Trust Accounts

As part of its mandate to protect the public, we hold lawyers accountable for properly dealing with all client funds and property held in trust. Find the current Trust Account Regulations under Part 10 of the Regulations.

Opening a Trust Account 

A lawyer must obtain authorization from the Society prior to opening and operating a trust account.  

Steps required for trust account authorization: 

  • Review Regulation 4.10 “Operating a Trust Account”; 
  • If required, successfully complete the Society’s Trust Account Assessment
  • Confirm that appropriate arrangements, in writing, have been made with the financial institution to comply with the requirements of Section 30 of the Act; and 
  • Submit a Lawyer’s Certification. 

To receive a copy of the Society’s trust account opening package and a link to the online assessment, submit a Request Permission to Operate a Trust Account Form.

After opening the account, the lawyer is required to provide the particulars of their trust account(s) to the Society’s Trust Assurance Administrator.  

After lawyers have successfully completed the requirements for operating a trust account, they will receive a confirmation email from the Society permitting them to operate their trust account.  

Trust Account Assessment 

The Society developed the Trust Account Assessment to assess a lawyer’s knowledge and ability to apply the requirements of the Trust Account Regulations. The assessment takes into consideration the competencies a lawyer should demonstrate to operate a trust account.  

The assessment is administered through an online platform and includes multiple-choice questions and a simulation question. Lawyers have seven days to complete the Assessment. 

For a link to the online trust account assessment submit a Request Permission to Operate a Trust Account Form.

Trust Account Competencies

The Trust Account Assessment takes into consideration the competencies a lawyer should demonstrate to operate a trust account.  

1. Opening Accounts for a legal practice 

1.1   Demonstrate understanding: 

  • 1.1.1 of the difference between a Trust account, Service Nova Scotia trust account and General Account 
  • 1.1.2 of the meaning “trust property” (1.1.1(cc)) 
  • 1.1.3 of the meaning of “trust money” (1.1.1 (bb)) 
  • 1.1.5 the rules for naming a Trust account (10.5.2)
  • 1.1.6 the requirement for a Trust account (10.2.4) 
  • 1.1.7 how service charges should be addressed 

1.2   Outline the Trust Account Opening Process 

  • 1.2.1 Identify who must be contacted to open a Trust Account 
  • 1.2.2 Identify the requirements that must be met to open a Trust Account 
  • 1.2.3 Explain the trust account opening process 

2. Managing Trust Accounts

2.1   Deposits 

  • 2.1.1 Demonstrate an understanding of what should be deposited in a Trust account (10.2.1) 
  • 2.1.2 Identify the requirements for handling cash over $7500.00 (4.12) 
  • 2.1.3 Demonstrate an understanding that only trust money can be deposited and held in a Trust account (10.2.6, 10.2.7) 
  • 2.1.4 Identify the timing related to the deposit of trust funds (10.2.3) 
  • 2.1.5 Explain how the receipt of items in trust is documented (10.4.2 (a)) 
  • 2.1.6 Explain how trust funds being held for more than 30 days are to be handled 
  • 2.1.7 Describe the duty to supervise (10.2.10) 

2.2     Withdrawals 

  • 2.2.1  Identify that all withdrawals must be to a named payee (10.3.5(a)) 
  • 2.2.2  Explain the requirements for the authorization of the withdrawal of trust funds (10.3.5) 
  • 2.2.4  Identify the requirements for electronic fund transfers 
  • 2.2.5 Demonstrate an understanding of the manner in which trust funds cannot be withdrawn (10.3.6) 

3. Maintaining Records

3.1   Required Records 

  • 3.1.1 Demonstrate an understanding of the required books and ledgers for a trust account (10.4.2 (a), (b), (c), (j) and (i)) 
  • 3.1.2 Demonstrate an understanding of the required records for trust property (10.4.2(d)) 
  • 3.1.3 Demonstrate an understanding of the required records for a general account (10.4.2 (e) and (f)) 
  • 3.1.4 Demonstrate an understanding of the required records for billings and other charges to clients (10.4.2(g)) 

3.2     Maintenance of Records 

  • 3.2.1 Explain what records must be retained 
  • 3.2.2 Identify how long records must be retained (10.4.1 (c)) 
  • 3.2.3 Demonstrate an understanding of when records should be updated (10.4.1.(b)) 
  • 3.2.4 Perform record-keeping in a simple set of manual trust books of account 
  • 3.2.5 Perform a simply bank reconciliation 
  • 3.2.6 Prepare a list of client trust ledger balances from a simple set of manual trust books of account 
  • 3.2.7 Review all records prepared by others 

4. Working with an SNS Trust Account

4.1   Demonstrate understanding of: 

  • 4.1.1 the purpose of a SNS trust account (10.5.3 and 10.5.4) 
  • 4.1.2 how a SNS trust account is named (10.5.2) 
  • 4.1.3 what funds can be deposited to a SNS trust account 
  • 4.1.4 the requirement to deposit recording fees and deed transfer tax funds in trust 
  • 4.1.5 the process for the withdrawal of funds for the SNS trust account (10.5.5 – 10.5.13) 
  • 4.1.6 the authority to delegate (10.5.14) 

4.2   Maintenance of Records 

  • 4.2.1 List the records to be printed and reviewed (10.5.9 – 10.5.12) 
  • 4.2.2 Identify which records must be retained (10.5.13) 

5. Reporting and Addressing Errors

5.1    Demonstrate an understanding of 

  • 5.1.1 the definition of an overdraft (10.1.1(f)) 
  • 5.1.2 the  requirement  to  maintain  sufficient  balances  in  trust  to  meet  all  trust obligations and to address overdrafts immediately (10.6.1) 
  • 5.1.3 the requirement to report and provide a full explanation of applicable overdrafts immediately to the Executive Director of the Society (10.6.3) 
  • 5.1.4 the need to correct errors without delay (10.6.2) 

5.2   Identifying and Addressing Overdrafts 

  • 5.2.2 Explaining the process to rectify overdrafts 

6. Audits/Investigations 

6.1   Investigation Process 

  • 6.1.1 Identify who can initiate an investigation/audit (10.7.1) 
  • 6.1.2 Explain when an investigation/audit can be initiated (10.7.2) 
  • 6.1.3 Demonstrate an understanding of what documents must be produced (10.7.4) 
  • 6.1.4 Explain the overall investigation/audit process (10.7.5 and 10.7.6) 
  • 6.1.5 Demonstrate an understanding of the ramifications of non-compliance (10.7.7) 

Lawyer’s Certification 

The Lawyer’s Certification confirms the lawyer has read and reviewed the Legal Profession Act and the regulations relating to trust accounts. It further confirms the lawyer has completed the Trust Account Assessment without assistance from any other person. Lawyers must also provide the Society with details of their trust account(s).  

Closing a Trust Account 

Upon closing a general trust account, the practicing lawyer or law firm must immediately give written notice to the Society’s Chief Executive Officer.

Lawyer(s) closing their practices cannot change category or resign until their trust account is closed. In addition to dealing with the distribution of funds in the trust account, lawyers must complete and file their final trust account report and accountant’s report. 

Annual Reporting Requirements 

All practising lawyers are required to report annually on their involvement with trust accounts. 

Practising lawyers or law firms operating one or more general trust accounts must submit a trust account report to the Society’s Chief Executive Officer annually by March 31 and submit an accountant’s report annually by March 31.  

FAQs Guidance for Old Trust Balances

Why should you deal with old trust balances in a timely manner?

Old trust balances are a beast. Nobody likes dealing with them. They take time away from productive activities. It is frustrating to “get your head back into” an old file only to discover you can’t find the client or something is missing which prevents an easy solution.

In an ideal world, lawyer trust accounts would not hold any funds older than a year. The world is not ideal, and things happen; however, every firm should have a process for limiting your exposure by eliminating old balances.

Further, each individual lawyer in a firm is now required to pay out money held in a trust account as soon as practicable upon completion of the legal services to which the money relates (Regulations 10.2.9.1 and 10.2.9.2).

What is an old trust balance?

Old trust balances are funds held in trust for which the purpose of the trust cannot be fulfilled for some reason. The risk to you or your client is elevated by virtue of the passage of time.

You should devote time to examining and clearing them quickly before it gets harder to do so or a problem develops. Old balances include, but are not limited to:

Funds held back for recording a mortgage release (more than 180 days from the closing date of the transaction).

  • Escrow funds where the terms of escrow have not been fulfilled upon completion of the legal services.
  • Builder’s Lien holdbacks that have not yet been paid into court after an undischarged lien was filed and you have completed the legal services for the client.
  • Any funds for filing, registering or recording a document that is in your possession or control but have failed to file, register or record.
  • Funds held back for CRA liabilities where no steps have been taken to determine the balance owing to CRA.
  • Retainer funds for a client with whom the law firm has lost contact
  • Any funds due to a client that has not been disbursed in a timely manner.

What is the problem with carrying old balances?

Old balances are a risk and problematic for you and for your client(s):

  • You can only pay into or withdraw from a trust account money related to legal services that you or your firm is providing. Further, you must pay out trust money as soon as practicable upon completion of legal services. If you have old balances, chances are that legal services have long been completed.
  • An account holding old trust funds is a known temptation for theft: for lawyers, staff and bank staff. You leave yourself vulnerable. You must be aware that if a staff member steals trust money, the loss is unlikely to be covered by the Lawyers’ Fund for Client Compensation and is not insured through LIANS. You will be responsible for the loss unless you have purchased specific insurance for this purpose.
  • The funds probably belong to someone, not the firm or the lawyer.
  • Human nature: you are less likely to pay attention to old balances as time passes. This prevents you from closing your file and makes it harder to deal with later because you forget things.
  • If you are suddenly unable to practice due to suspension, disability or death, old balances are very difficult for a successor in practice to resolve.
  • They are a serious barrier for your retirement from the practice of law, especially for solo and small firms: nobody else will want to deal with old balances, so finding a successor may be difficult, if not impossible.
  • They are an administrative burden – old balances cost you money, time, and stress.

