We are pleased to provide an update to our October 26, 2023 notice regarding the end of the pandemic relief measures that permitted client verification by viewing government issued ID over a video call. The pandemic-era video verification method presented a high risk of identification fraud. It should have been used only when a better option was not available, and it should not be used in future.
This update deals with three matters: 1) a new deadline for the removal of pandemic measures; 2) a review of existing options used to verify ID, remotely and otherwise; and 3) technology options designed to verify ID remotely, which are helpful even in-person.
Client verification measures are increasingly important in an environment where fraud, money laundering and terrorist financing is prevalent. Violations of the legislation designed to address these risks can result in steep fines, and a failure by Canadian law societies to enforce the rules could result in the regulation of the legal profession’s trust accounts by FINTRAC.
Verification of client identity is required only if a lawyer is retained to engage in or give instructions in respect of the receiving, paying, or transferring of funds. For all other matters, refer to the client ID rules in and around Regulation 4.13.5.
Return to Pre-Pandemic Rules Effective March 31, 2024
Most law societies across Canada are reverting to the enforcement of the rules in early 2024, which means a return to in-person verification in addition to other methods. The previously reported NSBS deadline for this return to enforcement was January 31, 2024. The revised NSBS deadline to revert to pre-pandemic rules is March 31, 2024.
This means law firms may continue to verify a client by viewing a government issued ID with the respective person over a video call until March 31, 2024, if no other method is available. After that date, client verification must be done through one of the five options set out in the rules below. See Appendix A for full details.
IMPORTANT: For existing clients, you may be able to use previously verified ID through Regulation 4.13.19.
4.13.19 Where a lawyer has verified the identity of an individual, the lawyer is not required to subsequently verify that same identity unless the lawyer has reason to believe the information, or the accuracy of it, has changed.
You may rely on 4.13.19 for an in-person or remote closing, even if your client is abroad, unless you doubt the information in the ID or are uncertain the person on the video feed is the same person you identified.
Further, if you have engaged an agent under option 5, you may rely on the similar Regulation 4.13.12, if your agent previously verified the ID.
Five Options to Verify Client ID In-Person or Remotely
- Viewing government-issued photo ID while comparing it to the client in-person.
- Reviewing the client’s credit file.
- Using the dual process of reviewing two valid documents from reliable sources.
- Virtually verifying a client with extra authentication steps.
- Using an agent to complete one of the four preceding options.
After March 31, 2024, if option 1 is selected but in-person viewing is not possible, an additional layer of remote verification must be used, and the method becomes option 4.
Technology Options for Remote Verification
After March 31, 2024, if you are managing a remote interaction and cannot use a previous verification, pursuant to 4.13.19 or 4.13.12, you must remotely verify client IDs by using verification technology. While this technology will be required for such remote instances, it can be used even for in-person identification, as an extra layer of assurance.
The requirement to use technology to remotely verify the authenticity of government issued photo IDs aligns with guidance from the Federation of Law Societies. See our recommendations.
a) If you haven’t already done so, establish a separate file on your system for each of your frequent clients, for all ID and source of funds matters. You will destroy this file six full years after the last transaction for which it was used because it contains sensitive personal information and because the requirement for retention is six years.
b) Update that file when you start each subsequent file for the respective client.
c) If you have a client on vacation or otherwise traveling, rely on 4.13.19, if applicable.
d) Consider engaging a remote ID verification software provider.
The Society is not mandating or recommending a particular verification software provider. We are simply requiring an additional layer of verification and acknowledge that many remote ID verification software providers meet this requirement.
The Digital Identification and Authentication Council of Canada (DIACC) has produced a directory of identity management and proofing products. Providers Chicago Title, FCT, Stewart Title, Bluink and TreeFort are active in Nova Scotia. A local product, FACES2 ID Authentication, is expected to be listed by the time this is read. The Society will continue to review and share information as it becomes available.
Additional information about virtual verification of identity is available through the Federation of Law Societies of Canada.
We are following client verification developments closely and have prepared a roundup of relevant news and informationat Appendix B.
Methods To Verify an Individual Client
OPTION 1: GOVERNMENT ISSUED PHOTO ID METHOD
- Review photo identification issued by federal, provincial, or territorial government, excluding health card
- The identity document must be viewed in the presence of the individual to ensure the document is authentic and valid and name and photograph match
- Record and keep client identification information, type of document, document number, issuing jurisdiction and country, expiry date, and date of verification
NOTE: Lawyers who wish to verify an individual’s government-issued photo identification document virtually should review Option 4.
OPTION 2: CREDIT FILE METHOD
- Review Canadian credit file in existence for at least three years.
- Ensure name, address, and date of birth match information provided by the client.
- Record and keep client identification information, source of credit file, reference number, and date of verification.
