FINTRAC Policy Interpretations

Ascertaining Identification

New ID methods - Real Estate Brokers and Agents

Question:

I have several questions in regards to the recent amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), and the FINTRAC Guideline: Methods to ascertain the identity of individual clients.

1. Forthe Dual Process Method, can FINTRAC provide more details on what would be a “reliable” document or information source?
For example:

  • Is a document signed by a guarantor confirming the client’s date of birth and name or a notarized copy of a document sufficient?
  • Can FINTRAC provide more examples of “information” (rather than “documents”) that may be used to satisfy the Dual Process Method?  The Guidelines cite the example of a “Telephone call…from the financial entity holding the deposit account”. However, may telephone calls from other institutions or Government Bodies be used?

2. For the Dual Process Method, can FINTRAC provide examples of foreign documents that could be used?

  • For example, is a foreign utility bill, foreign bank statement or foreign marriage certificate sufficient if it includes the relevant information (i.e. name and address or name and date of birth)?
  • Is a bank statement from an overseas branch of a Canadian bank sufficient to confirm a financial account?
  • Is a bank statement from the domestic branch of a foreign bank that operates in Canada sufficient?
  • Is a bank statement from the overseas branch of a foreign bank that operates in Canada sufficient?

3. For the Dual Process Method, the Guideline states that “if there is no account number, you must record a reference number that is associated with the information”.

  • Can FINTRAC please provide examples of when a reference number rather than an account number would be used?
  • Is this reference number simply a reference number internal to the reporting entity and when would a reference number be used rather than an account number?

4. For the Photo ID method, the Guidelines require both “Issuing Jurisdiction” and “Country”. We understand this to mean:

  • For an Ontario driver’s license, “Ontario” is the issuing jurisdiction and “Canada” is the country.
  • For a Canadian passport, “Federal Government of Canada” is the issuing jurisdiction and “Canada” is the country.
  • For a Californian driver’s license, “California” is the issuing jurisdiction and “United States” is the country.
  • For a US passport, “Government of United States” is the issuing jurisdiction and “United States” is the country.

5. When a real estate broker or salesperson uses an agent or mandatary to obtain the client information, from the agent/mandatary please confirm our understanding that the broker/salesperson simply needs to look at what the agent/mandatary has given them - they don’t need to compare it to another document.

6. Regarding the amendment to 63(1), and the change from "recognizing" a previously identified client to not having doubts:

  • Are brokers/salespersons required to ascertain a client’s identity where the client’s identity was previously ascertained and the broker/salesperson does not have any doubts about the information but where they do not necessarily recognize the client? For example, in cases where a new salesperson is informed by his broker that a client’s identity has been previously ascertained and the information on file appears complete.

7. Please clarify if FINTRAC requires a client information record and third party records to be kept on unrepresented parties.

Answer:

1. The dual process method involves referring to information from reliable and independent sources. The information may be found in documents from these sources or may be information that these sources are able to provide. If you refer to a document, you must view the original, valid and current document. If you refer to information provided from a source, it must be valid and current. The client does not need to be physically present at the time you ascertain their identity.

In reference to a document or an information source, as explained in the FINTRAC Guidelines, “reliable” means that the source is well known and considered reputable, and is one that you trust to verify the identity of the client. You cannot use the same source for the two categories of information, and the source providing the information cannot be the reporting entity or the client; it must be independent. For example, reliable sources can be the federal, provincial, territorial and municipal levels of government, crown corporations, financial entities or utility providers.

Therefore, yes, both a document signed by a guarantor and a notarized copy of a document confirming the client’s date of birth and name are sufficient documents for ascertaining client identity, so long as the documents are original, valid, and current. In addition, yes, telephone calls from other institutions or Government Bodies may also be used as acceptable sources of information, so long as the information provided is valid and current, as described in the FINTRAC Guidelines.

2. With respect to the dual process method, all of the examples you provided may be used for the purpose of verifying a client’s name and address, or name and date of birth, so long as they are the original documents and refer to information from reliable and independent sources. However, it should be noted that in regards to confirming a client’s name and financial account, the financial account information has to be obtained from a financial entity as defined in the PCMLTFR.

3. To answer your question, no, the reference number could not simply be a reference number internal to the reporting entity. The reference number has to be associated with the information from the source. As explained in the FINTRAC Guidelines, the source is the issuer or provider of information or documents for ascertaining identification. A reference number may be used when no financial account number exists.

4. When using the photo identification method, a reporting entity has record keeping obligations related to:

  • Client’s name
  • Type of document
  • Document number
  • Issuing jurisdiction and country
  • Expiry date
  • Date of verification

We have two corrections related to the examples you provide, regarding the recordkeeping obligations for issuing jurisdiction and country; for a Canadian passport, “Canada” is the issuing jurisdiction and “Canada” is the country, and for a US passport, “United States of America” is the issuing jurisdiction and “United States of America” is the country.

5. An agent/mandatary may be used if there is a written agreement or arrangement in place and the reporting entity obtains all the information from the agent/mandatary. The reporting entity must be satisfied that the information obtained by the agent/mandatary is sufficient to meet its ascertaining identity obligations. The information must match the information provided by the client. 

6.Subsection 63(1) of the PCMLTFR states that “If a person or entity ascertains a person’s identity in accordance with subsection 64(1) and complies with section 64.2 — or if, before the coming into force of this subsection, they ascertained a person’s identity in accordance with subsection 64(1) or (1.1) and complied with section 67, as they read at the time the identity was ascertained — they are not required to ascertain the person’s identity again unless they have doubts about the information that was used for that purpose.”

Therefore, so long as the reporting entity (with the obligation to ascertain identity) has no doubts about the information previously used to ascertain the identity of a client, and a related record was kept, this exception may be applied.

7. No, real estate agents and brokers are not required to keep client information records on unrepresented parties to a real estate transaction. However, subsection 59.2(3) of the PCMLTFR identifies that a real estate broker or sales representative that represents either the buyer or seller in a real estate transaction must take reasonable measures to ascertain the identity of any unrepresented party to the transaction. If they are unable to ascertain the identity of the unrepresented party, subsection 59.2(4) of the PCMLTFR identifies that a record must be kept that details the measures taken to ascertain identity and the reasons why the identity could not be ascertained.

In the real estate sector, third party determinations are required when a large cash transaction record and a client information record are kept. Subsection 8(3) of the PCMLTFR, indicates that a reporting entity must keep a record when it is unable to determine whether a conductor of a large cash transaction, for which a large cash transaction record must be kept, is acting on behalf of a third party, but has reasonable grounds to suspect they are doing so. A similar obligation exists in relation to client information records at subsection 10(3) of the PCMLTFR.

Date answered: 2016-09-26

PI Number: PI-6909

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 8(3), 10(3), 59.2, 63(1), 64

Typos/Inaccuracies in the credit file

Question:

The guidelines state that "To be acceptable, the credit file details must match the name, date of birth and address provided by the client. If any of the information does not match, you will need to use another method to ascertain client identity". On occasion, we find the data in the credit file may contain a variation of a name, a typo in the date of birth or more frequently an out dated address. Can we still apply the credit file method?

Answer:

You have indicated that you use the credit file method to ascertain the identity of individual clients.

Pursuant to paragraph 64(1)(c) of the PCMLTFR, a reporting entity can ascertain the identity of a client by referring to a Canadian credit file that has been in existence for at least three years. As indicated in the FINTRAC Guideline, to be acceptable, the credit file details must match the name, date of birth and address provided by the client. If any of the information does not match, you will need to use another method to ascertain client identity.

You have indicated that "on occasion, we find the data in the credit file may contain a variation of a name, a typo in the date of birth or more frequently an out dated address.” In these instances, it is for the reporting entity to determine whether the information contained in the Canadian credit file matches the information collected from the client. If it is a slight typo/error in the address or a misspelled name, a reporting entity may determine the information still matches that which was provided by the client. However, in the case of an incorrect date of birth, it is likely the reporting entity will determine that the information does not match. In this case, the reporting entity cannot rely on the information referred to in the credit file for client identification purposes, and an alternative method (photo identification or the dual process method) for ascertaining the identity of clients must be used.

Date answered: 2016-09-23

PI Number: PI-6907

Activity Sector(s): Casinos

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)(c)

Nexus/Global Entry Cards acceptable as photo ID

Question:

Are Nexus and/or Global Entry cards acceptable forms of identification under the recently amended Regulations, as well as the previous Regulations?

Answer:

According to FINTRAC’s Guideline: Methods to ascertain the identity of individual clients, various forms of identification for the single process method of government-issued photo identification are acceptable so long as the documents used to ascertain client identity meet all requirements as outlined by the recently amended Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR).

For the Government-issued photo identification method, a reporting entity can rely on valid, current and original photo identification issued by a federal, provincial or territorial government to ascertain client identity. They may accept a foreign photo identification document if it is equivalent to a Canadian photo identification document. Photo identification documents issued by a municipal government, Canadian or foreign, are not acceptable.

The reporting entity must view the original document while in the presence of their client in order to compare the client with their photo. 

The photo identification document must:

  1. Indicate the client's name
  2. Have a photo of the client
  3. Have a unique identifier number

It is not acceptable to view photo identification online, through a video conference or through any virtual type of application.  A reporting entity cannot accept a copy or a digitally scanned image of the photo identification. The Guideline provides examples of acceptable government-issued photo identification documents from federal, provincial, and territorial authorities; however, this list is not exhaustive.

You have also asked whether the Nexus card and Global Entry card are acceptable forms of identification as per the old methods of ascertaining identification, which may also be used during the transition period until June 30, 2017. As explained in the previous Guidelines (Guideline 6: Record Keeping and Client Identification), there are three conditions that make a document acceptable for identification purposes:

  1. The document must have a unique identifier number
  2. The document must have been issued by a provincial, territorial or federal government
  3. The document also has to be a valid one and cannot have expired

These conditions are applicable at the time the identity is ascertained.

Therefore to answer both of your questions, based on the new and old methods of ascertaining identity, the NEXUS card and the Global Entry card are acceptable forms of identification in either case. Because the NEXUS card includes the client’s name, has an individual photo, a unique identifier number, is issued by Canada Border Services Agency (CBSA) and is valid for five years, it meets the requirements of being an acceptable form of identification as per the old and new methods. Likewise the Global Entry card, which is issued by U.S. Customs and Border Protection, also meets these requirements because it includes the client’s name, an individual photo, a unique identifier number and is valid until its expiry date.

Date answered: 2016-08-31

PI Number: PI-6901

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64

Acceptable original document

Question:

I am seeking clarification in regards to acceptable original documents as per the FINTRAC Guideline: Methods to ascertain the identity of individual clients. More specifically:

  • What is FINTRAC’s position on downloading a statement from an online banking website, adding encryption to the document (a PDF or XPS) prior to forwarding the document via email to the financial entity? Is this acceptable?
  • In the unlikely situation that a financial entity emails the statement to their client and that client in turn adds encryption to the document (a PDF or XPS) prior to forwarding the document via email to the financial entity, is this acceptable to FINTRAC?

Answer:

Pursuant to subsection 64(1.4) of the  Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “If a document is used to ascertain identity under subsection (1), it must be original, valid and current. Other information that is used for that purpose must be valid and current and must not include an electronic image of a document.”

The FINTRAC Guideline: Methods to ascertain the identity of individual clients, explains that an original document is what a client receives or obtains from the issuer through posted mail or electronically. Clients may email original electronic documents they receive or download. 

Therefore, to answer your question, so long as adding encryption, as an additional security measure, does not alter the downloaded original documents (i.e. bank statements) in any way, it may be used.

Date answered: 2016-08-15

PI Number: PI-6897

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1.4)

Ascertaining the identity of a child

Question:

I am seeking clarification in regards to FINTRAC’s Guideline: Methods to ascertain the identity of individual clients. After reading the Regulations and the guidance, my interpretation is in situations where the parent or guardian is a client of the financial entity (identity ascertained) the parent or guardian is confirming the child’s address as such an original document, information, acceptable identification is to be presented to confirm the account holder’s address VS relying on information in the financial entity records. Is this correct? Namely, I am wondering whether a financial entity is able to use its records on the parent of the child in order to verify the identity of a child between 12 and 15 years of age in an account opening scenario.

Answer:

According to subsection 64(1.2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “The identity of a person who is at least 12 years of age but not more than 15 years of age may be ascertained by referring under subparagraph (1)(d)(i) to information that includes the name and address of one of the person’s parents or their guardian or tutor and by verifying that the address is that of the person.”

Subparagraph 64(1)(d)(i) states that “referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,” is one acceptable method of ascertaining identification that has to be done in combination with subparagraph 64(1)(d)(ii), or subparagraph 64(1)(d)(iii).

Subsection 64(1.3) of the amended PCMLTFR identifies that “For the purposes of subparagraphs (1)(d)(i) to (iii), the information that is referred to must be from different sources, and neither the person whose identity is being ascertained nor the person or entity that is ascertaining their identity can be a source.”

Therefore, to answer your question as to whether a financial entity is able to use its own records in order to verify the identity of a child between 12 and 15 years of age in an account opening situation, the answer is no. Based on the information outlined, the financial entity cannot use its own records to verify the identity of the child in this case as it cannot be the source for the information.

The Guideline does state, “you could rely on the parent’s bank account statement to confirm their common address and the child’s birth certificate to confirm the child’s name and date of birth”; however, this example assumes that the parent’s information is not from the financial entity opening the account for the child, but a different financial entity at which they hold an account.

Date answered: 2016-08-05

PI Number: PI-6887

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64

Credit file method

Question:

Must a client be present to use the credit file method for ascertaining the identity of individual clients?

Answer:

The government-issued photo identification method indicates that you must view the original, government-issued photo identification document while in the presence of your client in order to compare your client with their photo. This is the only identification method which specifies that the client’s identity must be ascertained while in your presence. For all other methods, including the dual process method and the credit file method, it is optional for the client to be identified while in your presence. In the dual process and credit file methods, the client may be present, or not, in order to use these methods for ascertaining identity.

Date answered: 2016-07-26

PI Number: PI-6883

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64

Opening an account in its name - exception 62(2)(l)

Question:

We are seeking guidance regarding the application of the exceptions provided under paragraphs 62(2)(j) and 62(2)(l) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) with respect to record-keeping and ascertaining the identity of clients.

By way of background, a law firm acting on behalf of its client has contacted our financial institution to have funds held in escrow until a judgment is handed down, and our financial institution must open a trust account into which a deposit can be made.

The account holder is our financial institution, and the persons authorized to act on the account are employees acting as trustees who are duly authorized by means of corporate resolutions. Deposits in this account will only be released upon an order in a court judgment.

Answer:

Pursuant to subsection 62(2) of the PCMLTFR, there are certain exceptions to the requirements relating to record-keeping and ascertaining identity, namely in the case of 

"(j) the opening of an account established pursuant to the escrow requirements of a Canadian securities regulator or a Canadian stock exchange or any provincial legislation; and
(l) the opening of an account in the name of, or in respect of which instructions are authorized to be given by, a financial entity, a securities dealer or a life insurance company or by an investment fund that is regulated under provincial securities legislation."

It is important to note that, since the entities mentioned in paragraph 62(2)(l) of the PCMLTFR are defined in subsection 1(2) of the PCMLTFR, the application of this exception is very specific.

Based on the information provided, it is our understanding that your financial entity is opening a trust account in its name, and that it is the financial entity's employees, acting as trustees as part of their duties for the financial entity, who are authorized to give instructions in respect of the account. Hence, the exception in paragraph 62(2)(l) of the PCMLTFR appears to apply as long as the financial entity meets all the specified requirements.

Date answered: 2016-07-21

PI Number: PI-6919

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6

Regulations: 1(2), 62(2)(j), 62(2)(l)

Additional party added to a real estate offer

Question:

We are wondering whether we need to obtain client identity information for an additional party that has been added to an accepted real estate offer?

Answer:

According 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.”

According to paragraph 59.2(1)(a) of the PCMLTFR, “Subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction”.

Subsection 39(1) of the PCMLTFR states that certain records must be kept by a real estate broker or sales representative when engaging in the activity described in section 37 of the PCMLTFR, and as per paragraph 39(1)(b) of the PCMLTFR, “a client information record must be kept in respect of every purchase or sale of real estate”.

Therefore, to answer your question, you must ascertain the identity, and keep the required records, of every person who conducts the transaction. This includes the party added to the offer, as per the PCMLTFR.

Date answered: 2016-07-20

PI Number: PI-6879

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Regulations: 37, 39(1), 59.2(1)a)

Requirements when a real estate broker or sales representative acts as an agent of a real estate developer

Question:

What are the requirements of a real estate developer to ascertain a client’s identity in situations where it has a real estate broker or sales representative act as its agent for the sale of real estate? In this situation, would the real estate developer, the agent and/or the buyer’s agent be required to ascertain identity?

Answer:

Pursuant to subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “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 Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (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.

In regards to real estate brokers or real estate sales representatives, they are defined at subsection 1(2) of the PCMLTFR 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 states that every real estate broker or sales representative is subject to Part 1 of the PCMLTFA when they act as an agent in respect of the purchase or sale of real estate.

Pursuant to section 59.5 and subsection 59.2(1) of the PCMLTFR, and subject to subsection 62(2) and section 63, every real estate developer and every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under section 39.7 and subsection 39(1) respectively,

a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of the corporation’s directors; and
c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.

In cases where a real estate developer hires a real estate broker or sales representative, not as an employee, but to act as its agent for the purchase and/or sale of real estate, the real estate developer would be the real estate broker’s client and must be identified as so. In this instance, the real estate broker or sale representative would be responsible for all of the associated obligations, including the identification requirements, related to the purchase and/or sale of the real estate outlined under the PCMLTFA and its associated Regulations.

As to whether the “buyer’s agent is obligated to ascertain anyone’s identity”, subsection 59.2(2) of the PCMLTFR specifies that “Where the persons or entities that are parties to a real estate transaction are each represented by a different real estate broker or sales representative, the real estate broker or sales representative that represents one party is not required to ascertain the identity or the name and address of any other party or confirm their existence”.

Therefore, the buyer’s agent is responsible for ascertaining the identity of their client (the buyer) in this scenario, as required by the PCMLTFA and its associated Regulations.

Date answered: 2016-06-28

PI Number: PI-6430

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 1(2), 37, 39.5(1), 59.2, 59.5

Obligations regarding the use of a power of attorney

Question:

What are the requirements for financial entities to keep a signature card in respect of an account opening? And what are the requirements to ascertain the identity of a person not physically present, specifically when using a power of attorney (POA)?

  1. Who must sign the signature card? Only the person with the POA or only the account holder or both individuals?
  2. What is an independent and reliable identification product based on personal information as well as Canadian credit history? Could you give me an example?
  3. Can a POA signed by a Quebec Notary be used as attestation despite the fact that it does not include a copy of any identification document?

Answer:

1. Paragraph 14(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to subsection 62(2), every financial entity shall keep, where it opens an account, a signature card in respect of each account holder for that account”. Pursuant to subsection 1(2) of the PCMLTFR, a “signature card, in respect of an account, means any record that is signed by a person who is authorized to give instructions in respect of the account”. Therefore, those who sign the signature card are those authorized to give instructions in respect of that specific account. If both individuals will operate on the account, then both should sign the signature card.

That said, in the event that the individual wishing to open the account does not sign the signature card, they should be identified as a third party and a record must be kept. In accordance with subsection 9(1) of the PCMLTFR, a financial entity that is required to keep a signature card in respect of an account must, at the account opening, take reasonable measures to determine whether the account is to be used by or on behalf of a third party. If the third party is an individual, a record must be kept that sets out the third party’s name, address and date of birth, and the nature of the principal business or occupation of the third party. A third party is a person or an entity who instructs another person to carry out a transaction in respect of an account. It is not about who owns the account, or benefits from the money, but rather who gives instructions in regards to dealing with the money.

2. In order to ascertain a person’s identity, when that person is not physically present, subparagraph 64(1)(b)(ii) of the PCMLTFR specifies that non-face-to-face identification can be done by using one of the combinations identified, and further detailed in Part A of Schedule 7.

As per Part A of Schedule 7, one of the non-face-to-face methods is the Identification Product Method. This method consists of referring to an independent and reliable identification product that is based on personal information in respect of the person and a Canadian credit history of the person of at least six month’s duration. While I cannot direct you to a specific product, an identification product is understood to be a product offered by independent businesses, in which they provide a series of specific questions to be asked to the client based on information drawn from that individual’s Canadian credit history (they must have at least 6 months of credit history). The key here is that the questions asked are so precise that only the person concerned can answer them. This method must always be uses in combination with another method listed in Schedule 7 of the PCMLTFR.

Furthermore, paragraph 67(e) of the PCMLTFR requires the following information to be recorded when an identification product is used to ascertain the person’s identity: the name of the person, the name of the identification product, the name of the entity offering the product, the search reference number, and the date the product was used to ascertain the person’s identity. Therefore, the identification product used for this method must also supply all of this information.

3. Similar to the identification product method, the attestation method can be used to ascertain a person’s identity when they are not physically present. As per Part A of Schedule 7, the attestation method consists of obtaining an attestation from a commissioner of oaths in Canada, or a guarantor in Canada that they have seen one of the documents referred to in paragraph 64(1)(a) of the PCMLTFR. These documents include the person’s birth certificate, driver’s licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document. The attestation must be produced on a legible photocopy of the document (if such use of the document is not prohibited by the applicable provincial law) and must include the name, profession and address of the person providing the attestation; the signature of the person providing the attestation; and the type and number of the identifying document provided by the person.

For this purpose, subsection 3(2) of Schedule 7 indicates that “a guarantor is a person engaged in one of the following professions in Canada:

  1. dentist;
  2. medical doctor;
  3. chiropractor;
  4. judge;
  5. magistrate;
  6. lawyer;
  7. notary (in Quebec);
  8. notary public;
  9. optometrist;
  10. pharmacist;
  11. professional accountant (APA [Accredited Public Accountant], CA [Chartered Accountant], CGA [Certified General Accountant], CMA [Certified Management Accountant], PA [Public Accountant] or RPA [Registered Public Accountant]);
  12. professional engineer (P.Eng. [Professional Engineer, in a province other than Quebec] or Eng. [Engineer, in Quebec]); or
  13. veterinarian.”

While a notary in Quebec is considered a guarantor in Canada, the signed power of attorney is not the same as an attestation, and is therefore not acceptable for this method. 

Date answered: 2016-06-23

PI Number: PI-6428

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6G

Regulations: 1(2), 9(1), 14(a), 64(1)(b)(ii), 67e), Schedule 7

Failure to ID client in the sale of real estate

Question:

What should a real estate broker or sale representative do when a seller refuses to provide identification? Could this result in a fine?

