The organization examined audit programs and compliance procedures launched by Canadian law societies
The Federation of Law Societies of Canada has released a new report focusing on the regulation of anti-money laundering and counter terrorist financing by law societies.
The "Effectiveness of Law Society Regulation Relating to Anti-Money Laundering and Counter Terrorist Financing" report addresses Financial Action Task Force requirements with regard to the AML regime in Canada. In particular, the report tackles Immediate Outcome 4, which centers on how effectively designated non-financial businesses and professions like the legal profession are regulated.
The report examines the audit programs and compliance procedures implemented by Canadian law societies. It also looks into the disciplinary outcomes in cases related to trust account misuse, breaches of client identification and verification rules, and violations of the no-cash rule, as well as gatekeeping responsibilities such as licensing and admission processes, and restrictions on ownership and structure of legal practices.
The Model Rules and Model Code of Professional Conduct implemented across Canada by the federation details obligations on trust account use, conducting client due diligence via
identification and verification procedures, and cash use limitations, under the overarching principle that legal professionals do not aid in propagating dishonesty, fraud, or criminal activity. The rules and code harmonize the approach to AML/CTF regulation for consistency and effectiveness.
Moreover, the federation's AML/CTF standing committee cultivates law society collaboration for a unified regulation approach. Under the federation, law societies have set up a regulatory framework aligned with the FATF’s iO4 criteria.
Canadian law societies have been granted authority to supervise AML compliance in respect of constitutional principles. The federation provides online AML/CTF training modules to educate legal professionals on identifying and limiting AML risks. Guidance documents and risk advisories focus on trust account misuse, real estate transactions, and dealings with politically exposed persons.
The stringnent ownership rules enforced by law societies prohibit non-legal professionals from taking controlling stakes in legal practices. Law societies may also demand the release of privileged information in line with their broad investigative powers while retaining the privilege.
Those who violate AML/CTF rules may be subject to license revocations, fines, and suspensions.
The full "Effectiveness of Law Society Regulation Relating to Anti-Money Laundering and Counter Terrorist Financing" can be accessed here.
