The Federation of Law Societies of Canada working with government in the fight against money laundering and terrorist financing

The regulators of the legal profession in Canada and the Canadian government have embarked on a new chapter in the fight against money laundering and the financing of terrorist activities. Late last Spring Canada’s Minister of Finance announced the creation of a joint working group comprised of representatives of the government and the Federation of Law Societies of Canada. The working group, which held its first meeting at the end of June 2019, is intended as forum to explore issues related to money laundering and terrorist financing that may arise in legal practice and to strengthen information sharing between the regulators of the legal profession and the government of Canada. The group, co-chaired by an official of the Department of Finance and the Federation’s Executive Director of Policy and Public Affairs, will meet quarterly.

The creation of the joint working group follows a decade-long legal battle in which the Federation argued that attempts to subject members of the legal profession to the government’s AML regime interfered with solicitor-client privilege and the duties owed by legal counsel to their clients. A February 2015 decision from the Supreme Court of Canada upheld the Federation’s arguments finding that as applied to members of the legal profession, the AML regime was unconstitutional.

Canada’s legal regulators have engaged for many years in regulating the risks of money laundering and terrorism financing in the practice of law. Two model rules, aimed at limiting the handling of cash by members of the legal profession and ensuring legal counsel engage in due diligence in identifying their clients, have been the cornerstone of the regulators’ anti-money laundering and anti-terrorism financing initiatives. The Cash Transactions Rule was adopted in 2004, and the Client Identification and Verification Model Rule was adopted in 2008. Both were implemented by all Canadian law societies. Those rules were updated with amendments adopted by the Federation in late 2018. A new Model Trust Accounting Rule that restricts the use of the trust accounts of members of the legal profession as part of the law society regulations aimed at fighting money laundering and terrorist financing was adopted at the same time.

In the years following the court victory, the Federation encouraged the government to recognize the regulatory initiatives of the Law Societies and to see the regulators as partners in the fight against money laundering in Canada. Faced with criticism from the Financial Action Task Force over the exclusion of legal counsel from the legislative AML regime, the government was initially focused on the suggestion in the Supreme Court’s decision that it might be possible to develop constitutionally-compliant AML regulations governing members of the legal profession. The new joint working group and the discussions leading to its creation mark a significant shift in the government’s approach to this issue. The government has made it clear that it is interested in working closely with the Federation and the law societies on the anti-money laundering file indicating an understanding of the unique position of the legal profession and the duties that members of the profession owe to their clients.

It is expected that officials from Canada’s financial intelligence agency (FINTRAC) and federal law enforcement agencies will join representatives of the Federation and the Canadian departments of Finance and Justice on the joint working group. The next meeting of the working group is scheduled for November 2019.

Author: Frederica Wilson
Executive Director, Policy and Public Affairs and Deputy CEO, Federation of Law Societies of Canada

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Sustainability of self-regulation scrutinized in Ontario

Bencher candidate John Nunziata says he thinks the provincial government may have to intervene in the legal profession’s self-regulation model following the bencher election ending April 30.

Nunziata told Law Times that he has heard the proposition of reviewing the Law Society Act discussed among Ontario’s members of provincial Parliament who watch the legal profession. However, Law Times requested interviews with 14 MPPs who have backgrounds as lawyers and none accepted.

Several MPPs, including a spokesperson for Attorney General Caroline Mulroney, repeated the same message.

“The Law Society of Ontario has a mandate to regulate lawyers and paralegals in the public interest. Questions regarding the law society, the bencher election and the regulation of lawyers should be directed to the law society. The attorney general looks forward to working together with the law society in the future on legal issues that affect the people of Ontario,” said an email statement.

Nunziata, a former member of Parliament, would not reveal which MPPs he had spoken to.

Still, Nunziata says he thinks that issues such as low voter turnout, a budget deficit and the divide over the statement of principles requirement could draw the attention of Queen’s Park.

“The fact that the public is not on the side of lawyers — because most people have a negative opinion of lawyers — there are politicians that would say, ‘Well, let’s review what’s going on here.’ For one, conservatives do not believe in running deficits in principle,” says Nunziata.

Rebecca Bromwich, a faculty member at Carleton University in Ottawa who is running for bencher, has studied the topic of self-regulation and its ability to deal with complicated issues such as money laundering.