Answer:

FINTRAC administers the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations, and ensures that entities subject to this legislation are in compliance with the obligations outlined therein. The obligations established for the real estate sector, and other sectors, provide important measures for countering criminal behaviour in order to deter criminals from operating within the legitimate economy. For example, the simple requirement to identify a customer when they are purchasing or selling real estate is an important measure of deterrence as it eliminates the anonymity of the transaction. Compliance with the law also ensures that FINTRAC receives information that serves as the foundation of its analysis and intelligence. FINTRAC provides disclosures of financial intelligence to its partners when it has reasonable grounds to suspect the information would be relevant to investigations or prosecutions of money laundering and terrorist activity financing offences. These disclosures may contain information provided by reporting entities, including real estate brokers and sales representatives. 

Real estate brokers and sales representatives are subject to the PCMLTFA and its associated Regulations when they act as an agent in respect of the purchase or sale of real estate. Once subject, specific obligations must be met when engaging in these activities.

In accordance with the record keeping obligations for real estate brokers and agents, outlined at section 39 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a client information record must be kept in respect of every purchase or sale of real estate. As identified at subsection 1(2) of the PCMLTFR, a client information record means a record that sets out a client’s name and address and, if the client is a person, their date of birth and the nature of their principal business or their occupation, as applicable.

When a record, such as the client information record, is required to be kept in respect of a transaction, subsection 59.2(1) of the PCMLTFR specifies that client identification must be obtained. As such, except as identified in subsection 62(2) and section 63 of the PCMLTFR, every real estate broker and sales representative must:
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors; and
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.

As a result, when representing a client for the purchase or sale of real estate, client identification information must be obtained. Failure to do so, or to keep the necessary records, results in non-compliance with the obligations of the PCMLTFA and its associated Regulations. By being non-compliant, FINTRAC has legislative authority to issue administrative monetary penalties (AMPs), depending on the severity of the violation, up to $100,000 for individuals and up to $500,000 for entities (e.g. corporations). As well, a failure to meet the obligations outlined in Part 1 of the PCMLTFA and its associated Regulations could also result in criminal penalties.

Therefore, when a client refuses to provide identification, it is for the real estate broker or sales representative to determine whether or not to proceed with the transaction, knowing it can be cited for non-compliance. Reasonable measures are only acceptable when dealing with an unrepresented party, namely a party to the transaction that is not represented by a real estate broker or agent.

Date answered: 2016-06-22

PI Number: PI-6427

Activity Sector(s): Real estate

Obligation(s): Administrative Monetary Penalties, Ascertaining Identification

Guidance: 6B

Regulations: 1(2), 37, 39, 59.2

Obligations for credit cards and loans

Question:

1. Signature Card for Entity Clients - What are the obligations in regards to maintaining a signature card for entities? More specifically, when opening a:
a. credit card account only (i.e. purchasing/travel cards)
b. loan account only (i.e. direct lending facilities or syndicated facilities)

2. Client Identity for Entity Clients - What are the obligations in regards to ascertaining the identity of authorized signers? More specifically, when opening
a: a. credit card account only (i.e. purchasing/travel cards)
b. loan account only (i.e. direct lending facilities or syndicated facilities)

3. Non-Face-to-Face Verification - Is there a requirement to ascertain the identity of authorized signers when opening a credit card account for an entity? Is it permissible to use the combination of Identification product and credit file methods for non-face-to-face verification of authorized signers?

4. Client Identity - The majority of our entities are referrals from other Financial Institutions in Canada and the identity of these entities have already been ascertained by the referring financial institutions. Is it permissible for our organization to rely on the referring financial institutions to provide confirmation that the identity of these entities has been verified?

Answer:

1a. As specified in paragraph 14(a) of the PCMLTFR, there is no obligation for a financial entity to keep a signature card when opening a credit card account. However, section 14.1 of the PCMLTFR, states that, subject to subsection 62(2), every financial entity must keep, in respect of every credit card account that it opens, a credit card account record. The record must contain the name, address, and telephone number of every holder of a credit card for the account. Reasonable measures must also be taken to obtain the date of birth of every credit card holder for the account.

Given you specify that your client base consists of corporations and partnerships, if the credit card account is opened in the name of an entity other than a corporation, the record must also include the name and address of the client and the nature of their principal business. If the account is opened in the name of a corporation, the record must include the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of the account.

1b. Pursuant to paragraph 14(a) of the PCMLTFR, and subject to subsection 62(2) of the PCMLTFR, a financial entity is required to keep a signature card in respect of each account holder, for every account that it opens, other than a credit card account. This includes loan accounts.

2a. To answer your question, section 54.1 of the PCMLTFR states, “Subject to subsections 62(1) and (2) and section 63, every financial entity shall:
(b) where the financial entity opens a credit card account in the name of a corporation, confirm the existence of and ascertain the name and address of the corporation and the names of its directors in accordance with section 65; and
(c) where the financial entity opens a credit card account in the name of an entity other than a corporation, confirm the existence of the entity in accordance with section 66.”

2b. For loan accounts, paragraph 54(1)(a) of the PCMLTFR states, “Subject to sections 62 and 63, every financial entity shall in accordance with subsection 64(1), ascertain the identity of every person who signs a signature card in respect of an account, other than a credit card account, that the financial entity opens, except in the case of a business account the signature card of which is signed by more than three persons authorized to act with respect to the account, if the financial entity has ascertained the identity of at least three of those persons.”

If the account is opened for a corporation, paragraph 54(1)(d) of the PCMLTFR requires that a financial entity also, in accordance with section 65, confirm the existence of and ascertain the name and address of the corporation, and the names of the corporation’s directors. If the account is opened for an entity other than a corporation, paragraph 54(1)(e) of the PCMLTFR requires that a financial entity also, in accordance with section 66, confirm the existence of the entity.

3. As indicated in the response to 2a. above, when opening credit card accounts in the name of corporations, a financial entity must confirm the existence of and ascertain the name and address of the corporation and the names of its directions in accordance with section 65 of the PCMLTFR. For credit card accounts opened in the name of entities other than corporations, a financial entity must confirm the existence of the entity in accordance with section 66. The non-face-to-face identification methods may only be used to ascertain the identity of individuals that are not physically present, and therefore do not apply.

4. If by “referrals”, you mean that accounts are acquired from other financial entities subject to the PCMLTFA and its associated Regulations, then the client identification performed by the other financial entity may be relied upon, so long as:
• the clients were previously identified and records were kept in accordance with the PCMLTFA and its associated Regulations, or the accounts were opened prior to the legislative requirements to ascertain identity coming into force on June 12, 2002;
• only immaterial changes were made to the accounts such as, the accounts were given new numbers, logos and branding, new cards were issued and ancillary services were added or removed; and
• the transactional history of the accounts follows.

The acquiring financial entity is responsible for assessing the acquired client accounts against the criteria outlined above to ensure each item is met. If the acquiring financial entity determines that the criteria has been met, then there is no requirement to repeat the process of ascertaining the identity of each newly acquired account holder. However, should the acquiring financial entity open any additional accounts for an acquired client, then it must ascertain the identity of the client at that time.

Additionally, pursuant to subparagraph 71(1)(c)(i) of the PCMLTFR, the acquiring financial entity is required to conduct a risk assessment of each newly acquired account holder and to keep a record of the purpose and intended nature of the business relationship. This information has to be reviewed on a periodic basis and kept up-to-date. If the acquiring financial entity identifies a client as high-risk, the business relationship with that client must be monitored more frequently, the client identification information must be updated more frequently, and other enhanced measures must be taken to mitigate the risk.

Date answered: 2016-06-09

PI Number: PI-6425

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 14(a), 14.1, 54(1)(a), 54.1, 71(1)(c)(i)

Sharing of clients' personal information

Question:

As accountants, can we share clients’ personal information with a third party, such as another accountant who is involved in the transaction?

Answer:

To address your question, there is no specific legislative prohibition in the PCMLTFA or its associated Regulations preventing a reporting entity from sharing a client’s personal information. That said, section 8 of the PCMLTFA, that pertains to suspicious transaction reporting, states 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”. As a result, a reporting entity cannot share the contents of a suspicious transaction report (STR), or that they have submitted an STR to FINTRAC, with any other entity if the intent is to impair a criminal investigation (whether an investigation has begun or not).

Additionally, it should be mentioned that the use of personal information in Canadian commercial activities is protected by the Personal Information Protection and Electronic Documents Act (PIPEDA), or by substantially similar provincial legislation. Therefore, for more information and greater clarification, you may wish to redirect your question to the Office of the Privacy Commissioner of Canada or Industry Canada (Privacy For Business).

Date answered: 2016-05-17

PI Number: PI-6423

Activity Sector(s): Accountants

Obligation(s): Ascertaining Identification

Guidance: 6D

Act: 8

Co-member

Question:

1. Is there an exception to ascertain the identity of clients in situations where the signatory already has an account with the same financial entity?
2. Is the exception under paragraph 62(1)(c) of the Regulations transferable between caisses populaires belonging to the same association?
3. Using the same example, if Caisse A has used a combination of methods or has used an agent to ascertain the identity of a signatory, may Caisse B use the previously completed ascertaining of identity (combination of methods) done by Caisse A?
4. Co-member / co-subsidiary and financial group method

Answer:

1. The exception to ascertaining identification outlined in paragraph 62(1)(c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) is specific to account holders. A person who already holds an account with the financial entity does not have to have their identity ascertained at the opening of a subsequent account at that same financial entity. Therefore :
• a signatory to a business account must be identified if:
o they open a personal account with the financial entity; or
o they were not previously identified and become a signatory to another account for which at least three persons authorized to give instructions have not been identified.
• an account holder does not need to be identified again if:
o the person opens another account at the same financial entity, or
o the person becomes a signatory on a business account.**
** The previously completed ascertaining of identity can count towards the obligation to ascertain the identity of at least three signatories to the business account. 

That said, pursuant to subsection 63(1) of the PCMLTFR, should the person at the caisse populaire who is opening the account for the client have been the one to previously ascertain the client’s identity and recognize the person, visually or by voice, then that person at the caisse populaire is not required to ascertain that identity again.

2. No. Paragraph 62(1)(c) is specific to the opening of a subsequent account at the same financial entity. Two Caisse Populaires are not the same financial entity. However, if the two caisses populaire are members of the same financial services cooperative, then caisse B opening the second account could rely on caisse A to ascertain identity if it was done in accordance with paragraph 64(1)(a) of the PCMLTFR.

3. No. As specified in clause 64(1)(b)(i)(A) of the PCMLTFR, the financial entity must confirm that an entity that is subject to the Act and is a member of the same association as the entity ascertaining the identity of the person has identified the person in accordance with paragraph 64(1)(a), that is, by referring to the person’s birth certificate, driver’s licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document.

Another example provided was the opening of a second account at a different entity but by the same person. In that example, pursuant to subsection 63(1) of the PCMLTFR, if the person at the second reporting entity who is opening the account for the client, is the person who previously ascertained the client’s identity and recognizes the person, visually or by voice, then that person at the second reporting entity is not required to ascertain that identity again. For example, should a caisse populaire and a Valeurs Mobilières share counter space and employees, then it might be possible for an employee who works with both businesses to not need to ascertain the client’s identity for a subsequent account opening, if they recognize the client.

While bank accounts can be opened at separate branches, as these are considered to part of the same legal entity, affiliated entities must also ensure that the identity was ascertained in accordance with paragraph 64(1)(a) of the PCMLTFR when using the affiliate method.  As such, affiliated entities can only rely on the affiliate method for ascertaining identity if the reporting entity confirms that the affiliated entity has identified the person in accordance with paragraph 64(1)(a), that is, by referring to the person’s birth certificate, driver’s licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document.

4. Pursuant to subsection 64(1.21)(a) of the PCMLTFR, to be considered members of the same association for the purposes of sub-clause 64(1)(b)(i)(A)(III), the entities must be a financial services cooperative, or a credit union central, and each of its members that is a financial entity. 

Subsection 1(2) defines a financial services cooperative as a financial services cooperative that is regulated by An Act respecting Financial services cooperatives, R.S.Q., c. C-67.3, or An Act Respecting the Mouvement Desjardins, S.Q. 2000, c. 77, other than a caisse populaire. 

The term financial entity is defined in subsection 1(2) of the PCMLTFR as an authorized foreign bank, as defined in section 2 of the Bank Act, in respect of its business in Canada or a bank to which that Act applies, a cooperative credit society, savings and credit union or caisse populaire that is regulated by a provincial Act, an association that is regulated by the Cooperative Credit Associations Act, a financial services cooperative, a credit union central, a company to which the Trust and Loan Companies Act applies and a trust company or loan company regulated by a provincial Act. 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 an activity referred to in section 45.

Based on this information, a caisse populaire that is a member of the Fédération des caisses Desjardins can rely on another financial entity that is a member of the Fédération des caisses Desjardins, but cannot rely on a securities dealer with the same membership.

Date answered: 2016-04-22

PI Number: PI-6416

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 1(2), 62(1)c), 63(1), 64(1),

Customer due diligence

Question:

I am seeking more information regarding the obligation for securities dealers to ascertain the identity of their clients. More specifically, what is the detailed definition of the “customer due diligence” principle?

Answer:

Neither the Guidelines, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations or an existing policy interpretation defines customer due diligence. However, this is generally understood to encompass the measures taken to identify or prevent foreseeable risks, so, in relation to customers, includes measures to ascertain identification, keep records, assess the risks associated with the clients and their activities, and monitor clients and/or business relationships.

To this end, all of the securities dealer obligations associated with the above, would be part of their client due diligence pursuant to the PCMLTFA and its associated Regulations. In addition, pursuant to section 57.3 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), securities dealers are required to perform enhanced customer due diligence when they consider that the risk of money laundering offence or terrorist activity financing offence is higher and to apply the prescribed special measures in accordance with section 71.1 of the PCMLTFR.

Date answered: 2016-03-18

PI Number: PI-6406

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 4, 6E

Regulations: 57.3

Ascertaining identity as part of a sale by judicial authority

Question:

What are the obligations when a real estate broker is appointed by the court to carry out a sale by judicial authority?

Answer:

Pursuant to subsection 39(1) and subject to subsections (3), (4), (5), (6), 52(2) and 62(2), every real estate broker or sales representative shall, when engaging in an activity described in section 37, keep the following records:
a) a receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body;
b) a client information record in respect of every purchase or sale of real estate; and,
c) where the receipt of funds record or the client information record is in respect of 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 real estate broker or sales representative.

Moreover, subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), ascertain, as prescribed in subsection 64(1), the identity of any person who conducts the transaction. The real estate broker or sales representative must then confirm the existence of a corporation or an entity other than a corporation, on whose behalf the transaction is conducted, to determine whether other obligations to ascertain the identity of clients apply under paragraphs 59.2(1)(b) and (c) of the Regulations.

Where the sales representative is court appointed at a creditor’s request, there is still someone with whom the sales representative interacts to conduct the sale, or to sign documents on the creditor’s behalf. Even though the creditor sells the house and the creditor is indicated in the client’s file, someone must be identified as the person carrying out the transaction. If this person represents a creditor, which is a corporation that qualifies for the exception described in paragraph 62(2)(m), the sales representative may apply it.

Date answered: 2016-02-23

PI Number: PI-6397

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 39(1), 62(2), 63,

Subsidiary of a crown corporation

Question:

A crown corporation has a pension plan under which there is a section 149 (Income Tax Act) Company. Is this company considered a subsidiary of a crown corporation and therefore subject to the exception in 62(2)(n) of the PCMLTFR as long as its financial statements are also consolidated with the crown corporation?

Answer:

The realty advisor has indicated that a numbered company is a subsidiary of a public body or very large corporation to which 62(2)(m) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) applies. Research suggests that, to protect the plans' assets, real estate holdings for Canadian pension plans are often held through a limited liability vehicle such as a corporation, rather than directly by the pension plan. That said, given that the crown corporation is an entity to which the exception in 62(2)(m) of the PCMLTFR can be applied, then the exception in 62(2)(n) of the PCMLTFR can be applied to the numbered company, as it is a subsidiary that consolidates its financial statements with that public body or very large corporation.

Date answered: 2016-02-17

PI Number: PI-6392

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 62(2)(m), 62(2)(n)

Clarification on credit File Method

Question:

When a reporting entity is using the Credit File Method to confirm the identity of a client, does the reporting entity have an obligation to ask the client to answer specific questions regarding their personal credit bureau data?

Answer:

Schedule 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) outlines that the Credit File Method of ascertaining a person’s identity consists of confirming, after obtaining authorization from the person, their name, address and date of birth by referring to a credit file in respect of that person in Canada that has been in existence for at least six months. The Credit File Method must be used in combination with another identification method [subparagraph 64(1)(b)(ii) or 64(1.1)(b)(ii) of the PCMLTFR], the information obtained must be consistent both between the two methods used and with the information contained in the record kept by the reporting entity [subsection 64(1.3) of the PCMLTFR], and the reporting entity must keep the record in respect of the applicable activity, and record the name of the person, as well as the name of the entity that kept the credit file in respect of that person, and the date of the consultation [subsection 67(f) of the PCMLTFR]. The reporting entity must also keep the records associated with the identification method used in combination with the Credit File Method.

There is no obligation in the PCMLTFR for the reporting entity to ask the client to answer specific questions generated based on their credit bureau data.

Date answered: 2016-02-05

PI Number: PI-6390

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)(b)(ii), 64(1.3), 67(f), Schedule 7

Confirmation of Deposit Account Method

Question:

Is the obligation to confirm identity using the Deposit Account Method acceptable if the reporting entity has its client login to their bank accounts and initiate payments in order for the reporting entity to confirm identification information?

Answer:

Subparagraph 64(1)(b)(ii) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that non-face-to-face identification can be done by using a combination of identification methods as set out in Part A of Schedule 7, the Confirmation of Deposit Account Method being one method. This method of ascertaining a person’s identity consists of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of the PCMLTFR. For the deposit account method, paragraph 67(c) of the PCMLTFR requires that the client name, the name of the financial entity where the account is held, the number of the account, and the date of the confirmation be recorded.

If, by means of this payment initiated by the customer, the bank confirms the client’s name, the name of the financial entity where the account is held, the number of the account, and the date of the confirmation, then yes, the micro-withdrawals and/or micro-deposits are an acceptable means to confirm a deposit account with a financial entity as per Part A of Schedule 7 of the PCMLTFR, and would satisfy one of the two combination methods required.

Date answered: 2016-02-05

PI Number: PI-6389

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)(b)(ii), 67c), Schedule 7

Record keeping and ascertaining identity exceptions

Question:

Question 1
a) Is it accurate to say that, when a personal or business account is opened, if the signatory already has a personal account or is a signatory to a business account for this same financial entity, it is not necessary to ascertain the signatory’s identity, regardless of whether the signatory’s identity had been ascertained or not at the time of the opening of this first account, whatever its opening date might have been?
b) When it is stated in subsection 62(1) of the PCMLTFR that paragraph 54(1)(a) does not apply in respect of a person who already has an account with the financial entity, does the account still have to be open and active when the second account is opened?

Question 2
a) When the co-member method is used to identify an absent signatory, does the account still have to be open and active at this other entity which is the same association and for which the identity had been ascertained?
b) It has been stated previously that “an entity may rely on the fact that the client already has an account and that no identification is required to open another account. This would also apply if no other identification had been provided, similar to the case of accounts open before the introduction of our system.” Is it also applicable for the co-member method? In other words, if the signatory holds an account with another B entity in the same association, but this account was opened before the coming into force of the Regulations and the signatory’s identity was not ascertained by means of an identity document, can entity A benefit from entity B’s acquired rights with regard to ascertaining identity when the account is opened?

Answer:

Question 1
Pursuant to section 62 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), there are certain exceptions to the record-keeping obligations and to ascertaining identity. More specifically, paragraphs 54(1)(a) and (b), 54.1(a), 54.2(a) and 55(a) and (e), subsections 57(1) and 57.1(1) and paragraphs 60(a) and (b) do not apply to the opening of a business account when the credit union has already ascertained the identity of at least three people authorized to give instructions with respect to the account. In this case, the account would be the one that was being opened. For example, if seven persons were authorized to give instructions with respect to the account, the identity of at least three of these persons must already have been ascertained. The PCMLTFR does not require that the identity of the three persons be ascertained with respect to another business account. It is therefore possible that the identity of the three persons was ascertained when they opened personal accounts at the credit union.

Pursuant to paragraph 62(1)(c) of the PCMLTFR, if the person who already has an account with the financial entity opens a second account with the same entity, he or she is exempted from the obligations provided for in paragraphs 54(1)(a) and (b), 54.1(a), 54.2(a) and 55(a) and (e). This exception applies regardless of the date on which the original account was opened and the manner in which the identity was ascertained when the first account was opened. However, the original account must still be open when the second account is opened, because the exception applies specifically to an account holder who already has an account.

Question 2
The PCMLTFR allows reporting entities to use another entity for the purposes of ascertaining identity. However, under sub-paragraph 64(1)(b)(i) of the PCMLTFR, to allow an entity to use another entity for the purposes of ascertaining identity, certain criteria needs to be met, in particular:

• The entity used must be
(I) an entity referred to in any of paragraphs 5(a) to (g) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), that is affiliated with the entity ascertaining the identity of the person,

(II) an entity that carries on activities outside Canada similar to the activities of a person or entity referred to in any of paragraphs 5(a) to (g) of the Act and that is affiliated with the entity ascertaining the identity, or

(III) an entity that is subject to the Act and is a member of the same association as the entity ascertaining the identify.

• The entity used must have ascertained the person’s identity, in accordance with paragraph 64(1)(a) of the PCMLTFR, by referring to the person’s birth certificate, driver’s licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document;

• The person’s name, address and date of birth in the records of an entity that is a member of the same group or association must match the information provided by the person in accordance with the PCMLTFR.

Consequently, the reporting entity can rely on another entity if the other entity ascertained the identity of the person by referring to the person’s birth certificate, driver’s licence, provincial health insurance card (if such usage is not prohibited by the applicable provincial law), passport or other similar document. Under subsection 64(3) of the PCMLTFR, unless specified otherwise in these Regulations, only original documents that are valid and have not expired may be referred to for the purpose of ascertaining the identity of a person in accordance with paragraphs (1)(a) and (1.1)(a).

Rather than rely on an entity from the same group to ascertain identity, a reporting entity may also, in application of paragraph 64(1)(b) of the PCMLTFR, rely on an entity that is subject to the Act and is a member of the same association as the entity ascertaining the person’s identity. Pursuant to subsection 64(1.21) of the PCMLTFR, for the application of sub-paragraphs (1)(b)(i) and (1.1)(b)(i):
(a) a financial services co-operative and each of its members that is a financial entity are considered to be members of the same association;
(b) any credit union central and each of its members that is a financial entity are considered to be members of the same association.

