Lawyers’ role in money laundering scrutinized by B.C.’s Cullen Commission

VANCOUVER (NEWS 1130) – Whether knowingly or not, lawyers are at a high risk of being used by criminals hoping to clean dirty money, B.C.’s Cullen Commission of Inquiry into Money Laundering heard Monday.

Federal officials said lawyers are the profession with the second-highest rate of prosecution for money laundering.

But the Federation of Law Societies of Canada successfully fought federal legislation meant to prevent money laundering and the financing of terrorism in 2011 and lawyers are now exempt from the law.

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Bruce Wallace, manager of strategic policy and reviews for the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), told the Cullen Commission his agency is not focused on investigating the activities of lawyers.

Real estate transactions involve large amounts of money flowing through law firms, which make them vulnerable to potential money laundering, Wallace says.

— kelvin gawley (@byGawley) November 16, 2020

“We do have an interest in the extent to which legal professionals are used, wittingly or unwittingly, by those seeking to launder money,” he said. “But because they’re not currently covered by the legislation or the [regulatory] regime, it tends to be something we do when we can, as opposed to being something on the front burner.”

But the law federation, which represents 14 law societies from each province and territory (including two in Quebec), takes money laundering very seriously, according to its executive director of policy and public affairs, Frederica Wilson.

Wilson, who is also the federation’s deputy CEO, said the litigation fighting off federal rules was a matter of jurisdiction, not a lack of willingness to crack down on dirty money.

“I think there was general agreement about what kinds of rules ought to apply but not whose rules they should be,” she said.

In 2004, law societies from coast to coast capped cash payments lawyers could accept at $7,500. Four years later, they introduced new rules requiring members to take steps to identify their clients, with stricter protocols for those engaged in large financial transactions.

Wilson says the federation's litigation against federal legislation regulating lawyers' practices and subsequent federation moves to self-regulate money laundering issues were not "purely strategic" to avoid further legislation.

— kelvin gawley (@byGawley) November 16, 2020

Wilson said the federal government was committed to replacing the section of law that was struck down in court with new, constitutional legislation.

The government didn’t appreciate the weight of law society regulations, which are legally binding, Wilson said.

“[Law societies] have comprehensive mandates and very extensive powers,” she said. “They have shown no reluctance to use those powers and no inclination to shy away from appropriate regulation in any area. But, to be blunt, the assessors were not interested in hearing that.”

In 2018, however, the government’s “heels-dug-in” position intent on creating new regulations suddenly changed and federal officials have since demonstrated a willingness to collaborate with the federation and its member societies, according to Wilson.

Commission counsel Nicholas Isaac asked Wilson whether the fading spectre of legislation would take the federation’s focus away from money laundering.

“No,” she said. “I think there has been an evolution over 20 years in the thinking of the law societies and the federation about anti-money-laundering regulation. And that evolution has brought us to a place where there is a whole-hearted embracing at the level of law societies and the federation in the idea that law societies accept responsibility for law societies to regulate in this area.”

Testimony at the commission is scheduled to continue on Tuesday.