Client identification and verification rules

Anti-Money Laundering Measures webinar (free of charge)

The Law Society of BC is offering a free two-hour program provided by Practice Advisor Barbara Buchanan, QC and Audit Team Leader Tina Kaminski to help lawyers comply with the Law Society’s anti-money laundering rules. The program includes information on money laundering, cash, client identification and verification, red flags and risk management. The program is eligible for two hours of CPD credit. View the program on YouTube

COVID-19 and client identification and verification

In the context of COVID-19, can a lawyer use a virtual means, such as video-conferencing or telephone, for client identification and verification?

There are two methods for verifying a client’s identity that do not require a face-to-face meeting with the client – the dual process method or using information in a client’s credit file. Lawyers should also consider whether they may be able to rely upon the previous verification by another person (for example, a real estate agent) where permitted under the Rules.

In unique circumstances where lawyers unable to avail themselves of any other verification method, the Law Society will take a reasonable approach in its compliance activity, if the lawyer verifies identification of a client located in Canada by using video-conference technology. Lawyers who verify a client’s identification using video conference technology should be able to demonstrate that they:

  • are reasonably satisfied that the government issued identification is valid and current;
  • were able to compare the image in the government issued identification with the client to be reasonably satisfied that it is the same person;
  • record (with the applicable date) the method used to verify the client’s identification;
  • treat the transaction as a high risk transaction and continue to monitor the business relationship as a high risk transaction; and
  • document the efforts that were made to verify the client’s identity in accordance with the existing rules and the reasons why they were unable to verify the client’s identity in accordance with the existing rules.

 

A lawyer is obligated to know his or her client, to understand the client’s financial dealings in relation to the retainer, and to manage any risks arising from the professional business relationship with the client. Law Society Rules 3-98 to 3-110 require lawyers to follow client identification and verification procedures when retained by a client to provide legal services. There are six main requirements:

  1. Identify the client (Rule 3-100).
  2. Verify the client’s ID if there is a “financial transaction” (Rules 3-102 to 3-106).
  3. Obtain from the client and record, with the applicable date, information about the source of money if there is a “financial transaction” (Rules 3-102(1)(a), 3-103(4)(b)(ii), and 3-110(1)(a)(ii)) effective January 1, 2020).
  4. Maintain and retain records (Rule 3-107).
  5. Withdraw if you know or ought to know that you would be assisting in fraud or other illegal conduct (Rule 3-109).
  6. Monitor the lawyer/client professional business relationship periodically while retained in respect of a “financial transaction” and keep a dated record of the measures taken and information obtained (new Rule 3-110 effective January 1, 2020).

Rule changes: Effective January 1, 2020, amendments to the client identification and verification rules introduce more stringent requirements to verify a client’s identity, provide more options for how to confirm a client’s identity, and require lawyers in financial transactions to obtain additional information about a client’s source of funds, as well as periodic monitoring and recording professional business relationships with clients; see Highlights of Amendments to the Law Society Rules.

If you have questions regarding the rules, you are welcome to contact a practice advisor (practiceadvice@lsbc.org or 604.443.5797).

Below are FAQS in relation to the client identification and verification requirements.

Frequently asked questions – Rules 3-98 to 3-110, effective January 1, 2020

The series of questions and answers below are meant to assist in explaining the client identification and verification requirements. More information may be added at a future date.

Resources

COVID-19 FAQs

Anti-Money Laundering initiative

Knowing your client - Guidance and rules during COVID-19, Summer 2020 Benchers' Bulletin (pp. 18 -21)

Notice to the Profession, March 17, 2020 (client verification in the context of COVID-19)

Know your client – addressing questions and risks, Spring 2020 Benchers’ Bulletin (pp. 8 – 11)

Law Society Rules, Part 3, Division 11 (Rules 3-98 to 3-110)

New client verification and source of money requirements, Winter 2019 Benchers’ Bulletin (pp. 13 -17)

CLE-TV: Anti-Money Laundering – Client Identification and Verification Rules
One-hour webinar initially provided on November 27, 2019 by Practice Advisor Barbara Buchanan, QC (eligible for one hour of CPD credit)

Combatting money laundering, Fall 2019 Benchers’ Bulletin (pp. 12-13)

Rule amendments enhance Law Society’s anti-money laundering measures, Fall 2019 Benchers’ Bulletin (pp. 14-17)

Anti-money laundering cash transaction rule essentials, Summer 2019 Benchers’ Bulletin (pp. 10-14)

Client Identification and Verification Checklist, current to September 1, 2020

Sample Agreement with Agent for Verification of Client Identity [New – effective January 1, 2020]

Discipline Advisory: Securities fraud: Micro-cap stocks (June 1, 2020)

Discipline advisory: Private lending (April 2, 2019)

Discipline advisory: Lawyers are gatekeepers (April 10, 2018)

Discipline advisory, Client ID and verification (February 8, 2018)

Federation of Law Societies of Canada:

Source of money

One of the changes is that lawyers are required to obtain information about the source of money in relation to a financial transaction. This comes up in Rule 3-102(1)(a), Rule 3-103(4)(b)ii) and Rule 3-110(1)(a)(ii). In order to assist lawyers and firms with compliance, we offer the following guidance.

