This is the outcome of a case opposing Canada (Attorney General) v. Federation of Law Societies of Canada, 2015 SCC 7 (CanLII).
The Canadian Supreme Court held, in a ruling highly approved by the Canadian bar, that some provisions of the The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) breach sections 7 and 8 of the charter.
The legislation regulating the money laundering and terrorist financing is set up in quite a sophisticated way. The Criminal Code, RSC 1985, c C-46, prohibits money laundering and provides that it is illegal to fund terrorist activities. The PCMLTFA, on the other hand, sets out rules regulating when and how investigations of such acts should be carried out. The latter set of rules requires lawyers to respect certain obligations according to various guidelines such as record keeping and reporting standards as well as compliance agencies such as the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). The same statute governs the manner in which these mandatory provisions apply to lawyers. The rationale behind these rules is to inhibit illegal transactions and gather evidence that could be accessed with the proper judicial means if such transactions are carried out.
This legal framework, however, provides some exceptions. For example, the solicitor-client privilege still applies to the effect that lawyers have no obligation to divulge information they are given when providing legal services. Also, the PCMLTFA put in place some specific processes that can be followed by lawyers to protect documents covered by this privilege.
Two Main Issues
The provisions were contested on two main counts; the first contestation pertained to the search and seizure, whereas the second related to the conditions of identity verification.
Section 8 of the Canadian Charter of Rights and Freedoms
The charter, in its Section 8, contains provisions allowing certain authorized people to enter a location and examine records without any warrant, such searches are already authorized in homes search but require a search warrant.
Writing about these specific provisions, Justice Cromwell notes that the legislator gives such authorizations that disregard the existing risk of breaching solicitor-client privilege. He proceeds to state that the law as it reads has a criminal law character. He further relied on the Lavallee, Rackel & Heintz v Canada (Attorney General),  3 SCR 209 (Lavallee) case, noting that there is a need for the full protection of the client-solicitor privilege which involves a high expectation of privacy. The judge went on to note that there are flaws in the FCTFA in this case and concludes that the search provisions contained in the PCMLTFA violate section 8 and cannot be saved under section 1. Reading down provisions of the Act so that they do not apply to barristers and law firms, thus striking out section 64 relating to exceptions to the solicitor-client privilege.
Section 7 of the Canadian Charter of Rights and Freedoms
Regarding the Charter’s Section 7, having already declared the search provisions unconstitutional, Justice Cromwell examines the remaining provisions. To begin, he sets out the test required to prove an infringement of section 7 from Canada (Attorney General) v Bedford,  3 SCR 1101. Therefore, one must first prove a limit on the right to life, liberty or security of the person. One must then prove that the law violates the principles of fundamental justice. Justice Cromwell quickly disposes of the first part of the test, holding that the liberty interests of lawyers are engaged, given the severe jail or fine penalties imposed under the scheme.
The British Columbia Court of Appeal held that the principle of fundamental justice (“PFJ”) violated here was the “independence of the bar.” The Federation asserts that the PFJ is violated as it interferes with how lawyers provide services to their clients, and the impugned legislation makes their offices “an archive for the use of the prosecution.” Analyzing these two assertions, the former being broader, the latter being narrower, Justice Cromwell goes on to hold that for many of the same reasons that solicitor-client privilege is protected, the Court should “recognize as a principle of fundamental justice that the state cannot impose duties on lawyers that undermine their duty of commitment to their clients’ causes” (FLSC, para 84).
He also undertakes the analysis for creating new PFJs in the case, placing much emphasis on the requirement that there is overwhelming evidence of a strong and widespread consensus to support this PFJ. Applying this view to the impugned scheme, Justice Cromwell holds that the PFJ is violated for forcing lawyers to receive and retain more information than required for effective and ethical client representation and that clients could reasonably believe that lawyers are “acting on behalf of the state in collecting and retaining this information… ” (FLSC, paras 108-109).
As such, Justice Cromwell reads down the general provisions in the PCMLTFA Regulations regarding the verification of identity to not apply to lawyers while striking down the remaining ones that directly apply to lawyers.
In short concurring reasons, Chief Justice McLachlin and Justice Moldaver do not agree that there is sufficient certainty for the “lawyer’s commitment to the client’s cause” to be a PFJ. In their view: “The lawyer’s commitment to the client’s interest will vary with the nature of the retainer between the lawyer and client, as well as with other circumstances. It does not, in our respectful opinion, provide a workable constitutional standard” (FLSC, para 119).
The Effect of the Ruling
In this ruling, Justice Cromwell states twice that he wishes not to interfere with the legislature’s ability to regulate in pursuit of its ultimate aim to fight against money laundering and terrorist financing. Regarding the search provision, he says he does not exclude the possibility that Parliament could devise a constitutionally compliant inspection regime without a judicial pre-authorization requirement” (FLSC, para 56). He proceeds to hold that: “Parliament is entitled, within proper limits which I have outlined, to impose obligations beyond those which the legal profession considers essential to effective and ethical representation” (FLSC, para 113).
As such, this decision stands for the protection of solicitor-client privilege in Canada, created a new guideline that protects the lawyer’s commitment to the client’s cause. This prevents lawyers from being put between a rock and a hard place by being under the pressure of penalties. While promoting the privilege, Justice Cromwell is clearly noting that “this holding does not place lawyers above the law” (FLSC, para 111).