Proceeds of Crime working group calls for changes to money laundering legislation
A Proceeds of Crime working group at the Law Society is calling on law societies across Canada - through the Federation of Law Societies - to tackle the broad reporting requirements that are to be imposed on lawyers this Fall under the Proceeds of Crime (Money Laundering) Act SC 2000, c. 17 (Bill C-22): see Practice Watch in the January-February Benchers' Bulletin for background.
Vancouver Bencher David Gibbons, Q.C. chairs the working group whose members are Michael Bolton, Q.C., Jack Giles, Q.C., Richard Peck, Q.C. , Derek Brindle, Q.C. and Warren Wilson, Q.C., assisted by Practice Advisor Felicia Folk and Public Affairs Manager Brad Daisley.
The working group is advocating a national effort to convince the federal government to delay the enactment of those parts of the legislation and proposed regulations that affect counsel, pending a full consultation with the provincial law societies. The working group sees certain provisions as infringing on solicitor-client confidentiality and the professional independence of Canadian lawyers. If these discussions prove unfruitful, the working group urges the Federation of Law Societies to initiate or participate in a constitutional and legal challenge.
Both the Law Society Executive Committee and the Federation will discuss the recommendations of the working group in late May.
Under Bill C-22, lawyers - among others, such as accountants, insurance companies, casinos, securities dealers, realtors, banks and other institutions taking deposits - will be required to report any transactions that exceed $10,000 in cash, international transfers that exceed $10,000, as well as "suspicious" transactions to FINTRAC, the new Financial Transactions and Reports Analysis Centre of Canada.
Bill C-22 was given Royal Assent in June, 2000, but only part of the new legislation is in force. Proclamation of the balance, and new regulations, is currently scheduled for the Fall of 2001. Until then, the 1991 Money Laundering Act and its regulations continue in force.
If a transaction is subject to the reporting requirements of Bill C-22, a lawyer will be required to report a client's name, address and occupation and the source of the client's funds, and will be prohibited from disclosing to the client that such a report has been made, in the face of serious criminal penalties. There are also powers under Bill C-22 to search a lawyer's office without a warrant and to copy records.
While the Bill includes a provision that a lawyer is not required to disclose any communication that is subject to solicitor-client privilege, it does not recognize the distinction between legal privilege and the lawyers' broader duty of client loyalty and confidentiality, which is critical to the solicitor-client relationship.
In the view of the working group, such a statutory requirement for disclosure will substantially and unreasonably infringe on the confidentiality of the solicitor-client relationship and the independence of legal counsel, will put the interests of lawyers in conflict with those of their clients and will place them in breach of long-established legal, professional and ethical duties owed to the client. The potential benefit of disclosure is substantially outweighed by the benefits of fully protecting solicitor-client confidentiality.
What should lawyers do at this point?
Law societies in Canada may seek a postponement of, or a legal challenge to Bill C-22 and its proposed regulations, and B.C. lawyers will wish to monitor these initiatives closely.
With the time for implementation only months away, however, lawyers also need to understand the impact that Bill C-22 reporting requirements will have on their practice and to prepare their firms accordingly, in the event that the legislation and regulations come into effect in their current form. To assist, the Law Society Practice Advisor, Felicia Folk, in conjunction with the Law Society of Upper Canada, is analysing compliance issues of which lawyers need to be aware. She anticipates a special bulletin to the profession in early June, followed by a more extensive guide and a draft compliance manual published on the Law Society website.