A key component of client verification is that lawyers must obtain information from the "client" and record, with the applicable date, information about the source of “money” when there is a “financial transaction.” (See Rule 3-98 for the words in quotations.)

A lawyer should obtain from the client and record, with the applicable date, the following information about the source of “money” for the purposes of Rule 3-102(1)(a):

  • the payer’s full name, occupation and contact information;
  • the relationship of the payer to the client (the payer may be the client);
  • the date on which the money was received by the lawyer from the payer;
  • the economic activity or action that generated the money (e.g., bank loan, savings from salary, settlement funds);
  • the form in which the money was received by the lawyer (e.g., cheque, bank draft);
  • the full name and address of all financial institutions or other entities through which the payer processed or transmitted the money to the lawyer;
  • any other information relevant to determining the source of money.

Understanding the source of “money” and its appropriateness is the crux of anti- money laundering. You have a positive duty to make enquiries about “financial transactions” that you facilitate. This may include obtaining supporting documents if there are suspicious circumstances. 

In the absence of suspicious circumstances, a lawyer may accept a client’s explanation regarding the economic activity or action that generated the client’s source of money (e.g., inheritance, savings from salary, life insurance proceeds) without obtaining copies of the documents to support the client’s explanation. 

Where there are suspicious circumstances, lawyers must make further inquiries and assess the risk of participating in a financial transaction for a "client."

The new Rule 3-110 requires that while a lawyer is retained in respect of a “financial transaction” (as defined in Rule 3-98), a lawyer must periodically monitor the professional business relationship with clients. Risk assessment includes periodically monitoring the client’s information about the source of money used in the financial transaction and assessing whether there is a risk that the lawyer may be assisting in or encouraging dishonesty, fraud, crime or other illegal conduct. Lawyers must keep a record, with applicable dates of measures taken to comply with the rule and the client information that has been obtained.

The frequency of periodic monitoring and what information should be recorded will depend on what is reasonable in each case. For example, if a lawyer acts for a local seller of their $500,000 condominium and the matter closes in three weeks, the monitoring rule may have limited or no applicability. The file from start to finish may have ended in less than one month. On the other hand, if a lawyer acts for a buyer of multiple properties over 20 months, the lawyer should make inquiries about the source of money for the various “financial transactions.” Rule 3-110 would apply and the lawyer would be expected to engage in periodic monitoring.

Lawyers are encouraged to contact a practice advisor for further guidance on what may be required in a particular matter (practiceadvice@lsbc.org or 604.443.5797).

There is no hard and fast threshold, and the need to obtain documents about a client’s source of money will depend on the circumstances. For example, if a dispute between two neighbours regarding a fence between their properties was settled for $10,500, a lawyer may feel no need to obtain supporting documents about the source of money from the client employed as a teacher who provides a $10,500 personal cheque for the settlement. The lawyer will already have asked the client for their explanation of the source of money and recorded the information for the purposes of Rule 3-102(1)(a). 

If, however, a new client with an occupation “bank employee” from outside of Canada who wants to wire funds from a foreign bank to the lawyer’s trust account to complete a purchase of a multi-million dollar residential property, will require enhanced due diligence on the part of the lawyer. The lawyer would be expected to make sufficient enquires about the client and the source of money and obtain supporting documents as well as entering into an agreement with an agent independent of the client to verify the client’s identity, and obtain satisfactory results before receiving the money. Lawyers will need to ensure compliance with the Code and Rules in assessing whether to obtain documents to substantiate the client’s information about the source of money.

At any time where a client’s explanation for the source of money is unusual or inconsistent with the lawyer’s experience, the lawyer would need to undertake enhanced due diligence, including getting supporting documents. A lawyer should consider if he or she is acting beyond their competence, seek advice, and consider not acting.

Lawyers are encouraged to contact a practice advisor for further guidance on what may be required in a particular matter (practiceadvice@lsbc.org or 604.443.5797).

It will depend on the circumstances, including the size of the loan and whether there is a loan agreement. If the loan is large, there is little or no paperwork and no security, that would engage suspicious circumstances. The source of money for the lender would be a relevant question. However, even if not asking for anti-money laundering purposes, it may be prudent for a lawyer to know the name of the shareholder who loaned the money to the corporation. 

Note that if a client is a public company (a “reporting issuer” as defined in Rule 3-98), Rule 3-102(1)(a) does not apply. An exemption is provided in Rule 3-101(a)(iii)). 

Lawyers may decide to use whatever forms they want with their clients, and such forms may be very useful. A signed declaration on file will not always mean that a lawyer has met the requirements in every circumstance under the Code and Rules. Lawyers are required to apply their professional judgment to assess risks regarding client identification and verification, financial transactions and the source of money, and to ensure that they have taken adequate steps to address those risks.

For practical purposes, lawyers will need to obtain and record information about the source of money closer to the beginning of the retainer as part of the client identification and verification process as it is a key component to anti-money laundering and to prevent engagement in any activity that assists in or encourages any dishonesty, crime or fraud.