Under subsection 1(2) of the PCMLTFR, a financial entity means a bank governed by the Bank Act; a foreign bank authorized to carry on business in Canada; a cooperative credit society, savings and credit union or caisse populaire that is regulated by a provincial act; an association that is regulated by the Cooperative Credit Associations Act; financial services cooperative; credit union central; a company to which the Trust and Loan Companies Act applies; and a trust company and a loan company regulated by a provincial act. As indicated in subsection 1(2) of the PCMLTFR, a “financial services co-operative” means a financial services co-operative governed by the Trust and Loan Companies Act, R.S.Q., c. C-67.3 or the Act respecting the Mouvement Desjardins, R.S.Q. 2000, c. 77, other than a caisse populaire.

Consequently, relying on a co-member for the purposes of ascertaining the identity of clients is permitted under the PCMLTFR, provided that the co-member is governed by or a member of the financial services co-operative.

Date answered: 2016-02-05

PI Number: PI-6388

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 1(2), 62(1)c), 64(1)b), 64(3)

Act: Part 1

Changes regarding persons authorized to give instructions on an account

Question:

Our existing client is an entity. When an account was opened a few years ago, the identities of three people authorized to give instructions about the account were ascertained in accordance with the Regulations. Recently, one of the people authorized to provide instructions was replaced by a new person. As a result, should we ascertain the identity of this new person?

Answer:

Subparagraph 23(1)(a)(i) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) requires that the securities dealer keep a signature card that bears the signature of the person who is authorized to give instructions in respect of the account.

Out of this obligation, stems the requirement, pursuant to subsection 57(1) of the PCMLTFR, and subject to section 62 and subsection 63(1), for every securities dealer to ascertain, in accordance with subsection 64(1), the identity of every person who is authorized to give instructions in respect of an account for which that signature card was kept. Pursuant to paragraph 64(2)(a) of the PCMLTFR, ascertaining the identity of the person for who a signature card is kept, must be carried out before any transaction other than an initial deposit is carried out on an account.

There is, however, an exception whereby a securities dealer is not required to ascertain the identity of all who are authorized to give instructions in respect of a business account, as long as the identity of at least three of those persons authorized has been ascertained [paragraph 62(1)(a) of the PCMLTFR]. For this exception to apply, the identity of at least three persons authorized to instruct on the account has to continue to be ascertained. Therefore, if one of the three formerly identified persons has since left the company, the identity of another person must be ascertained so that the number of persons whose identity has been ascertained is maintained at three. Should there not be three people whose identity was ascertained when the business account was opened, then the reporting entity is required to fulfill the obligation to ascertain the identity of any other person who signs a signature card to be authorized to give instructions in respect of the account.

Date answered: 2016-01-15

PI Number: PI-4450

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 23(1)(a)(i), 57(1), 62(1)(a), 64(2)(a)

Ascertaining identity - Sale by judicial authority

Question:

What are the requirements for real estate brokers and agents to ascertain the identity of their clients? In particular, is it necessary to ascertain the identity of a bailiff hired by a very large corporation following the exercise of a hypothecary right by a financial institution?

Answer:

Real estate brokers and sales representatives are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) when they act as an agent in respect of the purchase or sale of real estate.

In accordance with paragraph 59.2(1)(a) of the PCMLTFR, subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), ascertain , in accordance with subsection 64(1), the identity of every person who conducts the transaction. As such, the real estate broker or sales representative must ascertain the identity of the person conducting the transaction. The real estate broker or sales representative must then consider where or not there is a corporation or an entity other than a corporation, on whose behalf the transaction is being conducted, to determine whether or not there are additional obligations related to ascertaining of identity, pursuant to paragraphs 59.2(1)(b) and (c) of the PCMLTFR.

That said, the paragraph 62(2)(m) of the PCMLTFR contains an exception whereby the real estate broker or sales representative is exempt from certain identification and record-keeping obligations in instances where the entity in respect of which a record is required to be kept is a public body, or a corporation that has minimum net assets of $75 million on its last audited balance sheet and whose shares are traded on a Canadian stock exchange or a stock exchange designated under subsection 262(1) of the Income Tax Act, and operates in a country that is a member of the Financial Action Task Force. Where the huissier has been engaged to represent a public body, or a corporation that qualifies for the exception under subsection 62(2)(m) of the Regulations, there is no legislative requirement to identify either the person conducting the transaction, or the large corporation or public body.

Date answered: 2016-01-07

PI Number: PI-4449

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2, 62(2)(m)

Act: 5(j)

Sale by judicial authority

Question:

Are court bailiffs required to provide their personal information or their professional identification issued by the Chambre des huissiers de justice du Québec to help real estate agents fulfill their obligation to ascertain their clients' identity?

Answer:

Real estate brokers and sales representatives are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and 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. In accordance with paragraph 59.2(1)(a), and subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), ascertain, in accordance with subsection 64(1), the identity of every person who conducts the transaction. As such, personal information is required when the real estate broker or sales representative ascertains the client's identity. If the huissier is representing a corporation or an entity other than a corporation, the real estate broker or sales representative has additional obligations related to ascertaining of identity, pursuant to paragraphs 59.2(1)(b) and (c).

Date answered: 2016-01-07

PI Number: PI-4448

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 39(1), 59.2(1)

Act: 5(j)

Address used for account opening

Question:

Our credit union typically requires its account holders to provide the physical location where business transactions are conducted, but is finding it difficult to gather this information from corporations that do not have a physical location. As such, could you confirm whether it would be acceptable to use the entity’s legal address (lawyer’s address), in situations such as these?

Answer:

As per the account opening obligations outlined at subsection 54(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), and subject to section 62 and 63, every financial entity must, in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation for which the financial entity opens an account and the names of the corporation’s directors.”

Section 65 specifies the existence of a corporation shall be confirmed and its name and address and the names of its directors shall be ascertained by referring to:
• its certificate of corporate status,
• a record that it is required to file annually under the applicable provincial securities legislation,
• or any other record that ascertains its existence as a corporation.

Therefore, in situations where a corporation does not have a physical location, it may use its legal address so long as it is identified on the record used to confirm its existence in accordance with section 65 of the PCMLTFR.

Date answered: 2015-12-23

PI Number: PI-4447

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54(1), 65

Client ID for an estate sale

Question:

Who or what supporting documentation should be looked at for client identification purposes, when an estate is being sold?

Answer:

Pursuant to subsection 39(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) every real estate broker or sales representative, when acting for the purchase or sale of real estate, must keep certain records, namely:
• a receipt of funds record of every amount that they receive in the course of a single transaction, unless received from a financial entity or public body;
• a client information record in respect of every purchase or sale of real estate;
• a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation, if the receipt of funds record or the client information is in respect of a corporation.

When any of these records are required to be kept, the real estate broker or sales representative must, in accordance with subsection 64(1) of the PCMLTFR, ascertain the identity of every person who conducts the transaction, and subsequently confirm the existence of any corporation or entity other than a corporation, on whose behalf the transaction is conducted.

Even in an estate sale, there is a person who is acting for the purchase or sale. This person must be identified, and the associated records kept.

Date answered: 2015-12-23

PI Number: PI-4446

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 39(1), 64(1)

Selling property for clients that are corporations

Question:

Could you provide clarification on the obligations of real estate agents to ascertain identity when selling property for clients that are corporations? More specifically, where it is stated that a real estate agent must identify the corporation’s signing officer and what would happen if a signing officer refused to provide their ID?

Answer:

Pursuant to section 39 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), when a real estate broker or sales representative acts as an agent in respect of the purchase or sale of real estate, they must keep a client information record in respect of every purchase or sale. Subsection 1(2) of the PCMLTFR specifies that a client information record means a record that sets out a client’s name and address and, in the case of a client that is a corporation, the nature of their principal business. When a client is a corporation, section 39 of the PCMLTFR also requires that 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 real estate broker or sales representative, be kept.

Subsection 59.2(1) of the PCMLTFR further indicates that “subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1),
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors.”

Therefore, in addition to obtaining and keeping a record of the name and address of the corporation, the nature of the principal business, and a copy of the part of its official corporate records that contains any provision relating to the power to bind the corporation, a real estate agent must confirm the existence of and ascertain the names of a corporation’s directors in accordance with section 65 and ascertain the identity of the individual who conducts the transaction in accordance with subsection 64(1).

If the corporation’s signing officer is conducting the transaction, their identity must be ascertained by the real estate agent in accordance with subsection 64(1) of the PCMLTFR. Failure to ascertain the identity of a client could lead to an administrative monetary penalty for the reporting entity.

Date answered: 2015-12-22

PI Number: PI-4445

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 1(2), 39, 59.2(1), 64(1)

Verification of terrorist lists

Question:

What are FINTRAC's expectations about verifying that settlors, trustees and beneficiaries of a trustee are not the persons or entities on the lists required by the United Nations Resolutions on the Suppression of Terrorism (RIUNRST) and/or the United Nations Al-Qaida and Taliban Regulations (UNAQTR).

Answer:

The Act and Regulations do not specify that a financial entity must ensure that the settlors, trustees and/or beneficiaries of a trust, for whom an account is opened, are not persons or entities registered on the lists referred to by the Regulations establishing a list of entities in application of subsection 83.05(1) of the Criminal Code and/or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (RIUNRST) and/or the United Nations on Al-Qaida and Taliban Regulations (UNAQTR).

However, every financial entity must establish and implement a program in accordance with the Regulations aimed at ensuring their compliance with parts 1 and 1.1 of the Act. The program must, in particular, provide for the development and application of the principles and measures allowing the person or the entity to be evaluated during the activities, the risks of a money laundering offence or a terrorist activity financing offence. Risk analysis must take into consideration the clients and business relationships of the person or the entity, its products and distribution methods, the geographic location of activities and any other appropriate criteria.

In keeping with the FINTRAC guidelines on compliance policies and procedures, a financial entity must know its clients in order to assess risk. Knowing your clients is not limited to identification or record-keeping requirements. It is about understanding who your clients are, including their activities, transaction patterns, how they operate and so on. As such, FINTRAC expects that financial entities anticipate other risk mitigation options, such as confirming whether the person is listed in the Regulations Establishing a List of Entities made under subsection 83.05(1) of the Criminal Code, and/or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (RIUNRST) and/or the United Nations on Al-Qaida and Taliban Regulations (UNAQTR).

That said, in accordance with subsection 7.1(1) of the Act, it is the responsibility of any person or entity referred to by the Act that is required to disclose information under subsection 83.1 of the Criminal Code under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism to report to the Centre in the manner prescribed. By doing this, a financial entity must be aware of whether a client is listed or not in the Regulations Establishing a List of Entities made under subsection 83.05(1) of the Criminal Code, and/or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (RIUNRST) and/or United Nations on Al-Qaida and Taliban Regulations (UNAQTR) to make sure that the financial entity complies with all the applicable laws and regulations.

Date answered: 2015-12-10

PI Number: PI-6385

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Act: Part 1,1.1, 7.1(1)

Real estate transaction with employee as client

Question:

A real estate broker has an employee that is a board member of a separate company that wants to buy a property. The separate company has employed the real estate broker for the purpose of the purchase. Does the real estate broker have the obligation to ascertain the ID of the employee that is a board member of the company? Pursuant to paragraph 62(2)(n) of the PCMLTFR, could the purchaser of the transaction be exempted?

Answer:

The exception outlined in paragraph 62(2)(n) of the PCMLTFR requires that the entity be a subsidiary of an entity referred to in paragraph 62(2)(m) or a public body AND that their financial statements be consolidated. If both conditions are met, then the exception can be applied.

That said, if there is no exception pursuant to paragraph 62(2)(n) or other that may be applied, then the real estate broker or sales representative shall, when engaging in an activity described in section 37, keep the following records:

(a) a receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body;

(b) a record, respect of every purchase or sale, that sets out a client’s name and address and
o (a) if the client is a person, their date of birth and the nature of their principal business or their occupation, as applicable; and
o (b) if the client is an entity, the nature of their principal business; and

(c) where the receipt of funds record or the client information record is in respect of 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 real estate broker or sales representative.

Where a real estate broker or sales representative is required to keep a record, then they must ascertain the identity of the person conducting the transaction AND the corporation, or the entity that is not a corporation, as appropriate.

In this case, the real estate broker is subject to the requirements to keep records and ascertain identity even though the individuals conducting the transaction are also employees, acting in their capacity as board members of the Corporation. The exception can be applied if the Corporation is an entity referred to in paragraph 62(2)(m), or a subsidiary of an entity referred to in 62(2)(m) with whom they also consolidate their financial statements.

Date answered: 2015-12-07

PI Number: PI-6383

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 37, 62(2)(m), 62(2)(n)

Methods used to identify a client that is not physically present

Question:

1. Pursuant to Guideline 1, do I need to report every transaction exceeding $10,000 to the Canadian Border Security Agency, even though transactions will be processed electronically?
2. Pursuant to Guideline 6, what type of "independent and reliable identification product" can be use in order to ascertain the identity of a client who is not physically present?
3. Pursuant to Guideline 6, when identifying a client who is not physically present by using the cleared cheque or deposit account method, can we instead use information returned by a bank? Also, what is classified as a "Pre-authorized payments"?

Answer:

1.While Guideline 1 does reference the cross-border reporting requirements, these are actually outlined in Part 2 of the PCMLTFA and reporting entities are not subject to Part 2 of the PCMLTFA.

However, as you clarify, you will be conducting electronic funds transfers (EFTs). EFT is defined at subsection 1(2) of the 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.” As per subsection 28(1) of the PCMLTF, MSBs 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, along with the information referred to in Schedule 3 or 6, as the case may be, and 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. Therefore, as an MSB in Canada, you will be required to report incoming and outgoing EFTs to FINTRAC.

2.Pursuant to subsection 59(1) of the PCMLTFR, MSBs must, in accordance with subsection 64(1), ascertain the identity of every person who conducts any of the following transactions:
(a) the issuance or redemption of money orders, traveller’s cheques or other similar negotiable instruments in an amount of $3,000 or more;
(b) the remittance or transmission of $1,000 or more by any means through any person or entity; or
(c) a foreign currency exchange transaction of $3,000 or more.

The methods used to ascertain the identity of clients when they are not physically present are provided at subparagraph 64(1)(b)(ii) of the PCMLTFR. The methods are further detailed at Part A of Schedule 7 and must be used in one of the combinations identified.

The Identification Product Method is a method that may be used in combination with the Attestation Method, the Cleared Cheque Method, or the Confirmation of Deposit Account Method. The Identification Product Method consists of referring to an independent and reliable identification product that is based on personal information in respect of the person and a Canadian credit history of the person of at least six month’s duration. While I cannot direct you to a specific product, commercial products that meet this criteria may be used and examples include those that provide credit ratings. If the Identification Product Method is used to ascertain a person’s identity, paragraph 67(e) of the PCMLTFR further requires that a record be kept that includes the name of the person, the name of the identification product used, the name of the entity offering the product, the search reference number, and the date the product was used to ascertain the person’s identity.

3. As per subparagraph 64(1)(b)(ii) of the PCMLTFR, the Cleared Cheque Method and the Confirmation of Deposit Account Method may be used in combination with the Identification Product Method, the Credit File Method, or the Attestation Method. Part A of Schedule 7 states the Cleared Cheque Method consists of confirming that a cheque drawn by the person on a deposit account of a financial entity, other than an account referred to in section 62 of the PCMLTFR, has been cleared. The Confirmation of Deposit Account Method consists of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of the PCMLTFR.

For the Cleared Cheque Method, the cheque must be written by the individual, cashed by a payee, and cleared through the individual’s account (other than an account referred to in section 62 of the PCMLTFR). The cheque does not have to have been made out to the reporting entity using this method. A returned copy, photocopy, or electronic image of the cleared cheque may instead be referred to. For the Confirmation of Deposit Account Method, a client’s bank statement may be used, or a reporting entity may confirm verbally or in writing with the financial entity where the person’s account is held, so long as it is indicated that it is a deposit account.

The term “pre-authorized payment” is used in Guideline 6 to specify that receiving a payment from a person’s account does not confirm the person actually holds the account, but suggests the person has access to the account. As such, confirming a transfer amount does not meet the criteria to confirm that a person actually holds a deposit account.

 

Date answered: 2015-12-07

PI Number: PI-6382

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 1, 6C

Regulations: 1(2), 28(1), 59(1), 62, 64(1)(b)(ii), 67e), Schedule 7

Act: 2

Exceptions to ascertaining identity of foreign regulated entities

Question:

Could you clarify whether the exceptions to ascertaining identity provided in section 3 of Guideline 6E: Record Keeping and Client Identification for Securities Dealers apply to foreign regulated entities in FATF member countries.

Answer:

Paragraph 62(2)(l) of the PCMLTFR provides an exception to certain record-keeping and ascertaining of identity obligations for “the opening of an account in the name of, or in respect of which instructions are authorized to be given by, a financial entity, a securities dealer or a life insurance company or by an investment fund that is regulated under provincial securities legislation.” It is important to know that the entities referenced in paragraph 62(2)(l) of the PCMLTFR are defined in subsection 1(2) of the PCMLTFR, so that the exception can only be applied very specifically. For example, a securities dealer means 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. These paragraphs are restricted to the particular situations and entities identified and therefore cannot be applied to foreign regulated entities in FATF member countries.

That said, paragraph 62(2)(m) of the PCMLTFR, provides an exception where the entity in respect of which a record is otherwise required to be kept is a public body, or a corporation that has minimum net assets of $75 million on its last audited balance sheet and whose shares are traded on a Canadian stock exchange or a stock exchange designated under subsection 262(1) of the Income Tax Act, and operates in a country that is a member of the Financial Action Task Force. Furthermore, paragraph 62(2)(n) of the PCMLTFR provides an exception in instances where the entity in respect of which a record is otherwise required to be kept is a subsidiary of a public body or a corporation referred to in paragraph (m) and the financial statements of the entity are consolidated with the financial statements of that public body or corporation.

Paragraph 62(2)(h) also provides for an exception where the opening of the account is in the name of an affiliate of a financial entity, if that affiliate carries out activities that are similar to those of persons and entities referred to in paragraphs 5(a) to (g) of the Act.

Date answered: 2015-12-04

PI Number: PI-6378

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 1(2), 62(2)(h), (l), (m), (n)

Exceptions for securities dealers

Question:

Based on Guideline 6E: Record Keeping and Client Identification for Securities Dealers, we have questions regarding exceptions that may exist for securities dealers subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) when dealing with various clients. More specifically,
1. Would the exemption listed in subsection 4.2 of the Guideline 6E apply to Exempt Market Dealers (EMDs), who are required to register with a provincial regulator?
2. Are there any exemptions for foreign securities dealers and what would be considered acceptable criteria?

Answer:

The Guidelines provide a plain language explanation of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). The general exceptions listed in Section 4.2 of Guideline 6E Record Keeping and Client Identification for Securities Dealers summarize the Exceptions to Record-Keeping and Ascertaining Identity pursuant to subsection 62(2) of the PCMLTFR.

Specifically, paragraph 62(2)(l) of the PCMLTFR provides an exception to certain record-keeping and ascertaining of identity obligations for “the opening of an account in the name of, or in respect of which instructions are authorized to be given by, a financial entity, a securities dealer or a life insurance company or by an investment fund that is regulated under provincial securities legislation.” It is important to know that the entities referenced in paragraph 62(2)(l) of the PCMLTFR are defined in subsection 1(2) of the PCMLTFR, so that the exception can only be applied very specifically. For example, a securities dealer means 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.

In response to your question on foreign entities, I direct you to paragraph 62(2)(m) of the PCMLTFR, which does provide an exception where the entity in respect of which a record is otherwise required to be kept is a public body, or a corporation that has minimum net assets of $75 million on its last audited balance sheet and whose shares are traded on a Canadian stock exchange or a stock exchange designated under subsection 262(1) of the Income Tax Act, and operates in a country that is a member of the Financial Action Task Force. Furthermore, paragraph 62(2)(n) of the PCMLTFR provides an exception in instances where the entity in respect of which a record is otherwise required to be kept is a subsidiary of a public body or a corporation referred to in paragraph (m) and the financial statements of the entity are consolidated with the financial statements of that public body or corporation.

Date answered: 2015-12-03

PI Number: PI-6377

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 1(2), 62(2)(l), (m), (n)

Timing of ID

Question:

Do real estate agents have 30 days to record the identification of their clients? Is this 30-day period a recommendation or an obligation?

Answer:

Real estate agents must ascertain the identity of persons for whom they must keep statements of receipt of funds (large cash transaction records) or client information records. Real estate agents must do this when doing the document-related transaction. It is only when the real estate agents must confirm the existence of an entity for which they must keep receipt of funds records or client information records that they must do it within 30 days following the date when the transaction associated with the document was performed.

Date answered: 2015-11-18

PI Number: PI-6372

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Client identification of foreign financial institutions

Question:

How do we identify clients that are foreign financial institutions?

Answer:

Pursuant to subsection 57(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) and subject to section 62 and subsections 63(2) and (4), every securities dealer shall, in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation for which it opens an account and the names of the corporation’s directors. Subsection 65(1) states “the existence of a corporation shall be confirmed and its name and address and the names of its directors shall be ascertained as of the time referred to in subsection (2), by referring to its certificate of corporate status, a record that it is required to file annually under the applicable provincial securities legislation or any other record that ascertains its existence as a corporation. The record may be in paper form or in an electronic version that is obtained from a source that is accessible to the public.”

However, in addition to ascertaining the identity of a foreign financial institution that is its client, your company must also obtain and take reasonable measures to confirm the names of all directors and names and addresses of all persons who own or control 25 per cent or more of the shares of the corporation as per section 11.1 of the PCMLTFR. Furthermore, in accordance with subsections 11.1(2) and 11.1(3) of the PCMLTFR, respectively, the reporting entity must take reasonable measures to confirm the accuracy of the information obtained under subsection 11.1(1), and keep a record that sets out the information obtained and the measures taken to confirm the accuracy of that information.

While FINTRAC does not specify the measures a reporting entity must take to confirm the accuracy of beneficial ownership information, it has provided examples, in Guideline 6E: Record Keeping and Client Identification, of documents where this information may be found. Guideline 6E also identifies the measures a reporting entity may take to confirm client identification information, which include asking the client to provide documentation and consulting paper or electronic records that contain the necessary information. These measures may be used to confirm beneficial ownership information as well, however, ultimately, it remains up to the reporting entity to determine what measures it considers reasonable, depending on each given situation. Reporting entities may rely on the information provided by clients, but are advised to use discernment when determining if the documentation is appropriate. It is our understanding that the non-exhaustive list of documents outlined in Guideline 6E may provide the information necessary; however, should the reporting entity determine that the information is not available in one of the documents listed, they are encouraged to consider alternative public sources that provide this information.

Date answered: 2015-09-14

PI Number: PI-6361

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 11.1, 57(3), 65(1)

Client information record requirements for real estates

Question:

Please provide information about the identification requirements for the real estate sector. More specifically, is a real estate broker required to obtain personal information on the directors of a partnership in relation to a recent transaction where the partnership was the seller.

