There have been two major disciplinary actions handed down by the Law Society of BC. In the line of fire are two lawyers: Justin Kates, found guilty of questionable money transactions.

And the other is Nickolaus Weiser, who boldly defied the rules by practicing law while already suspended.

Justin Kates, a Vancouver-based lawyer, found himself in hot water when it was discovered that he had funnelled a whopping $9.5 million through his trust account, all on behalf of a single client.

It’s like playing hide and seek with the country’s financial watchdog, FINTRAC, since lawyer trust accounts enjoy exemption from the agency’s money laundering and terrorist financing scrutiny.

Justin Kates’s activities raised eyebrows, leading to an accusation by the Law Society of grossly abusing the trust account. He was charged with letting millions flow in and out without direct legal services tied to the transactions.

$9.5M Trust Account Manipulation

He failed to be the “detective” he should have been, neglecting to probe or document the circumstances surrounding the trust transactions.

Kates found himself in deeper soup when it came to light that he enabled his client to outsmart a bank’s refusal to send around USD $6.4 million stateside. Kates played the role of an accomplice when he should have been suspicious about the transfer’s legitimacy.

Another charge against Kates was his lax attitude toward verifying client identities and recording necessary identification details.

Adding salt to the wound, Justin Kates was accused of being less than forthcoming in his responses to the Law Society auditor – a clear violation of transparency.

A two-month suspension

In the face of mounting evidence, Kates folded, making “substantial admissions” post-investigation. The Society responded with a two-month suspension, a verdict Kates accepted with grace.

Another lawyer, Kamloops-based Nickolaus Weiser, faced the music for his audacious disregard for suspension rules. Despite being suspended, Weiser decided to challenge the system by continuing his practice, an act that hit the Society’s trust like a hammer on glass.

His obstinate refusal to give complete and forthright answers to the Society’s questions further cemented his fate. This led to an additional three-month suspension.

This was a strong message to the legal community about the serious consequences of breaking rules and eroding public trust in the profession.

What do you think about this case involving $9.5M going through a lawyer’s trust account?

BC Lawyer Trust Account Rules

Lawyers in British Columbia bear a serious responsibility when handling trust accounts. The Law Society of British Columbia sets stringent rules around them. These standards exist to maintain transparency, prevent unethical conduct, and ensure public confidence in the legal system.

The crux of these regulations revolves around knowing the source of funds. The Law Society enforces strict requirements for the verification process. Lawyers must confirm the money’s origins before depositing it into a trust account.

This procedure, known as Client Identification and Verification, also known as the CIV, ensures the prevention of illegal activities like money laundering.

The lawyer must document

The CIV process demands thorough documentation. Lawyers need to record the client’s name, address, and occupation. If a client represents an organization, the lawyer must document the organization’s name, business address, and the directors’ names.

Importantly, these documents must be updated every time a lawyer or law firm engages in or gives instructions regarding financial transactions on behalf of the client.

Crucial to the verification process is the independent source rule. It obligates lawyers to confirm funds through an unbiased, independent source. It could be a government agency, a reputable financial institution, or a credit bureau.

Repercussions of Moving $9.5M Through Trust Accounts

For transactions above $7,500, the rules tighten further. Lawyers have to obtain additional details about the person instructing the transaction.

They must document the nature and purpose of the transaction, the source of the funds, and the client’s instructions. Such diligent record-keeping ensures legal compliance and adds a layer of protection for the lawyer.

Beyond verification, BC lawyers must also adhere to strict trust account management guidelines. They’re required to maintain separate accounts for each client, preventing the co-mingling of funds. Each account should carry a unique identifying number. This rule safeguards against the unintentional misallocation of funds.

BC Lawyer Suspended

The Law Society also demands prompt and accurate record-keeping. Within seven days of receiving trust funds, a lawyer must record the transaction details. Regular audits are performed to check these records, ensuring compliance and promoting best practices.

The rules emphasize the role of the lawyer as a fiduciary. Lawyers mustn’t use trust money for their benefit. They should act solely in the best interest of their clients, highlighting the profession’s ethical grounding.

Accounting and reporting rules are also stringent. Law firms must prepare monthly trust reconciliations and review these regularly. They should identify and rectify any discrepancies promptly. These practices ensure the proper handling of trust funds and promote accountability.

The rules for trust accounts in British Columbia are rigorous, ensuring lawyers adhere to the highest ethical and professional standards. Through these measures, the Law Society protects the integrity of the legal profession and secures the public’s trust in the system.