FINTRAC Policy Interpretations

Reporting

1. SWIFT and non-SWIFT EFTs - Knowing by or on behalf

Question:
Guidance regarding the application of the 24-hour rule and the requirement for financial entities to report electronic funds transfers (EFTs) has been requested. In support of the request, the financial entity has specified that it will be offering to its customers both SWIFT and Non-SWIFT products and has identified a situation where a customer could potentially send or receive both SWIFT and Non-SWIFT EFTs that aggregate to $10,000 or more within a 24 hour period. As a result, it has been asked how these EFTs should be reported to FINTRAC?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines an EFT as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” Pursuant to subsection 12(1) of the PCMLTFR and “subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre: b) the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and c) the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be”. In accordance with subsection 3(1) of the PCMLTFR, a single transaction occurs in situations where two or more EFTs of less than $10,000 each are made within 24 consecutive hours and total $10,000 or more, if the person, or the employee or senior officer of the entity knows that the transfers are conducted by, or on behalf of, the same person or entity. Whether an EFT is sent or received through a SWIFT or non-SWIFT message does not affect the application of the 24-hour rule and the requirement for financial entities to report EFTs conducted in a single transaction. FINTRAC has taken the position that should there be a process in place to gather the “by or on behalf of” information for a transaction, then the entity is deemed to know that the transactions were conducted by or on behalf of the same person or entity, even where there is not a process in place to reconcile the information gathered. Therefore, should the financial entity transmit or accept the transmission of client initiated instructions for the transfer of funds across the Canadian border, in two or more transactions (of less than $10,000 each) that add up to $10,000 or more, and that are conducted within 24 consecutive hours of each other; and should the financial entity have a process in place to gather the “by or on behalf of” information for the transactions, then it is deemed to know that these transactions are reportable EFTs conducted in a single transaction, regardless of whether the transactions were SWIFT or non-SWIFT. The transactions must be reported separately as EFTs to FINTRAC in the proper form and manner (i.e. SWIFT or Non-SWIFT), and the 24-hour rule indicator under Part A must be selected for each EFT report. It should be noted that an exception to the 24-hour rule exists at subsection 3(2) of the PCMLTFR when an EFT is conducted in a single transaction as identified in subsection 3(1) of the PCMLTFR, and is sent or received for two or more beneficiaries, if the requestor is a public body, a large corporation (as identified in paragraph 62(2)(m) of the PCMLTFR), or the administrator of a federally or provincially regulated pension fund.

Date Answered: 2016-06-15

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: FIN-4, 8
Regulations: 1(2), 3(1), 12(1)

2. Applicability of the PCMLTFA to private sales

Question:
Are private sales directly between sellers and buyers subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines a real estate broker or sales representative as a person or entity that is registered or licensed under provincial legislation in respect of the sale or purchase of real estate. It is only every real estate broker or sales representative, when they act as an agent in respect of the purchase or sale of real estate that is subject to Part 1 of the PCMLTFA. As such, when a person buys or sells property from another person without the involvement of a real estate broker or sales representative, the obligations of the PCMLTFA do not apply.

Date Answered: 2016-03-23

Activity Sector: Real estate
Obligation: Reporting
Regulations: 1(2)
Act: Part 1

3. Post office box as civic address

Question:
A financial entity is seeking to obtain clarifications from FINTRAC related to record-holding requirements and large cash transaction records (LCTRs) for clients “resident in regions where there are no civic addresses." More specifically, the financial entity asked “which information should be entered into which fields related to the civic address (number, street, postal code), considering that LCTRs are sent automatically” and that the address in the client’s (account holder's) file cannot be modified before it is sent?
Answer:

Sub-paragraph 1(2)(a)(ii) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations) requires in the case of a large cash transaction that financial entities record the following information in the files of each of their clients: “the name of the person from whom the amount is in fact received, their address and date of birth and the nature of their principal business or their occupation.” Moreover, paragraph 12(1)(a) of the Regulations stipulates that “Subject to section 50 and subsection 52(1), every financial entity shall report … to the Centre the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless this amount is received from another financial entity or a public body.” Schedule 1 of the Regulations indicates the address is a mandatory field. Although the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations do not define an address, FINTRAC has indicated previously that a post office box is not considered a valid or legitimate address because post office boxes are allocated to clients by the post office so they can receive their mail. The required address refers instead to the client’s physical address. When the client resides in a region where there is no civic address, FINTRAC has previously indicated that the financial entity should record in the client’s file all the smallest details, all the information or all the characteristics which might be useful for locating the person’s physical location. In light of these facts, and since the number and the street are included in a single field in the same LCTR, it seems that the proposed description of “the third house to the right after the community centre” meets the requirements related to the number and street address. With regard to the postal code in an address, it is not mandatory to indicate it so that the address is “valid” or “complete.” Nevertheless, the financial entity must take reasonable measures to obtain or determine the client’s postal code, mainly based on the region where the client is living. We understand that there is no region in Canada that has not been assigned a postal code. If the financial entity knows the region where the client is living, it can use the Canada Post electronic search tool to find the postal code corresponding to the region of residence. If the financial entity has the information requested, it is required to provide it in the case of an LCTR. If the information is not available at the time of the transaction or recorded in the files, the financial entity can leave the corresponding field empty. Having said this, for the purposes of the LCTR, the financial entity is mandated to collect information on the person making a large cash transaction and not the account holder. Thus, a system or a method must be put in place to allow the financial entity to obtain information on the person who actually deposits the cash. It is therefore not acceptable to enter the information related to the account holder in the fields related to the civic address, given the fact that this information may not be information on the person doing the transaction.

Date Answered: 2016-03-02

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2)a)(ii), 12(1)a), Annexe 1

4. LCTR - "deposit to an account"

Question:
If a customer comes in with $10, 000 cash to send an international outgoing electronic funds transfer (EFT), does the large cash transaction report (LCTR) disposition in Part B2 have to be an outgoing EFT? In cases where the bank’s process is to deposit the funds into the customer’s account first before sending the EFT, should the disposition be “deposit to an account”, even though the customer’s intention is to send the outgoing EFT and not to deposit to an account?
Answer:

Pursuant to paragraph 12(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), financial entities must report to the Centre the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body. Schedule 1 of the PCMLTFR specifies that the financial entity must indicate both a “transaction” amount and a “disposition” amount. Where a financial entity receives $10,000 cash for the purpose of a $10,000 electronic funds transfer, and the financial entity requires that the amount first be deposited to the client’s account, FINTRAC would expect the disposition to the transaction to be “deposit to an account.”

Date Answered: 2016-03-01

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 7, 8
Regulations: 1(2), 12(1)(a), Schedule 1

5. Reasonable efforts to report fields

Question:
What information may be entered into the fields representing a phone number on the large cash transaction report (LCTR), electronic funds transfer (EFT) report, and suspicious transaction report (STR) in situations where there is no phone number available? In such cases, should a series of zeros be entered or should the field be left blank?
Answer:

As indicated in Module 1 of FINTRAC’s Standard ASCII Batch Reporting Instructions and Specification document, reporting entities should refer to the “Reasonable Efforts” instructions contained in Guideline 3A: Submitting Suspicious Transaction Reports to FINTRAC Electronically, Guideline 7A: Submitting Large Cash Transaction Reports to FINTRAC Electronically or Guideline 8: Submitting Electronic Funds Transfer Reports. These guidelines specify that for “reasonable efforts” fields, such as the phone number, if the information is available to the reporting entity, then the reporting entity must provide it in the report. If the information was not available at the time of the transaction, and it is not contained in the reporting entities files or records, the field may be left blank. As such, the reporting entity should not be filling the field with zeros.

Date Answered: 2016-02-25

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 3A, 7A, 8

6. Knowing by or on behalf

Question:
FINTRAC has previously stated that "should a reporting entity have, as a business practice, the requirement to collect “by” or “on behalf of” details for transactions, then the entity would be deemed to know that the deposits were made “by” or “on behalf of” the same individual or entity". Please clarify the extent to which this guidance can be applied.
Answer:

Pursuant to subsection 3(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), two or more cash transactions or electronic funds transfers of less than $10,000 each that are made within 24 consecutive hours and that total $10,000 or more are considered to be a single transaction of $10,000 or more if, an employee or a senior officer of the entity knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity. If the same client card is used to conduct the transactions in question, then FINTRAC has taken the position that the reporting entity can use this fact to determine that the transaction was conducted by the same person. When a client card is not used, FINTRAC has taken the position that should there be a process in place to gather the “by or on behalf of” information, then the entity is deemed to know that the transaction was conducted by or on behalf of the same person, even where there is not a process in place to reconcile the information gathered. For example, if the transactions were conducted at three different branches and “by or on behalf of” was gathered and is the same at each branch, then the entity is deemed to know that one person or entity conducted these transactions, even if there isn’t a process in place to compare the information collected. The expectation is consistent across all reporting obligations. However, with suspicious transactions, the reporting obligation isn’t based on whether transactions were conducted by or on behalf of the same person; Rather the requirement is to report the transaction within 30 days after the person or entity or any of its employees or officers first detects a fact respecting a financial transaction or an attempted financial transaction that constitutes reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering or terrorist financing offence. The knowledge that two or more transactions were conducted by or on behalf of the same person may or may not trigger the suspicious transaction report obligation.

Date Answered: 2016-02-16

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: FIN-4
Regulations: 3(1)

7. Refusal to complete a transaction

Question:
What obligations are casinos under to not only report, but also refuse to pay out large sums if it is reasonably suspected that the money is being paid out not to a lucky gambler, but someone trying to legitimize ill-gotten gains?
Answer:

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations provide parameters for casinos to determine that transactions or clients should be monitored more closely for suspicious activity and when suspicious transaction, or other reports, should be filed. Specifically, casinos must report the: • Transactions where there are reasonable grounds to suspect a money laundering or terrorist financing offence; • Receipt of $10,000 or more over 24 hours from or on behalf of the same client; • Disbursement of $10,000 or more over 24 hours to or on behalf of the same client; • Sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more over 24 hours; and • Receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more over 24 hours. Casinos also have to develop and apply policies and procedures to assess the risks related to money laundering and terrorist financing in the course of their activities. Using a risk-based approach casinos can identify potential high risks of money laundering and terrorist financing and develop strategies to mitigate them. The risk assessment carried out must consider: • the products, services and delivery channels offered by the casino • the geographic locations of the clients and the activities conducted • the clients and the business relationships a casino has • other factors that the casino considers relevant. By monitoring their activities, clients and business relationships, casinos can develop a robust framework for assessing when they may consider refusing a particular transaction or client. The guidance FINTRAC has issued for all reporting entities also outlines a number of indicators that casinos can include in their assessments, and that may lead to the refusal to continue with a transaction. The PCMLTFA and its associated Regulations do not prescribe transactions that must be refused, but casinos may refuse to pay out any amount or to conduct any transaction where they deem that a transaction or client is suspicious. The policies and procedures also outline how the casino will comply with the requirements to ascertain identification, keep records and send reports to FINTRAC. Pursuant to the PCLMTFA and its associated Regulations, there are a number of transactions that trigger record-keeping and identification requirements. If a casino is unable to fulfill the requirements, the casino can refuse to complete the transaction. For example, if a client refuses to provide the necessary identification, the casino cannot verify the clients identity and keep the records as required by the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), so can refuse to continue with the transaction.

Date Answered: 2016-01-26

Activity Sector: Casino
Obligation: Reporting
Guidelines: 2,3

8. STR and LCTR obligations of real estate sector

Question:
Could you confirm whether real estate brokers, agents, or developers are obligated to submit a suspicious transaction report (STR) for aspects of the transaction they are not directly involved in? How is it determined whether the buyer’s agent or the seller’s agent must report an STR or a large cash transaction report (LCTR)?
Answer:

Pursuant to section 37 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “every real estate broker or sales representative is subject to Part 1 of the Act when they act as an agent in respect of the purchase or sale of real estate.” Subsection 39.5(1) of the PCMLTFR indicates that “Every real estate developer is subject to Part 1 of the Act when (a) in the case of a person or of an entity other than a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building; and (b) in the case of an entity that is a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building on their own behalf or on behalf of a subsidiary or affiliate.” As such, once a real estate broker, sales representative, or developer becomes subject to Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), it has an obligation to report suspicious transactions as per section 7. Section 7 of the PCMLTFA specifies that “subject to section 10.1, every person or entity referred to in section 5 shall report to the Centre, in the prescribed form and manner, every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that • (a) the transaction is related to the commission or the attempted commission of a money laundering offence; or • (b) the transaction is related to the commission or the attempted commission of a terrorist activity financing offence.” Therefore, so long as it relates to their activities, a real estate broker, sales representative, or developer can report on any aspect of the transaction, even those for which they are not directly involved. Regarding who must submit an STR, the buyer’s agent and the seller’s agent both have obligations under Part 1 of the PCMLTFA, when engaging in the activities described above, to report transactions in respect of which there are reasonable grounds to suspect the transaction is related to the commission or the attempted commission of a money laundering offence or a terrorist activity financing offence. Therefore, both reporting entities would be required to submit an STR in situations where they both became aware of suspicious activity, regardless of whether they were dealing with their own clients or not. Alternatively, if only one of the reporting entities encounters a suspicious situation then only that reporting entity has the obligation to file an STR. The obligations for real estate brokers, sales representatives, and developers to report large cash transactions are outlined at sections 38 and 39.6 of the PCMLTFR. As per these sections, and subject to subsection 52(1), reporting entities under the real estate sector who receive an amount in cash of $10,000 or more in the course of a single transaction must report the transaction to FINTRAC, together with the information set out in Schedule 1, unless the amount is received from a financial entity or a public body. Therefore, there is no determination to be made as to who is accountable for reporting. The reporting entity that receives $10,000 or more in cash as a single transaction must file the LCTR. Guideline 2: Suspicious Transactions, and specifically section 8.9, is a helpful resource that contains a list of indicators to consider when identifying suspicious transactions, and supports the determination that a real estate broker, sales representative, or developer can report on any aspect of the transaction. You may wish to consult this information for additional detail.

Date Answered: 2015-12-21

Activity Sector: Real estate
Obligation: Reporting Reporting
Guidelines: 2,3,7
Regulations: 37, 39.5(1)
Act: Part 1, 7

9. STR obligations - time of transaction

Question:
Where does FINTRAC stand with regards to a "financial transaction" and the "time of the transaction" in the real estate sector, especially in cases where a suspicious transaction might be reported?
Answer:

Pursuant to subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a real estate broker or sales representative “means a person or entity that is registered or licensed under provincial legislation in respect of the sale or purchase of real estate.” Section 37 of the PCMLTFR further clarifies that “Every real estate broker or sales representative is subject to Part 1 of the Act when they act as an agent in respect of the purchase or sale of real estate.” As per section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), all reporting entities, including real estate agents and brokers, must “report to the Centre, in the prescribed form and manner, every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that “(a) the transaction is related to the commission or the attempted commission of a money laundering offence; or (b) the transaction is related to the commission or the attempted commission of a terrorist activity financing offence.” FINTRAC has previously taken the position that, in the real estate sector, the “time of the transaction” can vary depending on the requirement. That said, based on the requirement to report a completed or attempted suspicious transaction, real estate sales representatives or brokers, who act as agents in respect of the purchase or sale of real estate, have suspicious transaction reporting obligations from their first interaction with a client in respect of those transactions. The reporting entity does not have to wait for the purchase or sale to be completed (i.e. the closing date) to report a suspicious transaction. In fact, if at any time during the course of their activities, a real estate sales representative or broker, subject to Part 1 of the PCMLTFA, has reasonable grounds to suspect that a transaction or attempted transaction is related to the commission or attempted commission of either a money laundering offence or a terrorist activity financing offence, they must report a suspicious transaction report (STR) to FINTRAC within 30 days. It is important to note that pursuant to section 10 of the PCMLTFA, no criminal or civil proceedings lie against a reporting entity for making a report in good faith under section 7, or for providing the Centre with information about suspicions of money laundering or of the financing of terrorist activities. Furthermore, the PCMLTFA does not prohibit a real estate sales representative or broker from completing a transaction for which it has submitted an STR.

Date Answered: 2015-12-10

Activity Sector: Real estate
Obligation: Reporting
Guidelines: 2,3
Regulations: 1(2), 37
Act: Part 1, 7, 10

10. LCTR obligations of MSB conducting transactions on its own behalf

Question:
Scenario: * MSB A has a business relationship with MSB B, who is their supplier. * MSB A initiates contact with MSB B to obtain foreign currency in cash. Amounts totalling over $10,000 CAD. * MSB B brings the cash to MSB A and MSB A pays MSB B via direct debit. Does MSB A have a Large Cash Transaction reporting obligation in this instance?
Answer:

Pursuant to paragraph 28(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every MSB is required to report “the receipt from a client of an amount in cash of $10,000 CAD or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from a financial entity or a public body.” As per the scenario, it appears that MSB A is initiating the foreign exchange transactions with MSB B for its own purposes and is not conducting these transactions at the request of a client, nor is it receiving an amount in cash of $10,000 CAD or more from a client. MSB A appears to be the client in these transactions. As such, MSB A has no large cash transaction reporting obligations as per the legislative reference at paragraph 28(1)(a) of the PCMLTFR.

Date Answered: 2015-12-10

Activity Sector: Money services business
Obligation: Reporting
Regulations: 28(1)(a)

11. Requirements to report LCTR on an aggregated basis

Question:
Could you provide clarification of the requirements to report large cash transactions on an aggregated basis? Specifically: 1. Are transactions conducted by an individual on his/her own behalf required to be aggregated with transactions conducted by the individual on his/her employer’s behalf? 2. Does the answer to Q1 change if the transaction conducted on behalf of the employer is a cash deposit - i.e. can we apply the principles that are inherent to PCMLTFR section 7[1] and Schedule 1 Part E[2], which are that cash deposits made by an employee to his/her employer’s account are considered to be lower risk, to the aggregation of cash deposits? 3. Does the answer to Q1 change if the employer is a financial entity or public body - i.e. can we apply the same general reporting carve-out of transactions for these entities that is outlined in PCMLTFR section 12 to the aggregation of cash deposits?
Answer:

Paragraph 12(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) specifies that “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre […] the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body.” Subsection 3(1) of the PCMLTFR specifies that “two or more cash transactions or electronic funds transfers of less than $10,000 each that are made within 24 consecutive hours and that total $10,000 or more are considered to be a single transaction of $10,000 or more if (a) where a person is required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations, the person knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity; and (b) where an entity is required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations, an employee or a senior officer of the entity knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity.” Additionally, subject to subsection 52(2) of the PCMLTFR, every financial entity shall keep a large cash transaction record in respect of every amount in cash of $10,000 or more that is received from a client in the course of a single transaction. As outlined in subsection 8(1) of the PCMLTFR, every person or entity that is required to keep a large cash transaction record under the PCMLTFR shall take reasonable measures to determine whether the individual who in fact gives the cash in respect of which the record is kept is acting on behalf of a third party. When determining whether a "third party" is involved, it is not about who "owns", or benefits from, the money, but rather about who gives instructions to deal with the money. To determine who the third party is, the point to remember is whether the individual conducting the transaction is acting on someone else's instructions. If so, that someone else is the third party. Therefore, in light of these provisions and for the purposes of large cash transaction reporting, transactions conducted by individuals into their own accounts are to be aggregated with the transactions they conduct on their employer’s behalf when the transactions are conducted in a 24-hour period and the reporting threshold amount is met. In situations where an employer instructs an employee to conduct a deposit into the employer’s account, the employer becomes a third party to the transaction, despite being the account holder, because they are giving instructions. Conversely, as per section 7 of the PCMLTFR, a person acting on behalf of their employer is not acting on behalf of a third party if the deposit is made to the employer’s business account. This does not negate the presence of a large cash transaction, but addresses the issue of third party. A report must still be submitted, but will not contain any third party information. Also, in situations where a deposit is made by the employee of a financial entity or public body, a large cash transaction report is not required as per the exclusion of these entities from 12(1)(a) of the PCMLTFR.

Date Answered: 2015-11-24

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 3(1), 7, 8(1), 12(1)(a), 52(2)

12. EFT reporting requirements for agent that is an MSB itself

Question:
My question concerns an outgoing electronic funds transfer (EFTO) scenario involving a money services business (MSB) and the agent of that MSB, that is also an MSB itself. Accordingly, for ease of reference, I will refer to the agent MSB as MSB 1 and the other MSB as MSB 2. MSB 1 receives 200 requests from various clients to send funds outside of Canada. The 200 requests total an amount of $175,000 to be sent, and this total amount includes two individual requests that meet the reporting threshold of $10,000. MSB 1 provides the total amount of $175,000 to MSB 2 with a list that details how the amounts should be distributed. MSB 2 then provides the total amount of $175,000 along with the list to a financial institution in Canada that subsequently transfers the instructions and funds to an entity outside of Canada for distribution to the various beneficiaries identified on the list. As a result, who has the responsibility to report this transaction, which amounts must be reported, and how it should be reported?
Answer:

Based on the information provided, it is unclear in what capacity the agent MSB actually operates as an agent. Instead, it appears the agent MSB may simply be using the other MSB’s services to carry out the transactions of its clients, in which case it is not operating as an agent. Because it is an MSB itself, subject to Part 1 and Part 1.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations, it has reporting obligations of its own that must be met. Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines electronic funds transfer (EFT) as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” Subsection 28(1) of the PCMLTFR further specifies that every MSB must report the receipt from outside Canada of an EFT, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be, as well as the sending out of Canada, at the request of a client, of an EFT of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5. For this reason, we have said in the past that to be reportable an EFT must be client initiated, and the transmission, across our border, of instructions to transfer funds (except instructions for the transfer of funds from one location in Canada to another location in Canada). In addition, as per subsection 28(3) of the PCMLTFR, an MSB does not have to report an EFTO if it orders another MSB, financial entity, or casino within Canada, to conduct the transfer, so long as it provides that other reporting entity with the ordering client’s name and address. That said, section 9.5 of the PCMLTFA states that “Every person or entity that is referred to in section 5 and that is prescribed shall, in respect of a prescribed electronic funds transfer that occurs in the course of their financial activities, a) Include with the transfer the name, address, and account number or other reference number, if any, of the client who requested it, and any prescribed information; b) Take reasonable measures to ensure that any transfer that person or entity receives includes that information; and c) Take any prescribed measures.” As such, for the two $10,000 EFTOs that meet the reporting threshold, MSB 1 may choose to retain its clients’ info, and report the EFTOs itself, or order MSB 2 to conduct the transactions. MSB 1 orders MSB 2 to conduct the transactions and provides its clients’ info: If the list provided by MSB 1 to MSB 2 contained not only the beneficiary information, but also the ordering client information (name, address, and account number or reference number, if any), then as per section 9.5 of the PCMLTFA, this information would have to be passed along by MSB 2 to the financial institution in Canada. The financial institution in Canada would then be required to report the two $10,000 EFTOs. The accumulated $175,000 would not be reportable on its own, as the instructions would not originate from the same ordering client but each individual client identified on the list, and each of the separate amounts would not meet the reporting threshold. The reports would look like this: Part A – Transaction Info – General info Part B – Ordering Client – MSB 2 Part C – Sending Institution - Financial Institution in Canada Part D – Third Party information – Ordering client (Individual/Business requesting the transfer with MSB 1) Part E – Receiving Institution – Entity outside Canada receiving EFT instructions Part F – Beneficiary - Beneficiary outside Canada (Individual/Business, identified on the list provided by MSB 1, that will receive the funds) MSB 1 orders MSB 2 to conduct the transactions, but does NOT provide its clients’ info: If the ordering client information (name, address, and account number or reference number, if any) is NOT provided by MSB 1 to MSB 2, MSB 1 is required to report the two $10,000 EFTOs. The reports would look like this: Part A – Transaction Info – General info Part B – Ordering Client – Individual/Business requesting the transfer with MSB 1 Part C – Sending Institution – MSB 1 Part D – Third Party information – If applicable Part E – Receiving Institution – Entity outside Canada receiving EFT instructions Part F – Beneficiary - Beneficiary outside Canada (Individual/Business, identified on the list provided by MSB 1, that will receive the funds) The $175,000 transaction must also be reported as the instructions for the transfer of funds are requested by the same ordering client – MSB 1. Additionally, when an ordering client requesting an EFT conducts a transaction with the initial amount of $10,000 or more and instructs that it be divided between multiple beneficiaries, the EFT must be reported using multiple reports (one per beneficiary with the 24-hour-rule indicator selected). Therefore, because MSB 1, as the ordering client, provides instructions to MSB 2 for the distribution of the $175,000 to the multiple beneficiaries identified on the list, the EFT must be reported using multiple reports with the 24-hour-rule indicator on, and MSB 1 must be identified as the ordering client in Part B of the reports. As explained above, section 9.5 of the PCMLTFA will apply and the ordering client information - MSB 1 (name, address, and account number or reference number, if any), would have to be passed along by MSB 2 to the financial institution in Canada. The financial institution in Canada would then be required to report. If it was determined that MSB 1 was in fact operating as the agent of MSB 2 and this was evident to each individual ordering client, and a written agreement existed between the two, then as per subsection 6(2) of the PCMLTFR, MSB 2 would be responsible for the EFTO reporting requirements. Subsection 6(2) of the PCMLTFR states “where a person or entity who is subject to the requirement of these Regulations, other than a life insurance broker or agent, is an agent of or is authorized to act on behalf of another person or entity referred to in any of paragraphs 5(a) to (l) of the Act, it is that other person or entity rather than the agent or the authorized person or entity, as the case may be, that is responsible for meeting those requirements.” Therefore, similar to the above, the two $10,000 transactions would be reportable and MSB 2 could choose to report the transactions itself or pass the client names, addresses, and account numbers or other reference numbers, if any, on to the financial institution in Canada that must then report. For the $175,000 transaction, if MSB 2 provided a list containing the ordering clients’ information (names, addresses, account numbers or other reference numbers, if any) on to the financial institution in Canada, then the $175,000 transaction would not be reportable as the instructions would not be from the same ordering client and the amounts would all be under the reporting threshold. If the list provided by MSB 2 did not contain the ordering client information, but only the beneficiary information, then the financial institution in Canada would have to submit a separate EFTO report for each beneficiary of the $175,000, with the 24-hour-rule indicator selected and the ordering client identified as MSB 2.

Date Answered: 2015-11-10

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), 6(2), 28(1), (3)
Act: Part 1, 1.1, 9.5

13. Requirements for Non-SWIFT EFT

Question:
Could you provide guidance as to whether we are required to report non-SWIFT electronic funds transfers (EFTs) when our financial entity acts as the sole trustee of a fully discretionary trust and sends/receives funds through its account with the bank.
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines electronic funds transfer (EFT) as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” Subsection 12(1) of the PCMLTFR further specifies that every financial entity must report the receipt from outside Canada of an EFT, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be, as well as the sending out of Canada, at the request of a client, of an EFT of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5. For this reason, we have said in the past that to be reportable an EFT must be: • Client-initiated, and • the transmission, across our border, of instructions to transfer funds (except instructions for the transfer of funds from one location in Canada to another location in Canada). Based on the information provided, it is not entirely clear whether your financial entity sends/receives EFTs through the bank as a result of client-initiated instructions, or whether it initiates the transfers on its own accord; however, if the former is true and it sends client-initiated instructions outside Canada or receives client-initiated instructions transmitted by an entity outside Canada, then your financial entity would be required to submit outgoing EFT (EFTO) reports and incoming EFT (EFTI) reports to FINTRAC. Whether an EFT is reported as a SWIFT EFT or a NON-SWIFT EFT depends on whether the reporting entity is a SWIFT member and whether the EFT sent/received is a SWIFT message or not. That said, pursuant to subsection 12(3) of the PCMLTFR, if your financial entity receives client-initiated instructions for the transfer of funds outside of Canada and provides the instructing client’s name and address to the bank to conduct the transfer, it would not be required to submit an EFTO report to FINTRAC. Similarly, pursuant to subsection 12(5) of the PCMLTFR, if your financial entity receives a client-initiated EFT from outside of Canada, it would not be required to submit an EFTI report to FINTRAC if the transfer contained the name and address of the beneficiary. In both cases, the information would be reported by the bank.

Date Answered: 2015-11-09

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2), 12(1), (3), (5)

14. Domestic EFT reporting guidance

Question:
Could you provide information regarding domestic electronic funds transfers? Specifically, a Canadian financial entity has indicated that foreign based entities use its services to conduct transactions from one Canadian account to another.
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines electronic funds transfer (EFT) as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” Subsection 12(1) of the PCMLTFR further specifies that every financial entity must report the receipt from outside Canada of an EFT, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be, as well as the sending out of Canada, at the request of a client, of an EFT of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5. For this reason, we have said in the past that to be reportable an EFT must be: • client initiated, and • the transmission, across our border, of instructions to transfer funds (except instructions for the transfer of funds from one location in Canada to another location in Canada). Based on our understanding of the information provided, it appears that the Canadian financial entity holds Canadian accounts for foreign clients and will, at the request of a client, transfer funds from the account in Canada to another account in Canada. Therefore, because the client-initiated instructions are provided directly to the Canadian financial entity and not transmitted through a foreign entity, and because the transfer occurs within Canada only, there are no EFT reporting obligations associated. That said, the Canadian financial entity is required to report incoming electronic funds transfers (EFTIs) when it receives client-initiated instructions for the transfer of funds from a foreign financial institution to the client’s Canadian account. The Canadian financial entity indicates its clients will initiate these transfers to fund their Canadian accounts prior to executing the domestic transfers within Canada to pay suppliers.

Date Answered: 2015-11-03

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2), 12(1)

15. Which currency to report on EFTI?

Question:
Which currency should be reported on an incoming electronic funds transfer (EFTI) report when the requesting client in a foreign country identifies one currency to be sent and the beneficiary in Canada receives a different type of currency? As a scenario, Joe tells a Canadian MSB that he will be getting $500,000 in currency X from Bob who is in a foreign country. The Canadian MSB contacts their agent in the foreign country and advises that Bob will be sending Joe money. When Joe tells the Canadian MSB that the incoming amount will be $500,000 in currency X, the Canadian MSB will tell Joe that he will be paid an equivalent of $10,000 Canadian. Therefore, if Bob instructs that $500,000 in currency X be sent, the Canadian MSB must report the EFTI in the currency X. Is this correct? Does the EFTI still have to be reported in the currency X if Bob knows the Canadian amount that Joe will be getting?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines electronic funds transfer (EFT) as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” Based on the information provided, it appears that Bob, the originating client, will provide instructions to a foreign entity to send $500,000 in currency X to Joe, a beneficiary in Canada. The foreign entity sends $500,000 in currency X to the Canadian MSB and the Canadian MSB converts the currency X to Canadian Dollars to provide to Joe, the beneficiary in Canada. Although Joe (the beneficiary) is aware that he will eventually receive Canadian Dollars, the instructions provided by Bob (the instructing client) are to send $500,000 in currency X and this is the amount that is ultimately sent to the Canadian MSB. As such, you are correct - the EFTI report must identify the transaction in currency X. Therefore, as per the information provided in Guideline 8A: Submitting Non-SWIFT Electronic Funds Transfer Reports to FINTRAC, and specifically the Field by Field instructions for an EFTI found in Appendix 1 - Field A3 would show the transaction amount of $500,000, Field A4 would show the currency type, and Field A5 would show the exchange rate used to convert the funds into Canadian dollars.

Date Answered: 2015-10-13

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), Appendix 1

16. Obligations when operating as client

Question:
Scenario 1: I am an MSB and I often travel overseas to initiate a transaction with a foreign MSB to acquire currencies I need or dispose of currencies I'm overstocked on. - Do I need to file a report? - Do I have to ask for ownership information, IDs, etc..? Scenario 2:  I travel overseas, and initiate a transaction with a foreign Coin shop/Numismatic store, to buy any foreign coins or banknotes that they do not have a numismatic market for, and I buy it as currency to add to my stock of foreign currency. - Do I need to file a report? - Do I have to ask for ownership information, IDs, etc..
Answer:

Based on the information provided, it appears that your MSB is initiating the foreign exchange transactions with the foreign entities for its own purposes and is not conducting the transactions on behalf of a client. Moreover, your MSB appears to be the client in these transactions. As such, there are no obligations associated. There is also no legislative requirement within the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) or its associated Regulations that requires your MSB to keep the receipt issued by the foreign entity, unless this is its own business practice. In addition to the above, because the transaction is conducted in a "coin shop, to buy any foreign coins…”, we should clarify whether your MSB is engaged as a dealer in precious metals and stones (DPMS) within Canada, since your MSB would be buying coins that are made of precious metals. Subsection 1(2) of the PCMLTFR defines a DPMS as “a person or an entity that, in the course of its business activities, buys or sells precious metals, precious stones or jewellery. It includes a department or agent of Her Majesty in right of Canada or of a province when the department or agent is carrying out the activity, referred to in section 39.1, of selling precious metals to the public.” Entities that fall under this definition are covered once they engage in the purchase or sale of precious metals, precious stones or jewellery in an amount of $10,000 or more in a single transaction, as per section 39.1 of the PCMLTFR.

Date Answered: 2015-09-29

Activity Sector: Dealer in precious metals and stones, Money services business
Obligation: Reporting
Guidelines: 2,3,7,8
Regulations: 1(2), 39.1
Act: Part 1

17. Reportable EFTs

Question:
1. Are all incoming electronic funds transfers covered? 2. What types of electronic funds transfers are excluded? 3. Are electronic funds transfers only for transactions from individuals or companies too?
Answer:

1.The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” Reporting entities must report the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, as the case may be, as well as the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction. For this reason, we have said in the past that to be reportable an electronic funds transfer must be: • client initiated, and • the transmission, across our border, of instructions to transfer funds (except instructions for the transfer of funds from one location in Canada to another location in Canada). 2. As previously indicated, the definition of electronic funds transfer excludes the transfer of funds from one location in Canada to another location in Canada, and SWIFT messages that are not MT 103. Therefore, they cannot be reported to FINTRAC. 3. To be reportable, an electronic funds transfer must be client initiated. The word “client” is defined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) as “a person or an entity that engages in a financial transaction or activity with a person or an entity referred to in section 5 [reporting entities], and includes a person or an entity on whose behalf the person or the entity that engages in the transaction or activity is acting.” Therefore, reportable electronic funds transfers can be initiated by individuals or companies.

Date Answered: 2015-09-04

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2)

18. No EFTs for real estate

Question:
Are real estate agents expected to report large EFTs? If not, why not?
Answer:

Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), the real estate sector has the obligation to report to FINTRAC suspicious transactions, terrorist property and large cash transactions. The real estate sector does not report electronic funds transfers to FINTRAC because there is no such requirement under the PCMLTFA and its associated Regulations.

Date Answered: 2015-09-04

Activity Sector: Real estate
Obligation: Reporting

19. EFTI required for returned wire

Question:
A financial entity has received an incoming electronic funds transfer (EFTI) that lacks information and does not include a beneficiary that is their client. As such, is the financial entity required to submit an EFTI report for this transaction?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines electronic funds transfer (EFT) as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” Subsection 12(1) of the PCMLTFR further specifies that every financial entity must report the receipt from outside Canada of an EFT, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be, as well as the sending out of Canada, at the request of a client, of an EFT of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or. For this reason, we have said in the past that to be reportable an EFT must be: • client initiated, and • the transmission, across our border, of instructions to transfer funds (except instructions for the transfer of funds from one location in Canada to another location in Canada). Based on the information provided, it appears that the financial entity receives client initiated instructions transmitted across our border by a foreign entity and is therefore required to report an EFTI to FINTRAC. This report must be submitted regardless of whether the transaction is ultimately not completed and returned to the originating entity.

Date Answered: 2015-08-28

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2), 12(1)

20. Payments related to ransomware

Question:
Does FINTRAC require companies that provide a medium for victims to make payments related to ransomware (a type of malware that prevents or limits users from accessing their system) to file STRs/ASTRs in Canada?
Answer:

Section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) states that “Subject to section 10.1, every person or entity referred to in section 5 shall report to the Centre, in the prescribed form and manner, every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that (a) the transaction is related to the commission or the attempted commission of a money laundering offence; or (b) the transaction is related to the commission or the attempted commission of a terrorist activity financing offence.” As a result, for a transaction to qualify as a suspicious transaction, reportable under the PCMLTFA and the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations, the reporting entity must have reasonable grounds to suspect it is related to the commission or attempted commission of either a money laundering offence or a terrorist activity financing offence. A money laundering offence is typically committed or attempted with the intention to conceal or convert proceeds derived from the commission of a designated offence, which could include drug trafficking, bribery, or fraud. A terrorist activity financing offence occurs when property (including funds) are knowingly collected to carry out terrorist crimes. It is therefore for the individuals and entities that are reporting entities under Part 1 of the PCMLTFA, to determine whether they have reasonable grounds to suspect that a transaction or attempted transaction is related to a money laundering or a terrorist activity financing offence. If so, an STR must be sent within 30 calendar days.

Date Answered: 2015-08-11

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 2,3
Act: Part 1, 7

21. Property owned by a terrorist group

Question:
1. At what moment is a financial institution considered to know or should know that an entity is a terrorist or a terrorist group? 2. What information must a financial institution have so that it “has the knowledge" that the entity is engaged in terrrorist activities?
Answer:

Under subsection 7.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), “Every person or entity referred to in section 5 that is required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism shall also make a report on it to the Centre, in the prescribed form and manner.“ FINTRAC only administers the PCMLTFA and its associated Regulations. Thus, it can only issue comments and advice on issues in this regard. It does not have the authority to interpret section 83.1 of the Criminal Code or section 8 of the United Nations Resolutions on the Suppression of Terrorism. Having that said, once the reporting entity satisfies the requirements of subsection 7.1(1) of the PCMLTFA, that is, it is required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism; it must also submit a report to FINTRAC. Reporting entities must submit such reports as soon as they realize that they have in their possession property that: 1. they know is owned or controlled by or on behalf of a terrorist or a terrorist group. This includes information on any transaction or proposed transaction relating to that property; or 2. they believe is owned or controlled by or on behalf of a listed person available directly or not. This includes information on any transaction or proposed transaction relating to that property. Although the PCMLTFA does not stipulate the time at which reporting entities must know or believe that the property in its possession or available to it belongs to a terrorist, a terrorist group or a listed person, and the PCMLTFA does not require that they specifically ascertain the identity of designated persons according to lists or prescribe the information to be used, it does require, however, that they submit to the Centre the terrorist property reports required by the Criminal Code and the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism. To duly prepare these reports, FINTRAC also expects reporting entities to develop principles and measures that are aligned with the requirements of the Criminal Code and the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism in order to comply with the law.

Date Answered: 2015-07-10

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Act: 7.1(1)

22. STR Reporting - Locations and Part G

Question:
I would like to request clarification concerning the requirement to report an STR for each location where a transaction takes place. As per FINTRAC Guideline 3A, Appendix 1: "...If you have multiple branch or office locations, the information in this part should refer to the branch or office location where the transaction took place or was attempted. Transactions that happened or were attempted at different branch or office locations must be reported on separate reports." If a reporting entity states in Part G that transactions conducted at multiple ATMs form part of the suspicious activity, should the RE have reported these transactions under seperate STRs? In other words, do ATMs count as differing "locations" the same way a branch does?
Answer:

Section 7 of the PCMLTFA states that “Subject to section 10.1, every person or entity referred to in section 5 shall report to the Centre, in the prescribed form and manner, every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that (a) the transaction is related to the commission or the attempted commission of a money laundering offence; or (b) the transaction is related to the commission or the attempted commission of a terrorist activity financing offence.” Subsection 9(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations states that “Subject to section 11, a report under section 7 of the Act concerning a financial transaction or an attempted financial transaction in respect of which there are reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering offence or a terrorist activity financing offence shall contain the information set out in Schedule 1.” In the FINTRAC Interpretation Notice, FIN 5 – Large Cash Transactions through Automated Banking Machines, we indicate that, for the purposes of a large cash transaction report (LCTR), the complete address of the location of the automated banking machine (ABM) where the transaction occurred must be reported. As such, the same logic may be applied to STRs when suspicious transactions or attempted transactions occur at ABM locations.   Additionally, we have said in the past that if a reporting entity has reasonable grounds to suspect the commission or the attempted commission of a money laundering offence or a terrorist financing offence of one transaction, or one attempted transaction, then it is acceptable to include the information about that one suspicious transaction or that one attempted transaction in Part B of the STR and to summarize the nature of the transactional activity/pattern/behaviour observed, in Part G of the STR. However, in the case where the reporting entity has reasonable grounds to suspect the commission or the attempted commission of a money laundering offence or a terrorist financing offence through more than one transaction or more than one attempted transaction, the reporting entity can include all suspicious transactions or attempted transactions, in Part B of the STR, so long as they are related to the same suspicion and they took place at the same address. Part B of the STR allows you to add up to 99 transactions. The structure of the suspicious transaction report only allows for one Part A in any given report, which includes the address of the transaction. Therefore, all transactions included in the report must have taken place at the same address. If there are transactions related to the same suspicion that occurred at other addresses, they must be included in separate reports. However, Part G of each report must include a summary of all transactional activity/pattern/behaviour observed including those at the other locations because they are related to the same suspicion.

Date Answered: 2015-06-30

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 2,3, FIN 5
Regulations: 9(1)

23. Returned wires

Question:
I have a question about returned wires. A reporting entity sent a client-initiated wire (EFTO) and it was returned. The returned wire had a note stating “No beneficiary branch details indicated.” Another returned wire had a note that said “invalid intermediary bank”. Therefore, the reporoting entity does not believe the returned wires were “client initiated”. I would like to confirm that if a wire is not client initiated, but simply returned by the receiving bank, then it is not reportable as an EFTI.
Answer:

Subsection 12(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “ Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre: […] the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and […] the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be.” Furthermore, subsection 1(2) of the PCMLTFR defines an electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada”. For this reason, we have said in the past that to be reportable an electronic funds transfer must be: • client initiated, and • the transmission, across our border, of instructions to transfer funds (except instructions for the transfer of funds from one location in Canada to another location in Canada). Based on the information you have provided, namely that a client ordered an electronic funds transfer to be sent outside of Canada (EFTO), and that this EFTO was ultimately returned by the receiving financial institution, it seems the receiving financial institution returned these EFTs because some information was missing in order to complete the transaction. Therefore, it would appear that these “returned EFTs” do not constitute reportable EFTs, as per our definition, since it is not client initiated.

Date Answered: 2015-06-23

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2), 12(1)

24. non-SWIFT Interac email money transfers

Question:
The following are questions regarding non-SWIFT, Interac email money transfers sent/received within Canada. To summarize, we are looking for clarity/answers to three questions: 1. Whether FINTRAC considers a non-SWIFT Interac e-mail money transfer of funds sent/received within Canada, an Electronic Funds Transfer ("EFT"). 2. Whether non-swift Interac e-mail money transfers of funds sent/received within Canada have any EFT reporting obligations to FINTRAC. 3. Whether non-SWIFT Interac e-mail money transfers sent/received within Canada have any EFT record keeping requirements.
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines an electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” This does not include domestic SWIFT MT 103 messages. Furthermore, section 9.5 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) requires every person or entity referred to in section 5 to include certain information with prescribed electronic funds transfers when they occur in the course of their financial activities. Subsection 66.1(2) of the PCMLTFR goes on to specify that the prescribed electronic funds transfers to which section 9.5 of the Act applies are those as defined in subsection 1(2) of the PCMLTFR, but include transfers within Canada that are SWIFT MT 103 messages. As such, the only domestic EFTs to which the obligations set out in section 9.5 of the Act applies are SWIFT MT 103 messages. With respect to client identification obligations for EFTs subparagraph 54(1)(b)(ii) of the PCMLTFR states: 54. (1) Subject to section 62 and 63, every financial entity shall (b) in accordance with subsection 64(1), ascertain the identity of every person who has not signed a signature card in respect of an account held with the financial entity and has not been authorized to act with respect to such an account but who conducts (ii) an electronic funds transfer, as prescribed by subsection 66.1(2), in an amount of $1,000 or more sent at the request of a client […] Therefore, a financial entity will only be required to ascertain a client’s identity when the financial entity conducts an electronic funds transfer as defined in subsection 1(2) of the PCMLTFR or a transfer within Canada that is a SWIFT MT 103 message. Based on the foregoing, since you have requested a policy interpretation on non-SWIFT Interac email money transfers sent/received within Canada, it appears that you would have no client identification, record keeping or reporting obligations when conducting domestic EFTs.

Date Answered: 2015-06-23

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2), 54(1)(b)(ii), 66.1(2)

25. EFT or foreign exchange only?

Question:
What are the MSB’s EFT reporting obligations in the following scenario? The MSB offers both foreign exchange and remittance services. The transaction is in excess of $10k Canadian - Client A wishes to purchase Euros from said RE. - The MSB has a Euro-denominated bank account held at a financial entity located in Europe . - The client holds a Euro-denominated bank account at a financial entity located in Canada. - In order to pay for its Euros, client A presents a bank draft denominated in Canadian funds to the MSB and once said draft is received by the MSB it wires the Euros from its bank account in Europe to the client’s bank account located here in Canada.
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada.” Subsection 28(1) of the PCMLTFR, further specifies that every MSB must report the sending out of Canada, at the request of a client, of an electronic funds transfer (EFTO) of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be, as well as the receipt from outside Canada of an electronic funds transfer (EFTI), sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be. For this reason, we have said in the past that to be reportable an electronic funds transfer must be: • client initiated, and • the transmission, across our border, of instructions to transfer funds (except instructions for the transfer of funds from one location in Canada to another location in Canada). Based on the information provided, the MSB does not appear to be conducting EFTs as it is not transmitting client initiated instructions for the transfer of funds across the Canadian border, nor is it receiving instructions, transmitted across the Canadian border at the request of a client, for the transfer of funds. Instead, it is solely conducting a foreign exchange transaction. As a result of the foreign exchange transaction, the MSB would be required to keep a transaction ticket, as outlined in subsection 30(f) of the PCMLTFR, and identify its client subject to subsection 63(1) and in accordance with subsection 64(1).

Date Answered: 2015-06-22

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), 28(1), 30(f)

26. Reporting requirements for Casinos

Question:
With regard to the regulation in Guideline 10A: 2. Casino Disbursement Report Requirements and Guideline 7A: 3. Large Cash Transaction Reporting Requirements, am I correct in my understanding that any single disbursement of $10,000 or more in a 24 hour period, rolling or static, requires a CDR reported to FINTRAC? And that any subsequent two or more disbursements of less than $10,000 but totaling $10,000 or more, in a 24 hour rolling or static time period, also require a CDR reported to FINTRAC? Or are all transactions for one patron for a 24 hour period, rolling or static, aggregated to one CDR/CTR whether disbursed or received? For example, FinCEN guidelines require that if there is more than one transaction in a 24 hour period, maybe one for $10,500 and one for $3,000, and one for $8,000, disbursed or received, that one CTR would be filed for that 24 hour period totaling $21,500. But FINTRAC filings would be one CDR/CTR for $10,500 and one for $11,000. Is this correct?
Answer:

Subsection 40(1) and 42(1) of the Proceeds of Crime (Money Laundering) and Terrorist Regulations (PCMLTFR) require that every casino shall report the following transactions and information to the Centre: • the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from a financial entity or a public body; • the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 5; • the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 6 • the disbursement of $10,000 or more in the course of any of the following transactions, together with the information set out in Schedule 8: (a) the redemption of chips, tokens or plaques; (b) front cash withdrawals; (c) safekeeping withdrawals; (d) advances on any form of credit, including advances by markers or counter cheques; (e) payments on bets, including slot jackpots; (f) payments to a client of funds received for credit to that client or any other client; (g) the cashing of cheques or other negotiable instruments; and (h) reimbursements to clients of travel and entertainment expenses”. In section 3 of the PCMTLFR, the definition of single transaction, otherwise known as “the 24-hour rule”, specifically applies to situations where two or more cash transactions or electronic funds transfers of less than $10,000 each are made within 24 consecutive hours and total $10,000 or more. This is considered to be a single transaction of $10,000 or more if “the person knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity.” In a situation where multiple transactions under $10,000 are conducted within 24 consecutive hours of each other, by or on behalf of the same individual or entity, depending on the values, the 24-hour rule may apply and the transactions might be reportable. Depending on what type of system the casino is using, the 24-hour period can vary. In the rolling 24-hour system, the 24-hour period begins with each new transaction of less than $10,000 (if the casino knows they were made by or on behalf of the same individual or entity). In the static 24-hour system, the casino is required to report the multiple transactions that the casino knows were made by or on behalf of the same individual or entity in that 24-hour period (e.g. from 9:00 a.m. to 9:00 a.m. the next day). The 24-hour rule indicator must be selected for each report sent to the Centre that is below $10,000. Therefore, the 24-hour rule applies only to transactions or disbursements that are under $10,000. As such, if the casino receives an amount of $10,000 or more in cash or disburses an amount of $10,000 or more in the course of a single transaction, each such transaction must be report to FINTRAC separately, in its own report (that is, an LCTR or a CDR). Therefore, in response to your query, any single disbursement of $10,000 or more must be reported in its own CDR to FINTRAC. Any large cash transaction of $10,000 or more must be reported in its own LCTR to FINTRAC. Any subsequent two or more disbursements of less than $10,000 but totaling $10,000 or more, in a 24-hour period, rolling or static, might be reportable to FINTRAC. Any subsequent two or more cash transactions of less than $10,000 but totaling $10,000 or more, in a 24 hour period, rolling or static, might be reportable to FINTRAC. As a result, based on the example of transactions you provided, namely that $10,500, $3,000, and $8,000 are disbursed or received within a 24-hour period by a casino, the casino should report a single CDR or LCTR for the $10,500 and, depending on the system in place, might report a CDR or LCTR for the two other transactions totalling $11,000.

Date Answered: 2015-06-22

Activity Sector: Casino
Obligation: Reporting
Guidelines: FIN-4
Regulations: 3, 40(1), 42(1)

27. Obligations for new and old housing

Question:
Your website states "new" housing. What is in place to ensure real estate agents local or overseas, are reporting large cash purchases? Why does this not apply to all housing. What controls are in place to crosscheck this? If not old housing, is there anything in place on this going forward and examining past practices? Does FINTRAC monitor ALL real estate deals, be it OLD or NEW? Or just new? If foreign agents are involved in the sale, what measures does FINTRAC undertake to ensure the validity of the transaction? Is this left to the agent to report? What expertise does the agent possess with money laundering transactions? Are they sufficiently trained to report such transactions to FINTRAC? Will FINTRAC look at reporting by agents in regards to foreign ownership more closely for ALL real estate transactions?
Answer:

On its website, FINTRAC provides a plain language interpretation of the obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations for each of the sectors identified under Part 1. In addition to the specific sector information, FINTRAC has written guidelines that outline in detail the requirements for each report, the record keeping and client identification requirements for each sector, and information on creating and maintaining a compliance regime. Regarding the real estate sector, subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines a real estate broker or real estate sales representative as “a person or entity that is registered or licensed under provincial legislation in respect of the sale or purchase of real estate.” Section 37 of the PCMLTFR further indicates that every real estate broker or sales representative is subject to Part 1 of the PCMLFTA when they act as an agent in respect of the purchase or sale of real estate. Also included in the real estate sector, a real estate developer is defined as “on any given day in a calendar year, a person or entity who, in that calendar year and before that day or in any previous calendar year after 2007, has sold to the public, other than in the capacity of a real estate broker or sales representative, (a) five or more new houses or condominium units; (b) one or more new commercial or industrial buildings; or (c) one or more new multi-unit residential buildings each of which contains five or more residential units, or two or more new multi-unit residential buildings that together contain five or more residential units.” According to subsection 39.5(1) of the PCMLTFR, “Every real estate developer is subject to reporting obligations under Part 1 of the PCMLTFA when (a) in the case of a person or of an entity other than a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building; and (b) in the case of an entity that is a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building on their own behalf or on behalf of a subsidiary or affiliate.” Therefore, in response to your query, the references to “new” housing, made in the sector profile page for the real estate sector, that you have identified, relate to real estate developers who sell new houses, new condominium units, new commercial or industrial buildings, and new multi-unit residential buildings. Real estate brokers and sales representatives, who act as an agent in the purchase or sale of existing real estate, are identified in the first paragraph of the sector profile page you referenced and are also obligated to report to FINTRAC in certain situations, such as when they receive cash in amounts of $10,000 or more. In response to your second question, the definitions indicate that only real estate brokers and sales representatives, registered or licensed under provincial legislation, are required to report to FINTRAC, when they act as an agent in respect of the purchase or sale of real estate. As such, foreign real estate agents are only subject to the Act and Regulations if they are also registered or licensed under provincial legislation within Canada and only when they act as agents in the purchase or sale of real estate within Canada. Regarding your question about whether real estate agents and developers are sufficiently trained to report to FINTRAC, subsection 71(1) of the PCMLTFR requires that reporting entities implement a compliance regime which must include, amongst other things, written compliance policies and procedures that are kept up to date, as well as a written ongoing compliance training program for all employees. The compliance regime is put in place to ensure reporting entities are aware of the record keeping, client identification, and reporting requirements under the Act and Regulations. As a result, it is up to the real estate broker, sales representative, and developer to ensure they are equipped to identify and accurately report information to FINTRAC when cash is received in an amount of $10,000 or more, when there are financial transactions that they have reasonable grounds to suspect are related to the commission of a money laundering offence or terrorist financing offence, including transactions that they have reasonable grounds to suspect are related to the attempted commission of a money laundering or terrorist financing offence, and when the transaction involves property that is owned or controlled by or on behalf of a terrorist or terrorist group.

Date Answered: 2015-06-19

Activity Sector: Real estate
Obligation: Reporting Compliance regime
Regulations: 1(2), 37, 39.5(1)
Act: Part 1

28. EFT reporting when securities dealer is owned by the financial institution

Question:
Who should report when a securities dealer is involved in ordering an EFT with a financial institution, and the dealer is owned by the financial institution?
Answer:

If a securities dealer is owned by a financial institution and is involved in the ordering of an EFT from that financial institution, it is the financial institution that has reporting obligations. Securities dealers do not have obligations associated with EFT reporting. The securities dealer may be considered to be the client ordering the EFT.

Date Answered: 2015-05-26

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Securities dealer, Trust and/or loan company
Obligation: Reporting

29. EFT questions

Question:
Wondering if you can help with some specific policy interpretation questions we have re: EFTs. 1) Under the 24 hour rule the wording seems to imply that in order to be a valid EFT under the 24 hour rule it must be the sender that is common amongst all transactions. Eg. If ABC INC orders 3 transactions totalling 10,000 these are valid EFTs. However, if ABC INC is the beneficiary of 3 EFTs totalling $10,000 but the ordering client is different, does this constitute valid EFTs under the 24 hour rule? 2) How are correspondent banks treated? If an EFT is reported only based on the correspondent institution being in Canada, but the other parties to the transaction are outside of Canada, how is this treated? Would this be reportable under the PCMLTFA? 3) If an EFT is conducted in Canadian $ it must clear through the Canadian system. In that case the transaction would be reported even though the parties to the transaction are outside Canada. How are these treated? Would these be reportable under the PCMLTFA?
Answer:

1. With respect to your question on the 24-hour rule: Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), the 24-hour rule applies for the receipt of two or more electronic funds transfers of less than $10,000 each that total $10,000 or more within a 24-hour period. The reporting entity has to make an electronic funds transfer report if their employee or senior officer knows the transactions were made within 24 consecutive hours of each other by or on behalf of the same individual or entity. FINTRAC’s guidelines specify that “on behalf of” refers to the instructing party to a transaction and not the beneficiary of said transaction. The electronic funds transfer obligations are triggered by the transaction(s) of a conductor, so are determined at the conductor level, not at the account level. 2. With respect to your question on correspondent banking relationship: It is a question of fact to be able to determine whether a person or entity subject to Part 1 of the PCMLTFA must report an EFT. However, I am able to provide you with some general comments: As per subsection 9.4(3) of the PCMLTFA, a correspondent banking relationship “means a relationship created by an agreement or arrangement under which an entity referred to in any of paragraphs 5(a), (b), (d) and (e) or an entity that is referred to in section 5 and that is prescribed undertakes to provide to a prescribed foreign entity services such as international electronic funds transfers, cash management, cheque clearing and any prescribed services.” As such, two banks that are not in a direct relationship and are not both participants in the same clearing house might have a correspondent banking relationship if, in order to complete an electronic funds transfer (EFT), they have an arrangement to pass through one or more intermediary banks. Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines electronic funds transfer as “the transmission – through any electronic, magnetic or optical device, telephone instrument or computer – of instructions for the transfer of funds, other than the transfer of funds within Canada.” To be reportable, an EFT must be: • client-initiated; and • include the transmission of instructions to transfer the funds across the Canadian border. As such, in your example, I can only assume that the client gave instructions to transmit funds from his bank account outside of Canada to the bank account of another individual outside of Canada. The intention (or the purpose) of the transfer is to move funds from a country other than Canada to another country other than Canada. Even if the funds are routed through Canada, our position is that this transaction does not constitute an EFT as defined in subsection 1(2) of the PCMLTFR, and therefore is not reportable by the Canadian intermediary bank. 3. With respect to your question on a transaction routed through Canada because the Canadian funds must be cleared through the Canadian system: It is a question of fact to be able to determine whether a person or entity subject to Part 1 of the PCMLTFA must report an EFT. However, I am able to provide you with some general comments: In the example you provided, it appears that the entity outside of Canada will use its corresponding banking relationship to clear the Canadian funds through the Canadian system. As indicated above, subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission – through any electronic, magnetic or optical device, telephone instrument or computer – of instructions for the transfer of funds, other than the transfer of funds within Canada.” To be reportable, an EFT must be: • client-initiated; and • include the transmission of instructions to transfer the funds across the Canadian border. As such, in your example, I can only assume that an individual instructs an entity outside of Canada to send money to another individual outside of Canada in Canadian Dollars. Because the EFT currency is in Canadian Dollars, the entity outside of Canada will send the EFT to its Canadian corresponding bank. Subsequently the Canadian corresponding bank will re-transmit the EFT to another Canadian corresponding bank as they are the correspondent bank responsible for transmitting EFTs to the other entity outside of Canada (the beneficiary’s account holder). In this case, the client gave instructions to transmit funds from his bank account outside of Canada to the bank account of another individual outside of Canada, in Canadian currency. The intention (or the purpose) of the transfer is to move funds from a country other than Canada to another country other than Canada. Even if the funds are routed through Canada because they are in Canadian Dollars, our position is that this transaction does not constitute an EFT as defined in subsection 1(2) of the PCMLTFR, and therefore is not reportable by the Canadian intermediary banks.

Date Answered: 2015-05-14

Obligation: Reporting
Guidelines: FIN-4, 8
Regulations: 1(2), 3
Act: Part 1, 9.4(3)

30. Authorized signer conducting EFT

Question:
There has been confusion recently in the financial sector over FINTRAC’s interpretation of the reporting requirements for non-SWIFT EFTO transactions - specifically, how to identify and report information about a third party on the EFTO when an EFT is sent by an entity. What specific sections of the Outgoing International non-SWIFT Electronic Funds Transfer Report (EFTO) must be completed for reporting for the following scenario? - An entity sends an international wire transfer in excess of $10,000 Canadian equivalent. - The transaction is conducted by the authorized signer for the entity. - The authorized signer is not acting on someone else's instructions. Based on the FINTRAC guidance, in our specific scenario, the person "in front of you" is not a third party because they are NOT acting on someone else's instructions, and consequently there is no requirement to report Part G - because there is no third party determination. However, there is a RECORD KEEPING requirement to collect and record information about the conductor of the transaction - FINTRAC Guideline 6G - Section 3.9 - EFT Record - The EFT record has to include the following: "if the client is an entity, the name, address, date of birth and telephone number of the individual who initiated the transaction on behalf of the entity, as well as the nature of the individual's principal business or occupation." In making a third party determination when employees are acting on behalf of their employers, they are considered to be acting on behalf of a third party. The only exception to this is when an employee deposits cash to the employer's account. In that case, the employee is not considered to be acting on behalf of a third party. This is only true if the account in which the employee deposits cash is a business account. As such, the individual conducting the transaction (be it the owner(s), director(s) or shareholder (who is a director or owner)) would not be a separate body from the entity. Therefore, the entity would be the client and its information should be entered in Part B. Since the director and/ or owner is the voice of the entity, there would be no third party in this scenario.?
Answer:

Before it can be determined whether the authorized signer is acting on behalf of a third party, you must first determine the type of relationship that exists with the entity. In most cases it is likely that the authorized signer will be an employee of the entity, the owner of the entity, or a separate individual or entity authorized by the entity to conduct certain transactions (e.g. an accountant). FINTRAC’s guidelines state that when determining whether a "third party" is involved, it is not about who "owns" the money, but rather about who gives instructions to deal with the money. To determine who the third party is, the point to remember is whether the individual in front of you is acting on someone else's instructions. If so, that someone else is the third party. In addition, section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) provides that “a person acting on behalf of their employer is considered to be acting on behalf of a third party except when the person is depositing cash into the employer’s business account.” Since conducting an EFTO is not the same as depositing cash into an employer’s business account, an employee requesting an EFTO for their employer is doing so on behalf of that entity. That entity is therefore considered to be a third party to the transaction. Regarding your scenario, and in line with the above, if the authorized signer is determined to be an employee of the entity, they are considered to be conducting the EFTO on behalf of their employer. The authorized signer’s (employee’s) information would be required in Part B of the EFTO report and the entity’s (employer’s) information would be required in Part D, as they are considered to be the third party to this transaction. If the authorized signer is determined to be a separate individual or entity authorized by the entity to conduct these types of transactions, such as an accountant or lawyer, it is understood that these transactions are conducted on behalf of the entity. Again, the authorized signer’s information would be required in Part B of the EFTO report and the entity’s information would be required in Part D of the report. Conversely, if the authorized signer is the owner or director of the entity, and is not considered an employee of the entity, he/she would be considered to be the voice of the entity and would be speaking directly for it, as the entity can only speak by means of a physical person. In this case, the entity’s information would be required in Part B of the EFTO report and there would be no third party to the transaction. Please note, the terms “employee”, “owner”, and “director” are not defined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), nor the PCMLTFR. As such, it will always be a question of fact to determine who occupies these positions. Having signing authority, or the authority to bind or act on an account is not necessarily a determining factor for employment or ownership. Additionally, as you made reference to Part G of the EFTO report, it should be noted that Part G is only meant for information on a third party to the beneficiary of the transaction. That is, if the recipient of the EFTO receives the payment on behalf of another individual or entity, that individual or entity is considered to be a third party and their information would be required in Part G of the report.

Date Answered: 2015-05-04

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting

31. LCTR reporting of another financial entity

Question:
Can our financial entity enter into an agreement with another financial entity so that it may accept cash deposits from our clients? Can the other financial entity take on the LCTR reporting obligations for cash it receives from our clients, or do we have to submit an LCTR for such activity?
Answer:

A financial entity may enter into an agreement that allows its clients to make cash deposits at another financial entity’s place of business, however, it is the responsibility of the financial entity that holds the client's account to fulfill the record keeping and reporting obligations. The agreement generates a principal/agent relationship whereby the client is deemed to be engaged in a financial transaction with the financial entity that holds his/her account, by means of an agent. As such, the financial entity that holds the client’s account continues to be responsible for the large cash reporting and record keeping obligations of the PCMLTFA and its associated Regulations. This interpretation is further supported by subsection 6(2) of the PCMLTFR, which states that “where a person or entity who is subject to the requirements of these Regulations, other than a life insurance broker or agent, is an agent of or is authorized to act on behalf of another person or entity referred to in any of paragraphs 5(a) to (l) of the Act, it is that other person or entity rather than the agent or the authorized person or entity, as the case may be, that is responsible for meeting those requirements." To establish such a relationship, FINTRAC anticipates that the written agreement would outline the agent/principal relationship and establish the obligations of both parties. FINTRAC anticipates that such an agreement would outline, but not be limited to, the following: • The financial entity holding the client's account must be informed, by the agent financial entity receiving the deposit, that the client has conducted a large cash transaction, whether in a single transaction or under the 24 hour rule. • The financial entity holding the client's account must obtain the appropriate information from the agent financial entity, including all information required to complete a large cash transaction report. This includes information such as the time, the date, the exact amount of the cash transaction, and all required information on the conductor of the transaction as well as the complete address of the place of business where the transaction occurred. The financial entity holding the client's account must ensure that its locations in F2R are updated to include the address information of the agent financial entity's place of business where the transaction in question took place. This information will be included in the large cash transaction report. It is also possible that both parties agree that cash deposited at the agent financial entity’s place of business will be reported by the agent financial entity on behalf of the financial entity holding the client’s account. The financial entity chosen to send large cash transaction reports to FINTRAC on behalf of the financial entity holding the client’s account would have to be registered as a service provider. The financial entity holding the client’s account would need to designate that financial entity as their service provider and delegate the appropriate reports. However, in such situations, the legal obligation to report still remains with the financial entity holding the client’s account.

Date Answered: 2015-03-17

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 6(2)

32. Part G of the STR

Question:
When completing a suspicious transaction report (STR), are we able to place information about the individual conducting the transaction in Part G instead of Part D?
Answer:

Section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) states that “subject to section 10.1, every person or entity referred to in section 5 shall report to the Centre, in the prescribed form and manner, every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that • (a) the transaction is related to the commission or the attempted commission of a money laundering offence; or • (b) the transaction is related to the commission or the attempted commission of a terrorist activity financing offence.” Part D of the STR is intended to capture conductor information, and contains a mandatory field (“Client number provided by reporting person or entity, if applicable”), therefore it must not be left blank, if applicable. With respect to non-mandatory fields in Part D, if the reporting entity has the information, these non-mandatory fields become mandatory and the information must be submitted in Part D. Part G is meant to capture details about the suspicion of the transaction and not conductor information.

Date Answered: 2015-02-18

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 2,3

33. No EFT Reporting

Question:
Customer A goes to the reporting entity requesting to transfer funds from their bank account in a foreign country to their bank account in Canada. As a component of their internal procedure, the reporting entity contacts their agent in the foreign country, who provides the agent's foreign bank account information to the reporting entity. The reporting enitty also provides Customer A's foreign country and Canada bank information to the foreign agent. The reporting entity then provides Customer A with the foreign agent's bank account information and instructs Customer A to transfer the funds from their personal bank account in the foreign country to the foreign agent's bank account. After receiving the information, Customer A wires funds from their foreign country bank account to the foreign agent's bank account. Once the foreign agent receives the funds in their foreign country bank account, they will verify the Canadian bank account information provided and will transfer the funds to Customer A's bank account in Canada. Questions: (1) Is this a reportable transaction? (2) If it is a reportable transaction, what information would be in each field of the report?
Answer:

Subsection 28(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), states that every money services business shall, subject to subsection 52(1), report to FINTRAC: • the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and • the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be. Subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada.” We have indicated in the past that to be reportable an electronic funds transfer must be: • client initiated, and • must be the transmission of instruction to transfer funds across our border. Therefore, based on the scenario you’ve provided, and specifically that the MSB “instructs Customer A to transfer the funds from their personal bank account in a foreign country to the foreign agent’s bank account in the foreign country,” it appears as though there is no EFT conducted by the MSB. There are no client-initiated instructions transferred by the MSB to the agent outside of Canada, only the transfer of the client’s banking information, which does not fulfil the definition of an EFT.

