The Cullen Commission is back underway for another week.

Two federal officials are being questioned:

- Gabriel Ngo, senior advisor, financial crimes policy, department of finance
- Bruce Wallace, manager of strategic policy and reviews, FINTRAC #bcpoli

Wallace says lawyers have some exemptions from reporting certain financial transactions.

Lawyers are the second most common profession prosecuted for money laundering.

The exemption for lawyers poses a hurdle for FINTRAC tracking money laundering, Wallace says.

"This would constitute a gap in regards to the intelligence we receive," he says, noting international rules require exemptions for legal professionals.

Canada stands out in the world for its exemptions, Wallace says.

International organizations have noted as such, he says.

Ngo, who sits on a Federation of Law Societies of Canada (FLSC) working group on money laundering, is now being questioned.

The group has focused on info sharing and best practices.

Ngo says the DoF made recommendations to the FLSC for "know your client" rules for lawyers.

In part, this would require lawyers to know if their client is "politically exposed," he said.

Ngo says DoF found the Law Society of BC has significant power to conduct its own investigations.

Ngo says DoF had questions about when the Law Society was referring potential cases it found via audit to law enforcement, which it raised during working group meetings.

He says it was "unclear" whether the referrals were proportionate but doesn't say whether it wasn't enough.

DoF sought to bring law societies into the federal framework for addressing money laundering by recommending changes to their self-created regulations, Ngo says.

Bruce Wallace of FINTRAC is being questioned once again.

He's talking about a report that was prepared about large cash transactions by lawyers. It included a case of a law firm involved in money laundering, he says.

Real estate transactions involve large amounts of money flowing through law firms, which make them vulnerable to potential money laundering, Wallace says.

"Complex corporate structures" and offshore shell companies are also ripe for money laundering, Wallace says.

Deposit to a personal, currency exchange, buying gambling chips are all potentially suspicious activities tracked by FINTRAC, Wallace says.

Chips were the second most common activity identified in a study, he says.

In tracking suspected money laundering, FINTRAC broke down cases by predicate offence (where the money came from).

35% involved fraud, Wallace says.

Wallace says FINTRAC doesn't have the means to determine whether a lawyer is knowingly engaged in potentially suspect activity. The agency just passes on potential info of interest to law enforcement, he says.

FINTRAC has less insight into the workings of legal professionals than professions required by law to report certain financial transactions, Wallace says.

Ludmila Herbst, lawyer for the Law Society of BC, is now questioning Wallace.

She's asking him about a case in his report involving a Quebec lawyer who received USD $3 million and was suspected of "deliberate misuse of client account."

FINTRAC received millions of large transaction reports last year and 280,000 suspicious transaction reports, Wallace says.

And FINTRAC made about 2,600 disclosures to law enforcement about suspicious activity, he says.

Wallace agrees with Herbst that the large financial transactions by lawyers he tracked in a study also involves some personal transactions.

For example, if a lawyer sold a used car and deposited more than $10,000.

FINTRAC has a hard time tracking whether its disclosures to police lead to charges and/or convictions because money laundering investigations often take years, Wallace says.

Kevin Westell, representing the BC branch of the Canadian Bar Association and the Criminal Defence Advocacy Society is now questioning Ngo of the federal Dept of Fiannce.

Ngo says the DoF seeks to improve the regulations of provincial law societies by sharing information and best practices.

DoF recommended they strengthen their measures to mitigate risks of money laundering.

Next witness Frederica Wilson, ED of police and public affairs and deputy CEO of the Federation of Law Societies of Canada. She is being questioned by commission counsel Nicholas Isaac.

Wilson says it's "critical" for provincial law societies to be coordinated in their approach to responding to money laundering.

The federation studied how law societies around the world regulate money laundering, especially other common law nations, including the U.S. and U.K.

In 2004, the federation introduced a rule preventing lawyers from accepting cash payments in excess of $7,500. Wilson says purpose is to mitigate the possibility of "criminally minded clients" using lawyers to launder money or finance terrorism.

In 2008, the federation introduced new rules requiring lawyers to identify their clients and confirm their identity.

"It's a due diligence rule," Wilson says.

Wilson says it's "obvious" due to the nature of legal practice, that "criminally minded" people would use them for their services to conduct money laundering.

Solicitor-client privilege "can be seen to" provide protections for money launderers, Wilson says.

She says she's not in a position to dispute this view but she's not an expert in the rationale people use to do what they do.

Over time, the federation of law societies came to understand the significance of money laundering, its harm and the ability of law societies to crack down on it, Wilson says.

Wilson says the federation's litigation against federal legislation regulating lawyers' practices and subsequent federation moves to self-regulate money laundering issues were not "purely strategic" to avoid further legislation.

Wilson says the federation disagreed with a federal evaluation that found the law societies' cash payment and client identification rules were inadequate and poorly enforced.

She says the feds think law society regulations aren't enough and federal legislation is needed.

She says that's inaccurate. Law society regulations have the force of law over their member lawyers.

Feds also ignored the effort made by law societies and dismissed them, Wilson says.

"The power that law societies have are extensive," Wilson says.

Law societies can go into law offices and "look at everything" and have more effective powers than FINTRAC, she says.

The federation took criticism of its money laundering regulations from the Department of Justice as a "shot across the bow" in 2016, Wilson says.