She concluded, in that research, that government should support self-regulation in the public interest. She says she is not privy to any comments from MPs about the LSO, and said that although Canada’s self-regulation model differs from other countries, the public and political will has typically not supported changing the model.

Bromwich also said there are some positives to self-regulation, and that critics of self-regulation may not consider how a government would undertake the same task. She says that centralising regulation in the government might be at odds with a more conservative political view.

“I think every election is important. I think it would be great if lawyers think it is important,” she says. “Benchers reduced the size of Convocation before this election, so it seems like if there are generally views of reducing the size of the regulatory body, most people seem to be the same page. It’s whether the government should be the one doing it.”

Nunziata says the LSO is an outlier compared to professions that are regulated by an appointed board, rather than a large election, such as the one taking place now.

“It’s important for lawyers to vote, it’s important for the law society to be truly representative of lawyers and paralegals,” he says. “Yes, one of the mandates is to govern in the public interest, but I think there is also an obligation to make sure the needs of lawyers and paralegals are addressed as well.”

The law society’s governance task force is currently considering options to shrink the number of benchers in Convocation.

Susan Tonkin said in an e-mail on behalf of the LSO saying, “The Law Society governs Ontario’s lawyers and paralegals in the public interest. Self-regulation strengthens the independence of the bar and protects the rule of law, which are two critical underpinnings of a democratic society. We look forward to continuing to work with the government and other legal stakeholders as we continue to fulfill our mandate.”

Several examples put forth for a call for comment by the governance task force suggest decreasing the number of elected benchers, which would proportionately give appointed benchers more sway.

At the time of the call for comment, in November 2018, Mulroney said in a letter that the provincial government “believes that it is vital that governing bodies are streamlined and efficient,” adding that her ministry would “fully endorse efforts to reduce the total number of benchers at Convocation to facilitate quicker and more effective decision-making and cost effectiveness.”

Nunziata points out that the provincial government recently cut the size of Toronto’s city council to 25 members from 47.

One skeptic of the LSO’s governance model has announced a run for office: Anita Anand, a law professor at the University of Toronto, said on April 2 that she is seeking the federal Liberal Party nomination in the riding of Oakville, Ont. Anand’s’ research into the topic was recently publicized through a newspaper article titled “Ontario’s law society needs to address problems in self-regulation.”

“Self-regulation opens the possibility of conflicts of interest: lawyers governing themselves may, in making rules for the profession, make decisions that benefit themselves rather than the general public, who may be unable to protect their own interests,” she wrote in the article.

“As a result of these concerns, both Britain and Australia have moved away from self-regulation.”


*This article first appeared in Law Times.

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University of Alberta professors found governance ‘lodge’

Hadley Friedland was just outside a conference room in Edmonton, speaking over the phone about a presentation on Indigenous law she’d just made to a room full of lawyers and legal academics. The conference was being sponsored by the Law Society of Alberta.

Around the country, First Nation communities, in “acts of self determination,” are striving to rebuild their own laws and governance structures from the legacy of the colonial era. And Canada’s legal community, says Friedland, an assistant professor of law at the University of Alberta, has become eager to discover how Indigenous concepts of law are influencing case law, legislation and legal practitioners.

In that vein, Friedland, along with Shalene Jobin, an associate professor in the U of A’s Faculty of Native Studies and a director of the U of A’s Indigenous Governance and Partnership Program, co-founded the Wahkohtowin Law and Governance Lodge.

Though there are no logs — for the time being the lodge is more a virtual repository for Indigenous legal knowledge than it is a physical structure — Wahkohtowin began its research and work developing Indigenous law at the beginning of May.

The lodge has been funded with a two-year, $567,400 grant from the Alberta Law Foundation. The project honors call to action #50 from the Final Report of the Truth and Reconciliation Commission of Canada, which asks Canada to develop Indigenous law institutes throughout the country in collaboration with Indigenous communities. Wahkohtowin “advances one of the key objects of the Foundation, which is to support Indigenous legal programs,” Darlene Scott, chairwoman of the ALF, said in a statement.