Date Answered: 2015-02-16

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), 28(1)

34. Accountant - Receipt of Funds Record Triggering Activity

Question:
We would appreciate your assistance with respect to the requirements to complete receipt of funds records in certain circumstances. ABC Ltd. (“ABC”), is a small business. Bank accounts are established in the name of the company. The duties we perform as part of our mandate are as follows: 1) We post all accounting transactions into a database based on source documents provided by our clients (e.g. copies of invoices issued to customers and invoices received from suppliers). 2) We complete monthly bank reconciliations for ABC’s owner. 3) We complete monthly financial statements for ABC’s owner. 4) We prepare the quarterly HST return and provide them to ABC’s owner for review. 5) ABC employees are paid monthly and one of our bookkeepers handles the payroll processing transactions and records the transactions in the books of account. 6) Annually we will provide a complete set of financial statements for tax purposes and we prepare the company’s corporate tax return. 7) ABC has instructed all its customers to mail their payments to our office and we are responsible for depositing the cheques in the company’s bank account at a bank. All ABC’s customers pay by cheque. 8) ABC’s owner spends the winter in the U.S.. While he is away he provides blank cheques to us and will provide instructions to issue payment cheques on his company’s corporate bank account to his employees for payroll, pay source deductions and HST balances owing and to pay his major supplier. The cheques are stored in a locked cabinet and two partners in our firm are authorized signatories on the company’s bank account and accordingly both partners must sign the cheque. Clarifying Questions 1) Would the duties outlined in item 7 and item 8 be considered “receiving funds“ or “paying funds“ on behalf of a client? 2) If the answer to question one above is “Yes”, would we be required to keep a receipt of funds record for the cheques deposited in item 7? 3) FINTRAC Guideline 6D: “Record Keeping and Client Identification for Accountants“ requires that a receipt of funds record include the following: a) The name, date of birth and address of the individual from whom you received the funds and that individual’s business or occupation. b) If the receipt of funds is a corporation, a copy of the official corporate records showing provisions relating to the power to bind the corporation to the transaction is also required Would the name, date of birth and address of the owner of ABC and ABC’s official corporate records be required to address the record keeping requirements outlined in a) and b) above? Or Would we be required to obtain this information (name, date of birth etc.) for all of the customers that pay ABC Inc. for the services it provides?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines an accounting firm as “an entity that is engaged in the business of providing accounting services to the public and has at least one partner, employee or administrator that is an accountant.” Accountant is defined as “a chartered accountant, a certified general accountant or a certified management accountant.” Pursuant to subsection 34(1) of the PCMLTFR and subject to subsections (2) and (3), “every accountant and every accounting firm is subject to Part I of the Act when they: (a) engage in any of the following activities on behalf of any person or entity, namely, (i) receiving or paying funds, (ii) purchasing or selling securities, real properties or business assets or entities, or (iii) transferring funds or securities by any means; (b) give instructions on behalf of any person or entity in respect of any activity referred to in paragraph (a).” Regarding the receipt of funds record requirement, subsection 36(1) of the PCMLTFR states that “subject to subsection 62(2), every accountant and every accounting firm shall, when engaging in an activity described in section 34, keep the following records: (a) a receipt of funds record in respect of every amount of $3,000 or more that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body; and (b) where the receipt of funds record is in respect of a client that is a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the accountant or accounting firm.” The obligations for accountants and accounting firms only apply if they are carrying out the activities described above. The requirement to keep a receipt of funds record only exists when the accountant or accounting firm receives funds. Therefore, based on the information provided, namely that your firm “is responsible for depositing the cheques in the company’s bank account” and that the ABC owner will provide instructions to your firm to issue payment cheques on his company’s corporate bank account, it would appear as though your firm is not directly “receiving” or “paying” funds on behalf of their client, as the transactions are conducted through the client’s accounts rather than their own. However, your firm is giving instructions on behalf of its client for the receipt, payment, and transfer of funds. As a result, your firm is covered under Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), but it would not be required to keep a receipt of funds record for situations, as described, where it does not receive funds. That being said, while your firm may not “receive” funds in a scenario such as the one you have suggested, the following obligations would still exist and it would be required, where applicable, to: • report suspicious transactions, suspicious attempted transactions, and large cash transactions, and send terrorist property reports to FINTRAC; • in addition to ascertaining the identity of any individual who conducts a large cash transaction or for whom they have to keep a receipt of funds records, they also have to take reasonable measures to ascertain the identity of any individual for whom they have to send a suspicious transaction report (some exceptions may apply); • meet the requirements of the PCMLTFR in relation to business relationships that they enter into; and • have a compliance regime. In the event that your firm meets the triggering activity identified at subsection 36(1) of the PCMLTFR, and is required to keep a receipt of funds record, it would be required to obtain the specified information for each individual or entity from whom it received funds, rather than its client’s information.

Date Answered: 2015-02-03

Activity Sector: Accountant
Obligation: Reporting
Guidelines: 2,3,7
Regulations: 1(2),34(1), 36(1)
Act: Part 1

35. STR Reporting - Related Transactions

Question:
Company A provided an overview of a case in which a person is suspected of committing fraud. The fraud was committed with funds provided by 500 individuals. The 500 individuals may be, either knowingly or not, involved in tax evasion. The primary question is whether or not the 500 individual transactions are required to be reported, or if only the transactions subsequent to the receipt of the funds, which would be the point in time at which the predicate offense (fraud) was completed, must be reported.
Answer:

Section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) stipulates that, "Subject to section 10.1, every person or entity referred to in section 5 shall report to the Centre, in the prescribed form and manner, every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that (a) the transaction is related to the commission or the attempted commission of a money laundering offence; or (b) the transaction is related to the commission or the attempted commission of a terrorist activity financing offence." If the reporting entity has reasonable grounds to suspect that a financial transaction that occurs or that is attempted in the course of their activities is related to the commission or the attempted commission of a money laundering offence or a terrorist activity financing offence, a suspicious transaction report must be submitted to FINTRAC. Based on the information provided, the reporting entity has, reasonable grounds to suspect that these financial transactions, which occurred in the course of their activities, are related to the commission or the attempted commission of a money laundering offence. They are therefore reportable.

Date Answered: 2015-01-19

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 2,3

36. LCTR Reporting Obligations when received by another party

Question:
We would appreciate your guidance regarding our large currency transaction reporting obligations vis-a-vis credit card retailers and wholesale cash counter service providers. We are requesting clarity regarding whether the acceptance of cash by a third party (such as a credit card retailer or wholesale cash counter service provider) would trigger an LCTR requirement for us. For our credit card line of business, a certain retail store may accept in store cash payments from customers paying their credit card bills. We receive a settlement instruction to credit the customer's credit card account. For our wholesale lines of business, our customers are able to deposit cash into retail branches of another reporting entity, which is then ultimately credited by us to the customers' account. For both of these situations, as described in the attached process flows, the retail store or other reporting entity is the recipient of the cash. At no point do we physically process or receive the cash.
Answer:

In response to the first scenario involving a retail store, FINTRAC's position is that 1. The retail store is not an agent of your entity (even though it may collect payments), and 2. The retail store is not a reporting entity and therefore has no responsibility under the Act. While you allow this type of transaction to occur at a retail store, the retail store is not a reporting entity and therefore has no obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). You, as a reporting entity, subject to the PCMLTFA and its associated regulations are therefore responsible for reporting any LCTRs received by the retail store. Similarly, for the scenario involving another reporting entitiy, the reporting entity that holds the client’s account has the reporting obligations and record keeping requirements associated with any large cash transaction conducted for this account through the other reporting entity. Therefore, for this type of situation it would be prudent to engage in a formal agreement outlining the respective agent/principal relationship and associated obligations of each party. However, as indicated, in the absence of this type of agreement, the reporting and record keeping responsibilities lie with the entity that holds the client’s account. Therefore you are responsible for reporting any LCTRs received for your client’s accounts by the other reporting entity.

Date Answered: 2015-01-16

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 12(1)(a)

37. Indirect clearers - Recipients of White label services

Question:
Who has the obligation to report a large cash transaction in the case where a financial entity has entered into an agreement that allows their clients to make deposits at another financial entity’s place of business
Answer:

In the case where a financial entity has entered into an agreement that allows their clients to make cash deposits at another financial entity’s place of business, it is the responsibility of the financial entity that holds the client's account to fulfill the record keeping and reporting obligations. The agreement generates a principal/agent relationship whereby the client is deemed to be engaged in a financial transaction with the financial entity that holds his/her account, by means of an agent. As such, the financial entity that holds the client’s account continues to be responsible for the large cash reporting and record keeping obligations of the PCMLTFA and its associated Regulations. This interpretation is further supported by subsection 6(2) of the PCMLTFR, which states that “where a person or entity who is subject to the requirements of these Regulations, other than a life insurance broker or agent, is an agent of or is authorized to act on behalf of another person or entity referred to in any of paragraphs 5(a) to (l) of the Act, it is that other person or entity rather than the agent or the authorized person or entity, as the case may be, that is responsible for meeting those requirements.” To establish such a relationship, FINTRAC anticipates that the formal agreement will outline the agent/principal relationship and establish the obligations of both parties. FINTRAC anticipates that such an agreement would outline, but not be limited to, the following: • The financial entity holding the client's account must be informed, by the agent financial entity receiving the deposit, that the client has conducted a large cash transaction, whether in a single transaction or under the 24 hour rule. • The financial entity holding the client's account must obtain the appropriate information from the agent financial entity, including all information required to complete a large cash transaction report. This includes information such as the time, the date, the exact amount of the cash transaction, and all required information on the conductor of the transaction as well as the complete address of the place of business where the transaction occurred. The financial entity holding the client's account needs to ensure that their locations in F2R are updated to include the address information of the agent financial entity's place of business where the transaction in question took place. This information will be included in the large cash transaction report. It is possible that both parties agree that cash deposited at the agent financial entity’s place of business will be reported by the agent financial entity on behalf of the financial entity holding the client’s account. In this case, the financial entity chosen to send large cash transaction reports to FINTRAC on behalf of the financial entity holding the client’s account will have to be registered as a service provider. The financial entity holding the client’s account will need to designate that financial entity as their service provider and delegate the appropriate reports. In such situations, the legal obligation to report remains with the financial entity holding the client’s account. Given that Part 1 of the PCMLTFA applies to entities as outlined in section 5 of the same, the determination above is specific to situations where a financial entity is offering services to other financial entities, as defined in subsection 1(2) of the PCMLTFR. If a financial entity is conducting transactions for an entity outside of Canada, not subject to the PCMLTFA, then the financial entity in Canada retains the obligations for the transactions conducted on behalf of the entity outside of Canada.

Date Answered: 2014-12-23

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2), 6(2)
Act: Part 1

38. EFTO reporting obligations

Question:
An MSB in Canada sends its client’s (Client A) instructions to a financial entity to transmit funds to a beneficiary outside of Canada. The financial entity provides the MSB’s information (as client info) to another MSB to complete the transaction. As a result of this scenario, is the financial entity relieved of their reporting obligation, as they provide the MSB’s information, as client info, to the other MSB, or is the financial entity instead required to provide the information for Client A to FINTRAC and if so should both the client's and the MSB'S information be provided?
Answer:

According to subsection 9.5(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), prescribed entities are required to include the originator information when they send prescribed EFTs. Pursuant with subsection 66.1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), subject to subsection (3), the prescribed electronic funds transfers to which section 9.5 of the Act applies, are those as defined in subsection 1(2), but including transfers within Canada that are SWIFT MT 103 messages. As per subsection 66.1(3) for greater certainty, subsection (2) does not apply in respect of: a) a transfer carried out using a credit or debit card, if the recipient has an agreement with the payment service provider permitting payment by such means for the provision of goods and services; b) a transfer where the recipient withdraws cash from their account; c) a transfer carried out by means of a direct deposit or a pre-authorized debit ; or d) a transfer carried out using cheque imaging and presentment. While it would appear that the requirement to include originator information offsets a prescribed entity’s option to retain information as long as they too will report, this is not, in fact, the case. Subsection 9.5(a) of the PCMLTFA requires that: 1) if a prescribed reporting entity has the originator information they cannot strip this information when they send the EFT; however 2) a prescribed reporting entity can choose not to include the requesting client details when using a domestic intermediary reporting entity for EFT purposes, instead choosing to include their own information as the originator of the prescribed EFT. Should the prescribed reporting entity choose to withhold the originator information, then both the reporting entity and the intermediary reporting entity are required to report, should it be a reportable transaction. Therefore, because you state that “the MSB provides the name and address of Client A (the original ordering client) to the financial entity and requests that the financial entity send funds to Beneficiary B”, the financial entity must consider Client A as the client ordering payment of the electronic funds transfer and must provide Client A’s information to the other MSB rather than the original MSB’s information. This would allow the financial entity to fulfill its reporting obligation as per section 12 of the PCMLTFR. The other MSB would then submit an EFT report. Alternatively, had the original MSB decided to provide its own information as the client ordering payment of electronic funds transfer information, instead of Client A’s information, then it would be sufficient for the financial entity to provide the MSB’s information to the other MSB to fulfil its reporting obligation. In this case, both the original MSB and the other MSB would be required to submit reports to FINTRAC. The original MSB would submit Client A’s information in Part B of Schedule 5 and the other MSB would submit the original MSB’s information in Part B of Schedule 5. The interpretation of section 9.5 of the PCMLTFA was interpreted this way in order to enforce the fact that the information about the client who requested the transfer (the original ordering client) cannot get lost in the transmission of the transaction. However, how the original ordering client’s information is reported to FINTRAC will always be a question of facts. The key is that section 9.5 of the PCMLTFA conveys what information must be passed along with the request, while the PCMLTFR provides the reporting requirements. Ultimately, the decision lies with the first reporting entity (RE), who receives the instructions from the original ordering client, as it can choose to either report the transaction to FINTRAC (if it decides not to pass the original ordering client’s information along) or pass the original ordering client’s information along to another RE to fulfil its reporting obligation. If an RE chooses to pass the original ordering client’s information along to another reporting entity, then, as per section 9.5, this same information must continue to be passed along to each subsequent RE, that is a part of the transaction, and the final RE must report to FINTRAC, providing the original ordering client’s information as third party information (Part D for non-SWIFT reporting). If any of the intermediary REs choose to also report to FINTRAC, they may do so but must also continue to pass along the original ordering client’s information to the final RE. Given that in the scenario you’ve described, the MSB provides Client A’s information to the financial entity as the original ordering client’s information. The MSB is therefore fulfilling its reporting obligation by passing the original ordering client’s information along, as per subsection 28(3) of the PCMLTFR. As per section 9.5 of the PCMLTFA, the financial entity must provide Client A’s information to the other MSB, which would also fulfil its reporting obligation under subsection 12(3) of the PCMLTFR. Being the last RE in the transaction, the other MSB must report the EFTO to FINTRAC, providing the financial entity's information as client information (Part B for non-SWIFT reporting) and Client A’s information as third party information (Part D for non-SWIFT reporting). In scenarios such as these, because the third party information is provided to the RE it becomes mandatory information and must be included in the report to FINTRAC. In the described scenario, if the MSB had not provided Client A’s information to the financial entity, then the MSB would be required to report to FINTRAC, providing Client A’s information as client information (Part B for non-SWIFT reporting).

Date Answered: 2014-12-22

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8A
Regulations: 12, 28(3), 66.1(2)

39. Large Cash Transaction Report and Armoured car delivery

Question:
My questions pertain to LCTRs filed for business accounts, where the deposits are being conducted by an armoured car delivery service. I would like to confirm: 1- What information should be entered into fields E1, E2 and E3 of the LCTR in this case? Is it necessary to enter the name of the delivery person, or would it be acceptable to enter the name of the delivery company instead? For this question, I am referring to Guideline 7A ("Submitting Large Cash Transaction Reports to FINTRAC Electronically"), specifically Appendix 1 ("Field-by-Field Instructions for a Large Cash Transaction Report"). 2- Is an employee of an armoured car delivery service that is engaged by a business considered to be an employee of the business when making a third party determination during the LCTR? For this question, I am referring to Part 7 of the PCMLTFR ("For the purposes of these Regulations, a person acting on behalf of their employer is considered to be acting on behalf of a third party except when the person is depositing cash into the employer's business account.").
Answer:

Pursuant to paragraph 12(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every financial entity shall report “the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body.” Part E of Schedule 1 is a mandatory field and indicates that the full name of the person conducting the transaction must be provided for deposits into a business account, other than a night deposit or a quick drop. Therefore, the full name of the driver must be provided, not the name of the delivery company. In response to your second question, section 7 of the PCMLTFR states that “for the purposes of these Regulations, a person acting on behalf of their employer is considered to be acting on behalf of a third party except when the person is depositing cash into the employer’s business account.” FINTRAC has previously taken the position that a third party is an individual or entity who gives instructions in regards to an account. It is only when an employee makes a large cash deposit into the employer’s business account that this exemption applies. Therefore, while it is always a question of fact to determine who is considered an employee of a business, FINTRAC does not consider the employee of an armoured car delivery service to be the employee of the hiring business.

Date Answered: 2014-12-15

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 7A
Regulations: Part 7, 12(1)(a)

40. Occupation information as Unemployed

Question:
Is “unemployed” an acceptable occupation in all cases (record keeping and FINTRAC reporting), or only in the case of Large Cash Transaction Reports (LCTRs) and Suspicious Transaction Reports (STRs)?
Answer:

“Unemployed” is an acceptable occupation in all reporting and record keeping cases, as applicable.

Date Answered: 2014-11-18

Obligation: Reporting
Guidelines: 3, 6, 7 and 8

41. Administrative monetary penalties - failure to provide Terrorist Property Reports

Question:
We are seeking information regarding the administrative monetary penalty (AMP) provisions associated with the failure to provide FINTRAC with Terrorist Property Reports (TPRs) in the prescribed form and manner, particularly for the Real Estate sector.
Answer:

Since subsection 7.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) applies to all reporting entities, real estate agents and brokers, when they are subject to Part 1 of the Act (i.e. when they engage in activities described in subsection 39(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations), they would be subject to the AMPs provision. This information can be found in the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations, Part 3. The provision 7.1 (1) of the PCMLTFA states that "Every person or entity referred to in section 5 that is required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism shall also make a report on it to the Centre, in the prescribed form and manner." The provision 10 of Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations indicates that : " REPORT MADE UNDER SECTION 83.1 OF THE CRIMINAL CODE OR UNDER SECTION 8 OF THE REGULATIONS IMPLEMENTING THE UNITED NATIONS RESOLUTIONS ON THE SUPPRESSION OF TERRORISM 10. Subject to section 11, a report made under section 7.1 of the Act shall be sent without delay to the Centre and shall contain the information set out in Schedule 2." Therefore, the failure of a person or entity to send a report containing the prescribed information without delay consist in a very serious violation.

Date Answered: 2014-11-13

Activity Sector: Real estate
Obligation: Reporting AMPs
Guidelines: 4, 5
Regulations: 10, 39(1)
Act: Part 1, 7.1(1)

42. Originator information and the travel rule

Question:
Pursuant with section 9.5 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), prescribed entities (financial entities, money services businesses and casinos) are required to include originator information for the prescribed electronic funds transfers they send. Originator information includes: name, address, account number, reference number if applicable. However, pursuant with subsections 12(3), 28(3) and 40(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), it would appear that FEs, MSBs and casinos have the option to not include originator information when they use a domestic intermediary to send the EFT as long as, should the transaction be reportable, both the domestic intermediary and the FE, MSB, or casino report. Example #1: An MSB could decide to provide the name and address of their client to the intermediary MSB/Bank in Canada, then the originating MSB would no longer be required to report the EFT. Example #2: An MSB could decide not to provide the name and address information of their client to the intermediary MSB/Bank in Canada, then both the originating MSB and the intermediary MSB/Bank in Canada would be required to report the EFT. Under section 9.5 of the PCMLTFA it would appear that example #2 no longer exists as an option, given that the prescribed entities are required to provide their client's name and address as part of the transfer. Is this the case? Are prescribed entities required to include the originator information in their response, thereby negating their ability to retain the client/originator information for propriety, or other, reasons and ensure two reports are sent, pursuant with subsections 12(3), 28(3) and 40(3) of the PCMLTFR?
Answer:

Pursuant with subsection 9.5(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), prescribed entities are required to include the originator information when they send prescribed EFTs. Pursuant with subsection 66.1(2), subject to subsection (3), the prescribed electronic funds transfers to which section 9.5 of the Act applies are those as defined in subsection 1(2), but including transfers within Canada that are SWIFT MT 103 messages. As per subsection 66.1(3) for greater certainty, subsection (2) does not apply in respect of : a) a transfer carried out using a credit or debit card, if the recipient has an agreement with the payment service provider permitting payment by such means for the provision of goods and services; b) a transfer where the recipient withdraws cash from their account; c) a transfer carried out by means of a direct deposit or a pre-authorized debit ; or d) a transfer carried out using cheque imaging and presentment. While it would appear that the requirement to include originator information offsets a prescribed entity’s option to retain information as long as they too will report, this is not, in fact, the case. Subsection 9.5(a) of the PCMLTFA requires that: 1) if a prescribed reporting entity has the originator information they cannot strip this information when they send the EFT; however 2) a prescribed reporting entity can choose not to include the requesting client details when using a domestic intermediary reporting entity for EFT purposes, instead choosing to include their own information as the originator of the prescribed EFT. Should the prescribed reporting entity choose to withhold the originator information, then both the reporting entity and the intermediary reporting entity are required to report, should it be a reportable transaction.

Date Answered: 2014-10-24

Obligation: Reporting
Regulations: 1(2), 66.1(2), 66.1(3)
Act: 9.5(a)

43. Life Insurance Sector - Use of policy numbers as account information for Part C of the STR

Question:
We are wondering whether or not a policy number is an account number to be included in PART C - Account Information, of the Suspicious Transaction Report (STR)?
Answer:

The term “account” is not defined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act or its associated Regulations. While accounts for the purpose of holding client assets are clearly understood to be accounts subject to account opening and other obligations, FINTRAC has taken the position that, in other cases, it is generally for a reporting entity to determine whether or not they offer accounts subject to the account opening and other obligations. That said, the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) do not outline account-related obligations for the life insurance sector, which would suggest that the PCMLTFR does not recognize the life insurance sector as having accounts. Furthermore, Part B 5 of Schedule 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations makes the distinction between account numbers and policy numbers, which would suggest that the policy number is not considered to be an account number. Based on the above, FINTRAC cannot require an insurance company to include the policy number in Part C – Account Information of the STR. However, policy numbers are required in Part B of the STR, if applicable, and must be a full number.

Date Answered: 2014-10-20

Activity Sector: Life insurance broker or agent, Life insurance company
Obligation: Reporting
Guidelines: 3A
Regulations: Part B 5 of  Schedule 1

44. Reporting large cash transactions for ABM based on the 24-hour rule

Question:
Can you confirm what are the requirements for reporting cash transactions in the amount of $10,000 or more conducted at an ABM or a series of cash transactions at an ABM, or multiple ABMs, considered to be a large cash transaction based on the 24-hour rule?
Answer:

When completing the Large Cash Transaction Record (LCTR) it is the cardholder’s information that must be included in Part D - Information on Person Conducting Transaction That Is not a Deposit Into a Business Account (if applicable), unless other information is provided. This is further explained below. Pursuant to section 53 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every person or entity that is required to keep and retain a large cash transaction record under these Regulations shall ascertain, in accordance with subsection 64(1), the identity of every person with whom the person or entity conducts a transaction in respect of which that record must be kept, other than a deposit made to a business account or a deposit made by means of an automated banking machine. Pursuant to paragraph 12(1)(a) of the PCMLTFR, subject to section 50 and subsection 52(1), every financial entity shall report to FINTRAC the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body. Given the exception outlined in section 53 of the PCMLTFR, we have highlighted, in FINTRAC Interpretation Notice no. 5, that financial entities are not required to identify the individual making the deposit, when cash is deposited through an ABM. That said, while the requirement to ascertain identification is offset by section 53 of the PCMLTFR, the requirement to include certain information, including Part D, in the LCTR continues to exist as it continues to be information referred to in Schedule 1 of the PCMLTFR. To assist reporting entities with their reporting obligations in situations where they are not required to ascertain identification, FINTRAC has indicated that it is reasonable to assume that the cardholder whose ABM card was used to access the ABM is the conductor of the transaction, unless other information is provided.

Date Answered: 2014-09-25

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 7
Regulations: 12(1)(a), 53, 64(1)

45. Reporting requirements for EFTs involving multiple currencies

Question:
What are the requirements for reporting EFTs that involves multiple currencies?
Answer:

FINTRAC would expect the money services business to keep records, ascertain identity and report accordingly. Concerning a foreign exchange transaction, the MSB have the obligations to do : o FX record o LCT record if CAD received in Cash o LCT report if CAD received in Cash o Ascertaining identity accordingly o Third party determination In regard of an EFT transaction, the MSB have the obligations to do: o EFT record o EFT report – using the last noon exchange rate provided by the Bank of Canada available at the time of the transaction o Ascertaining identity accordingly

Date Answered: 2014-09-04

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C, 8
Regulations: 1(2)

46. MSB reporting requirements for EFTI/EFTO

Question:
What are the reporting requirements for an MSB in regard to EFTI/EFTO?
Answer:

An electronic funds transfer is defined in subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) as the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included. Pursuant to paragraphs 28(1)(b) and (c), respectively, every money services business must report the sending out of Canada, or the receipt from outside Canada, an electronic funds transfer of $10,000 or more in the course of a single transaction, carried out at the request of a client. With this, we turn to the scenarios provided and we have assumed that all EFTs conducted are $10,000 or more in a single transaction. Scenario 1 • Company A instructs their bank in Canada to send EUR funds to the MSB’ bank account in the United Kingdom. • Once the MSB receives these funds in the UK, they provide an exchange rate to Company A, who accepts, and the MSB transfers the CAD equivalent from their ABC account in Canada to Company A’s bank account in Canada. There is no EFT conducted by the MSB. Therefore, there are no reporting obligations for the MSB, but rather foreign exchange transaction obligations, namely ascertaining identity and record keeping. Scenario 2 • Company C in the United Kingdom is sending funds to Company B. • Company C transfers funds from their bank in the United Kingdom to the MSB’ bank account in the United Kingdom. • Once the MSB receives these funds into its bank account in the United Kingdom, the MSB provides an exchange rate to Company B, who accepts, and requests that the MSB send USD to Company B’s bank account in the United States. While Company C is using the MSB to transfer funds to Company B, there are no incoming or outgoing instructions for the transfer of funds from Company C. There is, however, an outgoing EFT sent at the request of Company B, when Company B instructs an outgoing transfer of funds from the MSB’ ABC bank account to Company B’s bank account in the United States. Therefore, the MSB would be required to report an outgoing EFT done at the request of Company B. However, pursuant to subsection 28(3) of the PCMLTFR, if the MSB provides ABC with all of the necessary information then ABC would be required to send the outgoing EFT report, and the MSB would no longer have the reporting obligation. Scenario 3 • Company A/B instructs their bank in the United Kingdom to transfer funds to the MSB’ bank account in the United Kingdom • Once the MSB receives these funds into its bank account in the United Kingdom, the MSB provides an exchange rate to Company A, who accepts, and instructs the MSB to send USD to Company A’s supplier in the United States. • ALTERNATIVELY - the MSB provides an exchange rate to Company B, who accepts, and instructs the MSB to send USD to Company B’s supplier in the United States. The initial instructions from Company A/B while leaving the country are not doing so via a reporting entity, so there is no EFT conducted. There is, however, an outgoing EFT sent at the request of Company A or B, when that company instructs an outgoing transfer of funds from the MSB’s ABC bank account to the Supplier’s bank account in the United States. Therefore, the MSB would be required to report an outgoing EFT done at the request of Company A or B. However, pursuant to subsection 28(3) of the PCMLTFR, if the MSB provides ABC with all of the necessary information then ABC would be required to send the outgoing EFT report, and the MSB would no longer have the reporting obligation. In both Scenarios 2 and 3, the funds the MSB receives into its bank account in the United Kingdom do not constitute incoming EFTs, as an incoming EFT is instructions that cross from outside of Canada into Canada for the transfer of funds.

Date Answered: 2014-08-22

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 8, FIN 1
Regulations: 1(2), 28(1), 28(3)

47. EFT's reporting obligations

Question:
Is there an incoming EFT reporting obligation in this scenario? • Client contacts Company 1 in Canada in order to “purchase items with/from a merchant that uses ABC Pay as a payment processor”. • ABC website provides the client with the detailed information required to send funds to ABC’s Autralian bank account. • The client takes those instruction to their bank in Canada, instructing the bank in Canada to transfer funds. • ABC receives the funds in Australia • The transaction is not conducted to exchange currency but to pay for a product or service – therefore, funds are not “coming back” to Canada.
Answer:

The reporting obligations for the EFTO rest with the client’s bank, and there is no incoming EFT in this scenario.

Date Answered: 2014-08-22

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2)

48. Online gambling reporting requirements

Question:
Could you please clarify or confirm whether or not online gambling transactions are subject to reporting requirements? If so, where this regulatory requirement can be found?
Answer:

It is only reporting entities that have obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Subsection 1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Regulations (PCMLTFR) defines casino as “a person or entity that is licensed , registered, permitted, or otherwise authorized to do business under any of paragraphs of 207(1)(a) to (g) of the Criminal Code and that conducts its business activities in a permanent establishment (a) that the person or entity holds out to be a casino and in which roulette or card games are carried on; or (b) where there is a slot machine, which, for the purposes of this definition, does not include a video lottery terminal.” The definition of “casino”, as outlined in the PCMLTFR, does not include lottery schemes that are accessible to the public through the Internet or other digital network, so entities that do not meet the current definition of casino are not currently subject to the obligations of the PCMLTFA and its associated Regulations. Where an entity does meet the current definition of casino it is expected to apply the obligations of the PCMLTFA and its associated Regulations to all of its activities, whether or not a given transaction occurs at the permanent establishment of that casino. However, on June 19, 2014, the Economic Action Plan 2014 Act, No. 1, received Royal Assent. In this Act, the Government made changes to PCMLTFA which include a change to the definition of casinos as follows “the government of a province that, in accordance with paragraph 207(1)(a) of the Criminal Code, conducts and manages a lottery scheme, other than bingo or the sale of lottery tickets, that is accessible to the public through the Internet or other digital network, except if the network is an internal network within an establishment…” These changes will only come into force on a day or days to be fixed by order of the Governor in Council. When the changes come into force, entities conducting and managing a lottery scheme, other than bingo or the sale of lottery tickets, that is accessible to the public through the Internet or other digital network, except if the network is an internal network within an establishment…” will be considered to be reporting entities and therefore, subject to the obligations under the PCMLTFA.

Date Answered: 2014-08-14

Activity Sector: Casino
Obligation: Reporting
Guidelines: 6F
Regulations: 1(1)

49. Electronic Funds transfer

Question:
What amount would we report to FINTRAC for an EFT?
Answer:

Subparagraph 12(c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act requires that every financial entity report the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be. An electronic funds transfer is defined in subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.|” Since what is required to be included in reports, as defined in Schedules 3 and 6, is the “amount of electronic funds transfer”, a reporting entity must report the amount instructed for the transfer of funds. That said, where there are two amounts known, an initial and another reduced by fees, the reporting entity may not know what was instructed, so would be expected to rely on the amount received as the amount instructed to have been sent.

Date Answered: 2014-08-11

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 8
Regulations: 1(2)
Act: 12(c)

50. Definitions of Cash and Funds

Question:
Can you please clarify the definition of cash for the purpose of Large Cash Transaction report and How that differed with funds for a receipt of funds record? Can you provide clarification on what constitutes ''funds''?
Answer:

As per the PCMLTFR, “cash” means “coins referred to in section 7 of the Currency Act, notes issued by the Bank of Canada pursuant to the Bank of Canada Act that are intended for circulation in Canada or coins or bank notes of counties other than Canada. Whereas, “funds” means “cash, currency or securities, or negotiable instruments or other financial instruments, in any form, that indicate a person’s or an entity’s title or interest in them.” You’ll note that EFTs do not fall within the definition of “cash.” An “Electronic Funds Transfer” means “the transmission – through any electronic, magnetic or optical device, telephone instrument or computer – of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” That said, an individual can give a reporting entity cash to be sent as an EFT.

Date Answered: 2014-08-07

Obligation: Reporting
Guidelines: 6, 7
Regulations: 1(2)

51. Originator information required when sending an EFT

Question:
Can you please confirm whether the "originator information", that is required to be included when sending an EFT, applies to both domestic and international EFT's sent from financial institutions?
Answer:

Section 3.9 of Guideline 6G: Record Keeping and Client Identification for Financial Entities, is explaining section 9.5 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), commonly referred to as the “travel rule.” Pursuant to section 9.5 of the PCMLTFA, “Every person or entity that is referred to in section 5 and that is prescribed shall, in respect of a prescribed electronic funds transfer that occurs in the course of their financial activities, a) Include with the transfer the name, address, and account number or other reference number, if any, of the client who requested it, and any prescribed information; b) Take reasonable measures to ensure that any transfer that person or entity receives includes that information; and c) Take any prescribed measures. For the purpose of section 9.5 of the PCMLTFA a prescribed Electronic Funds Transfer (EFT) is defined in subsections 1(2) and 66.1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). Subsection 1(2) of the PCMLTFR defines EFTs as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” However, subsection 66.1(2) goes on to clarify that, for the purposes of the travel rule, transfers within Canada that are SWIFT MT 103 messages are also included. Therefore, the “originator information” as described in a) above must be included when sending EFTs, domestically, if sent via SWIFT MT 103, and internationally.

Date Answered: 2014-07-30

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 8
Regulations: 1(2), 66.1(2)

52. Confidentiality of suspicious transaction reports

Question:
We would thus like FINTRAC to confirm whether an financial institution can produce suspicious transaction reports (STRs) before the court in its own defence. If not, what is the interpretation of section 8?
Answer:

Section 8 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) stipulates that "No person or entity shall disclose that they have made a report under section 7, or disclose the contents of such a report, with the intent to prejudice a criminal investigation, whether or not a criminal investigation has begun." This ban on disclosing a suspicious transaction report applies only when the disclosure is made with the intention of prejudicing an ongoing or future criminal investigation. If there is no such intent, there is no ban and the Caisse can disclose that it has made a report pursuant to section 7 and disclose the content. In this case, the financial institution's intent is a matter of fact and the financial institution is in the best position to know whether or not it intends to prejudice an ongoing or future criminal investigation.

Date Answered: 2014-07-09

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 2, 3

53. Electronic Funds transfer

Question:
Do we have an obligation to report either the EFTI received from the Canadian financial institution or the EFTO to the Country1 correspondent financial institution?
Answer:

As per subsection 9.4(3) of the PCMLTFA, a correspondent banking relationship “means a relationship created by an agreement or arrangement under which an entity referred to in any of paragraphs 5(a), (b), (d) and (e) or an entity that is referred to in section 5 and that is prescribed undertakes to provide to a prescribed foreign entity services such as international electronic funds transfers, cash management, cheque clearing and any prescribed services.” As such, two banks that are not in a direct relationship and are not both participants in the same clearing house might have a correspondent banking relationship if, in order to complete an EFT, they have an arrangement to pass through one or more intermediary banks. Subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission – through any electronic, magnetic or optical device, telephone instrument or computer – of instructions for the transfer of funds, other than the transfer of funds within Canada.” To be reportable, an electronic funds transfer (EFT) must be: i) client-initiated; and ii) include the transmission of instructions to transfer the funds across the Canadian border. In question is whether funds transferred from one bank account in Country1 to another bank account in Country1, but routed through Canada, constitutes an EFT as per subsection 1(2) of the PCMLTFR. The client gave instructions to transmit funds from his bank account in Country1 to the bank account of another individual in Country1. The intention (or the purpose) of the transfer is to move Canadian funds within Country1. Our position is that this transaction does not constitute an electronic funds transfer as defined in subsection 1(2) of the PCMLTFR, and therefore is not reportable by the Canadian intermediary bank.

Date Answered: 2014-06-16

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2)
Act: 9.4(3)

54. Indirect clearers & recipients of White label services

Question:
Who has the obligation to report a large cash transaction in the case where a financial entity has entered into an agreement that allows their clients to make deposits at another financial entity’s place of business?
Answer:

Paragraph 12(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre: […] the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body”. Section 13 of the PCMLTFR indicates that “Subject to subsection 52(2), every financial entity shall keep a large cash transaction record in respect of every amount in cash of $10,000 or more that is received from a client in the course of a single transaction, unless the cash is received from another financial entity or a public body”. Section 2 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) defines a client as “a person or an entity that engages in a financial transaction or activity with a person or an entity referred to in section 5, and includes a person or an entity on whose behalf the person or the entity that engages in the transaction or activity is acting”. In the case where a financial entity has entered into an agreement that allows their clients to make cash deposits at another financial entity’s place of business, it is the responsibility of the financial entity that holds the client's account to fulfill the record keeping and reporting obligations. The agreement generates a principal/agent relationship whereby the client is deemed to be engaged in a financial transaction with the financial entity that holds his/her account, by means of an agent. As such, the financial entity that holds the client’s account continues to be responsible for the large cash reporting and record keeping obligations of the PCMLTFA and its associated Regulations. To establish such a relationship, FINTRAC anticipates that the formal agreement will outline the agent/principal relationship and establish the obligations of both parties. FINTRAC anticipates that such an agreement would outline, but not be limited to, the following: • The financial entity holding the client's account must be informed, by the agent financial entity receiving the deposit, that the client has conducted a large cash transaction, whether in a single transaction or under the 24 hour rule. • The financial entity holding the client's account must obtain the appropriate information from the agent financial entity, including all information required to complete a large cash transaction report. This includes information such as the time, the date, the exact amount of the cash transaction, and all required information on the conductor of the transaction as well as the complete address of the place of business where the transaction occurred. The financial entity holding the client's account needs to ensure that their locations in F2R are updated to include the address information of the agent financial entity's place of business where the transaction in question took place. This information will be included in the large cash transaction report. It is possible that both parties agree that cash deposited at the agent financial entity’s place of business will be reported by the agent financial entity on behalf of the financial entity holding the client’s account. In this case, the financial entity chosen to send large cash transaction reports to FINTRAC on behalf of the financial entity holding the client’s account will have to be registered as a service provider. The financial entity holding the client’s account will need to designate that financial entity as their service provider and delegate the appropriate reports. In such situations, the legal obligation to report remains with the financial entity holding the client’s account.

Date Answered: 2014-05-26

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 12(1)(a), 13

55. EFT reporting - incoming versus outgoing

Question:
I would like to request a policy interpretation regarding EFT reporting that concern a registered MSB, headquartered in the central region, which conducts remittances mainly for the Country1 community in Canada?
Answer:

Pursuant to subsection 28(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) , every money services business shall, subject to subsection 52(1), report to FINTRAC : • the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and • the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be. As per subsection 1(2) of the PCMLTFR, an electronic funds transfer (EFT) means the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada, and includes transferring funds from one individual or organization to another using any other method such as hawala, hundi, fei ch'ien, and chit. The scenario you have described appears to reflect a hawala system, whereby an individual approaches the MSB to have money sent to a beneficiary in Country 1, and the MSB, rather than physically sending the funds to the recipient, relies on an agent to pay the requested amount to the beneficiary in Country 1. The MSB will also pay out funds to a Canadian beneficiary upon request by the agent, based on funds that the agent in Country 1 was given for the purpose of getting to the beneficiary. The MSB and the agent either allow for multiple transactions to offset any amount(s) owing one to the other, or conduct a settlement to ensure that the amounts received and paid out balance. We have indicated in the past that to be reportable an electronic funds transfer must be: • client initiated, and • must be the transmission of instruction to transfer funds across our border As such, it is not typically the settlement between the MSB and its agent(s) that triggers the reporting obligation, but the client initiated EFTs, should they meet the thresholds. That said, in the scenario provided, where the agent in Country 1 asks the MSB to remit funds to a beneficiary in Country 2 on their behalf instead of receiving settlement funds from the MSB, a reportable EFT is conducted. The MSB submits that the agent in Country 1 is the initiator of the EFT and that the agent gives instructions to the MSB to transmit funds to the beneficiary in Country 2. As the client ordering the payment of the electronic funds transfer, the agent includes in the instructions the payment and banking details for the payment . The intention (or the purpose) of the payment is to transfer funds from Canada to the beneficiary in Country 1. Here is the electronic funds transfer as defined in our regulations. The agent initiates the transmission of instructions to transfer funds across the Canadian border. Our position is that this transaction constitutes an outgoing non-swift international electronic funds transfer as defined in subsection 1(2) of the PCMLTFR. The report should be completed as follow: Part A – Transaction Information Part B – Information on Client ordering payment of an EFT: The agent in Country1 Part C – Information on Sender of EFT: MSB in Canada Part E – Information on Receiver of EFT: Entity in Country1 Part F – Information on Client to whose benefit the payment is made: beneficiary in Country1 This transaction will only be an EFTO. The agent instructed the MSB in Canada to transmit funds to the foreign country. The intention (or purpose) of this transaction is to have the funds moved out of Canada to the foreign country.

Date Answered: 2014-05-23

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), 28(1)

56. EFT reporting

Question:
How to report an electronic funds transfer sent by one client but to multiple beneficiaries?
Answer:

Pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), reporting entities are required to report to FINTRAC electronic funds transfers valued at $10,000 or more (in the course of a single transaction) at the request of a client, along with the information referred to in Schedule 2 or 5, as the case may be; and the receipt from outside Canada of electronic funds transfers, sent at the request of a client, of $10,000 or more in the course of a single transaction, along with the information referred to in Schedule 3 or 6, as the case may be. When a client requesting an EFT conducts a transaction with the initial amount of $10,000 or more and instructs that it be divided between multiple beneficiaries, the EFT is still being carried out by one client, and the EFT must be reported using multiple reports (one per beneficiary). The key to determining the reporting requirement is the instruction given by the client. To better explain this, I have provided two examples below: 1) A client instructs that $15,000 be sent via EFT to three different beneficiaries, $5000 each. In this instance, the reporting entity would be required to send three different reports, one for each beneficiary, for a total of the $15,000 that the client requested be sent via EFT. When submitting the reports, the 24-hour-rule indicator must be selected, although this is not considered to be a single transaction of $10,000 or more as defined under section 3 of the PCMLTFR. OR 2) A client instructs that $5000 be sent to beneficiary A, a subsequent $5000 be sent to beneficiary B and a third $5000 be sent to beneficiary C. In this instance, the 24- hour rule must be considered. The 24-hour rule applies if the reporting entity knows, or an employee or senior officer knows, that the transactions were made within 24 consecutive hours of each other, by or on behalf of the same individual or entity. It applies only to transactions that are under $10,000. If a transaction is for $10,000 or more, it is reportable as one transaction. As such, if the reporting entity knows that the first two EFTs of $5000 each were made by, or on behalf of, the same person, then the reporting entity would be required to submit two reports under the 24-hour rule, as these two EFTs total $10,000.

Date Answered: 2014-05-23

Activity Sector: ALL
Obligation: Reporting

57. STR filing - Who is responsible to file

Question:
ABC Trust Company uses DEF as an agent to distribute their prepaid card product. Should DEF encounter any suspicious situation should they be filing the STR on behalf of ABC Trust or should ABC Trust be filing the STR? Should DEF alone file the STR and only if ABC Trust have additional details to add they can file a STR of their own?
Answer:

Section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) requires every entity referred to in section 5 of the PCMLTFA to report every financial transaction that occurs or that is attempted in the course of their activities where there are reasonable grounds to suspect that the transaction is related to the commission or the attempted commission of a money laundering offence or a terrorist activity financing offence. Both ABC Trust Company and DEF are reporting entities covered under the PCMLTFA so both have reporting obligations pursuant to section 7 in the event they become aware of one or more suspicious transactions, regardless if they are dealing with their own clients or not. If, in the course of its activities, ABC Trust Company becomes aware of one or more suspicious transactions involving its clients, it has an obligation to report these transactions. Alternatively, should DEF encounter any suspicious situation, then DEF has the obligation to file an STR.

Date Answered: 2014-04-30

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 2, 3

58. Report EFTOs ordered by an employee when there is an ongoing agreement between the MSB and employer.

Question:
How to report EFTOs ordered by an employee when there is an ongoing agreement between the MSB and employer.
Answer:

Subsection 10(1) of the Proceeds of Crime (Terrorist Financing) and Money Laundering Regulations (PCMLTFR) requires that reporting entities take reasonable measures to determine whether a client is acting on behalf of a third party when they are required to keep a client information record. When a money service business (MSB) enters into an ongoing electronic funds transfer agreement with an entity, it is required to keep a client information record with respect to the entity and a list containing the name, address and date of birth of every employee authorized to order transactions under the agreement (s. 32 PCMLTFR). Additionally, section 7 of the PCMLTFR makes it clear that a person acting on behalf of their employer is considered to be acting on behalf of a third party except when the person is depositing cash into the employer’s business account. When making a third party determination, Guideline 6G: Record Keeping and Client Identification, provides further guidance and clarifies that it is not about who "owns" the money, but rather about who gives instructions to deal with the money. To determine who the third party is, the point to remember is whether the individual conducting the transaction is acting on someone else's instructions. If so, that other individual is the third party. As each situation will be different, this determination must always be based on the facts of each specific scenario. Each entity will be responsible for making their own determination based on the information available to them. You have provided the following three scenarios: Scenario 1 There is an ongoing service agreement between the MSB and the entity. The employee, who is on the list of authorized employees orders an EFTO. You have asked whether the entity’s name should be entered in Part B, and whether Part D should be left blank. Answer: In this situation, the employee is the client as he or she is conducting the transaction and his/ her information should be entered in Part B. The third party would be the entity/employer, as it is instructing the employee to order the EFTO. As such, the entity’s information should be recorded in Part D. Scenario 2 There is an ongoing service agreement between the MSB and the entity. The employee, who is not on the list of authorized employees, orders an EFTO. You have indicated you would record “the individual name” in Part B and “the entity name” in Part D. Answer: In this scenario, I have assumed that by “individual,” you mean “employee”. If this is the case, the employee would be the client, as he or she is conducting the transaction. As such, his/ her information, including full name and address, should be entered in Part B. As the employee is not on the list of authorized employees, the MSB would be required to ascertain this individual’s identity in the event the EFTO being ordered is $1000 or more, pursuant to paragraph 59(1)(b) of the PCMLTFR. Subsection 59(4) of the PCMLTFR provides an exception to this obligation if the employee is authorized to order transactions under an ongoing service agreement. The entity is the third party as it is providing instructions to the employee. As such, the entity’s information should be entered in Part D. Scenario 3 There is no ongoing service agreement in place. The employee, who is the owner, director or shareholder of the entity, orders an EFTO. Answer: At the outset, it should be noted that the terms owner, director and shareholder may not always be synonymous with each other. To explain further, the shareholder could either be an employee, or the shareholder could be a director, the owner or one of the owners, which would change the way in which an EFTO report must be filled out. For example, if the shareholder is an employee, he or she is acting on the instructions of another individual or the entity so the shareholder will be considered the client (Part B) and the party providing this individual with instructions to order the EFTO will be the third party (Part D). If, on the other hand, the shareholder is the owner, one of the owners or a director of the entity, he or she may be speaking directly for the entity when ordering the EFTO. The entity can only speak by means of a physical person, which may be the Board of Directors (if the company has one) or the owner(s) (if the company is a sole proprietorship and/or the company does not have a Board of Directors). As such, the individual conducting the transaction (be it the owner(s), director(s) or shareholder (who is a director or owner)) would not be a separate body from the entity. Therefore, the entity would be the client and its information should be entered in Part B. Since the director and/ or owner is the voice of the entity, there would be no third party in this scenario. That being said, pursuant to paragraph 59(1)(b) of the PCMLTFR, the MSB must still ascertain the identity of the person who conducts the electronic funds transfer if it is $1,000 or more.

Date Answered: 2014-04-30

Obligation: Reporting
Guidelines: 6G, 8
Regulations: 7, 10(1), 32, 59(1)(b), 59(4)

59. Guidance on how to submit an LCTR in the case of a third party transaction conducted on behalf an embassy

Question:
Can we receive guidance on how to submit an Large Cash Transaction in the case of a third party transaction in which the transaction is conducted by an employee of an embassy ?
Answer:

Pursuant to paragraph 28(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) a money services business must report the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from a financial entity or a public body. Furthermore, as per section 29, subject to subsection 52(2), every money services business shall keep a large cash transaction record in respect of every amount in cash of $10,000 or more that is received from a client in the course of a single transaction, unless the cash is received from a financial entity or a public body. Where a reporting entity is required to keep a large cash transaction record under these Regulations, they must take reasonable measures to determine whether the individual who in fact gives the cash in respect of which the record is kept is acting on behalf of a third party. In this particular case, the conductor (the employee) of the transaction has indicated that the transaction is being conducted on behalf of the embassy for which he works. Based on information provided by the conductor (the employee), the embassy is the third party to this transaction. It is, therefore, up to the reporting entity to determine how to appropriately record the information on the entity (embassy) on whose behalf the transaction is being conducted in the LCTR. Although we have previously determined that an embassy is not an entity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), for the purposes of submitting the LCTR, certain information on the embassy is necessary to include. Part F – Information on Entity on Whose Behalf Transaction is Conducted (if applicable) is best suited to capture information on the embassy.

Date Answered: 2014-04-22

Activity Sector: Money services business
Obligation: Reporting
Regulations: 28(1)(a), 29

60. Reporting large cash transactions

Question:
How we should report transactions and dispositions on an Large Cash Transaction Report where the transaction included a cash and non-cash component?
Answer:

Pursuant to paragraph 12(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), financial entities must report the receipt from a client of an amount in cash of $10, 000 or more in the course of a single transaction, together with the information referred to in Schedule 1, the Large Cash Transaction Report. As such, the entity is required to report to FINTRAC cash received, this does not include cheques, funds drawn on an account, etc. Part B of the Large Cash Transaction Report requires the reporting entity to include information on the disposition of the funds. As per subsection 1(2) of the PCMLTFR, funds means cash, currency or securities, or negotiable instruments or other financial instruments, in any form, that indicate a person’s or an entity’s title or interest in them. As such, the disposition of funds in Part B of the Large Cash Transaction Report may include the full disposition of a particular transaction, so may reflect the addition to the cash portion of funds drawn on an account, a cheque, etc. Based on the above, it is possible for a reporting entity to report a large cash transaction with different transaction and disposition amounts.

Date Answered: 2014-04-11

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2), 12(1)(a)

61. EFT Reporting

Question:
In which currency should the EFTR be submitted? For incoming electronic funds transfers through Central1’s Money Transfer System (MTS) service, what amount should the financial institution be reporting (Transfer Amount or Original Transfer Amount)? What to report?
Answer:

Subparagraph 12(1)(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) requires that every financial entity report the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction. The wording of this provision clearly emphasizes the EFT is at the request of the client. Applying this logic, the currency that should be reported is the currency in which the client instructs the EFT be sent. In the above-mentioned scenario, the client requested that $10,000 CDN be sent electronically to the foreign bank. As such, the EFTR should be reported in Canadian currency.

Date Answered: 2014-04-09

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 8
Regulations: 12(1)b)

62. Obligations with respect to domestic EFTs of $1,000 or more

Question:
1) Considering the EFT was not an international EFT, was a third party determination even required?; 2) The fact that there is an electronic image of the cheque drawn on the lawyer’s in trust account at ABC with the lawyer’s signature on the cheque in the financial institution’s records, was the financial institution required to obtain additional information and ID on the lawyer when they had the lawyer’s assistant/employee’s ID on file? 3) Was there a deficiency issue with the financial institution recording themselves as the Sender and not the lawyer’s name and account information on the actual MTS EFT transmission?
Answer:

Subsection 1(2) of the PCMLTFR defines an EFT as the transmission of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included. This does not include domestic SWIFT MT 103 messages. Section 9.5 of the PCMLTFA requires entities referred to in section 5 to include certain information with prescribed electronic funds transfers when they occur in the course of their financial activities. Subsection 66.1(2) of the PCMLTFR goes on to specify that the prescribed electronic funds transfers to which section 9.5 of the Act applies are those as defined in subsection 1(2), but include transfers within Canada that are SWIFT MT 103 messages. As such, the only domestic EFTs to which the obligations set out in section 9.5 of the Act applies are SWIFT MT 103 messages. With respect to client identification obligations for EFTs paragraph 54(1)(b)(ii) of the PCMLTFR states: 54. (1) Subject to section 62 and 63, every financial entity shall (b) in accordance with subsection 64(1), ascertain the identity of every person who has not signed a signature card in respect of an account held with the financial entity and has not been authorized to act with respect to such an account but who conducts (ii) an electronic funds transfer, as prescribed by subsection 66.1(2), in an amount of $1,000 or more sent at the request of a client […] Therefore, when conducting an EFT, a financial entity will only be required to ascertain a client’s id when the entity conducts an electronic funds transfer as defined in subsection 1(2) of the PCMLTFR or a transfer within Canada that is a SWIFT MT 103 message.

Date Answered: 2014-04-07

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 8
Regulations: 1(2), 54(1)(b)(ii), 66.1(2)

63. Definition of PAD

Question:
what constitutes a pre-authorized debit for the purposes of EFT record keeping as required by subsection 14(m) of the PCMLTFR ?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines electronic funds transfer (EFT) as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada.” Section 9.5 of the PCMLTFA requires entities referred to in section 5 to include certain information with prescribed EFTs when they occur in the course of their financial activities. Subsection 66.1(2) of the PCMLTFR goes on to state that the prescribed EFTs to which section 9.5 of the Act applies are those as defined in subsection 1(2), and also include transfers within Canada that are SWIFT MT 103 messages. That being said, subsection 66.1(3) of the PCMLTFR specifies that subsection 66.1(2) does not apply in respect of: (a) a transfer carried out using a credit or debit card, if the recipient has an agreement with the payment service provider permitting payment by such means for the provision of goods and services; (b) a transfer where the recipient withdraws cash from their account; (c) a transfer carried out by means of a direct deposit or a pre-authorized debit ; or (d) a transfer carried out using cheque imaging and presentment. Whether a transaction constitutes a pre-authorized debit is a question of fact, and must be determined by the RE, based on the available information in each given situation and in consideration of the definition of EFT.

Date Answered: 2014-04-07

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2), 66.1

64. Obligations associated with large cash transactions

Question:
Can you give us a series of examples highlighting situations that may trigger the obligations associated with large cash transactions ?
Answer:

1) In the case of a financial entity, paragraph 12(1)(a) of the Proceeds of Crime Money Laundering and Terrorist Financing Regulations (PCMLTFR) states that “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre […] the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body.” 2) The large cash transaction obligations are triggered by the transaction(s) of a conductor, so are determined at the conductor level, not at the account level. 3) As per subsection 3(1) of the PCMLTFR, two or more cash transactions or electronic funds transfers of less than $10,000 each that are made within 24 consecutive hours and that total $10,000 or more are considered to be a single transaction of $10,000 or more if i. (a) where a person is required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations, the person knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity; and ii. (b) where an entity is required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations, an employee or a senior officer of the entity knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity. 4) Subject to subsection 52(2), every financial entity shall keep a large cash transaction record in respect of every amount in cash of $10,000 or more that is received from a client in the course of a single transaction. 5) As outlined in subsection 8(1), every person or entity that is required to keep a large cash transaction record under the PCMLTFR shall take reasonable measures to determine whether the individual who in fact gives the cash in respect of which the record is kept is acting on behalf of a third party. When determining whether a "third party" is involved, it is not about who "owns", or benefits from, the money, but rather about who gives instructions to deal with the money. To determine who the third party is, the point to remember is whether the individual conducting the transaction is acting on someone else's instructions. If so, that someone else is the third party. For example, if a father gives his son $10,000 to deposit into the father’s account, the father is the third party, even though he is the account holder. This is because the son is conducting the transaction (depositing the funds) on the instructions of his father. In the case of a business account, it is important to be clear that for the purposes of the PCMLTFR, a person acting on behalf of their employer is considered to be acting on behalf of a third party except when the person is depositing cash into the employer’s business account. 6) “On behalf of” does not refer to the beneficiary of a transaction, but rather is a reference to the individual or entity giving instructions on a transaction. 7) If the reporting entity has, as a business practice, the requirement to collect “on behalf of” details for any/all transactions, then the entity would be deemed to know that the deposits were made “on behalf of” the same individual or entity, should this be the case. 8) If the same client card is used for any/all transactions, then this can be used to determine that the transactions were made “by” the same individual or entity

Date Answered: 2014-03-27

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 3(1), 8(1), 12(1)(a), 52(2)

65. Third party to EFT

Question:
EFTs may or may not be CASH so may or may not be a LCT. Is this third party information only applicable if the EFT was a LCTR? What about the case of a business account, owned by a husband and wife (both have signing authority)? If the wife comes in and conducts a reportable International Electronic Funds Transfer on behalf of the company; when asked if this EFT was conducted on behalf of a third party, The wife indicated that it was the husband who gave her the instructions to send the transfer. In this case, would the husband be the third party?
Answer:

Pursuant to section 7 of the PCMLTFR the only time an employee conducting a transaction for an entity is NOT doing so on behalf of a third party is where the individual is an employee depositing cash to the business account. As such, where an employee is requesting an EFT for an entity, they are doing so on behalf of said entity, as this is not a cash deposit to the business account. That said, it is a question of fact as to whether the owner is an employee: • If the owner is not an employee, then they are requesting the EFT as the voice of the business and Part B would be populated with information on the business. • If the owner is an employee, then they are requesting the EFT on behalf of the business and Part B would be populated with the individual’s information and the business’ information would be put into Part D.

Date Answered: 2014-03-11

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 8

66. Clarifications - Attempted vs Completed STRs

Question:
We wanted a clarification on “attempted” vs. “completed” STRs. Thus far, we have interpreted “attempted” STRs as transactions where we have declined a transaction or where a patron has decided not to follow through with the transaction for whatever reason. We have treated “completed” STRs as transactions that have been completed regardless whether or not the patron has been identified. We want to ensure that we are accurately capturing our future STRs.
Answer:

The “conducted” or “attempted” label for transactions is not determined by whether or not the client’s identification was ascertained. A completed transaction is one that was carried out to completion, whereas an attempted transaction is one that was not finalized, either because the client did not follow through with the transaction or the reporting entity did not process the transaction. Regardless of whether or not the transaction was conducted or attempted, when a reporting entity has to send a suspicious transaction report to FINTRAC, they have to take reasonable measures, before the transaction is reported, to ascertain the identity of the individual who conducted or attempted to conduct the transaction, except where: • the reporting entity had already ascertained the identity of the individual as required and has no doubts about that previous identification information; or • the reporting entity believes that doing so would inform the individual that they are submitting a suspicious transaction report.

Date Answered: 2014-03-04

Activity Sector: Casino
Obligation: Reporting
Guidelines: 2, 3, 6F

67. Quick Drops are associated with Accounts

Question:
When the cash is sent by courier, can an MSB do LCT?
Answer:

MSBs can accept cash from a courier, they just can’t accept them as quick drops because quick drops are associated with accounts and MSBs aren’t recognized as having accounts. Where a large cash transaction triggers a large cash transaction record, the MSB must ascertain the identity of the person with whom the MSB conducts the transaction. In the case of a courier, that would mean ascertaining the identity of the courier as the person with whom the MSB conducts the transaction.

Date Answered: 2014-02-26

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C, 7

68. EFTI Reporting

Question:
It would be beneficial if FINTRAC could confirm that the information we are purporting to provide in the respecting reporting sections of the non-SWIFT incoming funds report is accurate. Essentially there are 2 scenarios. Please keep it in mind that Company 123 has operations and clients domiciled, in Canada, the US, US and Australia (this is particularly poignant to Scenario 2). Does those two scenarios constitute reportable EFTIs and if so, which party would be considered the ordering client in each scenario? Scenario 1: Where Instructions Refer to a Company 123-Canada Client ABC Corp. is a Company 123-Canada client. XYZ Corp., located in the UK, is ABC Corp’s customer and sends 10,000 EURO from its account at Bank Y in the UK to Company 123-UK’s bank account in the UK. An internal inter-company accounting function is completed and Company 123-Canada sends the exchanged CAD from its Canadian bank account to ABC Corp.’s bank account in Canada. Part A = Transaction Data Part B = Information XYZ Corp. Part C = Bank Y (XYZ’s bank account in the UK) Part D = 3rd party (if XYZ sending on behalf of a 3rd party) Part E = Company 123 Canada Part F = Information on ABC Corp. Part G = 3rd party (if ABC is receiving on behalf of a 3rd party) These are instructions sent electronically for the transfer of $10,000 or more from outside Canada at the request of a client. Scenario 2: Where Instructions Refer to a Beneficiary in Canada DEF Inc. is a Company 123-UK client. TUV Inc., located in Canada, is DEF Inc.’s customer (and not a customer of Company 123-Canada). DEF Inc. sends 10,000 EURO from its account at Bank Y in the UK to Company 123-UK’s bank account in the UK. An internal inter-company accounting function is completed and Company 123-Canada sends the exchanged funds from its Canadian bank account to TUV Inc.’s bank account in Canada. Part A = Transaction Data Part B = DEF Inc. Part C = Bank Y (DEF’s Bank account in the UK) Part D = 3rd party (if DEF is sending on behalf of a 3rd party) Part E = Company 123 Canada Part F = Information on TUV Inc. Part G = 3rd party (if TUV Inc. is receiving on behalf of a 3rd party)
Answer:

Subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada.” We have indicated in the past that to be reportable an electronic funds transfer must be: • client initiated, and • must be the transmission of instructions to transfer funds across our border Paragraph 28(1)(c) of the PCMLTFR states that, subject to subsection 52(1), every money services business shall report to the Centre the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction. In both of the scenarios, the intention (or the purpose) of the payment is to transfer funds from the payor’s account in the foreign country (XYZ Corp.’s account in Scenario 1 and DEF Inc.’s account in Scenario 2) to the payee’s bank account in Canada (ABC Corp.’s account in Scenario 1 and TUV Inc.’s account in Scenario 2). The payor, who is the client (XYZ Corp. in Scenario 1 and DEF Inc. in Scenario 2), initiates the transmission of instructions to transfer funds across the Canadian border. Furthermore, the payor’s instructions to transfer these funds include information, a unique order ID or reference number that will make it possible for Company 123 Canada to identify the transaction and banking details for depositing the exchanged funds into ABC Corp. and TUV Inc.’s respective bank accounts in Canada. Given the foregoing, it is our position that these transactions constitute incoming non-swift international electronic funds transfers as defined in subsection 1(2) of the PCMLTFR. The report for each scenario must be filed as follows: Scenario 1: Part A = Transaction Data Part B = XYZ Corp. Part C = Company 123-UK Part D = 3rd party (if XYZ sending on behalf of a 3rd party) Part E = Company 123 Canada Part F = Information on ABC Corp. Part G = 3rd party (if ABC is receiving on behalf of a 3rd party) Scenario 2: Part A = Transaction Data Part B = DEF Inc. Part C = Company 123-UK Part D = 3rd party (if DEF is sending on behalf of a 3rd party) Part E = Company 123 Canada Part F = Information on TUV Inc. Part G = 3rd party (if TUV Inc. is receiving on behalf of a 3rd party)

Date Answered: 2014-02-26

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 1(2), 28(1)(c)

69. LCTR Reporting and Receipt of funds record (ROFR)

Question:
1. What should the brokerage indicate on the ROFR? (eg. Funds received in brokerage's account, via cash deposit by the client OR should this be considered as funds received in cash?) 2. Is an LCTR required for the following scenario? - the brokerage represents a buyer who purchased a property - the buyer deposited $20,000 cash into the brokerage's bank account at a bank, as deposit for the purchase; the bank will be sending a copy of the deposit slip to the brokerage - the buyer went directly to the bank to make the deposit, no cash was physically given to the brokerage - it is the brokerage's regular practice to give clients their (brokerage's) deposit account information so that the funds can be deposited directly into their account
Answer:

Pursuant to subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, the receipt of funds record “means, in respect of a transaction in which an amount of funds is received, a record that contains the following information: (a) if the information is not readily obtainable from other records that the recipient keeps and retains under these Regulations, the name of the person or entity from whom the amount is in fact received and (i) where the amount is received from a person, their address and date of birth and the nature of their principal business or their occupation, and (ii) where the amount is received from an entity, their address and the nature of their principal business; (b) the date of the transaction; (c) the number of any account that is affected by the transaction, and the type of that account, the full name of the person or entity that is the account holder and the currency in which the transaction is conducted; (d) the purpose and details of the transaction, including other persons or entities involved and the type and form of the transaction; (e) if the funds are received in cash, whether the cash is received by armoured car, in person, by mail or in any other way; and (f) the amount and currency of the funds received." The receipt of funds record should accurately reflect the transaction whereby the funds were received. As such, the reporting entity should, in this scenario, indicate that the funds were received by means of a deposit, by the client, directly into the brokerage's account at the bank. The LCTR is intended to indicate the receipt, in cash, of $10,000 or more in a single transaction. A deposit made by the client into the brokerages account, where the brokerage did not handle the cash at any point, is not deemed as the receipt of funds in cash. In this instance, the transaction is not a cash transaction, therefore a large cash transaction report is not required.

Date Answered: 2014-02-26

Activity Sector: Real estate
Obligation: Record keeping Reporting
Guidelines: 6B, 7
Regulations: 1(2)

70. DPMS - Triggering activity and Reporting Clarifications

Question:
(1) Is a person or entity, not in the business of the sale, purchase, or manufacturing of precious metals, precious stones or jewellery, who, in two transactions within a short period, has sold approximately $100,000.00 of gold bars held as an investment by that person or entity, considered a DPMS? (2) If such a person or entity is considered a DPMS, my understanding is that the only reporting obligations arise in connection with (i) a cash transaction, and (ii) a suspicious transaction. As neither transaction was a cash transaction, the question is whether this would be a suspicious transaction. In this particular case, part of the gold was sold to a reputable foreign exchange company and the other part was sold to a non-arms length individual on the condition of anonymity. From the organization's perspective, this could be suspicious as they do not know the identity of one of the purchasers. From the perspective of the employee who facilitated the transaction there is nothing suspicious since they know the purchaser well. Ultimately this is not a suspicious transaction since my client knows the full details of the transaction, but the organization does not have sufficient information to reach the same conclusion. Would this transaction give rise to a reporting requirement? (3) Finally, if there is a reporting requirement, could the employee provide the details of the transaction in confidence to FINTRAC in order to satisfy the organization's reporting requirement, if any, in order to avoid breaching the confidentiality provision of the agreement of sale?
Answer:

While a business may be incorporated for the purposes of one activity, should it, in the course of its business activities, buy or sell precious metals, stones or jewellery, then it may meet the definition of a dealer in precious metals and stones (DPMS), as per subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). Should the DPMS buy or sell precious metals, stones or jewellery that total $10,000 or more in a single transaction, it becomes subject to the PCMLTFA and its associated Regulations, which include the obligations to report to FINTRAC, keep records, identify clients, and have a compliance regime. The purchases or sales referred to above exclude those carried out for, connected with, or for the purpose of: manufacturing jewellery; extracting precious metals or precious stones from a mine; or cutting or polishing precious stones. In other words, if all of its purchases and sales are related to these manufacturing, extracting, cutting or polishing activities, it is not subject to these requirements. In the dealers in precious metals and stones sector, large cash transactions and suspicious transactions trigger the reporting, identification and record-keeping obligations of the PCMLTFA and its associated Regulations. If a purchase or sale is not carried out in cash, then the DPMS is not required to report the transaction or keep a large cash transaction record, thereby also negating the need to identify the individual or entity making the purchase or sale, unless the transaction is deemed to be suspicious. Suspicious transaction obligations are triggered when a reporting entity has reasonable grounds to suspect that a transaction, or an attempted transaction, is related to money laundering or terrorist activity financing. “Reasonable grounds” are determined by what is reasonable in the circumstances, including normal business practices and systems within the industry. For the purposes of suspicious transactions only, an employee of a reporting entity is also a "reporting entity". This requires that the employee make a report to FINTRAC about a suspicious transaction unless they report it to their superior. The PCMLTFA and its associated Regulations do not apply to former employees of reporting entities. Where an employee does not deem a transaction or an attempted transaction to be suspicious, the employer is not precluded from reporting said transaction, should the employer suspect that the transaction or attempted transaction be related to money laundering or terrorist activity financing. Pursuant to subsection 53.1(1) of the PCMLTFR, a DPMS must take reasonable measures to ascertain, in accordance with 64(1), the identity of every person with whom the DPMS conducts, or attempts to conduct, a transaction that is required to be reported to the Centre under section 7 of the PCMLTFA, unless the DPMS had already ascertained the identity of the individual or believes that complying with subsection 53.1(1) would inform the person that the transaction and the related information is being reported (ss. 53.1(2) PCMLTFR). After taking reasonable measures to ascertain the identity of the person who conducted, or attempted to conduct, the transaction, the DPMS is expected to complete the suspicious transaction report providing the mandatory information, where applicable. Guidelines 2 (Suspicious Transactions) and 3 (Submitting Suspicious Transaction Reports to FINTRAC Electronically) outline the reporting requirements in more detail.