Using an agent to verify a client's identity

A lawyer may use an agent to obtain the information required under Rule 3-102 (Requirement to verify client identity) on the lawyer’s behalf when the “client” (as defined in Rule 3-98) is inside or outside of Canada (Rule 3-104). The lawyer and the agent must have an agreement or arrangement in writing that complies with the rule. A sample agent agreement, effective January 1, 2020 is on the website.

The former guarantor and commissioner provisions to verify a client’ s identity inside of Canada under subrules (2) to (4) have been rescinded with the result that a lawyer may use an agent inside of Canada as well as outside of Canada.

Yes, a lawyer may use an agent to obtain the information required under Rule 3-102 (Requirement to verify client identity) on the lawyer’s behalf when the “client” (as defined in Rule 3-98) is inside or outside of Canada (Rule 3-104). 

The guarantor and commissioner provisions to verify a client’s identity inside of Canada under subrules (2) to (4) have been rescinded with the result that a lawyer may use an agent inside of Canada too.

Subrule (7) was added to Rule 3-104, effective January 1, 2020, permitting lawyers to rely on an agent’s previous verification of an individual client in the following circumstances:

3-104(7) A lawyer may rely on an agent’s previous verification of an individual client if the agent was, at the time of the verification,

(a) acting in the agent’s own capacity, whether or not the agent was acting under this rule, or

(b) acting as an agent under an agreement or arrangement in writing entered into with another lawyer required under this division [Part 3 – Division 11] to verify the identity of a client.

You must have an agreement or arrangement with the agent in writing if you wish to rely on an agent’s previous verification of an individual. In follow-up, the verification information must match what the individual client provided to you when you obtained their basic identification information. You must satisfy yourself that the information is valid (authentic and unaltered) and current (not expired) and that the agent verified the individual’s identity through a permitted method (e.g. government-issued photo identification). If, for example, the agent used an expired driver’s licence to verify the individual’s identity, this is not acceptable. Note the date that you receive the agent’s confirmation of verification, as this relates to whether the information is recent and the timing within which verification must take place with respect to the “financial transaction” (Rule 3-105).

Yes, a lawyer must use an agent if the client is not present in Canada and is not physically present before the lawyer. The lawyer must have an agreement or arrangement in writing with the agent for that purpose that complies with Rule 3-104.However, a lawyer may be able to physically meet with a client outside of Canada before the “financial transaction” takes place and, in such case, may not require an agent.  Also, take note that the responsibilities of a lawyer to verify a client’s identity may be fulfilled by the lawyer’s firm, including members or employees of the firm wherever located (Rule 3-99(3)). An individual from the lawyer’s firm may be in a position to verify the client’s identity outside of Canada and if that is the case, the lawyer would not require an agent.    

Yes, a sample agent agreement, effective January 1, 2020 is on the website.

Lawyers will often enter into a written agreement or arrangement with another lawyer to verify a client’s identity; however, using a lawyer is not a requirement. You may know a suitable notary, accountant or other professional. If the client is outside of Canada, some embassies or consulates have been known to occasionally provide verification of identity services.  If you do not know a suitable lawyer, accountant or notary, check with the regulator for the profession in the jurisdiction where the client is located to ensure that you are dealing with a legitimate professional (you can compare contact information, status, etc.)

The agent should be someone who is reputable, who takes the verification of client identity seriously, and who will carry out the required work diligently and within your time limit.

Be aware that a new client who is a criminal could try to persuade you to use a certain agent of their choice. Be very wary as a phony agent could be part of the criminal’s scheme. The agent should be independent of the client. The agent is your agent, not the client’s agent. 

Remember that you are required to have an agreement of arrangement in writing to verify the client’s identity that is in compliance with Rule 3-104. A sample agreement is on the website.

Monitoring

The new Rule 3-110 effective January 1, 2020 requires that while a lawyer is retained in respect of a “financial transaction” (defined in Rule 3-98), a lawyer must periodically monitor the professional business relationship with clients. The degree and nature of periodic monitoring should commensurate with the degree of risk associated with the client and the legal services provided.

Rule 3-110 requires lawyers to periodically monitor their professional business relationship with a client while retained in respect of a financial transaction. This includes long-standing clients.

Lawyers must periodically assess whether the information that they have obtained about their client, the client’s information about their activities, the source of “money” (defined in Rule 3-98) used in the financial transaction and the client’s instructions are consistent with the purpose of the retainer.

Risk assessment includes periodically monitoring the client’s information about the source of money used in the financial transaction and assessing whether there is a risk that the lawyer may be assisting in or encouraging dishonesty, fraud, crime or other illegal conduct (also see Rule 3-109 and Code of Professional Conduct rules 3.2-7 and 3.2-8).

Lawyers must keep a record, with the applicable dates of the measures they have taken to comply with the rule and the client information that they have obtained. The record must be retained for the period required in Rule 3-107.

