Proceeds of crime legislation

Proceeds of crime legislation

The Law Society and Federation of Law Societies obtained an interlocutory order on November 20, 2001, upheld by the B.C. Court of Appeal on January 18, 2002. On February 15 the Attorney General of Canada applied for leave to appeal the order to the Supreme Court of Canada and for a stay of execution.

B.C. lawyers exempt from new money laundering reporting requirements

On November 20, 2001, the Honourable Madam Justice M.J. Allan of the Supreme Court of British Columbia made an order granting lawyers interlocutory relief from the requirement to comply with reporting requirements under the new federal money-laundering legislation: Federation of Law Societies of Canada v. Attorney General of Canada and The Law Society of British Columbia v. Attorney General of Canada, 2001 BCSC 1593. On January 18, 2002 the B.C. Court of Appeal dismissed an appeal of the interlocutory order brought by the federal government and upheld the order for the reasons given by Madam Justice Allan.

Allan, J. granted an exemption from the application of section 5 of the Regulations of the Proceeds of Crime (Money Laundering) Act, pending a full hearing on the merits of petitions of the Federation of Law Societies and the Law Society of British Columbia, which challenge the constitutionality of the legislation. That hearing is set for June 24.

The full text of the decision of the B.C. Supreme Court is available at http://www.courts.gov.bc.ca/jdb-txt/SC/01/15/2001BCSC1593.htm .

In the last paragraph of her decision, Madam Justice Allan said:

The proclamation of s. 5 of the Regulations authorizes an unprecedented intrusion into the traditional solicitor-client relationship. The constitutional issues raised deserve careful consideration by the Court. The petitioners seek a temporary exemption from the legislation until the merits of their constitutional challenge can be determined. I conclude that the petitioners have satisfied the tripartite test for the exemption they seek. They are entitled to an order that legal counsel are exempt from the application of s. 5 of the Regulations pending a full hearing of the Petitions on their merits.

The result of this decision is that, until further order of the court, B.C. lawyers are exempt from the obligation to make any reports to FINTRAC under the Proceeds of Crime (Money Laundering) Act. On February 15, 2002 the Attorney General of Canada applied for leave to appeal the interlocutory order and for a stay of execution.

Lawyers should check the Law Society website for updates, monitor future court proceedings and remain familiar with the Act and Regulations.

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Justice Minister takes position that B.C. order applies only to B.C. lawyers

The Federal Justice Minister, the Honorable Anne McLellan, has taken the position that the federal government will not recognize the B.C. Supreme Court's order that exempts lawyers from the application of s. 5 of the Regulations to the Proceeds of Crime Act, as applying to all lawyers across Canada. The Justice Minister's current position is that the order only applies within B.C., not beyond. As a result, court proceedings have been commenced or contemplated in several other Canadian jurisdictions. The first of these applications has been heard in Alberta.

Alberta Court of Queen's Bench makes interlocutory order — lawyers in Alberta must still report suspicious transactions to the Law Society of Alberta.

On December 6, 2001, the Federation of Law Societies brought an application on an expedited basis before the Alberta Court of Queen's Bench. The Federation sought an order of the Court recognizing the B.C. judgment pursuant to the doctrine of res judicata and/or judicial comity.

Watson J. of the Court of Queen's Bench of Alberta made the following interlocutory orders:

  1. The obligations of lawyers in Alberta concerning suspicious transactions are not stayed.
  2. However, lawyers will not provide their suspicious transaction reports to the Financial Transactions and Reports Analysis Centre (FINTRAC). Instead, they will place them in a sealed envelope marked only with their names and file numbers, to the Law Society of Alberta for storage.
  3. The Law Society of Alberta will stamp the envelopes as to date of receipt.
  4. The documents are not subject to search warrant unless ordered by this court.
  5. The order is to be reviewed at the time of the hearing on the merits of the application.

Superior Court of Justice grants temporary exemption to Ontario lawyers

On January 7 the Ontario Superior Court of Justice granted a temporary exemption for Ontario lawyers from reporting requirements of the new federal money laundering legislation until a constitutional challenge can be heard in Ontario.

On January 4 Justice Cullity ordered that legal counsel are exempt from the operation of section 5 of the Regulations of the Proceeds of Crime (Money Laundering) Act, pending a full hearing of the petitions by the Federation of Law Societies of Canada.

Justice Cullity's January 4 endorsement reflects a finding similar to that of the Supreme Court of B.C. on November 20, 2001.  Written reasons are pending.

Nova Scotia Supreme Court exempts lawyers from obligation to report

On March 21 the Nova Scotia Supreme Court also ordered that lawyers in that province are exempt from the reporting requirements of the new federal money laundering legislation until a constitutional challenge brought by the Nova Scotia Barristers' Society is heard on the merits. Written reasons are pending.

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