Criminal Activity and the Duty to Withdraw

There are situations when you may be required to withdraw from acting for a client.

If you are retained by a client, you must always inquire about the source of funds, pursuant to the Rules of the Law Society of Alberta, Rule 119.50(1)(a).  

The Rule requires you to inquire about the expected source and origins of the funds related to the legal services to be provided. This may be apparent from the information obtained from the client for the retainer.  In general, you should make sufficient inquiries to assess whether there is anything that suggests the proposed transaction is inconsistent with the client’s apparent means, and the circumstances of the transaction.

In making this assessment, depending on the circumstances, you may wish to consider questions such as:

  • Is someone other than the client providing information about the source of funds?
  • Is the disclosed source consistent with the knowledge about the client’s profile and activity?
  • Is there anything unusual about the source of the funds in the context of the transaction?

For record-keeping purposes, you should also retain supporting documents that relate to how you determined the source of funds.

Watch out for red flags - the answers or lack of answers may cause a legal professional to be suspicious that his/her services are being misused and where doubts persist, obtain and evaluate more detailed information from the client; or consideration should be given to not proceeding with the relationship or transaction.

In addition, during the course of gathering information for complying with the client identification or verification requirements, if you know or ought to know that you would be assisting the client in fraud or other illegal conduct, you must withdraw (Rules of the Law Society of Alberta, Rule 119.53(1); See also the Code of Conduct, Rule 3.7-5). 

Where the Rules required you to verify a client, Rule 119.54 requires you to periodically monitor your professional business relationship with the client to assess and record whether the client’s information and instructions are consistent with the purpose of the retainer, and whether there is a risk that you might be assisting in or encouraging fraud or other illegal conduct. You must be alert to new facts about a client’s activities, new information about source of funds, or unexpected client behaviour. 

Further if, during the retainer, you know or ought to know at any time that you are assisting a client in fraud or other illegal conduct, you must withdraw. (Rules of the Law Society of Alberta, Rule 119.55; See also the Code of Conduct, Rule 3.7-5).

Last modified: Monday, 21 August 2023, 9:28 AM