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Glossary of Defined Terms

This glossary contains definitions to assist licensees with understanding and applying the Law Society of Ontario’s anti-money laundering and terrorist financing (AMLTF) requirements. Sourced from the Law Society’s Rules of Professional Conduct, Paralegal Rules of Conduct and By-Laws, as well as the Federation of Law Societies of Canada (FLSC) and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) resources, these definitions should be used in the context of a licensee’s client identification and verification, cash handling, and trust accounting obligations.
  • AGENT
    An “agent” refers to an individual, other than an employee or another licensee of the firm, who is retained by a licensee to comply with the verification requirements of By-Law 7.1 on behalf of the licensee, provided that prior to the individual acting on behalf of the licensee, the licensee and the individual enter into a written agreement for this purpose [s. 23(11)(b) of By-Law 7.1].
  • BENEFICIAL OWNERS
    The term “beneficial owners” refers to the individuals who are the trustees or known beneficiaries and settlors of a trust, or those who directly or indirectly own or control 25% more of an organization or shares of an organization.
     
  • CASH
    The term “cash” refers to
     
    • current coin within the meaning of the Currency Act (Canada),
    • notes intended for circulation in Canada issued by the Bank of Canada pursuant to the Bank of Canada Act and
    • current coin or bank notes of countries other than Canada

    [s. 1 of By-Law 9].
     
  • CLIENT
    A "client" means an individual who or organization that (a) consults the licensee and on whose behalf the licensee renders or agrees to render legal services, or (b) having consulted the licensee, reasonably concludes that the licensee has agreed to render legal services on their behalf. “Client” includes a client of the firm of which the licensee is a partner or associate, whether or not the licensee handles the client's work [r. 1.1-1 of the Rules of Professional Conduct; r. 1.02 of the Paralegal Rules of Conduct].
  • CREDIT FILE METHOD
    The “credit file method” is a method that licensees can use to verify an individual client’s identity. The credit file method permits licensees to verify an individual’s identity by relying on information that is in their credit file. The credit file must be located in Canada and have been in existence for at least three years. The information in the credit file must match the name, date of birth, and address provided by the individual [s. 23(7)1.(ii) of By-Law 7.1].
  • DUAL PROCESS METHOD
    The “dual process method” is a method that licensees can use to verify an individual client’s identity. The dual process method of verification requires licensees to rely on any two of the following pieces of information to verify identity:
     
    1. information from a reliable source that contains the individual’s name and address;
    2. information from a reliable source that contains the individual’s name and date of birth; and/or
    3. information containing the individual’s name that confirms that they have a deposit account or credit card or other loan amount with a financial institution

    [s. 23(7)1.(iii) of By-Law 7.1].
     
  • ELECTRONIC FUNDS TRANSFER
    An “electronic funds transfer” means the transfer of funds from one financial institution or financial entity to another initiated by the transmission, through any electronic, magnetic or optical device, telephone instrument or computer, of instructions for the transfer of funds, where the record of the transfer includes
     
    • a reference number
    • the name of the financial institution or financial entity sending the funds
    • the name of the financial institution or financial entity receiving the funds
    • the date of the transfer of the funds
    • the amount of funds transferred
    • the currency of the funds transferred
    • the name of the holder of the account from which the funds transferred are drawn, and
    • the name of the holder of the account to which the funds transferred are deposited

    [s. 20, Definitions of By-Law 7.1].
  • EXEMPTIONS
    The term “exemptions” refers to the exemptions to the identification and verification requirements outlined in ss. 22(2), (3) and (4) of By-Law 7.1. There are exemptions for certain licensees, certain funds, and certain clients or third parties.
     