Date Answered: 2014-02-20

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting Reporting
Guidelines: 2, 3, 6I, 7
Regulations: 39.1, 53.1(1), 53.1(2)
Act: 1(2)

71. LCT from client branches and franchise and Quick Drop

Question:
How does the reporting of large cash transactions work when a courier/armoured car driver drops off bags of foreign currency collected from client branches and a franchise?
Answer:

In the case of a money services business, paragraph 28(1)(a) of the Proceeds of Crime Money Laundering and Terrorist Financing Regulations (PCMLTFR) states that “Subject to subsection 52(1), every money services business shall report the following transactions and information to the Centre […] the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body.” Section 29 requires that, subject to subsection 52(2), every MSB keep a large cash transaction record in respect of every amount in cash of $10,000 or more that is received from a client in the course of a single transaction, unless the cash is received from a financial entity or a public body. Pursuant to section 53, subject to subsection 63(1), every person or entity that is required to keep and retain a large cash transaction record under these Regulations shall ascertain, in accordance with subsection 64(1), the identity of every person with whom the person or entity conducts a transaction in respect of which that record must be kept, other than a deposit made to a business account or a deposit made by means of an automated banking machine. As per subsection 3(1) of the PCMLTFR, two or more cash transactions or electronic funds transfers of less than $10,000 each that are made within 24 consecutive hours and that total $10,000 or more are considered to be a single transaction of $10,000 or more if - where a person is required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations, the person knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity; and - where an entity is required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations, an employee or a senior officer of the entity knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity Furthermore, as outlined in subsection 8(1), every person or entity that is required to keep a large cash transaction record under the PCMLTFR shall take reasonable measures to determine whether the individual who in fact gives the cash in respect of which the record is kept is acting on behalf of a third party. When determining whether a "third party" is involved, it is not about who "owns" the money, but rather about who gives instructions to deal with the money. With respect to the 24-hour rule, it is important to remember that while the 24-hour rule is “by or on behalf of” the same person or entity, one does not negate the other; rather the two options support each other to ensure a complete picture of the transaction(s) being conducted at a reporting entity. While a transaction may not be reportable based on who it was conducted “by” it may be reportable based on who it was conducted “on behalf of” and vice versa. That is why it is important to consider both. To miss reporting opportunities because a reporting entity is only considering one or the other, that is “by” or “on behalf of”, could put the reporting entity into a position of non-compliance with the PCMLTFA and its associated Regulations. Upon further discussion, it was determined that the branches and the branch manager are deemed to be Corporate ABC. Finally, the quick drop is not an option for MSBs. This is because the quick drop is associated with accounts and MSBs are not recognized as having accounts. With these comments in mind, we turn to the scenario outlined in your e-mail. Where : 1) at 9:00 a.m., an armoured car driver drops off 3 deposits in one bag for each branch (Branch A - 2K, Branch B - 4K, Branch C - 6k), one person is conducting a $12,000 cash transaction, so the large cash transaction obligations are triggered and the MSB must keep a large cash transaction record, ascertain identity, make a third party determination and send a large cash transaction report. As such, the report should be completed as follows: Part A – Information on place of business where the transaction occurred Part B – Information on the $12,000 transaction Part C – N/A (MSBs are not recognized as having accounts) Part D – Information on the courier as the person conducting a transaction that is not a deposit into a business account because MSBs are not recognized as having accounts Part E – N/A (MSBs are not recognized as having accounts) Part F – Information on Corporate ABC (both the branch manager and the ABC branch are deemed to be Corporate ABC) or the DEF Franchise Part G – N/A 2) at 12:00 p.m. a courier drops off 3 deposits (Branch D - 2K, Branch A - 8K and Branch E - 9K), one person is conducting a $19,000 cash transaction, so the large cash transaction obligations are triggered and the MSB must keep a large cash transaction record, ascertain identity, make a third party determination and send a large cash transaction report. The report should be completed as follows: Part A – Information on place of business where the transaction occurred Part B – Information on the $19,000 transaction Part C – N/A (MSBs are not recognized as having accounts) Part D – Information on the courier as the person conducting a transaction that is not a deposit into a business account because MSBs are not recognized as having accounts Part E – N/A (MSBs are not recognized as having accounts) Part F – Information on Corporate ABC (both the branch manager and the ABC branch are deemed to be Corporate ABC) or the DEF Franchise Part G – N/A NOTE - While the “on behalf of” fields (Part F) may trigger subsequent LCT filing requirements (e.g., Corporate ABC was the entity in Part F both times so $31,000 was conducted on behalf of Corporate ABC), we would not expect to receive an LCTR to this effect because it would be a repeat of all of the information already reported. However, if no LCT obligations were triggered because instead the 9:00 a.m. transaction total was $8,000 and the 12:00 p.m. transaction totaled $7,000, we would expect an LCTR to be triggered if it was known by an employee or a senior officer of the reporting entity that both the courier and the armoured car driver conducted their respective transaction “on behalf of” the same individual or entity (i.e., either Corporate ABC or the DEF franchise.)

Date Answered: 2014-02-18

Activity Sector: Money services business
Obligation: Reporting Reporting
Guidelines: FIN-4, 6C, 7
Regulations: 3(1), 8(1), 28(1)(a), 29, 53

72. LCTRs 24 hour Rule - Aggregation on the basis of the "Conductor" and not the "Account Holder"

Question:
An employee is coming in to deposit on behalf of the employer. The employer (has account with bank) is seen as the bank’s client. The questions is: Should the bank aggregate on the basis of the account holder (employer) or conductor (employee) or both?
Answer:

With the information you have provided, the response is still that the aggregation must be at the conductor level, which will be the employee, in this case. In fact, the 24-hour rule applies for the receipt of two or more cash amounts of less than $10,000 each that total $10,000 or more within a 24-hour period. The reporting entity has to make a large cash transaction report if their employee or senior officer knows the transactions were made within 24 consecutive hours of each other by or on behalf of the same individual or entity. In the case of a financial entity, paragraph 12(1)(a) of the Proceeds of Crime Money Laundering and Terrorist Financing Regulations (PCMLTFR) states that “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre […] the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body.” As indicated in FINTRAC’s guidelines, “on behalf of” refers to the instructing party to a transaction and not the beneficiary of said transaction. The large cash transaction obligations are triggered by the transaction(s) of a conductor, so are determined at the conductor level, not at the account level. In addition, section 7 of the PCMLTFR makes it clear that a person acting on behalf of their employer is considered to be acting on behalf of a third party except when the person is depositing cash into the employer’s business account. Therefore, there will be no third party in this situation.

Date Answered: 2014-01-28

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: FIN-4, 9
Regulations: 7, 12(1)(a)

73. Alternative to LCTR - Reporting conditions

Question:
When can reporting entity send an alternative to large cash transaction report?
Answer:

As written in subsection 50(1)(c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), there are several conditions required to be met before a reporting entity can choose to send the alternative to large cash transaction report. One of the requirements is that the financial entity have records that indicate that the client has deposited $10,000 or more in cash into that account on an average of at least twice in every week for the preceding 12 months. An average of two deposits a week in a 12 month period would result in 104 deposits. Therefore, should the financial entity have records to indicate that the client has made at least 104 deposits for the preceding 12 months, and satisfies the other conditions outlined in subsection 50(1)(c) of the PCMLTFR, then the alternative to large cash transaction report option can be selected.

Date Answered: 2013-12-23

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 50(1)(c)

74. STRs reported by employees

Question:
I have a question regarding the agents of a mutual fund dealer or life insurance licensed agents. They are not "employees". Is it OK for the agents to make reports for anything to their 'superior' i.e. dealer and/or managing general agency and the dealer or agency will file the report with FINTRAC? Or are the agents required to report directly to FINTRAC?
Answer:

Subsection 5(g) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) specifies that “persons and entities authorized under provincial legislation to engage in the business of dealing in securities or any other financial instruments, or to provide portfolio management or investment advising services” are subject to Part 1 of the PCMLTFA. Furthermore, as per Section 16 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) Part 1 of the PCMLTFA applies to a life insurance broker or agent, defined under subsection 1(2) of the PCMLTFR as “a person or entity that is registered or licensed under provincial legislation to carry on the business of arranging contracts of life insurance.” Section 7 of the PCMLTFA requires every person or entity referred to in section 5 of the PCMLTFA to report every financial transaction that occurs or that is attempted in the course of their activities where there are reasonable grounds to suspect that the transaction is related to the commission or the attempted commission of a money laundering offence or a terrorist activity financing offence. Where entities working together are both reporting entities covered under the PCMLTFA, and no employer/employee relationship exists, both have reporting obligations pursuant to section 7. That said, reporting entities may enter into an agreement with a service provider, which may be another reporting entity, to have that provider fulfill part or all of the contracting reporting entity’s obligations. As a best practice we encourage reporting entities to ensure that the agreement clearly outlines the responsibilities of each party. Where such an agreement does exist, the reporting entity is still responsible for ensuring compliance with the PCMLTFA and its associated Regulations.

Date Answered: 2013-12-20

Activity Sector: Securities dealer
Obligation: Reporting
Guidelines: 2, 3
Regulations: 1(2), 16
Act: 5(g), 7

75. ID when accepting a Large Cash Transaction

Question:
What type of questions a financial institution can request from a business depositing a large transaction, namely can a bank request a business to disclose information on its clients when depositing a large amount?
Answer:

As per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), and explained in the Guidelines, reporting entities are subject to certain reporting, record keeping and client identification obligations in relation to large cash transactions (the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction), suspicious transactions, and electronic funds transfers. Should the large amount of a transaction trigger any of these obligations, the reporting entity must ask or have access to the information necessary to satisfy the requirements. In addition, subsection 9.6 (1) of the PCMLTFA requires that reporting entities establish and implement a compliance program. The compliance program must include the assessment and documentation of potential risks to the reporting entity, taking into consideration their clients and business relationships, whereby the reporting entity may consider assessing a business client’s activities, transaction patterns, how they operate and so on. It is important to note that a reporting entity is not limited by the PCMLTFA. Entities might, as a business practice, or as required by other governing legislation, ask for or obtain other information throughout the transaction process.

Date Answered: 2013-12-20

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Act: 9.6(1)

76. International Sanctions - STR

Question:
I would like your opinion on cases in which we find potential breaches of international sanctions and on whether or not we have to report to FINTRAC. For example: 1. A Canadian entity wants to conduct a transaction with a foreign entity against which sanctions have been imposed by the U.S. After we intervened, the Canadian entity changed the name of the foreign entity with which it wants to do business to a name that is not sanctioned. Our analysis shows that this transaction relates to the entities' trade activities and we do not question the legitimacy of these activities, so there is not doubt under the PCMLTFR. However, we question the Canadian entity's behaviour and its compliance with international sanctions. Should we submit a suspicious transaction report in accordance with the PCMLTFA? 2. We are receiving or sending an electronic funds transfer out of Canada (to a country that is not sanctioned) and we have reason to believe that the electronic funds transfer could be in breach of international and Canadian sanctions even though the sending/receiving country is not sanctioned. The transaction relates to the business activities of the entities in question and we do not question the legitimacy of these activities. Should we submit a suspicious transaction report in accordance with the PCMLTFA? In all cases of possible sanction breaches, we apply risk management measures to international sanctions, but we are still unsure as to whether or not we have to report these activities to FINTRAC even though there is not doubt under the PCMLTFR.
Answer:

Section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) stipulates that, "Subject to section 10.1, every person or entity referred to in section 5 shall report to the Centre, in the prescribed form and manner, every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that (a) the transaction is related to the commission or the attempted commission of a money laundering offence; or (b) the transaction is related to the commission or the attempted commission of a terrorist activity financing offence. If you have reasonable grounds to suspect that the financial transaction that occurred or that was attempted in the course of your activities is related to the commission or the attempted commission of a money laundering offence or a terrorist activity financing offence, a suspicious transaction report must be submitted to FINTRAC. "Reasonable grounds to suspect" are determined based on what is reasonable for the reporting entity's circumstances, including its common business practices and the systems in place in its industry. It is up to the reporting entity to judge the legitimacy of transactions, taking into account what is appropriate in the circumstances and consistent with common industry activities as well as the client's level of knowledge. Moreover, section 7.1 of the Act indicates the following: • 7.1 (1) Every person or entity referred to in section 5 that is required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism shall also make a report on it to the Centre, in the prescribed form and manner. If a reporting entity concludes that it is necessary to make a disclosure under section 7.1 of the Act, the entity must also make a report to the Centre. Moreover, it is important to note that, according to subparagraph 71(1)(c)(i) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations), every person or entity must assess the risks of their clients and business relationships. If the risk assessment reveals that the client or business relationship is high risk, then the reporting entity would be required to take special measures to identify clients, keep records and monitor financial transactions for high risk activities, in accordance with subsection 9.6(3) of the Act, and discussed in more detail in section 71.1 of the Regulations.

Date Answered: 2013-12-19

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 2, 3
Regulations: 71(1)(c)(i), 71.1
Act: 7, 7.1, 9.6(3)

77. Confirmation of EFTO Transaction

Question:
A customer in Canada pays Currency Exchange ABC $118,000 CAD at Currency Exchange ABC’s office in Vancouver, BC. The customer then instructs Currency Exchange ABC to send 86,555.39 EUR (which is the equivalent to $118,000 CAD) to the customer’s bank account in Austria. Currency Exchange ABC will then send 86,555.39 EUR from Currency Exchange ABC’s account in Europe to the client’s bank account in Austria. Does this scenario constitutes a reportable outgoing electronic funds transfer (EFTO)?
Answer:

Paragraph 28(1)(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) indicates, every money services business shall report the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction. Furthermore, subsection 1(2) of the PCMLTFR defines an electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada” Therefore, to be reportable, an electronic funds transfer must be: • client initiated, and • the transmission of instructions to transfer funds across the Canadian border (except where the instructions are to transfer funds from a place in Canada to another place in Canada). In the scenario outlined above, the intention (or the purpose) of the payment of $118,000 CAD at Currency Exchange ABC’s office in Vancouver, BC, is to transfer funds to the customer’s bank account in Austria. The customer’s instructions include information, a unique order ID or reference number, that will make it possible for the bank in Austria to identify the transaction and banking details for depositing 86,555.39 EUR into the customer’s bank account in Austria. This information constitutes the instructions for the transfer of funds. Based on the foregoing, Currency Exchange ABC is conducting EFTOs subject to the relevant obligations.

Date Answered: 2013-12-19

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), 28(1)(b)

78. LCTR - Quick Drop - Conductor Information

Question:
One of our business clients bring their deposits into the branch but the person bringing the deposit in doesn't stay to verify the contents, it is just dropped off at a teller wicket. The deposit is a multiple cash deposit and the # of deposits will number anywhere from 15 to 25 individual deposits with dollar values from $5.00 and upwards. We would like to confirm that's it's ok to report it as follows: B1 How was the transaction conducted?: In Branch/Office/Store B2 On behalf of: an entity (other than an individual) Disposition of funds: deposit to an account C Applicable account information provided F Information about the entity provided E Left blank
Answer:

When sending large cash transaction reports (LCTR), section 53 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states as follows, “Subject to subsection 63(1), every person or entity that is required to keep and retain a large cash transaction record under these Regulations shall ascertain, in accordance with subsection 64(1), the identity of every person with whom the person or entity conducts a transaction in respect of which that record must be kept, other than a deposit made to a business account or a deposit made by means of an automated banking machine.” In the scenario you have explained, the deposit is merely being dropped off and the individual is not present while it is being verified and/ or deposited into the account. Based on this information, it would be considered a quick drop and the conductor’s name would not need to be recorded. As such, the transaction can be reported as follows: B1 3. Night deposit/ Quick drop indicator: select “quick drop” 7. How was the transaction conducted?: select “quick drop” Note: Once “quick drop” is selected, sections D and E should disappear B2 On behalf of: Select “cash deposit employer business account” (section F should disappear) 8. Disposition of funds: select “deposit to an account” C 3. Account type: Business D Disappears when “quick drop” is selected in B1 E Disappears when “quick drop” selected in B1 F Disappears when “cash deposit employer business account” selected in B2

Date Answered: 2013-12-16

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting

79. Transactions considered as EFTO or not?

Question:
The Company ABC operates a payment platform through which its clients are able to transfers funds from one e-wallet account to another e-wallet account. The Company ABC is a Canadian MSB located in Canada. Based on the type of transactions described below, we would like clarification with respect to whether the Company ABC is conducting EFTs: A client of the Company ABC who is a Canadian resident transfers funds from their ABC e-wallet account to a non-Canadian ABC client who has an e-wallet account. The entity is currently reporting these transactions as EFTOs.
Answer:

Pursuant to subsection 28(1)(b) of the PCMLTFR, every money services business shall report the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction. The fact that Company ABC is a Canadian company also located in Canada means that all of its e-wallet accounts are also located in Canada. As such, when one client transfers funds from their ABC e-wallet to another client’s ABC e-wallet, the transfer remains within Canada. In that vein, subsection 28(2) of the PCMLTFR reads, “For greater certainty, paragraph (1)(b) does not apply when the money services business sends an electronic funds transfer to a person or an entity in Canada, even if the final recipient is outside Canada.” Given the foregoing, the transactions you have described do not qualify as EFTOs and are not reportable.

Date Answered: 2013-12-11

Activity Sector: Money services business
Obligation: Reporting
Regulations: 28(1)(b), 28(2)

80. The Caisse - SWIFT electronic fund transfer compliance regime

Question:
As concerns the relationship between the Caisse and its members with respect to electronic fund transfers, the Caisse has confirmed that the Caisses populaires do not have an account at the Caisse. They do, however, have the option of opening foreign currency accounts in the books of the Caisse. Whenever an electronic fund transfer request is sent to the Caisse, the Caisse populaire must debit the member's account and credit this amount in their liquidity fund. If the member has a foreign currency account other than CAD or USD, however, the Caisse populaire does not need to debit the member's account. Once the electronic funds transfer is processed, the Caisse debits the liquidity fund in question or the member's foreign currency account, which is on the books of the Caisse. If the transfer request is made through businesses or individuals accounts, the member's account is debited once the transaction is confirmed/signed. At the current time, the Caisse populaire receives a credit in the CAD or USD liquidity fund, which is debited once the electronic funds transfer is processed by the Caisse. Only in the case of a business account does the financial settlement take place at the Caisse. Who is responsible for implementing a compliance regime for SWIFT electronic funds transfers?
Answer:

As regards the implementation of a compliance regime, FINTRAC expects the documentation, such as policies and procedures, as well as the risk-based approach, etc., to reflect the reality of each reporting entity, by taking into account the products and services that it provides for its clients. In other words, the Caisse needs to have a compliance regime that reflects the obligations associated with its SWIFT electronic funds transfer activities when it sends these funds on behalf of its clients (such as the Caisses populaires). It also means that the Caisses populaires must have a compliance regime that reflects the obligations associated with their electronic funds transfer activities when they forward, to the Caisse, electronic funds transfer requests from their clients (business clients or individuals). In terms of responsibility for reporting electronic funds transfers, subsection 12(1)(b) of the Regulations reads as follows: "Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre (...) the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be." On the other hand, subsection 12(3) of the Regulations notes that "Paragraph (1)(b) applies in respect of a financial entity that orders a person or entity, to which subsection (1), 28(1) or 40(1) applies, to send out of Canada an electronic funds transfer made at the request of a client, unless it provides that person or entity with the name and address of that client." Hence, the Caisse populaire is not obliged to report the electronic funds transfer if it provides the Caisse with the client's name and address. In such cases, the electronic funds transfer is reported as a SWIFT electronic funds transfer by the Caisse, which must complete the following fields: Outgoing SWIFT messages report information Part A – Transaction Information Part B – Information on Client Ordering Payment of Electronic Funds Transfer (in this case, an individual who is a client of the Caisse populaire) Part C – Information on Person or Entity Sending Electronic Funds Transfer (in this case, the Caisse) Part D – Information on Person or Entity Ordering Electronic Funds Transfer on Behalf of a Client (in this case, the Caisse populaire) Parts E, F, G, H, I or J – As applicable Part K – Information on Client to Whose Benefit Payment is Made Part L – As applicable

Date Answered: 2013-12-02

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Compliance regime
Regulations: 12(1)(b), 12(3)

81. STR Inquiry - Hacker

Question:
One of the entity of a Canadian securities dealer and reporting entity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) was contacted by a hacker, who took over their email address and attempted to solicit funds from various individuals. He would like clarification on whether this incident should be reported to FINTRAC as a Suspicious Transaction Report.
Answer:

According to section 7 of the PCMLTFA, a reporting entity must report every financial transaction that occurs or that is attempted in the course of their activities in respect of which there are reasonable grounds to suspect that: 1. the transaction is related to the commission or the attempted commission of a money laundering offence; or 2. the transaction is related to the commission or the attempted commission of a terrorist activity financing offence As such, for a transaction to qualify as a suspicious transaction, reportable under the PCMLTFA, the entity must have reasonable grounds to suspect it is related to the commission or attempted commission of either a money laundering offence or a terrorist activity financing offence. With respect to the Security Dealers sector, some relevant indicators that a transaction is suspicious and may be related to money laundering and/ or terrorist financing might include the following: • Accounts that have been inactive suddenly experience large investments that are inconsistent with the normal investment practice of the client or their financial ability. • Any dealing with a third party when the identity of the beneficiary or counter-party is undisclosed. • Client attempts to purchase investments with cash. • Client wishes to purchase a number of investments with money orders, traveller's cheques, cashier's

Date Answered: 2013-12-02

Activity Sector: Securities dealer
Obligation: Reporting
Guidelines: 2, 3

82. EFT in a Foreign Currency

Question:
1. If an MSB remits money overseas and as part of that process converts one currency to another, would the conversion for sending EFT fit under the traditional definition of foreign exchange dealing, and 2. If the answer to above questions is “yes”, I have a follow-up question. If an MSB that was registered with FINTRAC a few years back and did not inform that they conduct de facto foreign exchange dealing, should they be cited under 4(a) of the PCMLTF Registration Regulations. We have seen some exams where RCOs are citing the REs under both 4(a) and 4(b). One of the scenarios for 4(b) citation could be that they did not update the MSB registration within 30 days.
Answer:

1. The MSB has to determine whether an EFT in a foreign currency is reportable. Paragraph 28(1)(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “ Subject to subsection 52(1), every money services business shall report the following transactions and information to the Centre: […] the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be”. If, in the course of this transaction, the MSB also exchanges one type of currency for another, the MSB has to keep a record of that transaction. Paragraphs 30(e) and (f) of the PCMLTFR states that “Every money services business shall keep the following records in respect of any of the activities referred to in paragraph 5(h) of the Act: […] where an amount of $1,000 or more is remitted or transmitted […], and a transaction ticket in respect of every foreign currency exchange transaction” (regardless of the amount). 2. The application for registration, notification of change (or newly obtained information), clarification request, and renewal of registration are all done on the same registration form and must all contain the information required in Schedule 1 of the PCMLTFRR. This includes information with respect to the activities that will be conducted by the applicant. The activities that will be conducted by the applicant or registrant are to be indicated in Part A: Item 9 in Schedule 1 of the PCMLTFRR, as follows: • foreign exchange dealing • remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network • issuing or redeeming money orders, traveller’s cheques, or similar negotiable instruments Registration Application Subsection 11.12(1) of the PCMLTFA states that “An application for registration shall be submitted to the Centre in the prescribed form and manner, shall include a list of the applicant’s agents, mandataries or branches that are engaged, on behalf of the applicant, in the activities referred to in paragraph 5(h), in selling money orders to the public if the applicant is a person or entity referred to in paragraph 5(l), or in any prescribed activities, and shall include any prescribed information.” Paragraph 4(a) of the PCMLTFRR only applies with respect to the applicant’s application for registration. The Regional Compliance Officer should cite paragraph 4(a) of the PCMLTFRR as it was at the point of registration when the applicant failed to fully disclose all of its activities (ie. foreign exchange dealing). In doing so, the applicant effectively failed to submit an application for registration in the prescribed form and manner, and with the prescribed information. Change of Information or New Information Section 11.13 of the PCMLTFA states that “An applicant or a person or entity registered with the Centre shall notify the Centre, in the prescribed form and manner, of any change to the information provided in the application or of any newly obtained information that should have been included in the application within 30 days after the day on which the applicant or the registered person or entity becomes aware of the change or obtains the new information.” Once a person or entity is a registered MSB, they have to keep their registration information up to date. If there are any changes, they must inform us within 30 days. In this scenario, the Regional Compliance Officer should cite paragraph 4(b) of the PCMLTFRR when the registrant failed to submit changes to the information originally provided in his/ her application (application for registration or application to renew registration only). Alternatively, the Regional Compliance Officer should cite paragraph 4(c) of the PCMLTFRR when the registrant did not include newly obtained information such as an activity they were newly engaged in (i.e. foreign exchange dealing).

Date Answered: 2013-12-02

Activity Sector: Money services business
Obligation: Reporting
Regulations: 28(1)(b), 30(e), 30(f), Schedule 1 of the PCMLTFRR
Act: 11.12(1), 11.13

83. LCTRs - Multiple branches

Question:
It is possible to have some guidance regarding LCTR reporting where the reporting entity’s (RE) client has multiple branches? The RE, Company ABC, processes foreign exchange transactions on behalf of 400 Company DEF locations in Canada (399 locations are branches of the same company and 1 location is a franchise). The bags of foreign currency are delivered to ABC by courier in separate bags, divided by branch. ABC is currently processing LCTRs according to each DEF branch, treating each DEF outlet as a separate client for LCTR purposes. Additionally, ABC records the manager of each branch as the third party. The ABC compliance officer has asked whether it is required to aggregate all DEF branch incoming CAD values. ABC has also asked whether they should be aggregating all branch incoming amounts under $10,000, in accordance with the 24 hour rule.
Answer:

A reporting entity has to send a large cash transaction report to FINTRAC in the following situations: • If they receive an amount of $10,000 or more in cash in the course of a single transaction. Each such transaction must be sent to FINTRAC separately, in its own report. • If they receive two or more cash amounts of less than $10,000 each that total $10,000 or more. In this case, if the reporting entity is an individual, they have to complete an LCTR if they know the transactions were made within 24 consecutive hours of each other by or on behalf of the same individual or entity. If the reporting entity is an entity, they have to complete an LCTR if their employee or senior officer knows the transactions were made within 24 consecutive hours of each other, by or on behalf of the same individual or entity. We have said in the past that “by or on behalf of the same individual or entity” means the person actually giving the instructions to deal with the money. ABC has indicated they are currently recording the name of the branch manager as the third party when they complete an LCTR. Subsection 8(1) of the PCMLTFR states that, “every person or entity that is required to keep a large cash transaction record under these Regulations shall take reasonable measures to determine whether the individual who in fact gives the cash in respect of which the record is kept is acting on behalf of a third party”. We indicate in our Guidelines that, when determining whether a "third party" is involved, it is not about who "owns" the money, but rather about who gives instructions to deal with the money. To determine who the third party is, the crucial aspect to keep in mind is whether the individual in front of you is acting on someone else's instructions. If so, that someone else is the third party. In the scenario ABC has described, it would remain a question of fact whether the person giving the instructions is indeed the branch manager or whether this person is DEF’s client. Having said that, there is nothing in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) nor its associated regulations that prevents ABC from reporting LCTRs per DEF branch as it is currently doing.

Date Answered: 2013-11-28

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 12(1)(a), 8(1)

84. EFT - Multiple Beneficiaries

Question:
Bank XYZ is wanting to confirm the details of the reporting obligations with bundled EFTs. In a case where one corporate client sends an EFT (Wire) to a foreign subsidiary with instructions to pay multiple individuals, what are the reporting requirements? (see example below) It was identified that if within the bundled EFT there was one individual transaction value determined to be at the reporting threshold amount ($10,000 CAD) than a report would need to be made about that transaction. Bank XYZ would like to clarify the reporting obligations for the entire EFT (outgoing wire), and how to correctly report both the bundled EFT as well as the individual EFT amount over $10,000 contained within the bundled wire. Example: Bank XYZ sends a Bundled EFTO 100,000 to foreign subsidiary with instructions to pay out 400 people (Canada to UK) - MT 103 (Bank XYZ - Bank XYZ) - Most of the 400 recipients are under the reporting threshold - 1 individual to be paid $12,000 triggers a report - How would Bank XYZ report the initial $100,000 bundled EFT? This would apply to large corporate clients who are essentially sending a wire to a foreign subsidiary through Bank XYZ and providing Bank XYZ with the names of 400 individuals to pay out. While the total wire amount is over $10,000 the instructions are mostly below the reporting threshold. Any guidance would be appreciated.
Answer:

Paragraph 12(1)(b) of the PCMLTFR requires that financial entities report to FINTRAC the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be. Therefore, in a situation where a client ordering an EFT enters with the initial amount of $10,000 or more and instructs that it be divided between multiple beneficiaries, the EFT is still being carried out by the same client. As such, the EFT must be reported and this should be done using multiple reports (one per beneficiary). Note: An EFT of $10,000 or more, to be divided between multiple beneficiaries, is NOT considered to be a single transaction of $10,000 or more as defined under section 3 of the PCMTLFR. The definition of a single transaction, also known as the “24-hour rule”, is specifically for situations where two or more cash transactions or EFTs of less than $10,000 are each made within 24 consecutive hours and total $10,000 or more. Given the above, the EFT in Bank XYZ’s scenario is reportable because it is being carried out by the same client and it is over $10,000. As the client instructs that the EFT be divided between multiple beneficiaries, the entity is required to submit one report per beneficiary, regardless of whether some beneficiaries receive less than $10,000. This example may further assist: • Example: At 9AM, Client A requests an EFT of $100,000 to be sent as follows: $12,000 to be sent to Beneficiary Y, $5,000 to be sent to 17 different beneficiaries, and $3,000 to be sent to Beneficiary X. One report of $12,000 will be sent to the Centre, 17 separate reports of $5,000 will be sent to the Centre and one report of $3,000 will also be sent to the Centre. In order to submit the $5,000 reports and the $3,000 report, the 24-hour rule indicator must be selected for each of them. The EFT is reportable because it is over $10,000 and it will be reported using 19 separate reports because the $100,000 is divided between 19 beneficiaries.

Date Answered: 2013-11-13

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G
Regulations: 3, 12(1)(b)

85. EFTs Reporting

Question:
" Personal Payments is a payment service that lets people send money to millions of eligible credit accounts around the world through the Original Credit Transaction (OCT). VPP consumer and business applications include: • PP Money Transfer: Consumers can send funds to their credit account or to another person’s credit account. • PP Prepaid Load: Consumers can load/reload funds to a credit reloadable prepaid card in participating countries. • PP Credit Card Bill Pay: Consumers can pay a credit card bill. A consumer can send payments and transfers to another consumer’s eligible credit card, or to his/her own credit card." We have some concerns with this type of a product offering as there would be very limited information made available about the sender or beneficiary and consider this an elevated risk transaction. We’re trying to identify whether this type of transfer would meet the EFTR – Non Swift Reporting Requirements (guideline 8A).
Answer:

Personal Payments service is currently under development, there is limited information available regarding how the money transfer service from consumer to consumer will specifically function. Absent this information, it is difficult to provide a clear determination as to whether this service can be considered an EFT. I note that section 9.5 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) makes it clear that, in respect of EFTs, reporting entities have an obligation to include specific information with the transfer, such as the name, address and account number of the requestor. Subsection 66.1(3) of the PCMLTFR further specifies that these obligations do not apply in respect of: (a) a transfer carried out using a credit or debit card, if the recipient has an agreement with the payment service provider permitting payment by such means for the provision of goods and services; (b) a transfer where the recipient withdraws cash from their account; (c) a transfer carried out by means of a direct deposit or a pre-authorized debit; or (d) a transfer carried out using cheque imaging and presentment. Given the foregoing, the reporting entity should continue to report EFTs as they have in the past but should further information regarding the PP service become available, please feel free to contact us.

Date Answered: 2013-11-04

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 66.1(3)

86. Large Corporation Exemption (ongoing service agreement)

Question:
An MSB, Company XYZ, receives foreign denomination coins from various airlines and subsequently pays the airlines for these coins in Canadian currency at an exchange rate set by Company XYZ. These transactions are deemed to be foreign currency exchanges. 1. Do the airlines that Company XYZ deals with meet the large corporation exemption under paragraph 62(2)(m) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR)? 2. In general, can MSBs avail themselves of this exemption? 3. If Company XYZ can rely on this exemption, does it have to identify the individual conducting those particular transactions and submit a large cash transaction report (LCTR)? 4. If they do have to identify the individual, would this be the individual that authorizes Company XYZ to engage in these transactions or do they have to identify the individual from who they pick up the coins?
Answer:

To respond to the above questions, it is necessary to refer to paragraph 59(1) of the PCMLTFR, which requires that MSBs ascertain the identity of every person who conducts a foreign currency exchange transaction of $3,000 or more. Subsection 59(2) goes on to state that MSBs must confirm the existence of every corporation in respect of which they are required to keep a client information record and ascertain the name and address of the corporation and the names of the corporation’s directors. However, subsection 59(6) makes it clear that subsection (2) does not apply in respect of an entity referred to in paragraph 62(2)(m) with which the MSB has entered into a service agreement referred to in section 32. Section 32 of the PCMLTFR reads as follows: "Every MSB that enters into an ongoing electronic funds transfer, funds remittance or foreign exchange service agreement with an entity, or a service agreement for the issuance or redemption of money orders, traveller’s cheques or other negotiable instruments, shall keep a record of the name, address, date of birth and occupation of every person who has signed the agreement on behalf of the entity, a client information record with respect to the entity and a list containing the name, address and date of birth of every employee authorized to order transactions under the agreement." As such, an MSB is only required to keep a client information record when it enters into an ongoing service agreement. Where an MSB has an ongoing agreement with an entity referred to in paragraph 62(2)(m), subsection 59(6) of the PCMLTFR states that subsection 59(2) does not apply. This means that, where an MSB enters into an ongoing agreement with an entity referred to in paragraph 62(2)(m), it must: • ascertain the identity of the person conducting the foreign currency exchange transaction (paragraph 59(1)(c) of the PCMLTFR) unless this individual is acting on behalf of their employer pursuant to an ongoing service agreement under section 32 of the PCMLTFR (paragraph 59(4) of the PCMLTFR) • keep a record of the name, address, date of birth and occupation of every person who has signed the agreement on behalf of the entity (section 32 of the PCMLTFR) • keep a client information record with respect to the entity (section 32 of the PCMLTFR) • keep a list containing the name, address and date of birth of every employee authorized to order transactions under the agreement (section 32 of the PCMLTFR) Where an MSB enters into an ongoing agreement with an entity that does not fall under paragraph 62(2)(m), it must comply with subsection 59(2) as well as section 32. As such, it will be required to: • ascertain the identity of the person conducting the foreign currency exchange transaction (paragraph 59(1)(c) of the PCMLTFR) unless this individual is acting on behalf of their employer pursuant to an ongoing service agreement under section 32 of the PCMLTFR (paragraph 59(4) of the PCMLTFR) • confirm the existence of the corporation (subsection 59(2) of the PCMLTFR) • ascertain the name and address of the corporation and the names of the corporation’s directors (subsection 59(2) of the PCMLTFR) • keep a record of the name, address, date of birth and occupation of every person who has signed the agreement on behalf of the entity (section 32 of the PCMLTFR) • keep a client information record with respect to the entity (section 32 of the PCMLTFR) • keep a list containing the name, address and date of birth of every employee authorized to order transactions under the agreement (section 32 of the PCMLTFR) Conclusion In response to questions 1 and 2 above, namely, whether paragraph 62(2)(m) applies to Company XYZ and MSBs in general, if an MSB has an ongoing agreement with an entity that meets the requirements of 62(2)(m) of the PCMLTFR, it does not have to confirm the existence of the corporation; however, it still has the obligation to ascertain the identity of the person conducting the transaction, in addition to the record keeping obligations listed above. As such, paragraph 62(2)(m) of the PCMLTFR has a limited application with respect to MSBs. Question 3 above asks whether Company XYZ must identify the individual conducting the transaction(s) and whether it must submit an LCTR. As discussed above, MSBs must ascertain the identity of every person who conducts a foreign currency exchange transaction of $3,000 or more pursuant to paragraph 59(1)(c). As to whether Company XYZ must submit an LCTR for these transactions, paragraph 28(1)(a) of the PCMLTFR affirms that every MSB must report the receipt from a client of an amount in cash of $10,000 CAD or more in the course of a single transaction, unless the cash is received from a financial entity or a public body. Question 4 asks whether Company XYZ must identify the individual who authorizes these transactions or the individual from who they are picking up the coins. As paragraph 59(1)(c) of the PCMLTFR indicates, MSBs must ascertain the identity of every person who conducts a foreign currency exchange transaction of $3,000 or more. This must be done at the time of the transaction.

Date Answered: 2013-11-01

Activity Sector: Money services business
Obligation: Reporting Reporting
Guidelines: 6C, 7
Regulations: 28(1)(a), 32, 59(1)(c), 59(2), 59(4), 59(6), 62(2)(m)

87. 24-hr rule: Aggregation based on Conductor

Question:
I need guidance concerning the reporting of transactions conducted under the 24-hour rule. I would like to know whether the reporting entity can aggregate these transactions based on the account information as opposed to the information of the individual conducting the transactions. For example, in cases where a transaction is conducted in a joint personal account, where it could be either the account holder or the joint account holder who is conducting the specific transaction(s), I'm seeking clarification on how the LCTR should be sent to FINTRAC. I would like to know whether the reporting entity is required to know which account holder conducted the transaction(s) and whether the reporting entity must include the conductor’s name and particulars in Part D of the Reports.
Answer:

The 24-hour rule applies for the receipt of two or more cash amounts of less than $10,000 each that total $10,000 or more within a 24-hour period. The reporting entity has to make a large cash transaction report if their employee or senior officer knows the transactions were made within 24 consecutive hours of each other by or on behalf of the same individual or entity. Paragraph 12(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre: […] the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body”. Therefore, at the time the large cash transaction is conducted, the identity of the individual must be ascertained by the reporting entity (the exception under section 63 of the PCMLTFR may apply). Schedule 1, Part D requires that the reporting entity reports information about the individual who conducted the transaction that is not a deposit into a business account, not the information about the account holder(s). Therefore, the reporting entity must include the conductor’s information in Part D. If Part C is completed, the system used by the reporting entity must not auto populate the fields in Part D.

Date Answered: 2013-10-29

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: 6G, 7, FIN 4
Regulations: 12(1)(a), 63, Schedule 1

88. Casino Disbursement Reports & Bank of Canada Noon Rate

Question:
As per the PCMLTFR, casinos hardcode the daily Bank of Canada Noon Rate into our reporting systems to look for reportable foreign currency transactions. Here are the three scenarios in question: SCENARIO #1: Reason for Disbursement = CAD $10,000 front money account withdrawal Method of Disbursement - CAD $4,900 cash - USD $5,000 cash (CAD $5,100 commercial exchange rate) That day's Bank of Canada Noon Rate was 1.0114 so the USD portion of the transaction came out to CAD $5,057 for reporting purposes. The method of disbursement therefore totals CAD $9,957 and no CDR was created. SCENARIO #2: Reason for Disbursement = CAD $10,000 slots jackpot Method of Disbursement - CAD $5,000 cash - USD $5,000 cheque (CAD $5,000 commercial exchange rate) That day's Bank of Canada Noon Rate was 0.9937 so the USD portion of the transaction came out to CAD $4,968.50 for reporting purposes. The method of disbursement therefore totals CAD $9,968.50 and no CDR was created. SCENARIO #3: Reason for Disbursement = CAD $10,000 poker tournament prize Method of Disbursement - CAD $1,000 cash - USD $8,911 cheque (CAD $9,000 commercial exchange rate) That day's Bank of Canada Noon Rate was 1.006 so the USD portion of the transaction came out to CAD $8,916.35 for reporting purposes. The method of disbursement therefore totals CAD $9,916.35 and no CDR was created. I need some clarification on the application of the Bank of Canada noon rate with respect to Casino Disbursement Reports (CDRs).
Answer:

Section 2 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that, “where a transaction is carried out by a person or entity in a foreign currency, the amount of the transaction shall, for the purposes of these Regulations, be converted into Canadian dollars based on (a) the official conversion rate of the Bank of Canada for that currency as published in the Bank of Canada’s Daily Memorandum of Exchange Rates that is in effect at the time of the transaction; or (b) if no official conversion rate is set out in that publication for that currency, the conversion rate that the person or entity would use for that currency in the normal course of business at the time of the transaction.” FINTRAC’s Guideline 10A: Submitting Casino Disbursement Reports to FINTRAC Electronically, section 2.3 further clarifies that, “If a disbursement is in foreign currency, you will need to check whether it is the equivalent of 10,000 Canadian dollars or more to determine whether or not it is reportable. For this purpose only, use the last noon rate provided by the Bank of Canada available at the time of the transaction. This calculation is not based on the actual exchange rate used to process the transaction - this is only to check whether the $10,000 threshold is met for the transaction to be reportable.” FINTRAC has previously decided that the official conversion rate of the Bank of Canada (known as the noon rate) must only be used for determining whether the transaction is reportable. The reporting entity provided the following scenarios and requested that you confirm whether it's application of the noon rate is consistent with the PCMLTFR and FINTRAC's guidance: SCENARIO #1: Reason for Disbursement = CAD $10,000 front money account withdrawal Method of Disbursement - CAD $4,900 cash - USD $5,000 cash (CAD $5,100 commercial exchange rate) That day's Bank of Canada Noon Rate was 1.0114 so the USD portion of the transaction came out to CAD $5,057 for reporting purposes. The method of disbursement therefore totals CAD $9,957 and no CDR was created. SCENARIO #2: Reason for Disbursement = CAD $10,000 slots jackpot Method of Disbursement - CAD $5,000 cash - USD $5,000 cheque (CAD $5,000 commercial exchange rate) That day's Bank of Canada Noon Rate was 0.9937 so the USD portion of the transaction came out to CAD $4,968.50 for reporting purposes. The method of disbursement therefore totals CAD $9,968.50 and no CDR was created. SCENARIO #3: Reason for Disbursement = CAD $10,000 poker tournament prize Method of Disbursement - CAD $1,000 cash - USD $8,911 cheque (CAD $9,000 commercial exchange rate) That day's Bank of Canada Noon Rate was 1.006 so the USD portion of the transaction came out to CAD $8,916.35 for reporting purposes. The method of disbursement therefore totals CAD $9,916.35 and no CDR was created. After reviewing the above scenarios, it would appear as though the reporting entity has correctly applied the Bank of Canada’s noon rate for the purposes of submitting CDRs.

Date Answered: 2013-10-25

Activity Sector: Casino
Obligation: Reporting
Guidelines: 10A

89. Reporting EFTs or not

Question:
• Company ABC is an MSB based in Canada, with no other servers or locations outside of Canada and anticipates doing business with a German bank with no operations in Canada • Company ABC would like to provide Bank DEF with international money transfer services and will retain MSBs in the UK (“UK MSBs”) to carry out these money transfers • When Bank DEF wishes to transfer funds internationally at the request of its clients, it will instruct Company ABC to carry out this transfer • Bank DEF will provide Company ABC with the requesting client’s information, in addition to information on the beneficiary • Company ABC will then instruct the UK MSB to deliver these funds to the beneficiary • Beneficiaries may include residents of Canada and other countries Does Company ABC must report electronic funds transfers (EFTs) for certain international funds transfers initiated by the client of Bank DEF, a foreign bank with which Company ABC anticipates doing business?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines an electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada”. We have indicated in the past that to be reportable an electronic funds transfer must be: • client initiated, and • must be the transmission, across our border, of instructions to transfer funds (except where the instructions are to transfer funds from a place in Canada to another place in Canada). As the above indicates, and in response to your question, it is the instructions that must cross the Canadian border, not the funds, in order to trigger an EFT reporting obligation. It is Bank DEF’s client who provides the instructions to Bank DEF to transmit funds to the beneficiary. Bank DEF’s client is the ordering client, and his or her instructions include the necessary banking details for the transfer of funds. It is our position that the purpose of the transaction is to transfer funds from the ordering client to the beneficiary. According to subsection 28(1) of the PCMLTFR, every money services business shall report the following transactions and information to the Centre: (b) the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and (c) the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be. Given the foregoing, it is our position that the following two aspects of the transactions you have described constitute EFTs and must be reported by Company ABC: (1) Incoming EFT: When the ordering client provides instructions to Bank DEF, Bank DEF then provides instructions to Company ABC, which is situated in Canada. Bank DEF’s instructions, sent at the request of its client, are crossing the Canadian border, and qualify as an incoming EFT, reportable under paragraph 28(1)(c) of the PCMLTFR, if it meets the required threshold. (2) Outgoing EFT: Once the instructions from Bank DEF (on behalf of the ordering client) are received by Company ABC, Company ABC then sends the funds to the UK MSB and provides instructions (on behalf of the ordering client and Bank DEF) to the UK MSB to transmit the funds to the beneficiary. As such, these instructions again cross the Canadian border to the UK MSB and constitute an outgoing EFT, reportable under paragraph 28(1)(b) of the PCMLTFR, if it meets the required threshold. It is important to note the final destination of the instructions and funds is irrelevant as the instructions will always cross the Canadian border in order to reach Company ABC, and will always be crossing the Canadian border again in order to reach the UK MSB. Moreover, the purpose of this transaction is to transfer funds from the ordering client to the beneficiary and this is done by moving the instructions through Company ABC, which is situated in Canada. As such, based on the transaction information you have provided, Company ABC must report an incoming EFT when instructions are transmitted from Bank DEF and an outgoing EFT when it sends instructions to the UK MSB. You have also asked whether Company ABC may rely on an exception to reporting EFTs based on the inclusion of Bank DEF’s name and address in the instructions to the UK MSB. Section 28 of the PCMLTFR creates the following two exceptions to EFT reporting: • (3) Paragraph (1)(b) applies in respect of a money services business that orders a person or entity, to which subsection (1), 12(1) or 40(1) applies, to send out of Canada an electronic funds transfer made at the request of a client, unless it provides that person or entity with the name and address of that client. • • (5) Paragraph (1)(c) applies in respect of a money services business that receives an electronic funds transfer for a beneficiary in Canada from a person or entity to which subsection (1), 12(1) or 40(1) applies where the initial sender is outside Canada, unless the electronic funds transfer contains the name and address of that beneficiary. As paragraph 28(3) of the PCMLTFR states, an MSB will not be required to report an outgoing EFT if the request to send the EFT is being made to an MSB, financial entity or casino covered under the PCMLTFR, and that entity is provided with the name and address of the ordering client. Similarly, paragraph 28(c) of the PCMLTFR states an MSB will not be required to report an incoming EFT if it originates from an MSB, financial entity or casino covered under the PCMLTFR, where the EFT contains the name and address of the beneficiary. To our knowledge, neither Bank DEF nor the UK MSB are reporting entities covered under the PCMLTFR. Therefore, Company ABC cannot avail itself of the above exceptions.

Date Answered: 2013-10-11

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), 28(1)(b), 28(1)(c), 28(3)

90. Reporting EFTI

Question:
We have account in an European bank country in STG and Euro. Our Canadian client who have account in Europe wire amount to our account and we give them cheque or bank draft to them in Canadian currency as our exchange rate is better than the bank. Also, our client’s intent to do foreign exchange and to transfer money into Canada as they have money in other currency in other countries and want to bring here to spend, they can do it easily through their bank but exchange rate from their bank is very higher than us, they get rate from us then compare with their bank then back to us. Would you please inform me whether we should report such transactions or not.
Answer:

Pursuant to paragraph 28(1)(c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every money services business must report the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be. Subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission – through any electronic, magnetic or optical device, telephone instrument or computer – of instructions for the transfer of funds, other than the transfer of funds within Canada.” We have indicated in the past that to be reportable an electronic funds transfer (EFT) must be: • client-initiated; and • include the transmission of instructions to transfer the funds across the Canadian border. Our position is that the intention (or the purpose) of the wire is to transfer funds from your client’s account in the foreign country to your account in Canada and to give your client a cheque or bank draft in Canadian currency. This transaction constitutes an incoming non-swift international electronic funds transfer as defined in subsection 1(2) of the PCMLTFR and must be reported if it meets the above threshold.

Date Answered: 2013-10-07

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), 28(1)(c)

91. LCTR: Multiple currencies

Question:
Our customer would have contacted the Bank and sold to us, in one transaction the following currencies (banknotes) Transaction details in the attached LCTR: • 1,500,000 JYP • 12,100 EUR • 7,500 AUD • 2,000 SEK • 495 GBP • 12,500 SAR • 15 BZD • 4,500 CHF • 6,300 NOK • 70 GBP • 40 GBP • 330 HRK • 50 NIO • 840 BND • 200 KES • 7,000 RUB This would be part of a single transaction and we would have credited our customer’s CDN dollar account with the CDN equivalent which was $52,227.17 at the time of the transaction. The transaction would have been booked by one of our wholesale banknote traders as a single transaction. The currency would then have been shipped in a single package to our Toronto vault who would open the package confirm the amounts, take the currency into out bank currency supply, and complete the LCTR. The concern that was identified is that the LCTR report section B-2 fields 9 and 10 only allow for one amount and one currency. In this situation we have multiple amounts and multiple currencies which are part of one transaction that was credited to one account.
Answer:

It is FINTRAC’s position that all amounts involving multiple currencies that are part of a same instance and meet the $10,000 CAD threshold must be reported in the same Large Cash Transaction Report (LCTR), with each currency being recorded as a separate transaction. Even if one of these currencies, on its own, is equivalent to $10,000 CAD or more, it must be reported in the same LCTR as the other currencies that each amount to less than $10 000 on their own. The 24 hour rule indicator box should be used and each currency must be listed as a separate transaction. In this case, the dispositions should be repeated for all transactions in the LCTR. The following examples may assist in illustrating this position: Example: At 9am, a client gives $10,000 GBS, $4,000 USD and $6,000 EUR in cash to the teller. He then asks him to deposit the funds into his account. In this scenario, the entity would be required to report each of these currencies as separate transactions in one LCTR. In this case, the 24 hour rule indicator box must be ticked. The information about how the transactions were initiated and completed should be reported as follows: Report 1 24 hour rule indicator: ON Transaction 1: Amount of transaction (Field B5): $10,000 Transaction currency (Field B6): GBS Transaction 1 – Disposition 1: Disposition of funds (Field B8): Deposit to an account Amount of disposition (Field B9): $27,500 (approx.) Disposition currency (Field B10): CAD Transaction 2: Amount of transaction (Field B5): $4,000 Transaction currency (Field B6): USD Transaction 2 – Disposition 2: Disposition of funds (Field B8) Deposit to an account Amount of disposition (Field B9) $27,500 (approx.) Disposition currency (Field B10) CAD Transaction 3: Amount of transaction (Field B5): $6,000 Transaction currency (Field B6): EUR Transaction 3 – Disposition 3: Disposition of funds (Field B8): Deposit to an account Amount of disposition (Field B9): $27,500 (approx.) Disposition currency (Field B10): CAD In the scenario you have provided in your email below, the customer sold 16 different currencies to the financial entity at one time. If the multiple currencies that are part of a same instance meet the $10,000 CAD threshold, they must be reported in the same LCTR. The 24 hour rule indicator box must also be used. FINTRAC expects to find the information on the person conducting the transaction (that is not a deposit into a business account) to be included in Part D of the LCTR.

Date Answered: 2013-10-04

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 12(1)(a)

92. Armoured Car - Quick Drop Deposits and in Branch Deposits

Question:
Here are questions with respect to quick drop deposits and in branch deposits: 1. When is the deposit considered a quick drop vs. in branch? 2. The driver of the armoured car drops off the secured bag with the front receptionist who does not post any transactions. Is this a quick drop or in branch?. 3. The driver of the armoured car brings the secure bag in a supervised area where two staff members complete a physical check of the bag to ensure it is properly sealed and the staff signs the armoured car receipt. The bag is placed in a vault then verified and posted at a later time. Is this a quick drop as the bag was received in a supervised area or is it considered in branch? 4. One RE argued that the driver of the armoured car may not know the amount in the secured bag hence it may not be a large cash deposit? In that case, why would the RE need to get the name of the driver? The RE would only know that it is a large cash transaction once they post the transaction which may not be in the presence of the driver.
Answer:

1. What amounts to a quick drop is typically determined by the reporting entity, who may decide to have a drop box physically located outside the branch or may designate a specific area within the branch for deposits. All reporting entities must keep a record of the receipt of an amount in cash of $10,000 or more in a single transaction, unless the cash is received from a financial entity or a public body. Pursuant to section 53 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “Subject to subsection 63(1), every person or entity that is required to keep and retain a large cash transaction record under these Regulations shall ascertain, in accordance with subsection 64(1), the identity of every person with whom the person or entity conducts a transaction in respect of which that record must be kept, other than a deposit made to a business account or a deposit made by means of an automated banking machine.” As such, a reporting entity is not required to ascertain the identity of the person conducting the transaction if the deposit is into a business account or if the deposit is made via an automated banking machine, regardless if the deposit is made into a personal account. If an individual or entity conducts a large cash transaction, then the reporting entity is required to keep a large cash transaction record and send a large cash transaction report to FINTRAC. Subsection 1(2) of the PCMLTFR defines a large cash transaction record as “a record that indicates the receipt of an amount of $10,000 or more in cash in the course of a single transaction and that contains the following information: (a) as the case may be (i) if the amount is received for deposit by a financial entity, the name of each person or entity in whose account the amount is deposited, or (ii) in any other case, the name of the person from whom the amount is in fact received, their address and date of birth and the nature of their principal business or their occupation, if the information is not readily obtainable from other records that the recipient keeps and retains under these Regulations; (b) the date of the transaction; (c) where the transaction is a deposit that is made during normal business hours of the recipient, the time of the deposit or, where the transaction is a deposit that is made by means of a night deposit before or after those hours, an indication that the deposit was a night deposit; (d) the number of any account that is affected by the transaction, and the type of that account, the full name of any person or entity that holds the account and the currency in which account transactions are conducted; (e) the purpose and details of the transaction, including other persons or entities involved and the type of transaction (such as cash, electronic funds transfer, deposit, currency exchange , the purchase or cashing of a cheque, money order, traveller’s cheque or banker’s draft or the purchase of precious metals, precious stones or jewellery); (f) whether the cash is received by armoured car, in person, by mail or in any other way; (g) the amount and currency of the cash received; and (h) where the amount is received by a dealer in precious metals and stones for the sale of precious metals, precious stones or jewellery, (i) the type of precious metals, precious stones or jewellery involved in the transaction, (ii) the value of the transaction, if different from the amount of the cash received, and (iii) the wholesale value of the transaction.” Paragraph 12(1)(a) states that, “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre: […] the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body”. 2. In this scenario, the secured bag is merely being dropped off and is not immediately being verified and/ or deposited into the account. Therefore, it seems as though this would be considered a quick drop and the conductor’s name would not need to be provided. 3. A physical check of the bag is done to ensure it is sealed but the amount in the bag is not verified nor is the amount being deposited into the account at that time. As such, this is considered a quick drop and therefore the conductor’s name does not need to be provided. 4. If the secured bag is not being verified/ deposited at the time it is brought into the branch, it seems as though it would be considered a quick drop. As such, the conductor’s name would not need to be recorded.

Date Answered: 2013-10-02

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Ascertaining Identification
Guidelines: 6G, 7
Regulations: 1(2), 12(1), 53

93. Terrorist Property Report - Obligation

Question:
Our question concerns the Terrorist Property Report. If an IDE firm has completed a Monthly Suppression of Terrorism Form with a positive report, must the IDE firm also complete the FINTRAC Terrorist Property Report? If so, must the FINTRAC Terrorist Property Report be completed for any customer of the IDE firm, or only Canadian customers? While the Monthly Suppression of Terrorism Form contains only aggregate customer information, the FINTRAC Terrorist Property Report requires disclosure of personal customer information. Our concern is that laws in the local jurisdiction of a non-Canadian customer may prohibit an IDE firm from providing personal information of a non-Canadian customer to a non-local (e.g. Canadian) governmental authority. As a comparison, we have been told that firms operating in multiple jurisdictions (including Canada) would not provide personal information concerning Canadian customers to a non-Canadian financial regulator. I understand that there may be alternative ways for a Canadian financial regulator such as FINTRAC to cooperate with financial regulators outside of Canada to share information on terrorist property. For example, I understand that there are various judicial or administrative processes under which information may be shared. On this basis, I’m hoping that you can confirm that an IDE firm that files a positive Monthly Suppression of Terrorism Form need not also file a Terrorist Property Report, if the terrorist property in question belongs only to non-Canadian customers of the IDE firm, and the IDE firm reports the terrorist property to the relevant government agency in the non-Canadian customer’s home jurisdiction.
Answer:

Subsection 7.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) indicates that every person or entity required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism must also make a report on it to the FINTRAC. Therefore, if the entity is required to complete a Monthly Suppression of Terrorism Form, it will also be required to complete a TPR for submission to FINTRAC. Terrorist property reporting requirements apply to any IDE clients, whether they are Canadian clients or foreign clients, with respect to their activities in Canada only.

Date Answered: 2013-09-27

Activity Sector: Securities dealer
Obligation: Reporting
Act: 7.1(1)

94. Obligation to file STR when in the process of the Acquisition of a portfolio of credit card accounts

Question:
Bank ABC is in negotiations with another FE to purchase a portfolio of credit card accounts. There will be a period of time after Bank ABC takes ownership of these accounts during which the other FE will continue to service them. I want to know which entity will be responsible for filing STRs with respect to the acquired accounts during that time.
Answer:

Section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) requires every entity referred to in section 5 of the PCMLTFA to report every financial transaction that occurs or that is attempted in the course of their activities where there are reasonable grounds to suspect that the transaction is related to the commission or the attempted commission of a money laundering offence or a terrorist activity financing offence. Both Bank ABC and the other FE are reporting entities covered under the PCMLTFA and both have reporting obligations pursuant to section 7, regardless if they are the owners of an account or not. If, in the course of its activities, the other FE becomes aware of one or more suspicious transactions involving the acquired accounts, it has an obligation to report these transactions. As such, both Bank ABC and the other FE are subject to the reporting obligation found under section 7 of the PCMLTFA with respect to the acquired accounts in the event they become aware of one or more suspicious transactions.

Date Answered: 2013-09-20

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting

95. STR - Reasonable measures to identify an individual

Question:
Bank ABC has relationships with Canadian banks to offer money transfer services via the bank’s online banking platforms. For the purpose of the transaction the customer is authenticated via the bank’s online banking authentication process. Bank ABC is unable to rely on the bank’s customer ID and information for prescribed transaction, transactions are limited to $999. The bank certifies to us that they maintain the required compliance program and as such collect customer identification information at the time of account opening to comply with the PCMLTFA and Regulations. At times, through our monitoring program we identify patterns of customer activity which gives us concern that the activity may be related to ML or TF. My question to you is regarding the collection of ID to file the STR. FINTRAC Guidance in 6C, section 4.4 states that When you have to send a suspicious transaction report to FINTRAC, you have to take reasonable measures, before the transaction is reported, to identify the individual who conducted it, This does not apply in the following circumstances: • If you had already identified the individual as required and you have no doubts about that previous identification information; • If you believe that doing so would information the individual that you a submitting a suspicious transaction report; or • The transaction being reported was an attempted transaction. In this context, reasonable measures to identify an individual would include either of the options available t identify individuals who are not physically present. They also include asking the individual for an identification document. However, reasonable measures exclude any method that you believe would information the individual that you are submitting a suspicious transaction report. In this instance our option for reasonable measures is to request the ID information gathered by the FRFI at the time of account opening. While we cannot rely on the information passed by the bank through the online system, in FINTRAC’s opinion are we able to rely on the bank to provide us with the information regarding the customer ID, DOB and occupation to fully assess the report and file a complete report or are we required to file without the ID information as each transaction processed via the bank’s online system is less than the prescribed transaction limit for collecting ID. Contacting the customer for the ID information would be out of normal procedure and would tip them off that a report may be being filed. Bank ABC’s position is that the bank should provide the ID, DOB and Occupation for the customer so that we can meet our reporting obligation and provide full details. This will also allow us to assess the transactions for reasonableness and confirm our reasonable grounds to suspect and therefore report. The bank’s position is that privacy legislation prevents them from being able to provide this information to us (similar to them reporting STRs for Bank ABC product via referral to Bank ABC.) However, I believe that as they are passing the information to meet regulatory purposes as a result of their customer using a credit union service, this may trump PIPEDA. I am interested in FINTRAC’s views, as ultimately, the reporting obligation lies with Bank ABC and a future STR review under the current situation may find us deficient, which is not acceptable to Bank ABC.
Answer:

You have advised that Bank ABC has relationships with various Canadian banks who offer a credit union Money Transfer services via their online banking platforms. For the purpose of these transactions, the customer is authenticated via the online banking authentication process. You further indicate that these banks are fully compliant with the identification requirements found in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations but because Bank ABC cannot rely on this information, transactions are currently limited to $999. In the event that Bank ABC identifies suspicious customer activity that may be related to money laundering or terrorist financing, you have asked whether Bank ABC can force these financial institutions to disclose customer identification information so that it can submit a Suspicious Transaction Report (STR). Section 7 of the PCMLTFA requires every person or entity referred to in section 5 to report every financial transaction that occurs or that is attempted in respect of which there are reasonable grounds to suspect that the transaction is related to the commission or the attempted commission of a money laundering offence or the transaction is related to the commission or the attempted commission of a terrorist activity financing offence. Section 53.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) further indicates that every entity subject to the PCMLTFR shall take reasonable measures to ascertain the identity of every person with whom the person or entity conducts a transaction that is required to be reported under section 7 of the PCMLTFA, unless the entity believes this would inform the person that the transaction and the related information is being reported under section 7 of the PCMLTFA. Reasonable measures include using either of the options available to identify individuals who are not physically present, pursuant to subparagraph 64(1)(b) of the PCMLTFR. They also include asking the individual for an identification document; however, reasonable measures exclude any method that you believe would inform the individual that you are submitting an STR. In the specific scenario you have described, Bank ABC cannot compel these financial institutions to share their clients’ personal information. That being said, if Bank ABC is unable to obtain any further client information, and discloses all relevant information in its possession that it is able to without informing the individual that a report is being submitted, this is sufficient to meet the reasonable measures criteria in section 53.1 of the PCMLTFR.

Date Answered: 2013-09-11

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 2, 3, 6C
Regulations: 53.1, 64(1)(b)

96. Submitting EFTR - Currency to be Reported

Question:
The question relates to EFT reporting as required under section 12(b) of the PCMLTFR, specifically outgoing wires sent through the MTS service. The scenario that I am dealing with is a transfer of Canadian funds (from a credit union) to a foreign bank account that is in a non-Canadian currency. For instance, a transfer of $10,000 CDN from a Canadian bank account to a bank account in Poland where the currency is Zloty (PLN). In this case, the credit union would enter the transfer amount as $10,000 CDN. Credit Union Entity, seeing that the receiving account is in the PLN currency, will process a conversion from CDN to PLN, and send the wire. The conversion is done by Credit Union Entity, and not the sending credit union. Since Credit Union Entity is exempt from reporting requirements for EFTRs, it is the responsibility of the credit union to submit an EFTR for this transfer. The question is: in which currency should the EFTR be submitted? From the credit union’s perspective, the member requested a transfer of $10,000 CDN, not the equivalent amount in PLN. No conversion was done at the credit union. Should the report in this example contain the amount of $10,000 CDN or the equivalent in PLN that was sent by Credit Union Entity?
Answer:

Subparagraph 12(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) requires that every financial entity report the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction. The wording of this provision clearly emphasizes the EFT is at the request of the client. Applying this logic, the currency that should be reported is the currency in which the client instructs the EFT be sent. In the above-mentioned scenario, the client requested that $10,000 CDN be sent electronically to the foreign bank. As such, the EFTR should be reported in Canadian currency.

Date Answered: 2013-09-11

Activity Sector: Money services business
Obligation: Reporting
Regulations: 12(b)

97. LCTR Form - "on behalf of"

Question:
As per Module 3 of the LCTR batch specifications, Part E of an LCTR must be completed with information about the individual conducting the transaction where all dispositions within a transaction were a deposit to a business account (other than quick drop or night deposit). It further requires that the on behalf indication (field B.13) must be either “E” - on behalf of an entity, or “G” - employee depositing cash to employer’s business account. (refer to page 11 of module 3). When reviewing the instructions for Part D, the batch specifications require the part to be completed (other than quick drop or night deposit) where not all of the dispositions within a transaction were a deposit to a business account. However, there is no reference to any on behalf of requirement. (refer to page 11-12 of module 3). Upon review of the F2R system, it was discovered that the requirement for Part E is only driven by a deposit into a business account. There is no requirement for the on behalf of indicator to be set at either “E” or “G”. The purpose of this request is to establish the requirement for the on behalf of indicator to be set at either “E” or “G” for Part E to be completed. Would there be a circumstance where an individual could deposit into a business account where the disposition is made on behalf of themself or another individual?
Answer:

There may be scenarios in which an individual is making a deposit but neither of the two “on behalf of” indicators apply. For example, this could occur where the President of a company makes a deposit on his or her own accord and thus is not making the deposit on behalf of the entity.

Date Answered: 2013-09-11

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting

98. Transactions involving Digital Currency that are Reportable

Question:
I am registered as a money services business. I want to accept bitcoin currency besides regular currencies such as CAD or USD. How do I report each transaction if bitcoin, virtual currency.
Answer:

At this time, there are several transactions involving digital currency that are reportable under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). These include: • Outgoing EFTs for which an MSB, at the request of a client, accepts funds from that client, and converts those funds to virtual currency for the purpose of sending out of Canada. Then, subsequently re-converts the virtual currency into funds for a beneficiary outside of Canada • Incoming EFTs for which an MSB receives virtual currency from outside of Canada, sent at the request of a client, converted from funds for the purpose of being re-converted to funds once in Canada to be paid to the beneficiary. • Foreign exchange occurs when funds are exchanged for virtual currency and are subsequently re-converted to foreign funds. In this transaction, the virtual currency is used as a vehicle between two national funds. FINTRAC has informed Canadian officials that they do not consider businesses providing virtual currency -related services covered as MSBs under the PCMLTFA. I note that performing a simple conversion of non-digital currency into digital currency or converting digital currency into non-digital currency is not, at this time, subject to the PCMLFTA. Similarly, the straight purchase and sale of digital currency is not, in and of itself, subject to the PCMLTFA. However, when conducting transactions that fall under the three above-mentioned scenarios, and when the threshold is reached, you are required to report them in the same manner you would if they were conducted in non-digital currency. For example, if you are conducting an outgoing EFT (in the first scenario above) you are required to report it pursuant to paragraph 28(1)(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) and to keep a record pursuant to subsection 30(e) of the PCMLTFR. Additionally, pursuant to section 7 of the PCMLFTA, MSBs are required to report every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that the transaction is related to the commission or the attempted commission of a money laundering offence or the transaction is related to the commission or the attempted commission of a terrorist activity financing offence. This obligation extends not only to MSB activities enumerated under paragraph 5(h) of the PCMLTFA but to all other activities of the MSB where there are reasonable grounds to suspect that the transaction is related to the commission or the attempted commission of a money laundering offence or the transaction is related to the commission or the attempted commission of a terrorist activity financing offence.

