Canada's lawyers exempt from money-laundering laws

Canada's lawyers are now exempt from the federal government's anti-money laundering and terrorist financing laws following a ruling in B.C. Supreme Court Wednesday.

B.C. Supreme Court ruling strikes down sections of federal law

Canada's lawyers are now exempt from the federal government's anti-money laundering and terrorist financing laws.

The B.C. Supreme Court has struck down sections of the law relating to lawyers as unconstitutional.

The law requires financial institutions and others, including lawyers, to keep records on money transactions in an attempt to stop terrorists and criminals from using cash.

Canada's 14 law societies challenged the law saying it infringed on solicitor-client confidentiality.

Lawyers for the attorney general of Canada argued during the trial last May that the legislation is valid and part of the country's international obligation.

But B.C. Supreme Court Justice Laura Gerow concluded the law infringes on lawyers and has ordered that they and their firms be excluded.

The charter infringement puts lawyers and their clients' liberty interests in jeopardy by collecting information about clients, and making that information available to the government, Gerow said in her ruling.

"In my view, reading down the act to exclude legal counsel and legal firms is appropriate, as this remedy respects both Parliament's objectives of controlling money laundering and terrorist financing ... and the charter rights of lawyers and their clients," Gerow concluded.

Strict professional rules in place

John Hunter, lawyer for the Federation of Law Societies, said Wednesday the ruling applies to lawyers across the country because Canada's attorney general agreed the legal action would be a test case.

Hunter said the law societies challenged the legislation because lawyers felt it intruded far too much on the lawyer-client relationship, especially when lawyers have strict rules on money that have the same effect as the government laws.

"It shouldn't be applied to us, because we would have to basically create evidence against our own clients. Constitutionally that can't be done. There's an independence issue here that's important for clients."

In 2004, the law society developed the No Cash Rule, which stops lawyers from taking cash of $7,500 or more from clients on one matter. The rule augments long-standing law society rules that stop lawyers from taking part in illegal activity or from being unwittingly involved in money laundering and terrorist financing.

Hunter said the law societies' rules are very similar to what the federal government wants, so there's no gap in the coverage around laundering money for crime or terrorism. 

The court hasn't required the federal government to rewrite the law, but has simply said those portions that relate to lawyers aren't effective, Hunter said.