7.10 Client Verification
During the course of your retainer to provide legal services to a client whom you have duly identified, you may engage in, or receive instructions with respect to, the receipt, payment or transfer of funds. If this occurs, you must comply with the Client Verification Requirements.
The funds do not have to move through your trust account for this requirement to be triggered; the funds may pass directly from one party to another party. The key element is that you are giving instructions for the movement of funds (which can include the preparation of legal documents containing such instructions).
You do not have to obtain and record information again as to the client’s identity if you have already done so. However, if your initial retainer is with respect to receiving, paying or transferring funds and you have not already gathered this information, you must do so.
In addition, you must take reasonable steps to verify the identity of an individual client or an individual who is authorized to provide and give instructions on behalf of an organization. Note that while the Client Identification Rules require you to obtain and record information as to the client’s identity, the Client Verification Rules require you to obtain and retain a copy of all documents which you use in verifying the identity of individuals. This will be covered in chapter 11.
The difference between identification and verification is important. If you are conducting identification, you review the identification documents and keep notes of the client’s name, address, telephone number and occupation but do not photocopy and retain the documents. If you are conducting verification, you are required to make and keep copies of the documents.
You do not need to comply with the Verification Rules if:
- You are exempt from the Identification Rules (i.e., you are in-house counsel or an agent per Rules of the Law Society of Alberta, Rule 118.2(3)), or
- The client is
• a financial institution which is governed by Canadian or provincial law or is a department or agent of the federal or provincial Crown,
• a public body (i.e., federal or provincial crown department or agency, a municipal body, a local board, an organization that operates a public hospital, a body incorporated under provincial or territorial law for a public purpose),
• a reporting issuer within the meaning of provincial or territorial securities legislation, a corporation whose shares are traded on a stock exchange and that operates in a country that is a full member of the Financial Action Task Force or
• a subsidiary of the foregoing whose financial statements are consolidated with the financial statements of the foregoing, or
- The funds
• are received, paid or transferred by electronic funds transfer as defined in Rule 118.1(a). Note that the definition of “electronic funds transfer” only includes transmissions of funds conducted by and received at a financial institution that is headquartered and operating in countries which are full members of the Financial Action Task Force,
• are paid by or to a financial institution, public body or reporting issuer as described above,
• are received by the lawyer from a trust account of another lawyer within Canada,
• are received from a peace officer, law enforcement agency or other public official acting in their official capacity,
• are paid or received pursuant to a court order to pay a fine or penalty,
• are paid or received as a settlement of any proceedings which have actually been commenced either in Canada in any court, statutory tribunal, arbitration panel or arbitrator or before any foreign court (See Rule 118.1(f)) or
• are paid or received for professional fees, disbursements, expenses or bail.
If you intend to rely on an exemption, you should record the basis on which you determined that the exemption applied and retain this on your file.
Note that settlement funds received before commencement of legal proceedings are not exempt from the Verification Rules.
This Module is intended to introduce you to the situations where lawyers, clients or transfers are exempt from the Client Verification Rules. You should always consult a current version of the Rules as these rules are technical and precise. This Module is not a substitute for the actual Rules.