The federal government, in response to pressure from the international community, plans to beef up its laws against money laundering by finding a way to expressly include lawyers on the list of entities that must report suspicious transactions.
Ottawa will consult with the legal profession in an effort to take its concerns into consideration before introducing any changes to the legislation, Andrée Houde, a spokeswoman at the Department of Finance, said yesterday.
“We strongly believe that it's important to have the legal profession included on the list, but we want to understand their concerns better,” she said. “We also have to have a regime that meets international standards.”
Law enforcement officials said at a money laundering conference in Toronto yesterday that Ottawa needs to amend its laws if it wants to remain in good standing with the international community.
The Financial Action Task Force, a 33-nation task force spearheading a crackdown on money laundering, recommended in June that lawyers should be forced to supply information about their clients' finances. The Paris-based agency is backed by most of the world's industrialized nations, including Canada. The recommendations made by the FATF must be written into the law books of its member nations.
Charles Beall, a lawyer at Gowling Lafleur Henderson LLP, said at the conference that the government has no choice but to find a way to make lawyers part of the legislation because it wants to remain in compliance with the FATF recommendations.
“We can't become spies on our clients, but we do have a social responsibility and we have to find a way to meet it,” Mr. Beall said in an interview following his speech.
The fact that lawyers are exempt from reporting their clients' transactions under the legislation poses an obstacle for law enforcement agencies investigating alleged money laundering activities, Bill Lenton, assistant commissioner of the RCMP, told the conference. “Obviously, lawyers are a key part in a number of transactions. That causes us a problem,” he said.
Up to $17-billion in organized-crime profits are estimated to have been laundered in Canada last year. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act was introduced by Ottawa in an effort to clamp down on the illicit practice. The rules require financial institutions, brokerage firms, real estate agents and casinos to report large cash transactions — anything over $10,000 — and suspicious transactions.
The government had also initially required lawyers to secretly notify authorities if they suspected a client could be laundering ill-gotten funds. But in the wake of enormous pressure from the legal profession, the government scuttled the provision in March.
The government had repeatedly portrayed the measure as an indispensable weapon in the battle to identify and prosecute criminals and terrorists. Its unexpected about-face followed two years of opposition from legal groups who argued that the provisions would destroy the age-old principle of lawyer-client privilege.
The legal profession intends to keep on fighting Ottawa if it does not agree with whatever amendments are made to the anti-money-laundering legislation, Maurice Laprairie, head of the Federation of Law Societies of Canada's task force on money laundering legislation, said in an interview yesterday. “The legislation that we challenged successfully was abhorrent to the principles of the independence of the bar,” he said.
Law societies, which regulate the legal profession in each province, mounted a series of legal challenges to the legislation, culminating in a test case in the B.C. Supreme Court on the constitutionality of the reporting requirement. “Our litigation is not over,” Mr. Laprairie said, noting that a trial is set to begin in British Columbia in November, 2004. In the meantime, he said, if any legislation comes into force that the legal profession objects to, the new legislation will also be fought in court.
Mr. Laprairie also said his task force plans to meet with the Department of Finance in early November to discuss the proposed changes. When Ottawa scrapped the legislation governing lawyers, government officials said they would meet with the legal community in order to fill the legislative loophole.
Mr. Laprairie said other countries, including the United States and Japan, are also looking at requiring lawyers to report suspicious transactions involving their clients in the wake of the FATF recommendations.
At yesterday's conference, Mr. Beall warned of the growing danger of a public backlash in the United States against the “intrusive nature” of that country's Patriot Act. He said FBI officers can seize medical and other personal without a search warrant. He also said doctors are forbidden under the act to tell clients whether they are the subject of a probe.
Mr. Beall also said that Ottawa has to find a way to bring lawyers into the reporting fold under the money laundering legislation that also looks out for the rights of their clients. “We have to protect solicitor-client privilege as the cornerstone of our legal system but we also have to discharge our international obligations,” he said.
