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Why is client identification and verification important?

Client identification and verification are important because they are tools used to combat money laundering and the financing of terrorist activities. Money laundering and the financing of terrorist activities are serious concerns in modern society. The effects of these illicit activities are vast. They can alter the market value of property and affect a legitimate business’s ability to compete in the marketplace. When large sums of money are poured into the economy through money laundering, currency exchange and interest rates can also be affected. Lawyers may facilitate these financial transactions in different ways, e.g. real estate files, creating companies and trusts. As a result, lawyers are considered to be gatekeepers and have a substantial responsibility to ensure that none of their transactions involve either money laundering or terrorist activities.

The Law Society Rules require you to know your client and this obligation is underscored by section 3.2-7 of the Code of Professional Conduct which states that a lawyer must never:

  • knowingly assist in or encourage any dishonesty, fraud, crime, or illegal conduct,
  • do or omit to do anything that the lawyer ought to know assists in or encourages any dishonesty, fraud, crime, or illegal conduct by a client or others, or
  • instruct a client or others on how to violate the law and avoid punishment.