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OP I N ION BY PHILIP SLAYTON LEGAL ETHICS Privilege does not always prevail Lawyers and government once again at loggerheads over protecting solicitor-client information in dodgy financial transactions. I t's déjà vu all over again. The federal government is once more trying to force the legal profession to comply with the country's money laundering and terrorist financing rules. Canada's lawyers are fighting back, arguing that solicitor-client privilege, the profes- sion's right to regulate itself, ethical considerations, and anything else they can think of, stand in the way. We've seen it all before. The imbroglio started in 2000, when Parliament passed the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Regulations under the act required lawyers, and financial institu- tions, brokers, casinos, and others who handle cash, to report suspicious financial transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). Lawyers went nuts. Several provincial law societies ran off to court, arguing that the regulations forced law- yers to act inconsistently with their con- stitutional duties of loyalty to a client and confidentiality. In 2001-02, courts across the country accepted these arguments and exempted the legal profession from the reporting requirements. In 2003, the fed- eral government reluctantly removed law- yers from the list of those who must report suspicious cash transactions, but warned it was going to try and figure out some other way of roping lawyers in. Hoping to head off further action by the government, all law societies adopted a model rule developed by the Federation of Law Societies of Canada. This rule pro- hibited lawyers from accepting more than $7,500 in cash, subject to limited excep- tions, and required them to adopt more stringent record keeping of cash receipts. Meanwhile, there was pressure on the government to do something. In 2004, the auditor general said the exemption for lawyers was a "serious gap" and allowed crooks to bypass a key component of the anti-money-laundering system. An aca- demic study that year reported that law- yers had played a role in half the major money-laundering and proceeds-of-crime cases solved by the RCMP from 1993 to 1998. A 2005 RCMP report said lawyers 18 JUNE 2011 www. CANADIAN Lawyermag.com are left "bearing the brunt of increasingly desperate criminals with vast sums of dirty drug cash needing conversion into some- thing that can be spent without arousing suspicion." In 2006, the Senate banking, trade, and commerce committee recom- mended the government monitor lawyers for suspicious transactions. The Financial Action Task Force, an international body combating money laundering and terrorist financing, expressed dissatisfaction with Canadian efforts. In 2007, the government proposed new regulations, which required lawyers to keep information that verified their clients' identities and allowed FINTRAC to audit lawyers' files to ensure compliance. There were lengthy consultations with the legal profession that initially went well. But, after considerable back and forth, the govern- ment and the profession could not agree. Now the government apparently intends to go back to court to try and reverse the court decisions of 10 years ago. The battle lines have been drawn again, pretty much in the same place as before. What a dismal story! Two stubborn darcy mueNcHratH