The frequency of monitoring and what information should be recorded will depend on what is reasonable in each case. For example, if a lawyer acts for a local seller of their $500,000 condominium and the matter closes in three weeks, the monitoring rule may have limited or no applicability. The lawyer would have assessed the risks of acting at the outset of the retainer and during the course of the short file. The file from start to finish may have ended in less than one month. On the other hand, if a lawyer acts for a buyer of multiple properties over 20 months, the lawyer should periodically monitor the file and make inquiries about the source of “money” for the various financial transactions. Lawyers are required to apply their professional judgment to assess risks in any given circumstance.

Lawyers are encouraged to contact a practice advisor for further guidance on what may be required in a particular matter (practiceadvice@lsbc.org or 604.443.5797).

Referral of a client by another lawyer

If a potential new client was referred to you by a lawyer outside of your firm, and you intend to act for the client, consider asking for the client’s consent to speak with the referring lawyer. Not only will you wish to thank the lawyer for the referral, but at the same time you can find out if the referral was genuine. Unfortunately, sometimes fraudster clients use a referral as a ruse, hoping that a lawyer will let their guard down. Assuming the referral was genuine, below is some guidance about the application of the client identification and verification rules.   

If another BC lawyer or an “interjurisdictional lawyer” (member of a governing body who is authorized to practise law in another Canadian jurisdiction) has complied with Rules 3-100 to 3-106 or the equivalent provisions of another Canadian jurisdiction, and they have retained the information and documents, you do not have to identify and verify the client’s identity again when acting in respect of a “financial transaction” (as defined in Rule 3-98) unless you have reason to believe that the information, or its accuracy, has changed (Rules 3-99(2.1)(b), 3-100(2), 3-105(2), 3-106(2)).

Obtain confirmation from the referring lawyer to satisfy yourself that the lawyer has complied with the rule requirements. In addition, obtain copies of the information and documents from the referring lawyer (Rule 3-107). If you cannot obtain copies, then identify and verify the client’s identity in accordance with the rules.

Keep in mind that if you are acting for an organization, and the instructing individual changes, you must identify the new instructing individual and verify that individual’s identity if there is a “financial transaction” (as defined in Rule 3-98). Also note that Rule 3-110 (Monitoring) applies.

Yes, you are responsible to obtain information about the source of money for a financial transaction as you would for any client. See the FAQs above about obtaining information about the source of money. Also note that Rule 3-110 (Monitoring) applies.

Acting as a mediator

Law Society Rules 3-98 to 3-110 (Part 3 – Division 11 – Client Identification and Verification) apply to lawyers who are retained by clients to provide legal services (Rule 3-99(1)).These rules generally do not apply to lawyers who act as neutral mediators of disputes for parties to a mediation. Accordingly, you are not required to identify or verify the identity of the parties or their lawyers for the purposes of Division 11. This assumes that you are not engaged in the “practice of law” as defined in section 1 of the Legal Profession Act (e.g. you are not providing legal advice, you are not negotiating on one party’s behalf, and you are not drawing a document for use in a proceeding). If you provide legal advice or perform any of the acts that are included in the definition of the “practice of law” during the course of a mediation, you would be required to comply with Division 11.  However, note the BC Code rule 3.4-3 regarding conflicts. Rule 3.4-3 and commentary [1] provide that a lawyer must not represent opposing parties in a dispute, even with consent.

Because mediation by itself is not the “practice of law,” fees paid to you for services as a mediator are “not directly related to the provision of legal services” and therefore must not be deposited to your trust account (Rule 3-58.1). You can use your general account for such pre-payments or alternatively you can open a separate form of account to hold the funds. You may wish to obtain tax advice as to the form of account that you will use.

If you open an account for mediation deposits, you should make it clear to your financial institution that the account is not a lawyer’s trust account regulated by the Law Society of BC.

Acting as an arbitrator

Law Society Rules 3-98 to 3-110 (Part 3 – Division 11 – Client Identification and Verification) apply to lawyers who are retained by clients to provide legal services. These rules do not apply to lawyers who act as arbitrators of disputes for parties to an arbitration process (Rule 3-99(1)).

Because arbitration is not the “practice of law,” fees paid to you for services as an arbitrator are “not directly related to the provision of legal services” and therefore must not be deposited to your trust account (Rule 3-58.1). You can use your general account for such pre-payments or, alternatively, you can open a separate form of account to hold the funds. You may wish to obtain tax advice as to the form of account that you will use.

If you open an account for arbitrator deposits, you should make it clear to your financial institution that the account is not a lawyer’s trust account regulated by the Law Society of BC.

Frequently asked questions – Rules 3-98 to 3-109, current to September 1, 2019

Caution: The questions below are archived for research purposes only. Refer to the FAQs above for information on the current rules.

Identification versus verification

Identification refers to the basic information you need to obtain and record about your “client” to know who they are when you are retained to provide legal services, including the client’s name, address, telephone number and occupation. You are required to make reasonable efforts to obtain and record this information.

Verification refers to the information you need to obtain to confirm that your client is who or what they say they are. Verification is required only when you are acting for a client or giving instructions on behalf of a client regarding the receiving, payment or transferring of “money”, i.e. a “financial transaction”.

When you are verifying a client’s identity, you must take reasonable steps to obtain and retain a copy of every document used to verify the client’s identity.

