BACKGROUND

In order to prevent and counter terrorist activity, the Anti-terrorism Act introduced provisions into the Criminal Code and another piece of legislation to address terrorist financing and terrorism-related property. The approach used was essentially three-pronged. First, the Act introduced new offences into the Code that prohibit the provision of any assistance to terrorist groups or in support of terrorist activities, including monetary assistance, property or services, and regardless of whether the assistance is provided directly or indirectly. Second, the Act introduced freezing and forfeiture provisions, specifically designed to deal with terrorist property, into the Code. Third, the Anti-terrorism Act amended the Proceeds of Crime (Money Laundering) Act, renaming it in the process as the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The amendments introduced into the PCMLTFA allow the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to monitor and investigate suspicious financial transactions and large money transactions (those over $10,000) related to terrorism, as well as those related to money laundering. In the case of transactions raising a threat to the security of Canada, the PCMLTFA allows FINTRAC to provide certain information to law enforcement agencies and CSIS so that they may address and prevent any potential harm.

The provisions on the freezing of property are found at sections 83.08 to 83.12 of the Code, added by section 4 of the Anti-terrorism Act. Section 83.08 prohibits anyone in Canada and any Canadian outside Canada from dealing financially, directly or indirectly, with any property or interest owned in any degree by a terrorist group. A terrorist group means an entity listed by Cabinet, or that has terrorist activities as its goal or purpose. Section 83.1 requires anyone in Canada, and Canadians anywhere, to advise CSIS and the RCMP about terrorist group property or interests they may possess or about which they may have information. Section 83.12 makes it an offence for anyone to contravene these provisions.

The provisions on seizure and restraint of property are found at section 83.13 of the Criminal Code. On ex parte application by the Attorney General in private to the Federal Court, an order may be issued for the seizure of property in Canada or a restraint order for property outside of Canada, prohibiting transactions by Canadians in relation to it. As well, an order may be issued appointing a manager to see to the preservation of the seized or restrained property.

Property forfeiture provisions are found at sections 83.14 to 83.17 of the Criminal Code. Under section 83.14, the Attorney General may apply to the Federal Court for a forfeiture order in respect of the property of a terrorist group, in respect of property used to facilitate terrorist activity, or in respect of currency or monetary instruments controlled by individuals who facilitated or carried out terrorist activity or are planning to do so. If the Federal Court judge is satisfied on a balance of probabilities that the seized or restrained property is related to terrorist activities, the property can be declared forfeited to Her Majesty, and can be disposed of as directed by the Attorney General.

ISSUES OF CONCERN

Solicitor-Client Privilege

Section 83.1 of the Criminal Code, and other terrorist financing measures, have been of concern to the Canadian Bar Association and the Federation of Law Societies of Canada. As described briefly earlier in this chapter, section 83.1 requires every person in Canada, and Canadians anywhere, to disclose to the RCMP and CSIS the existence of property in their control or possession they know is owned or controlled by or on behalf of a terrorist group, and information about a transaction or proposed transaction related to that property. As well, the PCMLTFA requires the reporting of suspicious transactions to FINTRAC.

The Federation and the Association respectively represent the provincial and territorial self-regulating societies that oversee the legal profession throughout Canada and members of the legal profession itself. They submitted in their respective briefs that these measures are inconsistent with the constitutionally protected solicitor-client privilege. The Canadian Bar Association recommended that section 83.1 of the Code be amended to add to it an exemption for information subject to solicitor-client confidentiality and privilege. The Federation recommended that, to ensure the right to counsel is not made illusory, funds received by a lawyer for professional fees, disbursements and posting of bail be excluded from the freezing and forfeiture of property provisions of the Code. As well, it recommended that information subject to solicitor-client confidentiality be excluded from mandatory reporting requirements.

