A veteran B.C. lawyer with an otherwise “exemplary” record has been suspended for two months for not conducting due diligence on a Vancouver real estate transaction.
A Law Society of BC hearing panel suspended George Frederick Turner Gregory after determining Gregory failed to implement anti-money laundering (AML) policies on a foreclosure, according to a June 8 decision.
Gregory’s clients had previously been identified in a media report as people alleged to be trafficking illicit drugs and laundering proceeds of crime into the Vancouver real estate market, according to the decision.
According to the hearing panel, the key issue was whether Gregory had made reasonable inquiries of his clients so as not to be “duped” into facilitating alleged criminal activities, such as fraud and money laundering.
Society investigators approached Gregory about the clients’ transaction and pointed out that the home the clients were foreclosing on (due to an unpaid loan) was listed in a media report.
Gregory initially “expressed contempt” for the investigators, according to the decision, and “rejected the assertion that his client’s foreclosure matter concerned money laundering since no cash was involved.”
Instead, Gregory said he relied on legal advisors on the matter, although he never sought advice on whether he held a correct understanding of the definition of money laundering and how it works.
Gregory also admitted he did not understand what exactly the clients were attempting to do nor did he fully understand the structure of the loan agreement.
Instead, he “blindly accepted his client’s assertions of a valid loan and mortgage despite the opposing party’s complete denial of client A’s version of facts.”
Gregory made no inquiries about the source of wealth of his clients, the panel found.
It was also determined Gregory could not communicate directly with his Chinese-speaking client and did not hire an independent translator; instead, he relied on the client’s friend.
In the end, the panel found Gregory had filed false affidavits based on the information the clients provided.
The media report weighs significantly on the decision to suspend Gregory, considering it stated how the clients had been arrested by police while in possession of hundreds of thousands of dollars of cash, covered with traces of fentanyl, that was forfeited as the proceeds of crime.
“The media article discussed public interest concerns about lawyers facilitating their clients’ money laundering schemes. The article was critical of lawyers who give “shady” real estate transactions an “air of legitimacy” by writing up mortgage agreements and filing lawsuits on behalf of drug traffickers who were laundering their money in the Greater Vancouver area real estate market,” noted the decision.
“The article should have caused any responsible member of the profession to have a high degree of suspicion that they may be assisting their clients in the commission of a serious criminal offence and motivated them to make prompt, thorough, and careful inquiries about their clients, their clients’ employment, their clients’ source of wealth, and the source of the alleged loan before agreeing to continue acting,” stated the panel.
The lawyer's failure "to gain any reasonable grasp of his file or knowledge of his clients is bewildering," added the panel.
Gregory took the position his misconduct was a result of negligence and “sins of omission” and not “intentional malfeasance.”
He also claimed since the foreclosure never happened, no real harm was done and this is a mitigating factor along with some mental health issues he was having.
The panel did not agree, noting the opposing party endured stress. As well, Gregory’s doctor never concluded his health resulted in an inability to practice law.
“We do not accept the Respondent’s view that he was merely negligent, as opposed to being deliberate in his actions and inactions,” the panel ruled.
“We find the Respondent turned a blind eye to client A’s lack of financial information, despite the Law Society’s warning that the only financial information he had did not support client A’s alleged loan and mortgage,” wrote the panel.
Gregory was called to the Bar of British Columbia in 1982 and has no history of professional misconduct, in addition to having been an active member of the legal community, including pro bono assistance.
Gregory eventually acknowledged it was proper for the society to investigate and that he failed to “get down to the file.” The investigation was conducted in 2018.
He said he realized his lack of understanding of AML rules and “I can see now that every transaction involving illegal proceeds is money laundering.”
As such, the panel took his “otherwise exemplary” record into account in suspending him two months.
The decision noted such matters have been in the public’s interest of late, with the now-concluded Commission of Inquiry into Money Laundering in B.C.
Commissioner Austin Cullen noted that lawyers are “exposed to significant money laundering risks” considering they are not subject to the Proceeds of Crime Money Laundering and Terrorist Financing Act due to constitutionally-protected client confidentiality.
“While the foregoing risks are significant, the Law Society has mitigated many of them through robust regulation,” stated Cullen.
The decision may be found on the Law Society of BC's website.