Remember that “client”, “money”, and “financial transaction” are defined in Rule 3-98. These terms have a broader meaning than in the ordinary use of these terms. If your client represents or acts on behalf of a third party in relation to obtaining your services, you must generally collect the same information for the third party as if that party had directly retained you.

Identification

You must make reasonable efforts to identify your client whenever you are retained to provide legal services, except when:

(a) you are in-house counsel providing legal services on behalf of your employer;

(b) you act as an agent for another lawyer or an interjurisdictional lawyer who has confirmed to you that they have already complied with Rules 3-100 to 3-108 or the equivalent provisions of the governing body of the legal profession in another province or territory of Canada and they have retained the required documentation;

(c) you act for a client who was referred to you by another lawyer or an interjurisdictional lawyer who has confirmed to you that they have already complied with Rules 3-100 to 3-108 or the equivalent provisions of the governing body of the legal profession in another province or territory of Canada and they have retained the required documentation;

(d) a member or employee of your firm has identified the client, including members or employees of your firm conducting business in another Canadian jurisdiction;

(e) you provide legal services that do not involve a financial transaction as part of a duty counsel program sponsored by a non-profit organization;

(f) you provide pro bono summary advice that does not involve a financial transaction;

(g) you have previously identified and retained the identity documentation for this client; or

(h) your client retained you to provide legal services in respect of a matter before December 31, 2008 on which you are still acting and the client has not retained you in respect of a new matter.

Not as long as the matter is the same. But if you take on a new matter for the client after December 31, 2008, you must comply with the identification and verification requirements regardless of whether the client is an existing client.

You must exercise due diligence to satisfy yourself that the other lawyer/interjurisdictional lawyer has already identified the client. This involves asking the individual to confirm to you that he or she has complied with the requirements. If you are acting as an agent on behalf of an interjurisdictional lawyer or if an interjurisdictional lawyer has referred the client to you, the interjurisdictional lawyer must have complied with Rules 3-100 to 3-108 or the equivalent provisions of a governing body of the legal profession in another province or territory of Canada.

Generally, unless the law firm’s client is actively instructing you or the other law firm in relation to the legal opinion, you would not have to identify the law firm’s client. In any event, the Rule 3-99 (2) (c) exemption would likely apply.

When you are retained by an individual, you must make reasonable efforts to obtain and, if obtained, record all of the following information that is applicable:

(a) the client’s full name;

(b) home address and home telephone number;

(c) occupation(s); and

(d) business address and business telephone number.

You are required to make reasonable efforts to find out what your client does. If your client doesn’t want to answer the question, you should explain that all lawyers and interjurisdictional lawyers are required to ask all clients for this information and that you need it to properly represent him or her. If the client refuses to provide this information, you must advise the client that you will be in breach of the client identification rule (Rule 3-100) unless you get it and your professional obligations do not permit you to act for a client in such circumstances.

Note that 'occupation' does not need to be 'employment'. If your client is retired, a homemaker, a volunteer caregiver or otherwise occupied, you should record that information.

Rule 3-100 requires you to make reasonable efforts to obtain and record the information that is applicable. If the individual doesn’t have a home address, you will be unable to record it. However, it would be prudent to record what efforts you have made to obtain an address. Consider where you will send correspondence and how you will reach this client if you need to do so. Obtain that address and record it.

If the person isn’t living on the street but simply won’t give you a home address, consider whether you should be acting for that client at all.

Yes. “Client” includes another party that a lawyer’s client represents or on whose behalf the client otherwise acts in relation to obtaining legal services from the lawyer (Rule 3-98(1)(a). You do not have to verify the identity of the minor because a minor does not have legal capacity and so is not formally directing or instructing your client.

Organization means a body corporate, partnership, fund, trust, co-operative or unincorporated association. Subject to certain exceptions, when your client is an organization, you must make reasonable efforts to obtain and record all of the following information that is applicable:

(a) the client’s full name, business address and business telephone number;

(b) the organization’s incorporation or business identification number and the place of issue of its incorporation or business identification number;

(c) the general nature of the type of business or activity engaged in by the client; and

(d) the name, position and contact information of the individual(s) who instructs you in the matter for which you are retained.

When your client is a “financial institution”, a “public authority” or a “reporting issuer” (as defined in Rule 3-98), you must make reasonable efforts to obtain and record the following information to identify the client:

(a) the client’s full name, business address and business telephone number; and

(b) the name, position and contact information of the individual(s) who instruct you in the matter for which you are retained.

Yes. See the definition of “client” in Rule 3-98. If your client acts for or represents another party in relation to obtaining legal services from you, you must make reasonable efforts to obtain the same information to identify the party who is directing or instructing your client as if the other party was your client.

Although the rule does not impose a specific obligation, it would be prudent practice to do so.

Usually you would only identify the union since the union normally has the carriage of the grievance. The grievor, while an interested party, does not instruct the union. Where a grievor does have carriage of the grievance and instructs the union as to how to proceed, the lawyer would identify the grievor.