Answer:

Pursuant to section 39 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), when a real estate broker or sales representative acts as an agent in respect of the purchase or sale of real estate, they must keep a client information record. Where the client information record is in respect of a corporation, they must also include 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 real estate broker or sales representative.

Subsection 59.2(1) of the PCMLTFR states that “subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1),
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors; and
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted .”

Therefore, in addition to obtaining the name and address and confirming the existence of a corporation as per section 65 of the PCMLTFR, a real estate broker or sales representative is also required to ascertain the identity of the individual who conducts the transaction in accordance with section 64 of the PCMLTFR, regardless of whether they are conducting the transaction on behalf of a corporation.

Date answered: 2015-09-14

PI Number: PI-6360

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 39, 59.2(1), 64

Confirmation of existence of an entity other than a corporation

Question:

  1. Which type of document is acceptable in order to ascertain the existence of an entity, other than a corporation?
  2. Can FINTRAC confirm whether subsection 52(2) of the PCMLTFR could be applied in a situation where the information was provided as part of a different requirement, such as for the purposes of obtaining beneficial ownership information as per section 11.1 of the PCMLTFR?

Answer:

  1. Pursuant to paragraph 54(1)(e) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), and subject to sections 62 and 63, every financial entity shall in accordance with section 66 of the PCMLTFR, confirm the existence of every entity, other than a corporation, for which the financial entity opens an account. Section 66 of the PCMLTFR states that the existence of an entity, other than a corporation, shall be confirmed by referring to a partnership agreement, articles of association or other similar record that ascertains its existence. The record may be in paper form or in an electronic version that is obtained from a source that is accessible to the public.

    FINTRAC has previously taken the position that in order to ascertain the existence of an entity other than a corporation, a written document may be acceptable so long as it contains the signature, name, date, and position in relation to the entity of the signatory. Also, while generic position titles such as “officer” and “director” are acceptable, it is preferable for the financial entity to require the signatory to provide a more detailed position in relation to the entity.
     

  2. Subsection 52(2) states that “The requirement that a person or entity keep or retain a record or include information in it does not apply if the information that must be found in the record is readily obtainable from other records that the person or entity is required to keep or retain under these Regulations.” As such, it will always be a question of fact to determine whether the information required to ascertain the existence of an entity other than a corporation, as per subsection 66(1), is provided elsewhere. The requirement at paragraph 11.1(1)(c) indicates that only the names and addresses of those who own or control 25% or more are required, therefore this information would likely not be sufficient for the purposes of confirming the existence of an entity.

Date answered: 2015-09-02

PI Number: PI-6353

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 11.1(1)c), 52(2), 54(1)e), 66

Identification product and deposit account methods

Question:

Could you confirm if these methods meet the ascertaining identification non-face-to-face requirements?

  1. Credit bureau identification product
  2. Deposit account by accepting payments from customers through interac online and debit only (these 2 forms of payment requires an individual to maintain a deposit account with a financial institution in Canada). No credit card will be accepted as form of payment.

Answer:

Clause 64(1)(b)(ii)(C) indicates that money services businesses (MSBs) may ascertain the identity of persons not physically present by using a combination of methods 1 and 5. As per Schedule 7 of the PCMLTFR, method 1, the identification product method, consists of referring to an independent and reliable identification product that is based on personal information in respect of the person and a Canadian credit history of the person of at least six month’s duration. Method 5, the confirmation of deposit account method, consists of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of these Regulations.

Concerning the proposed use of a credit bureau identification product for the identification product method, we have said previously that a credit bureau identification product may only be acceptable as an identification product method if it meets the requirements, laid out in Schedule 7. An identification product is understood to be a product offered by independent businesses, in which they provide a series of specific questions to be asked to the client based on information drawn from that individual’s Canadian credit history (can only be used if they have at least 6 months of credit history). The key is the questions asked are so precise that only the person concerned can answer them. This method must always be uses in combination with another method listed in Schedule 7 of the PCMLTFR, in this case the confirmation of deposit account method.

Also for the identification product method, paragraph 67(e) of the PCMCLTFR requires the following information to be recorded: the name of the identification product, the name of the entity offering the product, the search reference number and the date the product was used to ascertain the person’s identity. Therefore, the identification product used for this method must also supply all of this information.

For the confirmation of deposit account method, we have indicated in the past that confirming an amount from a deposit account does not confirm the person actually holds the account, but merely proves that they have access to a deposit account. Therefore, confirming transfer amounts alone or accepting payments through Interac online or debit payments would not meet the criteria of confirmation that a person holds a deposit account.

The following is a non-exhaustive list of means for the confirmation that a person holds a deposit account:

  • a copy of the client’s bank statement
  • a legible fax or scanned copy of a bank statement
  • an original or electronically issued bank statement addressed to the client that contains all of the information

We have also said in the past that a reporting entity can confirm a deposit account by either confirming verbally with the financial entity where the deposit account is held, by letter from that financial entity to either the client or the reporting entity, or even by email (as long as it is indicated that it is a deposit account).

Paragraph 67(c) of the PCMLTFR also requires the client name, the deposit account number, the financial entity name, and the date of the confirmation be recorded.

Date answered: 2015-08-11

PI Number: PI-6341

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 64(1)(b)(ii)c), 67e), Schedule 7

Obligations for Trust Account

Question:

Our client is a financial entity. One of their members is a condominium developer who wants to open a trust account at the financial entity. This account will be used for individuals who are purchasing condos to pay their deposits to hold the condo units as the condo is being built.

Does the financial entity have an obligation to verify the identities of all individuals depositing money into that trust account for the purposes of paying a condominium deposit? Or is it sufficient for them to have all relevant information on the condominium developer only?

  • The deposits are for large amounts
  • Many purchasers are international
  • BUT they do not have accounts with the financial entity in their own name and they are only doing one single transaction to the financial entity

Answer:

As per section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a financial entity is required to ascertain the identity of all persons or confirm the existence of all corporations, or entities other than corporations, when an account is opened. Paragraph 54(1)(a) of the PCMLTFR further specifies that, for persons, “subject to sections 62 and 63, every financial entity shall, in accordance with subsection 64(1), ascertain the identity of every person who signs a signature card in respect of an account, other than a credit card account, that the financial entity opens, except in the case of a business account the signature card of which is signed by more than three persons authorized to act with respect to the account, if the financial entity has ascertained the identity of at least three of those persons.”

Therefore, the financial entity is only required to ascertain the identity of the condominium developer, when it opens the account, as he is the account holder. However, given that you state “the deposits are for large amounts” and “many purchasers are international”, the financial entity may also be required to obtain information on each individual depositor for the purposes of fulfilling the large cash transaction (LCT) requirements or electronic funds transfer (EFT) requirements.

Paragraph 12(1)(a) of the PCMLTFR states that subject to section 50 and subsection 52(1), 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. As per Schedule 1, the individual depositors information would be required under Part D, as this part requires the credit union to report information about the individual who conducted the transaction (that is not a deposit into a business account), not the information about the account holder.

Similarly, paragraph 12(1)(c) of the PCMLTFR 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. Subsection 1(2) of the PCMLTFR defines 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.” Schedule 3 and 6 require that information be obtained on the client initiating the EFT. As such, information on the individual depositors who provide instructions for the transfer of funds to the credit union must also be obtained.

Date answered: 2015-07-29

PI Number: PI-6340

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 1(2), 12(1)(a),(c), 54, 54(1)(a), Schedule 1

Exemptions for First Nations band

Question:

Are there any exemptions that apply to the client identification requirements of a real estate transaction for a First Nations band?

Answer:

Subsection 59.2(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1),
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors; and
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.

Exceptions to these requirements are identified at subsection 62(2) and section 63 of the PCMLTFR, however, no specific exception for First Nations bands exists. The only possible exception would be identified at paragraph 62(2)(m) of the PCMLTFR, that is if the First Nations band was identified as a public body. However, First Nations bands do not appear to fall under the definition of public body as defined under subsection 1(2) of the PCMLTFR, which states that “”public body” means:
(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.”

First Nations bands are not a department or agent of Her Majesty in right of Canada, or of a province; they are not incorporated or an agent of an incorporated entity; and they do not operate a public hospital designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act. As they are not explicitly listed under this definition they are therefore excluded from it.

As a result, there are no exceptions under the PCMLTFA or its associated Regulations that apply to native bands when engaging in real estate transactions.

Date answered: 2015-07-29

PI Number: PI-6335

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 1(2), 59.2(1), 62(2), 63

Verify the identity of persons authorized to give instructions

Question:

I am asking for a policy interpretation under subsection 57(1) of the PCMLTFR about the meaning of “every person" and about knowing whether a securities dealer must ascertain the identity of “every person who is authorized to give instructions in respect of an account," even if such person does not necessarily exercise this authority in the trust deed, or rather if the securities dealer must ascertain the identity of only those persons who, in fact, at the time the account is opened, are those giving instructions for said account.

Answer:

Subsection 57(1) of the Regulations stipulates that “Subject to section 62 and subsection 63(1), every securities dealer shall, in accordance with subsection 64(1), ascertain the identity of every person who is authorized to give instructions in respect of an account for which a record must be kept by the securities dealer under subsection 23(1)." On this topic, section 2 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act specifies that "person means an individual."

While every person that is authorized to give instructions in relation to an account must be identified, the determination of knowing which persons is a question of fact.

In this respect, subsection 62(1) stipulates that "subsections 57(1) and 57.1(1) ... do not apply in respect of
(a) the opening of a business account in respect of which ... the securities dealer ...has already ascertained the identity of at least three persons who are authorized to give instructions in respect of the account."

Consequently, when more than three persons are authorized to give instructions on a business account and when the securities dealer has already ascertained the identity of three of these persons, this means that they are exempt from verifying the identity of other persons with authority to give instructions on the account. Thus, if five people are authorized to give instructions on the account, the securities dealer is required to identify at least three of them, since the exception at subsection 62(1) applies to the other two. Conversely, if only two people are authorized to give instructions on the account, only these two people must be identified. Any other person would have to be identified by the securities dealer when they are able to give instructions on the account.

Moreover, pursuant to paragraph 64(2)(a) of the Regulations, identity must be ascertained in the cases provided in paragraph 54(1)(a), subsection 57(1) and paragraph 60(a), before any transaction is made in the account, except for the initial deposit. Consequently, if three persons are able to provide instructions related to an account, the securities dealer must identify these three people before any transactions are conducted on the account.

Date answered: 2015-07-28

PI Number: PI-6334

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 57(1), 62(1), 64(2)a)

Lawyer making purchase/sale on behalf of a company

Question:

Are the names of the Directors of a company required when the purchase or sale of real estate is conducted by a lawyer on behalf of the company?

Answer:

Real estate agents or brokers are subject to record keeping requirements under section 39 of the PCMLTFR, which include keeping receipt of funds records, client information records, and large cash transaction records.

Subsection 59.2(1) of the PCMLTFR further requires that “subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1),
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors; and
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.”

As per section 8 of the PCMLTFR, when a large cash transaction record is required to be kept, a real estate agent or broker must also take reasonable measures to determine whether the individual who provides the cash is acting on behalf of a third party. If it is determined that the individual is acting on behalf of a third party, a real estate agent or broker 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.

Similarly, in respect of every client information record that is kept, section 10 of the PCMLTFR requires that a real estate agent or broker take reasonable measures to determine whether a client is acting on behalf of a third party. If it is determined that the client is acting on behalf of a third party, a record must be kept 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 relationship between the third party and the client.

While the lawyer is making the purchase or sale on behalf of the corporation, the lawyer is, essentially, operating as the physical body of the corporation. The lawyer is therefore considered to be the client for record keeping and identification purposes and the real estate agent or broker is required to keep a receipt of funds or large cash transaction record and a client information record, for which the real estate agent or broker must then ascertain identity and carry out a third party determination (client information or large cash transaction record requirement). As stated above, according to paragraphs 59.2(1)(a), (b), and (c), real estate agents or brokers must ascertain the identity of every person who conducts the transaction, and confirm the existence of the corporation or the entity on whose behalf the transaction is conducted. As such, the lawyer should be prepared to: a) be identified in accordance with subsection 64(1) of the PCMLTFR, and b) provide documents confirming the existence of the corporation, including the names of the directors in the case of a corporation. Of course, should the lawyer’s corporation fall under the exception outlined in paragraph 62(2)(m) of the PCMLTFR, then the real estate agent or broker would not be required to carry out the record keeping and client identification requirements outlined above.

The real estate agent or broker is required to take reasonable measures to determine if there is a third party involved in the transaction, and it is only when they determine that there is in fact a third party involved in the transaction that the record keeping obligation kicks in. In addition, if an employee is acting on behalf of their employer, the employee is considered to be acting on behalf of a third party.

If the real estate agent or broker is not able to determine that there is in fact a third party, but the real estate agent or broker has reasonable grounds to suspect that there are instructions of a third party involved, the real estate agent or broker has to keep a record to indicate the following:
• in the case of a large cash transaction, whether, according to the individual giving the cash, the transaction is being conducted on behalf of a third party; or
• in the case of a client information record, whether, according to the client, the transaction is being conducted on behalf of a third party.

This record must also indicate details of why the real estate agent or broker suspects the individual is acting on a third party's instructions.

Finally, as per section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, an STR is expected to be submitted to FINTRAC when the real estate agent or broker has 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.”

A single indicator, such as not being able to determine if there is a third party involved in the transaction, is not necessarily indicative of reasonable grounds to suspect money laundering or terrorist financing activity. However, if a number of indicators are present during a transaction or a series of transactions, then the real estate agent or broker might want to take a closer look at other factors prior to making the determination as to whether the transaction must be reported.

Date answered: 2015-07-08

PI Number: PI-6329

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 8, 10, 39, 59.2(1), 62(2)(m), 64(1)

Act: 7

Employee identification

Question:

As part of a compliance file, I have an interpretation question about the employees of a company having access to its account to perform online transactions (Web access).

The regulations have two definitions that can link an individual to a business account to perform transactions. Either this individual is a signatory for the account or he/she can act on behalf of the employer who holds the account (on behalf of a third party, in the case of the employer, the company). Many companies can provide Web access to their accounts so employees can act within the account for business transactions: account payment, money transfers, exchange transactions, etc. In the case above, is the employee always considered to be acting on the employer's behalf, who would then be considered the third party (the employer)?  

If that is indeed the case, what is the document requirement for the employee who acts on behalf of their employer for bank transactions online if the employee is not considered a third party or a signatory? Must an employee acting in this way on their employer's behalf for online transactions be a signatory for the company's account? For example, the Chief Financial Officer gives his accountant (also an employee) access to the company's account on the Internet. Which documentary requirement must the financial institution meet about the accountant who may intervene in the Internet account?

Answer:

Financial entities have client identification obligations. They must take measures to verify the identity of persons and confirm the existence of entities. Entity means a legal person, trust, partnership, fund and association or unincorporated organization when they open accounts or when they make certain transactions with financial entities.

Paragraph 54(1)(a) of the Proceeds of Crime and Terrorist Financing Regulations stipulate: “In accordance with subsection 64(1), ascertain the identity of every person who signs a signature card in respect of an account, other than a credit card account, that the financial entity opens, except in the case of a business account the signature card of which is signed by more than three persons authorized to act with respect to the account, if the financial entity has ascertained the identity of at least three of those persons.”

This means that if more than three persons are authorized to act for the business account, the financial entity must ascertain the identity of at least three of them. However, under paragraph 62(1)(a) of the Regulations, the financial entity does not have to ascertain the identity of a person when a business account is opened for which the financial entity has already ascertained the identity of three people who are authorized to act for this account. In fact, subsection 62(1) stipulates: “Paragraphs 54(1)(a) and (b), 54.1(a), 54.2(a) and 55(a) and (e), paragraphs 57(1) and 57.1(1) and paragraphs 60(a) and (b) do not apply in respect of (a) at the opening of a business account in respect of which the financial entity . . . has already ascertained the identity of at least three persons who are authorized to give instructions for the account.” Subsection 1(2) of the Regulations defines a signature card as “any record that is signed by a person who is authorized to give instructions in respect of the account.”

The persons who sign the signature card are thus authorized to issue instructions for a specific account. Financial entities are not required to ascertain the identity of persons employed by a business that has access to the account unless they have less than three authorized persons, i.e., who sign a signature card or who carry out a trigger activity under paragraph 54(1)(b) of the Regulations:
"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 (i) a transaction whereby the financial entity issues or redeems money orders, traveller's cheques or other similar negotiable instruments in an amount of $3,000 or more, (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, or (iii) a foreign exchange transaction of $3,000 or more."

With regard to employees acting on behalf of their employer, who holds the account, section 7 of the Regulations stipulates 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." Financial entities must take reasonable measures to determine whether there is a third party when they are required to keep a major cash transaction record and every time they open an account and must keep a signature card or an account operating agreement. For this purpose, when employees act on behalf of their employer, they are considered to be acting on behalf of a third party. The only exception is when an employee deposits an amount in cash in his or her employer's account. In such a case, the employee is not considered to be acting on behalf of a third party. This exception only applies when the account in which the employee deposits an amount in cash is a business account (commercial account).

Date answered: 2015-07-07

PI Number: PI-6328

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 1(2), 7, 54(1), 62(1)

Non-face-to-face ID

Question:

The question pertains to the combination method for non-face to face identification.

The two methods we are contemplating to meet the Deposit Account Method are the following:
1. A scanned or electronically issued bank statement
2. The use of a web service that confirms that the individual has an account at another Canadian financial institution by: (i) during the application phase, entering in the individual's online banking credentials; (ii) using those credentials to log in to the financial entity; (iii) confirming that the account is open, the first and last name associated with the account (matching the name provided by the application); (iv) the account type (checking, savings, etc.); (v) the account number; and (vi) an indication that the individual's online credentials are valid and active

Would these two methods described above meet FINTRAC’s standards for confirmation of a deposit account as part of a combination method non-face to face ID check?

Answer:

Subparagraph 64(1)(b)(ii) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that non-face-to-face identification can be done by using a combination of identification methods as set out in Part A of Schedule 7, the confirmation of deposit account method being one. This method of ascertaining a person’s identity consists of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of the PCMLTFR. For the deposit account method, paragraph 67(c) of the PCMLTFR requires that the client name, the deposit account number, the financial entity name and the date of the confirmation be recorded.

Scanned or electronically issued bank statement - Past guidance has been that in addition to confirming a deposit account by means of copy of the client’s bank statement, a legible fax or scanned copy of a bank statement, an original bank statement addressed to the client that contains all of the information, or electronically issued statements, a reporting entity can confirm a deposit account by confirming verbally with the financial entity where the account is held, by letter from that financial entity to either the client or the reporting entity, or even by email (as long as it is indicated that it is a deposit account).

Therefore, a scanned or electronically issued bank statement can be used for the purpose of the Confirmation of Deposit Account Method, and would satisfy one of the two combination methods required.

Web service that confirms that the individual has an account at another Canadian financial institution - You have indicated that the web service logs into the financial entity and “confirms that the individual has an account at another Canadian financial institution by: […](iii) confirming that the account is open, the first and last name associated with the account (matching the name provided by the application); (iv) the account type (checking, savings, etc.); (v) the account number; and (vi) an indication that the individual's online credentials are valid and active.”

Based solely on the information you have provided, if the web service can confirm that the applicant has a deposit account with a financial entity, as per Part A of Schedule 7 of the PCMLTFR, and the reporting entity is able to record the client name, the deposit account number, the financial entity name and the date of the confirmation, it would appear that it can be used for the purpose of the Confirmation of Deposit Account Method, and would satisfy one of the two combination methods required.

We note that the web service will be able to confirm the account type; however, only personal deposit accounts will be acceptable.

Date answered: 2015-06-25

PI Number: PI-6325

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 64(1)(b)(ii), 67c), Schedule 7

ID options

Question:

My questions are around Guideline 6C
4. Client Identity
4.6 How to ascertain the identity of an individual.

My client’s customers will be applying for money transmittal services online and will not be physically present to ascertain the identity of the individual. The customers may be citizens of another country who are living and residing in Canada or Canada citizens sending money to their family in another country.

Under Section 4.6 under Individual not physically present – you have to use one or the other of the following options: Option 1: Affiliate (this section is not applicable because the company will not have affiliates).

Option 2: Combination of methods – To ascertain the identity of an individual using this option you have to use a combination of two of the following methods:

Identification product or credit file method
You can use either of the following methods but you cannot combine them:

• Refer to an independent and reliable identification product. It must be based on personal information as well as Canadian credit history about the individual of at least six months duration.

Attestation method
This process will make it difficult for most customers so will not be selected

Cleared cheque or deposit account method
You can use either of the following methods, but you cannot combine them
• Confirm that the individual has a deposit account with a financial entity. You could do this by viewing an original bank statement.

My questions are:
• If these customers are new residents of Canada the Canadian credit history may not be at least six months in duration – if the company pulls a report from an independent and reliable identification product and the report comes back not being at least six months in duration, what is our next step?
• All transactions conducted will be funded by an ACH debit to the individual’s account. May the company confirm that the individual has a deposit account with a financial by this debit to the account?

Answer:

In accordance with subsection 59(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every money services business shall, in accordance with subsection 64(1), ascertain the identity of every person who conducts any of the following transactions:

(a) the issuance or redemption of money orders, traveller’s cheques or other similar negotiable instruments in an amount of $3,000 or more;
(b) the remittance or transmission of $1,000 or more by any means through any person or entity; or
(c) a foreign currency exchange transaction of $3,000 or more.

Alternative to a credit history of less than six-month duration -
Paragraph 64(1)(b) of the PCMLTFR outlines the measures for ascertaining identity when a client is not physically present, which are further detailed in Schedule 7. These methods must be used in combination. That is, if an MSB is going to use the non-face-to-face methods for ascertaining identification, they must use a combination of at least two of the methods. It is for the MSB to determine which combination of two methods they use.

In a case where an MSB is unable to use the non-face-to-face methods for ascertaining identification, they must identity their clients face-to-face in accordance with paragraph 64(1)(a) of the PCMLTFR. This can be done by referring to the client’s birth certificate, driver's licence, passport, record of landing, permanent resident card or other similar document.

Confirmation of Deposit Account Method -
Pursuant to Schedule 7 of the PCMLTFR the Confirmation of Deposit Account Method is meant to ascertain a person’s identity by means of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of the PCMLTFR. Past guidance has indicated that in addition to confirming a deposit account by means of copy of the client’s bank statement, a legible fax or scanned copy of a bank statement, an original bank statement addressed to the client that contains all of the information, or electronically issued statements, an MSB can confirm a deposit account by confirming verbally with the financial entity where the account is held, by letter from that financial entity to either the client or the MSB, or even by email (as long as it is indicated that it is a deposit account).

Paragraph 67(c) of the PCMLTFR requires that the client name, the deposit account number, the financial entity name and the date of the confirmation be recorded. We have indicated in previous policy interpretations that confirming an amount from a deposit account does not confirm the person actually holds the account, but merely proves they have access to a deposit account.