Can I just bill old/stale trust balances?

While it seems like an easy solution, and maybe even a fair one if you’ve been put through a lot of trouble, it usually is not the right way to resolve an old trust balance.
It is appropriate to bill from an old balance only when:

  • There is unbilled legal work or a disbursement, and
  • That work or disbursement is within the scope of the original retainer, and
  • The funds are a retainer, not held for a specific purpose like a holdback or recording fee.
    • Example 1: your retainer letter/agreement covers postage and bank charges, and the fact the client is unresponsive leads to postage or bank charges not previously captured by a set fee for such disbursements.
    • Example 2: client agreed to pay postage, the balance in trust is 92 cents or less. Send them a letter and bill for the postage for that letter, because 92 cents is the current cost of a stamp in a book. Even if the letter is returned, you acted reasonably. Write-off any balance.
  • Any time that a client is billed, the invoice, outlining the work performed, must be sent to the client. If a lawyer were to generate an invoice and withdraw the funds without sending the invoice to the client, this is equivalent to misappropriating client money.

    It is inappropriate to bill from an old balance for:
  • An additional fee for administration or lawyer time related to holding the money (e.g. an additional file administration charge or the lawyer’s hourly charge related to time spent dealing with the old balance). Law firms are not banks; don’t charge fees for holding money.
    • Example: Balance in trust is $10.00. All the legal work was completed and billed earlier. Don’t send a bill for $10.00.

What are some suggested solutions for dealing with old balances?

Your approach to old balances should be systematic. Once it is no longer reasonable to try to return the funds to the client, you should pay those funds out through the next Undistributed Trust Funds Application made by the Society. This is the reason that the Society makes these applications: they provide an easy, cost-effective and appropriate way to clear old balances.

What type of system should we have to eliminate and prevent old balances?

Here are some tips to eliminate and prevent old balances:

  • Someone at your firm should review trust balances regularly, file by file.
    • Make sure there is action since the last review.
    • Review every balance older than a year, moving to six months as you work through any older balances.
  • All partners should take diligent interest in old and/or large balances, for their own protection. It is recommended to print trust listings, sorted by lawyer. These listings should be signed by the responsible lawyer and reviewed by the Designated Lawyer on a periodic basis.
  • It is recommended that the file of any lawyer with an old or large balance be reviewed by a different partner.
  • Set goals and targets for all lawyers; Remind lawyers of their responsibility to pay out trust money as soon as practicable upon completion of legal services.
  • Funds that can be returned to clients should be, asap.
  • If funds cannot be returned to the client asap, develop an appropriate alternative action, such as:
    • escalate pursuant to the mortgage release protocol
    • inclusion in the next Undistributed Trust Funds Application
    • payment into court
    • using a financial institution as an escrow agent
  • Follow up to make sure the action has happened.

Are there other general tips about preventing and eliminating old balances?

Here are some general tips:

  • If your firm is still unable to make headway on addressing old balances, consider any staffing issues you may have. Consider hiring additional staff to support the firm’s ability to fully complete files.
  • When possible, prevent trivial balances accumulating in your trust account. Before a final disbursement is made, review a copy of the client ledger card (history of client transactions). Is there a rounding error that may result in a trivial amount being left in the client account?Is a lawyer joining or leaving your firm? What is the firm’s policy on handling any balances left behind? These balances may become an unnecessary administrative burden/liability for the firm. Although the departing lawyer has an ethical responsibility to address these balances, it is the law firm (via the Designated Lawyer) who the Society will be following up with to address the issue. The Society has seen this issue happen time and time again – in particular for balances left behind by retiring lawyers. If a lawyer is joining your firm, consider the types of balances they wish to deposit into your trust account. Is there a plan of action for each balance? Will this balance become an unnecessary administrative burden/liability to the firm?
  • Do not get into a cycle of stale dated cheques. If a cheque has become (or is about to become) stale, contact the client to enquire about a change of address or misplacement of the original cheque. Consider making use of the Undistributed Trust Fund Application .
  • Before a cheque of $2.00 or less is issued to a client, consider asking the client if they prefer the funds to be submitted through the Undistributed Trust Fund Application .
  • Although bank drafts are an acceptable form of trust account withdrawal, unless you are certain the bank draft will be negotiated by your client, do not issue a bank draft as a final attempt to clear a stale or inactive trust account balance. If the client does not negotiate the bank draft after a certain period of time, the bank will contact you to address the funds.

How should I handle old balances held back due to an outstanding clearance certificate?

According to the CRA website, CRA’s assessment can take up to 120 days, assuming you provide all of the necessary documents. However, in certain situations, the CRA may need to do an audit before it issues the clearance certificate. If you have not received your certificate or a clearance certificate officer has not contacted you within 120 days, visit the CRA website to obtain contact information.

While the issuance of a clearance certificate may be outside your control, you cannot allow a holdback for this purpose to remain in trust in perpetuity. If you cannot obtain 1) any necessary assistance from your client or 2) advice from CRA, you may need to seek guidance from your insurer and/or the Society.

What are my obligations regarding the recording of mortgage releases?

All lawyers have an obligation pursuant to subregulations 8.2.7 to 8.2.10 of the Legal Profession Act to record mortgage releases in a timely manner. In particular, Regulation 8.2.7 requires that you take the necessary steps to record a mortgage release in a parcel register within 180 days of the closing date of the transaction. The requirement for the timely discharge of a mortgage is further set out in Real Estate Practice Standard 3.4.

How should I handle old balances related to funds or mortgage releases?

Take proactive steps if a bank or lawyer has undertaken to provide you a release but has failed to do so.  You can also look at these additional resources:

  1. Section 60 of the Land Registrations Act
  2. Regulations 8.2.6 to 8.2.10
  3. Real Estate Practice Standard 3.4
  4. Mortgage Payout Protocol practice aids and resources, and
  5. Mortgage Discharge Escalation Contact List

The following information is a summary of the resources above. You can use this information to remind a colleague of their obligations or use the resources to get the release recorded yourself.


Mortgage Payouts

All lawyers have both an ethical duty and a regulatory obligation to fulfill their undertakings.

Under the Code a lawyer “must  fulfill every undertaking given”[1]  The Regulations under the Legal Professional Act require lawyers practising real estate to comply with the Real Estate Standards of Practice.[2]   

The Real Estate Standards state:

A lawyer who undertakes to record the release of a mortgage or to cancel a security interest, must take steps to ensure the removal of the security interest from the registry or parcel register in a timely manner. A lawyer who pays out, or causes to be paid out, in full or in part, a mortgage recorded in a parcel register must be aware of and comply with the Mortgage Payout Protocol.[3]

The Mortgage Payout Protocol takes advantage of the provisions of the Land Registration Act reversing the onus to lenders once a mortgage has been paid out, and requiring them to apply to court to maintain a security interest. These provisions in the Land Registration Act and the Administration Regulation allow lawyers to use a simple procedure if the lender delays in providing or recording a release after payout. The simple procedure is set out in the Regulations 8.2.7 and 8.2.8 under the Legal Professional Act.  Guidelines and tools are provided in the Mortgage Payout Protocol.

Simply put, there is no excuse for a lawyer not to fulfill an undertaking to another lawyer to ensure a mortgage is paid out and the security interest is removed from the parcel register in a timely manner. 


[1] Chapter 7.2-11

[2] Regulation 8.1.3, See also Regulations 8.2.4 to 8.2.8 regarding removing security interests from the parcel registry

[3] https://www.lians.ca/standards/real-estate-standards/part-iv-conveyancing-practice/46-undertakings

How do I handle funds that are “trapped” in my Service Nova Scotia Trust Account?

For greater certainty, a practising lawyer or law firm must not pay into the Service Nova Scotia Trust Account more money than the practising lawyer or law firm expects to be required to pay the document registration fees and deed transfer tax, if any, related to a client’s real estate transaction. It is for this reason that the Service Nova Scotia Trust Account should be drawn down to a zero balance on a frequent basis.

There are times when the firm expected to pay registration fees but it was later determined that another party has done the registration. Lawyers are allowed to remove/transfer funds from the Service Nova Scotia Trust Account back to the main General Trust Account. This is considered to be a trust to trust transfer.

A record should be maintained for all transfers of trust money between clients’ trust ledger accounts with an explanation of the purpose for which each transfer is made. If the law firm opts to use an online transfer, we recommend the use of our Electronic Transfer of Funds Form for record keeping purposes.  

How should I handle old balances related to retainer funds and funds not encumbered by conditions

Take reasonable steps to return these funds to the client.  “Reasonable” depends on the circumstances, particularly the amount involved, and the age and vulnerability of the client.  Once you have exhausted the reasonable steps, include the funds in the next Undistributed Trust Funds Application.

What are some suggested steps to disburse funds to a client or find a missing client?

Here are some ideas to find clients and disburse funds to a client:

  • Include a brief letter with the cheque and send to the last known address; convey that if they do not cash the cheque, the funds will likely be paid to the Public Trustee.
  • If it has been a while since you have had contact with the client, try to verify the address before mailing the cheque. This will reduce the risk of the issued cheque becoming stale dated.
  • Do not just mail a cheque and give up if it is uncashed or is returned to sender.
  • Email and phone, if possible, before the cheque is even close to stale. Also, convey that the money will likely be paid to the Public Trustee if not cashed.
  • Look in the file for helpful information such as:
  • Purpose of the funds and circumstances leading to why the funds are being held
  • Full name
  • Previous names
  • Last known contact information
  • Property ownership at any given time
  • Occupation
  • Education
  • Age
  • Photograph
  • Names of family members, residence, and contact information
  • If their address is not current, conduct a Canada 411 search, within reason (John Smith isn’t going to search well, but John Smith Waterville might).
  • Google, within reason.
  • Facebook/Messenger (use Messenger to contact if you find them), within reason.
  • Instagram, within reason.
  • LinkedIn, within reason.
  • For clients who might reasonably own NS property, POL if you subscribe.
  • Use this list as a checklist (noting dates and results) to assist with any Undistributed Trust Funds Application.
  • Are they snowbirds? Try to contact them again in the spring.