Rule 3-100 (1) requires lawyers to identify clients who retain them to provide legal services. You do not provide legal advice and you do not draw documents for use in a proceeding. Non-lawyers can act as mediators in this context. You are not required to identify your client. If you provide legal advice or perform any of the acts that are included in the “practice of law” as set out in section 1 of the Legal Profession Act, you are required to identify the lawyers and their clients.

Simply commissioning or notarizing a document does not trigger the identification obligations under Rule 3-100. However, lawyers should still obtain and copy identity documents when acting as a commissioner or notary. Also note Appendix A, paragraph 1, commentary [8] of the BC Code, which states as follows:

[8] The commissioner should be satisfied that the deponent is who the deponent represents himself or herself to be. Where the commissioner does not know the deponent personally, identification should be inspected and/or appropriate introductions should be obtained.

If you are retained to provide legal advice or other representation, the rule applies and there could be a "financial transaction" triggering the obligation to verify identity as well.

Verification

You are only required to identify an organization’s directors, shareholders and owners if:

(a) the “organization” is a “client”;

(b) there is a “financial transaction”; and

(c) the organization is not a “financial institution”, “public authority”, “reporting issuer” or a “securities dealer”.

The words in quotation marks are defined in Rule 3-98.

To identify the directors, shareholders and owners, you must make reasonable efforts to obtain and, if obtained, record:

(a) the name and occupation of all directors of the organization, and

(b) the name, address and occupation of all persons who own 25 per cent or more of the organization or of the shares of the organization.

Since you are not required to verify the identity of the directors, shareholders and owners, you are not required to photocopy a driver’s license, etc.

The answer will depend on the context. In many cases, asking your client for the information and recording it will suffice. It may also be appropriate to consult corporate minute books where readily available or an on-line corporate registry service.

Once you have verified the identity of a client that is an organization and obtained information under Rule 3-103, you are not required to subsequently verify that identity or obtain that information (Rule 3-106). However, as a matter of prudence, it is wise to keep your files up to date in respect of the current directors and officers of an organization that is a client and who is authorized to give in instructions on behalf of a client.

Yes, provided you have made reasonable efforts to obtain the information. It would be prudent to record the efforts that you have made in such case.

No. Professional fees, disbursements and expenses are all exempted from the verification requirements. If that is the only money you receive and there is no other “financial transaction”, you do not have to verify your client’s identity.

No. There are many exemptions. First, for the verification requirements to apply, the lawyer must receive, pay or transfer “money” on behalf of a client or give instructions on behalf of a client in respect of the receiving, paying or transferring of money (a “financial transaction”). If there is a “financial transaction”, then you can check to see if there is an exemption from the requirement to verify identity. Note that money does not have to pass through your trust account in order for there to be a financial transaction. If funds pass directly between parties to a transaction, the verification obligations are triggered if you are giving instructions for the movement of funds.

The client verification requirements do not apply when a lawyer:

(a) pays money to or receives money from any of the following acting as principal:

(i) a financial institution”,

(ii) a “public authority”,

(iii) a “reporting issuer”,

(b) receives money paid from the trust account of another lawyer or an interjurisdictional lawyer,

(c) receives money from a peace officer, law enforcement agency or other public official acting in an official capacity,

(d) pays or receives money

(i) pursuant to the order of a court or other tribunal,

(ii) to pay a fine or penalty,

(iii) as a settlement of any legal or administrative proceeding, or

(iv) for professional fees, disbursements, expenses or bail,

(e) provides legal services as in-house counsel on behalf of the lawyer’s employer,

(f) acts as an agent for another lawyer or interjurisdictional lawyer who has confirmed that they have already complied with Rules 3-100 to 3-108 or the equivalent provisions of the governing body of the legal profession in another province or territory of Canada and they have retained the required documentation,

(g) acts for a client who has been referred by another lawyer or an interjurisdictional lawyer who has confirmed that have already complied with Rules 3-100 to 3-108 or the equivalent provisions of the governing body of the legal profession in another province or territory of Canada and they have retained the required documentation

(h) has fulfilled his/her responsibilities through their firm, including fulfillment through members or employees of the lawyer’s firm conducting business in another Canadian jurisdiction,

(i) previously verified the identity and retained the verification documentation for this client, and in the case of an individual, the lawyer recognizes the client

(j) acts for a client that is a financial institution, a public authority, a reporting issuer or an individual who instructs the lawyer on behalf of a financial institution, public authority or a reporting issuer.

(k) was retained by the client in respect of a matter before December 31, 2008 on which the lawyer is still acting and the client has not retained the lawyer in respect of a new matter.

In addition, the verification rules do not apply with respect to a transaction in which all funds involved are transferred by electronic transmission provided all the requirements set out in Rule 3-101 (c) are met. Neither the sender nor the beneficial receiver are permitted to handle or transfer the funds and a full record of the transaction must be kept. The transfer must occur between financial institutions or financial entities headquartered in and operating in countries that are full members of the Financial Action Task Force.

Take note that the exemption from verification for money “paid to another lawyer in trust, on the direction of the client” was deleted from the rules. That exemption no longer exists.

