Sat, Feb 14, 2015

(Reuters) - Canada's top court has struck down provisions of the country's anti-money laundering and terrorist financing law that target lawyers, on the grounds that it could breach a lawyer's duty to the client.

In a unanimous decision on Friday, the Supreme Court of Canada ruled that the legislation should not force lawyers to collect and turn over suspicious financial information about their clients.

Other provisions of the anti-money laundering and terrorist financing legislation remain in force.

Lawyers became subject to the legislation in 2001, when they were first required to report any suspicious financial activity involving their clients to the Financial Transactions and Reports Analysis Center of Canada.

Although the legislation could have imposed criminal charges for noncompliance, the government never enforced the provisions against lawyers following a constitutional challenge launched by a national federation of law societies in Canada, which argued that the provisions would turn lawyers into 'state agents.'

The court concluded that targeting lawyers would violate a principle of fundamental justice by undermining the lawyer's duty of commitment to his or her client's cause. The court decision also criticized provisions of the law that allowed for warrantless searches of records in a lawyer's office.

'The regime authorizes sweeping law office searches which inherently risk breaching solicitor-client privilege,' wrote Justice Thomas Cromwell in the decision.

Reacting to the ruling, the Federation of Law Societies of Canada said that Canadian lawyers still face appropriate oversight. The president of the federation said that each legal society has rules restricting suspicious transactions and can conduct audits while protecting privileged information of clients.

As an example, he said each legal society prevents lawyers from receiving a cash payment of C$7,500 ($6,028) or more.

'When there is evidence that a lawyer has been used as a dupe, there are certainly disciplinary proceedings that result,' said Thomas Conway, president of the federation, after the court decision was announced.