Last updated 08/05/2009.
CENTRAL AUTHORITY FOR REPORTING
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) was established under S. 41 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (2000, c. 17) (PCMLTFA) .
FINTRAC is Canada’s financial intelligence unit, a specialized agency responsible for the collection, analysis, assessment and disclosure of financial information and intelligence. FINTRAC’s mandate is to assist in the detection, prevention and deterrence of money laundering and the financing of terrorist activities in Canada and abroad.
FINTRAC receives reports from financial institutions and intermediaries, analyzes and assesses the reported information, and discloses suspicions of money laundering or of terrorist financing activities to law enforcement and intelligence agencies as permitted by the PCMLTFA.
FINTRAC will also disclose to Canadian Security Intelligence Service information that is relevant to the security of Canada.
OTHER ANTI-MONEY LAUNDERING REGULATOR(S) AND SUPERVISORY BODIES
Office of the Superintendent of Financial Institutions (OSFI).
OSFI shares information with FINTRAC regarding the policies and procedures that Canadian financial institutions have in place in order to combat money laundering and terrorist financing. In turn, FINTRAC provides a broad range of information to OSFI that will help facilitate its risk assessment of financial institutions subject to PCMLTFA. Pursuant to subsection 83.11(2) of the Criminal Code, R.S., 1985, c. C-46, OSFI now also acts as a central reporting point for issues related to the financing of terrorist activities.
Royal Canadian Mounted Police (RCMP).
The RCMP conduct assessments of money laundering operations based on information received from FINTRAC, complaints from the general public or suspicious activity reported by other anti-money laundering partner organisations. These assessments form the basis of the voluntary information reports prepared by the RCMP for the benefit of FINTRAC and determine whether or not a criminal investigation is necessary. The RCMP is also involved in training and raising awareness of anti-money laundering issues among their partner organisations, some of which are listed below.
Anti-Money Laundering Partners
Canada Border Services Agency (CBSA)
Canada Revenue Agency (CRA)
Canadian Security Intelligence Service (CSIS)
Department of Finance
Department of Justice (DOJ)
Office of the Superintendent of Financial Institutions (OSFI)
Public Prosecution Service of Canada
Public Safety Canada (PSC)
RCMP Anti-Terrorism Financing Group.
ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?
By amendment to the PCMLTFA in December 2006, lawyers are exempt from the suspicious and prescribed transactions reporting requirements of the legislation. Regulations requiring verification of parties to financial transactions enacted under the legislation and in force December 2008 are applicable to lawyers. However, pursuant to a court order (interim injunction) obtained through litigation that challenged the constitutionality of the legislation, these regulations cannot apply to lawyers without the consent of The Federation of Law Societies of Canada (the “Federation”) and the other parties to the litigation.
The litigation is presently adjourned. If consent is not given, the federal government is entitled to reconvene the litigation on the constitutional question. A decision in this respect is pending. As such, lawyers are not subject to the new regulations.
NAME THE LAWS REGARDING ANTI-MONEY LAUNDERING PROCEDURES
PCMLTFA (as described above);
Regulations under the PCMLTFA:
Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations – SOR/2001-317;
Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations – SOR/2002-184;
Cross-Border Currency and Monetary Instruments Reporting Regulations – SOR/2002-412;
Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations – SOR/2007-121;
Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations [Not in force] – SOR/2007-292.
IN ADDITION TO THESE LAWS, IS THERE ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS CURRENTLY IN PLACE?
In October 2004, The Federation of Law Societies of Canada (the “Federation”) adopted a model “No Cash Rule”, pursuant to which each member law society has implemented rules restricting lawyers from receiving cash in amounts over $7,500.
All Canadian law societies have adopted local rules which mirror the substance of the new new “know-your-client” model rule, which was adopted by the Federation in March 2008. This new rule describes the measures lawyers and Quebec notaries must take, and the records they must keep, to verify a client’s identity. The purpose of this rule is to help lawyers determine whether clients are attempting to use them as an intermediary for money laundering and terrorist financing.
Regulations imposing client identification and verification obligations on lawyers were implemented in all but 3 jurisdictions (the Barreau du Quebec, the Chambre des Notaires, and the Law Society of Saskatchewan) at the end of 2008. The regulations in the remaining jurisdictions are expected to come in force before the end of 2009.
UNDER WHAT CIRCUMSTANCES IS A LAWYER UNDER THE OBLIGATION TO REPORT
Under Part 2 of the PCMLTFA, specified persons are required to report the importation or exportation of amounts of CAD$ 10,000 or more of currency or monetary instruments in bearer form. The Federation indicates that it is the client and not the lawyer that has to report when involved in a reportable cross-border transaction under ss.12(3)(b)-(e) of the PCMLTFA. However, if instructed the lawyer may do so on behalf of the client. Lawyers will be required to report a cross-border transaction under section 12(3)(a) of the PCMLTFA only if they physically carry currency or monetary instruments across the border on behalf of the client. In all other cases, reporting is the client’s obligation.