No. A beneficiary does not fall within the meaning of “client” (as defined) just because the beneficiary may benefit from or be affected by the actions of your client, the executrix.

As long as the documents are reasonably current, relying on documents in your possession is fine. The documents referred to in the rules are examples of independent, reliable documents but the list is not exhaustive. Appropriate documents from non-governmental sources may also be sufficiently reliable. In any event, if you incorporated the business you likely have a copy of the certificate of incorporation and that is acceptable.

Yes. Although the original source of the money from the purchaser’s lawyer is exempt, paying the balance of the money to your client is a “financial transaction” that is not exempt from the verification requirements. In any event, it is prudent practice to verify your client’s identity for all purchase and sale transactions.

The verification provisions apply when you provide legal services with respect to a “financial transaction” (as defined). If you are simply giving advice but are not receiving, paying or transferring money on behalf of a client or giving instructions on behalf of a client with respect to the aforementioned, the obligations are not triggered.

First, remember that if the insurance company client is a “reporting issuer” or a “public authority” (e.g. ICBC), the verification rules do not apply.

Assuming that the insurer has, by operation of law or contract, succeeded to the rights of its insured in relation to the claim, you are required to take reasonable steps to verify the identity of the insurance company. If, however, the insured also has a claim that you are bringing concurrently with the subrogated claim, you must also take reasonable steps to verify the identity of the insured.

The client identification and verification rules will normally apply with respect to the insurer and the individuals instructing you on behalf of the insurer. Special considerations may apply with regard to an obligation to verify the identity of the insured.

If there is a “financial transaction”, you must take reasonable steps to verify the identity of the insurer and instructing individuals. The status of the insurance company (i.e., if it is a “financial institution”, “public authority” or a “reporting issuer”) will determine if the insurer (and consequently its instructing individual) is exempt from the verification process.

Different issues arise when considering an obligation to verify the identity of the insured. If the insured has a right under the policy to guide and instruct counsel, and is doing so, you must take reasonable steps to verify the identity of the insured.

If the insured is difficult or impossible to locate during the course of the retainer, defence counsel is not obliged to decline the retainer simply because the insured cannot be located.

No. You do not have to verify the identity of your client if the only “financial transaction” is “money” paid to settle a legal or administrative proceeding. However, the proceeding must have actually been commenced for this exemption to apply.

No, the verification requirements are not triggered in such a case. However, if you pay the money out to the client or otherwise, that may be a separate “financial transaction” (as defined in Rule 3-98).

You must take reasonable steps to verify an individual’s identity, obtaining and retaining copies of what you reasonably consider to be reliable, independent source documents, data or information. Independent source documents may include valid original government-issued identification, including a driver’s licence, birth certificate, provincial or territorial health insurance card, passport or similar record.

If your client represents or acts on behalf of another individual in relation to the matter for which you are retained, you are required to verify the identity of the other individual too. See the definition of “client” in Rule 3-98.

Unless another exemption applies, you must take reasonable steps to verify the client’s identity by obtaining and retaining copies of what you reasonably consider to be reliable, independent source documents, data or information.

If the “client” (as defined in Rule 3-98) is an organization such as a corporation or society created pursuant to legislative authority, you must obtain and retain a written confirmation from a government registry as to the existence, name and address of the organization, including the names of its directors and officers, such as:

(a) a certificate of corporate status issued by a public authority;

(b) a copy obtained from a public authority of a record that the organization is required to file annually under applicable legislation; or

(c) a copy of a similar record obtained from a public authority that confirms the organization’s existence.

Since a joint venture is not a legal entity, but rather a number of organizations that have joined together for a common purpose, each party to the joint venture would be directing the affairs of the joint venture. You would verify the identity of the organization or organizations for whom you act as in the case of verifying any other organization.

 

You must take reasonable steps to verify the identity of the partnership by obtaining a formal record that confirms its existence. Obviously, you may be able to obtain independent verification information through government registry searches for some partnerships (e.g. the certificate required to be filed by a limited partnership or a registration statement for an LLP) but not others. You could also obtain a copy of the partnership agreement, information from the Canada Revenue Agency GST/HST registry or a copy of the business licence.

You must take reasonable steps to verify the identity of the trust. The documentation you will need to consult will vary depending on the nature of the trust. Examples of appropriate documentation might include the trust agreement or other documents establishing the trust, documents amending the trust and documents identifying the trustees.

Yes. Assuming the client is in Canada, you must have a commissioner of oaths or a guarantor attest that they have verified the client’s identity (Rule 3-104).

Yes. If your client is in Canada but you cannot meet with the client in person, you must have a commissioner of oaths or a guarantor attest that they have verified the client’s identity (Rule 3-104). See Appendix 1 of the Client Identification and Verification Procedure Checklist for a sample attestation form for the verification of identity.

An attestation may be provided by a commissioner of oaths or a guarantor in Canada when the client is in Canada.

A guarantor must be a person in Canada who is engaged in one of the occupations set out in Rule 3-104(4) (e.g. architect, dentist, medical doctor, lawyer, notary public, etc.). You must exercise due diligence in ascertaining that the person providing the attestation is engaged in one of the permitted occupations.

