There is much hand-wringing in Ottawa about an international review of Canada’s efforts to fight financial crime.
A team of assessors from the Financial Action Task Force (FATF), a global body that sets standards to combat money laundering and terrorist financing, is conducting an on-site evaluation this month.
One doesn’t need a crystal ball to predict that they will home in on the exclusion of lawyers and other legal professionals from Canada’s anti-money-laundering and anti-terrorist-financing regime – a glaring gap previously flagged by the FATF in its last full review of our country roughly a decade ago.
That’s why it was disappointing that the Carney government failed to include a proposal to finally close that loophole when it presented the federal budget this week.
The omission was conspicuous because Canada’s 2025 national risk assessment, released on Aug. 22, rates lawyers and Quebec notaries as having a “high vulnerability” to money-laundering risks.
There are 136,000 lawyers and 4,200 Quebec notaries active in Canada, according to the government.
For their part, lawyers have been exempted from reporting suspicious transactions to the Financial Transactions and Reports Analysis Centre of Canada, or FinTRAC, the financial-crimes watchdog, for the past 10 years.
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A 2015 Supreme Court of Canada decision found Ottawa’s previous reporting requirements could subject lawyers to unreasonable search and seizure – or incarceration – if they refused to violate solicitor-client privilege, including by handing over records.
That legal ruling, however, left an opening for Ottawa to revise its legislation so that it aligns with the Charter of Rights and Freedoms. Instead of mustering the political will to do that, successive governments have avoided solving this problem because of vociferous opposition from the legal sector, which wants to preserve the current model of self-regulation.
Lawyers do maintain their own anti-money-laundering and anti-terrorist-financing rules. For instance, the Nova Scotia Barristers’ Society announced a new mandatory anti-money-laundering course on Oct. 28.
Trouble is, even upstanding lawyers can become unwitting dupes because of routine services. They operate trust accounts, create legal entities, facilitate real estate transactions, act as shareholders and directors, and accept cash to perform financial transactions on behalf of their clients.
“If you don’t do your due diligence, you can quickly find that you are vulnerable or compromised,” Peter German, a lawyer and former RCMP deputy commissioner for Western and Northern Canada, said at the Halifax Colloquium 2025 on money laundering at Dalhousie University last week.
“Any organized-crime figure would just love to get a hold of your trust account. If you’ve got a captive lawyer and a captive trust account, you can do all sorts of things because it’s very hard to find out what’s in a lawyer’s trust account due to solicitor-client privilege.”
Mr. German, who also authored the Dirty Money reports for the B.C. government, has previously characterized lawyers as the “‘black hole’ of real estate and of money movement generally.”
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Additionally, he has argued that, at the very least, there must be some visibility into the financial accounts maintained by lawyers: “There is no suggestion that privileged solicitor-client communications should be impacted.”
Indeed, other countries, including Britain, have found creative ways to overcome similar obstacles.
FinTRAC, meanwhile, is assessing trends involving lawyers and law firms based on financial filings received from other businesses. It is also examining financial intelligence disclosures involving legal professionals sent to police and national-security agencies.
One confidential research report, titled “Reported Financial Activity of Legal Professionals in Canada,” was prepared in 2022.
A heavily redacted version of that document was obtained by Ottawa-based researcher Ken Rubin through a request made under the Access to Information Act and then shared with The Globe and Mail.
The report assessed billions of dollars in financial activity directly involving the Canadian legal profession from 2017 to 2020.
Specifically, FinTRAC identified approximately 4,300 suspicious transaction reports that totalled $7.99-billion; 9,800 large cash transaction reports worth $154-million; and 67,500 electronic funds transfer reports with a collective value of $13.8-billion during that period.
“FINTRAC found that the majority of suspicious and large cash transactions carried out by members of the legal profession involved individual transaction amounts of less than $10,000,” the report stated.
It cited an unnamed Canadian law firm that facilitated payments to a shell company linked to a major money-laundering investigation “with ties to cartels.”
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The payments, which took place over 10 months, were electronic funds transfers with monthly totals ranging from US$75,000 to US$80,000.
Another example involved the misuse of client accounts. In that instance, an unidentified bank contacted the lawyer to glean details about the suspicious transactions.
“The lawyer refused to provide any further information, claiming solicitor-client confidentiality. The bank subsequently terminated their relationship with the lawyer,” the report said.
“A police investigation into the lawyer established that the funds were transferred to a reputed drug trafficker from South America.”
Given these and other examples, including the 2023 disbarment of a B.C. lawyer for knowingly assisting in money laundering, it’s time to question why Ottawa is ignoring its own threat analysis.
The FATF’s final report, which is scheduled to be released next June, will have implications for Canada’s credit rating and its economy as Ottawa pursues an ambitious goal of doubling non-U.S. exports over the next decade.
Ottawa must find a constitutionally compliant solution to include lawyers and other legal professionals in the federal anti-money-laundering regime. The collective cost of inaction is too high.