Solicitor-client privilege is an important component of the rule of law. It allows clients to seek legal advice in confidence from members of the legal profession, assured that the confidential information they provide will be protected from disclosure without their consent. It enables clients to seek and be provided with the best possible advice to resolve issues brought to their counsel for guidance in the conduct of their affairs. Both the Association and the Federation are concerned that the anti-terrorist measures being considered in this chapter are inconsistent with the constitutionally-protected principle of solicitor-client privilege, and may lead to lawyers being conscripted as state agents against the interests of their clients.

The Federation was so concerned about these issues that it started litigation against the reporting requirements of the PCMLTFA insofar as they apply to members of the legal profession. The litigation was successful in having these measures set aside. They have, in fact, been suspended, while the government and the legal profession continue to seek means by which transactions can be reported in a manner consistent with solicitor-client privilege. In the meantime, the Federation’s member law societies have taken a number of steps to provide guidance to members of the legal profession who become involved in suspect transactions.

The Supreme Court of Canada has on a number of occasions in recent years, considered the issue of solicitor-client privilege and offered guidance and interpretation on what it is, and the limitations to which it is subject. The Court has said that information subject to solicitor-client privilege is beyond the reach of the state. It cannot be forcibly discovered or disclosed and is inadmissible in court. As guardians of this information, it cannot be disclosed by legal counsel without the consent of the client whose information it is. The Court has said that, although this privilege is not absolute, it is as absolute as possible and any legislated interference with it will be considered unreasonable and thus inconsistent with the Canadian Charter of Rights and Freedoms unless the interference is absolutely necessary. Hence, information related to client billing and similar matters will likely be protected by solicitor-client privilege, while information related to criminal transactions by counsel with a client or in which a lawyer is merely a conduit for a financial transaction will likely not.

After deliberating on this difficult issue, the Subcommittee has concluded that for legislation and strategies related to terrorist financing and terrorism-related property to be effective, the reporting requirements must apply to everyone, with the exceptions being few and narrowly drawn. The Subcommittee is convinced, however, that the issues underlying solicitor-client privilege are important enough to justify a limited exemption for the legal profession from the reporting requirements. Although provincial and territorial law societies have taken a number of steps to sensitize members of the legal profession to the perils of potentially suspect transactions, this is not enough to justify the exemption of all transactions in which they are engaged.

Parliament recently adopted Bill C-25, amending the PCMLTFA. More specifically, section 9 of this legislation added section 10.1 to the parent legislation providing that the reporting requirements do not apply to legal counsel or law firms when they are providing legal services. This appears to be a narrowly drawn exception to the general reporting requirement allowing for an exemption for transactions directly related to the provision of traditional legal services offered by counsel. This would likely cover lawyers acting in criminal law, private law, public law, or administrative law matters. Transactions in these contexts would likely relate to professional fees and disbursements.

This recent legislative change would appear to have responded to one of the issues raised by the Federation in its brief. For completeness and consistency, the Subcommittee believes a comparable amendment should be made to section 83.1 of the Code.

RECOMMENDATION 16

The Subcommittee recommends that section 83.1 of the Criminal Code be amended so as to exempt from its requirements legal counsel or law firms when they are providing legal services and not acting as financial intermediaries.

A Due Diligence Defence

As described earlier in this chapter, section 83.08 of the Criminal Code makes it an offence for any person in Canada or any Canadian to knowingly deal directly or indirectly with property owned or controlled by a terrorist group, enter into or facilitate directly or indirectly transactions in respect of property owned or controlled by a terrorist group, or provide financial or related services with respect to such property.

Concerns have been expressed, by those involved in both business and charitable activity in Canada and elsewhere, that their legitimate undertakings may make them susceptible to possible prosecution under section 83.08 of the Code. Although this provision requires that these activities with terrorist group links be knowingly undertaken, the Subcommittee believes that for greater certainty this section should be amended to allow an accused to make a due diligence defence to such charges. This would allow an accused involved in legitimate business or charitable transactions to assert that the necessary steps were taken to assess the nature of the subject transaction, and it was still not possible to determine the terrorist links.

