Canada: Lawyers win argument over anti-money-laundering law

A B.C. judge has struck down provisions of an anti-money-laundering and terrorist-financing law as they apply to Canada’s lawyers.

The law, introduced in 2001, imposed obligations on certain businesses and professions that were deemed to be vulnerable to being exploited by criminals seeking to conduct illegal transactions.

Under the law, Canada’s 95,000 lawyers would be required to maintain client identification and verification, keep records of financial transactions, establish internal anti-money-laundering and terrorist-financing programs and report certain transactions to the authorities.

The country’s lawyers immediately challenged the law and succeeded in getting injunctions against the application of the legislation pending the outcome of the legal case.

At trial in May, the Canadian government argued that the law was necessary because “the use of lawyers figures prominently in criminals’ efforts to launder the proceeds of their crimes.”

Lawyers for the federal attorney-general said that lawyers are particularly vulnerable to money laundering, both intentionally and innocently.

Lawyers act as “gatekeepers” who furnish direct access to the financial system and can provide expertise to facilitate complex money-laundering schemes, the government claimed.

The Federation of Law Societies of Canada argued that the law violated the Charter of Rights because it jeopardized solicitor-client privilege.

The law would turn lawyers into “state agents” tasked with gathering information from their clients for potential use by the state against their clients, the federation argued.

And it pointed out that, since the law was passed, law societies across Canada have implemented regulations that meet obligations to fight money-laundering and terrorist-financing schemes.

In a ruling posted online Wednesday, B.C. Supreme Court Justice Laura Gerow said imposing the law would turn lawyers’ offices “into archives for the use of the prosecution.”

The law would violate the principles of fundamental justice insofar as it erodes the solicitor-client privilege, Gerow said.

The law societies’ rules and procedures were sufficient to meet the international obligations of Canada, the judge ruled.

“The law societies’ power to disbar lawyers serves as a strong incentive for lawyers to comply with law societies’ rules, including the no-cash and client-verification rules.”

Further disciplinary actions short of disbarment, including reprimands, fines and suspensions were also available, she said.

A Vancouver spokeswoman for the federal Department of Justice said she was forwarding a message to officials in Ottawa for comment.

kfraser@theprovince.com twitter.com/keithrfraser

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