Date Answered: 2013-08-28

Activity Sector: Money services business
Obligation: Reporting
Regulations: 28(1)(b), 30(e)
Act: 5(h), 7

99. Reporting STR

Question:
I’m supporting an ongoing examination through conducting analysis of the STRs submitted by a reporting entity. The STRs submitted by this reporting entity almost all fit under the identical threshold for submission – the reporting entities feels that the client is conducting excess wires for too much money. Because the suspicion that led the reporting entity to submit the reports was based on a number of wires, they are required to report all of them to us in the STR. From our guidelines “Your suspicion could be based on a series of transactions. In this case, include in the report the information for each transaction that led to the suspicion.” The reporting entity that I’m looking at does not submit such information. An example STR would be the following “The client sent 86 wires to Africa for $50,000. This is excessive. The wires were primarily sent from [name of the store] in Toronto.” The only information provided in the other parts of the STR shows a singular $50,000 wire. No beneficiaries, receiving locations, dates or amounts of the separate transactions etc as is required in the various parts of the STR.
Answer:

Section 7 of the PCMLTFA states that “Subject to section 10.1, every person or entity referred to in section 5 shall report to the Centre, in the prescribed form and manner, every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that (a) the transaction is related to the commission or the attempted commission of a money laundering offence; or (b) the transaction is related to the commission or the attempted commission of a terrorist activity financing offence.” Subsection 9(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations (PCMLTFSTR Regulations) states that “Subject to section 11, a report under section 7 of the Act concerning a financial transaction or an attempted financial transaction in respect of which there are reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering offence or a terrorist activity financing offence shall contain the information set out in Schedule 1.” Information set out in Schedule 1 includes: • Part A - Information on Place of Business where Transaction or Attempted Transaction Occurred; • Part B - Information on Transaction or Attempted Transaction; • Part C - Account Information (if applicable); • Part D - Information on Person Conducting or Attempting to Conduct Transaction; • Part E - Information on Entity on Whose Behalf Transaction is Conducted or Attempted (if applicable); • Part F - Information on Person on Whose Behalf Transaction is Conducted or Attempted (if applicable); • Part G - Description of Suspicious Activity; • Part H - Action Taken (if applicable). Section 11 of the PCMLTFSTR Regulations explains that information required in the suspicious transaction report is either mandatory, mandatory where applicable, or requires "reasonable efforts", as follows: • Mandatory: All items in the Schedule marked with an asterisk (*) have to be provided in the report. • Mandatory where applicable: The information requirements that have both an asterisk and "where applicable" have to be provided if they are applicable to the reporting entity or the transaction being reported. • Reasonable efforts: Based on subsection 11(1), for all other information requirements that do not have an asterisk, the reporting entity has to take reasonable measures to get the information. This concept is not defined in the Regulations so reference should be made to our guidelines for further clarification. "Reasonable efforts" means that the reporting entity tried to get the information for the report. If the information is available to the reporting entity, they must provide it in the report. If the information was not available at the time of the transaction, and it is not contained in the reporting entity’s files or records, the related field in the report may be left blank. The reporting entity can be cited if any of the prescribed information is not included in the report. We have said in the past that in the case where the reporting entity has reasonable grounds to suspect the commission or the attempted commission of a money laundering offence or a terrorist financing offence with one (1) transaction, or one (1) attempted transaction, it is acceptable to include the information about that one suspicious transaction, or that one attempted transaction, in Part B of the suspicious transaction report (STR) and to summarize the nature of the transactional activity / pattern / behaviour observed, in Part G of the STR. However, in the case where the reporting entity has reasonable grounds to suspect the commission or the attempted commission of a money laundering offence or a terrorist financing offence through more than one transaction, or more than one attempted transaction, the reporting entity can include all suspicious transactions, or attempted transactions, in Part B of the STR, as long as they are related to the same suspicion of a commission or the attempted commission of a money laundering offence or a terrorist financing offence and they took place at the same address. In fact, the structure of the suspicious transaction report only allows for one Part A in any given report. Because Part A includes the address of the transaction, all transactions included in the report must have taken place at the same address. If there are transactions that occurred at other addresses, they must be included in another report. For example, if an MSB determines that two transactions conducted on the same day at two different branches were suspicious, those have to be reported separately. Part B of the STR allows the reporting entity to add up to 99 transactions. All these suspicious transactions related to the same suspicion must be reported. The reporting entity can also be cited if it does not report an STR.

Date Answered: 2013-08-27

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 2, 3
Regulations: 9(1), 11PCMLTFSTR

100. 24 hour rule - Alternative LCTR

Question:
A credit union is seeking clarification regarding one of the conditions for Alternative to LCTRs: If a client makes multiple deposits totalling $10,000 or more within a 24 hour period, at least twice weekly, has the client met the below indicated condition? Does the 24 hour rule apply?
Answer:

According to paragraph 12(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every financial entity shall report the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body. Additionally, section 13 of the PCMLTFR specifies that every financial entity shall keep a large cash transaction record in respect of every amount in cash of $10,000 or more that is received from a client in the course of a single transaction, unless the cash is received from another financial entity or a public body. Paragraph 50(1)(c) provides an exception to the reporting obligation found under paragraph 12(1)(a) if the financial entity has records that indicate that the client has deposited $10,000 or more in cash into that account on an average of at least twice in every week for the preceding 12 months. It is also important to note that, pursuant to paragraph 3(1)(a) of the PCMLTFR, two or more cash transactions or electronic funds transfers of less than $10,000 each that are made within 24 consecutive hours and that total $10,000 or more are considered to be a single transaction of $10,000 or more if, where a person is required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations, the person knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity. In light of the foregoing, and because the PCMLTFR clearly indicates that the report includes two or more cash transaction of less than $10,000 each that are made within 24 consecutive hours and total $10,000, we can conclude that the 24 hour rule applies to ALT-LCTRs.

Date Answered: 2013-08-21

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 3(1)(a), 12(1)(a), 13, 50(1)(c)

101. Card skimming

Question:
Are credit unions required to report the suspicious alerts they receive from their Fraud Alert System regarding their clients’ debit cards. More specifically, the Fraud Alert System sends alerts to the reporting entity when their clients’ debit cards have been suspected of being skimmed (i.e.: where debit card information such as the personal identification number has been illegally recorded). Are these transactions, or attempted transactions, to be reported to FINTRAC as Suspicious Transaction Reports (“STR”)?
Answer:

Pursuant to section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), financial entities have the obligation to report every financial transaction that occurs, or is attempted in respect of which there are reasonable grounds to suspect that the transaction is related to the commission or the attempted commission of a money laundering offence or a terrorist activity financing offence. Under Canadian law, a money laundering offence involves various acts committed with the intention of concealing or converting property or the proceeds of property (such as money), while knowing or believing that this property was derived from the commission of a designated offence. In the current case, the alerts being issued by the Fraud Alert System are in relation to the skimming or suspected skimming of debit cards, a criminal offence amounting to fraud, as opposed to a money laundering or terrorist activity financing offence. However, if following the card skimming, efforts are made to conceal or convert the proceeds, this may amount to the commission or attempted commission of a money laundering offence. Any transactions or attempted transactions related to these efforts would then be reportable as STRs in accordance with section 7 of the PCMLTFA.

Date Answered: 2013-08-19

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting

102. International STRs

Question:
An FE doing business in Canada, who also has various branches and ATMs located outside of Canada, determined that a group of transactions were suspicious. Several of the transactions took place at one of the entity’s ATMs outside of Canada. The FE has asked whether a suspicious transaction should be reported and if so, how this should be done.
Answer:

It is our position that FEs operating in Canada and abroad are required to report suspicious transactions occurring at their foreign branches and/ or ATMs if these transactions have a material connection to Canada. Subsection 5(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) states that Part 1 applies to, “authorized foreign banks within the meaning of section 2 of the Bank Act in respect of their business in Canada, or banks to which that Act applies.” As this subsection illustrates, the PCMLTFA will apply to an FE’s business in Canada. This is directly in line with the purpose of the PCMLTFA, which is to assist in protecting the integrity of Canada's financial system through the detection and deterrence of money laundering and terrorist financing. In furtherance of this objective, FEs must also report suspicious transactions that have a material connection to Canada. A material connection to Canada should be determined on a case by case basis, given the specific facts of each situation. In most instances, if the only link to Canada is the client’s Canadian mailing address, this will not be sufficient enough to require an STR. However, if the suspicious transaction(s) happen to involve funds originating from or to a Canadian account, this may amount to a connection sufficient enough to require an STR. Again, this determination should be made based on the facts of each individual case.

Date Answered: 2013-08-16

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Act: 5(a), 7

103. Submitting 3 EFT reports using the with 24 hour indicator

Question:
EFT reports need to be submitted when an organization conducts an international transfer of $10,000 or more on behalf of the same individual or entity. Referring to the following example: Foreigner A sends to Customer B - $5000 Foreigner A sends to Customer C - $5000 Foreigner D sends to Customer C - $5000 Assuming that the above example occurs within a 24 hour period, how would these transactions be reported? To that end, would it be 3 EFT reports (with 24 hour indicator)? Also, when submitting a non-SWIFT EFT report, there is a 24-hour rule indicator but is there such an indicator for SWIFT EFT reports or under the batch reporting? Can you please indicate where the 24 hour rule indicator is?
Answer:

Paragraphs 12(1)(b) and (c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) require that financial entities report to FINTRAC the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be. In section 3 of the PCMTLFR, the definition of single transaction, otherwise known as “the 24-hour rule”, specifically applies to situations where two or more cash transactions or electronic funds transfers of less than $10,000 each are made within 24 consecutive hours and total $10,000 or more. This is considered to be a single transaction of $10,000 or more if “the person knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity.” The 24 hour rule applies when multiple transactions (that are less than $10,000 individually but total $10,000 or more) are conducted by or on behalf of the same person (this being the person giving the instructions as opposed to the beneficiary). Depending on what type of system the financial entity is using, the 24-hour period can vary. In the rolling 24-hour system, the 24-hour period begins with each new EFT of less than $10,000 (if you know they were made by or on behalf of the same individual or entity). In the static 24-hour system, you are required to report the multiple transactions that you know were made by or on behalf of the same individual or entity in that 24-hour period (e.g. from 9:00 a.m. to 9:00 a.m. the next day). Each EFT that the reporting entity has to report will be on a separate report (one per beneficiary). The 24 hour rule indicator must be selected for each report sent to the Centre that is below $10 000. The 24 hour rule applies when two or more electronic funds transfers of less than $10,000 each are made within 24 consecutive hours, on behalf of the same individual, and total $10,000 or more. Therefore, in the above example, only the two transactions sent by Foreigner A would be reportable as they total $10,000. Since there are two different beneficiaries, two separate reports need to be filed and the 24 hour rule indicator must be selected on each report. SWIFT BATCH reporting as well as Non-SWIFT BATCH reporting both have the 24 hour indicator option. For non-SWIFT Batch reporting, the 24 hour rule indicator information can be found in the link below, under the heading “Standard Batch Reporting Instructions and Specifications”, Module 4, on page 3, Section 5.2.3.1, Part A, Field number ±3A. Information on SWIFT Batch reporting can be found on the same page, under the heading “SWIFT Batch Reporting Instructions and Specifications” (only document), page 15, Section 5.2.1, Tag 0: FINTRAC Header.

Date Answered: 2013-08-15

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: FIN-4, 8A
Regulations: 3,12(1)(b), 12(1)(c),

104. LCTR: Bank is accepting cash deposits on behalf of another Bank

Question:
I need guidance on who has the obligation to report a large cash transaction in the case where a financial entity has entered into an agreement that allows their clients to make deposits at another financial entity’s place of business. For instance, Bank 1 is accepting cash deposits on behalf of Bank 2 for Bank 1s clients.
Answer:

Paragraph 12(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre: […] the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body”. Section 13 of the PCMLTFR indicates that “Subject to subsection 52(2), every financial entity shall keep a large cash transaction record in respect of every amount in cash of $10,000 or more that is received from a client in the course of a single transaction, unless the cash is received from another financial entity or a public body”. Section 2 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) defines a client as “a person or an entity that engages in a financial transaction or activity with a person or an entity referred to in section 5, and includes a person or an entity on whose behalf the person or the entity that engages in the transaction or activity is acting”. In this situation, the client is engaged in a financial transaction with the financial entity that holds his/her account. As such, the financial entity that holds the client's account has the reporting obligations and record keeping requirements associated with any large cash transaction conducted for this account through the other financial entity. The agreement between the financial entities is a form of agent/principal relationship that has been established. Therefore, the financial entity holding the client's account must be informed, by the other financial entity receiving the deposit, when the client has conducted a large cash transaction. The financial entity holding the client's account also needs the appropriate information from the other financial entity, such as the time, date and exact amount of the cash transaction, as well as the complete address of place of business where the transaction occurred. The financial entity, holding the client's account, needs to ensure that their locations in F2R are updated to include the address information about the other financial entity's place of business where the transaction in question took place. This information will be included in the large cash transaction report.

Date Answered: 2013-07-30

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 12(1)(a), 13

105. LCTR and STR - Information on Person Conducting the Transaction

Question:
In cases where a transaction is conducted in a personal joint account where it could either be the account holder or joint account holder conducting the specific transaction(s), we are seeking information on the expectation in completing the LCTR and STR reports sent to FINTRAC. Specifically is the reporting entity required to know which accountholder conducted the transaction(s) to include his/her name and particulars in Part D of the Reports? Both accountholder names are recorded in Part C of the Reports. Further, in the case of an STR the tombstone data of both of the accountholders may be recorded in the STR with the notation that it is unknown which accountholder performed the transaction(s). This is not possible in the case an LCTR. Is it FINTRAC’s expectation that for each transaction conducted through an account that Part D information is applicable since it involves an account? Further is it the expectation that the reporting entity is to design processes/systems to maintain this information in its records to report the information?
Answer:

In the case of a financial entity, paragraph 12(1)(a) of the PCMLTFR states that “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre […] the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body”. This means, at the time the large cash transaction is conducted, the identity of the individual must be ascertained by the reporting entity (the exception under section 63 of the PCMLTFR may apply). As such, the reporting entity must include the conductor’s information in Part D. Schedule 1, Part D requires that the reporting entity reports information about the individual who conducted the transaction that is not a deposit into a business account, not the information about the account holder(s). If Part C is completed, the system used by the reporting entity must not auto populate the fields in Part D. In the case of a suspicious transaction, subsection 53.1(1) of the PCMLTFR states that “Except where identity has been previously ascertained as required by these Regulations, every person or entity that is subject to these Regulations shall take reasonable measures to ascertain, in accordance with subsection 64(1), the identity of every person with whom the person or entity conducts a transaction that is required to be reported to the Centre under section 7 of the Act”. This means, the reporting entity must take reasonable measures, before the transaction is reported, to identify the individual who conducted the transaction. This does not apply in the following circumstances: • if you have already identified the individual as required; and you do not have doubts about this previous identification information; • if you believe that ascertaining identification might inform the individual that you are submitting a suspicious transaction report; or • the transaction being reported was an attempted transaction. Guideline 2: Suspicious Transactions provides more information about reporting attempted transactions. Note: I am providing you with the link to the FINTRAC Interpretation Notice # 5, FIN 5, which clarifies requirements for financial entities when large cash transactions are conducted through an automated banking machine (ABM). STR Report - Number of transactions reported In the case of a client conducting multiple transactions that are the same or similar (e.g., multiple repeated cash transactions), it is necessary to report each and every specific transaction in Part B or it is acceptable to input the data on the key transaction(s) that caused the suspicion and then summarize in Part G the nature of the transactional activity / pattern / behaviour observed.

Date Answered: 2013-07-29

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: 2, 3, 7
Regulations: 12(1)(a), 53.1(1), 63, Schedule 1-Part C and D

106. STR Report - Number of transactions reported

Question:
In the case of a client conducting multiple transactions that are the same or similar (e.g., multiple repeated cash transactions), it is necessary to report each and every specific transaction in Part B or it is acceptable to input the data on the key transaction(s) that caused the suspicion and then summarize in Part G the nature of the transactional activity / pattern / behaviour observed.
Answer:

In the case where the reporting entity has reasonable grounds to suspect the commission or the attempted commission of a money laundering offence or a terrorist financing offence with one (1) transaction, or one (1) attempted transaction, it is acceptable to include the information about that one suspicious transaction, or that one attempted transaction, in Part B of the suspicious transaction report (STR) and to summarize the nature of the transactional activity / pattern / behaviour observed, in Part G of the STR. However, in the case where the reporting entity has reasonable grounds to suspect the commission or the attempted commission of a money laundering offence or a terrorist financing offence through more than one transaction, or more than one attempted transaction, the reporting entity can include all suspicious transactions, or attempted transactions, in Part B of the STR, as long as they are related to the same suspicion of a commission or the attempted commission of a money laundering offence or a terrorist financing offence. Part B of the STR allows you to add up to 99 transactions.

Date Answered: 2013-07-29

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 2, 3

107. Auditor suspected of an incidence of "nefarious activity" - Reportable or not?

Question:
Can you tell me please is there an obligation to inform the “Centre”, subject to PCMLTFR, Sections 34/35 if any auditor were to suspect an incidence of nefarious activity? I expect it is a client responsibility, yes?
Answer:

You have asked whether an auditor who suspects an incidence of “nefarious activity” has the obligation to report this activity to FINTRAC, or if this obligation belongs to the reporting entity. For the purposes of this response, I will assume that by “nefarious activity” you are referring to the reporting obligation found under section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). This section specifies that every person or entity referred to in section 5 of the PCMLTFA shall report every financial transaction that occurs or that is attempted in the course of their activities where there are reasonable grounds to suspect that the transaction is related to the commission or the attempted commission of a money laundering offence or the transaction is related to the commission or the attempted commission of a terrorist activity financing offence. Section 5 of the PCMLFTA specifically lists the following persons and entities subject to Part 1, namely, • (a) authorized foreign banks within the meaning of section 2 of the Bank Act in respect of their business in Canada, or banks to which that Act applies; • (b) cooperative credit societies, savings and credit unions and caisses populaires regulated by a provincial Act and associations regulated by the Cooperative Credit Associations Act; • (c) life companies or foreign life companies to which the Insurance Companies Act applies or life insurance companies regulated by a provincial Act; • (d) companies to which the Trust and Loan Companies Act applies; • (e) trust companies regulated by a provincial Act; • (f) loan companies regulated by a provincial Act; • (g) persons and entities authorized under provincial legislation to engage in the business of dealing in securities or any other financial instruments, or to provide portfolio management or investment advising services; • (h) persons and entities engaged in the business of foreign exchange dealing, of remitting funds or transmitting funds by any means or through any person, entity or electronic funds transfer network, or of issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments except for cheques payable to a named person or entity; • (i) persons and entities engaged in a business, profession or activity described in regulations made under paragraph 73(1)(a); • (j) persons and entities engaged in a business or profession described in regulations made under paragraph 73(1)(b), while carrying out the activities described in the regulations; • (k) casinos, as defined in the regulations, including those owned or controlled by Her Majesty; • (l) departments and agents of Her Majesty in right of Canada or of a province that are engaged in the business of accepting deposit liabilities, that sell money orders to the public or that sell prescribed precious metals, while carrying out the activities described in regulations made under paragraph 73(1)(c); and • (m) for the purposes of section 7, employees of a person or entity referred to in any of paragraphs (a) to (l). Additionally, sections 11.2 to 50 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) outline the reporting obligations of each specific reporting entity sector. As you can see, consultants are not captured therein. Accountants, on the other hand, are captured under section 34 of the Regulations, which states that every accountant and every accounting firm is subject to Part 1 of the PCMLFTA when they engage in any of the following activities on behalf of any person or entity, namely: • receiving or paying funds, • purchasing or selling securities, real properties or business assets or entities, or • transferring funds or securities by any means; or They are also subject to Part 1 if they give instructions on behalf of any person or entity in respect of any of the above activities. However, subsection 34(2) makes it clear that subsection 34(1) does not apply in respect of an accountant when they engage in any of the activities referred to in paragraph (1)(a) or (b) on behalf of their employer. Given the foregoing, it would appear that only persons or entities listed under section 5 of the PCMLFTA and referred to in sections 11.2 to 50 of the PCMLTFR are subject to the reporting obligations found in Part 1 of the PCMLFTA. That being said, FINTRAC can also receive voluntary information from the public about suspicions of money laundering or of the financing of terrorist activities pursuant to section 54 of the PCMLFTA.

Date Answered: 2013-07-25

Activity Sector: Accountant
Obligation: Reporting
Guidelines: 6D
Regulations: 5,7, 11.2 to 50, 34, 54

108. Alternative LCTR

Question:
The client comes into the RE about once a week and has multiple deposit slips for different days and thus makes multiple deposits for different days all on one day. The RE then sees in their system that there is in fact only one deposit despite the multiple deposit slips. For a client to qualify for an Alt-LCTR they need to conduct 2 deposits a week for 12 months. Therefore, do we count one deposit as a deposit slip or one deposit as one visit to the RE? On the same topic, the Alt-LCTR regulations and guidelines speak of number of deposits however, the Alt-LCTR form provides an RE an exemption from submitting Large Cash Transaction Reports. Therefore, when reading the legislation and regulations do we understand a deposit to be the same as a transaction? If so, is one deposit or one transaction mean one visit to the RE?
Answer:

According to Section 50(1) of the PCMLTFR, “A financial entity is not required to report transactions under paragraph 12(1)(a) in respect of a business client if the following condition [is] met: c) the financial entity has records that indicate that the client has deposited $10, 000 or more in cash into that account on an average of at least twice in every week for the preceding 12 months”. In other words, when the financial entity annually submits the Alt-LCTR report to FINTRAC, there must be a record of a minimum of 104 visits in which their business client made a deposit. Since the Alt-LCTR reports submitted to FINTRAC only require a total number for deposits, whether the financial entity sees in their system that there is only one deposit, although multiple deposit slips have been received, is not a concern to FINTRAC.

Date Answered: 2013-07-03

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Regulations: 50(1)

109. Night deposits and automated teller transactions for commercial accounts

Question:
We have been informed that some financial entities give commercial clients the opportunity to make commercial deposits using the night deposit box to deposit cash and then immediately update their account, thus enabling commercial clients to do their accounting in real time with an automated teller machine (ATM). To make this deposit, commercial clients must use an ATM (using their card and PIN). The transaction is recorded as an ATM transaction by the financial entity’s system. For someone who uses an automated information system, the transaction appears as an ATM transaction and is likewise identified as an ATM transaction. As a result, commercial clients are immediately credited their deposits and deposits are verified the following day. Should these transactions be recorded as night deposits or ATM transactions?
Answer:

According to paragraph 12(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre: the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body”. The transaction described above is not considered to be a night deposit and should not be treated as such. The operation was carried out using an ATM and the cash was deposited in the night deposit box. Since the transaction is carried out with an ATM in a commercial account (other than a night deposit or quick drop), Part E becomes a mandatory field. The transaction must be reported and the name of the person who deposited the money must be entered in Part E of the large cash transaction report (LCTR). In the past, we indicated that this person was the cardholder of the ATM card. The name of the business should not be entered in this field. However, if the name on the card is the business, one of the three signing authorities for the commercial account may be designated as the individual carrying out the transaction.

Date Answered: 2013-06-05

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 7
Regulations: 12(1)(a), Schedule 1-Part E

110. Reporting EFTs – EFTI Exchange

Question:
What is the rate to declare on the report if the customer does not want the exchange yet because rates are unfavourable? Two scenarios: • EFT transaction did not specify currency for payout. The beneficiary decides when claiming the funds which currency it wants the payout in. • EFT transaction specifies the currency for the payout but not the exchange rate. The beneficiary will receive the rate of the day when payout occurs, but the beneficiary controls when the payout occurs.
Answer:

Section 2 of the PCMLTFR states that “where a transaction is carried out by a person or entity in a foreign currency, the amount of the transaction shall, for the purposes of these Regulations, be converted into Canadian dollars based on (a) the official conversion rate of the Bank of Canada for that currency as published in the Bank of Canada’s Daily Memorandum of Exchange Rates that is in effect at the time of the transaction; or (b) if no official conversion rate is set out in that publication for that currency, the conversion rate that the person or entity would use for that currency in the normal course of business at the time of the transaction.” In addition, Guideline 8A: Submitting Non-SWIFT Electronic Funds Transfer Reports to FINTRAC Electronically, section 3.5 Electronic funds transfers in foreign currency indicates the following: “If you send or receive an EFT in a foreign currency, you will need to check whether it is the equivalent of 10,000 Canadian dollars or more to determine whether or not it is reportable to FINTRAC. For this purpose only, use the last noon exchange rate provided by the Bank of Canada available at the time of the transaction, instead of the actual exchange rate used to process the transaction. This calculation is only to check whether the $10,000 threshold is met for the transaction to be reportable as an EFT transaction.” It could happen that an entity receives an incoming EFT and by means of how their business functions they are required to report the incoming EFT before the client has actually “withdrawn” the money from the MSB. There are two possible scenarios that arise. Scenario 1 – no currency for transaction because client hasn’t yet “withdrawn” the funds and can choose the currency into which the funds will be converted when they “withdraw” the funds In the world of foreign currency EFTs, the EFT and the foreign currency exchange can be viewed as two separate transactions: 1) The receipt of the incoming EFT 2) The conversion to pay out that transaction For reporting an EFT, the emphasis is on the EFT portion of the transaction. Field A4 is a mandatory field for the currency of the transaction. Because the transaction being reported is the incoming EFT, the currency reported in A4 should be the currency in which the EFT was received by the MSB. This holds especially true for transactions where the MSB holds onto the funds until the client chooses to “withdraw” them, but has to report before this happens. As a mandatory field, A4 has to be filled in and can only be filled in using the currency the MSB already knows about. In this example, Field A5 will be left blank since 1) the last noon exchange rate provided by the Bank of Canada used at the time of the transaction is only for the purpose of determining whether or not it is reportable to FINTRAC (CAD10,000 or more), and 2) there was no exchange rate applied to this transaction yet to convert the amount sent to Canadian dollars (since we don’t know yet if the client would want the funds to be paid out into CAD). Scenario 2 – no exchange rate indicated because the client is waiting for the best rate for the conversion from the currency in which the funds were received by the MSB to the currency in which they will “withdraw” the funds. As indicated in Scenario 1, there may be two transactions in a foreign currency EFT. The EFTI is one transaction, and the conversion to pay out the EFT is a second transaction and completes the processing of the EFT. While an entity is expected to use the Bank of Canada noon rate to determine whether or not the EFT is reportable, the exchange rate reported in Field A5 should be the rate actually used to process the conversion of the EFT. The following is an excerpt from Guideline 8A – Section 3.5: Once you have determined that an EFT in a foreign currency is reportable based on the Bank of Canada noon rate, you will have to send an EFT report to FINTRAC. On the EFT report in Part A, enter the amount of the transaction in the foreign currency. If you converted this amount to or from Canadian dollars when you processed the transaction (other than using the Bank of Canada noon rate to determine whether or not it was reportable), enter the actual exchange rate you used to process the EFT in Part A of the report. It is important to note that: • If the client has not yet “withdrawn” the funds then the MSB has not processed conversion of the EFT, at which point they would not be able to include an exchange rate in Field A5 of the EFT report. • In addition to this, the exchange rate in Field A5 should only be filled in if the MSB converts the amount received through the incoming EFT into Canadian dollars.

Date Answered: 2013-05-02

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 8A

111. EFTI / EFTO

Question:
I would appreciate your confirmation regarding my analysis of the following arrangement in light of FINTRAC Guideline 8A (the “Guideline"). The arrangement involves a Canadian money services business that is subject to The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “AML Regime”). I am satisfied that the arrangement does not give rise to any reporting obligation on the part of the Canadian money services business under the AML Regime. However, in light of the importance of the issue, I wanted to ensure that FINTRAC agreed with my opinion. Assume the following: 1. A Canadian resident (the “Canadian Exporter”) which is a client of Bank #1 in Toronto sells goods to a purchaser located in the United States (the “Foreign Purchaser”) for a purchase price of $20,000 U.S. 2. The Canadian Exporter requests a Canadian resident money services business (the “Canadian MSB”), which is a client of Bank #2 in Toronto, to: • collect the $20,000 U.S.; and • forward the exchange equivalent ($22,000 Cdn.) to the Canadian Exporter. 3. The Canadian MSB is part of a worldwide money services group and has an affiliate in the United States (the “US MSB Affiliate”) which will be involved in this transaction. 4. The Canadian Exporter instructs the Foreign Purchaser to effect the payment of the $20,000 U.S. by having those funds transferred to a bank account in the United States of the US MSB Affiliate at Bank #3 (the “U.S. Bank Account of the US MSB Affiliate”). Bank #3 is not related to the US MSB Affiliate. 5. The Foreign Purchaser requests its bank in the United States, Bank #4 to transfer $20,000 U.S. to the U.S. Bank Account of the US MSB Affiliate. Bank #4 is not related to the US MSB Affiliate 6. The $20,000 U.S. is received by the US MSB Affiliate through credit to the U.S. Bank Account of the US MSB Affiliate. 7. The US MSB Affiliate then notifies the Canadian MSB that the $20,000 U.S. has been received by the US MSB Affiliate. 8. The Canadian MSB then advances the exchange equivalent of $20,000 U.S., $22,000 Cdn. to the Canadian Exporter and, as a result, a $20,000 U.S. or a $22,000 Cdn. receivable is created on the books of the Canadian MSB in respect of the indebtedness owed to it by the US MSB Affiliate. 9. The Canadian MSB then requests its bank, Bank #2, Toronto to transfer $22,000 Cdn. to Bank # 1 in Toronto, for the credit of the Canadian Exporter. 10. As a result of there being a series of similar transactions daily involving the Canadian MSB and the US MSB Affiliate, there is a daily netting of the amounts owed by the two entities to each other. However, no funds are ever transferred from one to the other as a result of any indebtedness owing after the netting takes place. In my view, the most material aspect of this arrangement from the standpoint of the AML Regime is that there are no transfers of funds into, or from, Canada. Specifically: • The Canadian Exporter receives funds in Canada from a Canadian bank account of the Canadian MSB. • The funds sent by the Foreign Purchaser in payment of its debt to the Canadian Exporter are sent to the U.S. Bank Account of the US MSB Affiliate outside Canada. The Guideline deals with the circumstances in which reports must be filed in respect of electronic funds transfers to, or from, Canada, in connection with a transaction or series of transactions where the amount of the funds being transferred is greater than $10,000 Cdn. The Guideline defines an ETF as: “...the transmission of instructions for a transfer of funds through any electronic, magnetic or optical device, telephone instrument or computer. In this context SWIFT EFT messages are excluded, as explained in subsection 3.3.” In the above arrangement, since there is no cross border funds transfer of any kind, electronic or otherwise, there cannot possibly be any cross-border electronic funds transfer. I believe that this conclusion is consistent with the principles of the AML Regime. The fundamental purpose of the Guideline is to ensure that electronic funds transfers into Canada from another country, or from Canada to another country are monitored pursuant to the AML Regime. In the above arrangement, there is no cross-border transfer of funds into Canada from another country, or from Canada, to another country. The Foreign Purchaser does not make any payment into Canada and the Canadian Exporter does not receive any payment from the Foreign Purchaser. This arrangement is essentially a collection and foreign exchange arrangement. However, that is not to say that the arrangement is not "tested" from an AML standpoint. In fact, the transaction is tested at various levels since several banks are intimately involved in the arrangement and should have scrutinized their involvement in the arrangement from an AML standpoint. Significantly, • the Canadian Exporter is a client of Bank #1 • the Canadian MSB is a client of Bank #2 • the US MSB Affiliate is a client of Bank #3 • the Foreign Purchaser is a client of Bank #4 and each of these banks has its own AML responsibilities in connection with this arrangement. As a result, there is no policy purpose in having the Canadian MSB make any filing in respect of this transaction since each step in the arrangement takes place separately and individually within the banking systems of two countries. I would appreciate your confirmation of the views I have expressed above.
Answer:

We have reviewed the information and have the following comments: All of the examples explaining your scenario are essentially describing the same payment architecture, namely: the Canadian payee contacts the foreign payor to request that the foreign payor effect the payment of his/her debt by having funds transferred from the payor’s foreign bank account to the bank account of your business’s foreign affiliate. When this is done, there is a settlement between the your business’s foreign affiliate and your business in Canada, and the funds are released to the Canadian payee. To explain this payment architecture further, we will use an example provided by you, namely: ABC Farms receiving payment from a third party. MSB holds an agreement with its customer, ABC Farms, to receive payments on its behalf from customers outside of Canada. One such customer, DEF Company, located in the United States of America, was given instructions on how to submit the payment to ABC Farms in its local currency. DEF Company was instructed to send payment to a MSB bank account in the United States of America. Under the arrangement agreed to between ABC Farms and MSB, MSB converts payment collected for ABC Farms outside of Canada to CAD and remits those amounts to ABC Farms. Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines an electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada”. To be reportable an electronic funds transfer must be: • client initiated, and • the transmission of instructions to transfer funds across the Canadian border. You submit that the payee is a client of MSB that has directed a third party owing it funds to pay the funds to an account held by a MSB foreign affiliate. Our position is that the payor gives instructions to his/her foreign bank to transmit funds to the payee. As the account holder, the payor is the client ordering the payment of the electronic funds transfer. His/her instructions include information, a unique order ID or reference number, that will make it possible for the MSB to identify the transaction and banking details for settling the payment. In our example, DEF Company, as the account holder, is the client ordering the payment of the electronic funds transfer. Its instructions include the payment and banking details for settling the payment. You submit that such a transaction is not reportable under the current FINTRAC regulations. You state that the payor has not sent funds across border, but has only made a payment to a foreign bank account held by the MSB foreign affiliate, that later will be subject to a settlement between the MSB foreign affiliate and MSB in Canada. Our position is that the intention (or the purpose) of the payment is to transfer funds from the payor’s bank account in the foreign country to the payee’s bank account in Canada. The payor initiates the transmission of instructions to transfer funds across the Canadian border. In our example, the intention of this transaction is to transfer funds from DEF Company’s bank account in the United States of America to ABC Farms’ bank account in Canada. This represents an electronic funds transfer as defined in our regulations. DEF Company, the client, initiates the transmission of instructions to transfer funds across the Canadian border. Furthermore, we note that the payor’s instructions travel through the unique order ID or reference number transmitted to every player involved in the process of this payment. Our position is that this transaction constitutes an incoming non-swift international electronic funds transfer as defined in subsection 1(2) of the PCMLTFR. This transaction would be an incoming non-swift international electronic funds transfer even if the payor was located in Canada and instructed his/her bank in the foreign country to transmit funds to Canada, because the intention (or purpose) of this type of transaction is to have the funds moved from the foreign country into Canada.

Date Answered: 2013-05-02

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8A
Regulations: 1(2), 12(1)(b), 12(1)(c)

112. EFTI/EFTO - Reportable transactions or not?

Question:
I am providing you with a scenario that frequently occurs and would like to reconfirm that the transactions are reportable as both EFTI and EFTO. 1. MSB X in Canada has clients who send funds to Sri Lanka. The instructions are sent via informal channels (fax, email, text, etc) to MSB Xs correspondent in Sri Lanka, company Y, who pays out the funds to the beneficiaries. . Company Y may be an MSB in Sri Lanka, but just as possible they are not an MSB but a contact only. 2. Company Y has clients who have imported goods from countries such as China and Hong Kong and need to pay for the goods in those countries. 3. Instead of MSB X sending money to an account of Company Y in settlement, Company Y asks MSB X to send funds to bank accounts in China and Hong Kong (not owned by Company Y) on behalf of Company Y’s clients. 4. MSB X will use either another MSB in Canada or a Canadian bank to send the EFTOs to China and Hong Kong to the bank account requested by Company Y. MSB X is recorded as the ordering client on the EFTO (I have seen hundreds of the EFTO payment orders over the years to know this is how it is recorded). 5. The cycle starts again. Of importance is that while the MSB may call this a settlement, it is not a true settlement in that MSB X is not paying money to Company Y, but rather to third parties. In reference to #3 above my understanding is that an EFTI report is to be submitted by MSB X (assuming of course the transaction is at least $10K). In #4 my understanding is that an EFTO is then required once the payment instructions are sent out to China or Hong Kong (assuming again that the ordering client name and address is not provided to the entity sending the payment instructions outside of Canada). Would you agree that both reports are required? My second question is if my above understanding is correct, which party appears in Part B of both the EFTI and EFTO report – Company Y or Company Y’s clients who actually are really requesting funds be sent to Hong Kong and China?
Answer:

Subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada”. We have indicated in the past that to be reportable an electronic funds transfer must be: • client initiated, and • must be the transmission, across our border, of instruction to transfers funds (except where the instructions are to transfer funds from a place in Canada to another place in Canada) Subsection 28(1) of the PCMLTFR states that “Subject to subsection 52(1), every money services business shall report the following transactions and information to the Centre: […] (b) the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and (c) the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be.” If a money services business in Canada sends, at the request of a client, instructions to someone outside Canada ordering them to transfer funds, the MSB in Canada has to file an outgoing EFT report with FINTRAC. This is the case, in your example, where a client in Canada instructs MSB X in Canada to send funds to Sri Lanka. The instructions are sent by MSB X via informal channels (fax, email, text, etc.) to MSB X’s correspondent in Sri Lanka (Company Y) who pays out the funds to a beneficiary in Sri Lanka. MSB X in Canada would file the following EFTO with FINTRAC: Outgoing Non-Swift international electronic funds transfer report information: Part A – Transaction information Part B – Client in Canada Part C – MSB X in Canada Part E – Company Y in Sri Lanka Part F – Beneficiary in Sri Lanka If a money services business in Canada (MSB X) received instructions, from outside Canada, to transfer funds (and those instructions where sent by a person or entity at the request of their client), MSB X would have to file an incoming EFT report with FINTRAC. This is the case, in your example, where a client in Sri Lanka asks Company Y in Sri Lanka to send funds to a bank account in China via MSB X in Canada. MSB X in Canada would file the following EFTI with FINTRAC: Incoming Non-Swift international electronic funds transfer report information: Part A – Transaction information Part B – Client in Sri Lanka Part C – Company Y in Sri Lanka Part E – MSB X in Canada Part F – Holder of bank account in China In addition, if MSB X in Canada instructs another MSB in Canada or a Canadian Bank, to send instructions to a Bank in China for the transfer of funds, that other MSB or that Canadian Bank will have to report an EFTO to FINTRAC with the following fields: Outgoing Non-Swift international electronic funds transfer report information: Part A – Transaction information Part B – Client in Sri Lanka Part C – MSB X in Canada Part E – Bank in China Part F – Holder of bank account in China *It should be noted that if MSB X in Canada provided the other MSB in Canada (or Canadian Bank) with the name of the client who asked MSB X to ask for the transfer of funds, MSB X would not have to file an EFTO with FINTRAC (subsection 28(3) of the Regs).

Date Answered: 2013-04-26

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), 28(1), 28(3)

113. EFT Reporting - Iran

Question:
According to the following scenarios, could you confirm if they need to be reported to FINTRAC and if so, what parts of the EFTI report need to be filled out and who should be listed in those parts? Scenario #1: The Company 123, MSB in Vancouver, receives funds from Iran for the MSB’s customers in Vancouver. This Company has an agent in Iran. • Person A in Iran wants to send money (under $20,000 to Person B in Vancouver) • Person A will contact the agent in Iran and provide the money to the agent in Iran • The agent in Iran will contact Company 123 • Company 123 will provide the funds to Person B in Vancouver from its bank account • The agent and Company 123 will settle their books (this is a Hawala system) Incoming International Non-SWIFT Electronic Funds Transfer Report information Scenario #2 (transactions of $20,000 and above): Company 123 currently offers one option for Incoming International Non-SWIFT Electronic Funds Transfer of $20,000 and above from Iran to Canada; that being through a Kuwaiti MSB and a Kuwaiti Bank. Person A does not request this specific routing of the funds, but agrees to accept the only option offered by Company 123 and their agent in Iran. The agent in Iran operates under the instructions of Company 123 management in Canada. Company 123 is not privy to the exact instructions provided by other entities in this delivery channel. In this scenario, funds sent are $20,000 and above and follow this process: • Person A in Iran wants to send money ($20,000 and above to Person B in Vancouver). Person A instructs the agent in Iran to send funds to the beneficiary in Canada and provides the necessary information to do so. No specific routing instructions are provided by Person A and Person A accepts routing offered by the agent in Iran • Person A will contact the agent in Iran (of Company 123 in Vancouver) and provide the money to the agent in Iran • The agent in Iran sends instructions to a Kuwaiti MSB to route the transaction through a Kuwaiti Bank, and then, to the beneficiary’s bank account in Canada. The Kuwaiti MSB forwards the instructions to the Kuwaiti Bank to transfer funds to the Canadian beneficiary’s bank account in Canada • The Kuwaiti bank will send the money directly to the bank account of Person B in Vancouver • The agent in Iran will get a commission Scenario #3: In this scenario, funds follow these instructions: a Canadian resident, who has assets in Iran (Mr. ABC junior), instructs his father (Mr. ABC senior), who is in Iran, to sell his assets and then transfer the funds belonging to Mr. ABC junior to Canada. The funds being transferred belong to Mr. ABC junior who is the beneficiary of the EFTI transaction. Mr. ABC senior contacts the agent in Iran and provides the money to the agent in Iran.
Answer:

All scenarios submitted by the reporting entity are in relation to Iran. We would like to remind the reporting entity of the warning issued by Department of Foreign Affairs and International Trade (DFAIT), concerning Iran, which is posted on the FINTRAC Public website. FINTRAC encourages reporting entities to be aware of the obligations, under the new sanctions, on all persons in Canada and any Canadians outside of Canada; particularly, in respect of dealings with designated entities and persons and the prohibition on the provision or acquisition of financial services to or from Iran. Subsection 1(2) of the PCMLTFR defines an electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada”. In the past, we have indicated that to be reportable, an electronic funds transfer must be: • client initiated, and • the transmission, across our border, of instruction to transfers funds (except where the instructions are to transfer funds from a place in Canada to another place in Canada) Subsection 28(1) of the PCMLTFR states that “Subject to subsection 52(1), every money services business shall report the following transactions and information to the Centre: […] (b) the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and (c) the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be.” Scenario #1: Company 123has reported the following in the EFTI report to FINTRAC, and we confirm it is correct: Incoming International Non-SWIFT Electronic Funds Transfer Report information: Part A - Transaction information Part B - Person A in Iran Part C - Agent in Iran Part E - Company 123 Part F - Person B in Vancouver Scenario #2: Based on this scenario, Company 123 does not have to report this transaction. Because it is a bank to bank transfer, the Canadian bank, as the receiver of the EFT, will report this transaction to FINTRAC. Scenario #3: Based on this scenario, we assumed that the instructions included in the proceeds of the sale of Mr. ABC junior’s assets were entirely transferred to Mr. ABC junior in Canada. We also assumed that Mr. ABC junior instructed the specific amount of money to be transferred (being the same as the proceeds from the sale). If the transaction is under $20,000: the process described in Scenario #1 applies. Incoming International Non-SWIFT Electronic Funds Transfer Report information: Part A - Transaction information Part B - Mr. ABC senior Part C - Agent in Iran Part D - Mr. ABC junior Part E -Company 123 Part F - Mr. ABC junior If the transaction is $20,000 and above: the process described in Scenario #3 applies; Company 123 does not have to report this transaction. Because it is a bank to bank transfer, the Canadian bank, as the receiver of the EFT, will report this transaction to FINTRAC.

Date Answered: 2013-04-24

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), 28(1)

114. Condominium Developer's Obligations

Question:
FACTS: Please be advised that our law firm acts on behalf of a condominium developer, engaged in the development and sale of new condominium units, and our client (the “Developer”) has also retained the services of an independent real estate agency/brokerage firm (the “Agency”) to market and sell the new condominium units to third party purchasers. It’s my understanding that although real estate developers and builders are reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (hereinafter referred to as “FINTRAC”), the Developer does not have to comply with the reporting and record-keeping requirements of FINTRAC in those circumstances where the sale of all the condominium units being developed are handled by the Agency, because real estate brokers and sales representatives are also reporting entities under FINTRAC, and accordingly the Agency (being an external real estate broker or agent with whom the Developer has a contractual relationship) will correspondingly be compelled to keep the requisite records and make any required reports relating to the sale of the units available to the government. QUESTIONS: Can you kindly confirm: 1. Whether my understanding (regarding the Developer not having to comply with the reporting and record keeping requirements of FINTRAC in the above-noted circumstances) is correct; 2. Whether the Developer would be exposed to any negative ramifications (such as a fine or any criminal or quasi-criminal sanction, or any civil action) in the event that the Agency inadvertently failed to comply with its FINTRAC obligations in connection with any sale of a unit by the Developer in the condominium project under development; and 3. Whether the monies received by the Developer on the closing of any unit sale transaction (in respect of which the FINTRAC requirements were not followed by the Agency) are susceptible to being seized by (and forfeited to) the government any time after the closing date.
Answer:

To answer your questions regarding your client, the Developer, and their contractual relationship with an external real estate broker or agent, the Proceeds of Crime (Money Laundering) Terrorist Financing Act (PCMLTFA) outlines the reporting obligations for real estate developers. Subsection 1(2) of the PCMLTFR states, “a real estate developer means, on any given day in a calendar year, a person or entity who, in that calendar year and before that day or in any previous calendar year after 2007, has sold to the public, other than the capacity of a real estate broker or sales representative, a) five or more new houses or condominium units; b) one or more new commercial or industrial buildings; or c) one or more new multi-unit residential buildings each of which contains five or more residential units, or two or more new multi-unit residential buildings that together contain five or more residential units.” According to subsection 39.5(1) of the PCMLTFR, “Every real estate developer is subject to reporting obligations under Part I of the PCMLTFA when a) in the case of a person or of an entity other than a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building; and b) in the case of an entity that is a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building on their own behalf or on behalf of a subsidiary or affiliate.” It would be a question of fact to be able to determine who has to fulfill the requirements under the PCMLTFA and PCMLTFR in a case where the real estate developer has retained the services of an independent real estate agency/brokerage firm to market and sell the new condominium units to third party purchasers. In fact, it would depend on the nature of the contractual relationship between the builder and the sales agency. • If the contract makes the sale agency the builder's agent (and makes the individual sales representatives the employees of the builder), then the builder would remain responsible for the obligations (i.e. the usual rules for agents and employees, with the usual exception that the agent or employee might have a personal obligation to report STRs for which they have reasonable grounds themselves). • If the contract is simply a contract for services (i.e. the sales agency has contracted to do advertising, give info to prospective clients, but they do not act as agents for the sale, they simply help a buyer fill out the offer and act as a mail box to hand the offer to the builder who may or may not accept it), then the builder is still responsible for all obligations, and the sales representative has absolutely no obligations (not even STR obligations).

Date Answered: 2013-04-12

Activity Sector: Real estate
Obligation: Record keeping Reporting Reporting
Guidelines: 6B, 7
Regulations: 39.5(1)
Act: 1(2)

115. Instances where beneficiary information is missing when we act as intermediary on a transfer

Question:
We receive from Bank A an outbound wire transfer to Australia. They are required by section 9.5 of thePCMLTFA to include originator information. If they do so (name, address and account number of their client) then the reporting obligation shifts to us as per subsection 12(3) of the PCMLTFR. If they don't include beneficiary information then the report we make to FINTRAC doesn't have that information. So, we would be in non-compliance as beneficiary information is mandatory for outgoing reporting. The transfer doesn't include the full beneficiary information. It would make sense that beneficiary information would be explicitly named in section 9.5 of the PCMLTFA along with originator information if the PCMLTFA was meant to cover it. If we take reasonable measures to get beneficiary information (which in this case includes asking for it- as per FINTRAC PI) and Bank A doesn't give it to us because they are too busy or don't care, we have done our due diligence pertaining to section 9.5 of thePCMLTFA. However, then we have to report. The reporting obligation has shifted from Bank A to us because they provided us with the name and address of their client (as per the section 12.3 of the PCMLTFR). Beneficiary name, address & account number are mandatory fields as per Schedule 2 Part K. We have a legal obligation to report beneficiary information and Bank A may not have a legal obligation to give us the information. Would FINTRAC expect we would not perform the transfer if it doesn't include beneficiary information that is required in our report to FINTRAC or would they expect us to report what we have (after we exercise our due diligence and ask for it) and be in non-compliance with Part K requirements for beneficiary information- i.e. compliant with section 9.5 of the PCMLTFA but still not compliant with the Regulations. Could/would we get cited for not including all beneficiary information? Or would we be able to stand on evidence that Bank A didn't provided us with the information as required. We did our best efforts to ensure that the transfer included the information, but we are the ones in non-compliance with reporting obligations.
Answer:

Paragraph 12(1)(b) of the PCMLTFR states that every financial entity shall report to the Centre "the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be". As such, all mandatory fields outlined in Schedule 2 and 5 must be completed. Fields marked '"if applicable" must be completed if the information is available to the reporting entity as these fields will also become mandatory fields in the outgoing EFT report. In the scenario provided above, if you (Bank Z) determines that an EFTO must be reported to the Centre, all mandatory fields must be completed (including “Information on Client to Whose Benefit the Payment is Made” in Part F – Schedule 5). In order to comply, you (Bank Z) must provide all required information to FINTRAC.

Date Answered: 2013-04-10

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 7A
Regulations: 12(1)(b), Schedule 5 (Part F)

116. Accounts for MSB

Question:
Can a MSB have accounts and do we recognize that they are called accounts on the LCTR form?
Answer:

It is clear in the Regulations that there is no concept of an "account" for the MSB sector. The MSB sector is not recognize as having accounts, since the prescribed obligations applies only to financial entities, securities dealers and casinos. Therefore, in not having accounts, the exemption found in section 53 of the PCMLTFR cannot be used by MSBs. However, to ensure consistency and permit a better quality of reporting, we recommend, for reporting purposes only, that the MSB should be informed that, when filling out the LCTR for the example described below, they should use the drop down menu option - "other" and specify with "holding funds". The "holding funds" caption indicates more accurately that the reporting entity is holding an amount of $10,000 or more in cash for the future transaction.

Date Answered: 2013-04-10

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C, 7

117. Reporting EFTs

Question:
When is an MSB required to report an EFT to FINTRAC?
Answer:

Subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” As a result, the transactions processed via MT 101 are not to be considered as MT 103 messages, and are not reportable. We have indicated in the past that to be reportable an electronic funds transfer must be: • client initiated, and • must be the transmission of instruction to transfers funds across our border Subsection 28(1) of the PCMLTFR states that “Subject to subsection 52(1), every money services business shall report the following transactions and information to the Centre: […] (b) the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and (c) the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be.” Subsection 28(3) of the PCMLTFR states that “Paragraph (1)(b) applies in respect of a money services business that orders a person or entity, to which subsection (1), 12(1) or 40(1) applies, to send out of Canada an electronic funds transfer made at the request of a client, unless it provides that person or entity with the name and address of that client.” If the MSB sends an EFT to an individual or entity in Canada, they do not have to report it, even if the final recipient of the funds is outside Canada. It can happen that a client requests a transfer of funds and, instead of sending the EFT itself, the money services business orders someone else that is a financial entity, another money services business or a casino in Canada to send it. In this case, they have to make the related EFT report (EFTO) to FINTRAC unless they provide that other reporting entity with the client's name and address. In other words, if the first entity gives their client's name and address to the second entity, the first entity does not have to report the EFT. Subsection 28(5) of the PCMLTFR states that “Paragraph (1)(c) applies in respect of a money services business that receives an electronic funds transfer for a beneficiary in Canada from a person or entity to which subsection (1), 12(1) or 40(1) applies where the initial sender is outside Canada, unless the electronic funds transfer contains the name and address of that beneficiary.” If a money services business received instructions for a transfer of funds from outside Canada, they have to make the related incoming EFT report to FINTRAC, even if they have to forward the same instructions to a financial entity, another money service business or a casino in Canada. However, if they receive instructions for a transfer of funds from outside Canada from a financial entity, another money services business or a casino in Canada, they do not have to make an incoming EFT report, as long as the EFT contained the name and address of the beneficiary. If the EFT did not contain the name and address of the beneficiary and the original sender was outside Canada, the money services business who received it from another entity will also have to make an incoming EFT report. This is true even if they do not get a copy of the instructions received by the financial entity, other money services business or casino.

Date Answered: 2013-03-18

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), 28(1), 28(3), 28(5)

118. One Name for Individual Conducting Transaction

Question:
We discussed that other banks are experiencing FINTRAC reporting challenges due to clients having only one legal name. In fact, an incident was filtered into our LCTR incomplete queue because the Bank 123 client does not have a last name in our client records as they legally have one name only (recorded as first name). We would like to propose inserting "not applicable" in the last name field of the LCTR report to FINTRAC (for the individual conducting the transaction). Can you please provide your concurrence with this approach or suggest an alternative?
Answer:

As per Schedule 1, Part D requests the full name of the person conducting the transaction be entered in the LCTR. Currently, our forms are designed for persons with a first and last name. In a case where a person legally has only one name, what should be included on the LCTR? I contacted Passport Canada and Citizenship and Immigration Canada and here are their comments: • Passport Canada: “CIC will repeat the given name twice, or the name of the village where the applicant comes from will become his/her last name.” • Citizenship and Immigration Canada: “We use the same information available on the piece of ID used by the applicant. If only the given name is present on this piece of ID, then only the given name will be present on the Canadian piece of ID.” However, the CIC website suggests the following: In the context of the sponsorship of a spouse, etc. Sponsor Personal Details Full name Indicate your family name(s) (surname) exactly as it appears on your passport or travel document (even if the name is misspelled). Do not use initials. Note: If you do not have a family name on your passport or travel document, enter all your given name(s) here and leave the given name field blank. Write all of your given name(s) (first, second, or more) exactly as it appears on your passport or travel document (even if the name is misspelled). Do not use initials. Note: If you do not have a given name on your passport or travel document, leave this field blank. I was unsuccessful in finding if there is an international convention or treaty imposing a formal structure with respect to the name (i.e., name include given name and surname).

Date Answered: 2013-03-11

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 7
Regulations: Schedule 1 (Part D)

119. 24-hr rule: EFT reporting

Question:
Does the 24hr rule apply to the sum of incoming and outgoing EFTs, or the sum of only incoming and the sum of only outgoing?
Answer:

No, the 24 hour rule requirement lines up with the reporting requirements which are either in or out. In section 3 of the PCMTLFR, the definition of single transaction, otherwise known as “the 24-hour rule”, specifically applies to situations where two or more cash transactions or electronic funds transfers of less than $10,000 each are made within 24 consecutive hours and total $10,000 or more. This is considered to be a single transaction of $10,000 or more if “the person knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity.” The 24 hour rule applies when multiple transactions (each that are less than $10,000 but total $10,000 or more) are conducted by or on behalf of the same person (this being the person giving the instructions as opposed to the beneficiary).

Date Answered: 2013-03-06

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: FIN-4, 7A

120. International EFT Reporting - Typographical error

Question:
If a credit union receives a reportable wire where the beneficiary information does not totally match their banking system e.g. banking system says John Blow and MTS wire beneficiary says Joe Blow is this considered to be reportable even though it's a clerical error? The credit union in these circumstances will receive the funds but is the wire reportable because the 1st institution to receive would have reported using the information on the wire e.g. John Blow rather than what is contained on the credit unions banking system e.g. Joe Blow.
Answer:

If the credit union is the first financial institution to receive the international EFTI of 10k or more, then the credit union must report it. If the credit union is not the first financial institution to receive the international EFTI of 10k or more, the credit union must report it if the beneficiary information (name and address) is missing or incomplete. Where there is a typo in the name, as per paragraph 64(1.3)(b) of the PCMTFR, the reporting entity is not required to report this EFTI if “the information referred to in paragraph (a) is determined by the person or entity to be consistent with the information in respect of that person, if any, that is contained in a record kept by the person or entity under these Regulations.” Our position is that this is NOT applicable if the typo is in the account number.

Date Answered: 2013-03-06

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 7A
Regulations: 64(1.3)(b)

121. International EFT Reporting - Missing full address

Question:
To what extent do reporting entities need to obtain the following details when they are not present on EFT instructions and the transactions are considered reportable? • Full address of sending financial institution • Account number of sender or originator
Answer:

We have previously said that in terms of international or foreign addresses, there is no specific formula. It should be information relevant to help locate the person physically, or as many details as possible to where their personal housing unit is situated. It is difficult to give you a complete answer since every country has its own conventions. If no numerical address exists, the reporting entity should take reasonable measures to include relevant information to help locate the institution. A best practice would be to document the reasonable measures taken. Efforts should be made to get the address of the sending financial institution and account number (if applicable), as these are mandatory fields, as indicated in Schedules 5 and 6 of the Regulations.

Date Answered: 2013-03-06

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 7A
Regulations: Schedule 5, Schedule 6

122. EFT Reporting - Postal Code

Question:
Is a postal code of the beneficiary required to be present on incoming EFT instructions when making a determination to report?
Answer:

If the credit union is the first financial institution to receive the international EFTI of 10k or more, then the credit union must report it. If the credit union is not the first financial institution to receive the international EFTI of 10k or more, the credit union must report it if the beneficiary information (name and address) is missing or incomplete. A civic address does not require a postal code. Therefore, if only the postal code is missing for the address of the beneficiary in the EFTI, then the credit union does not need to report it.

Date Answered: 2013-03-06

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 7A

123. Length of address to be reported

Question:
What happens if the address they have for the bank is longer than the field character length permitted on the FINTRAC report?
Answer:

When the reporting entity is reporting an incoming non-SWIFT international Electronic Funds Transfer Report (EFTI), if the bank’s address exceeds the character capacity in the given address field, the reporting entity is required to include the relevant information to locate the institution.

Date Answered: 2013-02-28

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 7A

124. EFTI Reporting based on the ordering client’s name or beneficiary’s name

Question:
My question is whether the reporting determination for EFTI is based on the ordering client’s name or beneficiary’s name. This is especially important when the 24 hour rule is considered. It may be based on either or and I will give two examples: 1. Joe Blow sends two EFTIs of $6,000 from the US to Canada to two different beneficiaries within 24 hours. Would this be reportable? 2. John Smith sends $6,000 from the US to Canada to Jane Doe. Within 24 hours, Joe Blow sends $6,000 from the US to Canada to Jane Doe. Would this be reportable under the 24 hour rule?
Answer:

Subsection 3(1) of the PCMLTFR states, “In these Regulations, two or more cash transactions or electronic funds transfers of less than $10,000 each that are made within 24 consecutive hours and that total $10,000 or more are considered to be a single translation of $10,000 or more if (a) where a person is required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations, the person knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity; and (b) where an entity is required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations, an employee or a senior officer of the entity knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity. The 24 hour rule above applies when multiple transactions (each that are less than $10,000 but total $10,000 or more) are conducted by or on behalf of the same person (this being the person giving the instructions as opposed to the beneficiary). Therefore, to answer your questions below: Scenario #1 Yes, this would be reportable under the 24 hour rule. In this scenario, Joe Blow, the same person giving both sets of instructions, is conducting multiple transactions (each that are less than $10,000 but total $10,000 or more) within 24 hours. It does not matter that there are two different beneficiaries as the 24 hour rule applies to the person giving the instructions as opposed to the beneficiary. Scenario #2 No, this would not be reportable under the 24 hour rule. There are two individuals in this scenario, John Smith and Joe Blow, giving instructions to conduct their respective transactions. In order to be reportable, it would have to be the same person giving instructions to conduct the transactions. Also, it does not matter that Jane Doe is the beneficiary of both these transactions since the 24 hour rule applies to the person giving the instructions as opposed to the beneficiary.

Date Answered: 2013-02-26

Activity Sector: Money services business
Obligation: Reporting Reporting
Guidelines: FIN-4, 8
Regulations: 3(1)

125. International Dealer Exemption

Question:
Does a US Securities Dealer operating in Canada under an International Dealer Exemption have any reporting obligations in Canada to FINTRAC?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines securities dealer as “a person or entity that is authorized under provincial legislation to engage in the business of dealing in securities or any other financial instruments or to provide portfolio management or investment advising services”. We have already established that a foreign securities dealer, even if operating in Canada under an International Dealer Exemption, is authorized by the province to be engaged in the activities described under Subsection 1(2) of the PCMLTFR. Therefore, the Company ABC has to develop and apply policies and procedures consistent with record keeping, client identification and compliance regime requirements for its Canadian activities only.

Date Answered: 2013-02-19

Activity Sector: Securities dealer
Obligation: Reporting
Guidelines: 6E
Regulations: 1(2)

126. Correspondent banking relationship

Question:
If two banks are not in a direct relationship and are not both participants in the same clearing-house, the funds transfer instruction may have to pass through one or more intermediary banks which are the correspondent bank of both. Example: A client of Bank 1 in New York requests a wire to his account with Bank 2 in London (England). However, the two banks do not have the same clearing house and have to go through a correspondent bank of both, Bank ABC in Canada, to send the instructions. Could you provide a clarification on Flow Through accounts?
Answer:

Before answering, we made the following assumptions: • The example is not a real life scenario, but an example describing the mechanism of a flow through of an EFT; • We assumed there is only one set of instructions. As per subsection 9.4(3) of the PCMLTFA, a correspondent banking relationship “means a relationship created by an agreement or arrangement under which an entity referred to in any of paragraphs 5(a), (b), (d) and (e) or an entity that is referred to in section 5 and that is prescribed undertakes to provide to a prescribed foreign entity services such as international electronic funds transfers, cash management, cheque clearing and any prescribed services.” As such, two banks that are not in a direct relationship and are not both participants in the same clearing house might have a correspondent banking relationship if, in order to complete an EFT, they have an arrangement to pass through one or more intermediary banks. Subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission – through any electronic, magnetic or optical device, telephone instrument or computer – of instructions for the transfer of funds, other than the transfer of funds within Canada.” We have indicated in the past that to be reportable an electronic funds transfer (EFT) must be: • client-initiated; and • include the transmission of instructions to transfer the funds across the Canadian border. Concerning your example, the question is whether funds transferred from one England bank account to one US bank account, but routed through Canada, constitutes an EFT as per subsection 1(2) of the PCMLTFR. The client gave instructions to transmit funds from his bank account in London to his bank account in the US. The intention (or the purpose) of the transfer is to move funds from London (England) to New York (US). Our position is that this transaction does not constitute an electronic funds transfer as defined in subsection 1(2) of the PCMLTFR, and therefore is not reportable by the Canadian intermediary bank.

Date Answered: 2013-02-15

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 7A
Regulations: 1(2)
Act: 9.4(3)

127. 24-hour rule - EFT

Question:
What does "conducted by or on behalf of the same person" means in the context of the 24-hour rule?
Answer:

Subsection 3(1) of the PCMLTFR states, “In these Regulations, two or more cash transactions or electronic funds transfers of less than $10,000 each that are made within 24 consecutive hours and that total $10,000 or more are considered to be a single translation of $10,000 or more if (a)  where a person is required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations, the person knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity; and (b) where an entity is required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations, an employee or a senior officer of the entity knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity. As a reminder, the 24 hour rule above applies when multiple transactions (each that are less than $10,000 but total $10,000 or more) are conducted by or on behalf of the same person (this being the person giving the instructions as opposed to the beneficiary).

Date Answered: 2013-02-15

Obligation: Reporting
Guidelines: FIN 4
Regulations: 3(1)

128. Proceeds of crime deposited by police (Ottawa) - Reportable or not?

Question:
Does the Ottawa Police Department falls under subsection 1(2)(b) of the PCMLTFR in satisfying the definition of public body? If yes, does a large cash transaction is reportable by the Ottawa Police Credit Union?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) Terrorist Financing Regulations (PCMLTFR) defines public body as: (a) any department or agent of Her Majesty in right of Canada or of a province; (b) an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them; and (c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or any agent of such an organization. The Ottawa Police Department falls under subsection 1(2)(b) of the PCMLTFR, satisfying the definition of public body. As per paragraph 12(1)(a) of the PCMLTFR, “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre: the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body.” In this scenario, since Joe Blow of the Ottawa Police is a public body, the large cash transaction is not reportable by the Ottawa Police Credit Union.

Date Answered: 2013-02-11

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 7
Regulations: 1(2), 12(1)(a)

129. 24-hour rule - EFTR

Question:
I’m following up on behalf of our wire reporting group for guidance on the correct procedure to follow when multiple wire transactions are conducted on the 24 Hour Rule. SITUATION Multiple transactions under $10,000 are conducted within 24 hours by or on behalf of the same party. For illustrative purposes, let me provide the following example. 10:00 AM $4000 02:00 PM $3000 04:00 PM $4000 An EFTR is filed for the transactions that total $12000 but on three different ‘forms’ (Use a separate form for each EFT that you have to report, whether or not the 24-hour rule applies). A further transaction occurs the following morning at 11:00 AM for $4000. Another EFTR is required because this transaction combines with the previous two transactions matching the 24 hour rule. 02:00 PM $3000 (EFTR completed previous day) 04:00 PM $4000 (EFTR completed previous day) 11:00 AM $4000 GUIDANCE REQUEST Is the Financial institution required to complete EFTR’s for the previous two transactions that have already been reported? 1. Since the wire transactions are reported on separate EFTRs (unlike LCTRs that report multiple transactions within the same report), can the FI exclude the first two transactions and just report the final transaction noting the 24 hour rule on the transaction. 2. Should all of the transactions be reported when the 24 hour rule is triggered, even previously reported transactions?
Answer:

Subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included”. Paragraphs 12(1)(b) and (c) of the PCMLTFR require that financial entities report to FINTRAC the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be. In section 3 of the PCMTLFR, the definition of single transaction, otherwise known as “the 24-hour rule”, specifically applies to situations where two or more cash transactions or electronic funds transfers of less than $10,000 each are made within 24 consecutive hours and total $10,000 or more. This is considered to be a single transaction of $10,000 or more if “the person knows that the transactions or transfers are conducted by, or on behalf of, the same person or entity.” In a situation where multiple transactions under $10,000 are conducted within 24 consecutive hours of each other, by or on behalf of the same individual or entity, depending on the values, the 24-hour rule may apply and the transactions might be reportable. Depending on what type of system the financial entity is using, the 24-hour period can vary. In the rolling 24-hour system, the 24-hour period begins with each new EFT of less than $10,000 (if you know they were made by or on behalf of the same individual or entity). In the static 24-hour system, you are required to report the multiple transactions that you know were made by or on behalf of the same individual or entity in that 24-hour period (e.g. from 9:00 a.m. to 9:00 a.m. the next day). Multiple transactions under $10,000 are conducted within 24 hours by or on behalf of the same party. SCENARIO A - 10:00 AM $4000 B - 02:00 PM $3000 C - 04:00 PM $4000 A further transaction occurs the following morning at 11:00 AM for $4000. D - 11:00 AM $4000 In the scenario described above, depending on the reporting entity's system in place, the reporting entity will report as follow: • Transactions A, B, and C because these transactions amount to over $10 000 ($4 000 + $3 000 + $4 000 amounts for a total of $11 000) • Transactions B, C, and D because these transactions amount to over $10 000 ($3 000 + $4 000 + $4 000 amounts for a total of $11 000) (Transaction D will only be captured under the rolling 24-hour system) Each EFT that the reporting entity has to report will be on a separate report (one per beneficiary). While the reporting entity has the choice to file immediately or file later, they ultimately have 5 days to file an EFTR following the last entry. The 24-hour rule indicator must be selected for each report sent to the Centre that is below $10 000. In the case where the reporting entity reports the EFTR immediately, if any additional transaction be captured under the 24-hour rule, then this additional transaction is required be sent to the Centre e.g. transactions B and C will not be reported twice to the Centre.

Date Answered: 2013-01-23

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: FIN-4, 8
Regulations: 1(2), 3, 12(1)(b), 12(1)(c)

130. EFT - Multiple Beneficiaries

Question:
Here are two scenarios: • Scenario# 1: The client’s instructions are to pay out X amount to Beneficiary 1 and Y amount to Beneficiary 2; however, you can only fit one name on the report. • Scenario# 2: The client’s instructions are to pay out X amount to a joint account; however, you can only fit one name on the report.
Answer:

Scenario# 1: Subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included”. Paragraphs 12(1)(b) and (c) of the PCMLTFR require that financial entities report to FINTRAC the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be. In a situation where the client ordering an EFT enters with the initial amount of $10,000 or more and instructs that it be divided between multiple beneficiaries, the EFT is still being carried out by the same client. Therefore, the EFT should be reported using multiple reports (one per beneficiary). Note: This EFT with the initial amount of $10,000 or more to be divided between multiple beneficiaries is NOT considered to be a single transaction of $10,000 or more as defined under section 3 of the PCMTLFR. The definition of a single transaction, also known as the “24-hour rule”, is specifically for situations where two or more cash transactions or EFTs of less than $10,000 each are made within 24 consecutive hours and total $10,000 or more. Here are some examples: • Example #1: At 9AM, Client A requests an EFT of $25,000 to be sent to Beneficiary Y alone. The $25,000 will be reported to the Centre because it is over $10,000. • Example #2: At 9AM, Client A requests an EFT of $25,000 to be sent as follows: $20,000 to be sent to Beneficiary Y and $5,000 to be sent to Beneficiary Z. One report of $20,000 will be sent to the Centre; another report of $5,000 will also be sent to the Centre. In order to submit this $5,000-report, the 24-hour rule indicator must be selected. The EFT is reportable because it is over $10,000. The EFT will be reported using two separate reports because the $25,000 is divided between two beneficiaries. • Example #3: At 9AM, Client A requests an EFT of $25,000 to be sent as follows: $15,000 to be sent to Beneficiary Y, $5,000 to be sent to Beneficiary Z, and $5,000 to be sent to Beneficiary X. One report of $15,000 will be sent to the Centre; two reports of $5,000 will also be sent to the Centre. In order to submit theses $5,000-reports, the 24-hour rule indicator must be selected on each of them. The EFT is reportable because it is over $10,000. The EFT will be reported using three separate reports because the $25,000 is divided between three beneficiaries. • Example #4: At 9AM, Client A requests an EFT of $7,000 to be sent as follows: $4,000 to be sent to Beneficiary Y, and $3,000 to be sent to Beneficiary Z. The EFT is NOT reportable because it is below $10,000. These examples will also be true in the case of the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction. Scenario# 2: If the client's instructions name one beneficiary but the account the transfer is sent to is a joint account, the reporting entity must include the name of this one beneficiary (the instruction included the name of the beneficiary, in this example, it does not matter that the transfer is sent to a joint account.) If the client's instructions name two beneficiaries for the entire aggregate amount of the transfer (e.g. $20,000 to John Doe & Jane Deer who have a joint account), the reporting entity must include the name of these two beneficiaries. If the client’s instructions are to pay out X amount to a joint account and the instructions do not include the name of the beneficiary, the reporting entity must include the name of all account holders in the beneficiary customer field. If the client’s instructions are being transmitted via SWIFT MT 103, and if the information exceeds the character capacity in the beneficiary customer field, the reporting entity should make best effort to use the remittance information field to include any remaining information. Efforts should be made to include the entire information. A best practice would be to document the measures taken. If the client’s instructions are being transmitted via non-SWIFT, and if the information exceeds the character capacity in the beneficiary customer field, the reporting entity is required to include as much information that will help identify who the beneficiary/ies of the transfer is/are. Efforts should be made to include the entire information as the beneficiary customer field is mandatory. A best practice would be to document the measures taken.

