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    • Who's watching lawyers? An expert weighs in on money laundering

    A collaboration between the Investigative Journalism Foundation and CTV News has found that Canadian lawyers are involved in transactions with organized crime groups, according to a document obtained through Access to Information (Bloomberg Creative Photos via Getty Images) A collaboration between the Investigative Journalism Foundation and CTV News has found that Canadian lawyers are involved in transactions with organized crime groups, according to a document obtained through Access to Information (Bloomberg Creative Photos via Getty Images)
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    A report by Canada's financial watchdog obtained by the Investigative Journalism Foundation working in collaboration with CTV News looked at Canadian lawyers' potential role in money laundering schemes, including those by organized crime groups like biker gangs and drug cartels.

    University of Manitoba professor Michelle Gallant has studied financial crimes, and has also worked as Legal Counsel for the Federal Department of Justice.

    University of Manitoba professor Michelle Gallant (supplied photo)

    She spoke with CTV News Quebec Bureau Chief Genevieve Beauchemin.

    (Editor's note: the following interview transcription was edited for length and clarity.)

    Q. Genevieve Beauchemin:

    How are lawyers potentially being exploited by criminals?

    A. Michelle Gallant:

    When I think of the word exploited, I think of people who are vulnerable, and most lawyers, I wouldn't say are vulnerable at all, we are generally an educated, professional group. So rather than say exploited, I would say this Fintrac report talks about where there is some involvement of the legal profession. It means that maybe there is some money laundering because a law firm is setting up a corporation, or a lawyer is doing a real estate transaction, or maybe a lawyer is involved in sending money offshore. These are activities where lawyers are involved anyway.

    You can't finish a real estate transaction without a lawyer, when you set up a company, it is very helpful to have a lawyer, especially if you want to set up a company that has connections to another jurisdiction. Lawyers know how to do that. So those are the kinds of activities, the classic things that are associated with money laundering. They needn't be. So if you buy a house, or I buy a house, I am not money laundering, I am just buying a house and I need a lawyer. But those are the kinds of activities that classically money launderers use. Those are the kinds of services lawyers provide that can be part of a money laundering scheme.

    Q. GB:

    How are we watching lawyers?

    A. MG:

    We have a system that is set up to gather information, a reporting system that applies to banks and basically anybody who is offering any kind of service or financial service that could be used for money laundering. All of those folks have an obligation to report suspicious transactions, to report certain cash transactions, and to report electronic transactions and transactions where money is sent offshore. All those folks have obligations to identify their clients, to report suspicious financial activity. So if they make reports, it goes to this one central organization, which distills it, and finds patterns of criminal activity.

    But lawyers aren't part of that. Lawyers operate on their own, so it is not that lawyers are not regulated. But in this broad national system, lawyers are not part of that. Lawyers are self-governed, so there are 13 regulatory bodies that govern lawyers, in the provinces and territories. They have their own regimes and rules that have to do with money-laundering activities.

    (Gallant explained some of the rules and norms enacted by Canada’s law societies. See below for an example)

    Q. GB:

    Why are lawyers not subject to the same rules as bankers and casinos?

    A. MG:

    The government tried to regulate lawyers, I think the first attempt was in 2004, they said, ‘look, lawyers have to report suspicious financial activity.’ The law profession resisted, and they said that's a violation of solicitor-client privilege, we are not doing that. The government retreated, then the government tried again, and said, ‘look, we are trying to set up a national system, and we need lawyers to be part of that system.’ But again, the lawyers said no, and they brought forward a court challenge on this basis. They said lawyers aren't like bankers, lawyers enjoy a privileged relationships with their clients, it is generally called solicitor-client privilege.

    Lawyers have a special role in the justice system, so because of that role, if you share information with your lawyer it cannot be disclosed. That was the basis of their challenge, and law societies were successful and they continue to govern themselves. But that said, I would tell you that this doesn't mean that you couldn't set up a regime, that would be national, and could be constitutional, but the federal government hasn't tried again.

    Q. GB:

    While not alone in this, Canada is a bit of an outlier in this regard. Other jurisdictions have set up national reporting systems?

    A. MG:

    Yes, Canada is, and we have come under some pressure. There's an international body called the Financial Action Task Force, and its role is to try to set global standards around anti-money laundering and anti-terrorist financing. One of the things it has pointed out repeatedly is that Canada is out of sync with those standards, because lawyers aren't part of the national system.

