Lawyers are not required to collect client financial information, prepare reports on that information and submit to warrantless searches from the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2000, according to an important recent decision of the Supreme Court of Canada.
Lawyers not ‘agents of the state’
The issue has been under dispute since the Act began applying to lawyers in 2001. As written, the Act provides that:
- Lawyers must verify the identity of those for whom they act as financial intermediaries
- Lawyers must issue a “receipt of funds record” for such transactions over $3,000 unless the funds have come from a public body, and keep such records for five years.
- FINTRAC may “examine the records and inquire into the business and affairs” of any lawyer, including searching through computers and obtaining copies or prints of records
Punishment for failure to comply includes massive fines and imprisonment.
The Federation of Law Societies of Canada argued in Canada (Attorney General) v. Federation of Law Societies of Canada, 2015, that the Act violates the protection against unreasonable search and seizure and the right of security of the person guaranteed in the Canadian Charter of Rights and Freedoms (sections 7 and 8). These breaches effectively turn lawyers into “agents of the state” and law firms into “archives for the police and prosecution.”
Commitment to the client’s cause fundamental
The Supreme Court agreed, the majority going so far as to institute a duty of “commitment to the client’s cause” as a principle of fundamental justice. Justice Cromwell J. wrote in the majority decision:
It should be recognized as a principle of fundamental justice that the state cannot impose duties on lawyers that undermine their duty of commitment to their clients’ causes. Principles of fundamental justice have three characteristics. They must be a legal principle; there must be significant societal consensus that they are fundamental to the way in which the legal system ought fairly to operate; and, they must be sufficiently precise so as to yield a manageable standard against which to measure deprivations of life, liberty or security of the person. The lawyer’s duty of commitment to the client’s cause meets this test.
First, it is a normative legal principle and a basic tenet of our legal system. It has been recognized as a distinct element of a lawyer’s broader common law duty of loyalty.
Second, jurisprudence demonstrates that the principle is sufficiently precise to provide a workable standard. It does not countenance a lawyer’s involvement in, or facilitation of, illegal activities and it is consistent with a lawyer taking appropriate steps to ensure that his or her services are not used for improper ends.
Third, there is overwhelming evidence of a strong and wide-spread consensus concerning the fundamental importance in democratic states of protection against state interference with the lawyer’s commitment to his or her client’s cause.
The duty is fundamental to the solicitor-client relationship and how the state and the citizen interact in legal matters. The lawyer’s duty of commitment to the client’s cause is essential to maintaining confidence in the integrity of the administration of justice.
Dissent
The two dissenting judges concurred that the impugned provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act breach lawyers’ Charter rights, but disagreed that it was necessary to institute the duty of commitment to a client’s cause.
Conclusion
It remains to be seen what will happen to the Act. However, it seems likely that the government will rewrite it to attempt to comply with the Charter, since Canada is a member of the international Financial Action Task Force, and the Act is a key part of Canada’s participation in the task force.
In the meantime though, lawyers are not required to comply with the information collecting and reporting provisions of the Act. Importantly, lawyers do still fall under justified record-keeping obligations provincially, and of course it remains a crime to directly or indirectly participate in illegal activities like money laundering or financing terrorism.
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