Date Answered: 2013-01-16

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G
Regulations: 1(2), 3, 12(1)(b), 12(1)(c),

131. SWIFT message MT103s Reporting

Question:
The bank ABC processes a SWIFT EFT that was routed in the following (HONG KONG – CANADA – USA) • The ordering client is in Hong Kong. • The transaction is only routed through Canada as part of the SWIFT EFT MT103 process and there is no Canadian beneficiary or Canadian ordering client. • The transaction did not result in a payment / or instructions in Canada. • The beneficiary is in the USA. The question remains if this type of EFT is reportable as both an EFTI and an EFTO – based on the instructions above.
Answer:

Based on the detailed information provided in relation to these types of transactions, it would appear that these specific transactions are non-reportable due to the following considerations: • The instructions do not specify an EFTO/EFTI to Canada • The amounts are settled within the bank ABC internally • No foreign exchange was noted as these only apply to CAD funds only Although the SWIFT MT103 method was used – it was initiated with the intent of transmitting funds from Hong Kong to the USA – the internal process of the bank ABC (as noted) identified that the funds are run through the bank ABC (Canada) as a standard operating business process utilizing the SWIFT MT103 process, rather than two separate EFTI / EFTO transactions. While these types of internal transactions are currently being reported by the bank ABC as EFTI and EFTO – this is over reporting and is not a requirement.

Date Answered: 2013-01-10

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8B
Regulations: 1(2), 12(1)(b), 12(1)(c)

132. Pension funds accounts and Insurance policies for funeral expenses

Question:
We have been asked internally to clarify the treatment of a) pension funds and b) insurance policies for funeral expenses. We have prepared a draft response for FINTRAC’s comment and input. Treatment of pension fund accounts Section 62(2) of the PCMLTFR exempts designated transactions, accounts and activities from record keeping and CDD obligations. This includes accounts "where the account holder or settlor is a pension fund that is regulated by or under an Act of Parliament or of the legislature of a province" (s.62(2)(k)). Section 62(3) also generally exempts group plan accounts from the obligation to ascertain the identity of individual members of the group plan if "the member's contributions are made by the sponsor of the plan or by means of payroll deductions; and the existence of the plan sponsor has been confirmed in accordance with section 65 or 66". However, pursuant to s.15(1)(c) of the PCMLTFR, a trust company is required to keep designated records when it acts as a trustee for an institutional trust, which includes a pension plan trust. The exemptions in s.62(2) do not apply to section 15. Any specific information on who has to report would also be helpful. [FINTRAC input re: treatment of pension plan administrators?] Are specific insurance products (accounts/contracts) excluded? We are trying to determine if insurance purchased for funeral purposes (usually less than $50,000) is covered by AML. - With respect to insurance, the PCMLTFA applies to life insurance companies and life insurance agents and brokers. It is possible that these reporting entities may be required to perform CDD and keep records for "Insurance purchased for funeral purposes" to the extent that such a policy would be interpreted as a "life insurance policy for which the client may pay $10,000 or more” over the duration of the policy. However, insurance for funeral expenses provided through other insurance vehicles (e.g., property and casualty or disability insurance) would generally not trigger obligations under the Act. Further, section 62(2) of the PCMLTFR exempts designated transactions, accounts and activities from record keeping and CDD obligations. This includes the “purchase of an exempt policy as defined in subsection 306(1) of the Income Tax Regulations” and the “purchase of a group life insurance policy that does not provide for a cash surrender value or a savings component”. Whether or not a specific life insurance policy (in this case one for funeral purposes) would be eligible for these exemptions would be a question of fact for FINTRAC’s interpretation on a case by case basis.
Answer:

It is a question of fact to be able to clarify the treatment of a) pension funds and b) insurance policies for funeral expenses. But based solely on the information provided by the Department of Finance, here are some general comments: Life insurance: Subsection 5(c) of the PCMLTFA states that “life companies or foreign life companies to which the Insurance Companies Act applies or life insurance companies regulated by a provincial Act” are subject to Part 1 of the PCMLTFA. The life insurance sector includes life insurance companies as well as life insurance agents and brokers. Subsection 1(2) of the PCMLTFR defines life insurance broker or agent as “a person or entity that is registered or licensed under provincial legislation to carry on the business of arranging contracts of life insurance”. This sector has the following obligations, regardless of the type of product they offer. When applicable they must report any large cash transaction of $10,000 or more they receive, and have record keeping obligations in regards to that transaction. They must also report any suspicious transactions, as well as terrorist property reports. They also have a number of other record keeping obligations, ascertaining identity in certain situations, PEFP determination, third party determination, and finally they must also implement a compliance regime. My understanding of the insurance purchased for funeral purposes is: • Pay out a lump sum payment between $5,000 – $30,000 dollars upon the death of the policy holder to the designated beneficiary or the estate of the deceased; • Special policies are tailored to take care of medical bills, funeral expenses, outstanding debt, and other expenses at the time of death; • There is usually no medical examination required, and often no (or a high) age limit to be accepted for this type of insurance, funeral insurance can be used by people who are not eligible for traditional life insurance policies (due to age or health reason); • For many funeral insurances, coverage is limited within the first 2 years (i.e. you will not receive the full amount you are covered for, but instead only receive a portion of the funds or a refund of your premiums, depending on the insurer). The large cash transaction reporting requirement does not apply when the life insurance company or life insurance broker or agent is dealing in reinsurance. Reinsurance is insurance that an insurance company buys from another insurance company as a way to manage higher risk. Also, a large cash transaction report is not required for any of the following transactions referred to in subsection 62(2) of the PCMLTFR: • the purchase of a policy that is an exempt policy (this means a policy issued for insurance protection and not for significant investment purposes as defined in subsection 306(1) of the Income Tax Regulations) (paragraph 62(2)(a)); • the purchase of a group life insurance policy that does not provide a cash surrender value or a savings component (paragraph 62(2)(b)); • the purchase of an immediate or deferred annuity paid for entirely with funds directly transferred from a registered pension plan (paragraph 62(2)(c)) or the proceeds of a group life insurance policy (paragraph 62(2)(e)); • the purchase of a registered annuity policy or a registered retirement income fund (paragraph 62(2)(d)); • a registered plan, including a locked-in retirement plan, a registered retirement savings plan, a group registered retirement savings plan, a registered education savings plan and any other registered plan (paragraph 62(2)(i)); • where the account holder or settlor is a federally or provincially regulated pension fund (paragraph 62(2)(k)); • a transaction that is part of a reverse mortgage (this is a type of loan that allows homeowners to convert part of the equity in their home into money in their hands, without selling their home) or a structured settlement (this means a settlement on a claim for damages in personal injuries or wrongful death cases where the payments are over a period of time) (paragraph 62(2)(f)); or • a transaction for a public body or a very large corporation. The same is true regarding a subsidiary of either of those entities, if the financial statements of the subsidiary are consolidated with those of the public body or very large corporation (paragraphs 62(2)(m) and (n)). There are other transactions included in subsection 62(2) of the PCMLTFR, but those others would not apply to this sector. With respect to reporting suspicious transactions and terrorist property, both a life insurance agent and an employee of a life insurance company or broker, and the life insurance company have the responsibility to report. Pension Funds Accounts: Life insurance, financial entities and securities dealers do not have to ascertain identity of individuals or entities and to keep a copy of the part of the official corporate records showing the provisions that relate to the power to bind the corporation regarding the account, when they open any of the following accounts: • where the account holder or settlor is a federally or provincially regulated pension fund (paragraph 62(2)(k)); • for the purchase of an immediate or deferred annuity paid for entirely with funds directly transferred from a registered pension plan or the proceeds of a group life insurance policy (paragraphs 62(2)(c) and (e)).

Date Answered: 2012-12-21

Activity Sector: Life insurance broker or agent, Life insurance company
Obligation: Reporting Reporting Reporting
Guidelines: 5,6,7,8
Regulations: 1(2), 62(2)
Act: 5(c)

133. Reportable or not? - SWIFT Messages

Question:
If we receive a SWIFT EFT message that should have been sent (according to SWIFT rules) by the FI overseas as an MT103 (because it is not strictly bank to bank) do we have an obligation to reject it and insist on it being re-sent as an MT103? MT202s are bank to bank transfers that SWIFT rules stipulate may not be used for individuals or non-bank entities. Apparently some banks incorrectly use this format regularly for various reasons. I have come up with the following reasoning: The Regulations stipulate that only MT103s are reportable. No ifs/ands/or buts on that. (Subsection 1(2) of the PCMLTFR definition of an EFT: "In the case of SWIFT messages, only SWIFT MT103 messages are included.") Therefore, we are left in a position where we think that the transaction should be reportable, in the SPIRIT of the legislation, but are not reportable in the letter of the legislation (because they are not formatted as MT103s). We would like to request guidance from FINTRAC on what is required to be done as far as reporting these transactions or refusing them.
Answer:

If Company ABC receives a SWIFT message MT 202 that should have been sent (according to SWIFT rules) by the FI overseas as an MT 103 (because it is not strictly bank to bank) does Company ABC have an obligation to reject it and insist on it being re-sent as an MT 103? MT 202s are bank to bank transfers that SWIFT rules stipulate may not be used for individuals or non-bank entities. Apparently, some banks incorrectly use this format regularly for various reasons. Subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” As a result, the transactions processed via MT 202 are not to be considered as MT 103 messages, and are not reportable. FINTRAC is not in a position to provide guidance on what is required to be done by Company ABC as far as reporting these transactions or refusing them.

Date Answered: 2012-12-19

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2)

134. EFTI validation errors

Question:
ABC does not have a physical presence in Canada. ABC UK Ltd is based in the UK and ABC USA Inc. has an office in the US. This is as per our registration online. As discussed, your form does not allow in Field E.5 to input a UK address. Hence the trouble we have been having in terms of reporting. ABC bank’s address was selected as our Canadian bank account is held with them. The system preselects ABC, which is correct, but we are unable to then fill in our UK address. Please provide guidance regarding our activites. For example: A Canadian client requires a payment in GBP to an individual in the UK. They register with us and are subject to KYC, AML and our enhanced due diligence checks. Once registered, the client can book an exchange rate either over the phone or online. They then receive confirmation of the required CAD to send to our Canadian CAD account with ABC. Once the funds are received they are converted to GBP and deposited into our UK GBP account. If my understanding is correct this is the outflow that you require reporting on. We would then make the GBP payment from our London account to the client’s beneficiary scanning the beneficiary against sanctions lists, OFAC , BoE, Patriot and terrorist watch lists etc.
Answer:

In regards to your question about ABC UK Limited and ABC USA Inc., FINTRAC has previously determined, and continues to uphold the position, that any individual or entity that meets the definition of a money services business (MSB) as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, is carrying on these MSB activities in Canada and has “real and substantial connection to Canada”, is subject to the PCMLTFA and its associated Regulations. A Canadian bank account for the purposes of carrying on MSB activities is considered to be a “real and substantial connection to Canada”. Although ABC does not have a physical presence in Canada, the fact that they have a bank account in Canada with a Canadian Bank to remit funds to a Canadian beneficiary, ultimately means that they have a real and substantial connection to Canada and must report EFTs in accordance with paragraphs 28(1)(b) and (c) of the PCMLTFR, which reference the reporting form Schedules 2, 3, 5 and 6. Schedule 6 requires that the full name and full address of the receiving institution be included on an incoming non-swift international electronic funds transfer report. Our systems require that this be an address in Canada because the funds are incoming to Canada. Until ABC has established a physical presence in Canada, they will have to use the address and bank account number they have with the Canadian Bank for the purposes of Schedule 6 – Part E when submitting EFTI reports.

Date Answered: 2012-11-20

Activity Sector: Money services business
Obligation: Reporting
Regulations: 28(1)(b), 28(1)(c), Schedule 2, 3, 5, 6

135. S. 34(1)(a)(i) - Retainer for services

Question:
A large accounting firm receives, albeit, on rare occasions retainers for services to be rendered. Is this “retainer” considered a professional fee since it is received prior to rendering the service? The reporting entity indicated they have received retainers in the past and that these funds were deposited in their regular account (not in an )
Answer:

Subsection 34(1) of the PCMLTFR states that “subject to subsections (2) and (3), every accountant and every accounting firm is subject to Part 1 of the Act when they (a) engage in any of the following activities on behalf of any person or entity, namely, (i) receiving or paying funds, (ii) purchasing or selling securities, real properties or business assets or entities, or (iii) transferring funds or securities by any means; (b) give instructions on behalf of any person or entity in respect of any activity referred to in paragraph (a). The obligations for accountants apply only while they are carrying out the triggering activities described above. This means accountants are subject to Part 1, but only when they conduct the above activities on behalf of any individual or entity, or give instructions relating to these activities on behalf of any individual or entity. There is no definition of what a retainer is in our legislation. However, it is commonly understood in the field that a retainer means a service contract between a professional (such as an accountant) and his client, wherein the professional agrees to provide professional services, in exchange for money. If the retainer is used to pay professional fees the amount is not covered. With respect with the issue of funds received “in trust account” or “in an account other than an in trust account”, it would be a question of fact to be able to determine if we are in the presence of a retainer. In general, when the retainer fees are received to an in trust account, these funds are not the accountant’s yet, but still the client's funds, and may be considered as one of the triggering activities under 34(1)(a)(i) of the PCMLTFR. On the other hand, when the retainer fees are received in an account other than an in trust account, these funds are the accountant’s, and it must be determined if the accountant is receiving these funds on behalf of his client in respect of any activity referred to in paragraph (a), or to pay professional fees. In the case described below, if the accountant is NOT receiving these funds on behalf of his client in respect of any activity referred to in paragraph (a), the amount would NOT be subject to any requirements.

Date Answered: 2012-11-16

Activity Sector: Accountant
Obligation: Reporting
Regulations: 34(1)
Act: 5(j)

136. Postal codeless for record keeping / reporting obligations

Question:
We have come across a possible problem with citing deficiencies on civic address specific to Postal Code. We give deficiencies on reporting when a postal code is not provided. We also require REs to report incoming international EFTs if the name and address (including Postal Code) of their client are not part of the transfers. FINTRAC has told REs in writing and verbally that address means civic address. All the investigation I have done on various government websites is conclusive that civic address consists of: "the number, the street or road name, and the community name assigned to residential, commercial, institutional and industrial buildings." No mention of Postal Code anywhere. Further, Canada Post tells us that: "The Postal Code is an integral part of every postal address in Canada. The Postal Code was designed to aid in sorting mail by both mechanized and manual methods. It also enables the Customer to pre-sort mail, thereby bypassing a number of sorting processes within Canada Post and reducing costs." There were lots of rural addresses in the LCTRs filed and they often didn't include Postal Code. Many addresses contained PO Boxes and we definitely included them in our deficiency findings. However, we all came to the realization that we couldn't give them deficiencies on PO Box based on the fact that we require civic address and then also give them deficiencies on no postal codes based on the postal address. It just wouldn't fly. We need to choose one and stick with it! So, my question is: can we really require Postal Code to be included in reports when we tell them we want civic address? Can we also require REs to report EFTs where the Postal Code of their client is the only thing missing in the transfer?
Answer:

A "valid", "full", or "civic" address does not require a postal code. That being said, if the Postal Code is the only thing missing then the transfer would not become reportable for the credit union- based on the above rational that postal code is not part of valid, full or civic address. So, for credit unions or other REs that are not the first RE in Canada to receive the transfer, it would not be reportable if only the postal code is missing. In terms of international or foreign addresses, there is no specific formula. It should be information relevant to help locate the person physically, or as described in the case of First Nations clients "as many details as possible to where their personal housing unit is situated.” It is difficult to give you a complete answer since every country has its own conventions. January 2009: In regards to the First Nations clients, we would suggest that if they do not have a civic address, then they should provide as many details as possible in regards to where their personal housing unit is situated (i.e. the name of the street, and the name of the reserve they are on or any other similar type of information). Unfortunately, our policy interpretation in regards to the civic/personal address would not allow any relief in this case, and P.O. Boxes would still not be acceptable.

Date Answered: 2012-11-05

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 2, 3, 7, 8
Regulations: 12(1)(a), 12(5), Schedule 1

137. LCTR Reporting

Question:
1. Does the RE need to file a LCTR in cases where a customer cashes a cheque denominated in Canadian funds and utilizes part of the proceeds to conduct an FX transactions in excess of $10k CAD? 2.When one of ABC’s mandatory brings $10,000 or more to XYZ (owned by ABC) to pay the transfers our customer did in the business of this mandatory, do we have to report a Large Cash Transaction Report?; 3.When one of ABC’s mandatory brings $10,000 CAD or more to XYZ (owned by ABC) and we have to change the Canadian dollars to US dollars to pay the US dollars transfers our customer did in the business of this mandatory, do we have to report a Large Cash Transaction Report? Because, sometimes we can have to change the CAD to USD to pay the amount due per the mandatory to ABC. This question looks like the first one question but it is little bit different and I want to be sure. When a USD cheque of $10,000 or more is cashed for a customer, can we pay it directly in USD without making any foreign exchange between USD to CAD and CAD to USD? a. Do we have to report a large cash transaction if the cheque is cashed USD to USD dollars? b. Do we have to report a large cash transaction if the cheque is cashed USD to CAD dollars and CAD dollars to USD dollars in the same transaction?
Answer:

1.The RE does not have the obligation to file an LCTR in this case since the foreign exchange was purchased via cheque which was denominated in a different currency. There was no receipt of cash from a client and therefore the obligation enumerated under paragraph 28(1)(a) of the Regulations has not been triggered. However, said transaction is a FX transaction thus the RE needs to keep the prescribed information on hand in relation to this transaction plus it must formally identify the conductor. 2-3. Because the requirement under paragraph is triggered in cases where the RE receives $10,000 or more cash from a client, the reception of cash from its agents does not trigger the requirements under said section of the Regulations. However, it may be worth reminding the reporting entity that when the $10,000 or more in cash is received from the client this must be reported by whoever is responsible for reporting as set out in the agreement between the agent and the principal. 4.Part A – no, since the RE did not receive $10,000 or more in cash from a client. It is a cheque cashing operation which does not entail any record-keeping or client identification requirements on the part of the RE. Part B: no since in the RE did not receive $10,000 or more in cash from a client; however, the transaction in question is foreign exchange transaction and the RE needs to keep the prescribed information on hand in relation to this transaction plus it must formally identify the conductor. However, I only question how in (b) the cheque is being cashed USD to CAD and CAD to USD in the same transaction. Is the entity cashing the USD cheque to CAD, handing over the CAD, and then taking it back to cash it BACK into USD? Same as in Q1, if there are two transactions here, then there may be the requirement to file an LCTR for the second transaction.

Date Answered: 2012-09-12

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), 28(1)(a), Schedule 1

138. Domestic EFTs

Question:
Customer A of a FI in Canada requested that US funds be transferred to customer B of a credit union in BC. (The amount of the transfer in US funds was equivalent to $10K Canadian). The FI in Canada sent the US funds to the credit union in BC, however, the funds were routed from the FI in Canada to a FI in the USA before it arrived at the credit union in BC. I have checked with my colleagues in my office, and they believe the above scenario is a domestic transfer. The rationale is that customer A did not request the funds to be transferred from the FI in Canada to the FI in the USA. The funds went to the USA as part of the routing process of this transfer. Can you please confirm this.
Answer:

Subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada”. We have indicated in the past that to be reportable an electronic funds transfer must be: • client initiated, and • the transmission of instructions to transfer funds across the Canadian border You provided the following facts namely: “Customer A of a FI in Canada requested that US funds be transferred to customer B of a credit union in BC. (The amount of the transfer in US funds was equivalent to $10K Canadian). The FI in Canada sent the US funds to the credit union in BC; however, the funds were routed from the FI in Canada to a FI in the USA before it arrived at the credit union in BC”. In question is whether domestic or foreign currency funds transferred from one Canadian bank account to another Canadian bank account, but routed through a foreign country, constitutes an electronic funds transfer as per subsection 1(2) of the PCMLTFR. Customer A gave instructions to transmit funds from his/her Canadian bank account to the customer B’s Canadian bank account. The intention (or the purpose) of the transfer is to move funds from Canada to Canada. Our position is that this transaction DOES NOT constitute an incoming non-swift international electronic funds transfer as defined in subsection 1(2) of the PCMLTFR.

Date Answered: 2012-08-22

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2)

139. Obligations of DPMS

Question:
What are the DPMS obligations?
Answer:

A dealer in precious metals and stones is subject to the PCMLTFA if they have ever bought or sold precious metals, precious stones or jewelry that total $10,000 or more in a single transaction regardless of how it was paid. This single transaction reference to determine if the DPMS is covered literally means $10,000 or more at one time. It is not referring to the 24-hour rule for single transaction. That, however, is just for the triggering activity. Once the DPMS has carried out this one-time $10,000 or more triggering activity, they become subject to the PCMLTFA and all of its obligations, such as the compliance regime, STRs, large cash transactions and monitoring for “24-hour rule” single transactions. That said, if the reporting entity carries out a single transaction of $10,000 or more the activity is subject to the reporting, record keeping and identification requirements of the PCMLTFA. If the reporting entity instead carries out a $5000 transaction one week and then another $5000 transaction the following week, assuming the 24-hour rule doesn’t apply, then these transactions do not constitute a single transaction of $10,000 or more, so do not trigger the large cash transaction reporting, record keeping and identification requirements.

Date Answered: 2012-08-08

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Guidelines: 6I
Regulations: 1(2), 39.1, 39.2
Act: 5(i)

140. Triggering activities

Question:
From what I have read in previous PIs the 24 hr rule does not apply for triggering activities. An example provided was if Customer A purchases a gold watch 6000$ in cash and then 4 hrs later Customer A purchases another gold watch for 4000$ in cash it would not trigger the application of the regime. I just wanted to ensure that is still accurate?
Answer:

Section 39.1 of the PCMLTFR states that “every dealer in precious metals and stones that engages in the purchase or sale of precious metals, precious stones or jewellery in an amount of $10,000 or more in a single transaction, other than such a purchase or sale that is carried out in the course of, in connection with or for the purpose of manufacturing jewellery, extracting precious metals or precious stones from a mine or cutting or polishing precious stones, is subject to Part 1 of the Act”. Also, a single transaction means two or more cash transactions or electronic funds transfers of less than $10,000 each that are made within 24 consecutive hours and that total $10,000 or more. Therefore, the 24-hour rule does not apply to triggering activities. In subsection 3(1) of the PCMLTFR the definition of a “single transaction” states that two or more cash transactions or EFTs of less than $10,000.00 made within 24 consecutive hours and that total $10,000 or more are considered to be a single transaction if where a person is required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations, the person knows that the transactions or transfers were carried out by, or on behalf of, the same person or entity. If a DPMS has not yet carried out that triggering activity, then they are not yet a “person required to keep a large cash transaction record or to report an electronic funds transfer in accordance with these Regulations.” As such, they are not required to monitor for repeat activity by, or on behalf of, the same person or entity within a 24-hour period. The use of the term single transaction in Section 39.1 is a reference to the layman’s understanding of a single transaction – a transaction of $10,000 or more carried out at one time. Once the DPMS has carried out this one time transaction of $10,000 or more, they become a reporting entity that is obligated to monitor for “single transactions” as defined in subsection 3(1) of the PCMLTFR.

Date Answered: 2012-07-27

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Guidelines: FIN-4, 7
Regulations: 3(1), 39.1

141. Partial match

Question:
1) The main issue on which I need clarification is the idea of a ‘partial match’ with a name on either the Criminal Code list or the UN list. Since TPRs should only be submitted if there is certainty about terrorist property, does the very idea of a partial match create enough doubt that a report should not be submitted? In other words, if all an RE has to go on is a partial match on one of the lists, is that enough to file a TPR? My sense is no, but I want to confirm. 2) A related question: if there is a full match on a particular name, but there is a variation in spelling, should the RE still file a TPR? 3) Many seem to equate TPRs with STRs, or at least seem to think that both must be submitted in cases of terrorist property. Is it the case that an STR should be filed along with a TPR? Or does the TPR suffice? I feel like it is the latter, since a ‘suspicious transaction’ by definition indicates uncertainty about the nature of the funds or the client, while a TPR is only filed when an RE is sure about the nature of the funds.
Answer:

1) As explained in Guideline 5: Submitting Terrorist Property Reports to FINTRAC, two situations can trigger the requirement to send a terrorist property report to FINTRAC: • Knowing that property is owned or controlled by or on behalf of a terrorist or a terrorist group: The RE has to send a terrorist property report to FINTRAC if it has property in its possession or control that it knows is owned or controlled by or on behalf of a terrorist or a terrorist group. This includes information about any transaction or proposed transaction relating to that property. Once the RE knows that any property in its possession or control is owned or controlled by or on behalf of a terrorist or a terrorist group, or after any transaction is made or proposed for such a property, a terrorist property report must be sent to FINTRAC without delay. If the RE knows that a transaction is related to property owned or controlled by or on behalf of a terrorist or a terrorist group, the RE should not complete it. This is because such property must be frozen under the Criminal Code. If the RE is not sure that it is dealing with a terrorist or terrorist group, but suspects that it might be, then a suspicious transaction report is required if a transaction was completed. The RE also has to complete a suspicious transaction report if the suspicious transaction was only attempted. • Believing that property is owned or controlled by or on behalf of a listed person: The RE has to send a terrorist property report to FINTRAC if it has property in its possession or control that it believes is owned or controlled by or on behalf of a listed person. This includes information about any transaction or proposed transaction relating to that property. If the RE is not sure that it is dealing with a listed person (for example “partial match”), but suspect that it might be, then a suspicious transaction report is required if a transaction was completed. The RE also has to complete a suspicious transaction report if the suspicious transaction was only attempted. Section 1 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism defines listed person as “a person whose name is listed in the schedule in accordance with section 2, with the exception of the following: (a) the entities referred to in the Regulations Establishing a List of Entities; and (b) Osama bin Laden or his associates, or any person associated with the Taliban within the meaning of section 1 of the United Nations Al-Qaida and Taliban Regulations. (personne inscrite)” 2)In a case where there is a spelling variation and the RE believe that it is a listed person, it will make sense to rely on other information that leads the RE to believe that an individual or an entity is a listed person or associated with such a person. 3)To clarify, a TPR is really for the purpose of reporting that the RE is in control/possession of terrorist property whereas the STR is for suspicion of ML or TF and has to be tied to a financial transaction or an attempted financial transaction. As explained in Guideline 2: Suspicious Transactions, if the RE suspects that a transaction, whether completed or attempted, is related to money laundering offence or terrorist activity financing offence, the RE has to make a suspicious transaction report to FINTRAC. A suspicious transaction is one for which there are reasonable grounds to suspect that the transaction is related to a money laundering offence or a terrorist activity financing offence. Once the RE has detected a fact that amounts to reasonable grounds to suspect that a transaction is related to the commission or attempted commission of money laundering offence or a terrorist activity financing offence, a suspicious transaction report must be sent to FINTRAC within 30 days. However, if the RE knows, rather than suspects, that a transaction is related to property owned or controlled by or on behalf of a terrorist or a terrorist group, the RE should not complete the transaction, and file a TPR to FINTRAC without delay.

Date Answered: 2012-06-28

Obligation: Reporting
Guidelines: 2, 5

142. LCTR and 3rd Party Determination Interpretation

Question:
The PCMLTFA regulations state at section 8(1): Every person or entity that is required to keep a large cash transaction record under these Regulations shall take reasonable measures to determine whether the individual who in fact gives the cash in respect of which the record is kept is acting on behalf of a third party. The wording of the regulations implies it is not possible for the person conducting the transaction to also be the third party – especially if we substitute the new wording “instructing party” in place of third party. Guideline 6G: 6.1 Third party determination You have to make a third party determination when you have to keep any of the following records. • Large cash transaction record Whenever you have to keep a large cash transaction record (as described in subsection 3.2), you have to take reasonable measures to determine whether the individual who gives you the cash is acting on the instructions of a third party. In this context, a third party is an individual or entity other than the individual who conducts the transaction. In contrast the guideline distinguishes that Third Party Determination for a signature card is explained as: • Signature card or an account operating agreement (when opening accounts) Whenever you open an account and are required to keep a signature card or an account operating agreement as explained in subsections 3.3 and 3.5, you have to take reasonable measures to determine whether the account is to be used by or on behalf of a third party. In this context, a third party is an individual or entity, other than the account holder or those authorized to give instructions about the account, who directs what happens with the account. This interpretation would therefore include the following situations: 1) When a signer on a business account conducts a large cash transaction on behalf of the business, complete a third party statement about the business. 2) When someone other than our customer/account holder is depositing to our customer’s account, (based on our customer’s instructions), complete the third party statement with the details of our customer. E.g. If my mother asks me to deposit $12,000 to her account and I am not a signer on her account, my mother is considered the 3rd party, and I do not need to record information about myself, other than my name, as the conductor. Could you please confirm for me that my interpretation is correct, based on the wording of the regulations and the guideline.
Answer:

1)Yes, in addition to the large cash transaction record, and the third party determination record, Part F of the Large Cash Transaction Report must be completed with info on the business. It should be noted that if the necessary third party information is already in your records, you do not have to record it again on the third party record. However, you should record at least the name of the third party on the third party record so that you know who the third party is, and are able to locate the info on this third party. You must also be sure to note the relationship between the conductor and the third party. If, as outlined in section 7 of the PCMLTFR, the signer is an employee depositing into his/her employer’s business account, then this is not a third party transaction. 2)Your mother is the third party for this large cash transaction. This is a large cash transaction, you must keep a large cash transaction record, as outlined above, make the third party determination and keep the associated record, and send us a large cash transaction report. Third party info must be recorded on your mother as required by section 8(2) as noted above. If the address, date of birth, and occupation of the third party (mother) is already in your records, you do not have to record it again on the third party record. However, you should record at least the name of the third party (the mother) on the third party record so that you know who the third party is, and are able to locate the info on this third party (the mother). You must also be sure to note the relationship between you as the person giving the cash and your mother as the account holder. Also, on the large cash transaction record, conductor name is not required if the amount is received for deposit by a financial entity. However, for the large cash transaction report, you must report on the conductor as outlined in Part D of Schedule 1 in the PCMLTFR.

Date Answered: 2012-06-27

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G,7
Regulations: 7, 8(2), Schedule 1-Part F, Schedule 1-Part D

143. LCTR and 3rd Party Determination Interpretation

Question:
I had thought the intention of the legislation is to know and understand who we are doing business with – we already know our customer/signer, but we do not necessarily know anything about the person conducting the transaction. Of course we are required to record their name as the conductor, but we are not obliged to record anything else. From a money laundering risk perspective, would it not make more sense to know more about the person who has brought a large amount of cash into the credit union to deposit to the account?
Answer:

If an individual conducts a large cash transaction, then you must keep a “large cash transaction record”, which is defined in the PCMLTF Regulations as follows: • “large cash transaction record” means a record that indicates the receipt of an amount of $10,000 or more in cash in the course of a single transaction and that contains the following information: o (a) as the case may be (i) if the amount is received for deposit by a financial entity, the name of each person or entity in whose account the amount is deposited, or (ii) in any other case, the name of the person from whom the amount is in fact received, their address and date of birth and the nature of their principal business or their occupation, if the information is not readily obtainable from other records that the recipient keeps and retains under these Regulations; o (b) the date of the transaction; o (c) where the transaction is a deposit that is made during normal business hours of the recipient, the time of the deposit or, where the transaction is a deposit that is made by means of a night deposit before or after those hours, an indication that the deposit was a night deposit; o (d) the number of any account that is affected by the transaction, and the type of that account, the full name of any person or entity that holds the account and the currency in which account transactions are conducted; o (e) the purpose and details of the transaction, including other persons or entities involved and the type of transaction (such as cash, electronic funds transfer, deposit, currency exchange , the purchase or cashing of a cheque, money order, traveller’s cheque or banker’s draft or the purchase of precious metals, precious stones or jewellery); o (f) whether the cash is received by armoured car, in person, by mail or in any other way; o (g) the amount and currency of the cash received; and o (h) where the amount is received by a dealer in precious metals and stones for the sale of precious metals, precious stones or jewellery, (i) the type of precious metals, precious stones or jewellery involved in the transaction, (ii) the value of the transaction, if different from the amount of the cash received, and (iii) the wholesale value of the transaction. Please note that the content of a large cash transaction record is different from the required contents of a large cash transaction report.

Date Answered: 2012-06-27

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2)

144. LCTR and 3rd Party Determination Interpretation

Question:
If we already have records about our customer, (the account holder), and a person other than the account holder is conducting the transaction, why would it be necessary to record the information about our account holder (or business account or signer), who, according to the guideline is considered to be the third party?
Answer:

Section 8(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTF Regulations) indicates that third party records must be kept and contain the following info: • 8(2) Where the person or entity determines that the individual is acting on behalf of a third party, the person or entity shall keep a record that sets out (a) the third party’s name, address and date of birth and the nature of the principal business or occupation of the third party, if the third party is an individual; (b) if the third party is an entity, the third party’s name and address and the nature of the principal business of the third party, and, if the entity is a corporation, the entity’s incorporation number and its place of issue; and (c) the nature of the relationship between the third party and the individual who gives the cash. Please also note that section 7 of the PCMLTF Regulations states the following: For the purposes of these Regulations, a person acting on behalf of their employer is considered to be acting on behalf of a third party except when the person is depositing cash into the employer’s business account. Therefore, third party info must be recorded as indicated by section 8(2) unless section 7 applies. If the third party info (e.g. name, address, date of birth, and occupation) is already somewhere in your records, you do not have to record it again on the third party record. However, you should record at least the name of the third party on the third party record so that you know who the third party is, and be able to locate the third party info in your other records that you keep. Because your record must also indicate the nature of the relationship between the third party and the individual who gives the cash, you must be sure to get this information even if you already have the other third party details on file.

Date Answered: 2012-06-27

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 7
Regulations: 7, 8(2)

145. LCTR and 3rd Party Determination Interpretation

Question:
There is a clear distinction in Guideline 6G between who a third party can be when an account is opened versus who a third party can be in regard to a large cash transaction. My interpretation is that in regard to LCTRs a third party cannot be the person standing in front of you, conducting the transaction, which seems to be in line with the wording of the regulations, however I do not think this necessarily aligns with the intention of the legislation.
Answer:

You are correct in that a person conducting a large cash transaction cannot be a third party for that transaction. This could lead to a reporting entity gathering information on the account holder if it is not the account holder conducting the transaction, but someone they have sent to do this on their behalf. That said, it is important to gather information on the individual conducting the transaction as well as the individual instructing the transaction. For the person conducting the transaction, you are required to maintain a large cash transaction record, the details of which are laid out in subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). Furthermore, when a large cash transaction record must be kept, identification of the person or entity carrying out the transaction must be ascertained in accordance with section 64(1) of the PCMLTFR. Whenever you are required to keep a large cash transaction record, you must determine if the person giving you the cash is acting on behalf of a third party and keep a record to that effect. Finally, you are required to send us a large cash transaction report.

Date Answered: 2012-06-27

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G, 7
Regulations: 1(2), 12(1)(a), 13, 64(1)

146. LCTR completion- guidance and clarification of guideline 7A, Appendix 1

Question:
I am just unclear as to what makes an employee? What about the President makes him not an employee when he draws a salary from the company? At what point is the line drawn to define who is acting on behalf of the entity and who is just an employee? You indicated in your example that there is a definite difference between the person with authority vs. the person that is an employee. Is it the authority to act in respect to the account (I.e. the written/legal authority to act on behalf of the entity) that makes the President not an employee? In the long run it makes a huge difference in the completeness of reporting because part F (all the info on the business that owns the account) drops off completely as soon as you choose the "Employee deposit to employer business account" for the On Behalf of Indicator (there is nowhere to put reasonable efforts information even if the RE had it). So we just want to make sure that we get the guidance fully understood.
Answer:

Just to clear up a few things first: 1) Part F is not necessarily for information on the business that owns the account. Part F of the LCTR is for information on the THIRD PARTY TO THE TRANSACTION THAT IS AN ENTITY. That is why this drops away when you select that the disposition was a deposit by employee into employer’s account. As per section 7 of the Regulations, an employee depositing into their employer’s business account is not acting on behalf of a third party. 2) Having authority to bind or act on an account is not what makes you an employee or not. Below are a few scenarios that will hopefully explain our position : 1) Joe is a cashier for ABC Inc. , a pet food store. At the end of the day, Joe is asked by his employer to take the money from his cash register and deposit it into the Bank account of ABC Inc. Part F would not appear because as an employee of ABC Inc. depositing into his ABC Inc. employer’s account, Joe is not acting on behalf of a third party. 2) Joe is a cashier for ABC Inc., a pet food store. At the end of the day, Joe is asked by his employer to take the money from his cash register and deposit it into the Bank account of XYZ Inc. their dog food supplier. In this scenario, because the funds are being deposited by ABC Inc. into the XYZ Inc. account, ABC Inc. is a third party that is an entity. Part F would be completed as follows: F1 – Entity’s full name - ABC Inc. F2 – Entity’s incorporation number and place of issue of incorporation, if applicable: ON1234 , Ontario F3 – Entity’s type of business – pet food store F4 – Entity’s full address – 135 Dog Food Lane, Ottawa, Ontario, A1B 0C2 F5 – Entity’s telephone number – 613-111-1234 F6 – Full name of each person – up to three – who is authorized to bind the entity OR act with respect to the account. Because the deposit is being made by an employee of ABC Inc., a business not associated with the bank account of XYZ Inc., there is not likely to be anyone with the authority to necessarily act on the account, rather what likely applies here is the fact that there exist people with the authority to bind the entity (ABC Inc.) carrying out the transaction, so the names (up to three) would be ABC Inc. names with authority to bind ABC Inc. 3) Joe is the president of ABC Inc., a pet food store. At the end of the day, Joe takes the money from the various cash registers and deposits it into the Bank account of ABC Inc. In this scenario, as president of the business, we’ve determined that Joe is not an employee of ABC Inc. Part F would be completed as follows: F1 – Entity’s full name - ABC Inc. F2 – Entity’s incorporation number and place of issue of incorporation, if applicable: ON1234 , Ontario F3 – Entity’s type of business – pet food store F4 – Entity’s full address – 135 Dog Food Lane, Ottawa, Ontario, A1B 0C2 F5 – Entity’s telephone number – 613-111-1234 F6 – Full name of each person – up to three – who is authorized to bind the entity OR act with respect to the account. Because the deposit is being made into an ABC Inc. bank account by someone affiliated with the ABC Inc. there is likely to be ABC Inc. people with the authority to act on the account or bind the entity, so either could apply. Please note: • The person conducting the transaction may not be the individual who has authority to bind the entity, but rather the person conducting the transaction may be able to provide the names of up to three individuals who have this authority to bind OR the person conducting the transaction may not be the individual who has authority to act on the account, but rather the person conducting the transaction may be able to provide the names of up to three individuals who have this authority to act on the account. • Part F is only to be filled out as applicable, and Field F6 (or 12 as it’s numbered in the Guideline) is only reasonable efforts, as applicable • This information may not need to be requested of the individual conducting the transaction as it may already be on file with the bank.

Date Answered: 2012-06-18

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: Schedule 1- Part F

147. LCTR completion- guidance and clarification of guideline 7A, Appendix 1

Question:
Service providers and credit unions want to confirm the interpretation of the Large Cash Transaction Report guidelines in FINTRAC 7A – Appendix A – Part B2 and Part F. There has been some confusion in the industry about when a part F is required – Information about the entity on whose behalf transaction was conducted (if applicable). In the various scenarios presented in Part B2 – Information about the Disposition: • Not applicable This means that neither Part F (On behalf of entity) nor Part G (On behalf of another individual) applies to this report. "Not applicable" indicates that none of the other "On behalf of" selections is applicable to the transaction. For example, the transaction was a night deposit or a quick drop, or the disposition was not on anyone else's behalf (that is, it was on behalf of the individual that conducted it). • On behalf of an entity This indicates that the disposition was on behalf of an entity, such as a business, a partnership, a corporation, a trust or other entity, but was not an employee depositing cash to his or her employer's business account. For a transaction that was conducted on behalf of an entity, complete Part F for this report to provide the information about that entity. • On behalf of another individual This indicates that the disposition was on behalf of another individual but was not an employee depositing cash to his or her employer's business account. For a transaction that was conducted on behalf of another individual, complete Part G to provide the information about that other individual. • Cash deposit to employer's business account This indicates that the disposition was an employee depositing cash to his or her employer's business account. If it was an employee depositing cash to his or her employer's business account, neither Part F nor Part G of this report applies. Do not use this indicator if the employee deposited other than cash or if the employer's account was other than a business account. When an owner or signer of an account makes a deposit to a business account, we have found some institutions have been given guidance that the disposition for these transactions is “Not Applicable” – which as noted above does NOT require the completion of Part F of the LCTR. Other institutions (and one service provider I have contacted) have recently been given guidance that the correct disposition for this disposition is “On Behalf of an Entity” which as noted above requires the completion of Part F of the LCTR. The confusion exists because FINTRAC Guideline 7 – Appendix A – Part F (Information about the entity on whose behalf transaction was conducted) is described in the FINTRAC guidelines as follows: Part F: Information about the entity on whose behalf transaction was conducted (if applicable) This part only applies if the transaction's disposition was conducted on behalf of a third party that is an entity. Part F will only appear if you indicated "On behalf of an entity" in Part B2. If an employee deposited cash in his or her employer's business account, or if the transaction was a deposit to a business account by night deposit or quick drop, Part F does not apply. The definition of Part F implies it should ONLY be completed when the transaction is on behalf of a third party entity which by definition would NOT be the business on whose behalf the deposit was made. This conflict in the FINTRAC guideline has led to some Financial Institutions posting LCTRs without Part F and others posting with Part F (with information about the business account where the deposit was made). Our request for guidance – When a signer/owner makes a deposit to an account – what is the correct disposition to be completed under Part B2? Additionally, can Part F of the Guidelines be clarified when this section is required. I have another concern over the language in the Third Party (6G) and LCTR (7A) Guidelines. 6G 6.1 states the definition of a third party for an LCTR “a third party is an individual or entity other than the individual that conducts the transaction.” “When you are determining whether a "third party" is involved, it is not about who "owns" the money, but rather about who gives instructions to deal with the money. To determine who the third party is, the point to remember is whether the individual in front of you is acting on someone else's instructions. If so, that someone else is the third party.” 7A Appendix A Part F states “This part only applies if the transaction's disposition was conducted on behalf of a third party that is an entity.” 7A Appendix A Part G states “This part only applies when the transaction's disposition was conducted on behalf of a third party that is an individual.” In your guidance below you’ve indicated that when an account owner makes a deposit to their business account that Part F is required. “In the context of determining whether a third party is involved, the point to remember is whether the individual in front of you is acting on someone else’s instructions.” If the owner of the entity account is depositing to their own account, how can they be acting on someone else’s instructions? The entity can’t give instructions, so therefore the entity would not be a third party and following the FINTRAC guidelines, Part F would not be required in this scenario. The conflict resides in 7A Appendix A Part B2 that states “you have to indicate whether the individual who conducted the transaction was doing so on anyone else's behalf.” “For a transaction that was conducted on behalf of an entity, complete Part F for this report to provide the information about that entity.” In part F6 of Schedule 1, you are supposed to enter the names (up to 3) of persons who are authorized to bind the entity or act with respect to the account. For a small company, usually the name(s) would be the owner(s) of the company. For a larger corporation, it may be employee(s) who are appointed to represent/bind/ act on behalf of the entity/company. Employees who are appointed to represent/bind/ act on behalf of the entity/company generally have to sign a form which gives them these extra powers. Employees who merely make deposits for the company but are not authorized to represent/bind/act on behalf of the entity/company do not complete this form. My question is: When an employee who has been given the authorization to represent/bind/ act on behalf of the entity/company, does Part F need to be filled out when this employee makes a large cash deposit?
Answer:

Subsection 8(1)of the PCMLTFR states that “every person or entity that is required to keep a large cash transaction record under these Regulations shall take reasonable measures to determine whether the individual who in fact gives the cash in respect of which the record is kept is acting on behalf of a third party”. We indicate in our Guidelines that when determining whether a "third party" is involved, it is not about who "owns" the money, but rather about who gives instructions to deal with the money. To determine who the third party is, the point to remember is whether the individual in front of you is acting on someone else's instructions. If so, that someone else is the third party. With respect to a transaction conducted by an employee, section 7 of the PCMLTFR states that “for the purposes of these Regulations, a person acting on behalf of their employer is considered to be acting on behalf of a third party except when the person is depositing cash into the employer’s business account”. It is only when an employee makes a large cash deposit into the employer’s business account that this exemption applies. In fact, and as an example, if the employee walks into a bank with $10k+ in cash and instructs the bank to make an electronic funds transfer, reasonable measures must be taken to determine if there is a third party instructing the employee to do so. Here are a few comments with respect to Part F: Information about the entity on whose behalf transaction was conducted (if applicable): • It only applies if the transaction's disposition was conducted on behalf of a third party that is an entity • All of the information in this section pertains to the third party that is an entity • Reasonable measures must be taken to determine the names of up to three individuals who have authority to bind the entity OR conduct transactions through the account – the “or” indicates that the information in field F12 depends on the circumstances of the transaction. • The person conducting the transaction may not be the individual who has authority to bind the entity, but rather the person conducting the transaction may be able to provide the names of up to three individuals who have this authority to bind OR the person conducting the transaction may not be the individual who has authority to act on the account, but rather the person conducting the transaction may be able to provide the names of up to three individuals who have this authority to act • This information may not need to be requested of the individual conducting the transaction as it may already be on file with the bank • It does not apply if the employee makes a deposit in cash into his employer's business account, or if the transaction was a deposit to a business account by night deposit or quick drop Now, to explain this further, here are some examples: • The employee of ABC Inc. makes a large cash deposit of $10k+ into the account of XYZ Inc. Reasonable measures must be taken to determine the names of up to three individuals who have authority to bind the ABC Inc. • The President of ABC Inc. makes a large cash deposit of $10k+ into the account of ABC Inc. As President, the individual is not an employee, so is carrying out the transaction on behalf of ABC Inc., which becomes the third party that is an entity. In this case, Part F information applies to ABC Inc. and the information in field F12 should include the name of each person – up to three – who is authorized to act with respect to the account.

Date Answered: 2012-06-18

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 7, 8(1), Schedule 1

148. Clarification- EFTs and MSB

Question:
Clarification in regards to the matters of electronic funds transfers (EFT) and being licensed as a money transmitter in Canada.
Answer:

In Canada, money transmitters are part of a sector known as money services businesses (MSB). MSBs are required to send EFT reports to FINTRAC when they send or receive, at the request of a client, EFTs of $10,000 or more in the course of a single transaction. As per the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, an electronic funds transfer “means the transmission – through any electronic, magnetic or optical device, telephone instrument or computer – of instructions for the transfer of funds, other than the transfer of funds within Canada.” As such, if an MSB sends or receives funds in a transaction not carried out at the request of a client, then they are not carrying out an EFT for which they have reporting obligations. Furthermore, when an MSB carries out an EFT, at the request of a client, which originates in Canada to be sent to a final destination in Canada, this does not constitute a reportable EFT.

Date Answered: 2012-06-18

Activity Sector: Money services business
Obligation: Reporting
Guidelines: FIN -1
Regulations: 1(2)
Act: 5(h)

149. ACH inquiry

Question:
Bank in Canada has provided an explanation as to why their client's information is being reported in both the ordering client (Part B) and beneficiary fields (Part F) of their EFTs. Per their explanation, in Debit Pull scenarios, the Canadian FI's client is both the client ordering the payment of the EFT, and the client to whose benefit the payment is made. Consequently, the client's information is reported in both Parts B & F. The Canadian Bank’s “ACH Primer for FINTRAC": Debit Pull: In a Debit Pull transaction, funds are collected from a Receiver’s account and transferred to an Originator’s account, even though the Originator initiated the entry. For example, the Originator of a pre-authorized debit is the company to which the amount is owed. Consumers authorize the company to debit their accounts for their monthly bills. Once a month, the company initiates a Debit Pull through its ODFI to withdraw the funds from all of the consumers’ accounts. The company is the Originator of the transaction, and the consumers are the Receivers – even though the funds flow in the opposite direction from this. Examples of typical Debit Pull transactions include: utility payments; insurance premiums; monthly association or club dues; and mortgage/loan payments. The Canadian Bank’s Stance: The Canadian FI client is both the client ordering the payment of the EFT, and the client to whose benefit the payment is made. Consequently, the same client information is reported in both Parts B & F. In their reports, the Canadian Bank does not include information about the U.S. FI’s account-holder from which the funds are received. Example: Section 2a) - The Originator is the party that agrees to initiate an ACH transaction according to an agreement with a Receiver. The transaction may involve either a transfer to or from the Originator’s account. Section 2e) - The Receiver is the party which has authorized the Originator to initiate an ACH entry to the Receiver’s account with the RDFI. The Receiver’s account may be debited or credited depending on the nature of the transaction. Section 3b) - In a Debit Pull transaction, funds are collected from a Receiver’s account and transferred to an Originator’s account, even though the Originator initiated the entry. For example, the Originator of a pre-authorized debit is the company to which the amount is owed. Consumers authorize the company to debit their accounts for their monthly bills. Once a month, the company initiates a Debit Pull through its ODFI to withdraw the funds from all of the consumers’ accounts. The company is the Originator of the transaction, and the consumers are the Receivers – even though the funds flow in the opposite direction from this. Entity’s Question: Is this type of reporting of value to FINTRAC?
Answer:

It has been explained that, for example, a Canadian utility company would ask the Bank in Canada to contact an American financial institution to request that funds be put into the ACH system to be transferred into the Canadian Bank's account of the utility company. In this example, and according to the Bank in Canada, the utility company would be the initiator and the beneficiary of the funds and it would be reported as an outgoing EFT because the instructions for the transfer of funds would have gone from Canada to the US for the transfer of funds back into Canada. All examples submitted by the Bank in Canada essentially describe the same payment architecture, namely: the Canadian utility company (the payee) contacts the client (the payor) to request that the payor effect the payment of her debt by having funds transferred from her foreign financial institution’s bank account to the payee’s Canadian bank account. Subsection 1(2) of the PCMLTFR defines electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada”. We have indicated in the past that to be reportable an electronic funds transfer must be: • client initiated, and • must be the transmission of instruction to transfers funds across our border The Bank in Canada submits that the company owed the funds is the initiator and the beneficiary of the incoming/outgoing EFT. Our position is that the payor gives instructions, through the payee perhaps, to her foreign financial institution to transmit funds to the payee’s bank account. As the account holder, the payor is the client ordering the payment of the electronic funds transfer. Her instructions include the payment and banking details for the payment. The intention (or the purpose) of the payment is to transfer funds from the payor’s bank account in the foreign country to the payee’s bank account in Canada. Here is the electronic funds transfer as defined in our regulations. The payor initiates the transmission of instructions to transfer funds across the Canadian border. Our position is that this transaction constitutes an incoming non-swift international electronic funds transfer as defined in subsection 1(2) of the PCMLTFR. The report should be filled as follow: Part A – Transaction Information Part B – Information on Client ordering payment of an EFT: The payor Part C – Information on Sender of EFT: the payor’s bank account in the foreign country (American financial institution) Part E – Information on Receiver of EFT: the Canadian Bank Part F – Information on Client to whose benefit the payment is made: The payee (Canadian utility company) This transaction will only be an EFTI even if the payor was located in Canada and instructed her bank in the foreign country to transmit funds to Canada, because the intention (or purpose) of this transaction is to have the funds moved from the foreign country into Canada. Another example would be that a foreign utility company would ask a foreign bank to contact a Canadian financial institution to request that funds be put into the ACH system to be transferred into the foreign bank account of the utility company. In this example, and according to the Bank in Canada, the foreign utility company would be the initiator and the beneficiary of the funds and it would be reported as an incoming EFT because the instructions for the transfer of funds would have gone from the foreign country to Canada for the transfer of funds back into the foreign country. In this case, the intention (or the purpose) of the payment is to transfer funds from the payor’s bank account in Canada to the payee’s bank account in the foreign country. Here is the electronic funds transfer as defined in our regulations. Once again, the payor initiates the transmission of instructions to transfer funds across the Canadian border. Our position is that this transaction constitutes an outgoing non-swift international electronic funds transfer as defined in subsection 1(2) of the PCMLTFR. The report should be filled as follow: Part A – Transaction Information Part B – Information on Client ordering payment of an EFT: The payor Part C – Information on Sender of EFT: the payor’s bank account in Canada Part E – Information on Receiver of EFT: Foreign bank outside of Canada Part F – Information on Client to whose benefit the payment is made: The payee (foreign utility company) This transaction will only be an EFTO. The payor was located in Canada and instructed her bank in Canada to transmit funds to the foreign country. The intention (or purpose) of this transaction is to have the funds moved out of Canada to the foreign country.

Date Answered: 2012-05-29

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8A, 8B
Regulations: 1(2), 12(1)(b), 12(1)(c), Schedule 5, Schedule 6

150. Agent of the Crown

Question:
If a deposit is made by an Agent of a Public Body (with an agent agreement in place) can it be considered a deposit by the public body for the purposes of the LCTR reporting exception found in paragraph 12.(1)(a) of the PCMLTFR?
Answer:

Subsection 1(2) of the PCMLTFR defines “public body” as: (a) any department or agent of Her Majesty in right of Canada or of a province; (b) an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them; and (c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or any agent of such an organization. It appears that Insurance Corporation of British Columbia (ICBC) is a provincial crown corporation in British Columbia, and therefore falls within the definition of “public body” as it fits under “Her Majesty in right of a province”. The definition of public body also includes the agent of a public body. Therefore, a deposit made by an agent of a public body is considered a deposit made by the public body for the purposes of the LCTR reporting exception found in subsection 12.(1)(a) of the PCMLTFR.

Date Answered: 2012-04-12

Activity Sector: Life insurance company
Obligation: Reporting
Regulations: 1(2), 12(1)(a)

151. Online currency trading

Question:
I do currency tradings through an online trading broker. Occasionally I get friends or families exchanging small amount of Canadian dollar into US dollar because I can get better rate with my online broker than the local banks do. I don't do it as a business hence there isn't really any profit involved. I heard about this "large cash transaction" rule from my banks all the time so my concern is at what point I should worry about reporting to FINTRAC? For example, my aunt is thinking about buying a property in the US, she wants me to exchange $1 million CAD into USD. She will write me a cheque or bank draft to my bank account, then I will transfer that fund to my online trading account and exchange them to USD (all Canadian financial institutions); then I will write her a cheque back to her bank. For situation like this, am I in danger of money laundering and does this consider as "foreign exchange dealing"? Am I required to comply with certain financial laws since I'm just a doing trading as a hobby and I'm not interested in getting too complicated?
Answer:

Only reporting entities, as defined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, have to report to FINTRAC. Based on the information in your e-mail, you are using an online broker to conduct the foreign exchange activity. As a client of the online broker, you are not carrying out the transaction and thus have no reporting obligations to FINTRAC. Any reporting obligations that arise as a result of the transactions you described would be handled by your bank and the online trading broker with which you have an account. For your information, however, FINTRAC does have a reporting process by which we are able to receive voluntary information from the public about suspicions of money laundering or of the financing of terrorist activities. In answer to your question about large cash transactions, a financial institution (or any other business that reports to FINTRAC) is only obligated to report a transaction if they receive $10,000 or more in physical cash (bills and/or coins). The obligation to report does not apply to funds received by cheque, bank draft, etc.

Date Answered: 2012-04-11

Activity Sector: Securities dealer
Obligation: Reporting
Regulations: 1(2)

152. Armoured cars

Question:
We have had past guidance that when an armoured car makes a deposit at a branch of a credit union or bank, the conductor of the large cash transaction is the driver of the armoured car company. A credit union has advised that sometimes, the driver will refuse to provide his/her name. In this case, what should the credit union report as the conductor of this transaction?
Answer:

Paragraph 12(1)(a) of the PCMLTFR requires that, subject to section 50 and subsection 52(1), every financial entity report the receipt from a client of $10,000 or more in cash, along with the information referred to in Schedule 1. The conductor information, when applicable, is a mandatory field. FINTRAC does not have the authority to grant administrative forbearance with respect to the mandatory requirements of the PCMLTFR. Should the credit union proceed to file an LCTR without the name of the conductor, they would be in non-compliance with the legislation.

Date Answered: 2012-03-21

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: FIN-5, 7
Regulations: 12(1)(a), Schedule 1

153. Business accounts & ATM

Question:
Some banks and credit unions have begun buying new ABMs that include "Business Depositories." Basically, they are ABMs that allow businesses to make deposits which then unlock a night deposit safe located underneath the ABM keyboard to put their night deposit bag/envelope into. The deposit DOES NOT enter the ABM safe (unlike normal deposits you and I do into our bank accounts) but drops into a separate depository safe connected to the ABM to be verified the next day. The benefit to institutions to use this new type of ABM is that their business clients get immediate credit for their deposit- a marketing benefit. In order to make these deposits the business client must use the ABM (ie. their card and PIN). The transaction is recorded as an ABM transaction in the banking system. This means that, for everybody using an automated reporting system, the transaction is picked up for reporting as an ABM transaction and is reported to us as such. Because it is reported as an ABM transaction and not a night deposit, Conductor information in Part E is required. Those who are smart probably use the name of the principle on the account as the conductor but it has been readily admitted that most institutions are issuing a client one or two cards that are coded for deposit only and are shared by all their staff that make deposits. Do we care? Do we care that these deposits are reported as ABM instead of night deposits and that we probably get not quite accurate conductor information (or, as in most cases, none at all)? Or do we have to give guidance that these transactions are to be reported as night deposits (not sure how the institutions using these will be able to do that...)? What do we think they are? I think that they are night deposits done using the facility of the ABM so should be considered night deposits. I don't think the REs using these ABMs will have the capability to identify deposits done this way however... making correct reporting extremely difficult. In the long run should we not be suggesting a change in legislation that makes conductor not required on ABM deposits? It would solve this problem and get us into step with a changing banking world that may soon have no insitution using separate ABMs and night depositories. And in the meantime use administrative forebearance to let institutions report these transactions as either night or ABM? I have had another Financial Institution ask the following question with respect to ABMs. In this case the card is issued in a business name and not an individual name. Can the depositer be the business name?
Answer:

If the transaction is done via a ATM/ABM then it should be reported as such and the conductor's name appearing in Part E as we had indicated before should be the name of the individual to whom the card was issued. So basically if the person authorizes another employee to use his/her card to deposit sums in the account (and provides his/her nip), ultimately the individual to whom the card was issued has the responsibility attached to that card. This transaction would not be considered as night deposit and should not be treated as such (because it initially is done via the ABM). In the LCTR report, unfortunately in part E - Information about the individual conducting the transaction if it is a deposit into a business account (other than a night deposit or quick drop) is a mandatory field. Consequently, if the RE does not fill out the information about the individual (surname and name) it will be rejected. The business' name would not be acceptable, the RE should probably indicate one of the account holders' name as the individual or enquire who is making the deposits. Thus,we have in past indicated that in the absence of information to the contrary, it is reasonable to assume that the cardholder whose card was used to access the ABM is the conductor. If it is possible that each bank card for a business account is not associated with a particular employee in some manner, and the card is issued to a business name, you may indicate one of the three signatories to the commercial account as the conductor.

Date Answered: 2012-03-20

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: FIN-5, 7
Regulations: 12(1)(a), Schedule 1-Part E

154. DPMS-Agent of Her Majesty

Question:
Is an Agent of the Crown, that is considered a DPMS, only required to report $10,000 or more in cash if they receive the money for a precious metal sale to the public?
Answer:

We have said in the past that an agent of Her Majesty is only covered (i.e. is only DPMS according to the definition in subsection 1(2) of the PCMLTFR) when it is selling precious metals, precious stones and jewellery in an amount of $10,000 or more in a single transaction, to the public, as opposed to other DPMS who are covered for all their DPMS activities once they have engaged in a triggering activity. This also means that it will have no obligation under the Act to include its buying activities (including from refiners).

Date Answered: 2012-03-05

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Regulations: 1(2), 39.1

155. DPMS- Exemption for employees

Question:
Is the exemption given to employees as not being considered consumers, extended to family and friends of the employee? Or is it strictly employees?
Answer:

We said in the past that manufacturers that transact directly with consumers are no longer considered to be manufacturers and must comply with the requirements under the Act if they engage in purchases or sales of jewellery in an amount of $10,000 or more in a single transaction. The Act and Regs do not define who “consumers” are. However, I believe that if family or friends of the employee are NOT employed by the manufacturer then the manufacturer should NOT be exempted as it is with respect to its employees.

Date Answered: 2012-03-01

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Guidelines: 6i
Regulations: 1(2), 39.1

156. EFTs reporting requirements

Question:
Questions regarding the reporting obligations Example Scenario: 1. Client is in China and goes to an MSB in China (the owner of the China MSB is also an owner of the MSB in BC). 2. The client gives cash/cheque to the MSB and tells them to send the money to his daughter in Texas 3. China MSB will send the instructions to BC MSB advising them to send the money to Texas and wires the money to BC MSB’s TD account (in BC) 4. BC MSB receives the funds in their TD account 5. BC MSB sends the money from the TD account to the recipient in Texas 6. When the BC MSB sends the money to the recipient in Texas, they advise TD that they are a 3rd party sending the money on behalf of the client in China Questions: 1. Does the MSB in BC file an EFTI? 2. Does the MSB in BC file an EFTO? 3. Or does the MSB in BC file both EFTI and EFTO? 4. If they do file an EFTI or EFTO, who would be the client, the beneficiaries and the recipient?
Answer:

When determining if a wire or a transfer of funds is an EFT (incoming or outgoing), we always have to look at the facts in question. In this specific scenario, based on the facts described, we can look if there is a transmission of instructions or not that will help determine if there is an EFTI or EFTO as per the definition in our legislation. We believe there are two set transmission of instructions happening in the specific case. First set of instructions is given by the Chinese client: If the Chinese client gives instructions to send money to his daughter (Texas) to the Chinese MSB who in turn will send it internationally to Texas, since there is no other instructions from the Chinese client, namely to send the money via Canada, then there is no EFTI reportable. Second set of instructions is given by the Chinese MSB: If the Chinese MSB gives instructions to send money in Texas to the Canadian MSB who in turn will send it internationally to Texas, then there is an EFTO reportable. In this case, the client will be the Chinese MSB, the beneficiary will be the daughter in Texas, and the recipient will be the entity in Texas. Therefore, based on this scenario, we determined that there are an EFTI and an EFTO. 1. Incoming Non-Swift international electronic funds transfer report information: a. Part A – Transaction information b. Part B – Client in China c. Part C – China MSB d. Part D - e. Part E – Canada MSB f. Part F - Daughter in Texas 2. Outgoing Non-Swift international electronic funds transfer report information: a. Part A – Transaction Information b. Part B – China MSB c. Part C – Canada MSB d. Part D – Client in China e. Part E – Texas entity f. Part F – Daughter in Texas

Date Answered: 2012-02-23

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 1(2), 28(1)(b), 28(1)(c), Schedule 5, schedule 6

157. Large cash transaction Reporting Obligations

Question:
Scenario 1: A customer comes and brings $10,000 CAD. Within the same visit, $6,000 CAD of the $10,000 CAD was applied toward an order where the customer buys precious metals. The customer then decides to keep the rest of the $4,000 CAD on account. We would allow that and the customer may use that money for his future orders to buy precious metals. It also happens sometimes that the customer later changes his mind and wants the money back. In the scenario above, when I am filling out the large cash transaction report for the $10,000 CAD, should I put the “disposition” of the $10,000 as “purchase precious metals” or should I divide it into two dispositions: $6000 as “purchase precious metals” and $4000 as “hold for later purchase.” If it is neither of the two please also advise. Scenario 2: A customer comes on Feb.06 at 3pm and leaves $12,000 CAD of cash on his account. When this happens, we accept the cash and assume that the customer will use the money later to purchase precious metals. This is usually the case, but it happens sometimes that the customer may change his mind and wants the cash back without doing a transaction. Then the customer comes on Feb.07 at 2pm and places orders to purchase precious metals and uses the $12,000 CAD of cash that he brought on Feb.06. On Feb.08, we are preparing the large cash transaction report for the $12,000 CAD of cash received on Feb.06. At this stage, we know that the $12,000 was used for purchasing precious metals, but it was not used when the cash was received, so which one is more appropriate for us to put as the disposition of the cash in the report: to purchase precious metals, or to keep on account for later purchase? Or something else?
Answer:

In scenario 1 the LCTR would have 2 dispositions: • disposition 1 – purchase of precious metals and stones ($6k); and • disposition 2 – deposit to an account ($4k). As for scenario 2, the DPMS has this obligation: Section 39.2 of the PCMLTFR states that: “subject to subsection 52(1), every dealer in precious metals and stones that is subject to Part 1 of the Act and that receives an amount in cash of $10,000 or more in the course of a single transaction shall report the transaction to the Centre, together with the information set out in Schedule 1, unless the cash is received from a financial entity or a public body”. Therefore, LCT must be reported when the money/cash is received (i.e. $10K or more in cash). And because we realize that their business practices seem to allow the opening of a "corporate" account whereas the DPMS may accept cash in advance for future sales of either precious metals/precious stones or jewellery from an entity, we recommend that for reporting purposes only, that DPMS be informed that they should use when filling out the LCTR in the drop down menu – “deposit in account”. However, should this happen it would be up to you to decide whether a suspicious transaction is warranted or not

Date Answered: 2012-02-14

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Regulations: 39.2, Schedule 1

158. EFTs- transfer of funds regarding a new product

Question:
123 is a digital payments and commerce platform. 123 offers a secure and easy way to send and receive money online between 123 customers, or with merchants who accept our credit card, either in store or online, leveraging the credit card network. The system would like confirmation that based on their business model, there would not be any identification requirements for their transfers. As well they would like an additional policy interpretation regarding the transfer of funds if the transaction amount is over $1,000 for all transaction types except for the “serve customer to serve customer” transactions. They are aware that these would constitute EFTs and that identification requirements would apply. For the remaining products they would like to confirm that none of them would be considered the remittance or transmission of funds by an MSB under section 30(e) of the PCMLTFR.
Answer:

The products “customer to customer” definitely constitutes an EFT as per our legislation. Consequently, the entity would need to have a compliance regime in place. However, because the amounts of the transactions are below the threshold of $1000.00, there would be not record keeping obligation, nor any client identification obligation. As for the other products (network, ATM etc.), these do not fall within the list of activities covered under section 5(h) of our Act. Again, there may be additional information we do not have that could have had influenced our policy interpretation.

Date Answered: 2012-01-27

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 30(e)
Act: 5(h)

159. Pre-paid credit cards

Question:
We are planning to offer prepaid card, in terms of AML compliance what factors should we take into consideration? I visited the FINTRAC website and only found a short blurb on the product under Financial Intelligence. I am not sure if you are aware that a credit card company purchased a prepaid card program in 2011. Before we resign the agreement to offer prepaid cards in Canadian, USD, GBP & EUR we wanted to check with you to see if there are any changes to existing requirements for selling prepaid cards?
Answer:

MSBs are covered for their money services business activities only (which do not include pre-paid cards) - but a word of caution - *in regards to STRs, MSBs are covered for STRs for all their activities* (i.e. those enumerated under 5(h) of the PCMLTFA and any other activities that are not considered money services business activities (including prepaid cards).

Date Answered: 2012-01-09

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 2 , 3
Act: 5(h), 7

160. Applying the definition of EFTs

Question:
A non-Canadian Customer of a ABC Inc affiliate books a transaction outside of Canada for payment to a Canadian beneficiary. The Customer pays the ABC Inc affiliate outside of Canada, and ABC Inc initiates a payment from its Canadian bank account to the beneficiary in Canada.
Answer:

This is an incoming EFT as prescribed by paragraph 28(1)(c) of the PCMLTFR since this is the receipt from outside of Canada instructions to send funds to a Canadian beneficiary sent at the request of a client, the non-Canadian customer.

