Law Times

April 7, 2008

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Law Times Earlug Ad 1/16/08 4:06 P 416-598-5899 1-800-410-1013 McKELLAR STRUCTURED SETTLEMENTS INC. 1-800-265-8381 $3.55 • Vol. 19, No. 11 ckellar_LT_Jan14_08.indd 1 1/8/08 3:03:02 PM Law societies and feds clash over new regulations Showdown brewing BY TIM NAUMETZ For Law Times OTTAWA — Canada's law societies and the federal government may be headed for a showdown over new regulations intended to reassert contentious provisions of a money laundering and anti-terrorism law over law- yers and legal firms. The regulations, set to take effect Dec. 30, will put legal counsel and firms back on the list of "persons and entities" subject to onerous record-keeping and scrutiny under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The country's 14 law societies, through the Federation of Law Societies of Canada, are resisting the move and have developed a "model rule" the federation says will allow each society to fulfill the requirements of the federal law through self-regulation by law- yers and the societies. The standoff could lead to the second round of a legal battle between law societ- ies and the federal government that began shortly after the controversial measures were first promulgated following the Sept. 11, 2001 terrorist attacks in the United States. Canada joined other countries in the fight against terrorism that followed the attacks, and strengthened its monitoring of large cash transactions and electronic fund transfers by including terrorist fi- nancing with measures earlier aimed at money laundering. The changes introduced unprecedented controls that also covered lawyers whose clients backed their arguments that a key section of the money-laundering and terrorism-fi- nancing law represented an "unprecedent- ed intrusion into the traditional solicitor- client relationship. An initial B.C. Supreme Court judgment, eventually affirmed by the Supreme Court of Canada, centered on a section that required lawyers, along with financial institutions and other businesses, to report any transactions they suspected were related to money laun- dering or terrorist financing. Following the successful court challeng- es, the government amended the legislation to exempt the legal profession and removed lawyers and legal firms from the list of per- sons and entities subject to the act. The businesses include casinos, with precious metal and jewelry dealers to be added under the new regulations. The businesses and entities listed under the law are required to provide the federal government's Financial Transactions and Reports Analysis Centre (FINTRAC) with regular reports of major financial transac- tions, as well as information about "suspi- cious" financial transactions. The Federation of Law Societies says the 'The federal regulations would authorize govern- ment officials to come into law offices without a warrant and look through confidential client information,' says Michael Milani. may be involved in large financial transactions. The societies and the Federation of Law Societies won a series of court rulings that regulations to take effect in December will be unenforceable without the consent of the federation and the Canadian Bar As- sociation — because of a 2005 order from the Supreme Court of British Columbia that stemmed from the earlier court actions The Proceeds of Crime (Money Launder- ing) and Terrorist Financing Act includes sec- See Lawyers, page 2 Real estate fraud not diminishing W BY ROBERT TODD Law Times hile real estate lawyers scrambled last week to get in line with a new set of Rules of Professional Prac- tice aimed at cracking down on fraud, a prominent Toronto prac- titioner says they are battling a moving target that is likely steered by organized crime. "I think the police, investiga- tors, real estate counsel, and the law society are inundated with fraud investigations," says Bob 'I think the police, investigators, real estate counsel, and the law society are inundated with fraud investigations,' says Bob Aaron. Aaron, a law society bencher and member of the group that shaped the rules that took hold March 31. "The statistics are — and I'm told by the Toronto Police Service — that real estate fraud is not dimin- ishing. And if you look at the U.S. figures, they bear that out. The numbers are horrendous." Included in the changes is rule 2.04.1, known as the two-lawyer rule, which restricts a single lawyer from acting for both the transferor and transferee in a transfer of real property. There are exceptions to the rule, such as transfers in which the transferor and transferee are related (as defined by the Income Tax Act) and in some instances for lawyers practising law in remote areas of the province. The two lawyers can practise in the same firm, but general conflict of inter- est rules apply. Changes to rule 5.01, mean- while, put lawyers on notice that the buck stops with them in terms of documents they sign electronically with the e-reg system. The rule states that lawyers Rule of Law 6 Catastrophe-Proof 9 Focus On Energy Law Quote of the week "We suggested this was an opportunity for the court to resolve the apparent differences between the courts in several provinces, and they didn't take up the invitation." — Frank Addario lawyer, Sack Goldblatt Mitchell LLP see Budd, page 5 Inside This Issue 3 Covering Ontario's Legal Scene TitlePLUS title insurance and you, together we make real estate real simple. April 7, 2008 "assume complete professional re- sponsibility for his or her practice of law" and must oversee non-lawyers to whom they assign tasks. The rule prevents lawyers from allowing others to use their diskette to access the e-reg system. The law society says the changes acknowledge the government's view that "lawyers play an impor- tant role in real estate matters and are uniquely positioned to help protect homebuyers and the in- tegrity of Ontario's land registry system," according to its web site. Lawyers also had until March 31 to submit an application to Tera- view and sign a registration agree- ment. Accounts of those who didn't comply were to be changed to allow only searching capabilities. This was part of a move by the government See The battle, page 2 Advocate Placement THE BEST RECRUITER FOR ... work life balance 1800.461.1275 416.927.9222 19 Y E A R S

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