Hat tip to the GC at a prominent Canadian firm for pointing me to this one (and a reminder to readers that pointers and links are always welcome!): “Tax reporting law faces opposition from B.C. lawyers” —

• “The Law Society of BC is part of a pending constitutional challenge against amendments to the Income Tax Act; lawyers charge that new reporting requirements infringe on charter rights of solicitor-client privilege.”
• “Lawyers in B.C. and across Canada are challenging a new law that will cause them to report more instances of client transactions where abusive and aggressive tax avoidance is suspected and introduce penalties, including jail, for not doing so.”
• “Late last month, the Federation of Law Societies of Canada was granted an injunction against the federal government to delay the implementation of new laws under the Income Tax Act (Bill C-47) designed to further compel lawyers to report such transactions to the Canada Revenue Agency (CRA).”
• “Supreme Court of B.C. Justice Lisa Warren granted the injunction on Nov. 24 ahead of a constitutional challenge by the federation, which represents 14 laws societies and more than 141,000 lawyers across the country.”
• “At issue is alleged state overreach by the attorney general of Canada into the affairs of individuals. Lawyers contest new reporting requirements infringe on the constitutional right of solicitor-client privilege.”
• “‘Lawyers and other members of the legal profession, owe a duty of commitment to their client’s cause and are also bound by rules of professional conduct to maintain the confidentiality of information received from their clients,’ the federation has stated in an online backgrounder.”
• “Warren’s judgment found an injunction was warranted as it was apparent there was a serious issue to be tried in court. And before the challenge is heard, implementing the law would do irreparable harm should it be found to be unconstitutional, ruled Warren.”
• “Warren noted mandatory disclosures of reportable transactions have existed since 2013 but Bill C-47 lowered the reporting threshold and also implemented a punishment for lawyers and other professionals who do not comply — a fine of up to $25,000 and imprisonment for a term of up to 12 months.”
• “Warren also noted that the new law provides that ‘disclosure is not required ‘if it is reasonable to believe that the information is subject to solicitor-client privilege.’'”
• “Parliament enacted the amendments to improve the gathering of relevant information to assist the CRA to respond to tax risks. The lack of timely, comprehensive and relevant information on aggressive tax planning strategies is one of the main challenges faced by tax authorities worldwide, including the CRA, the government stated in its response to the injunction application.”

“Lawyers temporarily exempted from CRA’s mandatory disclosure requirements” —

• “Critically for lawyers, the new rules place the onus on every advisor or promoter involved in a reportable or notifiable transaction to make their own separate disclosure to the CRA, rather than relying on a single report from the taxpayer.”
• “During the parliamentary review process, an exemption was added to the law confirming that disclosure requirements do not apply where it is ‘reasonable to believe that the information is subject to solicitor-client privilege.'”
• “However, Roy Millen, the FLSC’s lead lawyer, explained that the law forces legal counsel to choose between their own and their clients’ interests. Penalties for non-compliance by advisors could rise to as high as $110,000 plus the value of all fees charged.”
• “‘The end result is still a requirement for lawyers to report, and the concept of a lawyer reporting on their client is, in our view, in conflict with a lawyer’s duty of loyalty to their client,’ said Millen, a partner with the Vancouver office of Blake Cassels and Graydon LLP.”

“SRA imposes near maximum fine for breaching AML rules” —

• “A firm which failed to check any of the sources of funds for three property transactions has been fined £23,216 – almost the maximum the Solicitors Regulation Authority can impose.”
• “The sanction was made against Ilford firm TTS Legal Ltd after an investigation into the transactions between 2018 and 2020. The three deals were all financed through mortgages and the clients’ own funds. In the third matter, the firm was instructed by a financial adviser to the client whose identity was not verified by lawyers.”
• “The SRA found ‘areas of concern’ over the firm’s compliance with money laundering regulations and its code of conduct. TTS Legal had no firm-wide risk assessment in place until January 2020 and no policies, controls and procedures to mitigate the risks of money laundering.”
• “In one of the property matters, information received from the client was inconsistent with how they were funding the purchase. The firm recorded that a deposit of £185,000 had purportedly been paid to the seller’s solicitor by a previous firm but TTS Legal failed to make any enquiries to verify this payment.”
• “The SRA said: ‘The firm failed to undertake, evidence or scrutinise source of funds, of significant amounts of money. The firm’s enquiries were limited to the location of the funds, as opposed to identifying how and from where the client got the money for the transaction. This meant the firm was unable to satisfy itself that the funds were not the proceeds of crime.’”
• “The firm was fined 2% of its annual turnover, reduced by 20% to take account of mitigating factors. TTS Legal must also pay £1,350 costs.”

“Hefty fine for law firm owner who relied on 2003 AML manual” —

• “A former law firm owner who failed to update its anti-money laundering manual since 2003 has been handed a five-figure fine. The Solicitors Regulation Authority said Richard Lionel Jones had breached regulations for ‘longer than was reasonable’ and demonstrated a pattern of non-compliance.”
• “In January 2020 he completed a declaration on behalf of the firm in response to a request from the SRA, stating that it had a fully compliant risk assessment which took account of information and updates published by the regulator. The form included references to the firm’s customers, the areas it operated in, its products and services and transactions.”
• “Five months later, the SRA began a forensic investigation and found that the firm had not verified the source of client funds in conveyancing matters.”
• “There was no firm-wide risk assessment as required by regulations updated in 2017 and the firm’s office manual referred only to 2003 money laundering regulations. No separate money laundering policies were in place, the SRA confirmed.”

“SRA writes to over 1,000 firms about poor sanctions compliance” —

• “The Solicitors Regulation Authority (SRA) has written to give guidance to more than 1,000 law firms that admit they do not have basic controls in place to mitigate sanctions risk.”
• “More than 3,000 firms completed the survey, of which nearly 1,700 did not do, or were unsure if they did, one or more of the following: identify their clients, verify their clients’ identities, check source of funds and check if a client was subject to sanctions.”
• “The SRA found that more than 1,000 firms had a greater risk of having a client who was a designated person for sanctions purposes because of their areas of work or because they (or their clients) had a connection to a sanctioned country.”
• “Twenty-six firms had dealt with a matter involving a designated person.”
• “Juliet Oliver, SRA deputy chief executive, said: ‘Strengthening the financial sanctions regime is an important part of the government’s response to war in Europe, and law firms have to a key role to play.”