Law Society improves standards of diligence for lawyers to fight money laundering and terrorist financing

Law Society By-Law 7.1 covers “Operational Obligations and Responsibilities” while Law Society By-Law 9 deals with “Financial Transactions and Records”.

An amendment to By-law 7.1 provides new methods by which licensees can verify the identity of their customers. When dealing with corporate clients and trusts, another change adds a requirement that licensees identify and verify corporate directors and make “reasonable efforts” to identify and verify trustees, beneficiaries. trusts and shareholders owning more than 25% of all shares. If this information is too difficult to obtain, the changes allow licensees to identify and verify the senior manager and monitor the services provided.

There are two new requirements when a provision involves the receipt, payment or transfer of funds. Licensees should inquire about the source of funds from the client, but licensees do not need to verify this information, nor do they need to inquire about the source of funding from other parties to the transaction. Second, licensees must “periodically monitor current assignments” to ensure that the client’s activities and funding sources are in accordance with the terms of the engagement and with the information provided by the client. The requirement does not involve monitoring the client’s affairs or investigating internal operations, only allowing the licensee to “determine if there have been any changes that create a risk that the licensee can assist. dishonesty, fraud or any other illegal activity ”.

Among the changes to By-law 9 is a clarification of the rule on cash transactions. A licensee cannot accept more than $ 7,500 in cash, which is already how the Law Society interprets this requirement. The exemption for cash received under a court order was removed, having been identified as a money laundering risk.

Also under By-law 9, the amendments clarify the restriction requiring that trust accounts be used only for “transactions or matters for which a licensee or his or her firm provides legal services”. Licensees are required not to hold money in trust “beyond a reasonable time” after service has been provided.

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