It’s easier to take these steps to find the client than to keep having to revisit the problem. Have tips about what works or doesn’t? Let us know at lss@nsbs.org.

For any balance over approximately $100, it is recommended you go further:

  • More than one letter/email is appropriate.
  • Spend more time on your online searches. It is reasonable to make a greater effort for greater amounts.
  • Consider contacting a third party if possible and reasonable, such as a family member, looking for contact info. Keep confidential information out of your discussion. It’s ok to say it’s good news.
  • Retain the services of a skip tracer, if appropriate.
  • You might check obituaries if reasonable.
  • Sometimes funds are in dispute, e.g. between ex-spouses. Many disputes melt away if you are frank. Tell the parties you must apply to pay the funds into court and ask for your costs, so there will ultimately be less for division.
  • You may contact the Society for guidance, especially if there is a large sum and you cannot find the client or the matter cannot be resolved.

When all else fails – What is the Undistributed Trust Fund Application (UTFA)?

Twice a year, the NSBS makes a court application on behalf of lawyers and law firms with undistributable trust funds to have those funds made payable to the Public Trustee.

There are three possible scenarios where funds are eligible for payment to the Public Trustee:

1. The beneficiary(ies) cannot be located or identified OR

2. The object of the trust cannot be carried out OR

3. If for any other reason it is not possible to distribute the assets of the estate or trust.

Your affidavit must provide an evidentiary basis to prove one of these scenarios.  Generally speaking, the higher the amount, the more effort you needs to put in to try and find the client and/or disburse the funds in accordance with their object. 

Once you have made reasonable efforts to return the funds to your client or disburse the funds in accordance with their object, we recommend that you prepare your affidavit while those efforts are fresh in your mind.

Information and a template affidavit are linked here.

The applications are typically made in the late fall and in the summer, but don’t wait. You can send applications to the attention of the Society’s Professional Responsibility Counsel at any time.

Please email any of your administrative questions regarding the filing of the UTFA to TrustAccounts@nsbs.org.

These affidavits are quite straightforward, and can easily become part of your systematic management of old trust balances. Please ensure you have reviewed the information as affidavits that include inappropriate information will be returned to you for revision.

How much does the Undistributed Trust Fund Application cost?

You must enclose with your affidavit a $25.00 administration fee payable to the Nova Scotia Barristers’ Society. There is only one $25.00 administration fee – not $25.00 for each balance or affidavit submitted.

Do I have to file a separate affidavit for each client I wish to include in the Undistributed Trust Fund Application?

Separate affidavits are not required. You may include several clients/balances in one affidavit, or if appropriate, you may make use of an appendix.

What are my reporting obligations with regard to old balances?

Any balance should be disbursed in a timely manner if the matter has concluded. Please review your obligations pursuant to subregulations 10.2.9.1 and 10.2.9.2. A Trust Account Report, in the prescribed form, must be filed by March 31 of each year by all practicing lawyers or law firms operating one or more General Trust Accounts. Currently, the Society requires the report to include a separate attachment summarizing any balance held in trust for more than three years (including date, dollar amount, reason for balance, and client name/ID). Since there are relatively few situations when a balance is required to be held in a General Trust Account for more than three years, the Trust Accounts Department will perform significant follow-up on any balances in this category. Follow-up will continue until the balances are appropriately disbursed or a satisfactory explanation has been provided. Satisfactory explanations include an appropriate timeline of actions taken or estimated timeline of actions to be taken to move the balance/matter forward. A significant amount or quantity of balances held in trust for more than three years may result in additional audit procedures and/or a report to the Professional Responsibility Department.

FAQs Undistributed Trust Funds Application 

What is the Undistributed Trust Fund Application (UTFA)?

Twice a year, the Society makes a court application on behalf of lawyers and law firms with undistributed trust funds to have those funds made payable to the Public Trustee under section 28 of the Public Trustee Act.

What funds qualify to be included in the UTFA?

Funds that qualify are those:

  • That have been held in trust for at least two years;
  • That cannot be paid out because:
    • The beneficiary(ies) cannot be located or identified OR
    • The object of the trust cannot be carried out OR
    • If for any other reason, it is not possible to distribute the assets of the estate or trust.
  • For which the client cannot be identified or contacted after reasonable efforts;
  • That can be quantified; and
  • That are not subject to any known conditions.

What is considered “reasonable efforts” to identify and/or locate the client?

“Reasonable efforts” depends on the circumstances, particularly the dollar amount involved and the age and vulnerability of the client. 

What are some suggested steps to make reasonable efforts to disburse funds to a client or find a missing client?

Here are some ideas to find clients and disburse funds to a client:

  • Include a brief letter with the cheque and send to the last known address; convey that if they do not cash the cheque, the funds will likely be paid to the Public Trustee.
  • If it has been a while since you have had contact with the client, try to verify the address before mailing the cheque. This will reduce the risk of the issued cheque becoming stale dated.
  • Do not just mail a cheque and give up if it is uncashed or is returned to sender.
  • Email and phone, if possible, before the cheque is even close to stale. Also, convey that the money will likely be paid to the Public Trustee if not cashed.
  • Look in the file for helpful information such as:
    • Purpose of the funds and circumstances leading to why the funds are being held
    • Full name
    • Previous names
    • Last known contact information
    • Property ownership at any given time
    • Occupation
    • Education
    • Age
    • Photograph
    • Names of family members, residence, and contact information
  • If their address is not current, conduct a Canada 411 search, within reason (John Smith isn’t going to search well, but John Smith Waterville might).
  • Google, within reason.
  • Facebook/Messenger (use Messenger to contact if you find them), within reason.
  • Instagram, within reason.
  • LinkedIn, within reason.
  • For clients who might reasonably own NS property, POL if you subscribe.
  • For corporate clients, check the Registry of Joint Stock Companies website
  • Use this list as a checklist (noting dates and results) to assist with your affidavit.
  • Are they snowbirds? Try to contact them again in the spring.

For any balance over approximately $100, it is recommended you go further:

  • More than one letter/email is appropriate.
  • Spend more time on your online searches. It is reasonable to make a greater effort for greater amounts.
  • Consider contacting a third party if possible and reasonable, such as a family member, looking for contact info. Keep confidential information out of your discussion. It’s ok to say it’s good news.
  • Retain the services of a skip tracer, if appropriate.
  • You might check obituaries if reasonable.
  • Sometimes funds are in dispute, e.g. between ex-spouses. Many disputes melt away if you are frank. Tell the parties you must apply to pay the funds into court and ask for your costs, so there will ultimately be less for the division.
  • You may contact the Society for guidance, especially if there is a large sum and you cannot find the client or the matter cannot be resolved.

What do I need to do to be included in the Society’s UTF application?

To be included in the Society’s application, you need to send us an affidavit and a filing fee of $25.00.

What evidence do I need to include in my affidavit?

Your affidavit must provide an evidentiary basis to prove that your application qualifies for payment to the Public Trustee. Generally, the higher the amount, the more effort you needs to put in to try to find the client and/or disburse the funds in accordance with their object. 

For Trust Funds to which one or more persons are entitled, include:

  • name of the client(s)
  • name of the lawyer who provided the service and received the trust funds
  • balance of trust funds currently held
  • date funds were received
  • date funds were last dispersed, where applicable
  • a statement that the funds were or appear to have been received for the provision of legal services
  • efforts made by you to deliver the funds to the client(s) (i.e., state that you did Property Online or 411 searches or sent X number of letters on X dates to the client(s)’ last known address) Please note: do not include private, confidential or privileged information about the client(s), such as copies of letters sent to the client(s), trust account ledger(s), the client(s)’ last known address, a description of the legal services provided to the client(s).
  • a statement that there are no conditions to which the funds are subject
  • if the client entitled to the funds was a corporation, a statement as to whether the corporation still exists according to the official records of the government of the jurisdiction in which the corporation was incorporated or continued
  • a statement that you wish the Court to authorize the transfer of funds belonging to (name of the client(s)), held in trust by (name of the lawyer or law firm) to the Public Trustee

For Trust Funds that cannot be attributed to any person:

  • the number of unattributed funds currently held
  • the date the funds were received
  • the reason(s), if known, why the funds were credited to the trust account and why the funds cannot be attributed to any particular client or another person
  • a statement that you wish the Court to authorize the transfer of unattributed funds held in trust by (name of lawyer or law firm) to the Public Trustee

Do you have a template affidavit?

We do have a template affidavit. Link to download template affidavit.

How much does the Undistributed Trust Fund Application cost?

You must enclose with your affidavit a $25.00 administration fee payable to the Nova Scotia Barristers’ Society. There is only one $25.00 administration fee – not $25.00 for each balance or affidavit submitted.

Do I have to file a separate affidavit for each client I wish to include in the Undistributed Trust Fund Application?

Separate affidavits are not required. You may include several clients/balances in one affidavit, or if appropriate, you may make use of an appendix.

What happens after I submit my affidavit and filing fee?

The Society may contact you to get clarification on your affidavit and may ask you to make revisions to your affidavit to help support the application.

The Society prepares the documentation and attends Chambers to get the  Court Order permitting the funds to be paid to the Public Trustee. We will let you know when the Order has been granted.

What do I do after the Order is granted?

Once the Society has received the Order granting payment of the undistributed trust funds to the Public Trustee, the Professional Responsibility Counsel will provide you with a copy of the Order and request that you send a trust cheque in respect of the funds contained in your application to the Society, payable to the Public Trustee.

FAQs Electronic Banking

Can I operate a trust account using electronic banking?

Yes. Trust accounts can be operated through electronic banking.

Are client trust accounts at increased risk for theft?

Yes.  Changes of process, remote working, and reduction of staff create increased risk, each of which require a unique response. Furthermore, those who are criminally minded will try to take advantage of the situation. It is important to review and discuss Anti-Money Laundering Rules with staff. Please review Client ID Documents & Resources.

What should I be thinking about to control risk of theft?

