The No Cash Rules

Another anti-money laundering measure brought in by the Law Society in 2005 was to prohibit the receipt of more than $7,500 in cash. Rule 1503(1) states: “A lawyer must not receive or accept cash in an aggregate amount greater than $7,500 Canadian dollars in respect of any one client matter.”

Rule 1503 applies when lawyers engage on behalf of a client, or give instructions on behalf of a client, in respect of:

• Receiving or paying funds,
• Purchasing or selling securities, real properties, business assets or entities, or
• Transferring funds by any means

However, pursuant to Rule 1503(4)(d), subrule (1) does not apply when the lawyer receives cash:

• From a financial institution or public body,
• From a peace officer, law enforcement agency or other agent of the Crown acting in an official capacity,
• To pay a fine, penalty, or bail, or
• For professional fees, disbursements, or expenses provided that any refund out of such receipts over $7,500 is also made in cash.

You should make your staff aware of these Rules. It is easier to explain to a client at the outset that you cannot accept cash amounts greater than $7,500 than to figure out what to do once you have received cash that exceeds the limit.

Recordkeeping for Cash Transactions

Rule 1503(7) sets out recordkeeping requirements for cash transactions. If you receive cash, you should, in addition to existing financial recordkeeping requirements, maintain a book of duplicate receipts with each receipt identifying:

• the date on which the cash is received,
• the person from whom the cash is received,
• the amount of cash received, the client for whom cash is received,
• any file number in respect of which cash is received, and
• containing the signature authorized by the member who receives the cash and of the person from whom the cash is received.

Remember as well that the only funds you may deposit into your trust account are those directly related to legal services you or your firm are providing. See Rule 1511(1).

How to Refund Unused Cash Retainer

It is recommended that lawyers return funds in the same manner they were received.

• If the client pays by cash, refunds are in cash.
• If the client pays by cheque, refunds are by cheque.
• If the client pays by credit card, they are refunded by credit card.
• If the client pays by debit card, they are refunded by credit to their debit card.

If you are required to refund cash to a client, you should make a trust cheque payable to yourself and take it to the bank and obtain cash for it. When you refund the cash to the client, obtain and retain a signed acknowledgement of the payment from them, or the person receiving the funds on their behalf, showing the date, amount, client name or client reference, file number, if any, and the name of the person who received the funds. See Rule 1503(5).