On May 5, 2019, CBC reported on a story of a lawyer who had his cell phone and laptop seized by the Canada Border Services Agency when he refused to give them his passwords.
According to the report, Nick Wright was returning to Canada after a 4 month trip to Guatemala and Colombia. After his bags were searched, the Canada Border Services officer asked for the passwords to his phone and laptop, so that they could be searched as well. Wright refused, telling the officer that his devices contained confidential solicitor-client information. His devices were then confiscated, to be sent to a government lab which would try to determine the passwords and search the files.
According to Canada Border Services, digital devices are classified as “goods”, and Canada Border Services is allowed to examine the goods, including any electronic files on the device, for customs purposes. If a traveller refuses to reveal their password, Canada Border Services may seize the device. According to the policy manual, although an arrest would “appear to be legally supported, a restrained approach will be adopted until the matter is settled in ongoing court proceedings.”
U.S. customs and border protection officials have similar rights to search devices. Refusal to disclose passwords may result in confiscation or a denial of entry.
Such digital device searches do not occur frequent. In the 17 months between November 2017 and March 2019, 19,515 travellers entering Canada (0.015% of all travellers) had their digital devices examined by Canada Border Services.
The Canadian Bar Association warns about the risks of such searches to lawyers. Lawyers have a duty to keep client communications private. This applies to all information about a client or former client. The duty extends to staff, as well. “Your client has a right to privacy which requires you not to disclose to anyone, with exceptions, when any communications between you relate to legal advice sought or given.”
The Canadian Bar Association says that a breach could result in a loss of client trust, a client lawsuit for negligence, an E&O claim, disciplinary action and public criticism.
The Canadian Bar Association suggests that when crossing a border, lawyers should travel with a “clean device”. They should use cloud technology to store any solicitor-client information. Lawyers should erase all privileged information from their devices, including contact lists with clients’ names, addresses and contact information. The search by border services does not allow them to access information on the cloud. Once across the border, this information can easily be reinstalled from the cloud.
It is not uncommon for Canadian estate trustees to make distributions to beneficiaries living in the U.S. In doing so, the U.S. Customs and Border Patrol (the “US CBP“) could be involved in a myriad of ways.
A recent story from CBC News is an example of what can go wrong if estate trustees are not aware of their US reporting obligations. An estate trustee in Ottawa mailed a bank draft worth $500,000.00 to a beneficiary in the U.S. U.S. border officials seized the bank draft because it was mailed without filing the appropriate customs declaration form. Almost a year later, the bank draft is still held at the border while the unfortunate beneficiary is sick and in need of money for his medical bills.
According to the U.S. Customs and Border Protection website, any time money exceeding $10,000.00 is sent to the U.S. from a foreign country, the sender is required to file a “Report of International Transportation of Currency or Monetary Instructions” (FinCEN Form 105) with the CBP before the money is sent. This applies regardless of whether the sender is acting personally or on behalf of another legal entity. This applies to money in the form of coins, currency notes, travellers checks, money orders, etc. This also applies to money sent by mail, courier, personal delivery, etc.
However, this particular US reporting requirement does not apply where the method of transfer does not involve physically transporting money over the border, such as wire transfers through banking institutions. If a wire transfer is used, the bank is responsible for satisfying the necessary reporting requirements.
In course of sending money worth $10,000.00 or more from Canada, there are corresponding Canadian customs requirements as well. If money is sent by mail, be sure to visit a Canada Post location and inquire about the necessary requirements. The applicable reporting form must be filled out and enclosed within the envelope or package and a copy of the same form must be submitted to the Canada Border Services Agency. If money is sent by courier, the courier is responsible for filing another reporting form while the individual sender is still responsible for providing the courier with the general reporting form.
Like the US CBP, Canada Border Services Agency has the authority to seize the funds and charge penalties if the Canadian reporting obligations are not satisfied.
Thanks for reading!
Listen to The Investment Accounts.
This week on Hull on Estates and Succession Planning, Ian and Suzana conduct a quick lesson on capital encroachment and discuss the role of investment accounts in the passing of accounts.
Ian has just returned back from spending some time at the Podcasters Across Borders Conference. The Conference was a chance for Podcasters all over the world to get together and talk about their Podcasting experience. There were Podcasters from as far a way as the U.K. and throughout Canada and the U.S.
Friday night was a real highlight as the attendees were treated to a speech from none other than Shelagh Rogers of CBC’s Sounds Like Canada. Shelagh was just back from Edmonton where she had her hair cut off in support of her friend who is suffering from cancer. Shelagh did this to raise money for the local Edmonton cancer research centre.
Shelagh is a supportive Podcaster and has her own Podcast. She told the audience about her Podcasting experience and she offered some important advice.
She reminded us to always use a sentence beginning with a subject followed by a verb and an object. She suggested that we use direct and active verbs when we speak and NEVER use terms like "everyone". She indicated that we should talk to the listeners as though they are right in the room with you and not to address an audience generally.