In December 2006, Part I of the PCMLTFA was amended to exempt lawyers from reports under that Part. As noted above, lawyers may have an obligation to report under Part 2 of the PCMLTFA (cross-border currency importing and exporting). Cross-border currency reporting requirements apply whenever monetary instruments (including securities and negotiable instruments) in amounts of $10,000 or more are being taken out of or brought into Canada.
Also noted above, lawyers in Canada are prohibited by law society regulations from accepting cash in amounts of $7,500 or more, with limited exceptions. These law society regulations are based on the model rule developed by the Federation and also impose specific record-keeping requirements on lawyers. These rules of the independent regulators of the legal profession may have the effect of placing a more stringent onus on lawyers than is required by the federal government.
CLIENTS IDENTIFICATION AND VERIFICATION
The new “know-your-client” model rule adopted by the Federation in March 2008 provides steps that lawyers and Quebec notaries must take and the records they must keep to ensure a client’s identity. According to the Federation, the rule was created to assist members of the legal profession in determining if a client is attempting to improperly transfer funds.
The Federation’s model rule has been implemented by most Canadian societies (and will soon be implemented in the remaining jurisdictions). Under the rule, lawyers and Quebec notaries are required to obtain the following information with respect to the entity or person retaining the lawyer:
The client’s full name;
The client’s business address and business telephone number, if applicable;
If the client is an individual, the client’s home address and home telephone number;
If the client is an organisation (other than a financial institution, public body or reporting issuer), the organization’s incorporation or business identification number and the place of issue of its incorporation or business identification number, if applicable;
If the client is an individual, the client’s occupation or occupations;
If the client is an organization, (i) other than a financial institution, public body or a reporting issuer, the general nature of the type of business or businesses or activity or activities engaged in by the client, where applicable, and (ii) the name and position of and contact information for the individual(s) authorized to provide and give instructions to the lawyer with respect to the matter for which the lawyer is retained;
If the client is acting for or representing a third party, information about the third party as set out in paragraphs (a) to (f) as applicable.
The model rule also imposes obligations to verify the identity of a client when the lawyer or Quebec notary gives instructions in respect of or engages in the receipt, payment or transfer of funds on behalf of the client (with limited exceptions).
LAWYERS PROSECUTED FOR MONEY LAUNDERING OFFENCES
R. v. Root, 2008 ONCA 869 – the Ontario Court of Appeal ordered a former federal prosecutor to stand trial for a second time on allegations of money laundering, which stemmed from a lengthy RCMP investigation. In 2006, the defendant was found not guilty on five charges relating to money laundering. However, the Crown successfully appealed the acquittals with respect to four of the five charges: conspiracy to commit an indictable offence of laundering proceeds of crime, conspiracy to commit an indictable offence of possession of proceeds of crime, attempting to launder proceeds of trafficking in cocaine and attempting to possess proceeds of crime. The Ontario Court of Appeal dismissed the appeal on the fifth charge of counselling a police officer to commit the offence of laundering proceeds of crime.
R. v. Shoniker, 2006 O.J. No. 5368 – An Ontario lawyer was sentenced to fifteen months in prison after pleading guilty to one count of money laundering in the sum of $750,000 contrary to s.462.31 of the Criminal Code of Canada. As well he pleaded guilty to one count of theft over $5,000 involving the sum of $50,000 contrary to s.334 of the Code.
R. v. Rosenfeld, unreported judgment, 30 March 2005 (O.S.C.J.) – An Ontario lawyer was sentenced to three years in prison and fined $43,230 for two counts of money laundering and attempting to possess the proceeds of crime.
USA v. Martin G. Chambers, Federal Circuits, 11th Cir. (June 24, 2005) – A Vancouver lawyer was sentenced to just over 15 years in a Florida state prison following his conviction in 2003 for laundering $700,000 U.S. in purported cocaine trafficking money.
HAS THE FINANCIAL ACTION TASK FORCE (FATF) OR RELEVANT SUB-REGIONAL ORGANIZATION CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?
The FATF conducted a mutual evaluation in February of 2008 based on the Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CTF) measures in place in Canada as of June 2007. The evaluation categorized Canada’s AML regime for non financial institutions to be “Not Compliant” with the 40+9 recommendations. The report specifically highlighted the PCMLTFA’s failure to apply the politically exposed persons, customer due diligence, record keeping, unusual transactions, and certain other requirements to lawyers.
Information supplied by:
Morli Shemesh, LL.B., LL.M., Aird and Berlis LLP, Toronto, Canada.
Previous contributors include:
Frederica Wilson, Director of Policy and Public Affairs, Federation of Law Societies of Canada;
Diana Yeung, J.D., M.B.A., Aird and Berlis LLP, Toronto, Canada.
Anti-Money Laundering Regulation - What Can be Learned From the Canadian Experience, by Ronald J. MacDonald, Q.C President, Federation of Law Societies of Canada, IBA Annual Conference Dubai, November 2011
Go to news section.
Back to North & Central America.