NOTE: A credit report or credit assessment is not sufficient, and the credit file request must be conducted at the time of verification (i.e., client cannot provide a copy of the credit file.)
OPTION 3: DUAL PROCESS METHOD
- Review any two of the following pieces of information, each from a different reliable source who is not the individual, the lawyer, or an individual acting on behalf of a lawyer.
- Individual’s name and address
- Individual’s name and date of birth
- Individual’s name and confirmation that they have a deposit account, credit card, or other loan amount with a financial institution.
- Ensure information is provided by a reliable source (i.e., an originator or issuer of information that you trust; source should be well known and credible)
- Documents may be an original paper document or electronic document as long as they are authentic, valid, and current; electronic images are not acceptable.
- Make certain that name, address, and date of birth match information provided by the client.
- Record and keep client identification information, the name of the two different sources used to identify your client, the type of information or documents used, account or reference number and the date of verification.
OPTION 4: VIRTUAL VERIFICATION WITH AUTHENTICATION
- Meet with the client virtually and use a process or method to determine whether the individual’s government issued photo identification document is authentic.
- To assess the authenticity of the identity document:
- Ask the individual to take a high-resolution image of the identity document using the camera on their mobile phone or electronic device and to send this scanned image by secure means, and
- Use authentication technology to compare the features of the identity document against known characteristics, security features, and markers to be reasonably satisfied that the document is true and genuine.
- Confirm the identification document is valid and current by comparing the name and features of the video image of the individual to the name and photo on the authenticated identity document or using a software application to apply biometric technology.
- Record, with the applicable date, the method by which you verified the client’s identity and document the process you followed to determine whether the identity document is authentic and the efforts you made to confirm that it is valid and current.
OPTION 5: USE OF AN AGENT
- Determine what method of verification (Options 1 to 4) the agent will use.
- Prior to the agent acting, you and the agent must enter into a written agreement.
- Obtain from the agent the documents and information obtained under the agreement.
- Satisfy yourself that the documents are authentic, valid, and current, any other information obtained is valid and current, and that the agent complied with the verification requirements.
- Record and keep the written agreement, client identification information, type of document, document number, issuing jurisdiction and country, expiry date, and date of verification.
ADDITIONAL STEPS FOR VERIFYING MINORS
Lawyer must take the following additional steps when verifying the identity of certain minors as identified in NSBS regulations 4.13.13:
• Individual under 12 years of age: Verify the identity of the minor’s parent or guardian using any of the above methods of verification.
• Individual between 12 and 15 years of age: Obtain information from a reliable source that contains the name and address of the minor’s parent or guardian and confirms that the address of the parent or guardian matches the minor’s address.
– Adapted with permission from the Law Society of Alberta.
Client ID Verification News and Information
CANADIAN BANK SECTOR EXAMPLES
- CIBC fined $1.3M for failing to comply with money laundering and terrorist financing rules: https://www.cbc.ca/news/business/cibc-fintrac-fine-1.7052256
- Canada’s anti-money-laundering agency levies largest-ever fine against RBC: https://www.theglobeandmail.com/business/article-rbc-financial-intelligence-agency-penalty/
LAW SOCIETY OF BRITISH COLUMBIA EXAMPLES
- LSBC has had the following recent AML related decisions:
- LSBC v. Pelletier disbarment
- Dean Resignation with undertaking not to reapply for 8 years
- Macdonald Resignation with undertaking not to reapply for 15 years
- The LSBC also has taken the approach of enforcing administrative penalties for breaches of the regulations, included the AML rules. These involve the imposition of fines on increasing severity for one or more breaches: https://www.lawsociety.bc.ca/lsbc/apps/hearings/decisions.cfm (see those labeled as “Administrative Penalty”)
- The LSBC and FLSC also participated in the Cullen Commission — an inquiry into money laundering in British Columbia:
- https://www.lawsociety.bc.ca/Website/media/Shared/docs/newsroom/highlights/CullenCommission-statement_2020-02.pdf; and https://flsc-s3-storage-pub.s3.ca-central-1.amazonaws.com/Federation%20Submission%20to%20Cullen%20Commission%20June%2026%202020.pdf
LAW SOCIETY OF ONTARIO EXAMPLES
There is a recent LSO Tribunal matter that involves improper use of a trust account and failing to verify client ID. It’s a detailed set of reasons that will assist us in our AML efforts as it establishes a benchmark for this misconduct. It serves as a good example for the profession that even a “technical breach” of this section is serious and warrants, at minimum, a significant suspension.
- 2023 ONLSTH 156 (CanLII) | Law Society of Ontario v. Albaum | CanLII
- In this case, the lawyer received four payments totalling $175,000 into a trust disbursed to a person who was not verified as a client, with no connection to the provision of legal services. He received about $4,000 total in fees. His penalty is a 9-month suspension, which can be appealed. The LSO was seeking revocation.