Additional controls and greater staff supervision and oversight may be necessary to offset the risk. Here are some things to remember:

  • Dual authorization is no longer required by the Regulations but is a recommended control.
  • The Trust Account Regulations (Part 10) are the minimum requirements; each firm is responsible for putting in place the internal controls that are appropriate to their own situation.   
  • Lawyers need to identify risks and develop customized control mechanisms to eliminate or manage risk.  
  • Additional controls may include having a review of all trust account transactions as a standing item at regular Partners meetings.   
  • A pdf copy of the client’s trust ledger card (history of client transactions) could be reviewed and electronically stamped/signed as “reviewed” by the responsible lawyer for each withdrawal transaction before it is processed.

Law firms may wish to look to their Accountants for additional guidance on appropriate internal controls based on their individual circumstances.

How do I create “documents” required by the Regulations?

You must continue to document transactions, which means you need to print the confirmation screen of online transactions of withdrawals and deposits.  The confirmation needs to have the financial institution and account from which the funds were sent, the financial institution and account to which the funds were deposited (i.e. your trust account), the amount deposited, and the date and time of the transmission of funds.  If the confirmation screen does not identify the client on whose behalf the funds have been deposited/withdrawn, electronically note on the PDF the client name and/or matter number. Also, include other details such as the source of funds.

You can use the print to pdf function to create appropriate documentation.  If the banking software does not have a “print” function, take a screenshot on your Mac or Windows device.  If you use mobile banking on your phone, take the screenshot as you would normally on your phone.  Develop a system for storing electronic documents/information in a secure location so it can be easily accessed when needed.

What if I am unable to comply with Regulatory Requirements?

If you are unable to meet the requirements of the regulations, you must document and report the exception in the manner outlined in Regulation 10.6. 

How do I make Electronic Withdrawals?

You can use the Electronic Transfer Authorization Form to authorize the withdrawal/transfer of trust funds.  You cannot use the Electronic Transfer Authorization Form to direct staff (who are non-members) to solely withdraw funds out of trust. This is because non-member staff access to online banking must be limited to “view only” or the office must have a system for two-person authentication already set up.  For firms with a larger staff, a three-person authentication system can be used in instances when the lawyer is not able to electronically process a transaction (signed form and two staff electronically processing the transaction). The Regulations do not restrict who may be a signatory on a lawyer’s trust account, but the lawyer must exercise professional judgment before permitting any person access to privileged or confidential client information.

Can I transfer funds from my General Trust Account to the Service Nova Scotia Trust Account?

Trust to trust transfers are not an issue. The lawyer may complete the transfer and send a copy of the confirmation screen to appropriate staff/bookkeeper. 

Can I transfer funds from my General (Operating) Account to the Service Nova Scotia Trust Account?

Transferring operating funds to the Service Nova Scotia Trust Account falls under subregulation 10.5.3(c) (for the Service Nova Scotia Trust Account only). Again, you can do this electronically; however, you need to need to ensure that when setting up the online banking, a non-member staff is not able to solely process trust account transactions.

How can I confirm non-member staff do not have the ability to process trust account transactions?

Theft by an employee who is not a member of the Society is not covered by the Lawyers’ Fund for Client Compensation. The Designated Lawyer must restrict online banking access to “view only” for staff.  You need get from your bank documentation confirming that staff are restricted to “view only”. You can also view the online banking screen of an employee with “view only” access. If it appears as though the trust account could be selected in a staff member’s transaction processing screen – the staff may not have the proper restrictions. Confirm with your bank that any attempts to process a transaction will be denied.

How do I comply with the requirement to “deposit without delay”?

Electronic banking allows for deposit without delay.  You need to be aware of clearing periods on funds that have been deposited electronically to ensure you do not act on funds before the funds have cleared. Every law firm needs to discuss clearance periods with their banks.

Direct Deposit

What is an electronic funds transfer (direct deposit)?

Direct deposit is an electronic transfer of funds deposited directly into the bank account of the recipient. Direct deposit replaces the need to issue payments by paper cheque. There is usually a maximum amount you can transfer using this method.

What are the advantages of electronic funds transfer (direct deposit)?

Electronic funds transfer (direct deposit) is a secure method of payment and reduces the risk of the payment being lost or stolen, and it is much less costly than issuing a paper cheque. It is also more convenient than mailing a paper cheque.

What are the disadvantages of electronic funds transfer (direct deposit) that a firm should be aware of?

  • The recipient may provide incorrect deposit information.
  • The law firm may key in incorrect deposit information.
  • The intended recipient may change their bank without informing the law firm.
  • Costs of setting up and using direct deposit.
  • Potential banking issues arising when requesting the bank to direct any electronic funds transfer fees to the general (operating) account.
  • Inconvenience of requesting banking information.
  • Audit trail issues. The lawyer must be mindful to print/save-to-pdf the electronic banking screen confirmation.
  • Social engineering fraud. Hackers may manipulate employees into disclosing or changing banking information.

Do I have insurance coverage if a bank account number for an electronic transfer of funds is keyed incorrectly, or am I on the hook?

The best guidance for lawyers using electronic fund transfers is to be very careful when providing recipient account information because an error could result in a trust deficiency. If an error is made that results in a deficiency in your trust account, you have a regulatory obligation to make it up forthwith. Once you do that, for practical purposes, the client suffers no loss and would have no claim to make against the lawyer, at least not for that issue. There may be first-party property insurance coverage available in the commercial insurance market for this scenario that could provide first-party reimbursement to you in this situation. You should contact your broker or agent to discuss this. Feel free to contact LIANS for information and to answer questions you might have.

Are firms allowed to receive money through electronic funds transfer (direct deposit)?

Yes, but you should exercise caution when sharing your firm’s trust account banking information. You should maintain any payment direction for audit trail purposes. It is generally unwise to provide an individual client with the law firm’s trust account banking information. It’s possible to see unexpected funds in your bank account as clients may incorrectly use this banking information when paying outstanding bills. Unknown funds in the trust account are not in compliance with trust account Regulations and present difficulties when trying to trace the source of the funds.

Be cautious of the possibility of your clients becoming victims of social engineering fraud. A fraudster could gain the trust of your client and manipulate them into transferring funds into a fake account. If you believe your client is at risk of being manipulated, the use of electronic funds transfer may not be appropriate.

Are firms allowed to use electronic funds transfer (direct deposit) when transferring trust funds to another law firm’s trust account?

Express consent is required. Electronic funds transfer (direct deposit) usually has a dollar limit. A trust cheque, bank draft, or wire transfer may be more appropriate. Wire transfers usually offer more stringent security protocols than electronic funds transfers, so if the firm is transferring a significant amount of money, a wire transfer may be more appropriate. It is wise to discuss security and holding periods for each method with your financial institution.

How can electronic funds transfer (direct deposit) be used to address and prevent dormant trust account balances?

With caution, electronic funds transfer (direct deposit) can be used to return unused trust funds to an individual client. Regulation 10.2.9.2 Requirement for Trust Relationship, outlines that a practising lawyer must pay out money held in a trust account as soon as practicable upon completion of the legal services to which the money relates. Law firms are not allowed to hold old/stale trust account balances. Sometimes old balances arise because an individual client is unwilling to cash a paper cheque. Direct deposit provides a convenient option to disburse funds to individual clients. Direct deposit information may be collected at the beginning of the relationship to ensure any residual money held in trust can be returned to the client. To reduce errors, the firm should request a voided personal cheque. The client can obtain a personal voided cheque by contacting their bank. Any direct deposit arrangement should be documented.

FAQs Client Identification and Verification Model Rule

Q: The rule talks about identification and about verification. What’s the difference?

A:     Identification refers to the basic information you must get about your client to know who they are whenever you are retained to provide legal services.

Verification refers to the information you must obtain to confirm that your client is who or what they say they are. Verification is required only when you are acting for a client or giving instructions on behalf of a client regarding the receiving, payment or transferring of funds, i.e. a “financial transaction”.

Original Author: Federation of Law Societies of Canada

Q: I work in a law firm. Do I have to personally identify or verify the identity of my clients?

A:     No, the identification and verification of identity may be fulfilled by any member, associate or employee of the firm, wherever located. You may also use an agent. However, as the lawyer, you remain ultimately responsible for meeting these requirements.

Original Author: Federation of Law Societies of Canada

Q: In what circumstances am I required to identify my client?

A:     You must identify your client whenever you are retained to provide legal services, except:

  • when you provide legal services to your employer, for example as in-house counsel;
  • when you are acting as an agent for another lawyer who has already identified the client;
  • when you are acting for a client who has been referred to you by another lawyer who has already identified the client; or
  • when you are providing legal services as part of a duty counsel program sponsored by a non-profit organization, except where the legal services involve a financial transaction.

This requirement is in keeping with your obligation to know your client, understand their financial dealings in relation to the retainer, and manage any risks arising from the professional business relationship with the client.

When acting as an agent or acting on a referral, it would be prudent to obtain the identity information from the other lawyer.

Original Author: Federation of Law Societies of Canada

Q: Do I have to identify anyone other than my client?

A:     Yes, in some circumstances. You must, for example, identify any third party who is directing or instructing your client. When your client is an organization, such as a company or a public body, you must also identify the person or persons instructing you on behalf of the client.

Original Author: Federation of Law Societies of Canada

Q: What information must I obtain when identifying a client if they are an individual?

A:     When you are retained by an individual you must obtain and record, with the applicable date, the person’s full name, home address, home telephone number, occupation(s), and the address and telephone number of the person’s place(s) of work, where applicable.

Original Author: Federation of Law Societies of Canada

Q: What information do I have to obtain when identifying a client that isn’t an individual, such as a company or a public body?

A:     When an organization (a corporation, partnership, fund, trust, co-operative or unincorporated association) retains you, you must obtain and record the client’s full name, business address, business telephone number, the general nature of the type of business or activities engaged in by the client, and the name, position of and contact information for the individual(s) authorized to provide and give you instructions. Where applicable, you must also get the incorporation/business identification number and the place of issue of the incorporation/business identification number.

Original Author: Federation of Law Societies of Canada

Q: Do I have to identify my client before acting for the client?

