During 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 also 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. 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 client identity information again if you have already done so. However, if your initial retainer is with respect to receiving, paying, or transferring funds and you have not 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. 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.
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 unless you have the client’s consent to do so. If you are conducting verification, you are required to make and keep copies of the documents.
You do not need to comply with the Client Verification Rules if:
You are exempt from the Client Identification Rules (i.e., you are in-house counsel or an agent as described in Rules of the Law Society of Alberta, Rule 119.46(3));
The client is:
- a financial institution governed by Canadian or provincial law or is a department or agent of the federal or provincial Crown;
- a public body (e.g. 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
- are received, paid or transferred by electronic funds transfer as defined in Rule 119.49(3) (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 to pay a fine, penalty, or bail; or
- are paid or received for professional fees, disbursements, or expenses.
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. Also remember that each transfer in the transaction must be assessed to determine whether it is exempt. For example, if you receive funds by electronic file transfer (EFT), that portion of the transaction does not trigger the verification requirements. However, if you pay the funds out to a non-exempt third party by cheque, the verification rules will be triggered.
Note that there is no longer any exemption from the Verification Rules for settlement funds received to settle legal proceedings.
This Module introduces the situations where lawyers, clients, or transfers are exempt from the Client Verification Rules. Always consult a current version of the Rules because these rules are technical and precise. This means visiting the Law Society’s website to obtain the most recent version of the Rules on a regular basis. This Module is not a substitute for the actual Rules.