Friedland and Jobin were inspired to approach the law foundation by the research of influential Cree activist Val Napoleon, who entered law school as a grandmother. Napoleon, now research chairwoman and Law Foundation Professor of Aboriginal Justice and Governance at the University of Victoria, established the Indigenous Law Research Unit at UVic’s Faculty of Law and has amassed a storehouse of British Columbia’s Indigenous legal traditions and theories. The work of ILRU became the foundation for the world’s first Indigenous law degree program, launched at the university last year.

“Dr. Napoleon coined the phrase ‘Indigenous legal lodge’ to hold her work,” says Friedland, who earned her law degree at UVic. “And that’s a concept we are working with.”

The Wahkohtowin Lodge’s work has begun with outreach to First Nations communities in Alberta hungering to “try and articulate and identify their own laws and legal principles.” Those principles will cover every kind of legal practice area that exists, because, Friedland says, “Indigenous societies are whole societies as well. Shalene’s work speaks to that.” But, adds Friedland, asked if some communities might resist working with academics, even if they have Indigenous heritage, “We are not going to just show up at the door of communities and ask to work with them. We will respond to invitations of interest from communities. And there’s no shortage of that.”

Already, in its first stage, Wahkohtowin has projects on the go, says Jobin. At the end of May 2018 Wahkohtowin held a three-day workshop at the U of A where elders, community leaders and members of the law profession worked together to help communities determine the vision of legal governance they want.

In a pilot project, says Jobin, the lodge has also been asked to help the Aseniwuche Winewak Nation near Grande Cache, Alta. to develop its own constitution-building resources. “We were approached by a community to do that work and that is happening right now as well.”

Friedland says there is an urgent need for Canada’s judges, lawyers and law students to increase their competency in Indigenous law.

“We have this educational deficit in Canada where we haven’t been teaching Indigenous law in law schools for 100 years. So [lawyers] are realizing they need more resources to be able to competently practise.”

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B.C. Paralegal Association supports LSBC creation of ‘licensed paralegals’

The Law Society is seeking input from the profession regarding a proposal to establish a new class of legal service professional who would hold a limited scope licence to practise in the area of family law. The concepts advanced in the scope of practice proposed in Schedule A of the discussion paper are not conclusions. They have been prepared to focus discussion. The Law Society will consider written submissions received by 5:00 pm on December 31, 2018.

Submissions on this consultation paper are collected under authority of the Freedom of Information and Protection of Privacy Act, RSBC 1996, c. 165, s. 26(c). The information will be used to analyze and develop the policy initiative described in the consultation. Please note that all submissions will be published on the Law Society website. If you have any questions about the collection, use or disclosure of this information, contact Michael Lucas in the Policy and Legal Services department, Law Society of British Columbia, 8th Floor, 845 Cambie Street, Vancouver, BC V6B 4Z9, 604.669.2533 or mlucas@lsbc.org.

Download the consultation paper and draft proposal

Read more from the local legal press on the Canadian Lawyer

Governance Gone Wrong: Examining Self-Regulation of the Legal Profession

England and Australia have abandoned self-regulation of the legal profession yet Canadian law societies continue to function on this basis. This article argues that the self-regulatory model on which the Law Society of Ontario (the “LSO”) operates represents an inadequate form of governance in terms of the accountability it yields. When compared to other organizations, including law societies in other common law jurisdictions as well as corporations, the weaknesses in the LSO’s governance model are conspicuous. This article advocates replacing self-regulation in Ontario’s legal profession with a co-regulatory regime. In the absence of such an extensive reform, this article puts forward recommendations for changes to the current bencher model of governance on which the LSO is based including the implementation of bencher expertise requirements and a duty of loyalty and a duty of care to the public.

Paper Available Here

Anita Anand, University of Toronto – Faculty of Law

Event: Creating inclusive workplaces for LGBT+ people (Legal Sector)

Canadian Centre for Diversity and Inclusion

Wednesday, August 22, 2018 – 14:00

Virtual – Webinar

This webcast will provide insights and promising practices of how legal professional can go beyond “pride” to celebrate LGBT+ people through the year, and create and maintain inclusive workplaces for LGBT+ people and their allies at all times.