A:     You must identify the client when you are retained to provide legal services. This can be done in conjunction with identification information to check for legal conflicts.

Original Author: Federation of Law Societies of Canada

Q: In what circumstances do I have to verify my client’s identity?

A:     When an organization (a corporation, partnership, fund, trust, co-operative or unincorporated association) retains you, you must obtain and record the client’s full name, business address, business telephone number, the general nature of the type of business or activities engaged in by the client, and the name, position of and contact information for the individual(s) authorized to provide and give you instructions. Where applicable, you must also get the incorporation/business identification number and the place of issue of the incorporation/business identification number.

Original Author: Federation of Law Societies of Canada

Q: Does every financial transaction trigger the verification requirement?

A:     No. There are several exceptions included in the rule. You do not have to verify the identity of the client (nor obtain and record information about the source of funds for the financial transaction) if:

  • the client is a financial institution, public body or reporting issuer;
  • the funds are transferred using an “electronic funds transfer” as defined in the rules; or
  • the funds involved are:
    • paid by or to a financial institution, public body or reporting issuer;
    • received by a lawyer from the trust account of another lawyer;
    • received from a peace officer, law enforcement agency or other public official acting in an official capacity;
    • paid or received to pay a fine or penalty or bail; or
    • paid or received for professional fees, disbursements or expenses.

When a client’s matter involves more than one financial transaction and there is an exemption from the verification and source of funds obligations with respect to one of the transactions, the other transactions will be subject to the obligations unless there are exemptions that apply to them.

Note that the former exemption from verification of identity in situations where funds are paid or received pursuant to a court order or settlement of any legal or administrative proceeding no longer applies.

Original Author: Federation of Law Societies of Canada

Q: How do I verify the identity of an individual?

A:     To verify the identity of an individual, you must use one of three methods: the government-issued photo ID method, the credit file method, or the dual process method.

Original Author: Federation of Law Societies of Canada

Q: How do I verify identity using the government-issued photo ID method?

A:      A valid, authentic and current (not expired) government-issued identification document containing the individual’s name and photograph (e.g. driver’s licence, passport, Secure Certificate of Indian Status, Permanent Resident Card, or certain provincial or territorial health insurance cards) may be used to verify identity. You may rely on an identification document issued by a foreign government if it is equivalent to a Canadian-issued identification document. Documents issued by municipal governments are not acceptable. You or your agent must view the original document in the presence of the individual to ensure that their name and photograph match.

A document is authentic if it is genuine and has the character of an original, credible and reliable document. For example, an original physical government-issued photo identification document is authentic.

When the individual is physically present:

You or your agent must view the original physical document in the presence of the individual to ensure that it is issued by a competent authority, that it is valid and current and that the individual’s name and photograph match.

When the individual is not physically present:

You or your agent may use the government-issued photo identification method if you have a process in place to authenticate the government-issued photo identification document and to determine that it is valid and current.

To authenticate the document, you could use a technology capable of determining the document’s authenticity. For example, you could:

  • ask the individual to scan their government-issued photo identification document using the camera on their mobile phone or electronic device; and
  • use a technology to compare the features of the scanned document against known characteristics (for example, size, texture, character spacing, raised lettering, format/design), security features (for example, holograms, barcodes, magnetic strips, watermarks, embedded electronic chips) or markers (for example, logos or symbols) to be satisfied that it is an authentic document as issued by the competent authority.

To determine that the authenticated document is valid and current, and that the name and photo are those of the individual providing the document, you could:

  • participate in a live video call with the individual and compare the name and the features of the live video image to the name and photo on the authenticated document; or
  • ask the individual to take a “selfie” using the camera on their mobile phone or electronic device and use an application to apply facial recognition technology to compare the features of that “selfie” to the photo on the authenticated document. You would also need a process to compare the name on the document with the name provided by the individual.

Original Author: Federation of Law Societies of Canada

Q: How do I verify an individual’s identity using the credit file method?

A:     You may verify an individual’s identity by relying on information in a Canadian credit file if it has been in existence for at least three years. You must confirm that the name, address and date of birth in the credit file match that provided by the individual. Using the credit file method is not the same as getting a credit assessment or credit report. To use the credit file method, you must obtain the information directly from a Canadian credit bureau (currently Equifax Canada or TransUnion Canada) or a third-party vendor authorized by a Canadian credit bureau. You cannot rely on credit file information provided by the individual.

The individual does not need to be physically present for you to verify their identity using their credit file. However, to rely on the credit file method, you must conduct the search at the time you are verifying the individual’s identity. An individual cannot provide you with a copy of their credit file, nor may a previously obtained credit file be used.

Original Author: Federation of Law Societies of Canada

Q: How do I verify an individual’s identity using the dual process method?

A:     You may verify an individual’s identity by relying on any two of the following:

  • information from a reliable source that contains the individual’s name and address;
  • information from a reliable source that contains the individual’s name and date of birth; and
  • information containing the individual’s name that confirms they have a deposit account or credit card or other loan account with a financial institution.

The information you rely upon must be from two different sources.

A “reliable source” is an originator or issuer of information that you trust. To be considered reliable, the source should be well known and considered reputable. The reliable source cannot be you, your agent, or the individual whose identity you are verifying. Federal, provincial, territorial and municipal levels of government, Crown corporations, financial entities and utility providers are examples of reliable sources.

The information you rely upon may be found in documents originating from or issued by a reliable source or may be provided directly to you through communications with an official or representative of a reliable source.

Examples of reliable source documents include: Canada Pension Plan (CPP) statement, property tax assessment, vehicle registration, Canada Revenue Agency notice of assessment, utility bill (e.g. electricity, water, telecommunications), record of employment, registered investment account statements (e.g. RRSP, TFSA or RRIF), government benefits statement, insurance documents (e.g. home, auto and life), birth certificate, permanent resident card, citizenship certificate, marriage certificate, mortgage statement, bank statement, and credit card statement.

If a document is used, you (or your agent) must view a valid, original and current paper or electronic document, and not a photocopy or electronic image (e.g. digital photograph, screen capture or scanned copy). A utility statement mailed to an individual by the utility provider is an example of an original paper document. A document downloaded directly from the reliable source issuer’s website and printed may also be used. An original electronic document may be a document the individual received by email or downloaded from a reliable source issuer that the individual then shows to you in its original format on your or the individual’s electronic device (e.g. a smartphone, tablet, or laptop) or sends to you in its original format. To be acceptable, the document must appear to be valid and unaltered; if any information has been redacted, the document is not acceptable.

Information found through social media is not acceptable.

The individual does not need to be physically present at the time you verify their identity through the dual process method.

Original Author: Federation of Law Societies of Canada

Q:    How do I verify the identity of an organization, such as a corporation or other entity?

To verify the identity of an organization you must consult documentation that is independent and reliable. If your client is an organization created or registered under federal, provincial or territorial law such as a corporation, cooperative or a society, you will need to obtain confirmation of its existence (e.g. a corporation’s annual filing or a certificate of corporate status), name and address, and the names of its directors, where applicable, from the appropriate government registry.

If an organization is not registered in a government registry, you may verify its existence by obtaining its constating documents, for example a partnership agreement, articles of association or trust agreement.

Original Author: Federation of Law Societies of Canada

Q: The rule talks about identifying directors, shareholders and owners. What is required?

A:     When your client, or a third party your client is representing, is an organization and the receipt, payment or transfer of funds is involved, you must obtain and record with the applicable date, the names of all directors (unless the client or third party is a securities dealer).

You are also required to make reasonable efforts to obtain and record, with the applicable date, the names and addresses of all beneficial owners and information about the ownership, control and structure of the organization. Beneficial owners are individuals who own or control, directly or indirectly, 25% or more of the organization or the shares of the organization and the trustees, known beneficiaries or settlors of the trust. The purpose of this requirement is for you to obtain sufficient information about the organization so that you know who effectively owns and controls it.

You are also required to take reasonable measures to confirm the accuracy of information about directors, beneficial owners, and the organization’s ownership, control and structure.

Original Author: Federation of Law Societies of Canada

Q: What are “reasonable efforts” with respect to identifying beneficial owners?

A:     The reasonable efforts standard requires you to apply sound, sensible judgment about the measures you take to identify beneficial owners. Reasonable efforts include searching through as many levels of information as necessary to identify those individuals. In making reasonable efforts to determine beneficial ownership, it is important to understand that the names on legal documentation may not be the actual owners of an organization. You must assess and determine what is appropriate for each situation to ensure the accuracy of the information obtained, while also taking into account the risk associated.

Original Author: Federation of Law Societies of Canada

Q: How do you confirm the accuracy of beneficial ownership information?

A:     To confirm the accuracy of beneficial ownership and information on the ownership, control and structure of an organization you should refer to official documentation or records, such as:

  • minute book
  • securities register
  • shareholder register
  • articles of incorporation
  • annual returns
  • certificate of corporate status
  • shareholder agreements
  • partnership agreements
  • board of director’s meeting records of decisions

It is possible for one document to be used to satisfy the two distinct steps, namely, to obtain the information and to confirm the accuracy of it.

You may also have the client sign an attestation to confirm the veracity of the beneficial ownership information provided. This document must include the ownership, control and structure information obtained.

Other reasonable measures to confirm accuracy include:

  • asking the client to provide supporting official documentation
  • consulting an online registry where available
  • conducting an open-source search
  • consulting commercially available information

Original Author: Federation of Law Societies of Canada

Q: If I am not able to obtain information on the directors and beneficial owners, may I continue to act for the client?

A:     If despite reasonable efforts you are unable to obtain the information, you must then take reasonable measures to ascertain the identity of the most senior managing officer

of the organization and assess the organizational client’s activities in the context of any risks that the financial transaction(s) may be part of dishonest, fraudulent or illegal activity. If the organization’s structure is more opaque than transparent, this may be a warning that the organization could be engaged in or facilitating unlawful activities. You will need to assess risk accordingly and keep in mind circumstances that may trigger your duty to withdraw.

