Catching the Middleman: Amendments to Money Laundering Provisions of the Criminal Code

I. INTRODUCTION

The Canadian federal government has been largely ineffective at combatting money laundering in Canada.¹ In response to increased scrutiny for its inaction and inability to effectively police money laundering,² in June 2019 the federal government amended s. 462.31(1) of the Criminal Code.³ Prior to this amendment, and since s. 462.31(1)’s inception in 1989,⁴ in order to be found guilty of the offence of money laundering one must have intended to conceal or convert property from an illegitimate form into a legitimate form with the knowledge that the converted property was the proceeds of crime. The June 2019 amendments changed the mens rea of the offence of money laundering from one requiring intent to one that may also be found in instances of recklessness.⁵ This particular amendment is impactful because it dramatically increases the scope of actors who can be prosecuted for money laundering—including lawyers.

II. PRIOR ATTEMPTS TO PREVENT MONEY LAUNDERING IN CANADA

Although Canada’s fight against money laundering has been described as being “in its infancy,”⁶ there is a prolonged history of the federal government attempting to involve legal professionals in the battle against money laundering.⁷ Recent amendments to the rules governing lawyers by Canadian law societies are the result of conciliatory efforts with the federal government to quell concerns of criminals using the legal profession as a vehicle for money laundering.⁸ Even so, the legal profession is still described as a “‘black hole’” for financial crimes.⁹ Specifically, the rules surrounding lawyers’ professional responsibilities have stayed entirely within the control of the legal profession, and it remains difficult for those outside of the profession to determine the origin of client funds.¹⁰ This generally leads to dead ends in financial crime investigations and exacerbates Canada’s money laundering problem.¹¹ These concerns contributed to the most recent attempt by the federal government to expand its ability to prosecute and track money laundering.

III. THE EFFECT OF THE JUNE 2019 AMENDMENT

The June 2019 amendment to the Criminal Code is intended to catch the intermediaries of the money laundering business. For this discussion, it is essential to analyze the full wording of the amended provision, s. 462.31(1), of the Criminal Code:

Every one commits an offence who uses, transfers the possession of, sends or delivers to any person or place, transports, transmits, alters, disposes of or otherwise deals with, in any manner and by any means, any property or any proceeds of any property with intent to conceal or convert that property or those proceeds, knowing or believing that, or being reckless as to whether, all or a part of that property or of those proceeds was obtained or derived directly or indirectly as a result of

(a) the commission in Canada of a designated offence; or

(b) an act or omission anywhere that, if it had occurred in Canada, would have constituted a designated offence.¹²

As can be seen, the wording of this offence is broad. The plain meaning of the provision suggests that any interaction with funds that are the proceeds of a designated offence,¹³ where an individual intends to convert the funds and is reckless as to the source of those funds, could now result in a conviction for money laundering. The guilty party does not have to intend to convert the proceeds of crime; they need only intend to convert the property in question and be reckless as to the source of that property. Before the amendment, the scope of the provision was restricted by the required mens rea of intent, which prevented those unwittingly involved in laundering money from being prosecuted. Now, both the actus reus and the mens rea of the offence are broad and wide-reaching. A banker converting Canadian currency into a foreign currency without first establishing a legitimate source of the funds, a lawyer placing money in trust for a client, an accountant transferring ownership of a business, and countless other daily financial transactions are now at risk of being considered money laundering offences.

Given past difficulties surrounding the prosecution of money laundering in Canada,¹⁴ there may be arguments suggesting that increasing the pool of potentially guilty parties is necessary to reduce the total amount of funds laundered through Canada’s financial system. The amendment may lead to increased scrutiny of large financial transactions across the Canadian financial industry, in turn making it more difficult for criminals to take advantage of unwitting agents to launder their money. However, the amendment also greatly increases the potential penalty for those who are taken advantage of by criminals. With these new amendments, lawyers, for instance, who fail to take the proper steps when determining the source of a client’s funds will now not only face possible professional sanction from their law society, but also a prison sentence of up to ten years.¹⁵

IV. CONCLUSION

The amendments to s. 462.31(1) of the Criminal Code take an already broad (yet historically ineffective) provision and give it an even broader scope. The lowering of the required mens rea not only targets those attempting to launder money, but also targets those who may be unknowingly involved in a money laundering scheme. It remains to be seen if this amendment will effectively increase the scrutiny of financial transactions or prosecution of those attempting to launder money. Nonetheless, the risk of prosecution for countless professionals involved in everyday financial transactions has markedly increased while the risk for those attempting to launder money remains largely the same.

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^* JD Candidate (Saskatchewan).

