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Law Society amends Rules to help prevent money laundering
December 4, 2019
Effective January 1, 2020, the Law Society of Saskatchewan will implement new Rules related to client identification, client verification and receipt of cash.
Why are we making these changes?
Money laundering and terrorist financing are on the rise in Canada. Money laundering involves hiding illegal funds and distributing them through complex financial transactions (also known as layering funds). Lawyers and other professionals such as accountants and investment advisors are considered “gatekeepers” who, given their roles in facilitating financial transactions, are at risk of being sought out by criminals seeking to place dirty money in the financial system.
In 2017 the Federation of Law Societies formed an anti-money laundering/anti-terrorist financing (AML/ATF) working group to review the current model rules and examine existing AML/ATF practices at Canadian law societies. In its report, the working group states, “When large amounts of criminal proceeds are invested into our economy, currency exchange and interest rates can become volatile. the consequences of money laundering and terrorist financing are vast and significant.”
In October 2018 the Federation approved amendments to the “No Cash” and “Client Identification” Model Rules and adopted a new “Trust Accounting” model rule to address the risks of money laundering and terrorism financing within the practice of law. Law societies across Canada are working on adopting and enforcing these rules so that we have consistent rules throughout the country.
How does this affect me?
Lawyers must be diligent in ensuring that they are not knowingly or unknowingly assisting their clients in money laundering or terrorist funding. The changes being implemented do not change a lawyer’s existing obligation of knowing their client.
What are the changes?
Cash Transaction Rules (Rule 1503):
- Addition of several definitions
- Fewer exceptions to the rule prohibiting lawyers from accepting amounts greater than $7,500 in cash
- Clarity and more organization within the rules
Identification and Verification rules (Rules 1541 – 1550):
- Greater clarity of the information required to be obtained when identifying clients
- New methods to verify the identity of clients who are individuals
- New requirement to verify the identity of children
- Clarification of the files that are exempt from verification
- New requirement to inquire into the source of funds involved in the transaction
- Removal of the “reasonable measures” standard for verifying identity
- Amendments and clarity of information required to verify corporations, businesses, trusts and other entities
- Amendments to the requirements when using an agent
- Reduced time to verify a client’s identity
- New obligation to periodically monitor ongoing clients
New Trust Accounting rule (Rule 1511):
- Provides a separate and clear distinction between Trust and Non-Trust funds as they relate to the use of a trust account.
For more background information, please review the Federation’s AML/ATF working group paper Guidance for the Legal Profession.
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