to report a transaction done on his or her own behalf.)

Accordingly, if a Canadian lawyer, acting on behalf of a client, sends currency or monetary instruments in bearer form of $10,000 or more by mail or courier to a party outside of Canada, it is the lawyer's client (as the "exporter" for the purposes of the Act and regulations) who is required to report, not the lawyer. If a lawyer carries out an importation or exportation of such currency or monetary instruments on the client's behalf, the client must name the lawyer in the report that the client makes under the regulations. While it is the client who has the obligation to file the report, the lawyer may do so as a service to the client if so instructed.

For more information, please consult the Cross-border Currency and Monetary Instruments Reporting Regulations.

Lawyers are reminded that, in their representation of clients, they continue to be exempt from Part 1 of the PCMLTFA, including the reporting requirements respecting suspicious and large cash transactions, at least until the constitutional challenge taken by the Federation of Law Societies is heard.