The Supreme Court of Canada has struck down sections of the federal anti-terrorist financing law because it violates solicitor-client privilege.
The court decision says the legal powers of FINTRAC (the Financial Transactions and Reports Analysis Centre of Canada) violate the Constitution in the way it applies to lawyers.
The court found the parts of the law that authorize sweeping searches of law offices inherently risk breaching solicitor-client privilege.
Agents of the state
In a unanimous decision, the court struck down sections of the law that allow authorities to search and seize files from lawyers' offices without a warrant.
It also recognized for the first time the constitutional protection of lawyers against any influence that undermines their relationship with their clients.
Canada's lawyers have fought the anti-money laundering law for 15 years, arguing it turns them into agents of the state.
The law required them to keep track of and report their clients' financial activities to the government.
Law societies have established their own anti-money laundering rules and have been exempt from the current law while the case made its way through the courts.
The anti-money laundering law will continue to apply to financial institutions and accountants, as well as to real estate firms.