Benchers adopt client identification and verification rules
On November 14, the Benchers adopted new client identification and verification Rules (Rules 3-91 to 3-102) based on the Federation of Law Societies of Canada's Model Rule. At the next meeting on December 12, the Benchers amended Rules 3-91 to 3-95 and Rule 97, based on revisions to the Model Rule. Law Society Rules 3-91 to 3-102 (including the December amendments), will take effect December 31, 2008.
The Law Society of BC Rules, which were developed by the Act and Rules Subcommittee of the Executive Committee of the Benchers are consistent with the Federation Model Rule. The Rules are designed to codify the steps prudent lawyers take in the normal course to identify their clients.
After circulating draft Rules to Law Society members in July, the Act and Rules Subcommittee recommended several changes, which were adopted by the Benchers in November and December, including:
- Duty counsel for non-profits and lawyers providing pro bono summary advice are excluded from the Rules, provided that the circumstances do not involve a "financial transaction" (a defined term);
- In-house counsel are not subject to the Rules when acting in the course of their employment;
- If a lawyer has completed the identification and verification requirements and refers the client to another lawyer, further client identification and verification will not be required by the second lawyer;
- The responsibilities of a lawyer may be fulfilled by the lawyer's firm, including members or employees of the firm conducting business in another Canadian jurisdiction;
- The principle of reasonable efforts has been extended to client identification as well as verification;
- The exemption from verification requirements when a lawyer "pays money to another lawyer in trust, on the direction of the client" was deleted.
- An exemption for electronic funds transfers will apply, provided the transfer is conducted at both ends by institutions in Canada or other Financial Action Task Force countries and neither the sender nor the beneficial receiver of the funds handle or transfer the funds;
- The defined term "reporting issuer" has replaced the term and definition of "public company";
- Verification requirements will not apply if the client is a "financial institution", "public authority" or "reporting issuer".
Members are asked to read the Rules carefully, paying close attention to the definitions — terms such as "client," "financial transaction", "interjurisdictional lawyer" and "reporting issuer" may not be consistent with common usage.
The text of the Rules as adopted by the Benchers in November and amended in December is available for viewing here. Copies of the Rules adopted in November are included in the Member's Manual amendment package as part of this mailing. The December amendments will be circulated at the earliest opportunity.
To help lawyers and law firms better understand and follow the Rules, resources are available on the Law Society website:
- frequently-asked questions;
- a new client identification practice checklist;
- a free online course.
For further information about the new Rules or the online course, contact Barbara Buchanan, Practice Advisor at 604-697-5816.
The Law Society has partnered with the Continuing Legal Education Society of British Columbia to deliver a free on-line course to help lawyers better understand the client identification and verification rules.
The course is interactive and featured videos and examples about implementing the rules in a lawyer's practice.
Client identification vs. verification
Identification and verification are two distinct concepts.
The client identification requirements apply when a lawyer is retained by a client to provide legal services. These requirements call for obtaining basic identification information about individual clients or organizational clients in every retainer, subject to certain exceptions.
The identity verification requirements are triggered when a lawyer receives, pays or transfers funds on behalf of a client or gives instructions for such activities on behalf of a client. A number of exceptions are included. For example, the verification requirements do not apply when a lawyer pays money to or receives money from a "financial institution," "public authority," or "reporting issuer" (all defined in Rule 3-91), or receives money from the trust account of another lawyer.