SHOULD LAWYERS EVER be gatekeepers? While suggestions in the aftermath of Enron that lawyers should be required to report their clients' financial misdeeds were quashed fairly quickly, the answers haven't been so easy when it comes to terrorism. The April 2013 decision by the BC Court of Appeal to strike down portions of the federal government's Proceeds of Crime (Money Laundering) and Terrorist Financing Act applying to lawyers was just the latest skirmish in a long-running (since 1999!) battle on the subject.
Elected officials are no longer willing to accept lawyer-client confidentiality as an article of faith, and instead seem prepared to effectively deputize lawyers as agents in the fight against terrorism — and to fight for that in court as well as in the court of public opinion. As a profession, we can pontificate all we want about the sanctity of privilege, but in an age where innocent spectators at the Boston Marathon can be maimed and murdered by terrorist acts, it's getting pretty difficult to convince the public that keeping client secrets is in everyone's best interest.
You need a bit of a roadmap here to fully appreciate what's been going on. The Proceeds of Crime (Money Laundering) Act, often referred to as Bill C-22, was introduced in the late '90s. The legislation required “regulated persons and entities” to report suspicious transactions, and those involving more than $10,000 in cash, to FINTRAC, a federal agency set up to analyze financial reports and disclose that information to the police. In addition, Bill C-22 prevented “reporting persons” from tipping off their clients. The law was given Royal Assent in 2000, but only parts of it were in force, and the rest deferred.
In November 2001, regulations making the provisions applicable to lawyers caused a firestorm: both the Federation of Law Societies and the Canadian Bar Association contended that the proposals infringed on solicitor-client confidentiality and professional independence. The Federation argued that the legislation made lawyers “secret agents of the state,” collecting and reporting information about clients. That threatened not only the sanctity of the lawyer-client relationship, but also constitutional principles and the integrity of the administration of justice.
The government's response? Piffle. Terrorism is a bigger problem. And off to court everyone went. In November 2001, the BC Supreme Court granted an injunction exempting lawyers from the reporting requirements. Courts in Alberta, Ontario, Saskatchewan and Nova Scotia followed suit. In May 2002, the cases in these other provinces were stayed pending the BC court's decision on merits. After years of wrangling, the BC case was stayed on consent in May 2005.
Between 2005 and 2008, legal regulators adopted “no cash” rules restricting lawyers from receiving cash in amounts over $7,500, which effectively rendered the $10K reporting requirement moot. Law Societies also adopted client identification requirements (the “know your client” rules). The Law Society of Upper Canada's 2008 report declared that these steps “will demonstrate that responsible self-governance by the law societies makes federal regulation of the legal profession on this subject unnecessary.”
So there it was, laid bare — it's not just about the best way to prevent terrorism; it's about who gets to regulate lawyers. When the feds introduced amendments in December 2008 and said the whole thing applies to lawyers, the truce was off, and the BC court case was back on. A chambers judge struck down the offending provisions in 2011, and the BC Court of Appeal agreed this spring.
It will likely take a trip to the Supreme Court to finally sort out the constitutional challenge. The bigger question, though, is whether government should be able to override lawyer independence when it sees a broader public interest at stake. We're not done with that one quite yet.
Paul Paton is a professor at the University of the Pacific's McGeorge School of Law in Sacramento, California. He can be reached at (916) 739-7284 or firstname.lastname@example.org.