Therefore, confirming transfer amounts alone or that the account was debited would not meet the criteria of confirmation that a person holds a deposit account.

Date answered: 2015-06-22

PI Number: PI-6320

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 59(1), 64(1)(a),(b), 67c), Schedule 7

ID obligations for Trust accounts

Question:

Regarding trust accounts and the ID obligations of financial entities that open these types of accounts, I am seeking clarification as to whether it is sufficient for a financial entity to identify the trustee only, or to provide general information about the owners of a trust when opening a trust account. I would also like to know whether the obligations set out in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations have to be strictly adhered to in all situations involving trusts (e.g. deeming a trust, opened by a parent for a child, as high risk if beneficial ownership information cannot be obtained).

Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines financial entity as “an authorized foreign bank, as defined in section 2 of the Bank Act, in respect of its business in Canada or a bank to which that Act applies, a cooperative credit society, savings and credit union or caisse populaire that is regulated by a provincial Act, an association that is regulated by the Cooperative Credit Associations Act, a financial services cooperative, a credit union central, a company to which the Trust and Loan Companies Act applies and a trust company or loan company regulated by a provincial Act. 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 an activity referred to in section 45.”

Pursuant to paragraph 54(1)(e) of the PCMLTFR, every financial entity must, in accordance with section 66, confirm the existence of every entity, other than a corporation, for which it opens an account. Section 66 of the PCMLTFR specifies that the existence of an entity must be confirmed before any transaction is conducted, other than the initial deposit, by referring to a partnership agreement, articles of association or another similar record that ascertains its existence. As per section 2 of the PCMLTFA, entity is defined as “a body corporate, a trust, a partnership, a fund or an unincorporated association or organization.”

If the financial entity is a trust company, then section 55 of the PCMLTFR states that, in addition to complying with section 54, it must
“(a) in accordance with subsection 64(1), ascertain the identity of every person who is the settlor of an inter vivos trust in respect of which the company is required to keep records under section 15;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation that is the settlor of an institutional trust in respect of which the company is required to keep
records in accordance with section 15;
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, that is the settlor of an institutional trust in respect of which the company is required to keep records in
accordance with section 15;
(d) where an entity is authorized to act as a co-trustee of any trust
(i) confirm the existence of the entity and ascertain its name and address in accordance with section 65 or confirm the existence of the entity in accordance with section 66, as the case may be, and
(ii) in accordance with subsection 64(1), ascertain the identity of all persons — up to three — who are authorized to give instructions with respect to the entity’s activities as co-trustee; and
(e) in accordance with subsection 64(1), ascertain the identity of each person who is authorized to act as co-trustee of any trust.”

The term inter vivos trust is further defined in subsection 1(2) of the PCMLTFR to mean “a personal trust, other than a trust created by will”. Additionally, subsection 15(2) of the PCMLTFR identifies an institutional trust as “a trust established by a corporation, partnership or other entity for a particular business purpose”.

As per subsection 11.1(1) of the PCMLTFR, every financial entity that is required to confirm the existence of an entity when it opens an account in respect of that entity, must obtain, at the time the existence of the entity is confirmed, the following information:
(a) in the case of a corporation, the names of all directors of the corporation and the names and addresses of all persons who own or control, directly or indirectly, 25 per cent or more of the shares of the corporation;
(b) in the case of a trust, the names and addresses of all trustees and all known beneficiaries and settlors of the trust;
(c) in the case of an entity other than a corporation or trust, the names and addresses of all persons who own or control, directly or indirectly, 25 per cent or more of the entity; and
(d) in all cases, information establishing the ownership, control and structure of the entity.

Reasonable measures must also be taken to confirm the accuracy of the information obtained. In the event this information cannot be obtained or confirmed, the financial entity must,
a) take reasonable measures to ascertain the identity of the most senior managing officer of the entity; and
b) treat that entity as high risk for the purpose of subsection 9.6(3) of the Act and apply the prescribed special measures in accordance with section 71.1 of the PCMLTFR.

If the financial entity is a trust company, section 11 of the PCMLTFR states that, for an inter vivos trust, it must keep a record with the name and address of each of the known beneficiaries as well as the date of birth and occupation or nature of principal business for all beneficiaries that are persons and the nature of principal business if the beneficiaries are entities.

Therefore, in light of these provisions, it would appear that in the case of a trust, a financial entity is required to confirm the existence of the trust and unlike the beneficial ownership information required to be gathered for corporations and entities other than corporations or trusts, that is the names and addresses of all persons who own or control, directly or indirectly, 25 percent or more of the entity, the trust requirement does not specify the requirement down to the person. As such, the financial entity is only required to obtain and take reasonable measures to confirm the names and addresses of all trustees and all known beneficiaries and settlors of the trust, which can be entity names and addresses.

We have said in the past that the beneficiary of a trust does not control the trust (by definition, if a beneficiary controls a trust, it is no longer a trust), and the beneficiary does not "own" a trust (the property that the settlor has put in the trust is the property of the trust, and is controlled by the trustee).

FINTRAC has also said in the past that in the case of a parent opening a trust for a child who will ultimately be the beneficiary, the beneficial ownership requirements do not apply. Beneficial ownership information is only required when accounts are opened for entities and not for individuals.

Date answered: 2015-06-19

PI Number: PI-6316

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 1(2), 11, 11.1(1), 15(2), 54(1)e, 55, 66

Act: 1(2)

Ascertaining ID through affiliate

Question:

Bank A has 3 separate lines of business that are wholly owned subsidiaries. Each of these lines of business open investment accounts for a specific subset of investment dealers. These investment products are introduced to the line of business via an introducing dealer (an outside investment/securities dealer/firm). The advisors who work for these dealers/firms introduce the clients to the dealers/firms, but the actual investment products are held with one of the Bank's lines of business, which is the carrying dealer. The investment account opened with the line of business is in the name of the actual client.

Each of the lines of business have an Agreement with the introducing dealers. Each of these agreements (read ‘agent agreement’) has AML/Client Identification Provisions in them. The AML/Client Identification Provisions are specific to the investment product.

Bank A issues investment loans for investment account/products opened/offered by their lines of businesses. The loan accounts are in the name of the actual client.

Question: Bank A does not identify clients for their loan product; they rely on their lines of businesses’ agreements with the introducing dealers, whereby the introducing dealer is viewing the ID face-to-face. Is this in line with the regulations? (We assume Bank A is using the affiliate method, and their line of business is using the agent method).

Answer:

Pursuant to subsection 64.1(1) of the PCMLTFR, a person or entity that is required to take measures to ascertain identity under subsection 64(1) or (1.1) may rely on an agent or mandatary to take the identification measures described in that subsection, but only if that person or entity has entered into a written agreement with that agent or mandatary for the purposes of ascertaining identity. The agent or mandatary would then have to be in a position to identify the client at the time of the transaction, either face-to-face or using a combination of the non-face-to-face methods, as is the requirement.

For the affiliate method, as per subparagraph 64(1)(b)(i) of the PCMLTFR, a reporting entity shall ascertain the identity of a person, when that person is not physically present, by:
• obtaining the person’s name, address and date of birth;
• confirming that an entity, referred to in any of paragraphs 5(a) to (g) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), that is affiliated with the entity ascertaining the identity of the person, has identified the person by referring to the person’s birth certificate, driver’s license, provincial health insurance card (if permitted), passport or other similar document; and
• verifying that the name, address and date of birth in the record kept by that affiliated entity corresponds to the information obtained.

Based on subsection 64(1.2) of the PCMLTFR, in this context, an entity is affiliated with another entity if one of them is wholly-owned by the other or both are wholly-owned by the same entity. Based on the information you have provided, it appears the three lines of business and Bank A are affiliated because the first three entities are wholly owned subsidiaries of the last.

Therefore, if Bank A is able to (1) obtain the client’s name, address, and date of birth, (2) confirm with one of its affiliates that it has ascertained the identity of the client by referring to any of the prescribed documents, and (3) verify that the name, address, and date of birth in the record kept by that affiliated entity corresponds to the information obtained, then Bank A has ascertained the identity of its client in accordance with subparagraph 64(1)(b)(i) of the PCMLTFR.

Date answered: 2015-05-14

PI Number: PI-6308

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)(b)(i), 64(1.2), 64.1(1)

ID for Mortgage Renewals

Question:

Do borrowers have to provide updated identification on mortgage renewals if the identification originally obtained has expired at renewal time?

Answer:

Section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that every financial entity shall ascertain the identity of a person, corporation, or entity other than a corporation, at the time an account is opened. With respect to mortgage renewals, the reporting entity must consider whether an account is opened. If the reporting entity opens an account, the reporting entity is required to fulfill all related obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations, including the identification of the client in accordance with section 64 of the PCMLTFR and keeping records in accordance with section 14 of the PCMLTFR. Please note that the facts are crucial in making a determination. Unfortunately, this is not a determination that can be made by FINTRAC.

Date answered: 2015-04-28

PI Number: PI-6302

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 14, 54, 64

Personal ID for business account

Question:

We have recently been contacted by our Bank 1, requiring us to update our account record. Our company was incorporated in the 1980s and has been in business since. We have had accounts with two other banks for several years. Instead of asking for a corporate cheque for validation, Bank 1 asks for SINs and a personal cheque from each of the signatory directors (3 for their bank). After explaining to them that most of our transactions will be performed by our account administrator, Bank 1 asked for the SIN and personal cheque of our accounts administrator also.

I am reading FINTRAC Guidelines about Corporations and as far as I see, there is no requirement of individual information. "In the case of a corporation, in addition to confirming its existence, you also have to determine the corporation's name, address and the names of its directors." By contacting our two other banks, Bank 1 should be able to validate "the corporation's name, address and the names of its directors". In fact, our Bank 1 account is tied to our other two bank accounts.

Are you able to confirm whether this requirement is legitimate? In particular, can you direct me to the Act and regulations that require that?

Answer:

As per paragraph 54(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, financial entities have to ascertain the identity of any individual who signs a signature card for an account that they open (other than a credit card account) before any transaction (other than the initial deposit) is carried out. In cases where a business account has more than three individuals authorized for it, they have to ascertain the identity of at least three of those individuals.

Date answered: 2015-04-21

PI Number: PI-6301

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54(1)(a)

UNLP acceptable form of ID

Question:

Please confirm if the UNLP (united nations laisser passer) travel document is acceptable as ID under the PCMLTFA.

Answer:

The identity of a person shall be ascertained by referring to the documents listed under subsection 64(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), namely, "the person’s birth certificate, driver’s licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document.”

As explained in Guideline 6, there are three conditions that will make a document acceptable for identification purposes:
- The document must have a unique identifier number
- The document must have been issued by a provincial, territorial or federal government
- The document also has to be valid and cannot have expired

These conditions are applicable at the time the identity is ascertained.

After conducting some research, it appears that the UNLP travel document is used much in the same way a regular government issued passport is. However, it appears to only be issued by the United Nations to employees of the UN, and other international organizations and according to the UN's “Guide to the Issuance of United Nations Travel Documents”, it can only be used to facilitate official travel.
 
Given that the United Nations is an international organization and not a “provincial, territorial or federal government”, the UNLP travel document does not satisfy the requirements specified in the Guidelines and is therefore not acceptable for the purposes of ascertaining i.d. as per the PCMLTFR.

Date answered: 2015-04-15

PI Number: PI-6299

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)(a)

Matricula Consular de Alta Seguridad (MCAS) card acceptable as ID?

Question:

Is the “Matricula Card,” a card issued by the Mexican consulate, an acceptable document for ascertaining identity under paragraph 64(1)(a)?

Answer:

The person's identity is ascertained using the documents listed in paragraph 64(1)(a) of the PCMLTFR “by referring to the person's birth certificate, driver's licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document.”

As explained in our guidelines (in the “How to ascertain the identity of an individual?” section), three conditions must be met so that an identification document is acceptable for identification purposes:
• The document has a unique identification number
• The document must have been issued by a provincial or territorial government or by the federal government
• The document must also be valid and not have expired

Moreover, we have said in the past that certain ID documents issued abroad may be acceptable if they are equivalent to an acceptable Canadian document. After doing some research, it appears that the Matrícula Consular de Alta Seguridad (MCAS) is an identification document issued by the Mexican government (Mexican consulate) to Mexicans residing outside Mexico. It attests to the nationality and identity of its holder. It also indicates that the holder is domiciled and “registered” in the issuer's electoral district in Mexico. It has a unique identification number and an expiry date, which allows us to determine whether it is valid or not.

In our opinion, this identity document is an acceptable ID document for ascertaining identity.

Date answered: 2015-03-16

PI Number: PI-6294

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64 (1) a)

Client Identification for a Dower Right

Question:

A real estate broker has a potential client that they would sell a property for. The client is the husband who is on the title. The wife is on the Dower Right, which means they need her permission to sell the property, but she is not on the title, nor is she a client. Do they need to ID her as a client? Also, do they need any other additional information on the client information records?

Answer:

Paragraph 59.2(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), […] in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction”.

That means, if the wife, who is on the Dower Right, is not the person or one of the persons conducting the transaction, there is no requirement to ascertain her identity.

With respect to the client information records, paragraph 39(1)(b) of the PCMLTFR states that “Subject to subsections (3), (4), (5), (6), 52(2) and 62(2), every real estate broker or sales representative shall, when engaging in an activity described in section 37, keep the following records […] a client information record in respect of every purchase or sale of real estate”. Subsection 1(2) of the PCMLTFR defines client information record as “a record that sets out a client’s name and address and […] if the client is a person, their date of birth and the nature of their principal business or their occupation, as applicable”.

There is no legislative or regulatory requirement to keep a record of the Dower Right. However, it is our understanding that some real estate brokers or sales representatives will keep a record of it. Again, there is no legislative or regulatory requirement under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations to keep such a record. We understand that this is a best practice that establishes who has rights on the real estate property.

Please note that when a real estate broker or sales representative is required to provide documents to one of FINTRAC’s Compliance Officers it is for the purpose of examining whether the real estate broker or sales representative’s clients were properly identified as per subsection 64(1) of the PCMLTFR as well as whether records were properly kept as per subsection 39(1) of the PCMLTFR. If available, the record on the Dower Right may be requested in order to facilitate FINTRAC’s examination.

Date answered: 2015-03-02

PI Number: PI-6289

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 1(2), 39(1)(b), 59.2(1)(a), 64(1)

Attestation method - Commissioner of oaths

Question:

The guidelines state that an identification document may be seen by a commissioner of oaths or a respondent.
Attestation method
Obtain the attestation establishing that an original identification document for the person was seen by the commissioner of oaths or a respondent. The attestation must be issued on a legible photocopy of the document. However, according to the Quebec Department of Justice, a commissioner of oaths may only swear in an individual who declares a copy as exact and may not themselves declare that the copy is exact.

Someone holding the position of commissioner of oaths may not certify that a copy of a document is consistent with the original. They can, however, swear in someone who presents the copy and states that it is consistent with the original document. However, this statement does not give an authentic value to this copy.

There seems to be a contradiction between the two pieces of legislation. Could you confirm whether commissioners of oaths in other provinces are authorized to certify copies of documents?

Question 1(b): If so, which provinces are they?

Question 2: To your knowledge, are there any exemptions for commissioners of oaths in Quebec so that they can perform this task as required by FINTRAC?

Answer:

Pursuant to subparagraph 64(1)(b)(ii) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a combination of non-face-to-face identification methods can be used to ascertain an individual’s identity when required. As per Schedule 7 – Part A of the PCMLTFR, the attestation method consists of “obtaining an attestation from a commissioner of oaths in Canada, or a guarantor in Canada, that they have seen one of the documents referred to in paragraph 64(1)(a) of these Regulations.”

The information provided on the Ministry of Justice Quebec website, regarding the restrictions of commissioners of oaths, indicates that a commissioner of oaths may not provide an attestation for a certified true copy; However, as indicated in the PCMLTFR, this method does not require the attestation of a certified true copy, but rather a confirmation that a commissioner of oaths has seen a document referred to in paragraph 64(1)(a). Therefore, when a commissioner of oaths attests they have seen one of these documents, it would satisfy the requirements of the attestation method.

Date answered: 2015-02-18

PI Number: PI-6287

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64(1)(a), 64(1)(b)(ii), Schedule 7 - Part A

Identification of clients when their accounts follow a representative who changes companies

Question:

I work for a securities broker. I have hundreds of clients that I have identified over the years. Some have been with me for over 10 years.

My question is the following: If I change firms and my clients follow me, do I have to identify them again?
I believe I understand from your guidelines that it is my NEW FIRM that should identify them.

Answer:

Pursuant to section 57 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), and subject to section 62 and section 63, every securities dealer shall ascertain the identity of a person, corporation, or entity other than a corporation, at the time an account is opened. An exception to the requirement to ascertain identity exists at section 63(1) of the PCMLTFR and states that “where a person has ascertained the identity of another person in accordance with section 64, the person is not required to subsequently ascertain that same identity again if they recognize that other person.” We have said in the past that this exception is attached to the person ascertaining the identity of the client, not the RE.

That means, if a person has ascertained the identity of another person and:
• recognizes the client and has the record, there is no need to ascertain the same identity;
• recognizes the client and does not have the record, the person needs to ascertain the identity of the client;
• does not recognize the client, the person needs to ascertain the identity of the client.

Therefore, this exemption for client identification will only apply when the same employee (who performed the identification with the first firm) is now working with another firm, and recognizes the client, and has kept the record.

Having that said, the responsibility to ascertain identity ultimately lies with the reporting entity acquiring the accounts. The acquiring entity must first consider whether new accounts are opened in order to determine the associated identification obligations.

Again, we have said in the past, there is no account opening if a reporting entity transfers over client accounts where:
• Clients were previously identified and records kept in accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated regulations, or, legislative requirements to ascertain the identity did not exist at the time the account was opened (prior to June 12, 2002);
• Only immaterial changes were made to the account; and
• Transactional history follows.

The acquiring entity is responsible for ensuring that the acquired client accounts were previously identified in accordance with section 64 of the PCMLTFR and that records were kept in accordance with section 23 of the PCMLTFR. If the acquiring entity determines that no accounts are opened, there is no legislative requirement for the acquiring entity to repeat the process to ascertain the identity of each newly acquired account holder. In the event that the accounts are acquired from a non-reporting entity, there will always be an account opening situation and the acquiring entity must ascertain the identity and keep records of each newly acquired account holder. In situations like these, the clients were not previously identified and records were not kept in accordance with the PCMLTFA and its associated regulations, since the non-reporting entity is not subject to Part 1 of the PCMLTFA. Similarly, should the acquiring entity add any account(s) to the profile of an acquired client, the acquiring entity shall ascertain the identity of the client at the time the new account is added. The exceptions outlined in paragraph 62(1)(c) and section 63 of the PCMLTFR, pertaining to ascertaining the identity, would not apply.

Furthermore, in accordance with subparagraph 71(1)(c)(i) of the PCMLTFR, every reporting entity is required to carry out a risk assessment of their clients and business relationships. As such, an acquiring entity is required to conduct a risk assessment for each of the acquired account holders. Should the risk assessment lead to a high risk designation, then the acquiring entity would be required to carry out special measures for identifying clients, keeping records, and monitoring financial transactions in respect of the activities that pose a high risk, in accordance with subsection 9.6(3) of the PCMLTFA, and further detailed in section 71.1 of the PCMLTFR.

Date answered: 2015-02-18

PI Number: PI-6285

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 23, 57, 62(1)c), 63(1), 64, 71(1)(c)(i)

Act: Part 1, 9.6(3)

Obligations and Exception for a type of Trust account

Question:

What record keeping and client identification obligations do we have for a specific type of trust account we open? Also, do the exceptions listed under section 62 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) apply?

Answer:

Based on the information you provided, it is our understanding that you open this specific type of trust account for companies who receive provincial approval to operate a community economic development investment fund (CEDIF) and “raise capital through an exempt public offering in Nova Scotia.” These trust accounts are opened in the name of your entity, and its employees are identified as signers for the account, however, it appears that instructions for the account are given by the CEDIF approved company.

Reporting entities subject to the PCMLTFA have record keeping and reporting obligations, including client identification obligations. They must take certain measures to ascertain the identity of individuals or to confirm the existence of entities.

Having said that, paragraph 62(2)(l) of the PCMLTFR provides an exception to record-keeping and ascertaining identity for reporting entities when “the opening of an account in the name of, or in respect of which instructions are authorized to be given by, a financial entity, a securities dealer or a life insurance company or by an investment fund that is regulated under provincial securities legislation” occurs. Of course, the exceptions are not mandatory, so it is for the reporting entity to decide whether it will apply them or not.

Date answered: 2015-01-16

PI Number: PI-6279

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6G

Regulations: 62(2)(l)

Clarifications on Guideline 6G - opening a credit card account

Question:

I am requesting additional clarification on Guideline 6G, more specifically with regards to the obligation to ascertain clients’ identity when opening a credit card account.

Answer:

While it is in line with Guideline 6G, I will start by highlighting the obligation under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) section 54.1, which states “Subject to subsections 62(1) and (2) and section 63, every financial entity shall
(a) where the financial entity opens a credit card account in the name of a person, ascertain their identity in accordance with subsection 64(1.1)”,
I will also highlight that a financial entity opening a credit card account with a maximum limit of $1500 may use the additional options as stated in the PCMLTFR in subparagraph 64(1.1) b) (iii): “subject to subsection (1.3), where the person has no credit history in Canada and the credit limit on the card is not more than $1,500, by using a combination of any two identification methods referred to in any of Parts A, B and C of Schedule 7.”
Consistent with this, Guideline 6G states that there are additional methods available only for credit card accounts:

“If you have to ascertain the identity of an individual who is not physically present at the opening of a credit card account, you can use either option 1 or option 2 as described above. For option 2, additional methods are available as follows:
• Consult a reputable, independent data source that is compiled from a telecommunications directory. It must contain the names, addresses and telephone numbers of individuals to confirm the individual's name, address and telephone number.
• If you are ascertaining the identity of an individual credit card applicant who has no credit history in Canada, for a credit limit of no more than $1,500, the available methods also include the following:
o Obtain a utility invoice issued by a Canadian utility in the name of the individual and that includes the individual's address.
o Obtain a legible photocopy or an electronic image of an identification document for the individual.
o Obtaining a legible photocopy or an electronic image of a deposit account statement issued by a financial entity in the name of the individual.”

Your question is specific to accounts opened for an individual with no credit history, who is not physically present. You ask: “Now suppose some time later (be it one day, one month or five years....), the boarded credit card account asks for more than a $1,500 credit limit; what are the requirements?” The PCMLTFR includes exceptions to the obligations to ascertain identity under 54.1 (a), such as under paragraph 61(1)(c) that reads “a person who already has an account with the financial entity(….)”.