RECOMMENDATION 17

The Subcommittee recommends that section 83.08 of the Criminal Code be amended to allow for a due diligence defence.

OTHER RECOMMENDED AMENDMENTS

Terrorist Financing without Lawful Justification or Excuse

To commit the offence of providing or collecting property for terrorist activity under section 83.02 of the Criminal Code, it must be committed “wilfully and without lawful justification or excuse.” The Subcommittee believes that “wilfully” is redundant to “without lawful justification or excuse,” as committing an act without a will to do so would presumably be a lawful justification or excuse. We also note that “wilfully” does not appear in other provisions of the Code that use the phrase “without lawful justification or excuse.”¹ We accordingly believe that “wilfully” should be removed from section 83.02.

RECOMMENDATION 18

The Subcommittee recommends that the words “wilfully and” be removed from section 83.02 of the Criminal Code.

The Subcommittee also notes an inconsistency in that the phrase “without lawful justification or excuse” does not appear in section 83.03 of the Code, setting out the offence of collecting or providing property for terrorist purposes, or in section 83.04, setting out the offence of using or possessing property for terrorist purposes. If a person does not commit an offence under section 83.02 if he or she had a lawful justification or excuse, we believe that the same should be true in respect of alleged offences under sections 83.03 and 83.04, as all three provisions set out comparable offences.

RECOMMENDATION 19

The Subcommittee recommends that the words “without lawful justification or excuse” be added after the words “directly or indirectly” in section 83.03 and after the word “who” in section 83.04 of the Criminal Code.

References to a Person

As discussed in the previous chapter of the report on terrorist activity offences, the Subcommittee believes that a statutory reference to “a person” is too narrow and that the broader and defined term “entity” is preferable, as it includes “a person, group, trust, partnership or fund or an unincorporated association or organization.” With respect to the terrorist financing offence in section 83.03 of the Criminal Code, we believe that “entity” should be substituted for “person” so that it is an offence to invite an entity to provide property, financial or related services for a terrorist purpose, and for this to be done, in paragraph (a), for the purpose of benefiting any entity who is facilitating or carrying out a terrorist activity.

RECOMMENDATION 20

The Subcommittee recommends that the words “a person” be replaced by the words “an entity” in the opening words of section 83.03 of the Criminal Code, and that the word “person” be replaced by the word “entity” in paragraph (a).

Freezing of Property

Subsection 83.08(2) of the Criminal Code precludes civil liability on the part of a person who takes or does not take measures to ensure that he or she does not deal with property owned or controlled by a terrorist group, if the person “took all reasonable steps to satisfy themself that the relevant property was owned or controlled by or on behalf of a terrorist group.” The Subcommittee does not consider “themself” to be a word (although it recognizes that the intention of the drafters was to avoid the masculine or feminine). Preferable wording would be “took all reasonable steps to be satisfied that the relevant property was owned or controlled by or on behalf of a terrorist group.”

RECOMMENDATION 21

The Subcommittee recommends that the words “satisfy themself” be replaced by the words “be satisfied” in the English version of section 83.08(2) of the Criminal Code.

As mentioned in the background portion of this chapter, section 83.1(1) of the Code requires individuals to disclose the existence of terrorist property in their possession or control, or information about a transaction relating to it, to the Commissioner of the RCMP and the Director of CSIS. However, section 83.12(2) states that no person contravenes section 83.1 if disclosure is made only to the RCMP Commissioner or CSIS Director. If failure to advise both of these officials is not an offence under subsection 83.12(2), advising them both should not be a requirement under subsection 83.1(1). We believe that the current inconsistency is confusing. Moreover, it should be sufficient for a person to advise either the RCMP or CSIS of terrorist property or transactions, as those two organizations are in a position to communicate with one another.

RECOMMENDATION 22

The Subcommittee recommends that the second instance of the word “and” be replaced by the word “or” in the opening words of subsection 83.1(1) of the Criminal Code, and that subsection 83.12(2) be repealed.