Date Answered: 2011-12-08

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 1(2), 28(1)(c)

161. Applying the definition of EFTs

Question:
Canadian Customer has a need to receive payment outside of Canada. Canadian Customer instructs payor to pay funds to an account held by ABC Inc or a ABC Inc affiliate outside of Canada. Upon receipt of those funds outside of Canada,ABC Inc wires funds from its bank account in Canada to the Customer's Canadian bank account.
Answer:

Our position is that the payor gives instructions to his/her foreign bank to transmit funds to the payee. As the account holder, the payor is the client ordering the payment of the electronic funds transfer. His/her instructions include information, a unique order ID or reference number, that will make it possible for the MSB to identify the transaction and banking details for settling the payment. You submit that such a transaction is not reportable under the current FINTRAC regulations. You state that the payor has not sent funds across border, but has only made a payment to a foreign bank account held by the ABC Inc foreign affiliate, that later will be subject to a settlement between the ABC Inc foreign affiliate and ABC Inc in Canada. Our position is that the intention (or the purpose) of the payment is to transfer funds from the payor’s bank account in the foreign country to the payee’s bank account in Canada. The payor initiates the transmission of instructions to transfer funds across the Canadian border. Furthermore, we note that the payor’s instructions travel through the unique order ID or reference number transmitted to every player involved in the process of this payment. Our position is that this transaction constitutes an incoming non-swift international electronic funds transfer as defined in subsection 1(2) of the PCMLTFR. This transaction would be an incoming non-swift international electronic funds transfer even if the payor was located in Canada and instructed his/her bank in the foreign country to transmit funds to Canada, because the intention (or purpose) of this type of transaction is to have the funds moved from the foreign country into Canada. However, and based on the other examples provided to us, we would like to specify that tuition fee payments are considered to be payment processing activities if, and only if, the tuition fee payment is made to a designated educational institution empowered to confer diplomas, certificates or other degrees inside or outside of Canada, and therefore are not reportable.

Date Answered: 2011-12-08

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 1(2), 28(1)(c), Schedule 6

162. Applying the definition of EFTs

Question:
Canadian Customer books a payment with ABC Inc for delivery of funds outside of Canada. Canadian Customer pays the principal amount of the payment to a ABC Inc bank account outside of Canada. ABC Inc initiates a payment in the local currency to the beneficiary from a bank account held by ABC Inc or a ABC Inc affiliate in the jurisdiction outside of Canada in which the beneficiary is located, or via a corresponding bank.
Answer:

In this scenario, the Canadian customer instructs ABC Inc to send funds outside of Canada. Although the funds are not sent across the border by ABC Inc and the funds are deposited into the foreign account directly by the Canadian client, this is an outgoing EFT as prescribed by paragraph 28(1)(b) of the PCMLTFR since ABC Inc is sending instructions for the transfer of funds out of Canada at the request of a client. This is a reportable transaction as long as it is of an amount of 10,000$ or more.

Date Answered: 2011-12-08

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 1(2), 28(1)(b)

163. Applying the definition of EFTs

Question:
Canadian Customer books a payment with ABC Inc for delivery of funds outside of Canada. Canadian Customer pays the principal amount of the payment in CAD to ABC Inc’s Canada bank account. ABC Inc directs its bank in Canada to wire funds to the foreign beneficiary. Funds are delivered to the beneficiary by such Canadian bank, through a foreign affiliate of the Canadian bank, or through the Canadian bank's corresponding banking relationship(s).
Answer:

In this scenario, it seems like the bank is the one conducting the outgoing EFT and Custom House ULC is the client. ABC Inc instructs its Canadian bank to send funds outside of Canada. As prescribed by Part D of Schedule 2 or Schedule 5 of the PCMLTFR, the information on the third party, where the client ordering the EFT is acting on behalf of someone else, must be included. Therefore, the bank will report the EFT, identify ABC Inc as being the client as required by Part B and include the information on the originating Canadian client as prescribed by Part D. If ABC Inc does not provide the prescribed client information as required in Part D to the bank, ABC Inc must submit an outgoing EFT report as well. This is an outgoing EFT as prescribed by paragraph 28(1)(b) of the PCMLTFR as the Canadian bank is sending instructions for the transfer of funds out of Canada at the request of a client. This is a reportable transaction as long as it is of an amount of 10,000$ or more.

Date Answered: 2011-12-08

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 1(2), 28(1)(b), Schedule 2- Part D, Schedule 5- Part D, Schedule 2- Part B, Schedule 5- Part B

164. Applying the definition of EFTs

Question:
Canadian Customer books a payment with ABC Inc. for delivery of funds outside of Canada. Canadian Customer pays the principal amount of the payment to ABC Inc.’s bank account in Canada. ABC Inc. initiates a payment in the local currency to the beneficiary from a bank account held by ABC Inc. or a ABC Inc. affiliate in the jurisdiction outside of Canada in which the beneficiary is located, or via a corresponding bank.
Answer:

In this scenario, the Canadian customer instructs ABC Inc to send funds outside of Canada. Although the funds never cross the border, this is an outgoing EFT as prescribed by paragraph 28(1)(b) of the PCMLTFR as ABC Inc is sending instructions for the transfer of funds out of Canada at the request of a client. This is a reportable transaction as long as it is of an amount of 10,000$ or more.

Date Answered: 2011-12-08

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 1(2), 28(1)(b)

165. General Insurance Companies and reporting obligations

Question:
Could you please confirm if a general insurance agency (does not sell life insurance) wholly owned by a credit union has the requirement to report attempted suspicious, suspicious and large cash transactions?
Answer:

These are two separate legal entities, therefore the credit union does not report for their subsidiary. The subsidiary must register separately with us and report separately. However, the general insurance company is not a covered sector under our Act - only life insurance companies and life insurance brokers or agents are covered under our legislation. Therefore if the general insurance company is not a life insurance company, it does not have any legislative obligations under the PCMLTFA and associated regulations.

Date Answered: 2010-05-18

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Life insurance broker or agent, Life insurance company, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: 2,3,7
Regulations: 1(2)

166. CDR completion dates

Question:
On April 11, patron first wins 4 jackpots of $2000 each for a total of $8000, then patron wins 5th jackpot of $2000 bringing him to $10,000. Patron doesn't have sufficient ID so 5th jackpot is held until he returns on April 15 with proper ID. The 5th transaction would be completed on April 15 and no CDR will be triggered. My thought is that perhaps in both cases the CDR should actually be dated for April 11 to ensure a CDR is completed for when transaction was actually triggered and not necessarily when disbursement was completed. Is that the preference for FINTRAC? or should we complete according to date of disbursement and treat exceptions like this as a possible STR situation if warranted?
Answer:

The date of the actual disbursement is the date when the clients shows up with the ID In the regulations (s.60(b)(i)), the casino must identify every person that receives an amount from the casino for which a record is required to be kept under 43(g) (i.e. when a report is made to us). There is no disbursement possible, if there is no identification - therefore the date of the disbursement cannot be prior to to the identification of the person.

Date Answered: 2010-05-18

Activity Sector: Casino
Obligation: Reporting
Regulations: 60(b)(i), 43(g)

167. LCTRs made in retail stores

Question:
Cash payments made at the retail stores do not fall under the large cash transaction reporting regime as the payments are made at an entity that is not subject to the provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and Regulations (the "PCMLTFA" and "PCMLTFR", respectively). Section 5 of the PCMLTFA does not include retail stores in its list of entities subject to the application of the Act and section 12 of the PCMLTFR imposes reporting obligations only in respect of a "financial entity". Requiring large cash transaction reporting by a retailer is extending the PCMLTFA reporting obligations beyond the requirements established under the Act and Regulations and results in the acquisition of information by FINTRAC that extends beyond its legislative authority. A proposed cease of filing large cash transactions of this sort.
Answer:

The current policy interpretation remains the same as follows, FINTRAC is not extending the application of the legislation to the retail stores. FINTRAC is however applying the legislation as it is written to the financial institution - Retail Store Bank ('the Bank") . It is the Bank that emits the credit cards, not the stores, and if the Bank mandates the stores that they can receive payments from clients towards their Retail Store Bank credit card, then the Bank has the obligation to ensure that the reporting of large cash be done; and, In regards to the OPC argument - the Bank under the Act must report LCTR - and the information the Bank would provide to FINTRAC is within our legislative authority to receive.

Date Answered: 2010-05-11

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 12(1)

168. Obligations regarding syndicated loans

Question:
A credit union central provides syndicated loan services to credit unions. Credit Unions participate based on the syndicated offering. The Credit Union Central receives payments via AFT from the borrower's designated FI, and those funds are then redistributed to the credit unions' participating in the syndicated loan, based upon their proportionate share. The credit risk is at the CU and all payments are passed thru the Central directly to the CU...the discussed credit union central is the facilitator. Please advise if syndicated loan accounts fall under all obligations of PCMLTFA?
Answer:

CU has no obligation in these cases because the client in question of CU is a FE that is also a member, thus exempted. In an earlier PI, you stated that CU are only covered for the transactions that trigger the coverage. Again, I will stress with CU that they are not covered provided the CU is a member.

Date Answered: 2010-04-28

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting

169. Is it mandatory to update existing records: Credit Union Centrals

Question:
Is there a requirement for credit union centrals to go back and update all records on existing accounts, including inactives, to meet all the compliance obligations?
Answer:

No, unless there are triggering events that follow for these clients after the coming into force.

Date Answered: 2010-04-28

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting

170. Terrorist Property

Question:
Guideline 5 states that a terrorist property report must be filed if a company knows or believes that property in its possession or control is owned or controlled by or on behalf of a terrorist(s). If a company does not have possession or control of the assets the requirement does not apply to us. Would you agree with this?
Answer:

With regards to TPR you are still obligated to send a monthly report to your regulator with regards to the OSFI list. Should you have a match than a TPR report should also be sent to FINTRAC/RCMP & CSIS as per the directions in Guideline 5.

Date Answered: 2010-04-22

Activity Sector: Securities dealer
Obligation: Reporting

171. Suspicious Transaction Obligations

Question:
In regards to the concept of a ‘suspicious transaction', a company is only responsible for trades that are initiated by them (they do not accept instructions from the clients to perform trades or to move funds). For cash movements that are initiated by the client in the account at RE XYZ we only see these transactions after the fact (on the client statements that we receive from XYZ) but we cannot prevent the transaction from occurring nor are we party to facilitating the transaction in any way. It does not state so specifically in Guideline 2, but I assume that for us to report a suspicious transaction we would need to be involved in the facilitation of that transaction in some way, in terms receiving instructions from the client or actually carrying out the physical transaction. Could you provide any further clarification on this ?
Answer:

There is no exemption for the STR or TPR provisions of the PCMLTFA. Any transaction or attempted transaction that occurs in the course of your activities where you have reasonable grounds to suspect potential ML or TF is reportable. This is a tough one for PMs because they have discretionary authority over the assets. Nonetheless, since you are entering into contractual arrangements with clients and if you are aware of any suspicious transactions in the course of your activities it should be reported.

Date Answered: 2010-04-22

Activity Sector: Securities dealer
Obligation: Reporting

172. Up to date information in client ID

Question:
When a reportable transaction such as an LCT or large wire occurs, are we required to obtain updated ID from the client if the ID we have on file from the time the account was opened has since expired eg. expired drivers license.?
Answer:

Yes if you recognize as per 63(1), in the case where the person's identity was previously ascertained as per section 64 of the regulations, you do not need to ascertain the identity of that person again. Just a reminder that there is no legal obligation to keep the client's identification information up to date, except in the case of high risk clients. And in the case of an LCTR - although the reporting entity can recognize under 63(1), and therefore benefits from an exemption to identify again, the RE must still make a third party determination in every case.

Date Answered: 2010-04-13

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6, 7
Regulations: 63(1) , 64

173. Cash Advance and CDRs

Question:
Are Cash Calls (cash advances on a credit card) reportable as a CDR? In that case though, the patron would get a receipt from the ABC ATM machine, then would have to go to the cashier who would issue them a cheque.
Answer:

With a review of subsection 42(1), ATM machine receipt being "cashed" by the casino within one of the reportable cash disbursements and unfortunately this does not fall within any of the transactions enumerated - i.e. it is not a payment to a client of funds received for credit (the funds received need to be initially received by the casino), and it is not the cashing of cheques or other negotiable instruments (the receipt from the ATM machine is not a negotiable instrument). Therefore, this scenario should be treated as an advance on a credit card (with a twist as the receipt will be cashed by the casino) and is not reportable.

Date Answered: 2010-04-12

Activity Sector: Casino
Obligation: Reporting
Regulations: 42(1)

174. Bank reporting obligations of deposits from Public Bodies

Question:
The CRA has adopted a "no cash" policy for payments on tax debtors accounts. While there are some procedures in place to accept cash in special circumstances, we have been advised by our Payment Processing section, that they would prefer the monies be converted to a bank draft or money order. This is where your written opinion is being sought. As the amounts are almost always in excess of $10,000, the financial institutions are very reluctant to complete conversion of the cash to another negotiable instrument, due to the reporting requirements imposed by FINTRAC. Is there a way to obtain a written document, that we could provide to the financial institutions, that will allow them to process a transaction such as I've described, whereby they do not have to report? Our intention is to negotiate some type of arrangement with a financial institution(s) and we are sure that your reporting requirements would be an issue.
Answer:

The legislative reporting requirement applicable to financial entities you are referring to is found in subsection 12(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing (PCMLTF) regulations that indicate that financial entities benefit from an exemption to report the receipt of an amount in cash of $10,000 or more when the cash is received from another financial entity or a public body. As your organization falls within the definition of a public body (department or agent of Her Majesty in right of Canada) within our legislation, the bank does not have to file a report with us when they receive the amount in cash of $10,000 or more from your organization.

Date Answered: 2010-04-12

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 12(1)(a)

175. Swift or Non-Swift

Question:
Does having a membership in SWIFT ABC qualify them to report by SWIFT as the SWIFT ABC website notes that this product allows them to send and receive SWIFT MT103 message? Does this mean if they apply and are accepted as a SWIFT member (but only use the SWIFT lite Services), they can continue to report in the SWIFT format?
Answer:

It is indicated on ABC's website the following caption: "When ordering ABC, you automatically apply to become a SWIFT member and have access to the SWIFT's community of more than 8,600 banking organisations, securities institutions and corporate customers in over 209 countries." Giving the impression that you do not become automatically a SWIFT member, but still have to apply to become a SWIFT member. Therefore,no, ABC is not SWIFT. However, if they are SWIFT member, then they can report SWIFT. We had indicated before that the "format" of the message is not sufficient, that they must be SWIFT member... I would just ensure that if they are SWIFT member and they use the SWIFT ABC services, that the SWIFT MT 103 is used and that all the information appear.

Date Answered: 2010-04-01

Activity Sector: Money services business
Obligation: Reporting
Regulations: 12(1)

176. Account opening and CDR

Question:
Regarding the potential for Disbursements when depositing back into e-wallets, regardless of whether the fact the patron actually is paid out the money (ie transferred to their e-walllet or holding account), is the casino is required to submit a CDReport each time for the disbursement? Also what if they transfer it to their e-wallet lose most of it in the casino and leave with an amounts below, is still CDR required?
Answer:

I believe that if the client hits the disbursement thresholds in regards to his casino account, it is really irrelevant where the money is sent afterwards i.e. whether it goes to his personal bank account or into his e-wallet. The casino account is the barometer to determine if a disbursement report is required within the prescribed requirements in subsection 42(1)- it would fall under (e) payments on bets - the "winnings" would transit from the client's casino account to eventually be deposited in his e-wallet as per the client's request or instructions. The CDR takes places once it leaves the casino account (that is when the pay out takes place - payment on bets). Where the money is sent (e-wallet, bank account, etc) is not relevant - so basically if the client requires a pay out from his casino account, then that is when the casino needs to report a CDR. I don't believe that the online account should be treated differently than an account opened at the casino.

Date Answered: 2010-03-29

Activity Sector: Casino
Obligation: Reporting
Regulations: 42(1)

177. BC Notaries only?

Question:
Only notaries from British Columbia would be considered a reporting entity, correct? 
Answer:

Yes at this time only the BC Notaries are covered under our legislation.

Date Answered: 2010-03-17

Activity Sector: British Columbia notary
Obligation: Reporting
Regulations: 33(1)
Act: Part 1

178. Scrap Metal

Question:
Would scrap dealers (who typically receive their material from pawn shops) would fall under the DPMS definition? They have many scrap dealers as customers and, much like the banks when dealing with MSBs, want to know if potential clients are aware of their legislative obligations prior to accepting their business. Given the current high price in gold, they've seen a large increase in these types of customers wanting to do business.
Answer:

Scrap jewellery collectors if they hit the threshold of $10,000 or more through the sale or purchase of precious metals, precious stones or jewellery in a single transaction under subsection 39.1, then they are covered and are subject to Part I of our Act. However, if the scrap jewellery collector happens to purchase for $10,000 or more, hits the threshold under 39.1, but this transaction is in the course of, in connection with or for the purpose of manufacturing jewellery (i.e. the scrap collector also happens to manufacture jewellery once the scrap metal is melted) then he would not be covered. But in that business, from what I understand, the Scrap Collectors are not in the business of manufacturing jewellery, but are just in the business of collecting scrap jewellery to melt and then sell, so for all purpose would be covered as a DPMS.

Date Answered: 2010-03-11

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Guidelines: 6i

179. Risk Assessment

Question:
Should risks and suspicious transactions be identified for all accounts, including RRSPs? Section 62 is an exception with regard to keeping documents and identification, but does not apply to reporting. However, risk assessments must be conducted for all the reporting entity's activities.
Answer:

Both for the risk assessment and for STRs, all clients and products offered should be considered (including RRSPs). For the risk assessment the entity must take into consideration - under subsection 71.(1)(c) (i) the clients and business relationships and under (ii) the products

Date Answered: 2010-03-02

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 2, 4
Regulations: 71(1)

180. Casino Reporting Obligations

Question:
In a scenario where a patron plays slots and goes to ABC and redeems slot tickets on 20 separate occasions in a 5 hour period for aggregate total of $10,000 cash (20 transactions are tracked using our multiple transaction logs). CDR is created/reported, 24 hour rule selected as 'yes'. 20 transactions are recorded on CDR.
Answer:

Multiple transactions - 24 hour rule applies so 20 transactions to be recorded on CDR.

Date Answered: 2010-02-23

Activity Sector: Casino
Obligation: Reporting Reporting
Guidelines: FIN-4, 10
Regulations: 42

181. Casino Reporting Obligations

Question:
In a scenario where a patron goes to ABC after playing slots and redeems 20 slot tickets in one transaction for a total of $10,000 cash. The slot tickets are validated/redeemed in one transaction and patron is paid out $10,000. CDR is created/reported for $10,000. 24 hour rule selected as 'no'. 1 transaction is recorded on CDR. What is FINTRAC's reporting requirement interpretation of the following scenarios? Is the reporting, as indicated, accurate or are we still missing information on CDR in this scenario?
Answer:

One single transaction (reason and method)

Date Answered: 2010-02-23

Activity Sector: Casino
Obligation: Reporting
Regulations: 42

182. Determination if covered with new business model?

Question:
A security service provides armed courier and vault storage services to governments, merchants and corporations in Ontario will be broadening their vault services to include the short and long term storage for precious metals (predominantly gold bullion) and will inevitably deal with international citizens as well – companies and corporations that would utilize local exchanges to make their purchases and end up storing it with them. What type of documentation would you like to see in place for us to store bullion on a short and long term basis? Also the company offers a cash supply to clients, predominately currency exchange companies and ATM companies. This involves the company providing us with a certified cheque or wire transfer, then the company would deposit the proceeds in our account and withdraw cash and delver the cash via armoured vehicle back to the client. If such a company engages in the cash supply, do we now fall under the FINTRAC regulations and if so, what measures have to be taken to become compliant?
Answer:

The "storage" of precious metals or precious stones is not covered by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated regulations. Under the PCMLTFR, in subsection 39.1, a dealer in precious metals and stones is defined as a person or an entity that in the course of its business activities buys or sells precious metals, precious stones or jewellery, and is covered when they engage in the purchase or sale of precious metals, precious stones or jewellery in an amount of $10,000 or more in a single transaction, for purposes other than manufacturing. We understand that your business model is comprised of armed courier and vault services (e.g. storage) of precious metals, and as such, does not fall within the definition of a dealer in precious metals and stones as defined in subsection 1(2) of our regulations. Therefore, your corporation is not covered by our legislation and has no legislative requirements under our Act to report or record keep. In regards to offering a cash supply to your clients, we do not believe that this activity falls within the money services business activities or qualifies as a money services business as per the PCMLTFA legislation and associated regulations. Therefore, based on the information provided at this time, such a company would not have the obligation to register as a money services business with FINTRAC.

Date Answered: 2010-02-17

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Regulations: 39.1, 1(2)
Act: 5(i)

183. Credit Union

Question:
An entity of a credit union will be a reporting entity as of July 1, 2010, but only for services it offers to the public. Are other clients who are shareholders of the entity and use their services (i.e. a cooperative association) considered "public".
Answer:

a) If the shareholder is a member it is not covered. b) If the shareholder is not a member it is covered.

Date Answered: 2010-01-14

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting

184. Identifying Centrals/Cooperatives

Question:
Could you please confirm which centrals and [reporting entity] will be covered under the Act?
Answer:

The Credit Union Centrals are subject to Part I of our Act when they offer financial services to 1) a person or 2) an entity that is not a financial entity member. So in other words, the Centrals are covered (i.e. have legislative requirements under our act) when they offer services to individuals and entities other than a financial entity and a member (both conditions must be met). Unless the Credit Union Centrals deal with individuals or corporations (which are not very likely) - then most of their financial services offered will not be covered. Centrals usually deal almost exclusively with CU or banks that are members. Please note that in Quebec however, the requirements are completely different in that all financial services offered by financial services cooperatives are covered (whether given to Caisses Populaires members or general public). Written ongoing compliance training program: Three items should be found in regards to a written ongoing training program - Written training material, indications that the training was given (e.g. interviews of front line staff for example), and written training plan. If a Caisse Populaire uses a general Central written plan and decides to give some of the training suggested (but not all that is found on the standardized Central plan), but at the same time, giving their additional CP training, we do not believe that the CP could be cited for a deficiency. After all, the CP has a written plan and gives out training. As best practice, we may want to suggest that they update the Central's standardized written plan to include their respective training and to better reflect their actual training.

Date Answered: 2010-01-13

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(2), 12(1), 52(1)

185. Questions on reporting

Question:
An online business with clients in both the United States and Canada is an online payment carrier registered as a money services business with FINTRAC as well registered with FINCEN in the United States. Are there any situations, cases, or guidance for matters where FINTRAC might be interested with American clients activities ?
Answer:

If the transaction is linked in any way to Canada, then it should be reported to us (STRs or other reportable transactions). When an MSB is registered as a Canadian MSB, then all their activities within their Canadian money services business must be reported (if LCTR, EFTs or STRs), not just if the client is Canadian or if the beneficiary is Canadian.

Date Answered: 2010-01-07

Activity Sector: Money services business
Obligation: Reporting Reporting
Guidelines: 3, 7, 8
Regulations: 28(1)

186. FINTRAC reporting, American clients

Question:
ABC Inc. is an online payment carrier registered as a money services business with FINTRAC. We are as well registered with FINCEN in the United States. Our head office is in Montreal, Canada. As an online business, clients in the United States register with us to be able to benefit from our services. Up to present, and into the foreseeable future, our verification and KYC requirements for American clients are applied in the same fashion and rigour as Canadian clients. We uphold the same risk-based approach in our compliance regime for American clients as well. We report STRs, LCTRs, EFTIs and EFTOs to FINCEN in the same fashion as we do for our Canadian clients to FINTRAC. Are there any situations, cases, or guidance for matters where FINTRAC might be interested with American clients’ activities?
Answer:

In order for us to determine who should be reporting, we need to know which office is actually processing the transaction itself. By determining which office is doing the transaction, then we can determine who will report. Is it being processed in Canada or somewhere else? For example - DEF Operations is registered in Canada, therefore, whatever transactions handled by DEF Operations in Canada that are reportable should be reported to us. In regards to XYZ Services Ltd - we are not sure if they only offer a service (AML and Compliance) to DEF Operations. If they only offer a service to DEF Operations, then only the transactions processed in Canada by DEF Operations should be reported. If XYZ offers services to all of DEF (MSB in Canada, and MSB in Isle of Man) again we need to determine where the transaction is processed to determine who will be reporting and where. The STR in regards to Canadian processed transactions are reportable to us... however, if the MSB Isle of Man processed the transaction, then it should be reported to the FIU in the Isle of Man. It is again a question of fact to determine where and how the transaction is processed and by which office/branch/HQ. In regards to ABC Inc. - If the head office is in Montreal, and all transactions are processed in Canada then they need to report to us all the transactions processed here. If however, part of their operations are handled in Montreal, and part of them are also handled by their US branch or office, then depending where the transactions is being processed, then it will determine if it should be reported in Canada or to FINCEN. The other thing to consider is - are we talking about HQ and a branch or HQ and an agent? That must also be taken into consideration.

Date Answered: 2010-01-06

Activity Sector: Money services business
Obligation: Reporting
Regulations: 28(1)

187. When does a transaction start (24 hr rule)

Question:
Does an EFT (for the purposes of the 24 hour rule) start from the time the instructions are given, the funds are delivered to the MSB, or the funds are transferred by the MSB? Guideline states: “An EFT is the transmission of instructions….” S. 3.(1) states “…two or more cash transactions or electronic funds transfers of less than $10,000 each that are made within 24 consecutive hours…” This seems to imply the transactions have been action/transacted.
Answer:

The transaction which should be indicated in the EFT is the date that the transfer instructions cross the border (the date that the MSB submits the instructions to its bank to transfer funds internationally). Compliance Officer should also consider the following: 1) If the MSB gave the name of the client and all the information to the Bank, the Bank would report - again the date of transaction = date of transfer of instructions across the border; 2) If the instructions are given by phone and cross the border, the date would be: the date that the phone call took place and the instructions crossed the border.

Date Answered: 2009-12-29

Activity Sector: Money services business
Obligation: Reporting Reporting
Guidelines: FIN-4, 8
Regulations:  3.(1)

188. Reporting time period

Question:
Can Compliance Officers cite an MSB for late reporting if it offers proof that it inscribed the wrong transaction date in a report?
Answer:

The reporting error does not constitute late reporting however, the MSB did not file in the proper form and manner, because the transaction date is erroneous.

Date Answered: 2009-12-29

Activity Sector: Money services business
Obligation: Reporting
Act: 9(1)

189. When are obligations considered to kick in in the case of fx.

Question:
A client, upon requesting a forward rate currency exchange transaction to a Reporting Entity, the RE then drafts a forward rate agreement outlining the currency pair, rate and date for the transaction to be completed. The RE requests a 10% deposit from client in the currency he/she wishes to sell at the forward rate specified in the agreement. On the maturity date the client, will exchange the entire amount by providing the balance of funds in exchange for the currency specified in the Forward Rate Agreement. This is when the transaction will be completed and transaction ticket issued. If the client does not complete transaction on maturity date he/she forfeits the deposit. When do the obligations kick in the case of forward fx contract - at the time of the signing of the contract or at its expiry date? (which is when the fx transaction actually takes place)
Answer:

The obligation kicks in at the time of the foreign exchange transaction i.e. when the fx takes place in actual time (not at the signing of the contract for a future fx).

Date Answered: 2009-12-22

Activity Sector: Money services business
Obligation: Reporting
Regulations: 30, 59(1)

190. Centrals and reporting EFTs obligations

Question:
As of July 31, 2010, all Centrals will be recognized as Financial Entities. As it will be considered an RE, and it would be the last entity in Canada to receive the instructions for an EFT, would it not have the reporting obligation?
Answer:

The Centrals (except in Qc) are covered only when they deal with the public (i.e. non FE s members of the CU). The EFTs would only be reportable by the Centrals if they are initiated by the Centrals' clients.

Date Answered: 2009-12-22

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 1(1), 2, 11.2(2), 12

191. Converting to a bank draft or money order

Question:
The Policy and Technical Services Section of Revenue Collections for the Canada Revenue Agency are seeking your assistance with regards potential reporting requirements. During the administration and enforcement of the many Acts that we work with, some of the collection action we take, involve seizure of large amounts of cash. Internally the CRA has adopted a "no cash" policy for payments on tax debtors accounts. While there are some procedures in place to accept cash in special circumstances, we have been advised by our Payment Processing section, that they would prefer the monies be converted to a bank draft or money order. As the amounts are almost always in excess of $10,000, the financial institutions are very reluctant to complete conversion of the cash to another negotiable instrument, due to the reporting requirements imposed by FINTRAC. Is there a way to obtain a written document, that we could provide to the financial institutions, that will allow them to process a transaction such as I've described, whereby they do not have to report? Our intention is to negotiate some type of arrangement with a financial institution(s) and we are sure that your reporting requirements would be an issue.
Answer:

CRA is a departmental corporation and falls within the definition of a public body within subsection 1(1) of our regulations. As such, there are exemptions applicable to financial entities (subsections 12(1)(a), 13 and 62(2)(m) etc.) in respect to transactions with public bodies. In this specific case of deposits of large cash transaction, financial entities do not have to report, or record keep when the large cash is received from a public body.

Date Answered: 2009-12-13

Obligation: Reporting
Regulations: 1(2), 12(1)(a), 13, 62(2)

192. Clarification of FX Wire Payments

Question:
Credit Union receives instructions from their clients to transfer funds. CU's personnel key the instructions (and not a Bank in the U.S employee) via a CU computer by accessing U.S. Bank general website; and The Canadian Branch of the Bank in the U.S is not involved in the transfer of instructions. The only involvement of the Canadian Branch of the Bank in the U.S is to debit CU's account for the settlement of funds between the two financial institutions involved (CU and Bank in the U.S). Can you confirm that the legislative requirements and reporting obligations apply for the Foreign Currency Transactions only or if they do apply to Single Currency Transactions as well?
Answer:

If the process utilized by CU/Bank in the U.S is exactly the same in both cases, then yes CU would have to report both on the FX side, and as well as the single transactions. However, we would have to ensure that it is the same process. If the process is different, then CU/Bank in the U.S would have to provide more details so we can make sure that we understand all the intricacies and provide an appropriate policy interpretation on the issue.

Date Answered: 2009-11-27

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8B
Regulations: 12(b), 12(c)

193. Clarification of FX Wire Payments

Question:
Credit Union receives instructions from their clients to transfer funds. CU's personnel key the instructions (and not a Bank in U.S. employee) via a CU computer by accessing Bank in the U.S general website; and The Canadian Branch of the Bank in the U.S is not involved in the transfer of instructions. The only involvement of the Canadian Branch of the Bank in tbe U.S is to debit CU's account for the settlement of funds between the two financial institutions involved (CU and Bank in the U.S.). Which Financial Entity has the legislative requirements and reporting obligations under these circumstances, CU or the Bank in the U.S?
Answer:

The legislative requirements and reporting obligations fall exclusively on the CU who will have the obligation to report the international electronic funds transfers of $10,000 or more (client initiated), and record keep the prescribed information as per our legislation. If the process utilized by CU/Bank in U.S is exactly the same in both cases, then yes CU would have to report both on the FX side, and as well as the Single transactions.

Date Answered: 2009-11-27

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8B
Regulations: 12(b), 12(c)

194. MSB Commission payments

Question:
When the worker sends instructions to pay out their XYZ account to a beneficiary this would be a transfer of funds, am I correct?
Answer:

Yes it qualifies as a transfer of funds

Date Answered: 2009-11-25

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2)

195. MSB Commission payments

Question:
XYZ has e-wallet accounts. When their corporate client tells them to pay the commissions to the various employees, XYZ deposits the funds in the employee's e-wallet account with XYZ. The e-wallet only contains commission payments. When the worker sends instructions to pay out their XYZ account to their bank account does this classify as a transfer of funds?
Answer:

Yes.

Date Answered: 2009-11-25

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2)

196. MSB Commission payments

Question:
XYZ has asked if commission payments are considered the same as payroll. A commission payment differs from regular payroll because the amount paid varies depending on the amount of commission the person earns. Do they need to perform record keeping, client identification, and reporting on commission payment EFTs
Answer:

Yes, we have indicated in the past that commission payments were (as are payrolls payments) not considered a money service business activity covered under our legislation. However, it is always a question of facts. The Centre has to ensure that the commission payments that are handled by XYZ are from employers or merchants to their employees (and not open to the general public).

Date Answered: 2009-11-25

Activity Sector: Money services business
Obligation: Reporting
Act: 5(h)

197. Request for Assistance

Question:
CRA is seeking your assistance with regards potential reporting requirements in very specific situations. During the administration and enforcement of the many Acts that we work with, some of the collection action we take, involve seizure of large amounts of cash. In most, if not all cases, the monies were seized by a police unit, prosecution against the individual is/will not be successful and, as a result of a tax liability, we are intercepting those monies to partially or completely satisfy the amount owing. Our issue is partially internal, as the CRA has adopted a "no cash" policy for payments on tax debtors’ accounts. While there are some procedures in place to accept cash in special circumstances, we have been advised by our Payment Processing section, that they would prefer the monies be converted to a bank draft or money order. This is where your written opinion is being sought. As the amounts are almost always in excess of $10,000, the financial institutions are very reluctant to complete conversion of the cash to another negotiable instrument, due to the reporting requirements imposed by FINTRAC. Is there a way to obtain a written document that we could provide to the financial institutions that will allow them to process a transaction such as I've described, whereby they do not have to report? Our intention is to negotiate some type of arrangement with a financial institution(s) and we are sure that your reporting requirements would be an issue.
Answer:

Firstly, we do not provide written documents as requested in the initial email sent from CRA. However, CRA is a departmental corporation (i.e. part of the department) and falls within the definition of a public body within Subsection 1(2) of the Regulations. As such, there are exemptions applicable to financial entities (subsections 12(1)(a), 13 and 62(2)(m) etc...) in respect to transactions with public bodies. In the case below noted, i.e. deposits of large cash transaction, financial entities do not have to report, or record keep when the large cash is received from a public body.

Date Answered: 2009-11-20

Obligation: Reporting
Guidelines: 6G, 7
Regulations: 1(2), 12(1)(a), 13, 62(2)(m)

198. LCTRS and "on behalf of" section

Question:
When a person who is an officer / owner / director / etc. of an entity makes a deposit into their own business account should the “on behalf of” indicator be when LCTR reporting in B12?
Answer:

In order to use B) to employer's business account, the individual conducting the transaction must be an employee of the business. Directors and shareholders are usually not employees of the company.

Date Answered: 2009-11-19

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting

199. Large Cash Transaction Reporting Obligations

Question:
High level overview of the process involved in a cash payment made at a retail store. We remain of the view that cash payments made at the retail stores do not fall under the large cash transaction reporting regime as the payments are made at an entity that is not subject to the provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and Regulations (the "PCMLTFA" and "PCMLTFR", respectively). Section 5 of the PCMLTFA does not include retail stores in its list of entities subject to the application of the Act and section 12 of the PCMLTFR imposes reporting obligations only in respect of a "financial entity". Requiring large cash transaction reporting by a retailer is extending the PCMLTFA reporting obligations beyond the requirements established under the Act and Regulations and results in the acquisition of information by FINTRAC that extends beyond its legislative authority (cf. Final Audit Report of the Privacy Commissioner of Canada (2009)). With respect to your comments concerning the potential loss of financial intelligence, it is respectfully submitted that FINTRAC would continue to receive financial intelligence through suspicious transaction reporting, as legislatively mandated under the PCMLTFA. Generally, large cash payments at retail stores are unusual and would both (1) continue to be reviewed by our AML Investigation Team to determine whether the activity is suspicious of money laundering and (2) be reported as appropriate in accordance with the legislative requirements. Cash Payment Process • Retail store credit card account holder makes cash payment at the retail store. Cash goes into the retail store register and is not sent to the retail store Bank. • Merchant settlement system records the payment amount, payment tender and masked credit card account number. No other customer information is recorded or retained by the retail store. • Retail stores provides the Retail store Financial Services a daily settlement file of the credit card purchases, returns, and payments. • Retail store Financial Services settles with the retail store by electronically transferring funds to the retail store’s financial institution. Settlement amount is equal to credit card purchases net of returns and credit card payments.
Answer:

The position of the Centre on this issue remains the same. We are not extending the application of the legislation to the retail stores... we are applying the legislation as it is written to the financial institution. It is the Bank that emits the credit cards, not the stores, and if the Bank mandates the stores that they can receive payments from clients towards their retail store Bank credit card, then the Bank has the obligation to ensure that the reporting of large cash be done. In regards to the OPC argument - the Bank under the Act must report LCTR - and the information the Bank would provide is within our legislative authority to receive it.

Date Answered: 2009-11-18

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 7
Regulations: 12(1)

200. Clarification as to how “Layaway Payments” may be affected by the AML Regulations now in force

Question:
A customer purchases an item such as a diamond ring, with a retail price of $39,996.00 and they pay for it by four equal cash payments of $9,999.00 each, with more than 24 hours between each payment. If we get all the necessary identification from the customer and it appears in order, do we have an obligation to report such a transaction to FINTRAC?
Answer:

These transactions would appear very suspicious by being structured into payments just under the reporting/RK/ID requirements for LCTRs. These transactions individually have not met the reporting threshold for LCTRs since the requirement to report would be based on the cash being physically received by the RE and not on the total cost of the item once installments are complete (unless of course, within a 24hr period). As for the STR obligation - that would be a question of fact for the reporting entity to determine if the transaction is suspicious.

Date Answered: 2009-11-16

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting Reporting
Guidelines: 7
Regulations: 12(1)(a), 3. (1)

201. Mobile Homes

Question:
Are mobile homes covered?
Answer:

We had indicated in past policy interpretation that pre-fabricated and modular homes were covered (i.e. were included in the definition of new homes) - and we also specifically indicated that mobile homes would fall within the new homes definition.

Date Answered: 2009-11-12

Activity Sector: Real estate
Obligation: Reporting
Guidelines: 6B
Regulations: 1(2)

202. FICOM - MOU - compelling documents

Question:
A Credit Union is asking if FICOM is: a) able to demand records such as STRs for the purposes of conducting an investigation and; b) if the request is contrary to privacy legislation?
Answer:

a) Under our MOU, yes we can share information with FICOM but only for purposes of ensuring compliance with Part 1 of PCMLTFA - and FICOM's investigation of the CU member would not fit under this purpose. As for the RE sharing their STR info with the Regulator, you may want to answer that there is nothing in the PCMLTFA that prohibits it, unless it prejudices a criminal investigation (which I don't think is the case with FICOM). b) I agree with the way you have worded it ("can not assist RE with the Privacy Act and Regulations") and would leave it at that. "With respect to the FICOM examinations, it would be best to address this with FICOM."

Date Answered: 2009-11-12

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 2,3

203. Suspicious Attempted Transactions--Follow up from Money Laundering in Canada Conference

Question:
What is FINTRAC’s expectation? Should reporting entities be filing two STRs on one account; a completed and an attempted? This would have an impact on time and resources as well as possibly inflating reporting numbers. If FINTRACs expectation is for an STR and SATR be submitted on one account it would be appreciated if communication about this clarification could be sent to all reporting entities. Will the STR form be amended so an indication about the type of transaction could be included for each transaction?
Answer:

Where either a SATR or STR is itself comprised of multiple transactions directly related to the underlying suspicion FINTRAC expects that each of these transactions be provided within the SATR or STR as a separate transaction. The practice of merely filling out the entirety of a client's transaction record into a SATR or STR is folly is not sufficient as a prudent person should be able to discern the relationship between the transactions and the transactions' dispositions contained in each SATR/STR report. Likewise the practice of providing partial information or a sample of the underlying transactions renders the report non compliant as only a portion of the suspicion(s) that led to the report is divulged impeding our analysts ability to analyze the report adequately. To be clear the PCMLTFA obligates FINTRAC to only be in receipt of reports that are related to money laundering and/or terrorism financing incident and failure on the part of reporting entities to properly vetted these transactions against the test of suspicion means that FINTRAC may be in receipt of information FINTRAC is prohibited from receiving under the PCMLTFA. Finally, the effort to embed a SATR within a STR renders such a report non compliance as it is a matter of fact that a report cannot be both attempted and complete. Where a relationship exists between an STR and a SATR the reporting entity should endeavour to make reference to this relationship in the G section of the respective filing but not by embedding one report inside another which is both imprudent and may be misleading. A best practice would be to quote the appropriate report number as a reference.

Date Answered: 2009-11-10

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 3

204. LCTR reporting - Clarification

Question:
At the top of Part B2 – Large Cash Transaction Report Form & Guideline 7- Submitting LCTRs, you have to indicate whether the individual who conducted the transaction was doing so on anyone else’s behalf. You have to select one of the following for this entry from the drop-down menu: • Not applicable • On behalf of an entity • On behalf of another individual • Cash Deposit to employer’s business account When a person who is an officer / owner / director / etc… of an entity makes a deposit into their own business account should the “on behalf of” indicator be “Not applicable” or “On behalf of an entity”?
Answer:

It is a question of fact again, however, in order to use b) to employer's business account, the individual conducting the transaction must be an employee of the business. Directors and Shareholders are usually not employees of the company.

Date Answered: 2009-11-10

Obligation: Reporting
Regulations: Schedule 1

205. ABC Operations Ltd.

Question:
ABC Limited is the contracting entity for all of XYZ Inc.'s non-European clients, including Canadians. ABC Limited has no employees and only 2 directors. It is the entity that appears in the Terms of Use when a non-European client signs up a ABC account. DEF Limited provides client contact centre, accounting, AML investigations and IT services to ABC Limited and other group entities. We reviewed the business model of ABC Limited and its relationship with DEF Ltd. There is no agreement between XYZ Inc. and ABC. Is ABC Ltd an MSB?
Answer:

1) ABC Ltd is already registered as an MSB with FINTRAC therefore the question of whether or not they are covered becomes a moot point as they voluntary registered with us. There is a good probability that they do operate within Canada as per their own admission by registering with the Centre. When it comes to "online" MSBs such as ABC what we are looking for to determine if they are covered are not, is a clear and substantive connection to Canada (such as bricks and mortar, branches, employees, and Canadian Bank accounts). In this case, the connections to Canada are the Canadian bank accounts, and maybe an agent (i.e. XYZ inc.?). 2) XYZ inc. seems to be either an "agent" or the company to whom ABC has delegated the power to administer the bank accounts that are used by Canadian clients when dealing with ABC. In the absence of a written agreement between the two that would shed some light on the exact relationship existing between the two entities, we are of the opinion that these accounts are used for the Canadian operations and seem to be controlled by ABC. Consequently, the reportable transactions by ABC are the EFTs that are initiated by clients and that take origin or transit through Canada most certainly via the Canadian Bank accounts held by XYZ inc. for ABC. Again, word of caution, it is all a question of facts, and right now, we seem to be answering in regards to "possible" scenarios, as opposed to "hard" facts! Nevertheless, the instructions are given by clients (Canadians?) via the ABC website and as indicated before, the fact that the instructions are given through a website equate that ABC received the instructions from Canada (and in Canada via the website) - and the actual funds were sent to the XYZ bank accounts to be used for that transaction.

Date Answered: 2009-11-06

Activity Sector: Money services business
Obligation: Reporting
Regulations: 1(2), 32

206. STR's and Attempted STR

Question:
How should reporting entities proceed if there were multiple suspicious transactions on an account; some completed and some attempted.  Should they be filed as one STR or two; a completed and an attempted? 
Answer:

Information to be contained in a suspicious transaction report Your suspicion about there being a relation to a money laundering or a terrorist financing offence may be as a result of more than one transaction. In this case, include all the transactions that contributed to your suspicion in the same report. Part G: Description of suspicious activity This part is to provide details of why you suspected that the transaction or the series of transactions were related to money laundering or terrorist financing. Therefore, we expect Reporting Entities to provide all transactions related to the suspicion into the same STR or SATR report. Although there is limited space in Part G, in the majority of cases, it is sufficient to provide a detailed description of the suspicious activity. Where either a Suspicious Attempted Transaction Report or Suspicious Transaction Report is itself comprised of multiple transactions directly related to the underlying suspicion FINTRAC expects that each of these transactions be provided within the SATR or STR as a separate transaction. The practice of merely filling out the entirety of a client's transaction record into a SATR or STR is not sufficient as a prudent person should be able to discern the relationship between the transactions and the transactions' dispositions contained in each SATR/STR report. Likewise the practice of providing partial information or a sample of the underlying transactions renders the report non compliant as only a portion of the suspicion(s) that led to the report is divulged impeding our analysts’ ability to analyze the report adequately. To be clear the PCMLTFA obligates FINTRAC to only be in receipt of reports that are related to money laundering and/or terrorism financing incident and failure on the part of reporting entities to properly vetted these transactions against the test of suspicion means that FINTRAC may be in receipt of information FINTRAC is prohibited from receiving under the PCMLTFA. Finally, the effort to embed a SATR within a STR renders such a report in non compliance as it is a matter of fact that a report cannot be both attempted and complete. Where a relationship exists between an STR and a SATR the reporting entity should endeavor to make reference to this relationship in the G section of the respective filing but not by embedding one report inside another which is both imprudent and may be misleading. A best practice would be to quote the appropriate report number as a reference. (I suggest that providing this as a best practice given there is currently no requirement or guidance currently provided that asks the RE to provide this info although it should probably be added in the future.)

Date Answered: 2009-11-05

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting

207. EFT Reporting and RE settlement

Question:
Clarification received from an American Bank on the routing of wire instructions in relation to the updated process for ABC credit union international wires: ABC cedit union enters the wire instructions into the FXT application provided by the American Bank. The agreement, between the American Bank and ABC, for use of the application is with a national association of the American Bank (US parent company). The wire instructions are transmitted through the application to the American Bank, which results in two different payment flows based on the type of transaction, Foreign Exchange transactions or Single Currency transactions. For Foreign Exchange transactions the instructions entered through the application are forwarded to the national association of the American Bank (US) and the party requesting payment is the American Bank in California. It initiates a settlement transaction to debit ABC credit union's CAD account at the American Bank in Toronto. For Single Currency transactions the instructions entered through the application are forwarded to the branch where the settlement account is held, in this case the American Bank in Toronto. In this case payments are requested to be made on behalf of ABC credit union by the American Bank in Toronto. The American Bank's Canada Branch in Toronto settles the transaction by debiting ABC credit union’s account at the American Bank in Toronto. Transactions of this type that meet the FINTRAC criteria would be picked up through existing processes at the American Bank and are being reported to FINTRAC. In either case ABC credit union disburses the funds for the payment of the wires to accounts that ABC credit union holds at the American Bank in Toronto (USD and CAD). As Single Currency transactions are currently being reported to FINTRAC by the American Bank in Toronto who processes the wires and receives the settlement funds, this process is not in question. Q1. Who has the reporting responsibility for the Foreign Exchange transactions that are processed by the American Bank in California where the American Bank in Toronto receives the settlement funds? A1. Clarifications needed for Compliance Officers/Reporting Entities for proper PI Determination 1) Can you confirm if the scenario is only for outgoing electronic funds transfers? 2) What is the difference between the FX transactions versus Single Currency? If single currency is a transaction only with Canadian funds, is it only domestic wires? These are all international wires (domestic wires are handled by a different vendor and application for ABC’s customers). The 2 flows (FX transaction vs single currency) are based on whether ABC credit union is converting funds or not. For single currency transactions, ABC credit union is sending a wire in US dollars from ABC credit union’s US account to an international destination (US or otherwise) or Canadian dollars from ABC credit union’s Canadian account to an international destination. For FX transactions, ABC credit union is sending a wire in any foreign currency (GBP, EUR, CHF, JPY, etc) to an international destination and paying in Canadian dollars from ABC credit union’s Canadian account. 3) Why are there two payment streams for FX and Single Currency? The American Bank could provide more definitive rationale for the difference. My understanding is that the American Bank processes the two transactions differently based on whether a currency exchange position needs to be secured/settled or not. A different screen is used to enter the information within the application based on whether the transaction is “Single Currency” or “FX Trades” 4) In order for the transfer of funds to take place between the American Bank US and the American Bank Canada, are instructions given to the American Bank in Toronto (since the Account is held at the American Bank in Toronto)? The American Bank could provide more definitive information on the access to the instructions. My understanding is that a number of the American Bank departments or locations could potentially have access to the instructions or transaction details through use of designated user ID's and/or passwords if those user ID's/passwords have the rights to access that area of their system. I do not know what details are shared between the American Bank US and the American Bank Canada in order to provide settlement between the American Bank branches. 5) Taking into account question 4, which is the last entity in Canada to receive the instructions before it is transferred out of Canada? The American Bank would need to provide more definitive information on this. I do not have a clear understanding of whether Toronto does not have access rights or does not use their access rights to see the instructions.
Answer:

Firstly because ABC credit union is using the American Bank's terminal/system to transmit the instructions from Canada to the US, then that becomes an EFTO for the American Bank and the American Bank will need to report the EFT. It would be different if ABC credit union was phoning the American Bank in the US and giving the instructions via the phone (then you would not have an EFTO for the American Bank). Here is a good visual concept that should help understanding the relationship between the American Bank and ABC credit union: The fact that ABC credit union uses the American Bank's system on Canadian soil is almost like if ABC credit union was going through the American Bank's branch/agent on Canadian soil. The reality is that, ABC credit union gives instructions for an international transfer to the American Bank in Canada, then the American Bank transmits the instructions to the US, therefore, the Amercian Bank must report an outgoing EFT to the States.

Date Answered: 2009-11-03

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 12(1)(b)

208. Casino ATM credit card advance

Question:
An individual goes to a casino and uses a machine (similar to an interac machine) and request an advance on credit using is credit card. The machine issues him a cheque (the ones we see the most are issued by ABC Bank in the US). He then goes to the teller and ask for a disbursement. Is this disbursement reportable to FINTRAC? Reason for disbursement = Cash negotiable instrument - Cheque other Method of disbursement = Paid out in cash
Answer:

Although an advance on credit card at a casino is not reportable in itself, this scenario is somewhat different - because the machine issues a cheque and the client cashes the cheque then both the reason for disbursement and the method of disbursement will be covered. The cheque cashing is covered (assuming the threshold is met) and therefore in this scenario the disbursement is reportable.

Date Answered: 2009-11-03

Activity Sector: Casino
Obligation: Reporting
Guidelines: 10A
Regulations: 42(1)(g)

209. LCTR Exception

Question:
In discussions with our Risk Compliance Administrator – it has come to my attention that ABC Credit Union Limited (now amalgamated to form XYZ Credit Union Limited) had inadvertently failed to file the annual LCTR exception verification review for one of their Members, 123 Consumers Co-op. 123 Consumers Co-op was approved by FINTRAC23/ / for LCTR exception in March of 2003. It was with the understanding by management at ABC Credit Union at the time that with this approved exception, no LCTR needed to be forwarded to FINTRAC until further notice. Subsequently, with the amalgamation, we have learned that an annual verification review was to have been conducted and submitted to FINTRAC accordingly. Upon discussions, FINTRAC is now requesting that all LCTR since March 2004 be filed with FINTRAC. We are asking that you would so kindly reconsider your request and allow XYZ Credit Union management on behalf of ABC Credit Union (since ABC does not exit any longer) to submit the annual exception verification for each of the years 2004, 2005, 2006, 2007, 2008, 2009. Our reason for our request is following: • Your request would add considerable strain on existing resources as we have subsequently converted into an automated service provider reporting solution in Spring of 2009. Since we have streamlined our operations as a result of this new software solution, any previous LCTR (for prior years) would have to be manually researched through historical records which we anticipate would take a number of months to complete. • Our member 123 Consumers Co-op continue to conduct similar business, however, with increased volumes as the economy in the surrounding area has grown over the past 6 years. The same management structure and personnel are in place at 123 Consumers Co-op. We have and continue to monitor this account very closely with a good understanding of their core business. Q1. Based on the above considerations could FINTRAC reconsider its request and in place of, submit the annual exception verifications that were missed for the subsequent years? Considerations – HQ FINTRAC Ottawa In my opinion, it seems like the RE verified on an annual basis whether their client met the conditions. As they did, ABC was exempted from reporting these transactions. However, they failed to send FINTRAC the annual verification. Therefore, I suggest that we request that they send us the annual verifications from 2004 to prove that their client met the conditions. If they cannot prove it then we should cite them for failure to report and request that they file the reports back. Plus, I do not see the analytical value of receiving these transactions if such transactions can be exempted from reporting in the first place. It would only add to the RE's reporting burden.
Answer:

I agree that if the RE has conducted an annual review to ensure that the conditions for the exemption were met, then it would make sense to have the RE send those reports as opposed to requesting them to back file. I would still however cite them for 50(4)(b) for failure to send a report (every 12 months) to FINTRAC identifying the names and addresses of each client together with the name of a senior officer confirming that the conditions have been met. If however the RE indicates that no assessment was made than we should cite them for failure to report and request that they back file since we do not have the authority to exempt them from reporting.

Date Answered: 2009-10-19

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 12(1)(a), 50(4)(b)

210. Lottery tickets cashed at a casino and CDRs

Question:
Some casinos have recently introduced a form of sports "betting" (such as it is, permitted under the Criminal Code). I attended a casino on Friday to observe the facility and understand the "game" in order to determine the applicability of the PCMLTFA. Here is what I learned: 1. The casino sports betting runs off the same software and platform as ABC, an DEF lottery product. 2. The casino transaction slips, with some minor wording changes, are virtually identical to the ABC slips. 3. The casino transaction slips can be redeemed at any DEF lottery prize centre, not just the casino. 4. Unlike chips or slot tickets, the casino transaction slips are non-refundable. That is, once the ticket has been purchased it cannot be redeemed unless the player wins. This is identical to lottery tickets such as 6/49, etc. 5. Not that this has any bearing on our definition of "casino", but the [reporting entity] considers the casino sports facilities to be lottery products and not casino products. 6. The maximum bet per slip is $200, so a player would have to make 50 bets in a 24-hour-period to reach the LCTR threshold. 7. It is possible to reach a $10,000 payout. 8. The agreement DEF has with the casinos is to run the sports facilities are under a retail lottery agreement, not a casino operator agreement. Based on my observations and the above information, it is my belief that the sports facilities would be considered lotteries and not casino products. As such, there would be no LCTR or CDR obligations under the PCMLTFA. However, the STR provisions would apply as section 7 of the PCMLTFA requires casinos to report "every financial transaction that occurs in the course of their activities" where there are reasonable grounds to suspect it is related to the commission or attempted commission of a ML/TF offence. Note that in the past we have deemed lottery tickets cashed at a casino not to be subject to the disbursement requirements as they are not a casino product.
Answer:

Lottery tickets cashed at a casino are not subject to the disbursement requirements, and this "new sports lottery", even though it is offered by the casino, would fall in the same category and not be subject to the disbursement requirement.

Date Answered: 2009-09-25

Activity Sector: Casino
Obligation: Reporting Reporting Reporting
Guidelines: 2,3,7

211. Two business accounts, one owner

Question:
We have a member that runs two businesses (convenience store/gas bar), each with a different account number at our office. The member runs the two businesses under one limited company. Do I need to report to FINTRAC based on the total deposits per account or the total deposits per limited company?
Answer:

If the cash deposits are made by or on behalf of the same entity, then subsection 3(1) applies i.e. the 24 hour rule applies. If the deposits are made on behalf of the same entity such as described in this case, the limited company (even if in two separate accounts) and the RE knows, the 24 hour rule applies and they must report if it reaches the threshold of $10,000 or more. The key factor is the total amount of deposits by the entity (not by accounts).

Date Answered: 2009-09-22

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: FIN-4, 7A
Regulations: 3(1), 12(1)

212. EFT reporting problem they have experienced for some time

Question:
An RE is experiencing EFT reporting problems of certain non-SWIFT “electronic funds transfers” (EFTs) pursuant to subsections 12(1)(b) and 12(1)(c). Consisting of messages that were MT 500 series and others message types that were obviously not related to the movement of funds but rather to instructions on the account i.e.. purchase or sale orders of securities. What guidance should be given in such situations?
Answer:

The Centre is not in the position to answer as more details/ information is needed in order to ascertain if they are EFTs or not but generally speaking when a bank reimburses another bank via a "settlement", this does not qualify as an EFT and is not covered (because in that case the messages are not client initiated). The EFT that are covered, must be client initiated. In the scenarios provided, we are not sure if they are client initiated or not, therefore we can't conclusively answer either way.

Date Answered: 2009-09-21

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8
Regulations: 2(1)(b), 12(1)(c)

213. EFT's and the 24 hour rule

Question:
Background: Our system has set a maximum cap of “the foreign exchange equivalent of Philippine Pesos: 250,000” for each remittance transaction. This cap was set for two (2) reasons: 1. So that the system could trigger the review of the completeness of the documents submitted for “Philippine Anti-Money Laundering Council (AMLC) covered transactions of PhP250,000 or more”. Once the Canada personnel encodes this for delivery, the system automatically puts a hold on the transaction that would be released only once the designated responsible officer or staff both in Canada (Compliance Officer) and in Manila have reviewed the submitted documents and found them in order. 2. So that more service fees could be collected for each transaction “’equivalent to PhP250,000 and below”. Impact to ABC Inc. (Canada): When we have to process a remittance that amounts to more than PhP250,000 in equivalent, we have to “split” the remittance in 2 or more transactions within the day so that it could be processed by the system. We send copies of the required documents and collect service fee charges on each of the transactions. Details: The client pays in total, by cash, interact or demand draft (or a combination of these payment modes) for the total remittance transactions; he fills in one encoding receipt form (ERF) and submits 1 declaration of source and use of funds. The sender, beneficiary, “entity sending the order” and “entity receiving the order” are the same for all the split transactions. The transactions are processed within 1 to 3 minutes of each other, by one teller/agent, in one day. Work in Progress: We are currently making representations to ABC Inc. (Philippines), to lift the set maximum transaction cap, while continuing to “put on hold” transactions of PhP250,00 or more in order to apply the same requirements review process, and collect service fees for every PhP250,000 transaction equivalent. Given the above details, would you allow reporting the split transactions in only one EFTO and one LCTR (if applicable)? In the past, we had to report these transactions as “24 hour rule” but we opine that it is not really what the 24 hour rule meant as this is ABC Inc.-initiated “split” not the clients’.
Answer:

Although there is only one set of instructions (and only one transaction in theory), there seems to be two separate EFTO that will take place in reality because of the constraints of their system (i.e. not more than 250,000 pesos). Consequently, there is no split of instructions, but there will be two EFTOs

Date Answered: 2009-09-10

Activity Sector: Money services business
Obligation: Reporting Reporting
Guidelines: FIN-4, 8
Regulations: 3(1), 28(1)

214. Safety Deposit Box

Question:
Does a safety deposit boxes meet the definition in section 7 of the Act of a "financial transaction" for filing suspicious transaction reports?
Answer:

In order for safety deposit boxes to be subject to section 7 of the Act as a financial transaction that occurs or that is attempted, the renting of the safety deposit box can be considered the "financial transaction" aspect of section 7. The financial transaction would then be the paying of an amount and in return the client can use the safety deposit for a set time period. Therefore, if there are reasonable grounds to suspect that the "rental" of the deposit box is related to money laundering or terrorist funding, then the financial institution can file a STR. However, the mere fact that the client visits his safety deposit box, without a another factor attached to it, such as a duffel bag filled with cash, does not mean that it is suspicious. The problem with the safety deposit boxes is that the financial institutions do not know what is being deposited or withdrawn from them. Thus, it becomes even more difficult to determine if any activities surrounding the safety deposit boxes would trigger the threshold of reasonable grounds to suspect that it is related to money laundering or terrorist funding.

Date Answered: 2009-09-10

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 2 , 3A, 3B

215. EFTIs in F2R

Question:
A policy interpretation was given regarding when EFTO and EFTI should be reported. Also how would EFTIs be reported? In the case where an MSB is incorporated in Canada but has employees and customers in the U.S. The MSB has a U.S. bank account with Bank in the U.S. The U.S. customer (named "A") calls up deposits funds into the Bank in the U.S and calls up the MSB with instructions to transfer the funds to a beneficiary (named "B") in U.K. (could be anywhere in the world). Over the phone, the client provides the MSB with the "B's" U.K. bank account information. The MSB easily reports the transaction as an EFTO but is an EFTI to be reported? Also, how will an EFTI be reported in F2R in such a case?
Answer:

When determining if a wire or a transfer of funds is an EFT (incoming or outgoing), we always have to look at the facts in question. So it is a bit difficult to have a ready made answer that will cover every different cases. In this specific scenario we can look if there is a transmission of instructions or not that will help determine if there is an EFTI or EFTO as per the definition in our legislation. The MSB is incorporated in Canada but has employees and customers in the U.S. The MSB has a U.S. bank account with Bank in the U.S. The U.S. customer (named "A") calls up deposits funds into the Bank in the U.S and calls up the MSB with instructions to transfer the funds to a beneficiary (named "B") in U.K. (could be anywhere in the world). Over the phone, the client provides the MSB with the "B's" U.K. bank account information. The MSB easily reports the transaction as an EFTO as follows: First we need to ensure that we are talking about a Canadian MSB only (and there is not a MSB in the States as well). So if the US client sends instructions to the Cdn MSB who in turn will send it internationally then we have an EFTI incoming because the instructions come from the US, cross the border, and are received in Canada by the MSB who will then send it internationally - so EFTI reportable. Then the Cdn MSB sends the instructions to another country (i.e. UK) then the MSB will have to report an EFTO. As for how to report the guidelines provide the field by field information that must be reported. The person providing the instructions is the US client to Cdn MSB who in turn will sent it to the final recipient i.e. the beneficiary - and in this scenario that would be B. A further point to note is that It is not the transfer of funds that make it an EFT but the "transfer or transmission of instructions".

Date Answered: 2009-09-10

Activity Sector: Money services business
Obligation: Reporting

216. Citing - Reporting Time Limits

Question:
If a reporting entity sends a report to FINTRAC within the time period provided by regulations or FINTRAC's guidelines, and the report is not in the form and manner prescribed, does this mean that the reporting entity still has whatever days remaining in the period to file in compliance a replacement report. For example, for LCTR, the legislative requirement is to send a report to FINTRAC within 15 calendar days of the date of the transaction. If a RE sends a LCTR 10 days after the date of the transaction, does this mean that the RE still has 5 days left to make any changes to the report and still be in compliance? Or is the RE non-compliant the minute they send a report that is not in the prescribed form and manner?
Answer:

No, the RE is not in non-compliance the minute they send a report that is not in the prescribed form and manner, and we should not cite the RE before the 15 days have expired.

Date Answered: 2009-09-09

Obligation: Reporting
Guidelines: 7A, 7B

217. Correct lists to check for Terrorist Property

Question:
An RE is using the service providing system. Upon receipt of the latest listings of individuals/entities noted, I cross referenced several new additions to the list we are provided by the RE. The OSFI and UN Individual and Organization listings are registered in the RE systems, along with several other listings. A search of a number of the new listings, sent to us from CUDGC, revealed that some names were on the RE listing and some did not appear. Which listing should we rely on in order to continue meeting compliance requirements by FINTRAC?
Answer:

As long as the RE meets our requirements under section 7.1 of the Act - i.e. that if the person or entity is required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the UN Resolutions on the Suppression of Terrorism, then they must also make a report to us. Both 83.1 Criminal Code and 8 UN do not refer to lists. They can look at any lists, however, they have to keep in mind that whichever list they use must permit them to stay in line with the legal requirements of 83.1 Criminal Code and 8 of UN, both of which legislative requirements are not ours to interpret or apply.

Date Answered: 2009-09-03

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 4, 5

218. Cross checking of OFSI lists and United Nations Al-Qaida and Taliban Regulations (UNAQTR) - Amendments to Consolidated List

Question:
Several new additions to the lists of OSFI and UN Individual and Organization listings we are provided by ABC. The OSFI and UN Individual and Organization listings are registered in the ABC systems, along with several other listings. A search of a number of the new listings, sent to us from CUDGC, revealed that some names were on the ABC listing and some did not appear. Which listing should be relied on in order to continue meeting compliance requirements by FINTRAC?
Answer:

As long as the RE meets our requirements under section 7.1 of the Act - i.e. that if the person or entity is required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the UN Resolutions on the Suppression of Terrorism, then they must also make a report to us - they can basically use whichever list they want.

Date Answered: 2009-09-02

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Act: 7.1,

219. Caisses Populaires and STR obligations

Question:
Can a service provider, through an agreement with a RE and in the name of the RE (its client), make a unilateral decision to not submit STRs that were sent to it by the RE? What if the service provider decides, in light of additional facts that the RE may not be aware of, to not submit the STRs in question to FINTRAC without warning the RE or getting its approval? Also, is an official agreement necessary or is just being a service provider (eg through F2R) sufficient? If an agreement is necessary, what type of agreement is adequate? Is the authorization in our CAEF sufficient?
Answer:

A service provider cannot filter the STR - the STR and the obligation to file lies with the CP and it should be up to the CP to make the call whether the STR should be submitted or not and in determining if the transaction is suspicious or not. The service provider should not decide unilaterally to not send STRs, the decision to send or not remains with the CP. No, the authorization form in CAEF does not represent a specific delegation to "filter" or manage the STR reporting on behalf of the reporting entity. The CAEF authorization is a document that permits or mandates a representative to answer all questions relating to FINTRAC. The same argument applies to the document filled out by reporting entities in regards to service providers. This document does not represent a specific delegation in regards to filtering STRs or determining which will be sent or not. The STR and the obligation to file lies with the CP and it should be up to the CP to make the call whether the STR should be submitted or not and in determining if the transaction is suspicious or not. The determination of whether a STR should be filed with us or not resides with the reporting entities. And even if it was specifically delegated, the ultimate responsibility (as in who would be cited) would remain with the reporting entities.

Date Answered: 2009-09-02

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 3A, 3B
Regulations: 6(2)

220. Service providers and reporting

Question:
Q1. Can a service provider after securing an agreement with a Reporting Entity (RE), make a unilateral decision in the RE’s (client’s) name not to submit STRs that are sent to it by the RE if the service provider thinks, in the light of additional information that the RE may not have, that it should not send the STRs in question to FINTRAC, without informing or obtaining the approval of the RE? Q2. Is an official agreement necessary between the parties or is just being a service provider (via F2R for example) sufficient? Q3. If an agreement is required, what kind of agreement is acceptable? Is authorization in CAEF sufficient?
Answer:

A service provider cannot filter the Suspicious Transactions Reports - the STR and the obligation to file lies with the RE and it should be up to the RE to make the call whether the STR should be submitted or not and in determining if the transaction is suspicious or not. In other words the service provider should not decide unilaterally not to send STRs. The decision as to whether or not to send STRs resides with the RE. Follow up questions & answers Q. Even if the RE signed the Authorization form found at the end of our CAEF? A. No, the authorization form in CAEF does not represent a specific delegation to "filter" or manage the STR reporting on behalf of the reporting entity. The CAEF authorization is a document that permits or mandates a representative to answer all questions relating to FINTRAC. The same argument applies to the document filled out by reporting entities in regards to service providers. This document does not represent a specific delegation in regards to filtering STRs or determining which one will be sent or not. The determination as to whether or not a STR should be filed with us resides with the reporting entities. Even if it was specifically delegated, the ultimate responsibility (as in who would be cited) would remain with the reporting entities. Q. I am wondering if a representative would be allowed to filter the STRs on behalf of a RE if someone had signed an authorization form. Although this form does not represent a "specific delegation", could it be included in the powers this representative has? I guess my question is not per say in regard of the service provider but also for every representative/lawyer that would sign an authorization form. Since a compliance officer can delegate some of his tasks, can this one (filtering of STRs) be delegated to a representative who had signed an authorization form? A. The delegation does not need to be a written document, although it is preferable that it is written. Secondly the delegation must be clear and must specifically cover the STR portion, and the RE may delegate who he wants - it is clear that the service provider without that specific delegation can not filter on his own. We reiterate that the RE remains the ultimate responsible. Q. To be clear, would a general, Policies and Procedures (P&Ps) statement to the effect that the service provider will filter STRs be acceptable? Would this P&Ps need to be approved by each RE? Or, would an explicit approbation suffice given that that fact that the agreement is in the general P&Ps (used by each RE)? A. A general statement found in the policies and procedures would be considered as a sufficient delegation to filter STRs - although it would be preferable to ensure that the RE have endorsed (as in understood) the whole content of the P&Ps, an explicit application of the policies and procedures would also be acceptable (for example the RE applies, day to day, all of the P&Ps including the delegation of the STRs to the service provider).

