The Canadian government has called on the provincial law societies to enact rules to assist in the fight against money laundering, terrorist financing and fraud involving legal services. As a result, the Canadian law societies are enacting new rules that require client identification and, for certain transactions, verification of client identity. These rules are often called the "Know Your Client" rules.
The "Know Your Client" rules require lawyers to obtain certain information in order to identify all clients when new matters are taken on. Identification is required for both new and existing clients. Specifically:
For individual clients. Lawyers are required to obtain a client’s name, home address and telephone number, occupation and, if applicable, business address and business telephone number.
For organizational clients. Lawyers are required to obtain a client’s name, business address, business telephone number and a description of the client’s business activity. They are also required to obtain a client’s incorporation number or business identification number and its place of issue. In addition, lawyers need details about the contact person who is providing them with instructions.
If a client is representing a third party, the client’s lawyer is required to obtain the same information in respect of the represented third party.
In the event that a retainer involves certain financial transactions, such as utilizing a law firm’s trust account or involvement in receiving, paying or transferring monies, negotiable instruments or securities, lawyers may, depending on circumstances, also be required to take certain steps to verify the identity of the client and any represented third party. As a result, they may be required to obtain more information about the directors and significant owners. Lawyers may also need to review (in person or by an appointed agent) identification documents for clients and represented third parties, which include both individuals and any persons authorized to provide instructions in respect of the payment, receipt or transfer of funds.
Despite these new identification and verification requirements, lawyers’ professional obligations regarding client confidentiality have not changed and continue to be of fundamental importance to our practice and the practices of all Canadian lawyers.