Commentary to New Rule on Cash Transactions and Record Keeping Requirements
Rule 15 is a model rule on cash transactions and reporting requirements as proposed by the Federation of Law Societies Canada and approved in similar form by all law societies in Canada.
The rule defines cash transactions and limits members to receiving or accepting cash transactions to $7,500, except in circumstances specified in rule 15.02(4).
The rule sets out the record keeping and reporting requirements. Members are required to report in the Member’s Annual Report, Form 5.06A, the stipulated exceptions permitting the acceptance of cash in the amount of $7,500 or more.
Any deliberate or careless breach of this rule will be treated as conduct deserving of sanction.
Advisory on Professional Conduct Related to Money Laundering
A member should be alert to and avoid unwittingly becoming involved with a client engaged in criminal activity such as mortgage fraud or money laundering. Vigilance is required because the means for these, and other criminal activities, may be transactions for which members commonly provide services such as:
establishing, purchasing or selling business entities; arranging financing for the purchase or sale or operation of business entities; arranging financing for the purchase or sale of business assets; and purchasing and selling real estate.
Before accepting a retainer or during a retainer, if a member has suspicions or doubts about whether he or she might be assisting a client in dishonesty, fraud, crime or illegal conduct, the member should make reasonable inquiries to obtain information about the client and about the subject-matter and objectives of the retainer, including verifying who are the legal or beneficial owners of the property and business entities, verifying who has the control of business entities, and clarifying the nature and purpose of a complex or unusual transaction where the purpose is not clear. The member should make a record of the results of these inquiries.
15.01 In this Part, unless the context otherwise requires:
(a) “cash” means coins referred to in section 7 of the Currency Act, notes issued by the Bank of Canada pursuant to the Bank of Canada Act that are intended for circulation in Canada and coins or bank notes of countries other than Canada.
(b) “funds” means cash, currency, securities and negotiable instruments or other financial instruments that indicate the person’s title or interest in them;
(c)“money” includes cash, cheques, drafts, credit card sales slips, post office orders and express and bank money orders.
(d)“public body” means,
i)a department or agent of Her Majesty in right of Canada or of a province;
ii)an incorporated city, town, village, metropolitan authority, township,district, county, rural municipality or other incorporated municipal body or an agent of any of them; and
iii)an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital under the Excise Tax Act or agent of the organization.
15.02(1) A member shall not receive or accept from a person, cash in an aggregate amount of $7,500 or more Canadian dollars in respect of any one client matter or transaction.
(2) For the purposes of this rule, when a member receives or accepts from a person cash in a foreign currency the member shall be deemed to have received or accepted the cash converted into Canadian dollars at,
(a)the official conversion rate of the Bank of Canada for the foreign currency as
published in the Bank of Canada’s Daily Noon Rates that is in effect at the time the member receives or accepts the cash; or
(b)if the day on which the member receives or accepts cash is a holiday, the official conversion rate of the Bank of Canada in effect on the most recent business day preceding the day on which the member receives or accepts the cash.
(3) Rule 15.02(1) applies when a member engages on behalf of a client or gives instructions on
behalf of a client in respect of the following activities:
(a)The member receives or pays funds.
(b)The member purchases or sells securities, real properties or business assets or
(c)The member transfers funds by any means.
(4) Notwithstanding rule 15.02(3), rule 15.02(1) does not apply when the member,
(a)receives cash from a financial institution or public body;
(b)receives cash from a peace officer, law enforcement agency or other agent of the
Crown (acting in his or her official capacity);
(c)receives cash pursuant to a court order, or to pay a fine or penalty; or
(d)receives cash of $7,500 or more for professional fees, disbursements, expenses or
bail, provided that any refund out of such receipts is also made in cash.
15.03(1) Every member, in addition to existing financial records requirements to record all money and other property received and disbursed in connection with the member’s practice, shall maintain
(a)A book of original entry identifying the method by which money is received in trust
for a client, and
(b)A book of original entry showing the method by which money, other than money received in trust for a client, is received.
(2) Every member who receives cash for a client shall maintain, in addition to existing financial records requirements, a book of duplicate receipts, with each receipt identifying the date on which cash is received, the person from whom cash is received, the amount of cash received, the client for whom cash is received, any file number in respect of which cash is received and containing the signature authorized by the member who receives cash and of the person from whom cash is received.
(3) The financial records described in rule 15.03(1) and (2) may be entered and posted by hand or by mechanical or electronic means, but if the records are entered and posted by hand, they shall be entered and posted in ink.
(4) The financial records described in rule 15.03(1) and (2) shall be entered and posted so as to be current at all times.
(5) A member shall keep the financial records described in rule 15.03(1) and (2) for at least the six year period immediately preceding the member’s most recent fiscal year end.
(6) Every member shall report in the Member’s Annual Report, Form 5.06A, on whether the member received cash in the amount of $7,500 or more in any given transaction during the course of the reporting period, and indicate the exception under rule 15.02(4) permitting the member to accept such cash.
(7) Any deliberate or careless breach of this rule will be treated as conduct deserving of sanction.
(Adopted: Part XV, Fall Term Convocation, September 26, 2005)