If your client is not in Canada and you cannot meet with the client in person, you must rely on an agent to obtain the information required to verify the identity of the client under Rule 3-102, which may be attested to in a form similar to that described in Rule 3-104. You must have a written agreement or arrangement with the agent for this purpose.

If you enter into such an agreement or arrangement, you must obtain from the agent the information obtained by the agent.

You may use your discretion to determine who is an appropriate agent in the circumstances (e.g., a lawyer, notary).

See the sample agreement with an agent for verification of a client’s identity when the client is outside of Canada (Appendix II of the Client Identification and Verification Procedure Checklist).

Yes, but you should request the original attestation for your records. The documents used to verify identity should be clear and legible. You may store the document electronically as long as you can readily produce a hard copy.

As long as you recognize the individual, you do not have to verify their identity more than once.

In the case of an “organization” (as defined in Rule 3-98), you do not have to verify the identity again. This exception also applies to verifying the identity of the individuals who you have previously identified who instruct you on behalf of the organization.

There may be circumstances where it is prudent to verify the identity of an individual or an organization more than once.

In every case involving a “financial transaction” (as defined in Rule 3-98), you must take reasonable steps to verify the identity of the person instructing you unless you have previously done so or another exemption applies.

You must use your judgment in the circumstances. If you are satisfied that one individual is responsible for the instructions that you are receiving from the others, it may be sufficient to verify that one person’s identity. If however no instructing individual has overall responsibility for the instructions given by others, you must take reasonable steps to verify the identity of each person instructing you on behalf of the company.

The rule does not require that you investigate such an assertion. If you have concerns about the assertion it would be prudent to make further inquires to satisfy yourself that the individual is indeed authorized to instruct you.

You must make reasonable efforts to identify your “client” (as defined in Rule 3-98), when you are retained to provide legal services.

You must also take reasonable steps to verify the identity of a client when you provide legal services in respect of a “financial transaction”. If the client is an individual, you must verify identity before or at the time that you provide legal services in respect of a “financial transaction”. The same is true for verifying the identity of individuals instructing you on behalf of an organization and individuals whom your client represents or on whose behalf the client otherwise acts (Rule 3-105 (1)).

However, if your client is an “organization” (as defined in Rule 3-98), you must take reasonable steps to verify the identity of the organization within 60 days of engaging in a “financial transaction” (Rule 3-106).

Rule 3-102(1) requires you to take reasonable steps to verify your client’s identity. Although you have 60 days within which to comply with the verification requirements if your client is an organization, you should verify the identity of your client as early as possible in the retainer. If you are unable to verify your client’s identity despite having taken reasonable steps, it would be prudent to document the steps that you have taken.

Rule 3-107 requires that you obtain and retain a copy of every document you rely on to verify the identity of any individual or organization.

You must also record the information that you obtain to identify your client and any information and copies of documents that you rely on to identify the directors, shareholders and owners of 25 per cent or more of an organization.

Not as long as you continue to act for the client on the same matter. But, if you take on a new matter for the same client on or after December 31, 2008, you are required to take the necessary steps to identify the client, and to verify the identity if you are involved in a “financial transaction” (as defined in Rule 3-98).

Where you have verified the identity of an individual, you are not required to subsequently verify that same identity if you recognize that person.

If you have verified the identity of a client that is an organization and obtained the information under Rule 3-103 (identifying directors, shareholders and owners), you are not required subsequently to verify that identity or obtain that information. However, if someone new is instructing you in respect of a financial transaction on behalf of the organization, you must verify the identity of the individuals instructing you.

You should determine whether the donor is a “client.” In most cases you will need to verify the donor’s identity unless you drafted the power of attorney and completed the verification at that time.

Other

If, in the course of obtaining the information and taking the required steps or while retained by the client, you reasonably suspect that you would be assisting the client in fraud or other illegal conduct, Rule 3-109 requires that you must withdraw.

See also BC Code rules 3.2-7 and 3.2-8. A lawyer must not engage in any activities that a lawyer knows or ought to know assists in or encourages any dishonesty, crime or fraud.

You are not required to record when you are relying on an exemption; however, it would be prudent to do so in order to demonstrate to the Law Society that you relied on a valid exemption, if asked.

You can keep the information and documents in your client file. There is no need to maintain a separate file but you may decide that you want to do that.

Yes, you may obtain and retain a copy of every document used to verify the identity of any individual or organization in a machine-readable or electronic form, if a paper copy can be readily produced from it.

You must retain a record of the information and any documents obtained for the purposes of client identification (Rule 3-100) and identification of directors, shareholders and owners (Rule 3-103) and copies of all documents received for the purposes of verification (Rule 3-102(2), for the longer of:

(a) the duration of the lawyer and client relationship and for as long as is necessary for the purpose of providing services to the client; and

(b) six years following completion of the work for which you were retained.

You are welcome to contact a Law Society Practice Advisor. You can also refer to the Client Identification and Verification Procedure Checklist or view the Client Identification and Verification Online Course (Part 3 of the Courthouse Libraries BC series, The Practical Lawyer, 2016).