Date Answered: 2009-08-20

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 6(2)

221. Interac E-mail money Transfer and The Travel Rule

Question:
A new product "Interac Email Money Transfer" allows customers of participating financial institutions to securely send money in real-time to anyone with an e-mail address and a Canadian deposit account. The transfers will be in Canada only and there will be daily limits established, therefore the transfers will be lower amounts. Q1 - Would this new product be considered a "wire transfer" or a "cheque replacement product"? Q2 - Since the service is entirely within Canada, would there be any reporting requirements, apart from record keeping?
Answer:

Yes. This is definitely a wire transfer/ EFT. The "Interac Email Money Transfers" are then only considered SWIFT MT103 and so subject to 9.5 of the Act if they are determined SWIFT members.

Date Answered: 2009-08-12

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8B
Regulations: 1(2), 66.1(2)

222. Email money transfers and SWIFT Mt103

Question:
Are Interac Email Money Transfers" are considered SWIFT MT103, because as we know, 9.5 of the Act applies to domestic wires only when they are SWIFT MT103
Answer:

One would have to verify with the RE to determine if they are SWIFT members and thus using that system to wire. If so, then the domestic SWIFT MT 103 would fall within the travel rule.

Date Answered: 2009-08-12

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8

223. Email money transfers and reporting and record keeping obligations

Question:
A CU is introducting Interac Email Money Transfer. Are interac money transfers considered same as a “wire transfer” or a “cheque replacement product “Interac Email Money Transfer”? Since the service is entirely within Canada, there would be no reporting requirements, only the record keeping, especially the “originator” information?
Answer:

Yes this is definitely a wire transfer/EFT (that will be done via Interac). Also, if the CU is offering/administrating this new product or it is being offered by another entity - if so, the other entity would have to register as a MSB, and would have to comply with all the legislative requirements (e.g. LCTR, TPR, STR etc.). If its from the CU then all the attached requirements to EFTs would have to be observed. The travel rule i.e. the originator information (section 9.5 of our Act) would similarly apply to this new product/wire transfer, as per subsection 66.1(2) (that includes transfers within Canada that are SWIFT 103 messages). So in other words, the reporting entity must include with the transfer the name, address and account number of the originator (and any other prescribed information). Therefore, it would be insufficient for the reporting entities to say that their system has that informatiom; it must be sent with the transfer.

Date Answered: 2009-08-12

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8
Regulations: 66.1(2)

224. Travel Rule and Originator information obligation in email money transfers in Canada

Question:
Does the "Travel Rule" originator information apply to "Email Money Transfers"? Subsection 9.5 of the Act indicates that every person or entity referred to in section 5 (i.e. reporting sectors/entities) shall in respect of a prescribed EFT (a) include with the transfer the name, address, and account number or other reference number, if any, of the client who requested it (i.e. originator information) outgoing and (b) take reasonable measures to ensure that any transfer that the person or entity receives includes that information (incoming). Furthermore, in the regulations, subsection 66.1(2) the prescribed EFTs to which section 9.5 of the Act applies are EFTs as defined in subsection 1(2)- but including transfers within Canada that are SWIFT MT 103 messages. So, I am not sure if "Email Money Transfers" within Canada are subject to "EFT Originator Information".
Answer:

Yes the travel rule i.e. the originator information (section 9.5 of our Act) would apply to this new product/wire transfer, as per subsection 66.1(2) (that includes transfers within Canada that are SWIFT 103 messages). So in other words, the reporting entity must include with the transfer the name, address and account number of the originator (and any other prescribed information). So it would not be sufficient for the reporting entities to say that their system has that information, it must be sent with the transfer.

Date Answered: 2009-08-11

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8
Regulations: 66.1 (2), 1(2)

225. Interac Email Money Transfers as EFTs

Question:
In regards to interac email money transfers within Canada, is this considered same as a “wire transfer” or a “cheque replacement product”?
Answer:

Yes this is definitely a wire transfer/EFT (that will be done via Interac). Is the CU offering/administrating this new product or it is being offered by another entity - if so, the other entity would have to register as a MSB, and would have to comply with all the legislative requirements (e.g. LCTR, TPR, STR etc.). If from the CU then all the attached requirements to EFTs would have to be observed.

Date Answered: 2009-08-11

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8
Regulations: 66.1(2)

226. When does an EFT start in regards to the 24 hr rule

Question:
Does an EFT (for the purposes of the 24 hour rule) start from the time the instructions are given, the funds are delivered to the MSB, or the funds are transferred by the MSB?
Answer:

The EFT takes places at the time of the transfer of instructions i.e. when the instructions cross the border.

Date Answered: 2009-08-05

Activity Sector: Money services business
Obligation: Reporting Reporting
Guidelines: FIN 4
Regulations:  3.(1)

227. EFTIs and EFTOs in money abroad: are both needed

Question:
When a MSB receives funds from abroad to be sent to a beneficiary abroad, is both an EFTI and EFTO required from the MSB? Is this affected by whether or not the money is ever sent to a financial institution in Canada (a Canadian MSB can have accounts held by institutions in other countries)? How does the travel rule and originator rule effect what reports are required from the MSB?
Answer:

Yes, in this scenario, EFTI and EFTO are required from the MSB in Canada. However, the MSB will only have to identify the individual or entity for the EFTO.

Date Answered: 2009-08-05

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 8
Regulations: 1(2), Schedule 5 Part C and E

228. Reporting Requirements of a returned EFT

Question:
For an international incoming EFT of $10,000 (Canadian equivalent) or more does it need to be reported to FINTRAC if the receiving financial institution returns it to the sending financial institution on the same day that it is received?
Answer:

First and foremost, the moment the instructions cross the border, i.e. the moment the financial entity receives it, then yes even if it the instructions cross back again, it means the FI has received it and that the FI must report it.

Date Answered: 2009-07-29

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8
Regulations: 1(2), 12

229. Reason or methods in calculating transaction value

Question:
When calculating the total transaction value in Canadian dollars to test for the 24 hour rule and to see if the value is above the threshold, what value is used: Reason or Method?
Answer:

The value that should be used is the amount that was disbursed (i.e. Method).

Date Answered: 2009-07-23

Activity Sector: Casino
Obligation: Reporting
Guidelines: FIN 4

230. New casino accounts and LCTR

Question:
Will a deposit to the new Casino Accounts trigger an LCTR?
Answer:

Yes, if it is a cash deposit.

Date Answered: 2009-07-23

Activity Sector: Casino
Obligation: Reporting
Guidelines: 6F, 7
Regulations: 1(2), 41

231. Disposition of funds that trigger LCTRs

Question:
If deposits to a new Casino account triggers an LCTR should the Disposition of funds then be set to “Deposit To Account”?
Answer:

Yes, the disposition should be "deposit to an account". The casino would then have to provide the details in Part C of the LCTR. It is also important to note that in Part C3 (type of account) the casino should check "other" and either state "front money" or "credit".section 41 (on LCTs) is not an exhaustive list whereas section 42 (on CDRs) is. Basically what it means is that every single amount of 10 000$ or more in cash received by a casino should trigger a LCT.

Date Answered: 2009-07-23

Activity Sector: Casino
Obligation: Reporting
Guidelines: 2, 7
Regulations: 41, 42

232. 24 hour rule and applying it across casinos

Question:
Does the 24 hour rule apply across properties/casinos ? If a player spends $5000 at one casino and then within 24 hours spends $5000 at another casino does the 24 hour rule apply?
Answer:

The 24 hour rule apply across properties/casinos if there is one reporting entity and if the IT system is such that the reporting entity knows that the transactions are conducted by or on behalf of the same person or entity (and if the IT system is used by all the casinos under the same reporting entity banner then we believe that the reporting entity would know about it!). If however, all casinos report as separate entities, then no the 24 hour rule would not apply across casinos

Date Answered: 2009-07-23

Activity Sector: Casino
Obligation: Reporting
Guidelines: FIN 4
Regulations: 3, 7, 40, 41

233. Guidance on identifying transactions which are suspicious because they may be in furtherance of money laundering

Question:
In particular, I am looking for guidance on identifying those transactions which are suspicious because they are or may be in furtherance of money laundering. I am aware of the 'common indicators' and I am of what the term 'suspicious' means. My question has solely to do with the nexus of suspicion with a money laundering offence. Guideline 2 provides the following insight regarding what is a money laundering offence: "Money laundering offence Under Canadian law, a money laundering offence involves various acts committed with the intention to conceal or convert property or the proceeds of property (e.g. money) knowing or believing that these were derived from the commission of a designated offence. In this context, a designated offence means most serious offences under the Criminal Code or any other federal Act. It includes those relating to illegal drug trafficking, bribery, fraud, forgery, murder, robbery, counterfeit money, stock manipulation, etc. The few exceptions to what is a designated offence are for offences such as those related to tax evasion or breach of copyright." From that it seems obvious that I would need to know what the "various acts" are; and what offences are designated, in order to determine whether a transaction (or attempted transaction) is suspicious because it is in furtherance of money laundering and therefore ought to be reported to FINTRAC. We discussed my situation of a client who wished to make a transaction, submitted a KYC with all required information, and when we ran his name through the World Check database, it generated a hit indicating that he had been charged with a federal offense of tax evasion. The details of the charge were that he owned a warehouse where illegally imported cigarettes were stored. I confirmed with the client that the hit related to him. He advised that it had all been a mistake and the charges had been withdrawn and he had a letter from the RCMP so stating. I asked him for the document, and for the name of his lawyer and asked him to instruct his lawyer to speak to me regarding the charges. He agreed, but we never heard from him again. Of course, without satisfying me, no transaction by him can proceed. You agreed that it was difficult to relate those circumstances to money laundering. Suspicious? A bit. But how to tie it in to a suspicion of money laundering? It would help to have some direction on the "various acts" and "designated offences".
Answer:

Following is a statement that might help the reporting entity in their identification of suspicious transactions (however, it lists more the offences found in the securities world). However, we should be careful when we suggest to reporting entities to review the designated offences found in the criminal code, as it is not the predicated or designated offenses listed that should be reported to FINTRAC as an STR, but financial transactions that reporting entities have reasonable grounds to suspect are related to the commission of a money laundering offence, or the commission of a terrorist activity financing offence. Money Laundering offences Under Canadian Law, a money laundering offence involves various acts committed with the intention to conceal or convert property or the proceeds of property (e.g. money) knowing or believing that these were derived from the commission of a designated offence. In this context, a designated offence means most serious offences under the Criminal Code or any other federal Act [ 4 ] . It includes those relating to illegal drug trafficking, bribery, fraud, forgery, murder, robbery, counterfeit money, stock manipulation [ 1 ], insider trading [ 2 ], False prospectus [ 3 ], secret commission, etc. [ 1 ] s. 382 of the Criminal Code [ 2 ] s. 382.1 of the Criminal Code [ 3 ] s. 400 of the Criminal Code [ 4 ] Include most federal laws except the exemptions listed in s. 462.3(1)of the criminal code.

Date Answered: 2009-07-17

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 2

234. SWIFT Reporting

Question:
ABC’s platform generates MT103 messages, for the purpose of SWIFT upload, because it is a requirement of their institutional clients. We use the MT103 message to format our payment file to the spec’s of our banking providers, primarily Bank X. The Bank X processes our EFT debit & credit’s. The vast majority of our outgoing payments are settled within North America using EFT or ACH credit. A smaller percentage would account for the SWIFT payments which largely go to Europe, UK and Japan. All outgoing international payments, processed by Bank X, would contain our client name and address. Outgoing payments processed by our Canadian banks would only have our customer beneficiary name and their account number. With this format should an RE using this platform report swift or non-swift?
Answer:

In light of the following that we can find on the ABC website in regards to SWIFT interface: The SWIFT Interface module provides S.W.I.F.T. (Society of Worldwide Financial Telecommunications) messaging services including message generation and message upload capabilities. The SWIFT Interface Module has been designed using XML technologies to support any batch file formatting style. Features Output to SWIFT message batches to any file format using XSL templates Electronically in-source/outsource SWIFT messaging to a partner institution So the system that the entity uses in not SWIFT (but merely a copy of the SWIFT messages) - therefore they should be reporting non-SWIFT.

Date Answered: 2009-07-16

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Money services business, Trust and/or loan company
Obligation: Reporting
Guidelines: 8
Regulations: Schedule 5, and 6

235. Agent or Not?

Question:
This individual wants to register as a Canadian agent of a Pakistani MSB. This person in Canada claims that he receives money through a wire to his bank account from a Pakistani MSB, and that he then distributes the $ to the beneficiaries/clients here in Canada. Would they be considered an agent or not?
Answer:

That individual is either an agent of the Pakistani MSB (in which case the principal would have to register as well as register the individual as his agent), or and that seems to be a bit more tricky, this individual would register as a MSB principal himself (although based on what we discussed, I have more trouble in justifying this alternative, this individual just seems to receive the funds from the principal in Pakistan and then distributes it to the beneficiaries in Canada).

Date Answered: 2009-07-16

Activity Sector: Money services business
Obligation: Reporting
Regulations: 6(2), 64.1

236. Filling out client ID sections of reports for non face-to-face transactions

Question:
We plan to begin opening accounts non face-to-face using cleared cheque and credit bureau to verify identity. My question is this, when reportable transactions occur after the account opening (eg. large outgoing wire / large cash transaction / suspicious transaction) what do we enter in the client identifier section of these reports?
Answer:

Subsection 53 indicates that for all LCTR you must ascertain the identity, however, if you recognize the person under 63(1) you do not have the obligation to ascertain the identity. For corporate accounts - an exemption applies and the CU does not have the obligation to ascertain the identity if it is an automated drop. In this scenario we understand that at the account opening, a NFTF method was used, therefore the CU cannot "recognize" the person under 63(1). So for the LCTR, the CU will need to ascertain the identity of the person. For EFT and for STR - cleared cheque account number (since that is the method that was used combined to the credit bureau method) would be the client "identifier". Unfortunately, if NFTF methods were used at the account opening, we reiterate that a CU cannot benefit from the exemption found in 63(1). Our argument is how can you recognize someone you never physically (as in face to face) identified in the first place. The fact that CU's employees may have seen that individual subsequently to a NFTF identification, does not mean that this individual is physically the same person. Therefore, the CU's employees would have in that case to identify the individual face to face and then will be able to benefit from that exemption of "recognizance" found in 63(1). I believe that in the past policy interpretation you refer to, we had indicated that if a staff member were to start working in a subsidiary corporation he could still benefit from that exemption in 63(1) if he recognizes the person.You must have identified face-to-face.

Date Answered: 2009-07-10

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: 6G,7,8
Regulations: 63(1), 53, 13

237. Question on scenarios found in GL10A.

Question:
Will the transaction be rejected if it is sent as: A CDR is required under the 24-hour rule for the 4:00 p.m. transaction and the 8:00 p.m. transaction, as follows. • Transaction 1 (from 4:00 p.m.): o Reason: Redemption of slot tickets, 7,000 CAD o Method: Paid out in cash, 7,000 CAD • Transaction 2 (from 8:00 p.m.): o Reason: Redemption of chips or tokens, 3,000 CAD o Method: Paid out in cash, 8,500 CAD
Answer:

As QTV has indicated that this transaction will be accepted, so it should not be rejected. It wouldn't warrant a change in our guidelines.

Date Answered: 2009-07-10

Activity Sector: Casino
Obligation: Reporting
Guidelines: 10A

238. EFT Originator information

Question:
A credit union has asked me for a legislative reference to section 3.9 of guideline 6G, which I have been unable to find. If the EFT network has the technical capability to include the originator information, you should not send any EFTs without including originator information. Effective June 23, 2009, the requirement to transmit originator information will no longer be subject to the capability of the EFT network to carry originator information. The exceptions described in subsection 3.1 do not apply to these requirements regarding originator information. Information to be included with incoming transfers If you receive an EFT, when the EFT network is capable of carrying the information, you have to take reasonable measures to ensure it includes originator information. In this context, reasonable measures could include contacting the institution that sent the payment instructions. These requirements apply to the same EFTs as described above under the heading “Information to include with outgoing transfers“, with the same exclusions. Also, as explained above, the exceptions described in subsection 3.1 do not apply to these requirements regarding originator information. Effective June 23, 2009, the requirement to take reasonable measures to ensure an incoming EFT includes originator information will no longer be subject to the capability of the EFT network to carry originator information." Is there a legislative reference to this? Is this still on a reasonable measures basis if they do not receive the info?
Answer:

In regards to your request, the legislative reference you are looking for is in the Act - subsection 9.5 that indicates that every person or entity referred to in section 5 (i.e. reporting sectors/entities) shall in respect of a prescribed EFT (a) include with the transfer the name, address, and account number or other reference number, if any, of the client who requested it (i.e. originator information) outgoing and (b) take reasonable measures to ensure that any transfer that the person or entity receives includes that information (incoming). Furthermore, in the regulations, subsection 66.1(2) says at this time : "... - that are sent at the request of a client by a means that allows for the information referred to inparagraph 9.5(a) of the Act to be included with the transfers. As of June 23, 2009 - this subsection is amended to only read that EFTs to which 9.5 applies, are those defined in subsection 1(2) including domestic MT-103, thereby, dropping the whole notion of technical capability to include originator information. So both 9.5 and 66(2) that will come into force in June are the sections that should be referenced for EFTs and originator information.

Date Answered: 2009-06-29

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G
Act: 9.5, 66(1)(2)

239. Reporting LCTRs by a CU for accounts kept in securities account

Question:
The credit union was reporting on their members who had made large cash deposits and the balance of the deposits were attributed to the ACC account. The CU has been working on completing these filings and recently discovered that some of their clients accounts were being kept in the Brinks accounts and not being reported on by the CU. This situation arose for a chain of gas stations that had all of the deposits amalgamated into one deposit into the ACC account. The ACC then wired the funds to the individual financial institutions that held those accounts and the CU realized that some of these accounts were being held with them. So the question is, does the credit union need to report on these accounts, or is it sufficient to have included this amount in the initial LCTR filing on behalf of ACC. The deposit to the clients' CU accounts is now one more step further removed in this case. It would appear reasonable that these funds just be reported on as having been deposited to the ACC account. Are you in agreement with this?
Answer:

Yes the CU would have to report as the LCTs are from its own clients i.e. the gas station(s) that are member(s) of the CU - the CU would have all the information on its own clients. It is true that as long as the LCTRs are reported is good - but the LCTRs must be reported by the reporting entity responsible to report.. which would be the CU.

Date Answered: 2009-06-25

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Securities dealer, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: 7

240. MSB

Question:
An entity is currently working in the US and have now decided to shift to the Canadian Market. They are looking at opening up a CAD bank account with ABC where they can deposit all their surplus of Foriegn currencies and sell them to MSBs in Canada. They have yet to receive confirmation for their provincial incorp for Ontario and once they have that I told him that I would be calling him back regarding registration.
Answer:

This company based in Canada is covered and should be registered as a MSB.

Date Answered: 2009-06-25

Activity Sector: Money services business
Obligation: Reporting
Act: 5(h)

241. Incoming EFT

Question:
Is there need to report incoming EFTs into our non-Canadian-based bank accounts. For example, a typical incoming EFT would be a local client asking their bank in the UK to send GBP to the entity’s account (also in the UK). We would exchange the GBP to CAD and pay our client. Are we correct in the thought that this transaction is not reportable as an EFTI? Is there any circumstance where we would need to report it? Another scenario: If a local client tells us that a relative in the UK is sending funds to our GBP account in the UK, and we receive the incoming EFT with the sender with the remarks “further credit to the client, does that fit the definition of “instructions” and therefore require us to report it?
Answer:

We believe that in both cases, we have a classic EFT (instructions are crossing our border - regardless of in which country the actual transfers of funds takes place) and in both cases they are reportable (i.e. the first and the second scenario given by the entity). In the first case, we assume that the local client is a Canadian local client.

Date Answered: 2009-06-25

Activity Sector: Money services business
Obligation: Reporting

242. SWIFT lite: non-members ability to report SWIFT

Question:
Application that allows access to SWIFT messaging services over the Internet. It is intended for corporates and financial institutions that on average send and receive fewer than 200 items per day over SWIFT. Also mentioned that ABC was currently looking at this option. This could be problematic given that these transactions would be considered MT 103 messages as per our Regulations but the only way that reporting entities could send the reports is through batch. It appears that SWIFT may now be offering a new product that will allow users to send SWIFT messages without necessarily being a SWIFT member. As such, a small MSB may now be able to avail themselves of this new service and send SWIFT messages....where if it is a MT103 it would be reportable, but only through batch. Hence the concern....would a small MSB really build a batch reporting system? Please review and advise
Answer:

This new product is owned by SWIFT, however, it is a totally different product that what we know as a SWIFT service/SWIFT messages. Therefore, the transactions processed via this new application would not be considered as MT 103 messages or any SWIFT messages, for that matter.

Date Answered: 2009-06-15

Activity Sector: Money services business
Obligation: Reporting

243. Thresholds for EFTR obligations

Question:
MSB (or all sectors for wires). This question is best illustrated by an example. A client enters a MSB and asks to have $9900 CA wired to the US. The MSB agrees and adds a $100 fee, to bring the total amount to the $10,000 threshold. Does the MSB have the obligation to report as a EFTR?
Answer:

No the MSB would not have the obligation to report an EFTR in that particular scenario. When you calculate the $10,000 or more threshold in the case of EFTs, you do not include the MSB fees.

Date Answered: 2009-06-10

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 8

244. Obligations of enters agents and mandataries

Question:
Does an MSB have to enter into a agent/mandatary agreement as per section 64.1 of the PCMLTFR for MSB agents which identify clients? In other words, when a MSB agent identifies a client, is this considered non face-to-face for the MSB itself, which, if so, would trigger section 64.1 of the PCMLTFR?
Answer:

No the principal MSB does not have to enter into an agent/mandatary agreement with his MSB agents (listed as such within the register of course) to identify clients.

Date Answered: 2009-06-10

Activity Sector: Money services business
Obligation: Reporting

245. Guideline 6 ID question in regards to the Office of the Public Guardian and Trustee for Ontario: guideline exceptions

Question:
One of the roles of the OPGT is to manage the financial affairs of incapable people who have no one else who is authorized to do so. In this role, which is called "guardian of property", the OPGT makes all the financial decisions and transactions that these individuals would otherwise handle themselves. This includes receiving and depositing income, making investments, maintaining and selling property, applying for benefits, filing tax returns, paying bills and acting in legal proceedings if required. I work in the Financial and Tax Planning department of the OPGT and we are responsible for financial planning for OPGT clients. The issue we run into with our clients is when there is a need to update KYC or open a new investment account in order to facilitate a financial plan. I currently have an issue where a client has an account with an institution but they will not process any transactions until the KYC is updated which is understandable. Our standard process is to send a Certificate of Authority along with the signed KYC by an employee of the OPGT. In this case the firm wants photo ID of someone, but there are numerous departments that are required to access information from the firm. The Public Guardian is the entity acting on behalf of the client, not a single person. All trades are sent by paper with a Certificate of Authority. The account will continue to be in the client's name but OPGT is the only person authorized to sign for the application. The OPGT is the statutory guardian of property for the client, under authority of various Sections of the Substitute Decisions Act, 1992. We supply the institution a certificate of authority which shows our authority and the financial and tax planning department employees sign the new application on behalf of the client. We were under the impression that the OPGT would fall under the following exception: Accounts or transactions for a public body or very large corporation If you open an account, including a credit card account, or conduct a transaction for a public body or a very large corporation, the record keeping requirements described in subsections 3.3 to 3.9 do not apply. The same is true regarding a subsidiary of either of those entities, if the financial statements of the subsidiary are consolidated with those of the public body or very large corporation. In this context, a public body means any of the following or their agent: a provincial or federal department or Crown agency; an incorporated municipal body (including an incorporated city, town, village, metropolitan authority, district, county, etc.); or a hospital authority. A hospital authority means an organization that operates a public hospital and that is designated to be a hospital authority for GST/HST purposes. For more information on the designation of hospital authorities, refer to GST/HST Memoranda Series, Chapter 25.2, Designation of Hospital Authorities available from the Canada Revenue Agency website.
Answer:

Firstly, the Office of the Public Guardian and Trustee for Ontario's model is somewhat identical to its provincial Quebec counterpart "Le Curateur Public du Québec". The model for the office is the following - it is "part" of the ministry, (i.e. is part of the Social Justice Services Division of the Ministry of the Attorney General) however, it does not seem to act on behalf of the department nor act as an agent of that ministry - it is a person that is appointed independently that will oversee the operations of the office. In other words, it does not at first glance fall within the definition of a "public body". FYI - The Public Guardian and Trustee is appointed by the Lieutenant Governor in Council, and must be a lawyer who has been a member of the Ontario bar for at least ten years and the current Public Guardian Trustee is Louise A. Stratford. The Public Guarding oversees the delivery of operations by the Office of the Public Guardian and Trustee through its three-hundred staff in six local offices located throughout the province. Secondly, even if this office qualified as a public body which we dispute - they would not necessarily qualify as an entity under our Act because of the fact that it a person that is appointed as the PGT and therefore would not benefit from the exemption found in subsection 62(2)(m) that states that entities (not persons) can benefit from this exemption. Unless the OPGT can provide documents indicating that 1) the office is an agent or is within (not at arm's length) the ministry or 2) the office is an entity - then they cannot benefit from any exemption under 62(2)(m).

Date Answered: 2009-06-09

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Securities dealer, Trust and/or loan company
Obligation: Reporting

246. Non-face to face transactions

Question:
An MSB is a payee for a Bank's online banking. Basically, if you have an "account" with the MSB you can ask the Bank (either online or at a branch) to pay your account to transact a remittance, much like you would ask them to pay your credit or electricity bill. In order to set up an "account" the MSB client must first physically visit a branch/agent and be fully identified in person. This situation poses two questions: 1. As you may recall, a while back the MSB Working Group sent a document containing several policy interpretation questions. In this document we were asking for policy interpretation to revisit the concept of "recognize," as we felt visual or verbal recognition to be too high of a burden for the online industry. Has there been any progress in relation to the policy interpretation of "recognize"? 2. In a case where the payments are being received through an online system or paid at a Bank branch, for reporting purposes where is the transaction said to be taking place? Which location should be reported in Part C of an EFTO?
Answer:

In regards to your request, here are some comments in reply. 1. No there hasn't. Recognize is still interpreted as recognize visually or by voice - if online, a password, or a "PIN" is not acceptable. 2. The transaction is said to have taken place either at the server's location (if online) or at the MSB's location. In other words, the transaction takes place where the transfer of instructions occur (from the initiator of the EFT to the MSB).

Date Answered: 2009-05-29

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Money services business, Trust and/or loan company
Obligation: Reporting Ascertaining Identification
Guidelines: 6C
Regulations: 63(1)

247. Obligations regarding cheques being issued and sent to the US

Question:
They have a client in the US and the way that MSB describes the relationship is that they manages bank acts and issues cheques for the US based entity. What appears to happen is that the US Co sends an electronic file to the MSB with a list of cheques to issue. They seem to be refund and rebate cheques. The MSB also sends approximately the face value of the cheques to various US based bank accounts held by the US entity in order for there to be funds in the accounts when the cheques start to clear. The US based entity will then send the MSB a Canadian cheque in settlement of the US wires.
Answer:

This as a customer based transaction and any wires that are sent to the US (over 10K) to the bank accounts of the US entity would be reportable.

Date Answered: 2009-05-28

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Money services business, Trust and/or loan company
Obligation: Reporting
Guidelines: 7

248. Reasonable Efforts Fields on Report

Question:
In regards to 'reasonable effort' for filling out fields in reports. 1. do they have to be documented? 2. do you have to go as far as asking the individual for the information at the time of the transaction? 3. do you only have to include the reasonable efforts information if you have it available in your files or records already?
Answer:

Q.1 Implicitly if there is a reasonable measures process there must be a way f to verify that an RE took reasonable measures, thus the notion of documenting must be in place to ensure that the reasonable measures were taken. Q.2 Yes the RE should ask for this information at the time of the transaction if they do not have the information on file. Q3. Either you use information on file or you ask.

Date Answered: 2009-05-27

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting

249. The aggregation of LCTRs by CUs and the related filing obligations

Question:
In the situation where a CU is aggregating deposits using an armoured car pick for bank X retail customers, the LCTR reporting obligation would reside with the CU as they are the reporting entity that receives the cash and bank X receives a ETF from the CU to cover the deposit. LCTR Reporting considerations Since the CU receives that cash from an armoured car service the CU will not be hindered in their LCT reporting as the CU: will indicate an armoured car delivered the cash; will provide the details of the armoured car personnel from whom they receive the cash - this information should be included on from the armoured car company's paperwork; and, will not need to trouble bank X for client identification/third party disclosure in order to complete the LCTR. The scenario works like this the armoured car company picks up the deposits at various retail outlets and then the funds are dropped off at the CUs clearing centre where the bags are opened and the monies and/or negotiable instruments are tallied and sent by EFT to the retailers Bank account at bank X in this case. BNS does not see the cash they are only in receipt of the domestic EFT.
Answer:

Yes our answer was that the CU would report. In your case though the retailers are clients of the bank and not the CU. Since the CU receives the cash, sends out directly to the customer's account, and has all the information then really as long as the reports are sent for LCTs with all the information I am fine with it

Date Answered: 2009-05-26

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: 7

250. Alternative Reporting and reporting Exemption

Question:
Regarding one of our alternative reporting accounts in Barry's Bay. They have continued to meet the exemption requirements and we have recently filed an evaluation update in January. This client has now sold the shares of the corporation to another individual. The new buyer is opening an account with us and going to continue to deposit cash in the same fashion as previous owners but with a new account. It is still the same corporation but different officers (since new owners bought shares). The question below is kind of grey so hoping you could assist me in the solution. Would you consider this now to be a new client (I am assuming yes) and therefore we now have to report any large cash tranactions until this company is with us for 24 months and of course fulfils the other requirements.Please advise.
Answer:

If the legal entity/corporation is the same (i.e. the same business is being carried and therefore still falls within subsection 50 list of businesses exempted), then yes the client would still benefit from that exemption. On a more cautious side, some checks and "monitoring" take place to ensure that the legal entity (with the new owners) follow the same business history as previously it had under the old ownership.

Date Answered: 2009-05-25

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting

251. Bullion Storage / Money Laundering

Question:
I am the Senior Account Executive at XYZ Ltd. We currently provide armed courier and vault storage services to governments, merchants and corporations. We are in the process of broadening our vault services to include the short and long term storage for precious metals (predominantly gold bullion). With the financial markets in turmoil, more and more investors are turning to the ownership of bullion. We have been in talks with a few of the gold exchanges and dealers. My question would be – what type of documentation would you like to see in place for us to store bullion on a short and long term basis? We will inevitably deal with international citizens as well – companies and corporations that would utilize local exchanges to make their purchases and end up storing it with us.
Answer:

The "storage" of precious metals or precious stones is not covered by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated regulations. Under the PCMLTFR, in subsection 39.1, a dealer in precious metals and stones is defined as a person or an entity that in the course of its business activities buys or sells precious metals, precious stones or jewellery, and is covered when they engage in the purchase or sale of precious metals, precious stones or jewellery in an amount of $10,000 or more in a single transaction, for purposes other than manufacturing. We understand that your business model as submitted is comprised of armed courier and vault services (e.g. storage) of precious metals, and as such, does not fall within the definition of a dealer in precious metals and stones as defined in subsection 1(2) of our regulations. Therefore, your corporation is not covered by our legislation and has no legislative requirements under our Act to report or record keep.

Date Answered: 2009-05-22

Activity Sector: Securities dealer
Obligation: Reporting
Regulations: 39.1, 1(2)

252. Term loans: covered or not, and reporting obligations in regards to term loans

Question:
An MSB is considering the implementation of term loans. We would be offering these to clients that qualify based on credit in amounts of $500 - $3000. My question after reviewing the MSB requirements is as follows: If we keep all copies of the client files created whether we approve or decline the client would this be compliant with the current regulations? I know that the guidelines refer to the LCTR section however, we will never be in a position where the loan would meet or exceed the $10 000 threshold since a client would only qualify for one loan at a time over a term of 6 – 18 months. Are there any other requirements that I have missed in relation to this product? We also realized that OSFI would be the governing body and we anticipate there will be other things to comply with once our research on that front is completed.
Answer:

Term loans are not covered by our legislation. However, should an MSB offer term loans as part of their activities, MSBs have to report STR in regards to all activities (MSB activities and other non-MSB activities). Regarding the credit file - in regards to term loans, the entity does not have to keep credit file (as loans are not covered).

Date Answered: 2009-05-08

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 2,3

253. Relevance of obligations for a life insurance company who doesn't sell life insurance

Question:
If a life insurance agent is licenced, but not selling life insurance - are they responsible for having a compliance regime?
Answer:

The life insurance brokers and companies are simply covered because they are life insurance brokers or companies (as opposed to other sectors that either have triggering activities or because they hit a threshold and then they are covered..) Therefore even though they are not selling life insurance or have no clients per se, they would still have to put in place a compliance regime and report STRs. However, their compliance regime would be somewhat very limited if they have no clients and do not sell life insurance.

Date Answered: 2009-05-08

Activity Sector: Life insurance broker or agent
Obligation: Compliance regime Reporting
Act: 3(i), 5(c)

254. Providing copies of LCTRs to Clients

Question:
Can a RE provide a copy of a LCTR (or its content) to a client that requests it? (the LCTR is of course on that particular client).
Answer:

It would be up to the RE to decide if they provide that information or not to the client. There is no legislative prohibition in our Act or regulations preventing a reporting entity from doing so. The only provision worth mentioning is in regards to STR - subsection 8 of the Act indicates that that no person or entity shall disclose that they have made a STR or disclose the contents of such a report, with the intent to prejudice a criminal investigation, whether or not a criminal investigation has begun. However, this section only applies to STRs.

Date Answered: 2009-05-04

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 2,3

255. Life Insurance Policy Question

Question:
When a life insurance agent/brokerage or company sells property and casualty insurance - as well as life insurance - my understanding is that the entity is responsible for the Compliance Regime STR/LCTR/TPR aspect of those products also, but that the client identity and record keeping are not an issue. Where can the policy be found and does it differ from a life company vs. a life insurance broker/agent?
Answer:

The entity is responsible for the compliance regime, STR and TPR - but not for the LCTR.

Date Answered: 2009-04-29

Activity Sector: Life insurance broker or agent, Life insurance company
Obligation: Reporting Reporting Reporting
Guidelines: 5,6,7,8

256. Reporting entity status determination by FINTRAC

Question:
An inquiry concerning FINTRAC's determination of the status of a reporting entity. FINTRAC's determination whether an entity is covered under the Act is based on the information that the entity provides to FINTRAC. If the entity omits information or changes its business model FINTRAC reserves the right to change our decision. Therefore can a reporting entity reply on FinTRAC's written determination of whether a business meets the definition of a money services business pursuant to paragraph 5(h) of the PCMLTFA so long as the description provided is the same as the description provided to FinTRAC.
Answer:

MSB Registration acceptance/denial should not be considered as an endorsement or non-endorsement from FINTRAC. FINTRAC expects each reporting entity comply with legislation and perform their own due diligence relative to their clients. Any correspondence between FINTRAC and an entity is not meant by FINTRAC to be relied on for any purpose by a third party.

Date Answered: 2009-04-29

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 5(h)

257. Definition of bearer's cheque and whether or not it is considered cash

Question:
Here is the definition of bearer's cheque: A bearer check is payable to anyone who is in possession of the document: this would be the case if the cheque does not state a payee, or is payable to "bearer" or to "cash" or "to the order of cash", or if the cheque is payable to someone who is not a person or legal entity, e.g. if the payee line is marked "Happy Birthday". Now do we consider this as cash? (because technically it does sound like it is). If so, then it would be reportable if $10,000 or more as a LCTR?
Answer:

The bearer's cheque is not cash. It is still a cheque. GL 7, section 1: "Throughout this guideline, any references to dollar amounts (such as $10,000) refer to the amount in Canadian dollars or its equivalent in foreign currency. Furthermore, all references to cash mean money in circulation in any country (bank notes or coins). In this context, cash does not include cheques, money orders or other similar negotiable instruments."

Date Answered: 2009-04-20

Obligation: Reporting

258. Deciding which actor is responsible for reporting

Question:
The armoured car company (ACC) picks up the money from the various businesses and takes it back to their own ACC location to count the money. The ACC then takes the money in one big bundle to the bank on behalf of the credit union (and uses a deposit slip in the name of the credit union). The ACC does not have an account at this bank, they are merely delivering the money. As far as the bank is concerned, they have received this money from the credit union (via the ACC) and credits a general account at the credit union in one lump sum. I do not know if the bank is reporting that they have received this cash (if they believe that this is credit union money then they would be exempt, but it would seem pretty obvious that the bank knows about the credit union arrangement with the various businesses and the ACC). However, the bank does not receive any paperwork that would indicate who these deposits actually belong to. This is not a retail bank branch - it is a central bank processing centre that receives cash. The credit union then receives separate paperwork from the ACC which tells them what each business' share of the deposit is. If the business has an account at the credit union, the credit union deposits that share to the business account. If the business does not have an account with the credit union, the credit union then deposits that which is owing to each other remaining business into an account held by the ACC at the credit union. It is then up to the ACC to wire the money to each of the other business' account at whatever financial institution that they deal with. This arrangement has been in place with a credit union and an ACC since 2004. It started off on a small basis just picking up cash from a chain of gas stations and since 2007 has expanded to include fast food restaurants and other businesses Canada wide. The credit union just realized that no LCTRs have been filed on behalf of their clients and have since started filing them. They estimate that there are at least another 1800 transactions going back to 2004 that need to be filed. So, does the receiving bank have an obligation to report the cash in? Do they report just on behalf of their client (the credit union) or on each individual business, or on behalf of the ACC (which is just delivering it)? Or, is it up to the credit union to report on behalf of their own clients and to advise the other financial institutions to report on their clients? Is it up to both the bank and the credit union to report this and would this be double reporting? Does the credit union have any obligation to report for those businesses who do not bank with them? Reporting of the ACC wires is another story - one can only presume that the credit union is handling this correctly!
Answer:

Based on the following information provided: 1) The ACC (armoured car company) acts as a courier and receives cash on behalf of the Credit Union; and 2) the Bank processes the cash and does not have the information required to report on each individual businesses that hold an account at the Credit Union. Our conclusion is that the obligation to report LCTRs lies with the Credit Union, in regards to the individual businesses that hold accounts at the CU, and the CU would also have the obligation to file a report on the ACC (Armoured Car Company) for LCTRs - after all the ACC holds an account with the Credit Union. ACC is a client/member of the Credit Union and therefore the CU would file LCTRs on ACC. ACC picks up money for the CU members/clients and ACC is one of those members/clients through CU (this is a service arrangement). CU may advise other FIs that they are responsible for filing LCTRs for their clients (see FIN 5 draft) if that is the situation. Even though through ATMs the same principal would apply to Armoured car pick ups. I would also add if the CU is also facilitating these wire transfers for ACC to its related customers, I would question what kind of businesses they are servicing?? Risk assessment of the CU relative to this client (ACC) - almost looks like nested account to hide owners. The Bank only acts as a transit (for a lack of better word) and the only one holding the account at the Bank is the Credit Union.The Bank is not required to report in this particular case due to the following rationale. Subsection 12(1)(a) specifies that every financial entity shall report large cash transaction - unless the cash is received from another financial entity or a public body. In this case the cash received by the Bank is received from another financial entity (i.e. the CU), therefore the Bank is exempted from reporting.

Date Answered: 2009-04-16

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Securities dealer, Trust and/or loan company
Obligation: Reporting
Guidelines: 7
Regulations: 12(1)(a)

259. Questions about LCTR

Question:
I have two question about large cash transaction reports. Please see below: 1) I know that when it comes to suspicious transactions, it's not necessary for us to stop the transaction when we raise suspicion on a transaction, but what about large cash transaction? What happens if a customer comes to us, wants to do a large cash transaction, however he refuses to provide us with his occupation or date of birth? In that case, are we allowed to continue the transaction or do we have to reject it and send the customer back? Another example, if somebody is coming on behalf of a corporation, however the person cannot provide the incorporation number to us (let's say he just cannot remember and even after he goes back, he cannot find it), in that case what should we do if we have to file a report but we do not have the incorporation number? I don't recall seeing something related to this in the guidelines. 2) There are companies that are incorporated under the Letters of Patent instead of of the Certification/Articles of Incorporation that I normally see, but it's a legal incorporation document; I have consulted our lawyers about this, and they replied that these companies do not have an incorporation number. So I'm just wondering if one day this corporation which does not have an incorporation number comes and does a large cash transaction with us, we will not be able to provide that number to FINTRAC in the LCTR. Will FINTRAC be ok with that? There is no place in the report for us to explain why the incorporation number is not provided, otherwise we can say something like "this company was incorporated under the Letters of Patent and has no incorporation number."
Answer:

The info is only obligatory if applicable.

Date Answered: 2009-03-27

Activity Sector: Accountant
Obligation: Reporting
Guidelines: 7
Regulations: Schedule 1, 52(1)

260. Noon Rate Questions

Question:
We have a few concerns regarding the use of the Bank of Canada's Noon Rate in our systems. 1. The file provided by the Bank of Canada that includes all the Noon Rate information is available between 12:30pm and 12:45pm. We will have a server process that looks for a new file and when found it will populate our rates database with the updated noon rates. We are using these rates in a 'live' environment and Fintrac is checking after the fact. Here is an example of a possible situation: 2/24/09 at 12:05 Buy 7994.00 US ( have not yet received the file, therefore the system uses the rate of 2/23/09 of 1.2512) 10002.00 CAD, a LCT is done. At 12:15pm the rate is updated at 1.2470 . If Fintrac is checking the transaction using the 2/24/09 Bank of Canada rate, the amount would be 9968.51. Will Fintrac reject this LCT? 2. Currently, ABC accepts foreign currency from two countries that do not have a corresponding bank of canada rate. These currencies are KWD (Kurait Dinar) and SAR (Saudi Arabia Riyal). Since we will not have a Bank of Canada Noon Rate to compare to we will have to create LCTs based on the exchange rate in the ABC systems. I would like to confirm that this solution is valid.
Answer:

Although it is flawed, here's the guidance as specified in our regs, which I believe answers both questions: GENERAL Foreign Currency 2. Where a transaction is carried out by a person or entity in a foreign currency, the amount of the transaction shall, for the purposes of these Regulations, be converted into Canadian dollars based on (a) the official conversion rate of the Bank of Canada for that currency as published in the Bank of Canada’s Daily Memorandum of Exchange Rates that is in effect at the time of the transaction; or (b) if no official conversion rate is set out in that publication for that currency, the conversion rate that the person or entity would use for that currency in the normal course of business at the time of the transaction

Date Answered: 2009-03-26

Obligation: Reporting
Regulations: 2(a), 2(b)

261. DPMS - refinery

Question:
I have a MSB who is also in the refining business. He receives precious metal scrap and coins from Customer A (wholesaler, retailer or public). He refines the scrap and then sells the metal to Customer B (again, could be wholesaler, retailer or public). He occasionally purchases and sells amounts over $10,000. Although refining activities are exempted under the Act, once he purchases/sells to the public an amount over $10,000, would he then have obligations under the Act for all of his activities? Or, being a refiner, is he completely exempt from any obligations. Customer A is sometimes paid in cash (obviously a reportable transaction for Customer A if they're a retailer or wholesaler). Customer B will also occasionally pay for the goods in cash.
Answer:

If the MSB conducts transaction of 10000 or more with the public, it is covered for all of its DPMS activities including refinery. If the company solely deals with wholesalers and retailers it is not covered. However, our guidelines state that they would be covered if they deal with the public in a transaction of 10000 or more. We should stick with this interpretation.

Date Answered: 2009-03-25

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Regulations: 39.1, 1(2)

262. Fees and LCTRs, STRs, EFTs

Question:
Maybe you are aware of a past policy or intent in regards to including fees in STRs? or discussions around that issue. Should include fees because a criminal would be willing to accept higher fees to avoid ID, record keeping and reporting requirements, whereas an ordinary consumer would not and that could be an indicator?
Answer:

It would make more sense that the STR include the fees (i.e. field indicates amount of transaction).

Date Answered: 2009-03-24

Activity Sector: Money services business
Obligation: Reporting Reporting Reporting
Guidelines: 2,3,7,8

263. STR file - Identity fraud

Question:
This was filed under an ATTEMPTED Transaction. A gentleman left a small deposit for a purchase of currency in order to safeguard the rate. After doing our verification of facts that he had provided, and other circumstances, we decided to cancel the transaction. We left a message on client's voice mail and did not hear from him further to our voice mail message. We mailed out a refund cheque to the address noted on the Driver License as well as our Transaction Invoice indicating that the sale was being cancelled. This morning, we received a phone call from another gentleman, who had received our paperwork and cheque in the mail informing us that he never had transacted anything in our office. Furthermore, he advised us that he had received a Bank Statement, with his name from a bank where he did not have an account. He continued that he contacted this Bank who had advised him that " le gars a été arrêté/(the man was arrested)". The caller wanted to know what type of Identification I had on him and I said that I could not discuss this. I called back the number that he had provided and asked him to mail back the paperwork as well as the cheque. I also asked him to write that he did not conduct anything at our office. He said that he will contact his lawyer to see what he is going to do. He also said that the Police will want to see what I have. Please advise what, if anything, if I am visited by Police, that I should disclose, or do I refer them to contact FINTRAC? I believe that we may be looking at Identity Fraud.
Answer:

I agree with you. I suspect that there is a definite identity fraud in this case (so the police should be involved), and a SATR should be filed with FINTRAC as well. As for divulging the fact that they filed a SATR, under subsection 8 of the Act - no person or entity shall disclose that they have made a report under section 7 (i.e. report on a transaction in respect of which there are reasonable grounds to suspect that the transaction is related to a ML/TF offence), or disclose the contents of such a report, with the intent to prejudice a criminal investigation, whether or not a criminal investigation has begun. In this particular case (and PI group please correct me if I am wrong) - I do not believe that indicating that a SATR has been filed with FINTRAC would prejudice a criminal investigation? However, on the other hand the report should not be shared with law enforcement. I don't think there is any real risk in also telling the RE that the prohibition would not apply in the given case if the RE chose to tell the police it had filed an STR in those circumstances (or chose to share the content of the STR with police).

Date Answered: 2009-03-24

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 2,3
Act: 7, 8

264. Interpretation of reporting Time Limits

Question:
How do we calculate time limits?
Answer:

Pursuant to section 27 of the Interpretation Act "Where there is reference to a number of clear days or "at least" a number of days between two events, in calculating that number of days, the days on which the events happen are excluded". With this being said, if a transaction occurred on the 1rst of the month and the report is sent on the 16th (this being the 15th day), the entity is in compliance. For example: a transaction is completed at 3pm on June 1rst, the clock would start ticking from midnight on June 2nd. In other words, if the entity files the report before midnight on the 16th of June, they would be ok.

Date Answered: 2009-03-23

Obligation: Reporting
Guidelines: FIN-4

265. MSB - is this activity covered?

Question:
ABC is a money service business. A foreign bank located in a non FATF country, has clients that operate websites. The websites sells products/services and receive payment for these products via cheque made out to the website. The websites then deposit the cheques in their bank account. The bank is unable to process the cheques, so they bundle the cheques together and send them to ABC. ABC then processes the cheques (by cashing it through their own banking relationships) and sends a payment to the bank (EFT). Are these activities covered? If it is covered who needs to be identified (the bank, the websites, or the person writing the cheques)? What would the reports look like?
Answer:

The activities you are describing are more of a processing business, or a cheque clearing house. These activities are not money services business activities (quick note the EFT that ABC sends back to the bank is not client initiated, nor sent at the request of a client). Therefore, in regards to that side of their business ABC would only have a STR obligation.

Date Answered: 2009-03-20

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Money services business, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: FIN-1, 2,8

266. Definition of working days

Question:
I will need a definition of what "working days" means and also an interpretation on how to calculate time limits for multiple transactions under $10,000 that are conducted within 24 hours.
Answer:

Here is a bit of labour background: The provincial laws determine what in the province should be considered as the "labour" conditions and hours of work in general, although within a province the employer and employee may enter into an agreement to determine the terms of the employment. Of note, in Ontario, ninety percent of Ontario's employees are covered by Ontario provincial labour law. The remaining ten percent fall under federal labour law, in particular the Canada Labour Code. When it comes to labour laws, it also depends whether the place of work is federally or provincially regulated. About 90% of Canadian workers are covered by employment laws that are enacted by the province that their workplace is located in. However, if part of an industry is federally regulated, then the federal government department is in charge of labour standards. To complicate a bit more the labour standards, if a union covers the employee, then the union represents the employee and the "union agreement" will define the labour standards that are applicable to the unionized. "Working Days" - Ontario: In Ontario, the Employment Standards Act (ESA) refers to wages, "normal" hours of work, holidays and vacations; the Act defines in general terms minimum standards applicable in Ontario, without defining per se a "working day". Normal hours of work are usually a 7.5 to 8 hours a day. As well, a usual working week would be a 5 day week. But again no standard Canada-wide definition is available (to my knowledge). The concept of work hours/work day/work week has evolved so much that it has become very difficult to determine a standardized definition. Policy Interpretation: Subsection 5(1) - EFT reports not later than 5 working days after the day of the transfer: 1) Working days: However, as a general rule the term "working days" has meant in the past - Monday to Friday and still rings true for the average office worker including federal employees. The same definition of "working days" have been used by financial entities in the past. So it would not be unreasonable for the Centre to consider "working days" as being Monday to Friday, exclude the week-ends, as well as statutory holidays. Subsection 5 (2) - both (a) and (b) refer to respectively within 30 days after the transaction or in any other case 15 days after the transaction. As we are not referring to "working days", it could be either or - working days or days (I think we use working days right?). However, in regards to when the delay for reporting starts running - it makes sense to rely on the Interpretation Act, section 27 - i.e. for example the delay would start running at midnight of the day of the transaction plus 15 or 30 days depending on the report. That would be up to the Centre to determine if they want to keep this interpretation

Date Answered: 2009-03-20

Obligation: Reporting
Regulations:  5(1), 5(2)(a)(b)

267. SWIFT Electronic Transfers

Question:
XYZ currently uses several Financial Institutions (FI) to execute its payment transmissions in a Non-SWIFT format. As such, we currently report all our EFT transactions in a Non-SWIFT format to FINTRAC. Our main FI, Bank within the U.S, is expected to migrate away from its current non-SWIFT payment platform to SWIFT in September 2009. As such, in order to continue to process our payment transmissions with the bank in the U.S, XYZ will begin to format its payment messages in the SWIFT MT 103 format to meet the bank in the U.S requirements. XYZ will also continue to execute payment transmissions through other FI’s (non-the bank in th eU.S) and we will not use the SWIFT MT103 format in these cases. The bank in the U.S has invited XYZ to be part of ABCD, Member Administrated Closed User Group, which provides for a formalized B2B relationship between the bank in the U.S and its corporate clients. In doing so, it has made XYZ a de facto sponsored “SWIFT member” despite the fact we ourselves will not be processing the payments in SWIFT. We will simply be preparing our instructions in a SWIFT MT 103 format and then the bank in the U.S will be executing the transaction via the SWIFT network on our behalf. XYZ would like to continue to report all EFT reportable transactions in a Non-SWIFT format for several reasons: · It will provide standardization in reporting to FINTRAC regardless of the FI we are using to execute the transmission (bank in the U.S or Non-U.S FI’s); · XYZ will not actually be executing the transmission in SWIFT itself-we are merely preparing the transmission in a SWIFT format at the bank in the U.S request (and for the bank in the U.S alone) so that the bank in the U.S can execute the transmission in SWIFT; · We are currently reporting to FINTRAC in a Non-SWIFT format and have costly development under way with several integrated software systems (IBM, TREMA) to continue reporting in a Non-SWIFT format in the future; · Conducting reporting in a dual environment (SWIFT and Non-SWIFT) will be an onerous undertaking (costly) and also more prone to potential errors; · XYZ is part of a ABCD to a SWIFT member (Bank in the U.S) and is not a SWIFT member network processor itself. Based on the aforementioned, XYZ is seeking to continue to report in the Non-SWIFT format and your response is greatly appreciated.
Answer:

XYZ needs to continue to report non-SWIFT to us (i.e. continue to report in the same manner as they have been reporting to us in the past), as it is not a SWIFT member.

Date Answered: 2009-03-16

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 8A
Regulations: 28(1)(b), 28(1)(c)

268. Question regarding Foreign Exchange Dealing under the PCMLTFA

Question:
Customers purchase a service from our client (for example, Customer X purchases the service for Cdn$2,000). This creates a debt (which amount may or may not be the same as the amount originally paid by the client) that our client must eventually pay back to the client (using the same example as above, our client, as a result of the provision of the service, pays back an amount of Cdn$3,000 to Customer X). If our client (instead of paying back his debt to Customer X in Canadian currency) pays Customer X in U.S. currency (using the current exchange rate), would this transaction be qualified as a foreign exchange dealing under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act Does it make a difference whether or not the service is originally purchased in Cdn$ or U.S.$? That is to say, if Customer X had originally purchased the service using U.S. funds. Please note that the situation described above is different than the situation where “change” or “cash back” is given to a customer; situation which is addressed on FINTRAC’s website. In other words, our client is not providing change or cash back but is repaying an amount of money owed to his customer
Answer:

From what we can see, based on the description and the information provided by the client, it would appear that this entity is not engaged in the business of money services, as it is not engaged in currency exchange

Date Answered: 2009-03-13

Activity Sector: Money services business
Obligation: Reporting
Guidelines: FIN-1
Regulations: 1(2)
Act: 5(h)

269. Exchange rates: Bank of Canada

Question:
If the Bank of Canada doesn't list a particular currency then do we allow the RE to use an alternate site to obtain the exchange rate to determine reportable transactions?
Answer:

As per subsection 2(a) of PCMLTFA regulations - the conversion into Cdn dollars is based on the official conversion rate of the Bank of Canada. If there is no official conversion rate set out for that currency by the Bank of Canada, then yes the entity can rely on another alternative reliable system to determine the exchange rate - subsection 2(b) indicates that the entity would use the conversion rate for that currency in the normal course of business and the normal course of business would certainly include alternatives systems for currency rates not listed by the Bank of Canada.

Date Answered: 2009-03-09

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Money services business, Trust and/or loan company
Obligation: Reporting
Regulations: 2(a), 2(b)

270. Entity permits users to use software operating and hosted on its site - is it a MSB?

Question:
Question: Based on the following information about a business please advise if they are engaged in money service business? Would ABC Financial only distribute/sell the software? Answer: For the moment, ABC does not intend to sell or distribute software. It will, however, permit users to use software operating and hosted on its site. As for the mobile payments component to the business, there will be a system of sending and receiving SMS messages that will be part of the process of administering user accounts, but that process will not require the user to install any specific software on their mobile devices or on their computers. Question: Has ABC opened a bank account, and if yes, is there a transfer of funds into that account from the client's personal bank account (or bank accounts)? Answer: Yes, ABC has a bank account at a Canadian bank. Yes, ABC will use an external EFT services company in Canada to cause the transfer of funds from individual customer (i.e. consumer) accounts to a single aggregate holding account (being the ABC bank account in Canada). When users transfer funds to other users, no banking transaction occurs. When a user wishes to retrieve their funds, they will be paid out by ABC effecting another EFT transaction through a Canadian EFT provider. Question: Does the entity have total control of the client's money? Answer: Subject to the legal undertakings of ABC to the user, yes.
Answer:

Following the additional information provided, there is a real substantive connection to Canada, as this entity has a bank account in Canada. Therefore, based on that information, then this entity is engaged in the money services business in Canada, and will have to register as such.

Date Answered: 2009-03-09

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: FIN-1
Regulations: 1(2)
Act: 5(h)

271. MSB Issues

Question:
Pertaining to the filing of STRs to non-related MSB activities: If an MSB sets up a separate legal company which performs check cashing but operates from the same business location, would the check cashing entity be required to file STRs?
Answer:

As indicated earlier, if it is a separate legal entity, and that entity is not considered a money services business, then that entity has no obligations or legislative requirements under our legislation (including reporting STRs). The only point made by risk assessment, is that if the separate legal entity is using the same employees, or same location than the MSB, then the MSB would have to take into account all factors or information in regards to its risk assessment - in other words the MSB entity could use information obtained from one business to help assess its own MSB clients and make appropriate determinations in relation to filing STRs, based on information it gathered via the other business.

Date Answered: 2009-03-05

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 2,3

272. TFSA - Question

Question:
In Guideline 6 section 3 reference is provided to the exemptions for “intended use of accounts” (section 3.3) in regard to registered plans. Can you confirm that the new Tax Free Savings Account (TFSA) would fall under “other registered plans” as outlined below and is therefore no requirement is needed for intended use of account on TFSA’s?
Answer:

TFSA are "other registered plans".

Date Answered: 2009-02-24

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G
Regulations: 62(2)(i)

273. PCMLTF Act and Regulations applicability to Co-Ownership transactions

Question:
We are trying to determine whether the new obligations for real estate developers under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and Regulations would apply to the sale of co-ownership interests in a new multi-unit residential building. These kind of co-ownership transactions involve the sale of a part interest in a multi-unit residential building. The purchasers receive title to the undivided co-ownership interest in the entire property as tenants in common. The purchaser will receive a deed for their part interest in the property and a license to use the residential unit allocated to that part interest. For example, if a building has 100 units each purchaser will receive a 1% interest in the property and the deed will set out that 1% interest as a tenant in common with all the other co-owners of the property. In other instances the vendor will transfer only a beneficial co-ownership interest in the multi-unit residential property while the developer retains the full registered interest in the property. These transactions are similar to those discussed above except that because only a beneficial interest is transferred there is no transfer of title to the purchasers. Given the language of the regulations it does not seem that these co-ownership transactions would fall under the definition of 'real estate developer'. They do not seem to fall under part (a) of the definition as they are not freehold houses and they are technically not condominium units, and they do not seem to fall under part (c) as this seems only to apply to the sale of the entire multi-unit residential building in one transaction. If you can, please let me know if the Act and Regulations do extend to co-ownership interests in both circumstances and provide an explanation of why and what sections of the Act/Regulations were relied on in drawing your conclusion.
Answer:

If an undivided part of a building is sold (i.e. an interest or a percentage of a building, as opposed to for example a wing, a unit, a determined part of a building) then we have indicated that this is not considered as per our regulations as the selling or purchase of a new building or unit. So, a co-ownership involving the sale of an interest in a building would not be covered under our regulations. However, if the co-ownership involved the sale of a divided part of a new building (i.e. you can specifically determine what part of the building they are purchasing), then that would be considered as the purchase of sale of a new building or unit.

Date Answered: 2009-02-13

Activity Sector: Real estate
Obligation: Reporting
Regulations: 1(2)

274. Large Cash Transaction Report

Question:
As I mentioned to you on the phone, in our business there are cases where a customer can bring cash and request to put it in his account temporarily, and he might choose to buy precious metals later on, or he might choose to leave the funds on account until whenever he is ready to place an order. It is also possible that sometimes a customer asks for the funds back without doing a transaction for a specific reason (e.g. we do not have the inventory). I am just wondering if this case applies to "deposit to an account." And if yes, what happens if an employee brings cash for his employer (who is our customer), and puts the fund in the account without placing an order? In the Large Cash Transaction Report, PartB2, there is an option - On behalf of: employee depositing cash to employer's business account. If we choose this option, we will not need to fill in part F and part G. Does this option really apply to us or is it more for financial institutions?
Answer:

Although it is clear in the regulations that there is no concept of "account" for the DPMS sector, we realize that their business practices seem to allow the opening of a "corporate" account whereas the DPMS may accept cash in advance for future sales of either precious metals/precious stones or jewellery from an entity. Therefore, in light of that fact, and to permit a better quality of the reporting (and after discussion with Luc as well), we recommend that for reporting purposes only, that DPMS be informed that they should use when filling out the LCTR in the drop down menu - "deposit in account" instead of using "other". The "deposit in account" caption indicates more accurately that the entity (or its employees) have deposited an amount of $10,000 or more in cash in their "corporate account" with the DPMS reporting entity for the future purchase of precious metals, stones, or jewellery. This will also facilitate the capture of the information on the third party determination.

Date Answered: 2009-02-13

Activity Sector: Accountant, Dealer in precious metals and stones
Obligation: Reporting
Guidelines: 6I, 7
Regulations: Schedule 1

275. Large Cash Transaction Report

Question:
In Guideline 6I: Record Keeping and Client Identification for Dealers in Precious Metals and Stones, it mentioned that in the Large Cash Transaction Record, "the wholesale value of the transaction (i.e. the amount you had paid for the item sold)" is required as part of the content. I have spoken to our IT department, and they have told me that we keep track of a limited set of items, and most of the items cannot be tracked back, which means we cannot get the price that we paid at for a specific item that we sold. However, we might be able to catch the "we buy" price of an item that we are selling (at the time of the selling transaction), and this would be the price that we would pay if we had bought the item from a supplier at that moment. So can you please let me know if it is acceptable for us to use the buying price at the time of the transaction to calculate the "wholesale value of the transaction"?
Answer:

This would be fine - since the LCTR is really about the client paying in cash and all the information in that regards

Date Answered: 2009-02-13

Activity Sector: Accountant, Dealer in precious metals and stones
Obligation: Reporting
Guidelines: 6I, 7
Regulations: Schedule 1, 39.2, 39.3, 39.4

276. Determination if an entity engaged in the business of a MSB

Question:
I spoke to an individual today who is living in Florida and who operates a business in the States and in Canada. He has no physical presence of an office here in Canada, but has licensing to operate in Canada. What he does exactly is purchases and sells currency by using Casino's, Banks (Domestic US and Canada) as well as Offshore companies. Most of his transactions in Canada are with an Ontario Casino and they range more so in the $100000. Would you be able to determine whether or not this company would be considered an MSB.
Answer:

We have indicated in the past to a similar case, that unless there is a substantive connection to Canada (such as a Canadian bank account, agents in Canada, physical location in Canada, server in Canada etc.), then we do not consider the entity as conducting a money services business in Canada. So at first glance and with the information provided, it would seem that this entity is not conducting a money services business in Canada as per our Act and associated regulations. However, we may want to make sure that they do not have some other type of connection to Canada that they may not have mentioned (such as a server or bank account in Canada?),

Date Answered: 2009-02-13

Activity Sector: Money services business
Obligation: Reporting
Guidelines: FIN-1
Regulations: 1(2)
Act: 5(h)

277. Including or excluding fees in calculating transactions

Question:
If transaction fees take a transaction for an EFT to CAD 1,000 is ID required?
Answer:

ID would not be required in the case described. The reason is that the PCMLTFR at 30(e) state that a record (and identification) is required "where an amount of $1,000 is remitted or transmitted". Fees are not remitted or transmitted and therefore should not be included in determining the amount of the EFT. The determination as to whether to include fees or not in the calculation of amounts will vary depending on the record that is kept/or transaction conducted. While fees are excluded from EFTs, they may be included in other records. For example, in the case of a large cash transaction, fees would be included in the total amount to be reported because what is important here is the total amount of cash received (we don't care if a portion of it is for taxes or fees. $10,000 cash is $10,000 cash. The requirement for accountants to keep a receipt of funds would not include the receipt of professional fees. The reason being that accountants are covered for funds received on behalf of another person/entity. Professional fees are paid to the accountant for services rendered and do not constitute funds that are received on behalf of someone else.

Date Answered: 2009-02-11

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 30(e)

278. Debrief Habitat for Humanity

Question:
Does Habitat for Humanity fall within our definition of a real estate developer covered by our legislation?
Answer:

Considerations have to be given to the fact that this is a charitable organization, with a very specific mandate, and more importantly is accessible to a very limited portion of candidates that can qualify, or are selected based on very specific sets of criteria. So based on the fact that this organization does not sell to the "public" as in the general public, and "sell" to a very specific group of families, with very specific and restrictive set of criteria - we recommend that this entity is not subject to Part I of the Act, as it does not fulfill all the legislative requirements/definition of a real estate developer under our Act and associated regulations.

Date Answered: 2009-02-10

Activity Sector: Real estate
Obligation: Reporting
Regulations: 1(2)

279. Alternative to Large Cash Transaction Report

Question:
Financial entities can choose to report a Financial Entity Business Client report if their client meets all the LCTR exemption criteria. Once they become aware that any of the conditions are no longer being met for a client, they must resume reporting large cash transactions, as stated in the Regulations. They do not, however, have to notify us when this happens. I'm seeking a legal opinion of whether it is right for us to include something in Guideline 9 that asks them to additionally inform the regional officer that the client has been taken off their LCTR exemption list. This is also seen more as a best practice.
Answer:

You are right there is nothing in the regulations stating that the RE must inform FINTRAC that the client has been taken off their LCTR exemption list. However, yes we can encourage the RE as a best practice to inform us that the client is off the list.. and Guideline 9 could be a good avenue to use to indicate this best practice - this issue should be raised with our managers to determine if there is an appetite to include this in GL9, and eventually with Communications

Date Answered: 2009-01-29

Obligation: Reporting

280. Traders of cash for gold

Question:
Would companies like the following actions fall under the act. Basically, you ask for a sample kit and they mail you a small envelope. You place your gold/ silver/ platinum jewellery in the package and mail it to them. They take their cut of the value and mail you a cheque. There are never any face to face transactions. We do not have any customers in Canada who do this. However, it is very popular in the U.S.
Answer:

The U.S. based entity are clearly not covered by our legislation - the transaction itself does not take place on our soil (even if the Canadian mails the package to the U.S. entity, the entity will assess the value in the U.S. and then mail a cheque accordingly). As for the two Canadian entities - it would be a question of fact to determine if they have a real and substantial connection to Canada (such as web server based in Canada, agents based in Canada, employees in Canada etc..). We would apply the same criteria that were used for the online MSBs. Both servers seem to be located in Canada, therefore there is a real and substantial connection to Canada, so if and when they engage in the triggering event of purchasing or selling precious metals or stones, or jewellery in an amount of $10,000.00 or more, then they would be subject to Part I of our Act (and other prescribed obligations).

Date Answered: 2009-01-29

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Guidelines: 6i
Regulations: 1(2), 39.1

281. RE that wants to submit an STR in court

Question:
Is it the bank that intends to submit the STR as evidence or is it the client who is requiring that this evidence be provided by the bank? In brief, who originally wanted to submit the STR? The client claims that if we had doubts concerning his activities, we should have informed the authorities (the police). We want to demonstrate that we did.
Answer:

If they are civil proceedings and not criminal, the Bank’s lawyer will have to ensure that the act of divulging the STR and introducing it as evidence does not contravene section 8 of the Act (ie the intention to harm a criminal investigation in progress or a potential investigation), which doesn’t seem to be the case in this situation anyway. Consequently, the bank can divulge reports/information that it has in its possession during civil proceedings. The only issue is the private nature of the information and the client (business or individual) could very well oppose it or even declare it an invasion of his or her privacy. Moreover, the bank should consult the client's lawyer, who must have prepared his or her declaration as a defendant anyway, as well as the list of documents that he or she would like to submit as evidence in support of his or her position. This is a question of the interpretation and application of Part 1 of the Act. You can tell the bank that the Act does not prohibit submitting an STR as evidence (if the bank wishes to do so) unless it is done with the intention of harming a criminal investigation. In these circumstances, there is little risk in concluding that the bank is not doing it with that intention (but the bank is in a better position to know which intention is behind its actions).

Date Answered: 2009-01-26

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 2,3

282. Regulations 3 (24 hour rule)

Question:
We are proposing to remove the deficiency that relates to provision 3 of the regulations (24 hour rule) since it is an application rule and does not contain a position obligation. The same would possibly apply to 42(2) (24 hour rule for CDR).
Answer:

In both cases - subsection 3 and subsection 42(2) both are application rules/definition of what constitutes the 24 hour rule, and do not represent per say a positive obligation under our regulations. Consequently, we suggest that deficiencies should not stem from those two subsections of the regulations.

Date Answered: 2009-01-22

Activity Sector: Casino
Obligation: Reporting
Guidelines: FIN-4
Regulations: 42(2), 42(3)

283. Exemptions for Universities

Question:
A broker here in Ontario who is going to be listing a property (here in Ontario) owned by a University in England. Are there any exemptions for educational facilities outside of Canada. We know they would be considered a large corporation (by our guidelines), but probably not publically traded.
Answer:

There are no exemptions for educational facilities outside of Canada. If however, the university qualifies as a large corporation (publically traded etc..) then it would benefit from the exemption found in subsection 62(2)(m) of our regulations.