    Q. GB:

    Why should Canadians be interested in the issue of whether lawyers are involved in money laundering, and how they are regulated?

    A. MG:

    In part, there are those issues people will talk about. Money laundering is corrosive, if you have a lot of money around you can buy judges, you can buy police, you can buy bankers. The other is that if I am laundering money, it means that my restaurant can push other legitimate restaurants out, they can't compete. It also may have an impact on real estate, so if drug dealers are buying the houses and that is artificially increasing prices, that is a concern. But fundamentally, the reason we are concerned about money laundering is because of the underlying activity. So you think about the fentanyl crisis, bodies in the streets. You think about human trafficking, you think about women and children being bought and sold. Money laundering is connected to those and that is why we ought to be concerned about it.

    Lawyers, we are agents of justice. That is why the solicitor-client privilege is so highly protected. So the idea that lawyers are not living up to this, that lawyers are part of money laundering, well they should actually be held to even a higher standard of ethic because it is a privilege to be a lawyer.

    RELATED:

    Examples of law societies' rules and norms regarding lawyers and money laundering:

    (SOURCE: Le Barreau du Quebec/The Quebec Bar Association)

    • Except in carefully circumscribed circumstances, a lawyer cannot receive in trust, for the same mandate or service contract, a cash sum of $7,500 or more. (Art. 69 to 72)
    • The lawyer must, in each file, identify the client and record information on the nature of the mandate or service contract entrusted to him. (Art. 13, 14 and 20 to 27)
    • The sums of money in trust held by the lawyer must be linked to the execution of a service contract or a lawful mandate, clearly defined and linked to the exercise of his profession. The mere fact of holding sums of money in a trust account does not constitute the exercise of the profession. (Art. 47 et al.)

    From those watching lawyers

    by Genevieve Beauchemin

    Le Barreau du Quebec, the Law Society of Ontario, the Law Society of B.C. and the Federation of Law Societies of Canada all declined interview requests.

    Here are excerpts from some of the statements forwarded to CTV News and the Investigative Journalism Foundation:

    Federation of Law Societies of Canada:

    "The Federation has been actively leading efforts to prevent money laundering and terrorist financing for more than 20 years.

    We have been working closely with Finance Canada to address money laundering risks in legal practice since 2019. That work through the Federation of Law Societies of Canada – Government of Canada Working Group on Anti-Money Laundering continues.

    Our partnership with Finance Canada strengthens the sharing of information between Canada’s law societies and the federal government to mitigate risks of money laundering and terrorist financing.

    All lawyers, Quebec notaries, and paralegals in Ontario are bound by their ethical duty not to facilitate or encourage any crime, including money laundering. This duty is spelled out in the Federation’s Model Code of Professional Conduct. "

    "Law societies have extensive powers to enforce their anti-money laundering and other regulations. Where evidence points to wrongdoing the law societies can and do prosecute."

    The Barreau du Quebec: (Quebec Bar Association)

    “The Barreau du Québec, whose mission is the protection of the public, supervises the practice of the profession through rigorous and effective disciplinary processes. This control is exercised, it should be remembered, by the Professional Inspection Service, the Office of the Syndic and the Registry Service, through the Disciplinary Committee.â€

    The Law Society of B.C.

    "The Law Society of British Columbia recognizes that lawyers, in providing legal services to their clients, are vulnerable to being targeted by criminals, including to launder the proceeds of crime. We have been aware of these risks and engaged in anti-money laundering (AML) related measures since at least the late 1980s. The Law Society has dedicated significant resources to this AML-related work, as it is one of our top priorities in keeping with our mandate to protect the public interest."

    "In addition, we have effective tools for proactively detecting conduct issues and addressing them. This includes a strong Trust Assurance Program, with compliance audits being conducted on law firms on a four or six year cycle at a minimum. Our compliance audits have been instrumental in identifying serious conduct issues that are referred to investigations. We also encourage other regulators and law enforcement to refer conduct concerns to us. Our significant investigation powers enable us to conduct effective investigations into AML-related obligations and to effectively police failure to meet Law Society requirements the ensure lawyers to not assist with money-laundering."

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