Canadian Lawyer

w w w . C A N A D I A N L a w y e r m a g . c o m J U N E 2 0 1 7 27 DIRTY rom where he sits in his downtown Vancouver office, Kim Marsh doesn't like what he sees. Offshore money pouring into real estate. Trusts and nominees set up to conceal the true owners of com- panies and property. Neighbourhoods where half the houses are dark at night because properties are being used to park or launder money. Much of it, says the former head of the RCMP's International Organized Crime Investigation Unit, has been set up with the help of Canadian lawyers. "Lawyers, they're the biggest problem with money laundering in this country, as far as I'm concerned," says Marsh, now presi- dent of IPSA International. However, Marsh isn't the only one raising questions about the role some Canadian lawyers may be playing in helping to "snow wash" money and whether Canada's law societies are doing enough to stop them. Canada is under increasing international pressure to include lawyers in its anti-money-laundering and terrorist-financing sys- tem, setting the stage for a new confrontation between the federal government and Canada's law societies in coming months. In 2016, an evaluation by the international Financial Action Task Force identified the absence of lawyers and Quebec notaries as a "significant loophole" in Canada's anti-money-laundering monitoring system. That's at odds, however, with a 2015 judgment of the Supreme Court. It ended a 14-year-long legal saga between the federal government and Canada's law societies when it ruled that mak- ing lawyers subject to Canada's money-laundering and terrorist- financing act risked violating solicitor-client privilege. Malcolm Mercer, a partner in Toronto with McCarthy Tétrault LLP and a bencher with the Law Society of Upper Canada, says the ruling did more than simply reaffirm the importance of solicitor-client privilege. "The greater significance was around the importance of com- mitment to the client's cause. That was the new ground for the Supreme Court of Canada that was broken." The Federation of Law Societies of Canada considers the case closed. "It is a cornerstone of our democracy that the public be able to speak in confidence with legal counsel," says Maurice Piette, president of the federation. "Requiring legal counsel to report confidential client information to the state is unconstitutional because it would violate fundamental legal principles designed to protect the public." The federal finance department has a different reading. Finance department officials don't see the ruling as the final word but rather as an invitation to amend the law so that it doesn't threaten lawyer-client privilege. Finance Minister Bill Morneau has already quietly decided that lawyers should be part of Canada's anti-money-laundering and terrorist-financing system. "The government believes that the application of the rules to lawyers is important to maintain the integrity of Canada's AML/ATF Regime in order to prevent, detect and deter money laundering and terrorist financing in Canada, consistent with international standards established by the Financial Action Task Force," his office wrote. "It is important that financial intermediaries (including non- designated finance professionals, such as lawyers and businesses) take measures to ensure they are not unwittingly used to launder money or to finance terrorism." Now that the decision has been made, finance department officials are working behind the scenes on proposals to bring to Morneau in the coming weeks. While Canada has five years to fix the problems identified in the FATF report if it wants to remain in good standing, it has to present a progress report by October. The finance department's actions could take a number of forms such as legislation, possibly accompanied by regulations. Officials even muse about working with law societies to craft new rules. The federation, however, appears cool to the idea. "Lawyers in Canada are covered by comprehensive anti- money-laundering and terrorist-financing rules and regula- tions implemented by the law societies," says Piette, when asked whether the federation would be willing to work with the govern- ment to develop a new regime. almost inevitable with new rules A turf war and the federal government is between law societies terrorist financing in the pipeline on anti-money laundering and F KIM STALLKNECHT

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