CCDI prides itself on providing engaging and interactive education. Attendees participating in this webcast will have the opportunity to ask questions during the question and answer session for which accreditation is sought. Additionally, attendees are engaged through a variety of interactive means – such as whiteboards and polling – to ensure active participation and challenge their understanding of the subject.

This course is available as a live webinar in both English (August 22) and French (August 23). The webinar will then be available for rebroadcast for those working for CCDI Employer Partners through CCDI’s Knowledge Portal.Licensees working for one of CCDI’s Employer Partners are able to watch the recorded version of this webcast through our Knowledge Portal. Attendees viewing the content in this form are encouraged to send follow up questions to the presenters through an email address provided as part of the recording.

Register for this event here

The Legal Problems of Everyday Life: The Nature, Extent and Consequences of Justiciable Problems Experienced by Canadians

The purpose of this study is to inform policy makers about the incidence of civil justice problems and the extent of unmet need for assistance that justiciable problems in civil matters might represent. The study assumes a broad view of civil justice problems and unmet need. The broad view looks at the problem of civil justice and access to justice in terms of the prevalence of civil justice problems in the population. This involves identifying, by means of a sample survey, civil justice problems people have experienced that meet some reasonable threshold of seriousness. The broad view contrasts with the narrow view of civil justice and access to the justice system. The narrow view takes as a starting point the problems that come to the attention of the courts or other formal dispute resolution mechanisms.

Chapter II discusses the methodology and how it reflects the assumptions underlying the broad approach to civil justice needs that forms the paradigm of this research. Chapter III reports the basic data on the incidence of civil justice problems and considers the seriousness threshold that is fundamental to this type of research. Chapter IV examines the occurrence of multiple problems and the extent to which multiple problems reflect unmet need. Chapter V identifies the varied responses to civil justice problems and Chapter VI examines the outcomes of justiciable problems. The non-legal consequences of justiciable problems; in particular, the physical and mental health impacts are the subject of Chapter VII. Chapter VIII looks at the connection between the experience of civil justice problems and attitudes toward the law and the justice system.

Link to full report: Canadian Study

The Federation of Law Societies of Canada: AML update

The Federation of Law Societies of Canada (the “Federation”) is in the midst of a consultation with its members, the 14 provincial and territorial regulators of the legal profession, on proposed amendments to the Model Rules that have formed the cornerstone of the law societies’ fight against money laundering and the financing of terrorist activities for more than a decade. The amendments, and a proposed new rule that would tie the use of lawyer trust accounts to the provision of legal services, are intended to ensure that the law societies’ anti-money laundering and anti-terrorism financing regulations are as robust and effective as possible.

As a result of litigation between the Federation and the Canadian government, federal anti-money laundering and terrorism financing legislation and regulations do not apply to members of the legal profession. Acknowledging the importance of combatting these illegal activities, the regulators have been at the forefront of the fight against money laundering and the financing of terrorism since adoption in 2004 of the No Cash Rule. Intended as substitute for the suspicious transaction reporting requirements in the federal Proceeds of Crime (Money-laundering) and Terrorist Financing Act that the Federation challenged in court, the No-Cash Rule prohibits members of the profession from accepting more than $7,500 in cash. A second Model Rule, the Client Identification and Verification Rule, was adopted in 2008 and contains most of the same requirements that are in the federal government’s corresponding regulations.  These Model Rules have been adopted and implemented by all law societies as part of regulatory initiatives that are in keeping with important constitutional principles, as affirmed by the Supreme Court of Canada.

Fighting the threat that members of the legal profession will be used to launder money or finance terrorist activities remains a strategic priority for the Federation and its members. Recognizing that the Model Rules had not been reviewed since first adopted, in late 2016 the Federation established a special working group to undertake a full examination of the rules. The Anti-Money Laundering and Terrorist Financing Working Group (the “Working Group”) is also developing best practices guidance on ensuring compliance with and enforcement of the rules. The development of comprehensive educational materials for the legal profession is also underway.

The proposed amendments to the Model Rules would clarify some aspects of the rules and would also impose new obligations, including a requirement to obtain information on beneficial owners of an organization. This proposed change would address a specific criticism of the law society anti-money laundering and terrorist financing rules that has been raised by the Canadian government and the Financial Action Task Force. As there is not currently a robust corporate registry system for beneficial ownership information at either the federal or provincial levels in Canada, the Working Group recognized that compliance with this amendment may prove difficult in some cases. To address this possibility the draft amendments prescribe additional measures that must be taken when the required information cannot be obtained.