  • FINANCIAL ENTITY
    A “financial entity” refers to a financial entity headquartered and operating in a country that is a member of the Financial Action Task Force on Money Laundering [s. 20, Definitions of By-Law 7.1].
  • FINANCIAL INSTITUTION
    A “financial institution” means
     
    1. a bank that is regulated by the Bank Act (Canada)
    2. an authorized foreign bank within the meaning of s. 2 of the Bank Act (Canada) in respect of its business in Canada
    3. a cooperative credit society, savings and credit union, credit union or caisse populaire that is regulated by an Act of a province or territory of Canada
    4. an association that is regulated by the Cooperative Credit Associations Act (Canada) 
    5. a company that is regulated by the Trust and Loan Companies Act (Canada)
    6. a loan or trust corporation that is regulated by an Act of a province or territory of Canada
    7. a ministry, department or agent of the government of Canada or of a province or territory of Canada if the ministry, department or agent accepts deposit liabilities in the course of providing financial services to the public, or
    8. a subsidiary of an entity mentioned in clauses (a) to (g) where the financial statements of the subsidiary are consolidated with the financial statements of the entity
     
    [s. 20, Definitions of By-Law 7.1].
  • FINANCIAL TRANSACTION
    A licensee is retained in a “financial transaction" when, during the retainer, the licensee will engage in or give instructions in respect of the receipt, payment, or transfer of funds.
     
  • FUNDS
    The term “funds” means cash, currency, securities, and negotiable instruments or other financial instruments that indicate the person’s title or right to or interest in them [s. 20, Definitions of By-Law 7.1].
  • GOVERNMENT ISSUED PHOTO IDENTIFICATION DOCUMENT
    A “government issued photo identification document” is a document used in certain circumstances to verify the identity of an individual client or third party. It includes any valid, original, and current federal, provincial, or territorial government issued photo identification document with a unique identifier. The name and photograph on the document must match with the client [s. 23(7), of By-Law 7.1].

    A foreign government issued photo identification document is acceptable if it is equivalent to a Canadian issued photo identification document. A photo identification document that is issued by a municipal government, whether Canadian or foreign, is not acceptable.

    Click here for examples of acceptable photo identification.
  • HIGH-RISK COUNTRY
    A country identified by authorities as posing a high risk for money laundering. Indicia of high-risk countries include prevalence of corruption and financial crime and weakness of anti-money laundering laws and measures. For more information, licensees should review the advisories on the Government of Canada, FATF, FINTRAC and United Nations Security Council websites.
  • IDENTIFICATION
    Identification refers to the process of obtaining and recording certain basic information about a client or third party, such as name and contact information (address, phone number, etc.). The information required is set out in s. 23(1) of By-Law 7.1. Subject to limited exemptions, licensees are required to obtain this information whenever they are retained to provide legal services to a client [s. 22(1)(a) of By-Law 7.1].
  • LAWYER
    A “lawyer” means an individual who is authorized to practise law in a province or territory of Canada other than Ontario [s. 20, Definitions of By-Law 7.1].
  • LEGAL SERVICES
  • LICENSEE
    A “licensee” is a person licensed by the Law Society to provide legal services in Ontario or to practice law as a barrister or solicitor in Ontario including a candidate enrolled in the Law Society’s Licensing Process for licensees [r. 1.1-1 of the Rules of Professional Conduct; r. 1.02 of the Paralegal Rules of Conduct].
  • MONEY
    The term “money” includes cash, cheques, drafts, credit card sales slips, post office orders and express and bank money orders [s. 1 of By-Law 9].
  • MONEY LAUNDERING
    The United Nations defines “money laundering” as any act or attempted act to disguise the source of money or assets derived from criminal activity. Essentially, money laundering is the process whereby “dirty money” – produced through criminal activity – is transformed into “clean money,” the criminal origin of which is difficult to trace [see FINTRAC Guidance Glossary].
  • MONITORING
    The term “monitoring” refers to the requirements set out in s. 23.1 of By-Law 7.1. The monitoring requirements are triggered when a licensee engages in or gives instructions in respect of the receipt, payment, or transfer of funds. This requirement compels licensees, during a retainer, to
     
    • periodically monitor the professional business relationship with the client for the purposes of
      • determining whether the client’s information in respect of their activities, the source of funds, and the client’s instructions in respect of the transactions are consistent with the purpose of the retainer and the information obtained about the client and required under s. 23 of By-Law 7.1
      • assessing whether there is a risk that the licensee may be assisting or encouraging fraud or other illegal conduct, and
    • keep a record of the measures taken and the information obtained with respect to the licensee’s activities and the date on which the measures were taken, and the information obtained.
  • ORGANIZATION
    An “organization” means a body corporate, partnership, fund, trust, co-operative, or an unincorporated association [s. 20, Definitions of By-Law 7.1].
  • POLITICALLY EXPOSED PERSON (PEP)
    A person who holds or has previously held a public position (political or high-level professional appointment) or has professional or family ties to such an individual and as such may be in a position that could be abused for the purpose of money laundering, corruption, bribery, and activities related to terrorist financing.
  • PUBLIC BODY
    A “public body” means
     
