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Lawyers have become key players in money laundering operations because they are exempt from a federal requirement to report suspicious financial transactions, a senior RCMP officer said yesterday.

"My experience is that it's a widespread problem," said Inspector Bill Majcher, who is part of an RCMP white-collar crime unit known as the Integrated Market Enforcement Team, or IMET. "In almost every case we are doing, lawyers are central."

Insp. Majcher made the comments during a sentencing hearing for Toronto lawyer Simon Rosenfeld, who was convicted of money laundering last month. Mr. Rosenfeld was one of about 55 Canadian and U.S. citizens arrested in 2002 as part of an RCMP-FBI sting called Bermuda Short, which exposed a raft of stock market manipulation and money laundering scams. Crown prosecutors are seeking an unprecedented sentence of up to seven years in jail for Mr. Rosenfeld because he used his position as a lawyer to facilitate illegal transfers.

At yesterday's hearing, Insp. Majcher described how he met Mr. Rosenfeld during the undercover operation by posing as a representative of a Colombian drug cartel. Insp. Majcher said Mr. Rosenfeld was one of three Canadian lawyers who agreed to help him move millions of dollars into investments that would hide their illegal origin.

At one point, Insp. Majcher testified that he gave Mr. Rosenfeld one dollar and asked him: "Do I now have solicitor-client privilege?" Mr. Rosenfeld replied: "Yes, you do."

Insp. Majcher said Mr. Rosenfeld told him it was "twenty times" easier to launder money from Canada than the United States. He was also told during the investigation that five lawyers in Vancouver regularly laundered $200,000 a month through trust accounts in return for a 7-per-cent commission. Other lawyers used offshore accounts, stock market scams and foundations to hide illicit cash, Insp. Majcher testified.

In an interview outside the court, Insp. Majcher said police are constantly coming across lawyers at the centre of a variety of investigations. "We are seeing, in almost every case we are doing, there's a willful blindness or negligence on the part of a number of lawyers that have participated with the stock promoters."

He added that RCMP Commissioner Giuliano Zaccardelli wants the force to focus more on commercial crime. "He's been really pushing the RCMP to aggressively start protecting the economy as a national priority."

Insp. Majcher said lawyers should no longer be excluded from rules that require financial institutions, casinos, real estate agents and insurers to report all transactions over $10,000 and any suspicious transactions.

The federal government introduced those rules in 2001 as part of a crackdown on money laundering. Lawyers were exempted after a successful court challenge found the measure violated solicitor-client privilege.

"The majority of lawyers are honest in this country and they are frustrated by the difficulties [police]have because many of these lawyers are victim investors as well or they represent victims," Insp. Majcher said.

In a report last fall, Auditor-General Sheila Fraser pointed out several weaknesses in Canada's efforts to combat illicit money flows and said excluding lawyers from the reporting rules is "widely recognized as a serious gap in the legislation."

The Canadian Bar Association said it is working with the government to find a way to bring lawyers into the reporting system.