The Supreme Court of Canada has struck down sections of the federal anti-terrorist financing law because it violates solicitor-client privilege.
It's the end of a 15-year battle between Canada's lawyers with the federal government over the lawyers' right to protect their relationship with their clients.
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The law required them to keep track of and report their clients' financial activities to the government.
The unanimous court decision says the legal powers of FINTRAC (the Financial Transactions and Reports Analysis Centre of Canada) violate the Constitution in the way it applies to lawyers.
The court found the parts of the law that give authorities sweeping power to search and seize files from lawyers' offices without a warrant carry an inherent risk of breaching solicitor-client privilege.
Agents of the state
It also recognized for the first time the constitutional protection of lawyers against any influence that undermines their relationship with clients. That's a new principle of fundamental justice to be considered under section 7 of the charter.
The decision also reiterated that warrantless searches are "presumptively unreasonable," although it notes that Parliament "could devise a constitutionally compliant inspection regime" that wouldn't require a warrant.
"The search powers ... as applied to lawyers, along with the inadequate protection of solicitor-client privilege ... constitute a very significant limitation of the right to be free of unreasonable searches and seizures," Justice Thomas Cromwell wrote on behalf of the court.
Canada's lawyers have fought the anti-money laundering law since Jean Chrétien's Liberal government brought it into force in 2000, arguing it turns lawyers into agents of the state.
Law societies have established their own anti-money laundering rules and have been exempt from the current law while the case made its way through the courts.
The anti-money laundering law will continue to apply to financial institutions and accountants, as well as to real estate firms.
FINTRAC is a federal agency responsible for detecting, preventing and deterring money laundering, terrorist activity financing and other threats to the security of Canada. Financial institutions and intermediaries, as well as real estate agents and accountants, have to report to FINTRAC. The agency has the power to search documents and discloses suspicions of money laundering or of terrorist financing activities to police authorities and CSIS.