That said, while there is no obligation to ascertain the identity of the client again once the account is opened, the PCMLTFR requires the reporting entity to monitor the business relationship it enters into with its clients. In this case, the reporting entity would have a business relationship with the client because that client holds an account with the entity; and as per the definition of a business relationship under the PCMLTFR, this business relationship would include “all transactions and activities relating to those accounts”. The required ongoing monitoring is also defined in the PCMLTFR as:
“monitoring on a periodic basis based on the risk assessment undertaken in accordance with subsection 9.6(2) of the Act and subsection 71(1) of these Regulations, by a person or entity to which section 5 of the Act applies of their business relationship with a client for the purpose of
(a) detecting any transactions that are required to be reported in accordance with section 7 of the Act;
(b) keeping client identification information and the information referred to in sections 11.1 and 52.1 up to date;
(c) reassessing the level of risk associated with the client’s transactions and activities; and
(d) determining whether transactions or activities are consistent with the information obtained about their client, including the risk assessment of the client.”

Therefore, while there is no obligation to ascertain the identity of the client in the case you have mentioned, there would still be an obligation for the credit card emitter to periodically monitor its business relationship as mentioned above. This would include keeping client identification up to date and reassessing the level of risk associated with the client’s activities, and in this case, the credit limit change would likely be a factor in this assessment.

Date answered: 2014-12-16

PI Number: PI-6272

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54.1, 64(1.1) b) (iii)

Act: 5, 9.6

Ascertaining the identity of the person who signed the signature card

Question:

The money laundering regulations do not stipulate a time and place for signing the signature card. Only section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) indicate that the identity of the person who signs the signature card must be ascertained prior to all transactions, except for the initial deposit. However, in the case of student accounts, the identity of the person who signs the signature card is usually ascertained during the first withdrawal, allowing a number of deposits to be made following the initial deposit.

That way, a student can make a number of deposits into the account (deposits at school or by transfers) before the signature card is signed and before the identity of the student (or his/her parent, depending on the situation) has been ascertained.

We understand that FINTRAC is aware of this situation and that to date, no non-compliance findings have been made in relation to this procedure.

ABC would therefore like confirmation from FINTRAC that it is compliant with the requirements for opening an account, even though a signature card for a student account may have been signed upon the first transaction, and not during the first transaction following the initial deposit.

Answer:

We agree with ABC’s statement that neither the Proceeds of Crime (Money Laundering) and Terrorist Financing Act(PCMLTFA), nor its regulations, specify exactly when the signature card has to be signed and that “Only section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) indicate that the identity of the person who signs the signature card must be ascertained prior to all transactions, except for the initial deposit.”

In this case, FINTRAC is of the opinion that the fact that the signature card was not created before the identity of the student (or his/her father, mother or guardian under subsection 54(2) of the PCMLTFR) was ascertained does not constitute a violation of the PCMLTFA or its regulations.

Date answered: 2014-12-16

PI Number: PI-6271

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54

Clarification regarding the non-face-to-face identification methods.

Question:

Does the written confirmation (obtained for the attestation method) have to be an original (fresh ink signed copy) or will a photocopy of the confirmation suffice? Also, I would like to confirm how recent a cheque has to have cleared to be considered valid for identity verification purposes? i.e. Up to 6 months or 1 year ago?

Answer:

Pursuant to subparagraph 64(1)(b)(ii) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a combination of non-face-to-face identification methods can be used to ascertain an individual’s identity when required. As per Schedule 7 – Part A of the PCMLTFR, the attestation method consists of obtaining an attestation from a commissioner of oaths in Canada, or a guarantor in Canada, which states they have seen one of the documents referred to in paragraph 64(1)(a). It is further stated that “the attestation must be produced on a legible photocopy of the document.” As such, only the originally signed attestation can be provided to satisfy the requirements of this method.

To address your second question, the cleared cheque method consists of confirming that a cheque written by the individual, was cashed and cleared through the individual's deposit account with a financial entity, other than an account referred to in section 62 of the PCMLTFR. As outlined in subsection 64(1.3) of the PCMLTFR, “a combination of methods referred to in subparagraph (1)(b)(ii) or (1.1)(b)(ii) or (iii) shall not be relied on by a person or entity to ascertain the identity of a person unless

(a) the information obtained in respect of that person from each of the two applicable identification methods is determined by the person or entity to be consistent; and
(b) 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.”

Therefore, the information that the reporting entity finds using the combination of identification methods has to be consistent between methods, and consistent with the information, if any, already in a record kept by the reporting entity. For this reason, there is no specific time limit for which a cheque has to have been cleared for the purposes of the cleared cheque method, so long as the information obtained is consistent with that of the other method used as well as any other information obtained.

Date answered: 2014-12-15

PI Number: PI-6270

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: Schedule 7 – Part A, 64(1)(b)(ii), 64(1.3)

Clarification on Guideline 6E

Question:

Are the registered accounts mentioned in the list under Section 3.1, under Guideline 6 E, exempt from all the record keeping requirements under Guideline 6E or are they just exempt from Section 3.3-3.5 and Section 8 under 6E? Furthermore, does guideline 6E reflect an exact interpretation of the regulations?

Answer:

The exceptions to record keeping and ascertaining identity are laid out in subsections 62(1) to (5) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). In line with these sections, Guideline 6E lists the circumstances under which securities dealers are exempted from the obligations to keep certain records and ascertain their clients’ identity.
The exemptions mentioned in section 3.1 of Guideline 6E explain that:
“You do not have to keep any of the records described in subsections 3.3 to 3.5, or in section 8, when you open any of the following accounts:”
• 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;
• for the purchase of a registered annuity policy or a registered retirement income fund;
• for the deposit and sale of shares from a corporate demutualization or the privatization of a Crown corporation;
• in the name of an affiliate of a financial entity if the affiliate carries out activities similar to those of a financial entity, life insurance company or securities dealer;
• for 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;
• an account established pursuant to the escrow requirements of Canadian securities regulators or Canadian stock exchange or any provincial legislation;
• the opening of an account for, or for which instructions are authorized by, a financial entity, a securities dealer, a life insurance company or an investment fund regulated by provincial securities legislation;
• an account opened solely to provide customer accounting services to a securities dealer; or
• where the account holder or settlor is a federally or provincially regulated pension fund. “

and section 4.2 of Guideline 6E states: “You do not have to ascertain the identity of clients as described in subsections 4.5, 4.6 or 4.8, nor do the requirements described in section 5, 6 or 8 apply, in the following situations:
• the opening of an account 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;
• the opening of an account for the purchase of a registered annuity policy or a registered retirement income fund;
• any transaction, including opening an account for the transaction, that is part of a reverse mortgage or structured settlement;
• the opening of an account for the deposit and sale of shares from a corporate demutualization or the privatization of a Crown corporation;
• the opening of an account in the name of an affiliate of a financial entity if the affiliate carries out activities similar to those of a financial entity, life insurance company or securities dealer;
• the opening of an account for 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;
• the opening of an account established pursuant to the escrow requirements of Canadian securities regulators or Canadian stock exchange or any provincial legislation;
• the opening of an account for, or for which instructions are authorized by, a financial entity, a securities dealer, a life insurance company or an investment fund regulated by provincial securities legislation;
• the opening of an account solely to provide customer accounting services to a securities dealer; or
• the opening of an account where the account holder or settlor is a federally or provincially regulated pension fund.”

If your client’s account opening is for a registered plan mentioned in subsections 62(1) to (5) of the PCMLTFR, then both record-keeping and obligations to ascertain identity are captured under the exemption.
Obligations related to third party determinations, are laid out in the PCMLTFR.
• in section 8, and apply when a Securities Dealer has to keep a record for a Large Cash Transaction (no exemption; 3rd party determination is required.);
• in section 9, where a signature card or account opening record is kept (but is subject to the exemptions above: 3rd party determination is not necessarily required.);
• in section 10, where a client information record has to be kept (but is subject to the exemptions above: 3rd party determination is not necessarily required.);

Date answered: 2014-12-09

PI Number: PI-6267

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 8, 9, 10, 62(1) to (5)

Confirmation of a Deposit Account - Non face-to-face identification

Question:

I've received a policy position in the past stating that micro-withdrawals and micro-deposits cannot be used as a confirmation of a deposit account under Schedule 7 of the PCMLTFR. The reason provided was that there was no authentication of:
(a) a match between the customer's name and the name on the account; and
(b) the type of account to which the transaction was pushed.

More recently, I have been informed that some payment providers have the capacity to match the customer's name to the name on the account (and will not process transactions if there is not a match) and return information about the type of account to which the transaction was pushed.

If these conditions are met, would micro-withdrawals and/or micro-deposits be acceptable for use as confirmation of a deposit account provided that:
(a) there was a confirmed name match; and
(b) the account type was confirmed as a deposit account?

Answer:

Subparagraph 64(1)(b)(ii) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that non-face-to-face identification can be done by using a combination of identification methods as set out in Part A of Schedule 7, the confirmation of deposit account method being one. This method of ascertaining a person’s identity consists of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of the PCMLTFR. For the deposit account method, paragraph 67(c) of the PCMLTFR requires that the client name, the deposit account number, the financial entity name, and the date of the confirmation be recorded. Therefore, if the payment provider confirms the client name, the deposit account number, the financial entity name, and the date of the confirmation, then yes, the micro-withdrawals and/or micro-deposits is an acceptable means to confirm a deposit account with a financial entity as per Part A of Schedule 7 of the PCMLTFR, and would satisfy one of the two combination methods required.

Date answered: 2014-12-09

PI Number: PI-6266

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: Schedule 7, 62, 64(1)(b)(ii), 67©

A screen shot as a deposit account method

Question:

Specific to the confirmation of deposit account method, would a screen shot of an individual’s online bank account with a financial entity be an acceptable means to confirm a deposit account?

Answer:

Subparagraph 64(1)(b)(ii) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that non-face-to-face identification can be done by using a combination of identification methods as set out in Part A of Schedule 7, the confirmation of deposit account method being one method.

As per Schedule 7 – Part A of the PCMLTFR, the identification methods for all reporting entities include:
1. Identification Product Method
2. Credit File Method
3. Attestation Method
4. Cleared Cheque Method
5. Confirmation of Deposit Account Method

According to subparagraph 64(1)(b)(ii), a reporting entity must use one of the following combinations of the identification methods in Schedule 7 – Part A, namely,
(A) methods 1 and 3,
(B) methods 1 and 4,
(C) methods 1 and 5,
(D) methods 2 and 3,
(E) methods 2 and 4,
(F) methods 2 and 5,
(G) methods 3 and 4, or
(H) methods 3 and 5.

You cannot combine the cleared cheque method and the confirmation of deposit account method. However, the confirmation of deposit account method has to be used in combination with another acceptable method. Additionally, for the deposit account method, paragraph 67(c) of the PCMLTFR requires that the client name, the deposit account number, the financial entity name and the date of the confirmation be recorded.

Specific to the confirmation of deposit account method, you are asking whether a screen shot of an individual’s online bank account with a financial entity is an acceptable means to confirm a deposit account. If the screen shot confirms the type of account (i.e. chequing), the name of the account holder, the balance, the account number, and the name of the financial entity, then yes, a screen shot of an individual’s online bank account with a financial entity is an acceptable means to confirm a deposit account. According to previous policy interpretations, an electronically issued bank statement is an acceptable means to confirm whether an individual has a Canadian deposit account.

In rendering this policy interpretation, FINTRAC has considered previous policy interpretations regarding sufficient and acceptable means to confirm whether an individual has a deposit account with a Canadian financial entity. Previously determined sufficient and acceptable means include:
• a copy of the client’s bank statement
• a legible fax or scanned copy of a bank statement; there are no legislative requirements under the PCMLTFA that this copy be notarized
• an original bank statement addressed to the client that contains all of the information

Furthermore, in a situation where a credit card applicant has no credit history in Canada, Schedule 7, Part C, item 4 of the PCMLTFR allows for the use of “a legible photocopy or electronic image of a deposit account statement issued by a financial entity in the name of the person.”

The purpose of the identification methods for reporting entities is to compare if the individual’s information is consistent with what they have in their records, and is consistent with the information obtained using another method to ascertain the identity of the client. In addition, the Regulations do not prescribe how reporting entities must meet the requirements of paragraph 67(c) of the PCMLTFR in confirming the person has a deposit account.

Date answered: 2014-12-05

PI Number: PI-6265

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: Part A of Schedule 7, 64(1)(b)(ii), 67c)

Ascertaining identity of an individual - deposit account method

Question:

In regards to the confirmation of deposit account method, used to ascertain id, will an interac online payment satisfy the requirements for this method?

Answer:

Subparagraph 64(1)(b)(ii) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that non-face-to-face identification can be done by using a combination of identification methods as set out in Part A of Schedule 7, the confirmation of deposit account method being one method.

As per Schedule 7 – Part A of the PCMLTFR, the identification methods for all reporting entities include:
1. Identification Product Method
2. Credit File Method
3. Attestation Method
4. Cleared Cheque Method
5. Confirmation of Deposit Account Method

According to subparagraph 64(1)(b)(ii), a reporting entity must use one of the following combinations of the identification methods in Schedule 7 – Part A, namely,
(A) methods 1 and 3,
(B) methods 1 and 4,
(C) methods 1 and 5,
(D) methods 2 and 3,
(E) methods 2 and 4,
(F) methods 2 and 5,
(G) methods 3 and 4, or
(H) methods 3 and 5.

That being said, the confirmation of deposit account method must be used in combination with another acceptable method.

Based on our understanding of the information you provided, namely, “ABC works by sending the user to their bank’s website to authorize the payment,” an Interac online payment would not satisfy the confirmation of deposit account method.

Previous guidance has stated that in addition to confirming a deposit account by means of copy of the client’s bank statement, a legible fax or scanned copy of a bank statement, an original bank statement addressed to the client that contains all of the information, or electronically issued statements, a reporting entity can confirm a deposit account by confirming verbally with the financial entity where the account is held, by letter from that financial entity to either the client or the reporting entity, or by email (as long as it is indicated that it is a deposit account).

The fact that ABC sends the user to their bank’s website to authorize payment, does not confirm the person actually holds the account, but merely provides that the person has access to the deposit account. Therefore, based on our understanding, Interac online payments alone do not meet the criteria of confirmation that a person holds a deposit account.

Date answered: 2014-12-05

PI Number: PI-6264

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: Part A of Schedule 7, 64(1)(b)(ii)

International adviser exemption - Covered?

Question:

Our question concerns ABC, who is a foreign securities dealer and whether it is required to ascertain identity?

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.” Paragraph 5(g) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) excludes from the definition of securities dealer “persons who act exclusively on behalf of such an authorized person or entity.” In the past, we have established that foreign securities dealers (including those relying on the international adviser exemption, are authorized by the province to be engaged in the activities described under subsection 1(2) of the PCMLTFR. Therefore, such a securities dealer has to have in place policies and procedures consistent with reporting, record keeping, client identification and compliance regime requirements for its Canadian activities only.

Based on the information you have provided, it would appear as though ABC is subject to the PCMLTFA and its associated regulations. Although you state that “ABC relies on the international adviser exemption in each of the Canadian Provinces” and “ABC does not believe that its private placement business is subject to Canadian anti-money laundering requirements”, ABC is still responsible for reporting to FINTRAC, when applicable.

Additionally, pursuant to section 11.1 of the PCMLTFR, ABC must obtain beneficial ownership information, and take reasonable measures to confirm the accuracy of that information, in relation to account openings and transactions for clients that are corporations or entities, other than corporations.

Date answered: 2014-12-02

PI Number: PI-6263

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 1(2), 11.1, 64

Act: 5(g)

Real Estate transactions

Question:

As the client of a real estate agent, I am seeking clarification on what information I must provide to satisfy the requirements which real estate agents and brokers are subject to under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated regulations.

Answer:

Real estate agents or brokers, who are subject to the PCMLTFA, will require information from their clients in order to meet their obligations.

They are required to keep a receipt of funds or large cash transaction record and a client information record, for which they must then ascertain identity and carry out a third party determination (client information or large cash transaction record requirement). According to paragraphs 59.2(1)(a), (b), and (c) of the PCMLTFR, real estate agents or brokers must ascertain the identity of every person who conducts the transaction, and confirm the existence of the corporation or the entity on whose behalf the transaction is conducted.

As such, the client should be prepared to: a) be identified in accordance with subsection 64(1) of the PCMLTFR, and b) provide information confirming the existence of the corporation (if applicable).

FINTRAC’s Guideline 6B: Record Keeping and Client Identification, for the Real Estate sector, available on the FINTRAC website, provides additional details regarding the required elements of the client information record and identifies information that you, as the client of the real estate agent, should be ready to provide.

Date answered: 2014-11-13

PI Number: PI-6256

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2(1), 62(1)

Acquisition of a credit card portfolio

Question:

1) What are the rules for identification or record keeping when an organization acquires credit card accounts that have already been used and validated?
2) Is there any guidance which discusses the record keeping or identification requirements for financial entities when acquiring a portfolio of credit card accounts?
3) In the verifying identity section of the guidelines, it lists a number of possible documents to use to verify identity. Some have photos included and others do not. Is it required anywhere in the PCMLTFA or its associated Regulations that a photo id must be presented?

Answer:

When a reporting entity acquires client accounts, it must consider whether the accounts are already opened in order to determine its identification and record keeping obligations. FINTRAC has determined that there is no account opening in a situation where an entity acquires client accounts from another entity when:
• the clients were previously identified and records were kept in accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations or, the accounts were opened prior to the legislative requirements to ascertain identity coming into force on June 12, 2002;
• only immaterial changes were made to the account such as, the accounts were given new numbers, logos and branding, new cards were issued and ancillary services were added or removed; and
• the transactional history of the accounts follows.

Client Accounts Acquired from a Reporting Entity
When the acquiring reporting entity determines that there are no accounts being opened from the acquisition of accounts from another reporting entity, there is no legislative requirement to repeat the process of ascertaining the identity of each newly acquired account holder.
The acquiring reporting entity is responsible for assessing the acquired client accounts against the criteria outlined above in the section “No Account Opening”.
Should the acquiring reporting entity open any additional account(s) for an acquired client, the acquiring reporting entity must ascertain the identity of the client at the time the new account is opened. The exceptions outlined in paragraph 62(1)(c) and section 63 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), pertaining to ascertaining identity, would not apply.

Client Accounts Acquired from a Non-Reporting Entity
When client accounts are acquired from a non-reporting entity, there is an account opening situation and the acquiring reporting entity must ascertain the identity and keep records pertaining to each newly acquired account holder. This is because the non-reporting entity was not subject to the PCMLTFA, therefore its clients were not previously identified and records were not kept in accordance with the PCMLTFA and its associated Regulations.

Risk Assessment for All Acquired Client Accounts
Every reporting entity is required to carry out a risk assessment of their new and existing clients and business relationships. As such, an acquiring reporting entity is required to conduct a risk assessment of each newly acquired account holder and to keep a record of the purpose and intended nature of the business relationship. This information has to be reviewed on a periodic basis and kept up to date. If the acquiring entity identifies a client as high-risk, the business relationship with that client must be monitored more frequently, the client identification information must be updated more frequently and other enhanced measures must be taken to mitigate the risk.

Subsection 54.1(a) of the PCMLTFR states that “Subject to subsections 62(1) and (2) and section 63, every financial entity shall […] where the financial entity opens a credit card account in the name of a person, ascertain their identity in accordance with subsection 64(1.1)”.

There are three conditions that will make a document acceptable for identification purposes:
• The document must have a unique identifier number
• The document must have been issued by a provincial, territorial or federal government
• The document also has to be a valid one and cannot have expired

These conditions are applicable at the time the identity is ascertained. The PCMLTFA and its associated Regulations do not prescribe that a reporting entity use documents with a photo to ascertain identity. However, pursuant to subsection 9.6(3) of the PCMLTFA, if a reporting entity considers that the risk of a money laundering offence or a terrorist financing offence in the course of their activities is high, the reporting entity shall take prescribed special measures for identifying clients, keeping records and monitoring financial transactions in respect of the activities that pose the high risk. The prescribed special measures are those outlined in section 71.1 of the PCMLTFR. In addition to enhanced identification measures as per 71.1(a), reporting entities are required to take any other enhanced measures to mitigate the risks identified including those outlined in 71.1(b)(i) and 71.1(b)(ii). One of these can be to use a document with a photo to ascertain identity.

Date answered: 2014-09-29

PI Number: PI-6242

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6G

Regulations: 54.1(a) , 62(1), 71.1

Act: 9.6(3)

Large cash deposits conducted via armoured car

Question:

Can you advise of the current policy interpretation for the required conductor info:
• When the large cash transaction is conducted via armoured car and the armoured car goes to a branch of a FI; and
• When the large cash transaction is conducted via armoured car and the armoured car goes to a processing centre.

In short, do we need the actual name of the armoured car driver in Part E1 and E2?

Answer:

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.
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”.
Having said that, if the driver uses a quick drop and then the conductor’s name does not need to be provided.
With respect to your second question, unfortunately, there is not enough information to be able to make a determination.

Date answered: 2014-09-24

PI Number: PI-6239

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G, 7

Regulations: 12(1)(a), 53

Reporting requirements and obligations for real estate agents when selling property to foreign clients.

Question:

What are the reporting requirements and obligations for real estate agents when selling property to foreign clients?

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” and the Regulations do not make a distinction based on whether the real estate agent or broker is acting for a foreign client. Consequently, the obligations for Real Estate agents are the same whether their clients are in Canada or not.

In addition, you may find the information contained in Guideline 6B under section 3.6 to be helpful in meeting your identification obligations for clients not physically present.

Date answered: 2014-09-22

PI Number: PI-6238

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 37

Options available to money services businesses for ascertaining identity in non-face-to-face situations

Question:

What are the options available to money services businesses for ascertaining identity in non-face-to-face situations?

Answer:

Pursuant to paragraph 64(2)(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), identity shall be ascertained at the time of the transaction, namely:

(a) the issuance or redemption of money orders, traveller’s cheques or other similar negotiable instruments in an amount of $3,000 or more;
(b) the remittance or transmission of $1,000 or more by any means through any person or entity; or
(c) a foreign currency exchange transaction of $3,000 or more.

The credit Union and the financial institution providing the agent service do not have an affiliation, as defined in the PCMLTFR, so the credit Union cannot rely on the identification previously carried out by the financial institution.

Given that the proposal is to offer these services in a non-face-to-face capacity, the MSB would be required to consider the non-face-to-face options for ascertaining identity, at the time of the transaction. This would entail using one of the combinations of the identification methods set out in Part A of Schedule 7.

Alternatively, pursuant to subsection 64.1(1) of the PCMLTFR, a person or entity that is required to take measures to ascertain identity under subsection 64(1) or (1.1) may rely on an agent or mandatary to take the identification measures described in that subsection only if that person or entity has entered into an agreement or arrangement, in writing, with that agent or mandatary for the purposes of ascertaining identity. That said, the agent would have to be in a position to identify the client at the time of the transaction, either face-to-face or using a combination of the non-face-to-face methods, as is the requirement for the MSB sector.

