Law Society of British Columbia steps up trust account audits to monitor money laundering
“We have taken this very seriously and have tried to make sure the word is well known when it comes to the obligations regarding client identification and the rule of cash transactions and the proper administration of trust accounts. – Don, CEO of the BC Law Society Avison.
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The Law Society of BC has stepped up audits of attorney trust accounts in recent years in an effort to watch for signs of money laundering.
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The company did so to monitor trust accounts in the absence of an obligation for lawyers to report suspicious transactions to the Canadian financial intelligence agency. Notaries and real estate agents, for example, must report suspicious transactions.
The bar carried out around 450 audits per year until 2015, but by 2019 it had grown to 675 audits per year.
During the difficulties created by the COVID-19 pandemic, the company managed to perform 636 audits in 2020.
“We have taken this very seriously and have tried to make sure the word is well known when it comes to the obligations regarding customer identification and the rule of cash transactions and the proper administration of trust accounts,” BC Law Society CEO Don said. Avison.
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“The number of circumstances in which we find ourselves in what I would generally characterize as money laundering situations are still very low,” added Avison, former federal Crown prosecutor and Director General of Justice Canada.
Trust accounts hold money for transactions processed by law firms and are audited at least once every six years. Some companies, which work in areas of higher risk for money laundering such as real estate, are audited at least once every four years.
The Law Society of British Columbia has also introduced the use of artificial intelligence – by running computer software to extract data provided each year by law firms – to determine if more frequent audits are needed.
In 2017, a bar court sanctioned West Vancouver attorney Donald Franklin Gurney for allowing nearly $ 26 million to flow through his trust accounts without a reasonable investigation into the circumstances of the money and without providing any substantial legal services.
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More recently, in September this year, a bar court fined Vancouver lawyer Florence Esther Louie Yen for malpractice for authorizing the use of her trust account for deposits of around US $ 10 million and C $ 1.27 million. The funds were disbursed without providing substantial legal services in connection with the transactions, and without carrying out the necessary investigations, recording the results of the investigations or recording the source of the funds, the court ruled.
Yen appealed the decision – and the bar also requested a review of his three-month suspension. The company had requested a six-month suspension.
The legal profession has been in the spotlight in recent British Columbia government commissioned reports on How to Combat Money Laundering, as well as the province’s money laundering investigation by British Columbia Supreme Court Justice Austin Cullen.
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That’s because, following a Supreme Court of Canada ruling in 2015, lawyers remain exempt from filing suspicious transaction reports with Canada’s financial intelligence agency, the Analysis Center. financial transactions and reports of Canada, known as FINTRAC, for fear that this violates solicitor-client privilege. .
But law societies across Canada, including the national organization, and the federal government have been exploring how they can step up oversight of trust accounts without violating the precedent-setting High Court ruling.
In British Columbia, this has necessitated an increase in audit and investigation staff to ensure that oversight of trust accounts is strong.
And recently, the bar became a member of the Counter Illicit Finance Alliance of BC. The 38-member organization includes the RCMP, FINTRAC, the Canada Revenue Agency and all of Canada’s major banks and some credit unions. The alliance aims to help the public sector and private industry to share information “legally” to prevent, detect and disrupt illicit financial activity.
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Avison has said he would like FINTRAC to share information with the law society.
“If there are circumstances where the things they know would be useful in investigating a case involving a lawyer, they should pick up the phone and call my office,” he said.
Even before the 2015 ruling, the Law Society of British Columbia had rules in place to fight money laundering.
These included the introduction of a no-cash rule in 2004, which prohibits lawyers, except in very limited circumstances, from receiving $ 7,500 or more in cash from a client.
And in 2008, the Law Society introduced rules for identifying and verifying clients similar in scope to federal laws, but without the obligation to report to FINTRAC.
A lawyer should verify not only a person’s full name, address and telephone number, but also the client’s profession. If the client is an organization, the lawyer should obtain and keep a record of the general nature of the type of business they engage in, as well as the name, position and contact details of the people from whom the lawyer will receive. instructions.
