The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has issued a Special Bulletin in October 2024 highlighting the role of the legal profession in facilitating money laundering, terrorist financing, and sanctions evasion. While most legal professionals conduct legitimate transactions, their specialized knowledge and services, such as managing trust accounts, facilitating real estate transactions, and creating corporate entities, make them vulnerable to exploitation by criminal actors. This bulletin provides insights and typologies to help reporting entities identify and mitigate risks associated with these activities.
Legal professionals, governed by self-regulatory bodies like the Federation of Law Societies of Canada, adhere to anti-money laundering guidelines and professional codes of conduct. However, they are not classified as reporting entities under Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime, except for notaries in British Columbia. This regulatory gap makes the sector particularly attractive to professional money launderers and organized crime groups seeking to exploit solicitor-client privilege and the inherent legitimacy associated with legal services.
FINTRAC identifies several key areas where legal professionals are susceptible to misuse. Trust accounts are commonly exploited to conceal ownership and integrate illicit funds into the formal financial system. Real estate transactions remain a favoured vehicle for laundering, with criminals using back-to-back sales, false identities, and corporate ownership structures to obscure the source of funds. The creation and management of companies and trusts by legal professionals also present significant risks, enabling criminals to retain control over illicit assets while hindering law enforcement efforts.
The bulletin outlines various red flags to help detect suspicious activities. These include unusual payment structures, transactions involving high-risk jurisdictions, and the use of complex corporate arrangements without legitimate purposes. By addressing these vulnerabilities and leveraging the insights provided, reporting entities can enhance their ability to detect, prevent, and report suspicious transactions, thereby strengthening Canada’s broader efforts to combat financial crime.