Original Author: Federation of Law Societies of Canada

Q: If my client is an individual, do I have to verify their identity before acting for them?

A:     In the case of an individual you must verify their identity upon engaging in or giving instructions on their behalf to receive, pay or transfer funds.

Original Author: Federation of Law Societies of Canada

Q: If my client is an organization, do I have to verify identity before I can act for the client?

A:     When your client is an organization you should verify the client’s identity upon engaging in or giving instructions on their behalf to receive, pay or transfer funds, and must do so within 30 days. The 30-day window for verifying the identity of an organization does not apply to your obligation to verify the identity of the individual instructing you on behalf of the organization. You must verify the instructing individual’s identity at the time that you would verify the identity of any individual, i.e. when you engage in or give instructions in respect of the receiving, paying or transferring of funds.

Original Author: Federation of Law Societies of Canada

Q: What happens if after the funds have moved I am unable to verify the identity of my client in the 30-day window?

A:     You have an obligation to verify your client’s identity. Failing to do so within the 30-day window would result in a breach of this requirement.

Although you have 30 days within which to comply with the verification requirements for an organization, as a best practice you should verify the identity of your client as early as possible in the retainer.

Original Author: Federation of Law Societies of Canada

Q: When may I use an agent to verify identity?

A:     You may rely on an agent to verify the identity of an individual at any time. When using an agent, you must have an agreement or arrangement in writing for this purpose.

Original Author: Federation of Law Societies of Canada

Q: Are there times when I must I use an agent to verify identity?

A:     If the individual is not physically present in Canada, and you are not meeting the individual in person, you must use an agent to verify their identity. You must have an agreement or arrangement with the agent in writing.

Original Author: Federation of Law Societies of Canada

Q: Who may act as an agent to verify identity?

A:     Amendments to the Client Identification and Verification rule now permit you to choose any suitable person to act as an agent. Previously, agents had to be individuals in occupations who could provide an attestation respecting compliance with the verification requirements. The rule also provided a list of those occupations. As the attestation requirement has been removed, along with the list, you may now choose any appropriate individual to act as your agent. You should use your professional judgment to choose someone who is suitable.

Keep in mind that the responsibility for verifying an individual’s identity is yours, even when using an agent. You should always be the one who chooses the agent; don’t rely on your client or the individual whose identity is being verified to find the agent.

You should ensure that the agent is reputable, reliable, accountable, and, where feasible, familiar with anti-money laundering due diligence requirements. If you do not know a suitable candidate, you should check with the regulator for the legal profession in the jurisdiction where the individual is located.

Original Author: Federation of Law Societies of Canada

Q: There is a new requirement in the rule to obtain information about the “source of funds” relating to financial transactions. What does this mean and how do I fulfill this obligation?

A:     In addition to the requirement to verify the identity of your client when engaged in or giving instructions in respect of a financial transaction, you are also required to inquire about the expected source of the funds related to the transaction as well as the actual source of funds if the transaction proceeds. The source of funds is the economic activity or action generating the funds (e.g. savings from salary, insurance proceeds, inheritance, bank loan) and may be apparent from the information obtained from the client for the retainer. You are required to record this information. You should also obtain and record the following information regarding the funds:

  • the payer’s full name, occupation and contact information
  • the relationship of the payer to the client (the payer may be the client)
  • the date on which the funds were received from or transferred by the payer
  • the form in which the funds were received or transferred (e.g. bank draft, cheque)
  • the full name and address of all financial institutions or other entities through which the payer processed or transmitted the funds

You should make sufficient inquiries to assess whether there is anything that suggests the information about the source of funds, together with the proposed transaction, is inconsistent with what you know about the client, their occupation, economic profile, activities, and risk profile, and the circumstances of the transaction.

You should also retain any supporting documents that relate to how you determined the source of funds.

This requirement applies to both individual and organizational clients and also relates to the new periodic monitoring and risk assessment requirement.

Original Author: Federation of Law Societies of Canada

Q: Can I accept a client’s explanation as to the “source of funds”?

Where the source of funds is clear and there are no inconsistencies with the client’s profile and activities, the client’s explanation will likely be sufficient to satisfy the requirement. In other cases, it may be appropriate to obtain supporting documentation to confirm the source of funds. In circumstances that raise suspicions, for example where the client’s explanation is unusual or inconsistent with your knowledge of or experience with the client, you may need to undertake enhanced due diligence, including obtaining supporting documents.

In all cases, you should practice within your area of competence and exercise your professional judgment to assess risk. Seek advice from a law society practice advisor or equivalent in your jurisdiction for further guidance and resources with respect to addressing risks.

Original Author: Federation of Law Societies of Canada

Q: There is a new requirement in the rule to monitor the professional business relationship. What is the requirement and what does it entail?

You are required to periodically monitor the professional business relationship with your client while retained in respect of matters involving financial transactions. It may be useful to conceive of this obligation as a periodic “check-in” with a client during an ongoing retainer following the initial verification of identity and once information about the source of funds is obtained.

You must periodically assess whether the client’s information in respect of their activities and the source of their funds is consistent with the purpose of the retainer and the information you have obtained about the client. You also need to periodically assess whether there is a risk that you might be assisting in dishonesty, fraud, or other illegal activity. Monitoring inquiries may be triggered when your client provides you with new facts about their activities or source of funds, or when you are faced with unexpected client behaviour. This obligation is consistent with your professional duty to be vigilant about potential client dishonesty and diligent in avoiding fraud and other illegal activity.

You should use your discretion in defining the frequency of the monitoring. It will depend on factors such as the client, the nature of the work, the anticipated duration of the retainer, and the type of services provided.

You are required to keep a record of your monitoring inquiries and copies of any documents that arise from your inquiries.

Original Author: Federation of Law Societies of Canada

Q: Another lawyer in my firm already identified the client I am acting for. Am I permitted to rely on this identification?

A:     You may rely on the identification information obtained by another lawyer in your firm provided the information was obtained in accordance with the current rules.

Original Author: Federation of Law Societies of Canada

Q: I had a general retainer to provide legal services to a client before the rules were enacted. I have just been asked to provide legal advice on a new matter. I have not opened a new file. Do I have to identify this client?

A:     Yes. The question is not whether you have opened a new file since the rules were enacted, but whether you are providing legal services on a new matter. Since the matter on which you are providing legal advice arose after implementation of the rules, you are required to identify your client.

Original Author: Federation of Law Societies of Canada

Q: I am representing the plaintiffs in a class action. Do I have to identify all of the plaintiffs?

A:     No. You need only identify the representative plaintiff.

Original Author: Federation of Law Societies of Canada

Q: The rule requires me to obtain and record my client’s occupation. What do I do if the individual doesn’t have an occupation or doesn’t want to tell me what it is?

A:     The rule requires you to find out what your client does. If your client doesn’t want to answer the question you should explain that all members of the legal profession are required to ask all clients for this information and that you need it to properly represent him or her. If the client still refuses to provide the information, you must advise the client that you will be in breach of the rule unless you get it and your professional obligations do not permit you to act in such circumstances. Of course, if your client is unemployed or not actively engaged in an occupation, you may simply record this and continue to act for the client.

Note that “occupation” does not need to be “employment”. If your client is retired, a homemaker, a volunteer caregiver or otherwise occupied, you should record that information.

Original Author: Federation of Law Societies of Canada

Q: If my client is unable to provide some of the identification information required, for example an address or a phone number, am I obliged to withdraw?

A:     Where a client is unable to provide the information, for example where they have no address because they are homeless, or where they have no telephone number, you are not obliged to withdraw. Where the information does not exist, you should make a record of that fact. It would be prudent to document how you will contact the client. For example, there may be an address where the client can pick up mail.

This situation is to be distinguished from one in which the client refuses to provide the information.

Original Author: Federation of Law Societies of Canada

Q: I have been retained by another lawyer to do work for her client. Do I have to identify the client?

A:     Whether you have to identify the client of the other lawyer depends on two things: whether the lawyer who has retained you is licensed to practice law in a Canadian jurisdiction and whether the lawyer has complied with the identification obligations. If the lawyer is a member of the bar in a province or territory and has fulfilled her obligations to identify the client, you do not have to do so. It would be prudent to obtain a copy of the identity information from the lawyer before acting.

Original Author: Federation of Law Societies of Canada

Q: What are my obligations in determining whether a lawyer for whom I am acting as agent or a lawyer who has referred a client to me has taken the necessary steps to identify that client?

A:     You are expected to exercise due diligence to satisfy yourself that the other lawyer has already identified the client. This would involve asking the other lawyer to confirm that he or she has complied with the requirements of the rule. It would be prudent to obtain a copy of the identity information.

Original Author: Federation of Law Societies of Canada

Q: The lawyer who referred the client to me identified the client, but I have now learned that the matter will involve a financial transaction. Do I have to verify the client’s identity?

A:     Unless the referring lawyer also verified the client’s identity you must do so.

Original Author: Federation of Law Societies of Canada

Q: I have been retained by a law firm to provide a legal opinion on an issue arising in a matter for which they are acting for a client. Do I have to identify or verify the identity of that client?

A:     Generally, unless the law firm’s client is actively instructing you, you would not have to identify or verify the identity of the law firm’s client. In any event, if the law firm that has asked you to provide the legal opinion is a Canadian law firm, the exemption in section 2(3)(b) of the Model Rule may apply.

Original Author: Federation of Law Societies of Canada

Q: Are there any exceptions to the requirement to obtain information about organizations?

A:     Yes. When your client is a financial institution, a public body or a reporting issuer, you do not need to obtain or record the organization’s incorporation or business identification number or the nature of the business activities it is engaged in.

Original Author: Federation of Law Societies of Canada

Q: The corporation I have been retained by has authorized several people to instruct counsel. Do I have to identify all of them?

A:     No. The rule requires you to identify the individual(s) actually instructing you.

Original Author: Federation of Law Societies of Canada

Q: Do I have an obligation to look behind the assertion that an individual is authorized to instruct me on behalf of an organizational client?