A proposed new rule would prohibit legal counsel from depositing client funds into their trust accounts except where directly related to a matter for which the lawyer or firm is providing legal services.  The Working Group is of the view that by restricting use of trust accounts, the rule, which is modeled on rules in force in several Canadian jurisdictions, would assist in reducing the risk of lawyers’ trust accounts being used for purposes related to money laundering or the financing of terrorist activities.

The consultation on the amendments and new rule will continue through March 15, 2018. It is anticipated that final amendments will be approved before the summer and will then be referred to the law societies for implementation.

As the Federation’s consultation is wrapping up the Canadian government has launched a mandated review of its anti-money laundering legislation.  Although government representatives have suggested on a number of occasions that the government will try again to bring legal counsel within the scope of the federal anti-money laundering and anti-terrorism financing regime, a government lawyer testifying at recent hearings being held as part of the review acknowledged that this may not be possible. Referring to the 2015 decision of the Supreme Court of Canada that found the application of the legislation to legal counsel was unconstitutional, the lawyer said   “It won’t be easy. If you read this case, you will realize there is very little latitude to require information from lawyers, or to impose a requirement with respect to the submission of client information.”

Link to full consultation report

Article contributed by Frederica Wilson, Executive Director, Policy and Public Affairs and Deputy CEO, Federation of Law Societies of Canada

Legal Services Regulation at the Nova Scotia Barristers’ Society: a progress update

The journey to Legal Services Regulation (LSR) has taken a major step with the November 17, 2017 approval by Council of several regulatory amendments to advance the Society’s initiatives. The result is a model of regulating legal services that is risk focused, proactive, principled and proportionate. Key components of the regime and the impacts on law firms are outlined on the NSBS website.

The NSBS continues to work with government so that amendments to the Legal Profession Act will be introduced in the spring of 2018. With the proposed provisions, the Society will then have the full range of authority required to fully implement the policies previously approved by Council to enable better promotion of the public interest and the expansion of innovative legal services.

An essential component of the Society’s transformed Legal Services Regulation framework is an enhanced focus on risk. By risk, the NSBS means ensuring that:

  • lawyers and firms are able to achieve the ten elements of a management system for ethical legal practice;
  • lawyers engage in conduct that reduces risks to the public; and
  • the Society identifies and responds to these risks in a proactive, principled and proportionate way, and achieves their Regulatory Objectives and Outcomes.

Developing and embedding a risk focus in the Society’s regulatory work is unfolding on a variety of levels, requiring both internal and external culture changes, as well as changing the conversation with lawyers to offer support and to work collaboratively to reduce risk.

Read more about the NSBS approach to risk and the steps that are underway to embed a risk-focused approach in their regulatory system.

The Shifting Frontiers of Law: Access to Justice and Underemployment in the Legal Profession

The article examines two interrelated issues attracting attention from the legal academy, the profession, and policy makers:

i) the crisis of access to justice among ordinary Canadians, and

ii) the increasing number of qualified and underemployed lawyers.

This article sets out to understand the interrelated factors underlying these two trends, and explores long-term, accessible solutions to address the misalignment between the supply of underemployed law graduates and a demand for affordable legal services. In response to these twin problems, we examine how legislative reform, open source networks, and the automation of legal work can allow lawyers to create more cost-effective delivery mechanisms for legal services, while allowing clients to choose, and work with, lawyers in a more informed manner. While the alternatives we explore are a radical shift from the traditional methods of the legal profession, they are in line with emerging technological realities, and are realistic market solutions to the access to justice problem. To conclude, we focus on the legal academy’s important role in motivating budding lawyers to think critically about how the legal profession, as a social institution, can be ameliorated to ensure that claims for justice do not fall outside of its purview.

Citation: Ramanujam, Nandini and Agnello, Alexander, The Shifting Frontiers of Law: Access to Justice and Underemployment in the Legal Profession (June 28, 2017). Osgoode Hall Law Journal 54.4 (2017): 1091-1116.

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