Appendix 8 - Questions and Answers

No.  There are a number of situations where you are not required to verify the identity of the client and third party even though you are engaged in a funds transfer activity.  These situations include the following:

• you are providing legal services to your employer, for example as in-house lawyer or paralegal;
• you are acting as an agent for a lawyer (an individual authorized to practise law anywhere in a province or territory of Canada) or a paralegal licensed by the Law Society of Ontario, who has already identified the client;
• you are acting for a client who has been referred to you by a lawyer (an individual authorized to practise law anywhere in a province or territory of Canada) or a paralegal licensed by the Law Society of Ontario who has already identified the client;
• you are providing legal services as a duty counsel under the Legal Aid Services Act, 1998, as a duty counsel providing professional services through a duty counsel program operated by a not-for-profit organization or as the provider of legal aid services through the provision of summary advice under the Legal Aid Services Act, 1998;
• the funds are being paid to or are being received from a financial institution, public body (government) or reporting issuer (public company);
• the funds are being received from the trust account of another lawyer (an individual authorized to practise law anywhere in a province or territory of Canada) or a paralegal licensed by the Law Society of Ontario;
• the funds are being received from a peace officer, law enforcement agency or other public official acting in an official capacity;
• the funds are being paid or received pursuant to a court order;
• the funds are being paid to pay a fine or penalty;
• the funds are being paid or received as a settlement in a proceeding before an adjudicative body;
• the funds are being paid for professional fees, disbursements, expenses or bail;
• the funds are being paid, received or transferred by electronic funds transfer;
• you have previously verified the identity of an individual and you recognize the individual;
• the client and/or third party is an organization and either you or an employee of your firm or a lawyer or paralegal of your firm licensed by the Law Society of Ontario has previously identified the organization by obtaining the name and occupations of each director of the organization and the name, address and occupations of each person who owns 25% or more of the organization or of the shares of the organization and has verified the identity of that organization including the individual(s) giving you instructions on behalf of the organization with respect to the matter.

You are only required to verify the identity of a corporation if it is not a reporting issuer (public company), financial institution or public body.

If the organization is a corporation or an organization created or registered under federal or provincial law, you may obtain written confirmation of its existence from a government registry. This confirmation should also include the name and address of the organization and, where applicable, the names of its directors. In this regard, you could obtain a certificate of corporate status, a corporate profile report and/or an annual filing of the corporation.

If the organization is a trust, partnership or an association you will need to obtain some sort of formal record that confirms its existence as an organization. This could include a copy of the trust or partnership agreement or articles of association. It might also include the GST/HST registration information or information relating to the organization’s business licence.

If you are required to verify the identity of an organization, you must also take the following additional steps:

1. verify the identity of the individuals who provide you with instructions with respect to the matter on behalf of the organization
2. make reasonable efforts to obtain:
   • the name and occupation or occupations of each director of the organization unless the organization is a securities dealer
   • the name, address and occupation or occupations of each person who owns 25% or more of the organization or of the shares of the organization  

You have 60 days from the time you engage in or give instructions or act on behalf of your client to receive, pay or transfer funds to verify its identity.

However, you must verify the identity of the individual providing you with instructions on behalf of the corporation before or when you engage in the funds transfer activity.

• 58. My client is representing someone else. What are my obligations?
  The By-Law obliges you to identify third parties when they are directing or instructing your client or when they have the authority to direct or instruct your client, for example as a principal instructs an agent. When your client is acting for a third party in this way, you must obtain the same information for that third party as you would if they were your client.
• 59. My client is acting on behalf of a minor. Do I have to identify the minor?
  No. A minor does not have legal capacity and so cannot be formally directing or instructing the client.   
• 60. I am acting for the vendor in a real estate transaction. My client has directed me to pay a portion of the proceeds of the sale to another party who is not my client. Do I have to verify the identity of that other party?
  You are not required to verify the identity of a third party to which funds are paid unless the party also directs, instructs or has the authority to direct or instruct your client with respect to the transaction. In such a case, that party would be a third party pursuant to the By-Law whose identity must be verified.  
• 61. I am acting for a living trust that makes ongoing disbursements to the beneficiaries of the trust. Am I required to identify and verify the identity of the beneficiaries of the trust?
  You are only required to verify the identity of your clients and any third party instructing or having the authority to instruct your client.  If the beneficiaries of the trust are also your clients in the matter or if the beneficiaries are third parties directing your client or who have the authority to direct your client with respect to the matter, then you must also identify and verify their identity.

• 65. I have been retained to act in a class action. Is it sufficient if I identify the representative plaintiff or am I required to identify all of the members of the class?
  For the purposes of the By-Law, it is sufficient to identify the representative plaintiff.

• 67. I have been retained by an individual to prepare her will. I have received a retainer, but am not handling any other funds. Am I required to identify and verify the identity of my client?
  In these circumstances, you are obliged to identify your client, but you are not required to verify her identity. There is an exemption in the By-Law for funds received for professional fees and disbursements.
• 68. I have been retained by an estate trustee to administer an estate. Am I required to verify the identity of the beneficiaries of the estate when I pay out funds to the beneficiaries?
  When you act for an estate trustee and you handle funds, unless an exemption applies, you are required to verify the identity of your client, the estate trustee. Generally you are not obliged to verify the identity of the beneficiaries of the estate in these circumstances as the beneficiaries are not your clients, nor are they in a position to direct your client. However, there may be situations in which the beneficiary is instructing the client, as in a case involving litigation over the settlement of an estate for example. In that case the beneficiary would have to be identified and his or her identity verified as a third party unless an exception applies. Similarly if you act for a beneficiary of an estate, then you are obliged to identify and verify the identity of the beneficiary in accordance with the By-Law.