A:     The rule does not require that you investigate such an assertion. You should always exercise prudence, however, and if you have concerns about the assertion it would be advisable to make further inquiries to satisfy yourself that the individual is indeed authorized to instruct you on behalf of the organizational client.

Original Author: Federation of Law Societies of Canada

Q: Am I required to identify a person who exercises their right to counsel upon being detained by the police and calls me from detention?

A:     You are required to identify an individual when you are retained by a client to provide legal services. Whether you have been retained by the detained individual will depend on the circumstances. For instance, if you provide only summary legal advice relating to their detention, you do not charge a fee, and you confirm with the individual that you are not retained to represent them, you may not be required to identify the individual. Check with the law society to confirm whether an exemption from the client identification requirement applies where a lawyer provides pro bono summary legal advice.

You are not required to identify your client if you provide legal services as part of a duty counsel program sponsored by a non-profit organization, and you are retained to provide legal services that do not involve a financial transaction. If however you do

engage in or give instructions in respect of the receiving, paying or transferring of funds, you must identify the individual and unless an exemption applies, you must also verify the individual’s identity and obtain information regarding the source of funds.

Original Author: Federation of Law Societies of Canada

Q: I provide summary legal advice through a non-profit “law line” service. Do I have to identify the callers to whom I give advice?

A:     No. This is akin to providing summary legal services as part of a duty counsel program sponsored by a non-profit organization.

Original Author: Federation of Law Societies of Canada

Q: I sometimes commission or notarize a document for someone I am not otherwise retained to represent. Do I have to identify that person?

A:     Check with your law society for its position on identification when providing these legal services. However, it would be prudent to identify a person for whom you are providing commissioning or notarial services and to be satisfied that the individual is who they represent themselves to be.

Original Author: Federation of Law Societies of Canada

Q: Although there is one senior person giving me instructions on behalf of my corporate client, I am also receiving instructions on discrete aspects of the matter from several other employees of the corporation. Do I have to verify the identity of each of them?

A:     You must use your judgment in this situation. If you are satisfied that an individual is responsible for the instructions you are receiving from others in the corporation it may be sufficient to verify his or her identity only. If, however, no instructing individual has overall responsibility for the instructions given by others, you must verify the identity of each person instructing you on behalf of the corporation.

Original Author: Federation of Law Societies of Canada

Q: What is covered by the exemption for funds “paid by a financial institution”?

A:     This exemption is meant to cover a financial institution’s own funds, for example those advanced pursuant to a mortgage or loan agreement. Cheques, whether regular or certified, bank drafts or other forms of payment that are provided by anyone other than the financial institution directly on its own behalf, are not included in the exemption. For the exemption to apply, the financial institution must be a bank regulated by the Bank Act, an authorized foreign bank, a credit union or trust company or must otherwise meet the definition provided in the rule.

Original Author: Federation of Law Societies of Canada

Q: Are funds received from the trust account of a lawyer in another part of Canada exempt?

A:     If you receive funds from the trust account of a lawyer who holds a license to practise in one of the provinces or territories you are not required to obtain information about the source of funds or verify the identity of the client (or, where applicable, the third party). This exemption does not apply to funds received from the trust account of a lawyer regulated by a foreign jurisdiction nor does it apply to other financial transactions (i.e. transactions that are not transfers from the trust account of a lawyer licensed in Canada) that may occur in relation to the same client matter.

Original Author: Federation of Law Societies of Canada

Q: I am acting for the vendor in a real estate transaction. I will be receiving the proceeds of the sale from the trust account of the purchaser’s lawyer and, after paying off the outstanding mortgage, will be giving my client a cheque drawn on my trust account for the balance. Do I have to verify my client’s identity?

A:     Yes. The payment to your client is a financial transaction that triggers the verification requirements. Although there is an exemption from verification with respect to the funds you received from the trust account of another Canadian lawyer you are acting as a financial intermediary when you provide funds to your client. In any event, in all real estate transactions it is prudent practice to verify your client’s identity.

Original Author: Federation of Law Societies of Canada

Q: I settled a matter for my client. Do I have to verify my client’s identity?

A:     Yes. There is no longer an exemption from the verification requirements in respect of funds received or paid in settlement of a legal proceeding. You have an obligation to verify the client’s identity and obtain information about the source of the settlement funds unless another exemption applies.

Original Author: Federation of Law Societies of Canada

Q: I am acting for a client in a matter where money is being paid pursuant to a court order. Do the verification requirements apply?

A:     Yes. There is no longer an exemption when monies are paid pursuant to a court order. You will have to verify the client’s identity and obtain the source of funds information unless another exemption applies.

Original Author: Federation of Law Societies of Canada

Q: My client has come to me for tax advice in connection with some investments. Is this a situation in which I have to verify my client’s identity?

A:     The verification obligations kick in when you are engaged in or give instructions in respect of the receiving, paying or transferring of funds. Simply providing legal advice about a money matter does not trigger the verification obligations unless you are also engaged in or giving instructions for the movement of the money.

Original Author: Federation of Law Societies of Canada

Q: I am acting for a client with respect to the completion of a commercial transaction. I have prepared the necessary documentation to complete the transaction, but the closing funds will not be flowing through my trust account as my client will be paying these directly to the other side in accordance with the agreement and closing documentation. Is this a situation in which I have to verify my client’s identity?

A:     Yes. The verification obligations apply whenever you engage in or give instructions in respect of the receiving, paying or transfer of funds, unless an exemption applies.

Although the funds are not passing through your trust account in this transaction, you are instructing with respect to the transfer of funds.

Original Author: Federation of Law Societies of Canada

Q: I did the legal work to incorporate a business and am now acting for that business on another matter. May I rely on documents already in my possession to verify the client’s identity or must I rely on documents from a government registry?

A:     As long as the documents are current and qualify as written confirmation from a government registry as to the existence of the corporation, relying on documents in your possession is fine. The documents referred to in the rule are examples of independent, reliable documents, but the list is not exhaustive. As you incorporated the business, you likely have a copy of the certificate of incorporation, which is an acceptable source.

Original Author: Federation of Law Societies of Canada

Q: My client is a law firm partnership that is reluctant to provide me with a copy of the partnership agreement. What should I do?

A:     Obtaining the partnership agreement from the law firm is only one way to verify the client’s identity. Some partnerships, such as limited liability partnerships, are registered in searchable provincial government registries. Also, with the instructing lawyer’s consent, you may be able to obtain information from the law society in the client’s jurisdiction. You may also be able to obtain proof of the firm’s identity through a government registry, such as the GST / HST Registry available on the website of the Canada Revenue Agency.

If the client will not provide a copy of the partnership agreement and you are unable to obtain information from other sources, you cannot act for the client.

Original Author: Federation of Law Societies of Canada

Q: I am acting for a trust. How do I verify its identity?

A:     The documentation you will need to verify the identity of a trust will vary depending on the nature of the trust. Examples of appropriate documentation include the trust agreement or other documents establishing the trust, documents amending the trust, and documents identifying the trustees.

The verification requirements also require you to make reasonable efforts to obtain the names and addresses of all trustees, all known beneficiaries, and settlors of the trust. You must also make reasonable efforts to obtain, and if obtained, record with the applicable date, information establishing the ownership, control and structure of an organization.

Original Author: Federation of Law Societies of Canada

Q: I am a lawyer in Nova Scotia and my client is an individual located in Calgary. What methods can I use for verifying their identity?

A:     When your client is an individual and is in Canada, but you cannot meet with them in person, you can use the credit file method or the dual process method to verify their identity. You may also retain an agent to verify the individual’s identity. The agent may use any one of the three verification methods.

Original Author: Federation of Law Societies of Canada

Q: Do I have to pay the agent?

A:     Nothing in the rule requires you to pay an agent to verify a client’s identity. You should establish with the agent at the outset whether they will be charging for the service and if so what the charge will be. You are required to enter into a written agreement or arrangement with the agent and may wish to include information on the fee in the agreement. If you agree to pay a fee to the agent, you must comply with the requirement to meet all financial obligations in relation to your practice.

Original Author: Federation of Law Societies of Canada

Q: May I rely on verification documents faxed or emailed from the agent?

A:     Yes, you may rely on an email or fax from the agent including copies of the documents he or she relied on to verify the individual’s identity. As a best practice, you should obtain a copy of the original(s) for your records. You must be satisfied that the information is valid and current and that the agent verified identity in accordance with the rule. You must also retain these documents for your records. It is important that all documents used to verify identity are clear and legible. You may store the document electronically as long as you can readily produce a hard copy.

Original Author: Federation of Law Societies of Canada

Q: My client is not in Canada. What method must I use to verify my client’s identity?

A:     When your client is outside of Canada, and you are not meeting with them in person, you must use an agent to verify their identity. As in all cases in which you use an agent, you must have a written agreement or arrangement with the agent.

Original Author: Federation of Law Societies of Canada

Q: I am acting for an organization located outside of Canada. Do I have to use an agent to verify the identity of the organization?

A:     No. Unlike for individuals, you do not need to use an agent to verify the identity of an organization outside Canada. You may verify the organization through documents.

However, you will have to use an agent to verify the identity of the instructing individual(s) if they are not located in Canada and you are not able to meet with them in person.

Original Author: Federation of Law Societies of Canada

Q: My client is acting on behalf of a third party located in Canada. I will not be meeting that third party in person. How do I verify the identity of this third party?

A:     You may verify the identity of the third party in the same way that you would verify the identity of any client in Canada. If the third party is an organization, you may rely on documents to verify its identity. To verify the identity of an individual (or an individual providing instructions on behalf of an organization) you will have to use either the credit file method or the dual process method since you will not be meeting with the individual in person.

Alternatively, you may arrange for an agent to take the necessary steps to verify the third party’s identity. The agent may use any of the three methods: government-issued photo ID, credit file or dual process.

Original Author: Federation of Law Societies of Canada

Q: My client is a lawyer licensed to practise in a Canadian province or territory and the matter I am acting for them on involves a financial transaction. I am not able to meet them in person. Do I have to verify their identity?

