April 7, 2016 / 7:12 PM / 4 years ago

Canada watchdog report: Lawyers pose money laundering risk

(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.”

A companion intelligence report prepared by FINTRAC took a more damning tone, noting that in certain cases the lawyers “took advantage of their position” to knowingly circumvent regulations and aid in money laundering.

The paper said lawyers charged with money laundering represented 15 percent of all cases they studied and 25 percent of all professional money laundering service providers. The average sentence in all convictions was 4.6 years, though the brief did not break it down by profession.

Lawyers in Canada cannot accept cash transactions of more than C$7,500, though larger amounts can be wired, and must report suspicious activity by other lawyers to their law societies.

The Law Society of British Columbia said it has taken steps to prevent money laundering, noting they “rarely, if ever, get information from lawyers about possible money laundering” and that cash rule breaches have numbered fewer than ten per year since 2009.

Additional reporting by Mica Rosenberg in New York; Editing by Jeffrey Benkoe

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