14 min read · February 2025
Money laundering compliance is one of the most confusing areas of professional responsibility for Ontario lawyers. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act purports to impose FINTRAC reporting obligations on lawyers — but the Supreme Court of Canada has struck down mandatory reporting as unconstitutional. Here is what Ontario lawyers actually need to know: what FINTRAC requires, what the courts have said, what LSO obligations remain, and how to handle client identification and suspicious transactions in practice.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act S.C. 2000, c. 17 (PCMLTFA) established FINTRAC — the Financial Transactions and Reports Analysis Centre of Canada — as Canada's financial intelligence unit. The Act imposes obligations on "reporting entities" including banks, casinos, real estate brokers, and — controversially — lawyers.
The PCMLTFA's lawyer provisions purport to require:
However, these obligations have been constitutionally challenged by legal professional bodies across Canada — and the challenges have succeeded.
In Law Society of British Columbia v Canada (Attorney General) 2021 SCC 31, the Supreme Court of Canada confirmed that the mandatory reporting and client identification provisions of the PCMLTFA violate the constitutional protection of solicitor-client privilege under section 8 of the Canadian Charter of Rights and Freedoms and cannot be applied to lawyers acting in their professional capacity.
Key Ruling — 2021 SCC 31
The Court unanimously held that the law's requirement for lawyers to report client financial information to FINTRAC — without any solicitor-client privilege exemption — was unconstitutional. Solicitor-client privilege is a principle of fundamental justice. The mandatory reporting scheme was struck down as it applied to legal professionals. Lawyers are currently not requiredto file FINTRAC reports.
This constitutional exemption has survived subsequent legislative attempts to modify the PCMLTFA. As of 2025, lawyers in Canada are not subject to mandatory FINTRAC reporting, large cash transaction reporting to FINTRAC, or mandatory suspicious transaction reporting to FINTRAC.
The absence of FINTRAC obligations does not mean Ontario lawyers have no anti-money laundering obligations. The Law Society of Ontario's Rules of Professional Conduct impose independent professional obligations that effectively require vigilance about money laundering:
| Rule | Obligation |
|---|---|
| Rule 3.2-7 | A lawyer must not engage in or facilitate a transaction that the lawyer knows or ought to know is a money laundering transaction |
| Rule 3.2-1 (Know Your Client) | A lawyer must obtain and verify the identity of clients before accepting a retainer, through a risk-based approach |
| Rule 3.4-1 (Conflicts) | Relates to checking for conflicts — also requires a complete client identification process |
| Rule 2.1-1 (Integrity) | General requirement to act with integrity — receiving funds known or suspected to be proceeds of crime violates this rule |
| Rule 7.8-1 (Withdrawal) | A lawyer must withdraw from a retainer where continued representation would facilitate money laundering |
Even without FINTRAC obligations, Rule 3.2-1 requires lawyers to obtain and verify client identity before accepting a retainer. The LSO has published voluntary client identification and verification guidance that mirrors the FINTRAC approach:
LSO guidance recommends enhanced due diligence for politically exposed persons — current or former heads of state, senior government officials, senior military officers, judges, and their family members and associates. The connection between political exposure and proceeds of crime risk is well-established in international anti-money laundering standards.
While Ontario lawyers are not required to report large cash transactions to FINTRAC, receiving significant unexplained cash raises serious professional responsibility concerns:
Practical Guidance
Many Ontario lawyers adopt a firm policy of not accepting cash payments over $1,000–$3,000 and requiring bank drafts, certified cheques, or electronic transfers for larger amounts. This eliminates most cash-related risk without requiring FINTRAC-level analysis of every cash transaction.
Rule 3.2-7 of the Rules of Professional Conduct prohibits a lawyer from engaging in or facilitating any transaction the lawyer knows or ought to know is a money laundering transaction. Red flags that trigger Rule 3.2-7 scrutiny include:
You do not need certainty that a transaction is money laundering. The standard is "knows or ought to know." If a reasonable lawyer in your position, aware of all the circumstances, would have serious concerns — you must either satisfy yourself the transaction is legitimate or decline the retainer.
If money laundering concerns arise during a retainer — after you have already accepted the client — Rule 7.8-1 requires you to withdraw if continued representation would facilitate the illegal activity.
The challenge is that solicitor-client privilege prevents you from telling others — including FINTRAC — why you are withdrawing. You may simply state that you are unable to continue acting and cannot elaborate further. You must return trust funds to the client, less any fees actually earned.
Warning: Tipping Off
While lawyers are not required to file FINTRAC suspicious transaction reports, you should also not tip off a client that law enforcement or regulators are investigating them when you become aware of an investigation through confidential communications. This can constitute obstruction of justice under Criminal Code s. 139 or breach of other legal obligations.
Real estate transactions are a primary vehicle for money laundering in Canada. Ontario real estate lawyers face heightened vigilance expectations:
The LSO's real estate title insurance fraud guidelines and the Land Titles Assurance Fund rules also impose documentation requirements on real estate lawyers that overlap with AML compliance.
The LSO requires lawyers to maintain records documenting client identification and verification. These records must be retained for a minimum of six years after the end of the retainer:
These records are separate from trust accounting records (retained 10 years) and general client file records (retained per LSO file management obligations).
Licensed paralegals have the same fundamental obligations as lawyers regarding money laundering under the Paralegal Rules of Conduct:
The FINTRAC constitutional exemption extends to paralegals as legal service providers under the Law Society Act. Paralegals are also not required to file FINTRAC reports.
Atticus's client intake forms capture identification details at onboarding. Trust accounting records document every receipt with source and purpose. Canadian data residency keeps client records in Canada where they belong.
Start Free TrialNo. The Supreme Court of Canada has held that mandatory FINTRAC reporting by lawyers violates solicitor-client privilege and is unconstitutional (Law Society of BC v Canada 2021 SCC 31). Ontario lawyers are not required to file FINTRAC reports, but they have separate LSO professional conduct obligations regarding money laundering.
There is no mandatory FINTRAC $10,000 cash transaction reporting obligation for lawyers. However, receiving large unexplained cash payments creates professional conduct risk and potential Criminal Code s. 462.31 liability if funds turn out to be proceeds of crime. Most Ontario lawyers adopt internal policies limiting cash acceptance.
Ontario lawyers must: refuse retainers where they know or ought to know funds are proceeds of crime (Rule 3.2-7); conduct know-your-client identification for all retainers; withdraw if continued representation would facilitate money laundering (Rule 7.8-1); and maintain client identification records for six years.
Solicitor-client privilege protects confidential communications — it does not provide a defence to participating in money laundering. Receiving proceeds of crime through trust accounts, even unknowingly but negligently, can result in professional discipline and potential criminal liability.