A:     Yes. As with any client matter involving the receipt, payment or transfer of funds, you must verify the client’s identity unless a specific exemption applies. There is no exemption from the rules when the client is a lawyer. If you are not meeting the client in person, you may use the credit file method or the dual process method. Alternatively, you may engage an agent to verify the client’s identity.

Original Author: Federation of Law Societies of Canada

Q: I have acted for an individual client before and have already verified the client’s identity under the current rules. Do I have to do it again?

A:     As long as you recognize the person and have no reason to believe their identification information or the accuracy of it has changed, you do not have to verify the identity of an individual more than once. However, the rule requires that you periodically monitor the professional business relationship while you are retained in respect of a financial transaction.

Original Author: Federation of Law Societies of Canada

Q: My client is a corporation or a partnership. Do I have to verify its identity again if I have already done so under the current rules?

A:     No, you don’t have to verify the identity of a client that is an organization if you have already done so, you retained the recorded information and you have no reason to believe that the information, or the accuracy of it has changed. This exception also applies to verifying the identity of the individual(s) instructing you on behalf of the organization (see the question above) and to obtaining names of directors and owners. However, while retained in respect of a financial transaction, you are required to periodically monitor the professional business relationship with the client, which may include ascertaining whether there has been any change in the identity or ownership of the corporation and determining that the instructing individual is still authorized to act in that capacity.

Original Author: Federation of Law Societies of Canada

Q: I have acted for a corporate client on several matters and previously verified identity in accordance with the rules. Someone new is now giving me instructions on behalf of the client. Do I have to verify that new individual’s identity?

A:     Yes. In every case involving the receipt, payment or transfer of funds, you must verify the identity of the person instructing you unless you or an authorized person (i.e. an agent, another legal professional, or employee of the firm) have previously done so.

Original Author: Federation of Law Societies of Canada

Q: If a corporate client indicates that the funds for a financial transaction are from a “shareholder’s loan,” do I have to inquire into the source of funds of the shareholder who lent the money to the corporation?

A:     It will depend on the circumstances, including the structure of the corporate entity, the size of the loan and whether there is a loan agreement. A large loan with little or no paperwork and no security might be a red flag. The source of money for the lender would be relevant in assessing potential risks. As a matter of good practice, it would be prudent to obtain the name of the shareholder who provided the loan.

Note that if a client is a public company (a “reporting issuer”), you are not required to confirm the source of funds.

Original Author: Federation of Law Societies of Canada

Q: My client is representing someone else. What are my obligations?

A:     If your client is acting for or representing a third party (e.g. an attorney acting under a power of attorney), you must identify both your client and the third party. The third party may or may not be directly instructing your client, for example as a principal instructs an agent. If the third party is instructing your client in relation to a financial transaction, you must verify the identity of both the client and the third party. When your client is acting for someone else you must obtain the same information for that other person as you would if they were your client: their full name, home address and telephone number, their occupation, and where applicable their workplace or business address and telephone number.

The same requirement applies if the third party is an organization such as a company: you have to get all of the information you would get if you were representing the organization directly.

Original Author: Federation of Law Societies of Canada

Q: Do I have an obligation to ask my client if they are acting for a third party?

A:     While not required, it would be prudent practice to ask the client if a third party is involved. If the client is acting for or representing a third party, the rule requires you to obtain the identification information about the third party. If there is a financial transaction, you must verify the identity of both the client (including the individual instructing you on the client’s behalf if the client is an organization) and the third party. Accordingly, you should take reasonable measures to determine if a third party is involved if there is a financial transaction.

Original Author: Federation of Law Societies of Canada

Q: My client is acting on behalf of a minor. Do I have to identify the minor?

A:     Yes, you must identify the minor, and if there is a financial transaction, you must verify the minor’s identity. You must record the details with the applicable date.

If the minor is under 12 years of age you must verify the identity of one of the child’s parents or guardians.

If the minor is at least 12 years of age but not more than 15 years of age, you may refer to information from a reliable source that contains the name and address of one of the individual’s parents or their guardian and verifying that the address is that of the individual.

Original Author: Federation of Law Societies of Canada

Q: Are beneficiaries to an estate considered third parties within the meaning of the rule?

A:     No, the beneficiaries are not considered to be third parties unless they are instructing you or your client. The fact that an individual or organization might benefit from or be affected by the actions of the client does not by itself trigger the obligation to identify them or verify their identities.

Original Author: Federation of Law Societies of Canada

Q: I am acting for a developer of a new condominium project and am holding in trust the monies paid as deposits by the purchasers of the condo units. Do I have to identify the purchasers?

A:     No. In that case the developer is not acting for or representing the purchasers with respect to the legal services you are providing to the developer. However, note that a real estate developer selling condominiums to the public may be a reporting entity to FINTRAC. As such, the real estate developer would have obligations to verify the purchasers’ identities, keep client information and source of funds records with respect to the purchasers and to take reasonable measures to determine if a purchaser is acting on behalf of a third party.

Original Author: Federation of Law Societies of Canada

Q: I have been retained by a joint venture. Do I have to identify and verify the identity of the parties to the joint venture?

A:     Yes. Generally, a joint venture is not an independent legal entity; it is a business model in which two or more organizations (corporations, partnerships trusts) or individuals share resources for the purpose of a common venture. In such a case, each of the parties to the joint venture is a client.

Original Author: Federation of Law Societies of Canada

Q: I am acting for a living trust that makes ongoing disbursements to the beneficiaries of the trust. Do the identification and verification obligations apply to these beneficiaries?

A:     The rule requires that you make reasonable efforts to obtain, and if obtained, record with the applicable date, the names and addresses of all trustees and all known beneficiaries and settlors of the trust as well as information establishing the ownership, control and structure of the trust. If a beneficiary is directing you or your client in relation to the disbursement of funds from the trust, you will also have to verify the beneficiary’s identity. You should also be aware that the trust account rules prohibit you from holding funds in your trust account unless they are directly related to the provision of legal services. In this example, where you are making ongoing disbursements to the beneficiaries, you may not hold the funds in your trust account unless you are providing legal services related to the disbursements.

Original Author: Federation of Law Societies of Canada

Q: What are the obligations of insurance defence counsel, when defending an insured on the instructions of an insurer pursuant to a liability policy?

A:     The client identification and verification rules will normally apply with respect to the insurer and the individuals instructing you on behalf of the insurer. Special considerations may apply with regard to an obligation to verify the identity of the insured. If the matter involves the receipt, payment or transfer of funds, you must verify the identity of the insurer and instructing individuals. The status of the insurance company (i.e., if it is a “financial institution”, “public authority” or a “reporting issuer”) will determine if the insurer (and consequently its instructing individual) is exempt from the verification process and the obligation to obtain information about the source of funds.

Different issues arise when considering an obligation to verify the identity of the insured. If the insured has a right under the policy to guide and instruct counsel, and is doing so, you must verify the identity of the insured.

If the insured is difficult or impossible to locate during the course of the retainer, defence counsel is not obliged to decline the retainer simply because the insured cannot be located for the purpose of completing the identification process, nor will verification of the insured be required in the event funds are transferred. If counsel is able to make contact with the insured, identification and verification information will, however, be required.

Original Author: Federation of Law Societies of Canada

Q: I am acting for the vendor in a real estate transaction. My client has directed me to pay the proceeds of the sale to another party. Do I have to verify the identity of that party?

A:     Unless the vendor is acting for or representing the other party, there is no obligation to verify that party’s identity. However, prior to accepting the client’s instructions to pay the proceeds to another party, you should make reasonable inquiries about the purpose of the payment and the relationship between your client and the other party. You should not be disbursing trust funds to pay client obligations that are unrelated to the legal services being provided. Further, depending on the circumstances, these instructions may trigger your duty to periodically monitor the professional business relationship and assess the potential money laundering risk associated with the retainer.

Original Author: Federation of Law Societies of Canada

Q: My client was evasive when I tried to get the necessary identification and verification information. What should I do?

A:     This type of behaviour should raise suspicions that your client may be trying to get you to assist them in something illegal or dishonest. At the core of the client identification and verification rule is the professional responsibility not to participate in, or facilitate,

money laundering or terrorist financing. You have a duty to make reasonable inquiries in the face of this suspicion before acting or continuing to act.

If you know or ought to know that you would be assisting the client in fraud or other illegal conduct, you have a duty to refuse to act for them in that matter and withdraw from representation. The duty applies whether you become aware of this during the identification and verification process or at any time during your retainer.

Original Author: Federation of Law Societies of Canada

Q: I need advice about a specific situation that is not addressed in these questions. What should I do?

A:     If you have any unanswered questions or concerns about compliance with the rule you should contact a practice advisor or the equivalent with the law society in your jurisdiction.

Original Author: Federation of Law Societies of Canada

Trust Accounting Guidebook – The Reconciliation Process

A practicing lawyer or law firm must reconcile their trust accounts monthly. This is one of the most important functions that you perform with respect to the account records. Aside from providing a listing of outstanding deposits and cheques, it is a crucial internal control to aid in the identification of any mistakes or errors. This guidebook will support your firm’s reconciliation process.

Trust Account and Client Ledger Shortages 

Unless the overdraft is less than $50, a practising lawyer or law firm must immediately report to the Executive Director any overdrafts in the practising lawyer’s or law firm’s trust account, including any relevant information regarding the reason for the overdraft if  

  1. the overdraft was not corrected within 7 days of the time the shortage arose; or  
  2. the overdraft is an amount greater than $2,500, regardless of when it occurred. 

Audits 

The Society operates a primarily risk-based Trust Account Audit Program. This provides for audits of the trust accounts of selected lawyers and law firms, conducted by an accountant retained by the Society throughout the year. Those who are audited receive copies of the audit reports and the Society follows up with lawyers respecting all audit recommendations. Information respecting trends and concerns gleaned annually from the audits informs the Society’s education and other resources provided to lawyers and firms. 

Questions about the Trust Account Audit Program? Please contact the Society’s Trust Assurance Auditor.

Questions? 

Please contact the Society’s Trust Assurance Team.