Canada watchdog report: Lawyers pose money laundering risk

Fri Apr 8, 2016 3:46pm EDT
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(In this April 7 story, corrects the last paragraph to add per year.)

By Julie Gordon and Elizabeth Dilts

VANCOUVER/NEW YORK (Reuters) - An internal report prepared for Canada's anti-money laundering watchdog last year found that lawyers are the second most likely profession after entrepreneurs to face money laundering charges.

Details of the 2015 research paper, released in draft form to Reuters under Access to Information laws, come as the leak of millions of documents from a Panamanian law firm has caused public outrage about the role lawyers play in helping clients hide their wealth.

The paper was produced for the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to consider in refining its anti-money laundering regime. The regulator said it uses this type of research to strengthen compliance and inform legislators of vulnerabilities.

Lawyers in Canada, unlike financial institutions and other professionals, are exempt from the obligation to report suspicious transactions, allowing them to use trust accounts to move around money for clients without notifying regulators.

The exemption, won after a Supreme Court of Canada ruling, irks law enforcement and regulators, who say that while many lawyers abide by ethical standards, the lack of transparency makes it easy for others to hide illicit funds.

"In Canada, we are somewhat unique in that lawyers do not have to monitor or report suspicious transactions," said Christine Duhaime, a lawyer and money laundering expert. "That makes Canada more susceptible to being used for all types of financial crime."

The FINTRAC paper, which looked at 40 money laundering cases in Canada from 2000 to 2014, found court documents showing "lawyers convicted of money laundering were willing to exploit reporting exemptions in order to launder funds."   Continued...