Licensee, stakeholder feedback leads LSO to extend virtual verification policy exemption

By Amanda Jerome

Law360 Canada (November 28, 2022, 2:26 PM EST) -- After receiving feedback from the profession, benchers and stakeholders, the Law Society of Ontario (LSO) has extended its “temporary pandemic measure of allowing virtual verification without authentication until January 1, 2024.”

According to a release, issued Nov. 22, the extension will “provide licensees more time to adjust to post-pandemic practice and to better understand their client identification and verification obligations.”

“Virtual verification of identity without authentication was permitted as a temporary emergency measure during the pandemic to support lawyers and paralegals in adapting to changing circumstances and new challenges,” the LSO’s website explains.

LSO bencher Michael Lesage

LSO bencher Michael Lesage

The policy exemption was supposed to end on Jan. 1, 2023; however, the LSO began receiving feedback proposing an extension in the fall.  

LSO benchers Michael Lesage and Joseph Chiummiento filed a motion in October, requesting an extension to Jan. 1, 2024, noting the need for “study” of the exemption’s impact.

Lesage told The Lawyer’s Daily that he and Chiummiento brought the motion to “delay the implementation of the LSO's onerous new rules regarding virtual verification, that were due to come into force in January.”

“The rules as proposed date to a time before the legal profession in Ontario had modernized, and in our view, were not reflective of modern practice or appropriate in the circumstances,” he explained.

According to the LSO’s announcement, “money laundering, mortgage fraud, and identity fraud continue to be serious concerns” in Ontario and “vulnerabilities have increased during the COVID pandemic.”

“To avoid becoming involved in this type of illegal activity, licensees must continue to manage risks in their practice and remain highly vigilant, keeping in mind the client identification and verification requirements in By-law 7.1. When verifying client identity virtually, authentication of identity remains a best practice and the law society encourages licensees to authenticate client identity as part of the verification process,” the release added, noting that the regulator “recognizes the complexities involved in the national standards codified in By-law 7.1 respecting client identification and verification requirements as well as other provisions aimed at combating money laundering and terrorist financing.”

Lesage noted that the exemption has “allowed Ontario lawyers to function in the modern economy, to better assist clients, and are reasonable and proportionate in the circumstances.”

“Specifically, the current rules allow lawyers to assist their clients remotely in situations where the proposed rules would not,” he added, noting that he and Chiummiento “received significant feedback from the profession, which was almost uniformly against the proposed new rules, with the exception of a few benchers, who thought that the new rules were a ‘really good idea.’ ”

The Federation of Ontario Law Association’s (FOLA) also raised concerns with the regulator’s “position to end virtual verification of client identification in connection with Bylaw 7.1.”

According to a letter, dated Nov. 11, FOLA “heard from lawyers across Ontario who are concerned about the impact the removal of virtual verification will have and that more time is likely needed to enable a proper transition to full compliance.”

Mark Giavedoni, FOLA’s real estate chair, wrote that this “guidance comes at a time when many of law association members (tens of thousands of practising lawyers in Ontario) are still acclimatizing their practices to the challenges of COVID-19 and a post-pandemic world, where virtual legal services have been a difficult yet welcome adjustment.”

“Moreover,” he added, “the bylaw and staff guidance disproportionately affect solicitors and transaction lawyers.”

The letter noted that it is “not uncommon for lawyers in these areas of practice to act on real estate transactions or lending transactions on a few days’ notice from clients” and that “some of these transactions start and end in a matter of days, making compliance difficult within the parameters set out by the law society.”

“While the policy behind the client ID and verification rules are in the best interest of the public and licensees alike, the fact of the matter is, lawyers are not often the ones shaping client transactions and behaviour; it is the opposite, and licensees cannot readily alter client transactions to meet regulatory requirements,” the letter explained.

The letter also called on the LSO to defer the “removal of virtual validation of client ID” until Jan. 1, 2024.

Lesage told The Lawyer’s Daily that his motion has “been withdrawn from the December Convocation, as the law society has agreed to do as the profession asked.”

Lesage stressed that this is “an important issue to the profession, as the current rules allow lawyers to function in a modern way without having to jump through onerous hoops and regulations, while the proposed rules do not.”

“The proposed rules would have disproportionately affected small firms and solo practitioners, and the law society guidance provided was simply unclear,” he added.

Jennifer Wing, an LSO spokesperson, said the regulator “received feedback from licensees through correspondence, across our social channels and via stakeholder discussions that more time was required for them to adjust to post-pandemic practice and to better understand their client identification and verification obligations.”

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