These questions and answers were taken from H.H. 17th Karmapa‘s ‘Black Hat Lama’ MySpace blog:
Q: What are the criteria of a true Buddhist lama?
H.H. Karmapa: “Lama” means teacher. It is as plain as that, actually. Therefore, a Buddhist teacher has to have the qualities of genuine compassion, a great extent of dharma knowledge, and he or she needs to be someone who doesn’t just teach but also practices what they teach, which means believing in their product.
Other than that, there are many other qualities, but these two are the main ones. These are the guidelines of examining a teacher. Beyond that, there’s no real way to check whether someone is a teacher or not. Only time tells if someone is an authentic teacher.
Q: How can you tell whether a teacher has genuine compassion?
H.H. Karmapa: Genuine compassion is expressed both physically and mentally. If someone is truly compassionate, this will show in both his physical and verbal gestures, any time, under any circumstances.