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Anti-Money Laundering Requirements

By-laws to be amended re: anti-money laundering requirements
In November 2019, Convocation approved by-law amendments, in principle, to implement changes that have been made to the Federation of Law Societies of Canada’s Model Rules to fight money laundering and terrorist financing.

The amendments build on existing anti-money laundering and terrorist financing requirements and make certain that the rules in place to ensure that legal professionals do not unwittingly become involved in money laundering and terrorist financing are robust, effective, and up-to-date. The amendments to the Model Rules include:

  • a requirement that licensees identify and record the source of client funds for a transaction
  • clarification with respect to the amount of cash that a legal professional can receive in respect of any one client matter
  • changes to the requirements and processes for identifying and verifying the identity of individual and organizational clients
  • new requirements to engage in ongoing monitoring of the business relationship with the client, including assessing whether there is a risk that the legal professional may be encouraging fraud or illegal conduct
  • introduction of a new Trust Accounting Model Rule to explicitly prohibit the use of a trust account for a purpose unrelated to the practice of law.

The Federation has produced a guidance document to assist licensees with compliance. The Law Society’s own practice resources will be updated prior to implementation of the new requirements.

Convocation also approved an amendment to the motion to establish a working group of interested benchers to work with the Professional Regulation Committee, including its chair and vice-chair, on the proposed by-law changes.

The Professional Regulation Committee, with the assistance of the working group, will continue to review the Model Rule amendments and consider amendments to the Law Society by-laws that will be brought back to Convocation for approval.
 
For more information, see the full report to Convocation.

Background

In February 2018, the Law Society’s Professional Regulation Committee held a consultation to seek input from the professions on a number of proposed amendments to the Model Rules of the Federation of Law Societies of Canada (FLSC) regarding anti-money laundering as outlined in the Consultation Document. See also the related materials from the Federation of Law Societies

In October 2018, the Council of the Federation approved amendments to the No Cash and Client Identification and Verification Model Rules, and approved a new Trust Accounting Model Rule.