¹ See generally Dirty Money: An Independent Review of Money Laundering in Lower Mainland Casinos conducted for the Attorney General of British Columbia, by Peter M German (Victoria: AGBC, 31 March 2018), online (pdf): <news.gov.bc.ca/files/German_Gaming_Final_Report.pdf>, archived: <perma.cc/B8F9-ABKA> [German Report Part 1]; Expert Panel on Money Laundering in BC Real Estate, Combatting Money Laundering in BC Real Estate, (Victoria: Minister of Finance, 2019) at 13–15, online (pdf): <www2.gov.bc.ca/assets/gov/housing-and-tenancy/real-estate-in-bc/combatting-money-laundering-report.pdf>, archived <perma.cc/H4QH-8NKT>; Kevin Comeau, “Why Canada’s money-laundering problem is far bigger than we think”, Financial Post (28 May 2019), online: <business.financialpost.com/opinion/why-canadas-money-laundering-problem-is-far-bigger-than-we-think>, archived: <perma.cc/MVA2-KD4W>.

² Department of Finance, News Release, “Government of Canada Leads National Response to Money Laundering and Terrorist Financing” (13 June 2019) online: Government of Canada <www.canada.ca/en/department-finance/news/2019/06/government-of-canada-leads-national-response-to-money-laundering-and-terrorist-financing.html>, archived: <https://perma.cc/9QNK-G2CZ>.

³ RSC 1985, c C-46 [ Criminal Code].

⁴ German Report Part 1, supra note 1 at para 13.

⁵ Criminal Code, supra note 3, s 462.31(1).

⁶ José Hernandez, “Money laundering is a national crisis. What now?”, Pivot Magazine (7 March 2019), online: CPA Canada <www.cpacanada.ca/en/news/pivot-magazine/2019-07-03-jose-hernandez-money-laundering>, archived: <perma.cc/CWJ8-T862>.

⁷ See e.g. Canada (Attorney General) v Federation of Law Societies of Canada, 2015 SCC 7, [2015] 1 SCR 401; Amy Salyzyn, “A False Start in Constitutionalizing Lawyer Loyalty in Canada (Attorney General) v. Federation of Law Societies of Canada” (2016) 76 SCLR 169.

⁸ See e.g. Federation of Law Societies of Canada, Federation News, “Federation welcomes opportunity to work with federal government to address issues related to money laundering and terrorist financing” (13 June 2019), online: FLSC < flsc.ca/federation-welcomes-opportunity-to-work-with-federal-government-to-address-issues-related-to-money-laundering-and-terrorist-financing>, archived: <perma.cc/ZX5V-7GWD>; Law Society of British Columbia, Notice to the Profession, “Anti-money Laundering Measures of the Law Society – new trust rule and cash rule changes” (15 July 2019), online: LSBC <www.lawsociety.bc.ca/about-us/news-and-publications/news/2019/anti-money-laundering-measures-of-the-law-society>, archived: <perma.cc/VG4M-6HYP>; Law Society of Saskatchewan, “Law Society amends Rules to help prevent money laundering” (last modified 14 January 2020), online: Legal Sourcery <lsslib.wpcomstaging.com/2019/12/04/law-society-amends-rules-to-help-prevent-money-laundering>, archived: <perma.cc/YQ4J-JZT7>; Law Society of Saskatchewan, Code of Professional Conduct, Regina: LSS, 2019, ch 3.2-7; Law Society of Saskatchewan, Rules, Regina: LSS, 2020, rr 1503, 1511, 1541–1550.

⁹ Attorney General of British Columbia, Dirty Money Part 2: Turning the Tide—An Independent Review of Money Laundering in B.C. Real Estate, Luxury Vehicle Sales & Horse Racing, by Peter M German (Victoria: AGBC, 31 March 2019) at 159, online (pdf): <icclr.org/wp-content/uploads/2019/06/Dirty_Money_Report_Part_2.pdf?x30145>, archived: <perma.cc/G32F-V5XP>.

¹⁰ Ibid.

¹¹ Ibid at 159–161.

¹² Criminal Code, supra note 3, s 462.31(1) [emphasis added].

¹³ The term “designated offence” is defined broadly in the Criminal Code as:

(a) any offence that may be prosecuted as an indictable offence under this or any other Act of Parliament, other than an indictable offence prescribed by regulation, or

(b) a conspiracy or an attempt to commit, being an accessory after the fact in relation to, or any counselling in relation to, an offence referred to in paragraph (a).

(ibid, s 462.3(1)).

¹⁴ See e.g. Marc Montgomery, “Huge money-laundering operation in British Columbia alleged”, Radio Canada International  (18 January 2019), online: <http://www.rcinet.ca/en/2019/01/18/huge-money-laundering-operation-in-british-columbia-alleged>, archived: <https://perma.cc/42R7-ALC4>.

¹⁵ Criminal Code, supra note 3, s 462.31(2)(a).