Date Answered: 2009-01-22

Activity Sector: Real estate
Obligation: Reporting
Guidelines: 6B
Regulations: 62(2)(m)

284. Definition of 'Instructions' in EFTs

Question:
Based on your specs, we can use Tag 13C in the Swift message however, we do not use this tag as this is an optional field. We send few forward value date payments i.e., when we send payment messages to our H.O., we forward value the value date to 2 days. For example, we send out the payment today [Dec 11], value December 17. This particular message will not be reported to FINTRAC as of today but rather it will be reported on the December 17 reporting. Is this acceptable to Fintrac? The hope is you could clarify the meaning of "the transmission...of instructions" as per the EFT definition which is reproduced below for your convenience. "electronic funds transfer" means the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included. ( télévirement ) We believe that under the definition the use of the valuation date by the RE ( Dec 17 in this instance) may be incorrect and that the RE should instead use Dec 11 as this is the date they received the "instructions" from the customer. Please also consider that the instructions once received are diarized until the date that the transaction occurs, as such the RE does not keep a record of such instructions as the RE will instead rely upon the system of record to retain the valuation date. The only caveat to this is where the EFT system has the capability to schedule activities in advance however such a feature may not be "built in" to every system of record meaning that this capability may not be available to all REs. In addition where such a faculty does exist it may not be archived as the RE would be more likely rely on the "actual" transaction date than a diary record since the diary record poses no economic value and as such would not be considered worthy of retention/archiving from a system build perspective. Please also consider that the valuation date is the only date that actually matters with respect to the exchange rate used and whether the order is actually executed or "killed" between the time it is originally requested and when it actually takes place. When you also consider that we now have a SATR that can be reported isn't it of more value to FINTRAC to know the actual date ( in our Example Dec 17) of the transaction rather than the date the intent was communicated ( Dec 11).
Answer:

In the case you described, the EFT takes place at the time when the instructions cross the boarder, not when the funds are transferred. Therefore, the date to capture would be when the instructions are sent by the FE - so in this scenario if the instructions were sent on December 11th that would be the date of the EFT. If however, the instructions were only sent on Dec. 17 - then that is the date the EFT occurred.

Date Answered: 2009-01-22

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Money services business, Trust and/or loan company
Obligation: Reporting
Guidelines: 8B
Regulations: 1(2)

285. Coverage of Coin Dealers

Question:
If coin dealers deal in rare and expensive coins worth 10-15 thousand canadian are they subject to the Act? The example of a rare 5-cent coin might be worth $15,000, it has negligible amounts of silver, but is valuable because it is rare. In many cases these coin dealers are dealing with high value coins, that have negligible "melt value".
Answer:

Coin dealers are covered under the regime when they purchase or sell coins that contain any prescribed precious metals. It does not matter whether the quantity of precious metals is negligible or not. If the coin does contain precious metals - even in the smallest quantity - it constitutes precious metals in the form of a coin. Some may think that risks of money laundering in the examples described in your previous emails are low. However, other key considerations come into play. We have looked at establishing thresholds for composition or value; however, and in all cases this would require special expertise in numismatic and coin evaluation from the compliance officers. Our compliance officers are not experts in the art of evaluating coins and thus a situation where we cannot verify the facts would greatly impede our mandate of ensuring compliance. Secondly, we need to remain as consistent as possible in our interpretation. We have already taken the position that plated jewellery which only contains very small quantities of gold or silver is covered in the regime. So, all coin dealers are covered if they sell or purchase $10,000 or more of coins that contain silver, gold, palladium or platinum (which are the four prescribed precious metals in our legislation). This means that coin dealers that conduct such a transaction will have to implement a compliance regime. Dealers have STR, LCTR and TPR reporting obligations. They are only required to identify their clients and keep records when they receive a large amount of cash ($10,000) and when they submit an STR.

Date Answered: 2009-01-20

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting Reporting
Guidelines: 6i

286. Definition of Funds

Question:
Question regarding the definition of "funds". A receipt of funds record is required to be created upon the receipt of $3,000 or more. How about shares? If an accounting firm is involved in a share swap, where the entity received shares value at over $3,000, would they have to create a receipt of funds record in respect of the shares? I am assuming that the definition of funds includes securities, negotiable instruments or other financial instruments, in any form, that indicate a person's or entity's title or interest in them. Therefore, the definition of funds would include shares as well.
Answer:

Under the definition of funds subsection 1(2) of the Regs, securities are included. So yes, should the accounting firm receive funds of $3000.00 or more under the form of shares, they would have to under subsection 36(1) keep a receipt of funds. Unfortunately when the receipt of funds record obligation was drafted, the intention was not necessarily to include that scenario, however, because of the definition of funds existing already within our regulations, it is included.

Date Answered: 2009-01-16

Activity Sector: Accountant
Obligation: Reporting
Guidelines: 6D
Regulations: 1(2), 36(1)

287. DPMS - refinery

Question:
A manufacturing company that falls under the exemption for manufacturing (99% of his business is related to manufacturing and he has limited transactions with the public to amounts under $10,000) BUT if we take into account their refining activity it would change the manufacturing equation to 80%/20%. Do we take into account their refining activity in the manufacturing equation? Does the manufacturing equation not even apply once their refining activity meets the $10,000 mark with the public? The scrap metal they collect is occasionally from the public and it's entirely possible that they could receive scrap PM in amounts over $10,000. So (based on your response below) once they reach the $10,000 mark with the public, in their refinery activity, any previous exemption would no longer apply and they would then be covered for all of their business activities. Is this correct?
Answer:

We have not changed the policy interpretation on "refiners", that they are not covered for any of their activities (as per Finance's intent). Unfortunately, their business model is somewhat different from the "manufacturers" and therefore, makes it very difficult to apply the same caveat that we indicated in our guidelines for "manufacturers". We will be suggesting that the regulations be modified to exclude this sector, and will suggest this regulatory change at the next parliamentary review.

Date Answered: 2009-01-13

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Regulations: 39.1, 1(2)

288. DMPS obligations-the mint

Question:
I thought PI had decided that once a DPMS is subject to the Act all of its activities would be subject to the Act. For example, once a manufacturer who conducts $10,000 triggering transaction all of his activities, including those which strictly involve only manufacturing are covered. Would this not also apply to the Mint.
Answer:

The Mint is covered differently under our legislation. It is only covered when it sells prescribed precious metals as clearly set out in section 5(l) of the Act. This means that other activities such as refining is not covered. The regulations cannot go beyond what the Act says. Therefore our interpretation vis-à-vis the Mint has not changed: The Mint will have obligations under the Act only with respect to sales of precious metals, precious stones and jewellery. As such, the Mint will have no obligation under the Act to include its buying activities (including from refiners, if that is where they fit in the Mint's business model) in its Risk Based Approach. However, it may be an area where it would behove them to apply best/ sound business practices and good corporate governance in assessing their overall risk exposure .

Date Answered: 2009-01-08

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting Reporting
Guidelines: 6i
Regulations: 1(2), 39.1
Act: 5(l)

289. Section 67.1(2)- Date of activation

Question:
Section 67.1(2): "14 days from the day the account is "activated" What does it mean by "activated"?
Answer:

The term "activate" found in subsection 67.1(2) may be an unfortunate choice of word as it seems to better suit the "activation" of a credit card as opposed to the "activation" of an account. Having said that, you are right. The 14 days are triggered when the funds are deposited or any other transaction (i.e. in the securities sector, there might be other types of transaction that take place other than the "deposit" of funds) takes place.

Date Answered: 2009-01-08

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Securities dealer, Trust and/or loan company
Obligation: Reporting
Regulations: 67.1(2)

290. EFTRs Incoming and the 24hr rule: Over reporting?

Question:
1- This bank, and presumably other banks according to this reporting entity, electronically track the beneficiaries account activity for incoming wires in order to determine if the 24 hour rule applies. 2- Section 12(1)(c) states that the transaction is reportable if, among other things, the wire was "sent at the request of a client". 3- Section 3 states that the 24 hour rule applies is "...know that the [...] transfers are conducted by, or on behalf of the same person or entity". 4- Given how the bank tracks the 24 hour rule (via the beneficiaries account) is this not a case of over-reporting? 5- Section 12(1)(c) states "at the request of a client". The beneficiary in most cases is not the one requesting the wire. 6- Section 3 makes reference to the transfer being conducted "by" or "on behalf" of the person or entity ("by" or "on behalf of the person/entity requesting the wire as in section 12(1)(c)). 7- The beneficiary, as stated is more often then not, not the person requesting it and therefore section 3 does not apply to the beneficiary. Despite this, the reporting entity is nonetheless tracking the 24 hour using the beneficiary. Therefore, given the context above, is this not over-reporting, given that the 24 hour rule is tracked via the beneficiary account and not the "person or entity requesting the wire, or on behalf of the requestee", as clearly stated in the Regulations.
Answer:

The 24 hour rule applies when multiple transactions (each that are less than $10,000 but total more than $10,000) are conducted by or on behalf of the same person (this being the person giving the instructions as opposed to the beneficiary). So if the RE is tracking the 24 hour rule via the beneficiary account, then I would say that they are over-reporting; unless in those cases, it happens to have been conducted by or on behalf of the same person. With this being said, the RE is also probably failing to report the transactions that do fall under the 24 hour rule (that are actually done by or on behalf of the same person); in this case then we would cite them on failure to report as well. However, the RE should be encouraged to continue using the beneficiary field as trigger, but for potential STRs (if they meet the suspicion criteria) and not for EFTI 24 hr rule even though it is not an obligation on the RE's part to do so.

Date Answered: 2009-01-05

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: FIN-4, 8
Regulations: 3, 12(1)(c)

291. Reporting obligations for a real estate agent

Question:
FINTRAC is requesting from us in regards to real estate transactions that we are involved in as a real estate broker. In many of our transactions we are putting non-Canadians in contact with non-Canadians (eg. selling U.S. property to U.S. customers) and the only time any money would actually come into Canada would be when they send us our fee when a deal actually closes. Further, we do not have a trust account and never take money on behalf of clients for any purposes. Clearly we would like to minimize the amount of paperwork that we are required to do, but at the same time we want to be compliant with your requirements. As mentioned to you, we expect there to be resistance from some clients to answer some of these questions and will document any such resistance to such requests. We feel there should be a procedure to protect those who make the effort to obtain the information you are asking for and who are unable to secure it through no fault of their own. Please confirm that the attached reflects all of the information that you are requesting, and whether or not you will need this information as it pertains to transactions done outside of Canada between non-Canadians (and whether you will need this in similar circumstances, for example a Canadian buying a property in the U.S.).
Answer:

As he is only the "introducer" no he is not covered under our legislation, except for STRs (because he is still acting as an agent). So when the broker puts the potential buyer and seller in contact and has reasonable grounds to suspect that this transaction is related to money laundering or terrorist financing, then the broker would have the obligation to report a STR.

Date Answered: 2009-01-05

Activity Sector: Real estate
Obligation: Reporting
Guidelines: 6B
Regulations: 37, 38, 39

292. Accountant acting as Trustee in Bankruptcy

Question:
I am interested in determining whether the Proceeds of Crime (Money Laundering) and Terrorist Financing Act ("PCMLTFA") applies in the following circumstances: Entity A and Entity B are related entities (each is a separate legal entity); Entity A engages in the business of providing chartered accountancy services; Entity B is licensed as a Corporate Trustee in Bankruptcy (and is registered with the Office of the Superintendent of Bankruptcy); Entity B does not engage in the business of providing accounting services to the public; Certain officers or employees of Entity B may be chartered accountants, however they do not provide accounting services to the public. They do act in the capacity of trustee in bankruptcy, court appointed receiver, and court monitor and in these roles they act as officers of the court. They are regulated under the Bankruptcy and Insolvency Act. Directives issued pursuant to the Bankruptcy and Insolvency Act, among other things, impose upon a trustee minimum standards for the accounting for and the proper custody of estate trust funds. My understanding is that the PCMLTFA would not apply to Entity B in the above circumstances for the following reasons: Entity B does not provide accounting services to the public - Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the "General Regulation") an "accounting firm" is defined as "an entity that is engaged in the business of providing accounting services to the public and has at least one partner, employee or administrator that is an accountant." While certain employees of Entity B may be accountants and may conduct the activities referred to in paragraph 34 (1)(a) or 34 (1)(b) of the General Regulation, there is an exemption in 34(2) of the General Regulation for accountants "when they engage in any of the activities referred to in paragraph 1(a) or (b) on behalf of their employer.Could you advise whether you believe the above interpretation of the PCMLTFA and General Regulation is correct.
Answer:

In regards to your question below, I would like to clarify a bit in regards to the triggering activities and to the trustee services provided. In both cases, whether it is an individual accountant or an accounting firm - the trustee services are covered only if the trustee services offered is one (or falls within) of the triggering activities as described in section 34(1) of our regulations. The only difference is that in the case of an accounting firm, in order to be considered a firm within our legislation, as per our definition, the firm must first and foremost provide accounting services to the public, plus have one partner, employee or administrator that is an accountant. That is just the definition of the firm, in the same way that we define the accountant as being a chartered accountant, a cga or cma. Now once they are within those definitions - when they engage in any of the activities within 34(1), then they are subject to Part I of the Act. In other words, if the accounting firm falls within the definition of an accounting firm under the PCMLTFS and regs., or if an individual account (as defined within our regs.) engage in any of the triggering activities, whether it is while acting as trustee (or accounting services to the public in the case of the firm), then the firm or the accountant would be subject to our Act and regs. However, if the accountant engages in any of the activities (including as a trustee) found in section 34(1) on behalf of his employer, then under section 34(2) - he would not be covered.

Date Answered: 2009-01-05

Activity Sector: Accountant
Obligation: Reporting
Guidelines: 6D, FIN-7
Regulations: 1(2), 34(1), 34(2)

293. Currency Exchange Rate Issue for incoming reports

Question:
A short term solution to the issue with USD transactions that were rejected between October 1, 2008 and October 21, 2008 based on error code 998 is to increase the buffer to allow the reportable transactions in but we are looking for legal's views on the fact that: The more we increase the buffer, the greater the risk that unreportable transactions will enter our systems (possible OPC concerns) if we do not increase the buffer, then we are preventing RE's to submit reportable transactions since our systems are rejecting those reports. Please note that in the emails below, we were talking about approx 300 reports being rejected however since then, we have been advised from REs that report via F2R that they also have been experiencing problems submitting some reports. With this being said, the affected number of reports is probably much higher than we initially thought. We would appreciate an answer as soon as possible to be able to proceed with a short term fix and then consider long term solution.
Answer:

We all came to the conclusion that it would be quite justifiable in terms of risk management to increase the buffer. Although it may allow some unreportable transaction to go through - until our system is adjusted to reflect the noon currency exchange rate from the Bank of Canada, we feel that the risk of having a rejection of reports that should be received outweighs the fact that we may receive unreportable transaction. So on a short term basis, the buffer should be increased.

Date Answered: 2008-12-19

Obligation: Reporting

294. Citing Occupation

Question:
There is some reluctance in citing "salesman" as failing in their requirements to record occupation. While I agree, greater specificity is desired, I question whether the regulations go far enough for us to cite them for it. Especially given this is really simply a record keeping as opposed to a ascertaining identity issue; i.e. no validation against any documents, just what the client says. I am also concerned that if "salesman" = no occupation, and no occupation (being a required element) is now being rolled up to be cited as failing to keep the record, or in an LCTR - failing to report, we are progressing down a very slippery slope. Moreover, while the NOCs codes may be the ideal, we do not provide reporting entities any guidance on their use in anyRegulations or Guidelines as opposed to say the NAICS codes for Alternative to Large Cash transactions. "Occupation" is not defined anywhere in the PCMLTFA or its associated Regulations. Consequently, when an reporting entity asks where does it say "salesman" does not satisfy the requirement, we have nothing definitive to point to in the law. Can you convince me otherwise?
Answer:

We came to the same conclusion - that our policy interpretation in regards to the occupation field still stands. Indicating "salesman" as the occupation would simply not be sufficient - as there may be a difference in terms of salaries whether you sell shoes as opposed to luxury cars. There is some guidance that we provide to reporting entities in GL6 on the terms to be utilized in regards to the business or occupation: Be as descriptive as possible regarding the business or occupation. Record information that clearly describes it, rather than use a general term. For example, in the case of a consultant, the occupation recorded should reflect the area of consulting, such as "information technology consultant" or "consulting forester". As another example, in the case of a professional, the occupation should reflect the nature of the work, such as "petroleum engineer" or "family physician". For more examples, consult the resource on occupational information in Canada, called the National Occupational Classification (NOC). This information is available from the A-Z Index on the Human Resources and Social Development Canada Web site.

Date Answered: 2008-12-17

Obligation: Reporting
Guidelines: 6, 7
Regulations: Schedule 1- Part D

295. Timing of the triggering transaction

Question:
Section 39.1 of the PCMLTFR states that DPMS are subject to the PCMLTFA when they engage in the purchase or sale of PM/PS/jewellery of $10,000 or more (triggering transaction). However, the PCMLTFR is silent as to the timing of the triggering transaction. In order for the a DPMS to be subject to the PCMLTFA does the triggering transaction need to take place after the coming in force of the PCMLTFR? In other words, the triggering transaction must occur after Dec.30, 2008 in order for the DPMS to be covered.
Answer:

Yes the triggering activity/transaction would need to occur after December 30, 2008 for a DPMS to be captured/covered.

Date Answered: 2008-12-15

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Guidelines: 6i

296. Large Cash Transactions

Question:
Operationalising the reporting and transactor identification requirements of cash transactions at retail point-of-sale is a challenge. We currently direct our partner stores to not accept account payments over $10,000 to eliminate, as much as possible, this issue. I am sure you can appreciate that not accepting cash is anathema to our retail partners…. The bank has always attempted to file timely and accurate LCTR’s, however, the challenges are such that some fields cannot always be completed on-line. I therefore occasionally have LCTRs rejected by F2R. In discussions over one such case in the summer,it was indicated that perhaps cash payments at a retail store were not meant to be captured by the PCMLTFA (even if it was to pay my credit card account). I would like clarity on FINTRAC’s official position on this.
Answer:

The company wasn't an agent of the bank (even though it collects payments of the bank card). The company was not the reporting entity, nor the agent of the RE. The bank is the reporting entity. The fact of the matter is the bank, as a financial entity it is covered under our legislation, and under subsection 12(1)(a) if it receives from a client an amount of cash of $10,000.00 or more, it must report a LCTR. Whether the payment is to pay your credit card account is irrelevant, it is the LCT that matters. Unless there are changes to these arrangement or if the company should become a reporting entity under future iterations of the Act we would not expect the bank to train the company's personnel with respect to LCTs. That said, your effort to "direct our partner stores to not accept account payments over $10,000 to eliminate, as much as possible" is a good control/mitigation practice to manage the potential money laundering risk to your organization.

Date Answered: 2008-12-03

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 12(1)(a), Schedule 1

297. Real Estate Developers: Portion of buildings equal a building sale

Question:
A entrepreneurial real estate company develops, re-develops or acquires strip centres, enclosed mall shopping centres and freestanding retail properties. In the course of our business, we acquire various properties, including existing strip centres, enclosed malls and freestanding retail properties. We also sometimes purchase undeveloped land and residential properties on which we develop any of the aforementioned retail entities. Once developed, we lease out the properties to commercial retail tenants which can include “non-retail” tenants such as banks, insurance companies, doctors/dentist offices, etc. and we also manage the properties. We do not develop residential properties for residential purposes. We have purchased residential properties as part of a land acquisition for commercial development. The homes are torn down and the lands rezoned for commercial purposes. To a lesser degree, we have sold partial interests in some of our properties to a third party corporation, following which both parties jointly manage and lease the property. All financial dealings with respect to our transactions, both acquisition and sales, are handled by our outside legal counsel, i.e. we would transfer the funds for an acquisition to our lawyers who, in turn, would forward the funds on to the vendor’s solicitor. For sales, again, the vendor’s solicitor forwards the closing funds to our legal counsel who, in turn, transfers the funds (less any applicable deductions for real property taxes, mortgage discharges, etc.) to our bank account, either by way of cheque or wire transfer to our account. Can you please advise, based on the foregoing, whether or not we are required to comply with FINTRAC reporting requirements, compliance requirements, etc. in our business dealings. The question is two fold: 1.if a developer sells portions of several buildings in a given year and said portions add up to the equivalent of selling one commercial building or more, as stipulated under the definition of real developer in the PCMLTFR (triggering threshold) 2. and if yes, when does a commercial building cease to be new ? Since paragraph 39.5(1)(b) of the PCMLTFR states that RED are subject to the Part 1 of the PCMLTFA a new commercial or industrial building.
Answer:

1. No - portions of several buildings do not add up to equal one building, furthermore, it would be quite the feat to determine the % and adding up in order to arrive at being one building. 2. You can sell % of a building (or "portion indivise" of a building / undivided) - however, that would lead to a "partnership" of sort between the owners (of course as long as the builder still retains a %), and would not be considered as a sale of a building but rather as the sale of an interest in the building. You can also sell a part of the building (specific part such as either a unit of the building, a wing of a building, a floor of a building)... then when a builder sells part of a commercial building (i.e. the top floor), we should treat that as if he has sold a commercial building (even if it's only part of a larger commercial building). The builder would then be subject to the Act. But the key thing is this case is - can you identify the part of the building (portion "divise"/divided and specific part clearly identified as such).

Date Answered: 2008-12-01

Activity Sector: Real estate
Obligation: Reporting
Guidelines: 6B
Regulations: 39.5(1)(b)
Act: 5(j)

298. MSB question

Question:
Client of the RE wants to use it to facilitate wiring of funds from his US account in the Unitied States to Canada to his US account at Cdn financial institution. a) The bank wiring funds to RE directly in US currency b) RE wiring those funds to Cdn credit union still in US funds no exchange. c) RE uses a canadian bank to facilitate wire to Cdn credit union. (domestic transfer) First, do not know why the client is using the RE if their is no conversion of funds. Anyways, if RE is the first receipient, it is reportable as a EFTI.. and since it is not an outgoing international transfer, it is not a EFTO? Is that correct? Also the RE advised me that they received an interpretation stating it is not reportable if it is their client who is ordering the wire and is the beneficiary of the wire and there is no conversion of funds. Is this correct?
Answer:

It is an EFTI when the RE receives the wire, so the MSB that receives the funds will need to report the EFT incoming. However, the transfer of funds within Canada, you are right, is not a reportable transaction under our regulations. It would still be a reportable transaction, the transfer of funds incoming has crossed our borders even if the ordering clent is the beneficary and there is no conversion.

Date Answered: 2008-12-01

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 1(2)

299. Large Disbursement

Question:
It appears this particular casino offers draws or prizes based on gaming activity (i.e., a player rewards program). Would a $10,000 prize qualify as a CDR?
Answer:

Yes the prize qualifies as a disbursement and has been included in the CDR report, there is a little box to that effect in the form.

Date Answered: 2008-12-01

Activity Sector: Casino
Obligation: Reporting
Guidelines: 6F
Regulations: 5(2), 42, schedule 8

300. Accountant not publically practicing and obligations

Question:
We have a member (CGA) who is NOT registered for public practice. This individual is a contract controller for more than one company. What this is, is instead of say three companies hiring a controller each, this individual provides controllership services to these companies on a contract basis. He is NOT an employee and receives his remuneration by invoicing them for his services. This had gained popularity since it is hard to find controllers and there are some companies that do not need the services of a full-time controller. He will never hold himself out as John Doe, CGA, but rather as John Doe, CGA, Controller of a Company. By virtue of the fact that controllership services do not require registration in public practice (he is not considered to be an external accountant) he will not fall under the FINTRAC rules designed for accountants (where accountants are anticipated to be external accountants). There are two questions arising from this. For this situation, does this CGA require a compliance regime and fall under the reporting guidelines? Secondly, if the situation was altered and this person WAS registered in public practice (and thus falling under the rules for accountants and requiring a regime) what are his reporting requirements if he provides contract controllership services as part of his firm ie…again not holding himself out as an external accountant for a company, but being known as John Doe CGA, Controller.
Answer:

The fact that the member is not registered for public practice is irrelevant under our legislation. What matters is whether or not, the accountant is engaged in any of the triggering activities found under subsection 34(1). Therefore if he is involved in any of the triggering activities, then he is covered, and would need to have a compliance regime in place

Date Answered: 2008-11-27

Activity Sector: Accountant
Obligation: Reporting
Guidelines: 6D
Regulations: 34(1)
Act: 5(j)

301. Scenario referencing guideline 2

Question:
As the criteria in Guideline 2: Suspicious Transactions, are still at the consultation stage with our industry, guidance is also requested concerning how the sales transactions described in this scenario would be viewed by FINTRAC in relation to requirements for reporting suspicious transactions.
Answer:

You are required to file a Suspicious Transaction report where there are reasonable grounds to suspect that the transaction (or attempted transaction) is related to money laundering or terrorist financing. Since exactly what constitutes reasonable grounds to suspect can vary greatly from transaction to transaction it is impossible for FINTRAC to provide an exhaustive list of what circumstances constitute reasonable grounds to suspect ML or TF. Because you are very familiar with your industry, you and your members are in an excellent position to determine if the particular circumstances of a given transaction should reasonably give rise to suspicion. A transaction is certainly reportable to FINTRAC as suspicious when the developer has concerns about the transaction in question. FINTRAC's guidance is intended to assist developers in making this determination, but the fact that a client is non-resident does not by itself automatically constitute a suspicious transaction and might be linked to ML or TF.

Date Answered: 2008-11-20

Obligation: Reporting
Guidelines: 2,3

302. DPMS Activities / Coins

Question:
A company purchases the coins, they do so to add them to a larger order (of other pieces of scrap metals) and sent them off to a refinery to be melted. The coins do not make it back out into the market.
Answer:

Coins are considered cash. Cash is defined in the Act as "currency". The 1965 Silver Coins described in your scenario fall under the definition of "Currency" in the Currency Act (as would most Canadian coins out there). The criteria is really large. So if A purchases $10,000 or more of silver coins from B with a sum of $10,000 in cash, there would be need to be two large cash transaction reports. One from dealer A having received the silver coins from dealer B and one from dealer B who has received 10'000$ in cash from dealer A.

Date Answered: 2008-11-14

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Regulations: 1(2), 39.1, 39.2

303. A management group

Question:
A Management Group has 4 subsidiaries, but only Custodial buys and sells bullion directly, and these are all to external clients, and not sold internally to the Management group. The Management buys bullion only for the the mutual fund, based on the input of investor funds. In short, the Management Group owns subsidiaries the Management Services (the mutual fund manager), the Marketing Services (a limited market dealer to sell the fund), and the Custodial Services (the operator of the bullion bar program). Group, Management, and Marketing have already been registered as Securities Dealers. Custodial will be registered before December as DPMS.
Answer:

Based on the information provided, the Custodial is a DPMS and the Management Services is securities dealers. The only possible "but" in the story would be if the Management group were ever to purchase physical bullion from Custodial. Joe Blow indicated in the email that the Custodial would not sell internally to the Management group but it may be worth to confirm again. If there is no sale of physical bullion between the Management group and the Custodial, only the Custodial would have obligations as a DPMS (and the Management as a SD)

Date Answered: 2008-11-14

Activity Sector: Securities dealer
Obligation: Reporting
Guidelines: 6E, 6i
Regulations: 39.1, 39.2, 39.3, 39.4, 21, 22, 23
Act: 5(g), 5(i)

304. DMPS and manufacturer exemption

Question:
A DPMS who claims that his whole business consists of selling loose stones to other wholesalers, retailers and or manufacturers who in turn might sell the stones as is or manufacture jewellery with them. He claims not to treat the stones in any way, shape or form or shape. The entity is definitely a DPMS as defined under the PCMLTFR, but since he only sells loose stones to other manufacturers, retailers and wholesalers and has no dealings with the public, is he covered under the PCMLTFA?
Answer:

The entity is a DPMS that has obligations under the Act. The manufacturing exemption only applies to those who manufacture jewellery. If the DPMS in question is a gem dealer he is not considered to be manufacturing jewellery. If you remember, we have tightened the criteria for the exemption to simplify compliance. The intent of the regime was to exclude the manufacturers not everything in relation to manufacturing. If not of this "tightened interpretation" dealers (especially diamond and gem dealers) would have to investigate each sale of precious stones to other dealers (Who are you? What are you doing with this diamond?) to determine if the transaction is related to manufacturing. It would be very challenging to assess compliance with these types of transactions.

Date Answered: 2008-11-12

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Guidelines: 6i
Regulations: 1(2), 39.1, 39.2, 39.3, 39.4
Act: 5(i)

305. EFT Obligations

Question:
EFT scenario -Myanmar bank account - wires money to Cdn MSB (through a system similar to Hawala) - who in turn wires the money to Hong Kong. Just to be extra sure who reports the EFTI and the EFTO (I answered that the MSB would report the EFTI (if it didn't provide the originator information to the bank) and the bank the EFTO) ?
Answer:

If the EFT is via the Hawala system, there wouldn't be a bank involved on the onset of the transactions. Therefore, the Canadian MSB would report both an incoming EFT and then an EFTO to Hong Kong (Hawala in both cases). If the EFT is incoming from the Myanmar bank account - there would still be two reports minimum... an EFTI from the Canadian MSB, and 1) if it does not provide the originator information to the bank, the Cnd MSB would report an EFTO (non-swift) with the originator information, and the bank would also report the EFTO (probably swift) (with the MSB as the originator); 2) if it provides the originator information to the bank, then only the bank would need to report the EFTO (as it would have all the information prescribed).

Date Answered: 2008-10-30

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 28(1)(b), 28(1)(c), 28(3), 28(5)

306. US Jewelry manufacturer

Question:
A client of mine recently came across information regarding the new PCMLTFA regulations regarding dealers in precious metals and stones. They are a jewelry manufacturer located in the US who sells jewelry worldwide, including Canada. It appears from the information on your website that any transactions relating to the purchase of materials to construct the jewelry are exempt from these reporting requirements (assuming these materials were purchased in Canada). However on the sales of jewelry to Canadian customers, if any one transaction is greater than $10,000, it would be reportable.
Answer:

Transactions in cash in Canada of $10,000.00 or more - then reportable. But if the jeweller US sells to a Canadian individual in Canada - and hits the 10.000 threshold then US jeweller would be considered as a DPMS, under our legislation. that interpretation would also mean that the US manufacturer will have to set in place a compliance regime in regards to all his Canadian transactions

Date Answered: 2008-10-29

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Regulations: 39.1, 39.2, 39.3

307. Determination of activities as MSB activities

Question:
This year I made couple transactions buying and selling US$ and I'd like to do it more often. Here is the background; Venezuela is a south american country that have an exchange control. If you want to buy US$ in this country you have two sources: 1- Government source using pre-approved credit cards up to a maximum of US$5,000 per person per year at a exchange rate of VEB 2,150 per US$1; and 2- parallel market with a free fluctuation and with a today's rate of VEB 4,500 per 1US$. The difference between the two rates is attracting investors. There are two types of transaction. Transaction 1 where the credit card holder wants to keep the US$ cash, so they will swap the credit card and I will give them the cash less a commission. The transaction 2 is a bit complicated; people that don't want the cash is selling the rights of those US$5,000 in their credit cards. In this case they will swap the credit card and I will pay them a fee or incentive to cover for their rights. For transaction 1 the credit card holder is responsible to settle the debt with the bank (credit card issuer) and for transaction 2 I will be responsible the settle that debt. Since this situation occur on a specific market only, it's difficult to find some guidelines to make sure I will do all the legal reporting and taxation. So my question are: -Is this transaction considered a Money Service Business even when I'm not a financial services institution or any other business? -Is there any other regulation besides register and report the transactions to FINTRAC -Do you have already this type of transactions on your files? this is something that many people is doing but I want to be sure I will have all the regulations covered
Answer:

Firstly, we were wondering about the legality of the US FX transactions done in Venezuela (as it looks like they are doing indirectly what can't be done directly which is to exchange VEB in US dollars) ? Having said this, the second thing is we just can't find what is the connection to Canada... is there one? does he operate from Canada? We would need additional clarifications and the Canadian connection more specifically in order to answer on this one. And we should indicate to this gentleman that we can comment on the requirements under our legislation, but not on CRA's (taxation) requirements.

Date Answered: 2008-10-29

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 1(2)
Act: 5(h)

308. Custom built homes and reporting obligations

Question:
The key aspect in custom construction relates to instances where the consumer owns land prior to construction and simply contracts for the construction of a new home. In such cases, no home sale takes place, and this raises questions regarding the applicability of FINTRAC requirements. I would appreciate an opinion from FINTRAC on this.
Answer:

"Custom Home Builders" are like any other contractors who enter into an agreement with a land owner to provide that land owner with building (or plumbing or roofing or renovations) services: they are not real estate developers (i.e. they do not sell new homes to the public).

Date Answered: 2008-10-29

Activity Sector: Real estate
Obligation: Reporting
Guidelines: 6B
Regulations: 1(2)

309. Closing trust accounts and obligations

Question:
The RE stated that due to the prohibitive cost to fully implement and maintain the high level of compliance procedures and obligations in relation to the minimal number of transactions and low dollar volume they have handled in the past through their trust account, it has become the partnership's policy to discontinue providing any trust banking services to their clients. Instead of providing us with an action plan to address the deficiencies, they changed their business model and practice. They have completed disbursing to the beneficial owners the residual $1,479.45 from their trust accounts and have instructed the Bank to permanently close the two trust accounts (CDN& and US$). Moreover, they provided us with a letter to their bank instructing the closure of the accounts, and a copy of statement showing the closing zero balance. Does this change in intent and practice sufficiently "de-trigger" them from present obligations?
Answer:

Yes the closing of the trust accounts would be considered sufficient that the accountant is no longer involved in that triggering activity (of course, as long as he is not involved in any of the other triggering activities found in section 34(1)(a). The accountant would therefore no longer be covered as a reporting entity.

Date Answered: 2008-10-08

Activity Sector: Accountant
Obligation: Reporting
Guidelines: 6D
Regulations: 34(1)(a)

310. PEFPs- EFTs- s 54.2(d)

Question:
Does 54.2(d) also apply to a RE when it "sends" an EFT? That is, must the RE in Canada make a PEFPs determination regarding the "beneficiary" that is receiving the EFT at another FE?
Answer:

No you do not need to make a PEFP determination in regards to the beneficiary that is receiving the EFT.

Date Answered: 2008-10-03

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: PEFPS Reporting
Guidelines: 6G
Regulations: 54.2(c), 54.2(d)

311. PEFPs- EFTs- s 45.2(c)

Question:
Does 54.2(c) also apply to a RE when it "receives" an EFT? That is, must the RE in Canada make a PEFPs determination regarding the "initiator" that initiating the EFT from another FE?
Answer:

No in this scenario, you do not need to make a PEFP determination in regards to the originator when you receive an EFT in Canada.

Date Answered: 2008-10-03

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: PEFPS Reporting
Guidelines: 6G
Regulations: 54.2(c), 54.2(d)

312. NOC Codes for Occupation field

Question:
If we were to use the NOC codes listed on the hrsdc.gc site when we open a new person record would that meet the requirement for occupations? Meaning we would have under occupation NOC 414 for a school teacher or would we need to use code 4141 or 4142 or 4143.
Answer:

Currently, as per our guidelines, you should enter the occupation of the individual who conducted the transaction and be as descriptive as possible regarding the occupation. I do not believe providing the codes would be sufficient right now. However, if you want to use the codes and provide the description of the codes in this field (e.g. providing "school teacher" when NOC 414 is selected in the dropdown), I do not see a problem.

Date Answered: 2008-10-01

Obligation: Reporting
Guidelines: 6

313. EFT - Exclusion rule technically not applicable - Over-reporting

Question:
The RE can keep reporting all its EFTs and receipt of these reports by FINTRAC constitutes the most viable solution for the following reasons: - Technically, the RE doesn't always, or at least rarely, have the means to easily determine whether the client is exempt; - The exclusion rule was implemented to lighten the reporting burden for REs for this type of transaction, which is considered low-risk, transactions that were reported before June 23 and therefore were not considered to be over-reporting. We could consider and apply this rule as optional (as is done with the alternative to large cash transaction reports); - Finally, in the context of compliance reviews, it will be impossible for us for some transactions to associate the originator and, therefore, to check whether the exemption applies since several SWIFT messages do not contain enough information to determine this. Please confirm the position as proposed.
Answer:

The fact that the reporting entity is over reporting would not be cause for citing them as deficient (more so as you have pointed out that in an examination you may not be able to determine that is it from a public body). However, our regulations do say in section 3(2)(a) that the 24 hour rule does not apply in respect to EFTs requested by a public body.

Date Answered: 2008-09-25

Obligation: Reporting Reporting
Guidelines: FIN-4, 8
Regulations: 3(2)(a)

314. Reporting the volume of transaction between 10a and 10b

Question:
An entity received a clarification request regarding the amount/volume of transactions and he is calling back to inquire on the amount he is putting in. This is the scenario: If a client comes in for wire with 100 $ transfer to a foreign country (FX + Transfer) Should these two transactions result in 100$ in FX and 100$ in Wire Transfer in question 10A and 10B?
Answer:

There are two separate/distinct transactions taking place in the scenario provided - one for the FX, and one for the wiring. In the volume of the transactions (which I gather are actually the volume in terms of $/revenues of the MSB) then both of those transactions would generate revenues for the MSB. Profit on the foreign exchange transaction, and then another profit on the wiring part. Therefore, one transaction FX ($100) in 10A and one transaction ($100) for the wire field 10B.

Date Answered: 2008-09-23

Activity Sector: Money services business
Obligation: Reporting
Guidelines: FIN-1
Regulations: Schedule 1- Part B PCMLTFRR

315. Covered real estate activities: Scenarios

Question:
1. If a real estate developer incorporates a company to hold a specific parcel of land which they construct a building on, following which they sell the shares of the company as opposed to actually transferring title of the real property itself, would this be caught by the regulations? In other words, the registered title to the property does not change (it is always held by the company) but the beneficial ownership in the property changes as a result of the sale of the shares. 2. Also, would a sale and leaseback transaction be caught by the regulations? This is a transaction where for (deleted an extra "a" you had here) example, Mr. X sells a piece of land to company Y for $10 and company Y subsequently develops the land and then sells the developed land back to Mr. X with a long term lease for $20. In this transaction Mr. X owned the land before and after the building was constructed and there was only a temporary change in ownership so company Y could develop the property to its specifications which is easier for it to do than for Mr X. 3. If a client develops a new commercial property then occupies and operates in the space for a few months and then subsequently sells the building to a third party would this still be considered a 'new' building? If so, how long would a building need to be occupied before it was no longer considered 'new'?
Answer:

Scenario no 1 - it is not a real estate sale or purchase, so no, this would not be caught by our regulations. Scenario 2: If it is a sale, then yes it would be covered. If however it is a just a leaseback transaction (and there is no sale of the property) then no, it is not covered. Scenario 3: This issue of how "new" is "new" has not been resolved yet. Another discussion is in order to discuss this, and determine what is considered a "new" building.

Date Answered: 2008-09-19

Activity Sector: Real estate
Obligation: Reporting
Guidelines: 6B
Regulations: 1(2), 37, 39.5(1)
Act: 5(j)

316. Length of coverage for accountants

Question:
Once they are covered, are they covered for life? - Some of the accountants are considered as reporting entities for one or a few triggering activities (Trust account for paying bills or The Receiver General) they conducted a few years ago. Since then, the trust accounts were either closed already or are in the process of closing so there were/ will be no triggering activities conducted in the future at all. The group of CAs would like to know as to whether once they are examined by FINTRAC & provide post examination action plan, they are back to square one (meaning: as long as there are no triggering activities after the examination, they will no longer be reporting entities) as they don't believe that they should be covered for a life time. If not, what is the grace period? 6 months, 1 year or 2 years? Through our examinations and various meetings in the past few years, we noticed that most of the CAs & some CGAs have been changing their business models to make sure that they are not conducting any triggering activities. The perception is that they don't believe they are covered for life for the triggering activities they already ceased conducting. After all, having a trust account to pay clients' utility bills or tax bills is mainly for maintaining good client relationship and therefore are not revenue generating services.
Answer:

In regards to the second question - Once they are covered, are they covered for life? Yes, they are covered for life - unless they are able to prove that they have changed their business model altogether - and it wouldn't be enough to just say I will no longer pay any bills.. it is more than just that!! They would have to prove that they are not in any way, shape or form, involved in any of the triggering activities.

Date Answered: 2008-09-16

Activity Sector: Accountant
Obligation: Reporting
Guidelines: 6D
Regulations: 34, 35, 36

317. Exemptions to reporting

Question:
I've been asked to clear up some ambiguity in a couple of areas of the regulations with respect to financial entities. Here is one of the sections which also shows up in other areas: 3.3 Receipt of Funds Records Effective June 23, 2008, a receipt of funds record is required when you receive an amount of $3,000 or more, whether or not it is in cash. If you have to keep a large cash transaction record, you do not have to keep a receipt of funds record for the same transaction. You do not have to keep a receipt of funds record if the funds are received from a financial entity or a public body. Does the above reference mean that if a client transfers the funds through a financial entity (local bank) then we don't have to keep the receipt of funds record? Given the nature of our business, this is the normal process of receiving client funds.
Answer:

No, if a client transfers the funds through a financial entity (local bank), there is a requirement to keep a receipt of funds because the funds come from the client (via the bank), however, the bank is not the client, nor is the bank providing the funds - the funds just go through the bank! If the financial entity was providing the funds itself, e.g. because it is the "client" per se, then there would be no receipt of funds requirement.

Date Answered: 2008-09-16

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G
Regulations: 14(f)

318. Chartered Accountant acting as an executor for Family members

Question:
A CA acts as an executor of the estate for family members: - If a CA acts as an executor for the estate, RRSP investment purchases for their spouse or elderly parents, etc, are these activities triggering activities for FINTRAC purposes? The CAs stated that due to the nature of a CA's capacities, they are always automatically appointed by the family members (on a personal level) to act as an executor over the estate regardless of whether the CAs are considered as FINTRAC reporting entities (on the professional level). Although they all believe that the above transactions are non-client related transactions and should not be considered as triggering activities (for FINTRAC's purposes), the legislations are not very clear on this. They would like to seek FINTRAC's official clarification.
Answer:

If a CA acts as an executor of the estate for family members and the CA does not use his title as an accountant, his professional insurance/code of conduct does not apply because he is not acting in his capacity as an accountant, then he would not be covered. However, if he acts as an executor in his professional capacity as an accountant, and he's covered by his professional insurance - then he would be covered! It would be a question of fact to determine whether he is acting in his capacity as an accountant and if he is covered or not.

Date Answered: 2008-09-16

Activity Sector: Accountant
Obligation: Reporting
Guidelines: 6D
Regulations: 34, 35, 36

319. STR- The Agreement

Question:
Many CU across Canada I believe adhere to the agreement. Without getting too much into detail, the part of the agreement states that a CU's client (client is a member of the "issuer" CU) can transact (ex. Deposits, withdrawals) at another CUs (called the "acquirer"- client is not a member). The client can conduct, amongst other LCTs. The agreement (see page 19, appendix C1) states that the "acquirer" (where the transaction occurs, but for which the client is not a member) will fax the transaction details to the issuer (CU to which client belongs), and the issuer will submit the LCTR (this LCT can be either in branch or via an ATM). This process is based on the fact that the acquirer has no information about the client, and therefore the entity that is best placed to submit the LCTR is the issuer. FINTRAC has to date informally accepted this premise and approach. Given the explanation of the agreement and process used according to the agreement, would the "acquirer" (the CU where the client conducts a transaction, but of which the client is not a member- the client is a member of another covered CU agreement) have an obligation to report a STR (for a LCT or any other transaction that the acquirer is conducting as part of the agreement eg. Deposit of 5000$ cash or cheque)? Or does the Issuer only have the obligation?
Answer:

In the case of the STR - whoever has reasonable grounds to suspect reports. And it is still section 7 of the Act. As for the LCTR yes, it would be the financial entity where you have the account that would report the LCT.

Date Answered: 2008-09-15

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting Reporting
Guidelines: 2,3, FIN-5, 7
Regulations: 12, 13

320. Sale of home definition for purchases made by developers for renovation

Question:
If a developer buys a cluster of homes on a street, guts them, renovates them, and resells them, or guts a school/warehouse/etc and redevelops it as commercial space, wouldn't we want to cover that?
Answer:

We do not want to cover that scenario as the sale of a "new home" (and I believe that the regs can easily support that interpretation).

Date Answered: 2008-09-11

Activity Sector: Real estate
Obligation: Reporting
Guidelines: 6B
Regulations: 1(2), 39.5(1)(a)

321. Home Builder Inquiry

Question:
If a developer or builder has retained the services of a new home sales agency to handle all aspects of the sales process, working on-site on the developer’s or new home builder’s project (the sales agents are employed by the new home sales agency, but are not licensed real estate agents), who has the obligations? Is it the sales agency, because they are doing the selling, or is it the builder, because they are the beneficiaries of the sale?
Answer:

For the first question, I think it would depend on the nature of the contractual relationship between the builder and the sales agency (sorry to bring it back to a question of fact). If the contract makes the sale agency the builder's agent (and makes the individual sales representatives the employees of the builder), then the builder would remain on the hook for the obligations (i.e. the usual rules for agents and employees, with the usual exception that the agent or employee might have a personal obligation to report STRs for which they have reasonable grounds themselves). If the contract is simply a contract for services (i.e. the sales agency has contracted to do advertising, give info to prospective clients, but they do not act as agents for the sale, they simply help a buyer fill out the offer and act as a mail box to hand the offer to the builder who may or may not accept it), then I think the builder is still on the hook for all obligations, and the sales representative has absolutely no obligations (not even STR obligations).

Date Answered: 2008-09-11

Activity Sector: Real estate
Obligation: Reporting
Guidelines: 2,3
Regulations: 6(1), 6(2)

322. Obligations for a DPMS refiner

Question:
This company has basically two main refining streams; 1. Primary (Gold and Silver from mines) and 2. Secondary (recycled scrap precious metals, generally from jewelry and/or industrial scrap) We perform a refining service for all customers taking their metal from an impure grade to a grade level (99%+) that is accepted as "Good Delivery" in the market place. As part of the service we employ a Trading Manager whose responsibility it is to move metal from the customer to the end user usually the major banks. We never deal in cash, we know all our customers and for some time we have adopted the AML program used by our affiliate companies in the US, specifically to vet our secondary customers. We keep accurate records of all dealings. We never deal with third parties. To the best of our knowledge we use similar trading practices as the major banks. Our concern is whether or not they would have obligations when acting as an intermediary between the customer and the end user.
Answer:

No they would not be covered - the precious metal refinery part is exempted, and for their other role, they are more or less operating as the facilitator.

Date Answered: 2008-09-05

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Guidelines: 6i
Regulations: 1(2), 39.1

323. Question regarding large retailers

Question:
Let's say that a retail store's head office supplies only gold plated costume jewellery to their retail stores. Now since the quantity of the precious metal contained in the jewellery is not relevant (i.e. cheap plated gold items) as long as the transaction (in their case, to replenish inventory) meets the triggering amount of $10,000, the head office would have obligations under the Act. BUT if the amount of jewellery that each retail store has available for purchase adds up to only a few thousand dollars (if that), then the obligations could not apply to their retailers. Since there would never be any reportable transactions possible. Is this how it would be?
Answer:

I agree with your response below but would add the following kinck: the retailer could also be covered if it is a separate legal entity from head office and conducts a triggering transaction. So the response depends on the corporate structure. Are the retailers separate legal entities or are they owned and controlled by the head office? Looking at transactions between the the head office and the store might provide the answers on the corporate structure. Does the head office purchase the goods and resales them to retail stores?Or does head office distribute it and leaves for the store to sell (sort of like consignement?) If the head office resells it to the store then both enetities could potentially be covered and have obligations. If the store is a separate legal entity (is incorporated for example) and it purchases inventory through head office in an amount of 10000 or more it is covered too.

Date Answered: 2008-08-29

Activity Sector: Dealer in precious metals and stones
Obligation: Reporting
Guidelines: 6i
Regulations: 39.1, 39.2, 39.3, 39.4

324. EFT reporting with missing beneficiary information

Question:
A Canadian bank is acting as an intermediary in this case. A US bank has forwarded them a wire (over $10,000) that they will in turn forward to a French bank. The name and address of the beneficiary (not the originator/sender) is missing. As that is mandatory information, do they have to have it before they can send the wire, or do they have to reject the wire? Do they just report it with the mandatory info missing?
Answer:

In the scenario you provided, I am a bit curious as to why in this case there is an intermediary in the wiring (the Canadian bank) - plus it seems a bit strange that the Canadian bank as the intermediary would not have the information as to whom the money is sent. How else would the final recipient (i.e. the French bank) know to whom the final payment has to be made? Whether the outgoing EFT is swift or non-swift - in both cases the client's name (to whose benefit payment is made) and account number are mandatory and if swift you also have to include the client's address - see schedule 2 and 5 for outgoing, schedule 3 & 6 for incoming. Furthermore a record with a number of information would have to be kept by the financial entity (section 14(m)) where the EFT falls within section 66.1(2). As for incoming (from the US Bank to the Canadian one), that information (beneficiary's name, address and account number) is not mandatory but on a reasonable measures basis, however, for an incoming non-swift - the client's name and account number (to whose benefit the payment is made) is mandatory if applicable. So basically it would depend if the EFT is swift or non-swift - the EFTI swift would not be rejected, an EFTI non-swift would be rejected, the EFTO to the French bank swift or non-swift would be rejected as there would be missing mandatory information.

Date Answered: 2008-08-26

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 8A:Scenario 2 of Appendix 3B, 6G
Regulations: 12(1)(b), Schedule 2, Schedule 5, 12(1)(c), Schedule 3, Schedule 6, 14(m), 66.1(2)

325. Obligations or exceptions for real estate brokers in the case of repossession on behalf of CU

Question:
The situation is a power of sale situation - ie the property being listed has been seized and the credit union is representing the power of sale. Therefore the credit union itself is not purchasing or selling any property but the broker's "client" is the credit union? The broker would like to know how the client ID, record keeping requirements apply in this situation. If a broker is representing a credit union they would be exempt from all record keeping, ID, reporting etc .requirements? I know if it's a public body or large corp with assets of $75M etc. that is exempt but in the case of financial institutions I believe that would also be exempt correct?
Answer:

Actually - in the case of the CU the large corporation exemption at 62 (2) (m) can't apply because the exemption cover either a public body, or a corporation with a minimum net asset of $75 M and whose shares are traded on a Cdn stock exchange... and unfortunately the CUs are not traded on the Cdn stock exchange!!! So the real estate broker would have to identify the person that conducts the transaction on behalf of the credit union, as well as as ascertain the existence of the CU (and all the other related requirements). In the power of sale.. the credit union is repossessing the property and becomes the actual "owner" of the property (unless there is another mortgage company involved.. and that may lead to a 3rd party determination As for the receipt of funds... remember that the receipt must be kept unless the amount is received from a financial entity or public body - for the funds to be received from a financial entity, that would mean that the financial entity is the buyer! In other words - you have to keep a client information record even though the client is a financial entity - unless the financial entity has net assets of minimum $75 M and has shares that are traded on a Cdn stock exchange - and you will not have to keep a receipt of funds if the funds are received from a financial entity (i.e. buying the property).

Date Answered: 2008-08-20

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Real estate, Trust and/or loan company
Obligation: Record keeping Ascertaining Identification Reporting
Guidelines: 6B
Regulations: 62(2)(m), 39(1)(a), 39(1)(b)

326. Reporting requirements

Question:
Accounts or accounting firms are subject to the legislative requirements when they engage in triggering activities. Most of the accounting firms that end up being covered under the legislations are the one that have trust accounts used by one or a few clients. The majority of activities such as audit, review & compilation, are exempted from the legislative requirements. I would like to get clarification as to whether the RBA - special measure for high risk clients, only applies to clients where the accountant engages in triggering activities for or for every client that the accountant has (with or without the triggering activities). My understanding is that it only applies to clients where the accountant engages in the triggering activities. Would need confirmation on this.
Answer:

Yes you are right - the RBA only applies to the clients that are part of the triggering activities - because the accountants are only covered for certain triggering activities (e.g. receiving or paying funds, purchasing or selling securities etc., and transferring funds or securities by any means). So you would do the RBA in regards to these triggering activities (and thus to those clients) . However, the accountants must ensure that should the client be part of any of those triggering activities, then this client should be part of the risk assessment. Yes the reporting requirements in regards to the accountants sector only apply to the clients/transactions that are part of the triggering activities. It does not apply to the audits, review & compilation etc.

Date Answered: 2008-08-18

Activity Sector: Accountant
Obligation: Reporting
Guidelines: 6D

327. EFT reporting obligations with incomplete beneficiary address

Question:
If is our understanding that credit unions must do best efforts on MT103s. If a credit union receives in an MT205 (bank to bank) funds transfer and it should have been an MT103 is the credit union still required to collect the best effort information? Would they still be required to complete an EFTI report if it was over the reporting threshold and the beneficiary address was not complete?
Answer:

Most CUs are not SWIFT members. Therefore, all the obligations that pertain to them must be looked at from the eyes of non-Swift obligations. Therefore, let's break it down by 1- travel rule: The CU is responsible for all electronic wires its receives according to the definition in 1(2) Regs and 66.1(2). They are not SWIFT members, so the SWIFT message must stand the test of the definition a " transmission - through any electronic, magnetic or optical device, telephone instrument or computer - of instructions for the transfer of funds, other than the transfer of funds within Canada" as per 1(2) Regs." Therefore, according to 66.1(2) the CUs are only responsible for International wires (as per the definition) under the travel rule, as opposed to a Bank for example that is responsible for both international MT103 and Domestic SWIFT MT 103. Moreover, the "Best efforts' that the question refers to, relates to the travel rule 9.5(b) Act and not EFTRs, as for EFTRs, the field with asterisks are mandatory. 2- EFTIs- CUs that are not SWIFT members are responsible for all wires they receive that fit the definition in 1(2). Again, they are not SWIFT members, however, they receive the wire from CU central via MTS after CU central received it via SWIFT. Although CU central received it via SWIFT, because the CU is a non-Swift member, it must report via non-SWIFT. So, CUs are responsible for submitting EFTRs when they receive " transmission - through any electronic, magnetic or optical device, telephone instrument or computer - of instructions for the transfer of funds, other than the transfer of funds within Canada". They are non SWIFT members, so we should not speak in terms of SWIFT when dealing with CUs. Once more, according to schedule 6, the full name and if applicable the account number are mandatory. There is no reasonable measures for those fields unless part of the 24 h rule. The best efforts applies to the incoming travel rule (9.5(b)Act) not EFTR Incoming (Schedule 6- full name and if applicable account number (mandatory)). Also, as mentioned above, if the CU is not a Swift member, we should not be speaking in terms of SWIFT. Rather, to answer that question we must apply the test of the definition: "transmission - through any electronic, magnetic or optical device, telephone instrument or computer - of instructions for the transfer of funds, other than the transfer of funds within Canada" . If the answer is "yes" then the CU has obligations. This said, usually, a bank to bank is NOT at the request of a client, so there would be no obligations, nor for EFTR Incoming, nor for the Travel rule (66.1(2)) The CU would have an obligation regarding EFTIs if the definition was met: "transmission - through any electronic, magnetic or optical device, telephone instrument or computer - of instructions for the transfer of funds, other than the transfer of funds within Canada" . And, as stated, we should avoid, for clarity, using the term SWIFT, if the RE is not a SWIFT member (even if its service provider received via SWIFT, because the RE is not a Swift member and it receives in the end the message via a non-SWIFT system). There may be some confusion here. If the definition is met, than two scenarios are possible: If the CU is the first FE in Canada to touch it (CU central may be the first to touch it and sent it via non-SWIFT (MTS) to the CU, however it is not a FE) than the CU has an obligation to report the wire under 12(1)(c) irrespective if the beneficiary information is present or not. It is mandatory and Schedule 6 must be followed (For fields in schedule 6 that have no asterisk, Policy Interpretation has said that if the RE has the information, it must include it). 3- However, if on the other hand, the CU is not the first FE to touch the wire in Canada (eg. a bank to CU central to CU) than the CU would have to report the wire, again if 1- the definition was met and 2- if the name or address of the beneficiary were not in the wire. Again, CUs that are not Swift members would have to report according to Schedule 6 (For fields in schedule 6 that have no asterisk, Policy Interpretation has said that if the RE has the information, it must include it).

Date Answered: 2008-08-13

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G
Regulations: 1(2), 66.1(2), 12(1)(c), Schedule 6
Act: 9.5(b)

328. 24 hour rule - EFT

Question:
With EFT 24 hour rule, does the 24 hour rule kick in when the money is given, when the instructions are given, or when the order is action? I have a scenario where a MSB has "client accounts" that can have credits (funds). Clients sometimes wait until the end of the month before asking the MSB to send the funds to pay various bills. Please look at the various scenarios and tell me if you think they fall under the 24 hour rule. Also, please let me know if Policy Interpretation has previously given you an answer before. Scenarios: 1. Client's account has one instalment of $5,000 each week for three weeks totalling $15,000 in credits. On Monday the clients sends the MSB an order for $5,000 to be sent to 3 different international beneficiaries, beneficiary A, B &C. 2. Client's account has one instalment of $15,000 in credits. On Friday the client sends a request for $5,000 to be sent internationally to beneficiary A. On Monday the client sends a request for $5,000 to be sent internationally to beneficiary B. On Wednesday the client sends a request for $5,000 to be sent internationally to beneficiary C. The MSB actions all three requests on the Wednesday. 3. On Friday the client has one instalment of $5,000 and sends a request for $5,000 to be sent internationally to beneficiary A. On Monday the client has one instalment of $5,000 and sends a request for $5,000 to be sent internationally to beneficiary B. On Wednesday the client has one instalment of $5,000 and sends a request for $5,000 to be sent internationally to beneficiary C. The MSB actions all three requests on the Wednesday.
Answer:

The 24 hour rule kicks in when the instructions are sent (more specifically when the instructions/EFT sent across the border). In all three scenarios, the 24 hour rule would therefore apply. 1) Assuming you meant $5000 X 3 sent to three beneficiaries; 24 hour rule applies. 2) On the Wednesday, instructions sent and EFT cross the border; 24 hour rule applies. 3) IDEM.

Date Answered: 2008-08-13

Activity Sector: Money services business
Obligation: Reporting
Guidelines: FIN-4, 6C, 8A

329. Travel Rule and Originator information obligation regarding EFTs

Question:
Where you stated "You could ask the beneficiary for the missing information on the ordering customer, but he or she is not obligated to respond." Can you please confirm this as we understood that contacting the recipient for the originator information is not considered reasonable measures.
Answer:

Yes that would not be considered reasonable measures, as you are not asking the right person for that information... Plus we have to remember that Canadian legislation does not apply overseas, thus does not convey any obligations past our boundaries.

Date Answered: 2008-08-13

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Guidelines: 6G,8

330. Reportability of a transaction

Question:
A question regarding whether or not we need to report a transaction for FINTRAC purposes. Our office in Hong Kong has a client that wanted to do a foreign exchange transaction from CNY to HKD. Since we are an international company, we are able to operate on a 24-hour basis through the support of our other offices. Since our office in Toronto was open, we booked the deal for them and locked the rate. However, in this case no physical fund is coming in or going out of Canada. The record-keeping and reporting of the transaction is being accounted for in Hong Kong. Do we need to report EFTI and EFTO also here in Canada? Further Facts: 1. We have all required identified documents for this client (fulfill KYC purpose) 2. Client transfer funds from CNY account to our CNY account (which is not located in Canada) 3. KVB will pay out HKD via our Hong Kong office to client’s HKD account in Hong Kong 4. Hong Kong office will report to its local regulator for all required reports Our Hong Kong phone line will automatically switch it to other office every day after it office hour. In this situation, we picked up this call and client placed the order.
Answer:

Based on the information that the client provided, that this was not a client initiated transaction (i.e. a back office activity) so it is not reportable

Date Answered: 2008-07-31

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 1(2), 28(1)(b), 28(1)(c)

331. EFTIs\domestic wire coverage by FINTRAC

Question:
A company has a unique business model. The following scenario only occurs when the beneficiary is located in Canada. The beneficiaries are often mail order companies, who sell products to clients. The sender of the funds is the fulfillment house. In the mail order industry, mail order companies utilize the services of a fulfillment house who receives the purchase orders and payments and actions out the requests. In this example, a fulfillment house located internationally would receive the orders via a post office box. The fulfillment house would then split the payments/funds from the orders. The fulfillment house would then send the funds via a package to the company. The package will contain funds in multiple currencies and can contain cheques, money orders, cash, etc. The company would then calculate how much was in the package in Canadian Dollars. The company then has their CU account domestically wire the value of the funds to the beneficiary (only when the beneficiary is located in Canada). The company would then repackage the physical funds according to currency and deposit the funds in their internationally held accounts sent via packages. The funds/instructions are coming internationally as the originator of any given set of instructions would be the fulfillment house, therefore these transactions are EFTI not EFTO (as the company has mistakenly reported them). Assuming this transaction is reportable, who would be Part C in the EFTI? - Part C - Information about the individual or entity sending the payment instructions for the EFT.
Answer:

Despite the fact that the instructions came from overseas, the transaction was being carried out by a courier. The physical movement of funds that came over the border, carried out by a courier, is subject to Part II of the PCMLTFA and therefore enforced by CBSA and not FINTRAC. The other dispersements that involved sending funds from the company's CU account wired to the beneficiary within Canada, is a domestic wire and therefore not reportable.

Date Answered: 2008-07-30

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 1(2), 28(1)(c), 28(4),
Act: 12(1), 38(1)

332. Coverage of real estate agreements outside Canada

Question:
Do our requirements affect transactions that happen outside of Canada? A woman advised me that "we" have an exclusive contract with another country to sell properties in that country (no license required). Since she is registered in Canada - are those out of country transactions covered?
Answer:

The real estate broker under our legislation means person or entity that is registered or licensed under provincial legislation in respect of the sale or purchase of real estate. In this case, I would suggest that the real estate transactions that are done in another country (where no licence is required) do not fall within our real estate broker definition, therefore are not covered by our regulations.

Date Answered: 2008-07-18

Activity Sector: Real estate
Obligation: Reporting
Guidelines: 2,3,7
Regulations: 1(2)

333. EFTI rules

Question:
I have a MSB who wants to know if they need to report EFTI for FX transactions under the following scenario. "Client A" is located in the U.S. and wires U.S. funds to the MSB's Canadian bank account. The MSB then does a FX transaction converting the funds into Canadian funds and sends the funds back to "Client A" through the MSB's Canadian bank account (for this wire the MSB provides the name and address of the client sending the funds and therefore does not need to report an EFTO). Under this scenario, would the MSB need to report the EFTI in addition to the Canadian bank making an EFTI report? At the heart of the issue begs the question does this scenario constitute an EFT on the part of the MSB, or are they just performing a FX transaction? I know the banks are performing an EFT, but by having the client and beneficiary as the same person at the same address, is the MSB really conducting an EFT?
Answer:

There are three steps in this scenario: 1) Client A wires via Bank to MSB - that is your EFTI, Client A provided the instructions to the Bank, and the receiver/beneficiary is the MSB. The Bank would report the EFTI; 2) MSB receives the funds, and does a Foreign Exchange transaction; 3) MSB then gives instructions to the Bank to wire the FX funds to Client A - that is your EFTO, and Client A is the beneficiary. The Bank would also report the EFTO.

Date Answered: 2008-07-18

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C, 6G
Regulations: 12(1)(c), 12(1)(b)

334. Information that businesses are allowed to request about sources of funds

Question:
What information a business can ask an individual about the source of funds? The business is not a reporting entity to FINTRAC. The business claims that due to privacy laws, they can't ask questions regarding source of funds.
Answer:

We can't really comment on business practices, however, a business may very well refuse to accept a large amount of cash from a client and that would be the business' prerogative. However, we can only speak to our legislative requirements, and more specifically to the obligations of our reporting entities!

Date Answered: 2008-07-18

Obligation: Reporting

335. Confirmation on which wires need to be reported

Question:
Please confirm that the only wires that need to be “reported” to FINTRAC are to be in excess of $10,000 Canadian, international destination or origination with or without missing information. Is this correct?
Answer:

Of course, we cannot forget the 24 hour rule, if the RE "knows" about such transactions. Instructions that cross the border (Canada) electronically are covered! As well as stated, in the question, "with or without missing information". I just want to ensure that they fully understand their obligations, as the term "with or without missing information'' raises questions. I just want to ensure the awareness that: - EFTI- if the CU is the first to touch in Canada an international EFTI, section 12(c) applies, and the RE must respect Schedules 3 (SWIFT) or 6 (non-SWIFT) and be aware of asterisks (mandatory) and non-asterisk fields (reasonable measure- if they have the information, they must include it). So for example, regarding beneficiary information, in Schedule 3, Part K, there are no asterisks, therefore, if, in this case, the CU does not have beneficiary information, they need not include it in the report. If they have it they must include it. However, if one looks at Schedule 6, Part F (beneficiary), the beneficiary name is mandatory, no matter what. Therefore, to answer his comment "with or without missing information'' , he must use the Schedules as his guide for reporting purposes. - EFTI- if the CU is not the first to receive the EFTI, but receive it from a Canadian correspondent, then 12(5) applies. Now, what trigger 12(5) will be determined based on the policy interpretation, If the wire the CU receives has everything but the postal code, will 12(5) be triggered. It remains to be seen with policy interpretation. Once more though if 12(5) is triggered, the CU must fill out the report according to Schedule 3 and 6, which ever applies, and respect the asterisks (mandatory) and non-asterisk fields (reasonable measure- if they have the information, they must include it). - EFTO- if the CU is the last FE to touch the EFTO, 12(b) applies and Schedules 2 or 5 applies. Once more, the CU must fill out the report according to Schedule 2 and 5, which ever applies, and respect the asterisks (mandatory) and non-asterisk fields (reasonable measure- if they have the information, they must include it). - EFTO- if the CU is not the last FE to touch on EFTO that it initiates, it does not have to report the EFTO as well if it provides the FE sending the EFTO with the name and address of the CU ordering client.

Date Answered: 2008-07-17

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Reporting
Regulations: 12(c), Schedule 3 Part K, Schedule 6, 12(5), 12(b), Schedule 2, Schedule 5

336. Outgoing Non-SWIFT Electronic Funds Transfers

Question:
With respect to paragraph 30(e) of the PCMLTFR, there must be a record of the name and address of the client who initiated the transaction. Would FINTRAC, therefore, be able to apply the reporting requirements of Part B.1 AND Part B.2 of Schedule 5, the Outgoing Non-SWIFT International Electronic Funds Transfer Report? In addition, isn’t the reporting entity required to report information in all of Part B, given that every client information record is created for the purpose of an ongoing business relationship between the money service business and a client (as per paragraph 30(a) of the PCMLTFR)?
Answer:

Section 30 (e) of the regs indicates that as of June 23, MSBs have to keep a record, where an amount of $1000.00 or more is remitted or transmitted, of - if a client is a person, their name, address, DOB and telephone number, and the nature of their principal business or their occupation, if applicable. You are right in saying that the MSB has this information readily available because of the fact that the MSB has the obligation to keep a record of the above-noted information. Therefore, although in Schedule 5, Part B, only two fields are mandatory (client's full name and client's account number, if applicable), one can certainly argue that all fields (except client's identifier, and client's identifier number), are information that an MSB would have at hand and should include when completing Part B of Schedule 5.

Date Answered: 2008-06-30

Activity Sector: Money services business
Obligation: Reporting
Guidelines: 6C
Regulations: 30 (e), Schedule 5- Part B

337. Retainer fees and exemptions to reporting

Question:
A lawyer who is asking if the repeal of paragraph 34.1(c) means that retainers received by lawyers and accountants can be treated in the same manner as fees from professional services? In simple terms - can lawyers and accountants consider such fees non reportable?
Answer:

For lawyers, I think it depends what the retainer is for. If the retainer is used to pay professional fees, judiciairy costs, or other excluded fees the amount is not covered. However if the retainer is used to for other purposes such as payments made by lawyer on behalf of his client, the amount would be subject to requirements. Thus, the answer is that it depends what the retainer is used for. Other clarification, lawyers do not have reporting requirements However, the same provision does not exist for the accountants - so if the retainer fees are received in trust, we must assume that they have not been earned yet, therefore are not the accountant's (but still the client's money), and would have to be considered as one of the triggering activities under 34 (1) (a) (i) - so yes the accountant would have to report it. However, if the professional fees have been earned (work has been done and then accountant gets paid), then they do not need to be reported.

Date Answered: 2008-06-25

Activity Sector: Accountant,
Obligation: Reporting
Guidelines: 6D
Regulations:  34(1)(a)(i)

Date Modified: