Appendix 8 - Questions and Answers

You must identify your client whenever you are retained to provide legal services, except when:

1. you are providing legal services to your employer (for example as in- house lawyer or paralegal); 
2. 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 to provide legal services, who has already identified the client;
3. 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 to provide legal services who has already identified the client; or
4. 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.

When your client is an organization (a corporation, partnership, fund, trust, co- operative or an unincorporated association) you must get and record its :

• full name; and
• business address and its telephone number.

• the organization’s incorporation or business identification number and where it was issued if applicable, and the general nature of its business.  

• Ontario Business Corporation Numbers
• Canadian Business Corporation Numbers
• GST/HST Numbers
• If you wish to confirm the GST/HST number of a business, visit the Canada Revenue Agency website.
• European Common Union Value Added Tax (VAT)  

The person looking at the document (commissioner of oaths or guarantor) will have to provide you with a legible photocopy of the document that they have signed and on which they have included their name, profession and address and have identified the type and number of the identification document provided by the client. This is called an attestation in the By-Law.

Appendix 4 contains a sample form attestation.

If the individual, whose identity is being verified, is outside of Canada or if you choose not to use a commissioner of oaths or guarantor where the individual is in Canada, you will have to engage an agent to conduct the verification for you. If you use an agent, prior to the agent taking steps on your behalf you must have an agreement in writing with the agent outlining the steps that he or she will take on your behalf to verify identity and the agent must provide you with the information he or she obtains. The agent may provide the information in the form of an attestation.

Appendix 5 contains a sample form agreement that you may use when retaining an agent.

• 64. I have been retained by a group of individuals engaged in a joint venture. I have determined that there is a financial transaction that is not exempted under the By-Law. Do I have to verify the identity of all of the parties to the joint venture?
  Yes. By definition a joint venture is not an independent legal entity, but rather a collection of organizations or individuals that have joined together for some common purpose. In such a case, each of the parties to the joint venture would be a client.
• 65. I am acting for a client with respect to the completion of a commercial transaction. I have prepared the necessary documentation to complete the transaction, but the closing funds will not be flowing through my trust account as my client will be paying these directly to the other side in accordance with the agreement and closing documentation. Is this a situation in which I have to verify my client’s identity?
  Yes, unless an exemption applies. The verification obligations apply whenever you engage in or give instructions in respect of the transfer of funds. Although funds are not passing through your trust account in this transaction, you are instructing with respect to the transfer of funds when you instruct on how the funds will flow to complete the transaction, which may include the preparation of documents containing such instructions.
• 66. My client, a private corporation, has retained me with respect to a transaction which will involve the issuance or transfer of shares. Am I required to verify the identity of my client?

  It may be common to think of the payment of funds for a transaction in terms of cash or cheque. However, the client identification and verification requirements will also be triggered when the activity involves issuing or transferring shares. "Funds" is a defined term in the By-Law and includes securities and negotiable instruments.  When  a  lawyer  prepares  share  certificates  or  share  transfers regardless of whether monies are being paid for the shares or share transfer, the lawyer is engaged in the receiving,  paying or transferring of funds. In such circumstances unless an exemption applies, the lawyer is required to verify the identity of the client and any third party directing or authorized to direct the client.

• 68. I am acting for a union on a grievance. Do I have to identify the grievor?
  No. Except in rare cases, it is the union that has carriage of a grievance. The grievor, while clearly an interested party, is not instructing the union and as such is not a third party within the meaning of the By-Law. This would be true even in the case of a group or policy grievance where a large number of union members have a stake in the outcome of the matter. Where a grievor does have carriage of the grievance and is instructing the union as to how to proceed, the obligation to identify that person and, in appropriate cases, to verify their identity, would apply.

• 72. I am acting for a developer of a new condominium project and am holding in trust the monies paid as deposits by the purchasers of the condominium units. I am not acting for the purchasers. Do I have to verify the identify of the purchasers?
  No, provided that the purchasers are not your clients nor are they directing or in a position to direct your client. If the purchasers are your clients or if they are directing or in a position to direct your client, then you would need to verify their identity unless an exemption applies.
• 73. I am acting for a lender and collecting mortgage payments from the borrower on her behalf. Do I have to identify or verify the identity of the borrower?
  No. You are only obliged to verify the identity of your client and any third party who is directing or in a position to direct your client.
• 74. I act for a purchaser and a lender bank in a real estate transaction. I receive funds to close the transaction as follows:
  • a portion of the funds by certified cheque or bank draft from the purchaser; and
  • a portion of the funds (the mortgage proceeds) from the lender by bank draft.

  Who's Identity must I verify?

   Both the Bank and the purchaser are your clients in the transaction and therefore you must verify the identity of both unless an exemption applies.

  If the Bank is a “financial institution” as defined in the By-Law, you are not required to verify its identity as an exemption applies. The term “financial institution” is defined in Section 20 of the By-Law and includes a bank to which the Bank Act (Canada) applies and certain other entities.

  There is no exemption relating specifically to cheques or bank drafts received from a purchaser. Therefore unless one of the other exemptions in the By-Law applies, you are required to verify the identity of the purchaser either before or when you receive the purchaser’s funds.

• 75. If I am acting for a purchaser in a real estate transaction, am I required to verify the identity of the purchaser when I pay out funds to close the transaction?
  If you have previously verified the identity of the purchaser, for example when you received closing funds, then you are not required to verify the identify of the purchaser again. If you have not previously verified the identity of the purchaser, for example an exemption applied when you received the closing funds, then you would have to verify the identity of the purchaser when you pay out the closing funds unless an exemption applies.
• 76. If I am acting for a vendor in a real estate transaction, am I required to verify the identity of the vendor when I receive closing funds?
  Yes, unless an exemption applies. For example, if funds are received by certified cheque from the purchaser’s lawyer’s trust account or by “electronic funds transfer” as defined in the By-Law, an exemption applies and you are not required to verify the identity of your vendor client with respect to this transaction.
• 77. If I am acting for a vendor in a real estate transaction am I required to verify the identity of the vendor when I pay out closing funds?
  If you have not previously verified the identity of your vendor client, for example if an exemption applied when you received funds, you would be required to verify the vendor client’s identity when you pay out funds unless an exemption applies.
• 78. 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 that party directs, instructs or has the authority to direct or instruct your client with respect to the matter. In such a case, that party would be a third party pursuant to the By-Law whose identity must be verified
   
• 79. I am acting in a real estate transaction where documents are being signed by power of attorney. Whose identity do I need to verify when I deal with funds – the donor and/or the donee?

  If you are retained by the donee of a power of attorney, you are required to verify the identity of the donee. The donee acts pursuant to the power of attorney document and generally speaking in these circumstances the donor of the power of attorney would not be considered a third party instructing  or having the authority to instruct your client.

  However, if you are also retained by the donor in the transaction such as in a situation where you are obtaining instructions from both the donor and the donee, then you would be required to verify the identity of both clients.

  Powers of attorney are sometimes used to effect fraud or illegal activity. In the event that you suspect fraud or dishonesty, you have an obligation to do further investigation and in certain circumstances you may have to withdraw completely. In addition, if the transaction involves a mortgage and you are acting for the lender in the transaction, you should review and follow the instructions of the lender client with regards to the use of powers of attorney in the transaction.
• 80. I act for a lender regarding a syndicated mortgage, whose identity do I verify?

  A syndicated mortgage means a mortgage having more than one investor. These mortgages are sometimes held in trust by a lawyer or by one of the individual investors in trust for the remaining investors.

  If you act for an investor trustee of a syndicated mortgage, you must identify and verify the identity of the trustee and the remaining investor participants if they are your clients or if they are directing or in a position to direct your client.
• 81. I am acting on behalf of a Condominium Corporation and I have received instructions from the property manager to collect arrears of common expenses and to register a Notice of Lien. I subsequently received payment from the owner of the unit. I have determined that no exemption to the requirement to verify identity applies. Whose identity do I need to verify in these circumstances?

  You must verify the identity of your client, the Condominium Corporation and the property manager, who is the individual giving you instructions on behalf of the Condominium Corporation.

  In order to verify the existence of the Condominium Corporation, you could conduct a sub-search of title to the unit within the Condominium Plan to ascertain that no Order of Termination has been registered against the unit within the Plan. In addition, you could obtain the G.S.T. number for the Condominium Corporation, if available, to verify its identity.

  To verify the identity of the property manager, you may obtain, review and keep a copy of that person’s driver’s licence or an original identifying document from an independent source.