    1. a ministry, department, or agent of the government of Canada or of a province or territory of Canada,
    2. a municipality incorporated by or under an Act of a province or territory of Canada, including a city, town, village, metropolitan or regional municipality, township, district, county, rural municipality, any other incorporated municipal body, and an agent of any of them,
    3. a local board of a municipality incorporated by or under an Act of a province or territory of Canada, including any local board as defined in the Municipal Act and any similar body incorporated under the law of another province or territory, 
    4. an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act (Canada) or an agent of the organization,
    5. a body incorporated by or under an Act of Canada or of a province or territory of Canada for a public purpose, or
    6. a subsidiary of an entity mentioned in clauses (a) to (e) where the financial statements of the subsidiary are consolidated with the financial statements of the entity
     
    [s. 20, Definitions of By-Law 7.1].
     
  • RELIABLE SOURCE
    The term “reliable source” means an originator or issuer of information that you trust to verify the identity of a client. To be considered reliable, the source should be well known and considered reputable. The source providing the information cannot be the licensee, the licensee’s client, or the individual who is being identified; the source must be independent. For example, reliable sources can be the federal, provincial, territorial, municipal levels of government, Crown corporations, financial entities, or utility providers. Click here for a list of examples of reliable sources of information.
  • REPORTING ISSUER
    A “reporting issuer” means
     
    1. a reporting issuer within the meaning of an Act of a province or territory of Canada in respect of the securities law of the province or territory,
    2. a corporation whose shares are traded on a stock exchange designated under s. 262 of the Income Tax Act (Canada) and that operates in a country that is a member of the Financial Action Task Force on Money Laundering, or
    3. a subsidiary of an entity mentioned in clause (a) or (b) where the financial statements of the subsidiary are consolidated with the financial statements of the entity
     
    [s. 20, Definitions of By-Law 7.1].
     
  • SECURITIES DEALER
    A “securities dealer” means a person authorized under an Act of a province or territory of Canada to engage in the business of dealing in securities or any other financial instruments or to provide portfolio management or investment advising services, excluding any person who acts exclusively on behalf of such a person [s. 20, Definitions of By-Law 7.1].
  • SOURCE OF FUNDS
    The term “source of funds” refers to the requirement set out in s. 23(2) of By-Law 7.1. Subject to an exemption, the source of funds requirement is triggered when a licensee is engaged in or giving instructions in respect of the receipt, payment, or transfer of funds. The source of funds requirement imposes on licensees an obligation to obtain from the client information about the source of funds being received, paid or transferred, and to record this information and the date on which it was obtained [ss. 20, Definitions, and 23(2) of By-Law 7.1].
  • TERRORIST FINANCING
    A “terrorist financing” offence is knowingly collecting or giving property (such as money) to carry out terrorist activities. This includes the use and possession of any property to help carry out terrorist activities. The money earned for terrorist financing can be from legal sources, such as personal donations and profits from a business or charitable organization or from criminal sources, such as the drug trade, the smuggling of weapons and other goods, fraud, kidnapping and extortion [see FINTRAC Guidance Glossary].
  • THIRD PARTY
    A “third party” is a person who is an individual or organization that the client is acting for or representing. If you are required to identify or verify the identity of the client, you must also identity and verify the identity of any third party [ss. 20, Definitions and 23(1) of By-Law 7.1].
  • VERIFICATION
    Verification refers to the process of obtaining information and/or documentation to confirm the client and any third party are who or what they say they are. This involves comparing documents, data, or information with the actual client and third party using one of the methods prescribed in s. 23 of By-Law 7.1. Subject to limited exemptions, verification of the client and any third party is required when a licensee engages in or gives instructions in respect of the receipt, payment or transfer of funds [s. 22(1)(b) of By-Law 7.1].
Last Updated: January 1, 2022
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