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LSO - Know Your Client

By: W. Patric Mackesy

On January 1, 2022, Part III, Bylaw 7.1 of the Law Society of Ontario was amended.  That portion of the bylaw deals with 6 items: ID, Verification, Source of Funds, Monitoring, Record Keeping and Withdrawal.
 
A licencee, when retained to act for an individual to provide professional services to a client, must obtain the client’s full name, home address and home phone number, occupation and, if the client is acting for a third party, the same information for that third party.  If such client is further involved in the paying, receiving, or transferring funds, then the licencee needs to inquire as to the source of the funds.  The verification of the client must occur immediately after first being engaged relative to the paying, receiving, or transferring of funds.

The verification must be from a document issued by a federal, provincial or territorial entity and each document must be valid, original and current containing the person’s name and photo and has a unique identifier number. Municipal ID is not acceptable nor is a health card.  Aside from government ID, any 2 pieces of ID that provide a) name and address, b) name and birthdate, or c) proof of an account, credit card, or loan with a financial institution are acceptable verification.

If the client is an organization other than a financial institution, public body or reporting issuer, then the ID required is its business ID number and the ID’s place of issuance, the general nature the organization’s business and the name, position and contact info of each individual authorized to give instructions. Again, the source of any funds must be ascertained.  If funds are involved, then the licencee must obtain the name of each director and use best efforts to obtain the name and address of any entity that owns directly or indirectly, 25% or more of the organization or shares or the trustees of any unincorporated entity (i.e., control). 

Verification of any identification required must occur within 30 days of being engaged.  Acceptable ID is a Certificate of Corporate Status issued by a public body, proof that the organization must file annually by a public body, a government issued written confirmation of the existence, name and address of the organization and its directors.  If not incorporated, then a copy of the trust or partnership agreement or another document that is current and valid must be obtained.

If another employee or licencee of the firm obtains the ID and its verification or such has been obtained on a previous occasion and the licencee has no reason to believe such has changed, then the licencee need not investigate.  Interestingly, if a third party or agent of the client is providing the information, there must be a written agreement between both and the licencee must see same.  There must be a notation of the date the information and verification were obtained.  You must retain the documentation for a further 6 years after completion of the legal work and retainer.

A licencee must periodically monitor the professional business relationship with the client paying particular reference to making sure the client information remains correct and the client’s activities are consistent with your retainer and not assisting or encouraging fraud or other illegal conduct.  You must note and date these inquiries. n  

W Patric Mackesy is a partner at Mackesy Smye LLP. His practice concentrates on real estate, real estate development, wills, powers of attorney, estates and corporate law. 

He can be reached at: 

Mackesy Smye Lawyers
2 Haymarket St
Hamilton, ON 
L8N 1G7

Tel: (905) 525-2341
Email: [email protected]