Client identification and verification are two different duties

The two words are not synonyms

By-Law 7.1 imposes two obligations that are routinely treated as one, which is why firms are surprised by findings in this area. They differ both in what they require and in what triggers them.

• Identification means obtaining and recording specified information about who the client is — and about any third party the client is acting for or representing.
• Verification means actually looking at documents, data or information to confirm the client is who they say they are.

Writing a client's name and address onto a file-opening form is identification. It is not verification, and no quantity of it becomes verification.

Money is the trigger

Verification is required when a licensee is retained to provide legal services and engages in, or gives instructions in respect of, the receipt, payment or transfer of funds. That phrase does more work than it appears to: giving instructions about someone else's transfer counts, so a licensee who never handles the money can still be caught by it.

There is a timing rule attached. Identity is to be verified immediately after first engaging in that activity, not at some convenient later point in the retainer. Exemptions exist and are genuinely limited — they turn on particular licensees, clients or kinds of funds, not on how well you happen to know the person.

The permitted ways to verify an individual

The methods are set out rather than left to judgment, and for an individual they come down to a choice among:

• Government-issued photo identification.
• The credit file method.
• The dual process method.
• Virtual verification with authentication.
• Verification through an agent.

Verifying an individual brings two companions with it: a source-of-funds requirement, and an ongoing obligation to monitor the professional relationship for the duration of the retainer. Monitoring is the one most often forgotten, because it has no single moment at which it is performed — it is a standing duty rather than a task with a date.

Relying on someone else's verification

Where a referring licensee has already identified and verified the client in accordance with the current requirements, the receiving licensee does not have to repeat the exercise. The condition does real work in that sentence: the earlier verification has to meet the requirements as they now stand, not as they stood whenever it was carried out.

Reliance also does not carry the monitoring duty across. Where the matter is ongoing, the licensee still has to monitor the relationship periodically to assess whether there is a risk of assisting or encouraging fraud or other illegal conduct.

The related bright line on cash

Sitting beside these duties is one of the few genuinely hard limits in the trust rules: By-Law 9 caps the cash a licensee may accept for any one client matter. Unlike much of this area it calls for no assessment — above the prescribed amount, cash is simply not to be accepted for most matters, and knowing the client well changes nothing about it.