Date answered: 2014-09-12

PI Number: PI-6234

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 64.1(1), 64(2)(b)

Ascertaining identification using the non-face-to-face Confirmation of Deposit Account Method

Question:

the question is in regard of identification in a non face-to-face relationship surrounding the use of the original bank statement. It would be appreciated if you can confirm whether a dated, signed and scanned copy would meet the regulatory requirement of an original document or whether the original has to be on file?

Answer:

In accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), reporting entities must ascertain the identity of clients in a number of circumstances. Subsection 64(1) of the PCMLTFR outlines the measures for ascertaining identity when a client is not physically present, which are further detailed in Schedule 7. These methods must be used in combination. That is, if a reporting entity is going to use the non-face-to-face methods for ascertaining identification, they must use a combination of at least two of the methods. It is for the reporting entity to determine which combination of two methods they use.

Pursuant to Schedule 7 of the PCMLTFR the Confirmation of Deposit Account Method is meant to ascertain a person’s identity by means of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of the PCMLTFR. Past guidance has been that in addition to confirming a deposit account by means of copy of the client’s bank statement, a legible fax or scanned copy of a bank statement, an original bank statement addressed to the client that contains all of the information, or electronically issued statements , a reporting entity can confirm a deposit account by confirming verbally with the financial entity where the account is held, by letter from that financial entity to either the client or the reporting entity, or even by email (as long as it is indicated that it is a deposit account).

Date answered: 2014-09-12

PI Number: PI-6233

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 62, 64(1)

Non-face to face identification obligations

Question:

For non-face to face identification, where the securities dealer firm wants to:

Confirm that the individual has a deposit account with a financial entity. You could do this by viewing an original bank statement.

Would receiving an Electronic Funds Transfer where afterwards:
a. Account No's are validated
b. Validation of account name is not mandatory and can be done along with trace request

Will this be viewed as a way to confirm that the individual has a deposit account with a financial entity.

Answer:

Subparagraph 64(1)(b)(ii) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that non-face-to-face identification can be done by using a combination of identification methods as set out in Part A of Schedule 7, the confirmation of deposit account method being one. Pursuant to Schedule 7 of the PCMLTFR, the Confirmation of Deposit Account Method, is meant to ascertain a person’s identity by means of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of the PCMLTFR. For the deposit account method, paragraph 67(c) of the PCMLTFR requires that the client name, the deposit account number, the financial entity name and the date of the confirmation be recorded.

The EFT lacks two key components necessary to confirm that the individual has a deposit account with a financial entity. Even when the two proposed steps would be completed, all the necessary information would not be available since:
1) The EFT does not confirm who is the account holder and
2) The EFT does not confirm that the account is a deposit account at a financial entity.
Therefore, the EFT does not meet the legislative requirement of the Confirmation of Deposit Account Method.

Date answered: 2014-09-10

PI Number: PI-6230

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E, 8

Regulations: 64(1)(b)(ii), 67(c)

Client identification

Question:

Could you clarify when a security dealer is considered to be `opening an account” ?

Answer:

It appears that the Securities dealer (SD) is an entity “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”, as per subsection 5(g) of the PCMLTFA, and that they are a securities dealer subject to Part 1 of the PCMLTFA and its associated regulations. As such, the SD is subject to certain legislative requirements, namely:

• reporting STRs, TPRs, LCTRs;
• record keeping;
• having a compliance regime; and
• ascertaining identity.

More specifically, you have asked us to confirm if a SD is considered to be opening an account as per the PCMLTFA when they enter into agreements to distribute funds to clients through two separate channels – a direct channel, and a Broker / Dealer channel. An “account” is not defined in the PCMLTFA and can potentially mean different things depending on the context.

With regard to the “Direct Channel”, the SD has provided the following information:
o “Corporation 1, registered as an EMD, acts in the capacity of a dealer for the Funds in distributing/selling the Funds directly to clients;
o The client relationship is between Corporation 1 and the clients, therefore we must ensure that the Funds are eligible for the clients prior to executing the transaction on their behalf;
o In order to meet our obligations under securities legislation and client identification requirement imposed by AML Legislation, Corporation 1 ensures that steps are taken to established the identity of the clients and to ensure that we have sufficient information;
o Through the Subscription Agreement, KYC form, W-8BEN/W-9 and other supporting documentations, Corporation 1 ensures that we have sufficient information with respect to the clients’:
? Identity and existence; Personal circumstances; Investment needs and objectives; Financial circumstances; Risk tolerance; Investment knowledge and experience; Time horizon.
o Corporation 1 engages in meaningful dialogues with clients throughout the year to ensure any material changes that the clients may have are properly assessed and documented.”

For the Direct Channel as presented by Corporation 1 , and based on the above information, as a securities dealer (SD), Corporation 1 is opening an account in the name of their client.

For the Broker/Dealer Channel, Corporation 1 provided the following information:
o “Corporation 1 is not the dealer in these transactions, but rather the registered Investment Dealer is;
o For these transactions, Corporation 1 merely acts in the capacity of a portfolio manager (PM) and IFM for the Funds;
o The registered Investment Dealer, in its capacity as the dealer, facilitates the transaction in the Funds between their client and Corporation 1 through FundSERV;
o The client relationship is between the Investment Dealer and the client;
o The registered Investment Dealer is responsible for, among other things, supervisory oversight, obtaining KYC information, determining the suitability of the trade and other obligations under securities legislation as it relates to the client;
o Notwithstanding the registered Investment Dealer’s obligations, Corporation 1 still requires the Subscription Agreement and the W-8BEN/W-9 forms to be completed along with the tax identification information for all investors for reporting purposes to CRA.”

In this case, for the Broker/Dealer Channel, it is possible that Corporation 1 is opening accounts for their client as a PM (even if those accounts are not for deposit taking purpose) since it seems that they do complete agreement forms that require sufficient client information that would enable them to open accounts with their clients. If Corporation 1 determines that they are opening accounts, they would have all associated obligations. However, if it is just the Investment Dealer that is opening an account, it’s the Investment Dealer – not Corporation 1 – who has obligations under the PCMLTFR since, from a PCMLTFA perspective, the client is dealing with the Investment Dealer, and not with Corporation 1. It is possible that both entities are opening accounts and, therefore, have the associated obligations.

This is also consistent with what we have indicated in the past: “Even if a management mandate is given to a portfolio manager, the client is the person who has the account and who assigns the mandate, so the client must be identified. Ultimately, in this case, the client holding the account is still the person "responsible" for the account and can, at any time, decide to give instructions regarding the account directly (without going through the portfolio manager).”

Date answered: 2014-09-08

PI Number: PI-6228

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Act: 5(g)

Acting as a guarantor for individuals not physically present

Question:

What are the obligations for a real estate developer under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)? Can we have someone acting as a guarantor for individuals not physically present?

Answer:

According to subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “ 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 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 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”.

Should you be a real estate developer, Subsection 39.5(1) of the (PCMLTFR) indicates, “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 on their own behalf or on behalf of a subsidiary or affiliate.
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.

To answer your question in regards to “having someone act as a guarantor for individuals not physically present”, I refer you to Schedule 7, Part A 3(1) of the PCMLTFR which defines the Attestation Method. The Attestation Method is a “method of ascertaining a person’s identity [which] consists of obtaining an attestation from a commissioner of oaths in Canada, or a guarantor in Canada, that they have seen one of the documents referred to in paragraph 64(1)(a) of these Regulations. The attestation must be produced on a legible photocopy of the document (if such use of the document is not prohibited by the applicable provincial law) and must include
a) the name, profession and address of the person providing the attestation;
b) the signature of the person providing the attestation; and
c) the type and number of the identifying document provided by the person.

(2) For the purpose of subsection (1), a guarantor is a person engaged in one of the following professions in Canada:
a) a dentist;
b) medical doctor;
c) chiropractor;
d) judge;
e) magistrate;
f) lawyer;
g) notary (in Quebec);
h) notary public;
i) optometrist;
j) pharmacist;
k) professional accountant (APA [Accredited Public Accountant], CA [Chartered Accountant], CGA [Certified General Accountant], CMA [Certified Management Accountant] PA [Public Accountant] or RPA [Registered Public Accountant]
l) professional engineer (P. Eng. [Professional Engineer, in a province other than Quebec] or Eng. [Engineer, in Quebec])
m) veterinarian.

Should the individual in question meet the requirements as outlined in the PCMLTFR, then yes, the individual would be able to act as the guarantor in this case.

Date answered: 2014-08-22

PI Number: PI-6220

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 1(2), Schedule 7 - Part A 3(1), 39.5(1), 64(1)(a)

Exception under 62(2)(m)

Question:

Can the exception under 62(2)(m) apply to the Public Curator?

Answer:

It must be demonstrated the obligations of the Public Curator make it an "agent of the Crown"; then, since the Public Curator is a person, rather than an entity, the exception provided for in the Regulations can apply.

The Public Curator is not an agent of the Crown:
Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations), a public body is (a) any department or agent of Her Majesty in right of Canada or of a province. The Public Curator is not a department of the Quebec government. Webster's Dictionary defines "Agent" as "One who acts for, or in the place of, another, by authority from him".

When we examine the situation in depth, we find that the definition of "agent" does not correspond to the activities of the Public Curator, for a number of reasons:
• The Public Curator is designated as such by the government for a term of five years and cannot be dismissed.
• The Public Curator or his representative is responsible for "representing persons placed under public tutorship or curatorship". It is understood that the Public Curator, as the legal representative of an incapacitated person, must always act in the interest of the person and safeguard their autonomy. For example, in managing the affairs of a person under curatorship, the Public Curator must act in the person's interest and not in the interest of the government.
• The Public Curator is not subject to the direction of the Minister.
• Pursuant to the Public Curator Act, "The property of which the administration is entrusted to the Public Curator must not be commingled with that of the State."
• The Public Curator or his representative, in carrying out their mandate, act in the interest of the person under curatorship and not in the interest of the Department.
• And, lastly, the Public Curator may appear before the courts to represent the incapacitated person, rather than the State.

The exemption applies to the entity, not the individual.
That being said, the exemption provided for under subsection 62(2)(m) of the Regulations applies to: "instances where the entity in respect of which a record is otherwise required to be kept is a public body." The determining factor in supporting the exemption under 62(2)(m) cannot be applied, since the Public Curator is a person, not a body, when acting in this capacity (section 1 of the Public Curator Act: "The Government shall appoint a person to act as Public Curator.")

The exception provided for in the Regulations cannot, therefore, apply.

Date answered: 2014-08-11

PI Number: PI-6212

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 62(2)(m)

Use of the Cleared Cheque Method as a non-face-to-face identification.

Question:

Can we use the Cleared Cheque Method as a non-face-to-face identification method in combination with another approved method?

Answer:

Pursuant with Schedule 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), the Cleared Cheque Method of ascertaining a person’s identity consists of confirming that a cheque drawn by the person on a deposit account of a financial entity, other than an account referred to in section 62 of these Regulations, has been cleared. FINTRAC has indicated in past that the client opening the account can issue a cheque to the reporting entity opening that account and, once the cheque has cleared, this satisfies the requirements of the Cleared Cheque Method. FINTRAC has not specified how the cheque must be issued, just that the cheque must have cleared.

As such, given that Remote Deposit Capture (RDC) images of cheques are cleared through the Canadian Payments Associations’ payment and clearing system no differently than are paper cheques, FINTRAC takes the position that RDC images of cheques, once cleared, will satisfy the requirements of the Cleared Cheque Method. This method must be used in combination with another approved non-face-to-face method, as outlined in the PCMLTFR.

Date answered: 2014-08-07

PI Number: PI-6209

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: Schedule 7

Clarification on Client identification requirements for securities dealer’s dealings with client located outside Canada

Question:

What are the requirements for a securities dealer's regarding the identification of a client located outside Canada?

Answer:

Section 64(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) outlines measures for ascertaining identity when a client is not physically present. Section 64(1) highlights acceptable identification methods, which are further detailed in Part A Schedule 7. You will note, however, that the non-face-to-face methods often require some connection to Canada (e.g., a Canadian product).

Alternatively, pursuant to subparagraph 64(1)(b)(i), if the person is not physically present, the identity shall be confirmed by:
• obtaining the person’s name, address and date of birth;
• confirming that an entity that carries on activities outside Canada similar to the activities of a person or entity referred to in any of paragraphs 5(a) to (g) of the Act and that is affiliated with the entity has identified the person in accordance with paragraph 64(1)(a); and
• verifying that the name, address and date of birth in the record kept by that affiliated entity corresponds to the information provided in accordance with these Regulations by the person.

For the purposes of subparagraph 64(1)(b)(i), an entity is affiliated with another entity if one of them is wholly-owned by the other or both are wholly-owned by the same entity.

That said, for verifying the identity of clients located outside of Canada and pursuant to subsection 64.1(1) of the PCMLTFR, a person or entity that is required to take measures to ascertain identity under subsection 64(1) or (1.1) may enter into a written agreement or arrangement with an agent or mandatary, who could be located in the foreign country, for the purposes of taking the identification measures described in that subsection. The agent or mandatary then ascertains the identity of the client using the face-to-face identification measures outlined in subsection 64(1). The securities dealer in Canada must then obtain from the agent or mandatary the customer information obtained by the agent or mandatary under that agreement or arrangement (64.1(2) PCMLTFR).

Date answered: 2014-07-29

PI Number: PI-6204

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64(1)

Keeping Client Identification Information Up to Date

Question:

Is it strictly necessary for the securities dealer to update the Client ID in their file if the client remains low risk and all changes in information have been updated and documented (i.e. address, marital status, investment objectives)?

Answer:

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations do not require the expiry date of the identification card to be recorded. However, as per subsection 64(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), unless otherwise specified in the Regulations, only original documents that are valid and not expired can be used to ascertain identity in accordance with paragraph 64(1)(a) or 64(1.1.)(a) of the PCMLTFR.

However, the requirement to use a valid document is specific to ascertaining of identification. In this scenario, identification has already been ascertained and information is being kept up to date. Where a securities dealer is required to keep information up to date, they are not necessarily required to ascertain identification again. Rather, they must confirm that, in accordance with the PCMLTFR, the information on file continues to be applicable; this includes the name, address, date of birth and occupation or principal business of an individual.

Should the identity of an individual need to be ascertained again, pursuant to a requirement in the PCMLTFA or its associated Regulations, then the securities dealer must again use a valid document. Otherwise, in this scenario, you do not need to obtain a copy of a new passport, or other piece of identification, to update the client ID.

Date answered: 2014-07-24

PI Number: PI-6203

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64(1), 64(1.1), 64(3)

Definition of face-to-face identification

Question:

If a credit union uses technology such as video conferencing when opening an account for a new member, or for the sale of term deposit, would this be considered a “face-to-face” transaction and would the viewing / recording of identification and all other required information for record-keeping purposes done through this process be compliant with the definition of “face-to-face”?

Answer:

Pursuant to subsection 64(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), there are various methods for ascertaining the identity of an individual in a face-to-face situation. Using technology such as video conferencing when opening an account for a new member, or for the sale of term deposit, is not a listed option. Where an individual is not physically present, the credit union must use the non-face-to-face methods for ascertaining identity as outlined in subsection 64(1) of the PCMLTFR and further clarified in Schedule 7.

Date answered: 2014-07-18

PI Number: PI-6180

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)

Definition of face-to-face identification

Question:

Would the combination of a live employee to view and record ID, while another staff member conducts the account opening process via video conferencing be considered “face to face” for AML purposes?

Answer:

Pursuant to subsection 64(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), there are various methods for ascertaining the identity of an individual in a face-to-face situation. If the client is physically present with the employee of the credit union then the credit union can rely on the face-to-face methods outlined in subsection 64(1) of the PCMLTFR for identification.

If the client is not physically present, then the credit union must rely on the non-face-to-face methods for ascertaining identity as outlined in subsection 64(1) of the PCMLTFR and further clarified in Schedule 7.

Date answered: 2014-07-18

PI Number: PI-6179

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)

Confirming existence of an entity

Question:

Is there a requirement for the Dealer in precious metals and stones to confirm the existence of an entity?

Answer:

As pointed out, in the DPMS sector there is typically no requirement to confirm the existence of an entity because, for this sector, the ascertaining of identity is triggered only by LCTRs and STRs where the identity of the individual has to be ascertained.

That said, pursuant to subsection 9.6(3) of the PCMLTFA, if the person or entity considers that the risk referred to in subsection 9.6 (2) is high, the person or entity shall take prescribed special measures for identifying clients, keeping records and monitoring financial transactions in respect of the activities that pose the high risk.

These prescribed special measures are the development and application of written policies and procedures for :

a) taking enhanced measures based on the risk assessment undertaken in accordance with subsection 9.6(2) of the Act to ascertain the identity of any person or confirm the existence of any entity in addition to the measures required in sections 54, 54.1, 55, 56, 57, 59 and 59.1, subsection 59.2(1), section 59.3, subsection 59.4(1) and sections 59.5, 60 and 61; and

• (b) taking any other enhanced measure to mitigate the risks identified in accordance with subsection 9.6(3) of the Act, including,
• (i) keeping client identification information and the information referred to in section 11.1 up to date, and
• (ii) in addition to the measures required in sections 54.3, 56.3, 57.2, 59.01, 59.11, 59.21, 59.31, 59.41, 59.51, 60.1 and 61.1, conducting ongoing monitoring of business relationships for the purpose of detecting transactions that are required to be reported to the Centre under section 7 of the Act.

In this respect, DPMS are required to take enhanced measures to ascertain the identity of any person or confirm the existence of any entity because this requirement is in addition to any of those outlined in the ascertaining of identity requirements of the other sectors. Furthermore, DPMS must take any other enhanced measure to mitigate the risks identified, including keeping high risk client information up to date and conducting ongoing monitoring of business relationships for the purpose of detecting suspicious transactions. Again, these enhanced measures are in addition to the ongoing monitoring requirements outlined for the other sectors, so they apply to the DPMS sector.

Date answered: 2014-07-18

PI Number: PI-6178

Activity Sector(s): Dealers in precious metals and stones

Obligation(s): Ascertaining Identification

Guidance: 6I

Act: 9.6(2), 9.6(3)

Ascertaining the Identity of a third party and using non-face-to-face methods

Question:

1. If the client is converting currency on behalf of an individual and it exceeds the $10,000. Do you have to collect identification on this third party? If so, do you have to collect it like you would for a non-face-to-face client ID verification?

2. If the client is converting currency on behalf of an entity and it exceeds the $10,000. Do you have to collect identification from the entity?

Answer:

Subsection 59(1) of the PCMLTFR requires that every MSB ascertain the identity of every person who conducts a foreign currency exchange transaction of $3,000 or more. The identity must be ascertained in accordance with subsection 64(1), but there are certain exceptions to the requirement to identify and these are outlined in subsection 63(1).

Now, pursuant to section 29 of the PCMLTFR, if an MSB receives an amount of $10,000 or more in cash, in a single transaction, the MSB has to keep a large cash transaction record, unless the money is received from a financial entity or a public body. When an MSB has to keep a large cash transaction record, they have to ascertain, in accordance with subsection 64(1), the identity of the person who conducts the transaction, unless it was a deposit made to a business account or a deposit made through an automated banking machine.

According to subsection 8(1) of the PCMLTFR, the MSB also has to take reasonable measures to determine whether the individual who in fact gives the cash in respect of which the large cash transaction record is kept is acting on behalf of a third party. If the MSB determines that the individual is acting on behalf of a third party, the MSB has to 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.

If the MSB is not able to determine whether or not the individual is acting on behalf of a third party but there are reasonable grounds to suspect that the individual is doing so, the MSB must keep a record that
(a) indicates whether, according to the individual, the transaction is being conducted on behalf of a third party; and
(b) describes the reasonable grounds to suspect that the individual is acting on behalf of a third party.

The MSB does not have to ascertain the identity of the third party regardless of whether or not that third party is an individual or an entity.

You have also asked if, when a client is not physically present, the non-face-to-face methods refer to Canadian or foreign products. Pursuant to the PCMLTFR, reporting entities must ascertain the identity of clients in a number of circumstances. Section 64(1) of the PCMLTFR outlines measures for ascertaining identity when a client is not physically present. Section 64(1) highlights acceptable identification methods, which are further detailed in Schedule 7, and include The Credit File Method, Cleared Cheque Method and the Confirmation of Deposit Account Method.

You will note that both the Cleared Cheque and Confirmation of Deposit Account Methods, refer to a deposit account of a financial entity, and according to subsection 1(2) of the PCMLTFR, a financial entity means “an authorized foreign bank, as defined in section 2 of the Bank Act, in respect of its business in Canada or a bank to which that Act applies, a cooperative credit society, savings and credit union or caisse populaire that is regulated by a provincial Act, an association that is regulated by the Cooperative Credit Associations Act, a financial services cooperative, a credit union central, a company to which the Trust and Loan Companies Act applies and a trust company or loan company regulated by a provincial Act. 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 an activity referred to in section 45.” As such, for the reporting entity to be able to use either the Cleared Cheque or Confirmation of Deposit Account Method, the client must have a deposit account with a financial entity as defined above.

The Credit File Method requires that the reporting entity refer a client’s credit file in Canada, that has been in existence for at least six months, so this method also refers to a Canadian product.

That said, in accordance with subsection 64.1(1) of the PCMLTFR, a reporting entity that has to ascertain identity under subsection 64(1) or (1.1) of the PCMLTFR, can rely on an agent or mandatary to take the identification measures described in that subsection, as long as the reporting entity has entered into an agreement or arrangement, in writing, with that agent or mandatary for the purpose of ascertaining identity. If the reporting entity enters into such an agreement, they must obtain from the agent or mandatary the customer information obtained by the agent or mandatary under that agreement or arrangement.

Date answered: 2014-07-04

PI Number: PI-6174

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 1(2), 8(1), 29, 59(1), 63(1), 64(1), 64.1(1)

Account authentication

Question:

Is that allowed under your authentication policy that a financial institution ask to Equifax to confirm my identity, and then checks with Equifax again to check my credit?

Answer:

The requirements of the PCMLTFA and its associated Regulations are considered to be minimum requirements. Reporting entities may go above and beyond these, and apply the obligations in situations where the PCMLTFA does not require it.

That said, in accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), reporting entities must ascertain the identity of clients in a number of circumstances, such as when opening certain types of accounts. Section 64(1) of the PCMLTFR outlines the measures for ascertaining identity when a client is not physically present, which are further detailed in Schedule 7.
These methods must be used in combination. That is, if a reporting entity is going to use the non-face-to-face methods for ascertaining identification, they must use a combination of at least two of the methods. It is for the reporting entity to determine which combination of two methods they use.

Date answered: 2014-07-04

PI Number: PI-6173

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)

Identification exception for foreign government

Question:

Are there exceptions to the identification regulations when the client is a foreign government?

Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations) 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.

A foreign government is not a public body as defined in the Regulations. Consequently, the identification exemption does not apply in cases where a foreign government or one of its representatives is involved in a real property transaction which requires the identification and confirmation of the existence of the entity under 59.2(1)(c) or 66 of the Regulations.

Date answered: 2014-07-02

PI Number: PI-6170

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 1(2), 59.2(1)c), 66

Definition of Negotiable instruments

Question:

Is cashing a cheque the same as redeeming a negotiable instrument and therefore, ID must be ascertained?

Answer:

Pursuant to subparagraph 54(1)(b)(i) of the PCMLTFR, when a financial entity issues or redeems a money order, traveller’s cheque or other similar negotiable instrument for a 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, they must ascertain the identity of the person carrying out that transaction. Furthermore, subsection 14(l), the record-keeping obligation when redeeming, is very specific to the redemption of money orders, so does not apply to the redemption of travellers’ cheques or other similar negotiable instruments.

That said, although a cheque is a negotiable instrument, whether it is paid to order, paid to bearer, endorsed or not endorsed, it is not an “other similar negotiable instrument” for the purpose of the record-keeping and ascertaining of identification requirements of the PCMLTFR. Those negotiable instruments for which records have to be kept when issued, and ID has to be kept when issued or redeemed are other instruments similar to money orders and travellers’ cheques. This does not include cheques.

Date answered: 2014-06-27

PI Number: PI-6168

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 14(I), 54(1)(b)(i)

Interpretation of FINTRAC Guidelines

Question:

1. Does FINTRAC maintain a list of independent and reliable identification products, which satisfies the requirement set out in the FINTRAC Guidelines?
2. Are there any acceptable alternatives to or variations of the cleared cheque method? For example, is it necessary that the payee of a cheque for these purposes be the FINTRAC regulated entity? Could the cleared cheque method be satisfied by having the client produce a copy of a cleared cheque made payable to a third party payee.
3. Many financial entities are able to provide their clients with a copy of a cheque that has cleared the client's account. Would such a copy be sufficient to satisfy the cleared cheque method?

Answer:

Pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), reporting entities must ascertain the identity of clients in a number of circumstances. Section 64(1) of the PCMLTFR outlines measures for ascertaining identity when a client is not physically present. Section 64(1) highlights acceptable identification methods, which are further detailed in Part A Schedule 7. However, FINTRAC does not maintain a list of independent and reliable identification products, in our Regulations or Guidelines, which satisfies these identification requirements . FINTRAC does not endorse any identification products. Rather, it is the responsibility of the reporting entity to ensure that any identification products implemented meet the requirements of those identification methods described in Part A Schedule 7.

You have also asked whether “it is necessary that the payee of a cheque for these purposes be the FINTRAC regulated entity? Could the cleared cheque method be satisfied by having the client produce a copy of the cleared cheque made payable to a third party payee? Would a copy of a cleared cheque be sufficient to satisfy the cleared cheque method?”

Part A of Schedule 7 of the PCMLTFR lists the Cleared Cheque Method as one identification method. This method involves confirming that a cheque written by the individual, was cashed by the payee and cleared through the individual's account, other than an account referred to in section 62 of the Regulations. To answer your question, no, this cheque does not have to have been made out to the regulated entity using the Cleared Cheque Method. And yes, it is sufficient for the financial entity using the Cleared Cheque Method to refer to the returned copy, a photocopy, or an electronic image of the cleared cheque. I note that this would satisfy one of the two combination methods required.

Date answered: 2014-06-25

PI Number: PI-6167

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)

Interac email money transfer - Deposit account method

Question:

Can Interac email money transfer be considered as an acceptable form of the deposit account method?

Answer:

According to Schedule 7 of the Proceeds of Crime (Money Laundering) Terrorist Financing Regulations (PCMLTFR), Confirmation of Deposit Account Method is a method of ascertaining a person’s identity which consists of confirming that the person has a deposit account with a financial entity other than an account.

Although the “email money transfer process may allow a financial entity to confirm the name of the account holder, the name of the financial entity where the email money transfer came from, and the account number of the individual”, this does not confirm whether the individual actually holds the account, but merely proves that the individual has access to the account. Past guidance has been that in addition to confirming a deposit account by means of copy of the client’s bank statement, a legible fax or scanned copy of a bank statement, an original bank statement addressed to the client that contains all of the information, or electronically issued statements, a reporting entity can confirm a deposit account by confirming verbally with the financial entity where the account is held, by letter from that financial entity to either the client or the reporting entity, or even by email (as long as it is indicated that it is a deposit account).

It is important to note that the Confirmation of a Deposit Account Method must be used in combination with one of the other methods in Schedule 7, except the Cleared Cheque Method, for the purposes of non-face-to-face identification.

Date answered: 2014-06-09

PI Number: PI-6160

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: Schedule 7

Confirmation of Deposit Account Method

Question:

My question concerns whether or not the use of an approach entitled [new Non-Face-to-Face method] would meet the requirements of the deposit account method?

Answer:

Pursuant to Schedule 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, the Confirmation of Deposit Account Method, is meant to ascertain a person’s identity by means of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of the PCMLTFR. There is nothing that requires that the deposit account be solely in the name of one individual. As such, as long as the individual whose identity is being ascertained is listed as an account holder to the deposit account, this will suffice.

Furthermore, the requirement in Schedule 7 of the PCMLTFR is not that the account maintains a balance, rather that it is an open deposit account in the name of the individual whose identity is being ascertained. To not be able to determine the “balance since date” does not negate the existence of the deposit account. That said, the account must be open. If the “balance since date” is the only way to confirm that the account is open, then to lose this feature poses a problem for this method.

However, if the [new Non-Face-to-Face method] has an alternative way to determine that the account is open, then this option can still be pursued for the purposes of the Confirmation of Deposit Account Method, and would satisfy one of the two combination methods required.

Date answered: 2014-05-02

PI Number: PI-6144

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: Schedule 7

Identification exemptions for a securities dealer

Question:

The securities dealer opens most of their accounts non –face to face using the cleared cheque method and credit check method.

Section 62(1)( c) provides an exception to ID, if the person already has an account with the securities dealer.

For a couple of accounts in which they have previously ID, they ID the client before June 2008 when non face to face only required ONE method. Specifically, before June 2008, section 64(1)(c)(ii) only required a cleared cheque OR confirmation of account at a financial entity for non-face to face.

So if they had ID the client according to the pre June 2008 requirements where non face to face only required one method, do they have to ID the client again when the client opens a subsequent account post 2008 using the new combo method?

Answer:

Subsection 57(1) of the PCMLTFA states that, “subject to section 62 and subsection 63(1), every securities dealer shall ascertain, in accordance with subsection 64(1), the identity of every person who is authorized to give instructions in respect of an account for which a record must be kept by the securities dealer under subsection 23(1).” Paragraph 62(1)(c) of the PCMLTFR provides an exception to this obligation and states as follows:

62. (1) Paragraphs 54(1)(a) and (b), 54.1(a), 54.2(a) and 55(a) and (e), subsections 57(1) and 57.1(1) and paragraphs 60(a) and (b) do not apply in respect of
(c) a person who already has an account with the financial entity, the securities dealer or the casino, as the case may be [...]

Given the above, the SD may rely on this exception to identification based on the fact that the client has an existing account(s) for which he or she was already identified, regardless of whether identification was ascertained prior to the current non-face-to-face requirements.

That being said, all business relationships are subject to the ongoing monitoring requirements, for the purpose of detecting any transactions that are required to be reported in accordance with section 7 of the Act, keeping client identification information and the information referred to in sections 11.1 and 52.1 up to date, reassessing the level of risk associated with the client’s transactions and activities, and determining whether transactions or activities are consistent with the information obtained about their client, including the risk assessment of the client.

Should it be determined that the account-based business relationship is high risk, the requirements of subsection 71.1(b) of the PCMLTFR take effect. That is, the securities dealer must take enhanced measures to mitigate the risks identified, including keeping client identification information and the information referred to in section 11.1 up to date, and conducting ongoing monitoring of the business relationship for the purpose of detecting transactions that are required to be reported to the Centre under section 7 of the Act.

Date answered: 2014-04-17

PI Number: PI-6140

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 57(1), 62(1)(c), 71.1(b)

Act: 7

Obligation for real estate developers to ascertain identity

Question:

If the client information required for each and every transaction includes government-issued identification where the new homes sales person takes a photocopy and/or notes down the particulars (e.g. type of identification, issuer, number) for the file/records, I assume that the new homes sales person has to ask every purchaser for this identification as part of entering into a contractual agreement?

Answer:

Section 39.7 of the PCMLTFR requires that real estate developers keep the following records:
• a receipt of funds record (ROFR);
• a client information record (CIR);
• a part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the real estate developer – if the ROFR or CIR is in respect of a corporation; and
• a large cash transaction record*.
* If the real estate developer is required to keep a large cash transaction record, then they are not required to also keep a receipt of funds record or a part of the official corporate records relating to the power to bind the corporation in respect of the transaction.

Pursuant to section 59.5 of the PCMLTFR, where a real estate developer has to keep a record under section 39.7, they must ascertain the identity of every person who conducts the transaction, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of the corporation’s directors, and confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted. The identity of the person conducting the transaction has to be ascertained in accordance with subsection 64(1) at the time of the transaction, whereas the existence of the corporation and the existence of the entity must be confirmed in accordance with sections 65 and 66 of the PCMLTFR, respectively, within 30 days after the transaction.

There are exceptions to the need to identify, as outlined in subsection 62(2) and section 63 of the PCMLTFR. For example, as per subsection 63(1) where a person has ascertained the identity of another person in accordance with section 64, the person is not required to subsequently ascertain that same identity again if they recognize (visually or by voice) that other person, unless they have doubts about the information previously collected.

Date answered: 2014-04-16

PI Number: PI-6139

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 39.7, 59.5, 62(2), 63

Identifying authorized signers of entities owned by foreign governments

Question:

How a financial institution should address the requirement to verify the identity of three persons authorized to give instruction on behalf a government entity ?

Answer:

paragraph 54(1)(e) of the PCMLTFR states that “Subject to sections 62 and 63, every financial entity shall […] in accordance with section 66, confirm the existence of every entity, other than a corporation, for which the financial entity opens an account.”

Section 2 of the PCMLTFA defines “entity” as “a body corporate, a trust, a partnership, a fund or an unincorporated association or organization”. It is a question of fact to be able to determine if “entities owned by foreign governments” fall under this definition of “entity”, and to be able to determine whether or not there is the obligation to confirm the existence of “entities owned by foreign governments”.

Regardless, it is clear that the financial entity has the obligation to “ascertain the identity of every person who signs a signature card in respect of an account, other than a credit card account, that the financial entity opens, except in the case of a business account the signature card of which is signed by more than three persons authorized to act with respect to the account, if the financial entity has ascertained the identity of at least three of those persons” (paragraph 54(1)(a) PCMLTFR). Our Act and its associated Regulations do not create additional obligations nor include exemptions to ascertaining identity “when dealing with overseas governments (or their representatives) and supranational organizations”. FINTRAC is not in a position to prescribe how to fulfill this obligation. However, we may wish to indicate that, pursuant to subsection 64.1(1), a person or entity that is required to take measures to ascertain identity under subsection 64(1) or (1.1) may rely on an agent or mandatary to take the identification measures described in that subsection only if that person or entity has entered into an agreement or arrangement, in writing, with that agent or mandatary for the purposes of ascertaining identity. Should the reporting entity choose this method of ascertaining identity, they must obtain from the agent or mandatary the customer information obtained by the agent or mandatary under the agreement or arrangement (ss. 64.1(2) PCMLTFR).

Date answered: 2014-04-01

PI Number: PI-6128

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54(1)(a), 54(1)(e), 64.1(1), 64.1(2)

Act: 2

Retirement compensation arrangement for large corporations

Question:

A large corporation – xyz wants to open an account with us for a retirement compensation arrangement for its executives.

The retirement compensation arrangement is not a subsidiary of xyz.
The retirement compensation arrangement's financial statements are not consolidated with xyz's financial statements. However, there may be certain assets or liabilities in xyz's financial statements related to the funding of the retirement compensation arrangement Furthermore, all of the information about the retirement compensation arrangement can be found in the notes to xyz's financial statements. .

In light of the context, should we consider this as opening an account for a large corporation?

Answer:

The fact that the retirement compensation arrangement (RCA) is referred to in the corporation's financial statements or in the notes to the financial statements does not mean that the RCA is a subsidiary of the entity.

An RCA is a plan or an agreement between an employer and an employee, whereby the employer or the employee makes contributions to a custodian of the RCA trust, and under which the custodian may be required to make distributions to the employee or another person on, after, or in view of the employee's retirement, the loss of an office or employment, or any substantial change in the services the employee provides. When a reporting entity opens an RCA, the custodian has a trust account opened for the RCA.

When a reporting entity opens a trust account, it has certain obligations. However, pursuant to paragraph 62(20(m) of the PCMLTFR, the requirements for securities dealers set forth in sections 23 and 57 of the PCMLTFR do not apply when the entity for which the client information record has to be kept is a large corporation with minimum net assets of $75 million on its last audited balance sheet, whose shares are traded on a Canadian stock exchange or a stock exchange referred to in subsection 262(1) of the Income Tax Act, and which operates in a country that is a member of the Financial Action Task Force.

Therefore, when a reporting entity opens a trust account for the RCA of a client that is a large corporation, the requirements set forth in sections 23 and 57 do not apply. The fact that the RCA is not a subsidiary of the entity is of no consequence, since the RCA is an account, not another entity for which an account has been opened.

You can also remind the reporting entity of its requirements under section 11.1 of the PCMLTFR with respect to the trustees.

Date answered: 2014-03-31

PI Number: PI-6127

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 11.1, 62(2)(m)

Identification and Ongoing Monitoring - Guideline 6G

Question:

Please find below our questions on Guideline 6G that were submitted.

1. If an applicant for a credit card does not hold a bank account with the credit card issuer (i.e. if the applicant banks with Bank A and wants to have a credit card with Bank B), how would the credit card issuer (i.e. Bank B) use the "cleared cheque method" to identify whether or not a cheque cleared? Is it a check the applicant writes to the credit card issuer (i.e. Bank B) and they deposit it (which doesn't make sense as there is no payment due to the credit card issuer, Bank B, at this time. The individual is merely trying to open a credit card with Bank B)? Or is it a copy of a check the applicant wrote to an unaffiliated third party payee. If it is the latter (i.e. the copy to the unaffiliated third party), what is the acceptable form of proof to satisfy the Guideline 6G (for example - a print out of the image of the cheque from the applicant's online bank account).

2. "Option 2: Combination of methods" in section 4.12 of Guideline 6G, states: "In each of the two methods you use, the individual's information has to be consistent with what you have in your records. The information also has to be consistent from one method to the other. For example, if each of the methods you use has the name, address and date of birth information about the individual, all of it has to agree with what you have in your records.? If you do not have a record for an individual (i.e. they are applying for a credit card for the first time), does that mean you cannot use the "combination of methods" outlined in section 4.12?

We note that in subsection 64(1.3)(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (SOR/2002-184), which is excerpted below, the words "if any" appear in relation to the combination of methods. Does this mean that for credit card applicants that do not have a record with the credit card issuer, that the credit card issuer only has to ensure that the information is consistent from one method to the other?

-(1.3) A combination of methods referred to in subparagraph (1)(b)(ii) or (1.1)(b)(ii) or (iii) shall not be relied on by a person or entity to ascertain the identity of a person unless:
(a) the information obtained in respect of that person from each of the two applicable identification methods is determined by the person or entity to be consistent; and
(b) 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?.

3. For Politically Exposed Foreign Person ("PEFP") under section 8.1 of Guideline 6G, there is a requirement to perform "enhanced ongoing monitoring" of a PEFP account. Is there a description, list or criteria of what "enhanced ongoing monitoring" is? Does the "non-exhaustive list of enhanced measures" for a business relationship under section 5, describe accurate "enhanced ongoing monitoring"?

4. Guideline 6G states, under section 8.1, that for new and existing accounts for PEFP that you have to: "take reasonable measures to establish the source of funds that have been, will be or are expected to be deposited in that account". In the case of a credit card issuer does "deposited in that account" mean/include payment to a credit card account?

5. Section 4.2 of the Guideline 6G discusses exceptions to client identification requirements and states that you do not have to ascertain the identity for an individual that already has a credit card account with you. If an individual had a credit card account with the credit card issuer (i.e. cancels the credit card), does that mean the credit card issuer has to ascertain the identify the individual again when the individual re-applies for a credit card (i.e. the individual cancels their credit card on day 1 and applies for another credit card with the same financial entity on day 5)?

6. If you have a private corporation that issues credit cards (i.e. they are not a person or entity described under section 5 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the "Act")) does the Act apply?

Answer:

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) administers the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations. To this end, I have considered your questions against the Act and Regulations, but may also address the guidance provided in Guideline 6G - Record Keeping and Client Identification for Financial Entities.

Where an applicant for a credit card does not hold a bank account with the credit card issuer, the credit card issuer can refer to both the face-to-face and non-face-to-face options for ascertaining identification that are outlined in subsection 64(1.1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). Pursuant to subparagraph 64(1.1)(b)(ii) of the PCMLTFR, where the person is not physically present when the credit card application is submitted, identification can be ascertained, subject to subsection (1.3), by using a combination of any two identification methods referred to in either Part A or Part B of Schedule 7.

One of the identification methods listed in Part A of Schedule 7 of the PCMLTFR is the Cleared Cheque Method. This method involves confirming that a cheque written by the individual, was cashed by the payee and cleared through the individual's account, other than an account referred to in section 62 of the Regulations. This cheque does not have to have been made out to the entity using the Cleared Cheque Method. The financial entity using the Cleared Cheque Method can refer to the returned copy, a photocopy, or an electronic image of the cleared cheque.

As outlined in subsection 64(1.3) of the PCMLTFR, a combination of methods referred to in subparagraph (1)(b)(ii) or (1.1)(b)(ii) or (iii) shall not be relied on by a person or entity to ascertain the identity of a person unless:

(a) the information obtained in respect of that person from each of the two applicable identification methods is determined by the person or entity to be consistent; and

(b) 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.

The reference in paragraph 64(1.3)(b) to “information in respect of that person, if any, that is contained in a record kept by the person or entity under these Regulations” is a reference to the information that may already be in a record the financial entity has, either from previous interaction with the applicant or that was gathered by the financial entity for a record in the process of opening the credit card account for the client. As such, the information that the reporting entity finds using the two methods has to be consistent between methods, and consistent with the information already in a record kept by the financial entity.

Where a person has ascertained the identity of another person in accordance with section 64, the person is not required to subsequently ascertain that same identity again if they recognize that other person (63(1) PCMLTFR), that is, if the person recognizes the other person visually or by voice, and has the record. Where a person that is a client closes a credit card account and subsequently applies for a new credit card account at the same reporting entity, the person does not need to ascertain the identity of the other person again if that person is recognized either visually or by voice, and the necessary documentation continues to reside with the financial entity.

In addition to ascertaining the identification of the client, a financial entity, subject to section 62 and subsection 63(5), must, in accordance with subsection 67.1(2), take reasonable measures to determine whether a person for whom the financial entity opens an account is a politically exposed foreign person (s. 54.2 PCMLTFR). Pursuant to subsections 67.1 (1) of the PCMLTFR, if a person is determined to be a politically exposed foreign person, the financial entity must consider that client as a high risk and shall:

(a) establish the source of the funds that have been, will be or are expected to be deposited in the account in question;

(b) subject to subsections (2) and (3), obtain the approval of senior management to keep the account open; and

(c) conduct enhanced ongoing monitoring of the activities in respect of the account for the purpose of detecting transactions that are required to be reported to the Centre under section 7 of the Act.

The PCMLTFA and its associated Regulations do not define the term “deposit”, but a payment to a credit card is not deemed to be a deposit into an account.

For the purposes of paragraph 67.1(1)(c) of the PCMLTFR, if a reporting entity determines that a client is a politically exposed foreign person, a non-exhaustive list of enhanced ongoing monitoring options is available under “Ongoing Monitoring” in section 5 of Guideline 6G – Record Keeping and Client Identification for Financial Entities.

Finally, FINTRAC administers the PCMLTFA and its associated Regulations. Only reporting entities subject to Part 1 of the PCMLTFA are required to keep records, ascertain identity, implement a compliance regime and report to FINTRAC. These reporting entities include accountants, British Columbia notaries, casinos, dealers in precious metals and stones, life insurance companies, life insurance brokers and agents, money services businesses, real estate agents or brokers, securities dealers, and financial entities. Financial entities include 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, cooperative credit societies, savings and credit unions and caisses populaires regulated by a provincial Act and associations regulated by the Cooperative Credit Associations Act, and trust companies or loan companies regulated by a provincial Act.

Date answered: 2014-03-19

PI Number: PI-6122

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54.2, 62, 63(1), 63(5), 64(1.1)(b)(ii), 64(1.3), 67.1(1), Schedule 7

Is a French driving licence considered a valid piece of ID?

Question:

Can a driving licence issued by France be used as ID?

Answer:

To be acceptable for identification purposes under subsection 64(1) of the PCMLTFR, the piece of ID must have been issued by a provincial or territorial government or by the federal government, must have a unique identification number, and must still be valid. In this context, "valid" means that it has not expired.

After doing some research, we came to the conclusion that the French driving licence was issued by a government, that it has an identification number, and that it does not have an expiry date. The driving licence therefore appears to meet the requirements of the PCMLTFR. However, if a reporting entity has doubts about the validity of this driving licence, there is nothing in the Act and its associated regulations that obliges the reporting entity to accept it.

Date answered: 2014-03-11

PI Number: PI-6117

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)

Cleared Cheque Method and Confirmation of Deposit Account Method

Question:

We are currently working on an initiative to expand our online offering. In this regards we are exploring options on how we can fully onboard a Member online (i.e. open a new Membership and related accounts for an individual who is physically not present).

1. In the following statement that you said to me previously “Please note that debits and/or pre-authorized payments are not acceptable ways to confirm that the client has a deposit account with a financial entity.”, are you saying that “[Company MM]” feature (which enables Members to transfer funds from another financial institution to [Company MM] cannot be used as a method of identification?

If this is the case are you able to share the FINTRAC perspective on how a funds transfer is different from a cheque. i.e. what does one provide that the other does not?

2. Finally are you aware of any other methods we can use to confirm a deposit account with another FI outside of the examples listed below.

Answer:

1. The focus on cheques stems from the PCMLTFR. Pursuant to Schedule 7 of the PCMLTFR, the Cleared Cheque Method involves confirming that a cheque drawn by the person on a deposit account of a financial entity, other than an account referred to in section 62 of these Regulations, has been cleared. Schedule 7 clearly indicates that the reporting entity must confirm that a cheque cleared the account. As such, for the Cleared Cheque Method, a reporting entity cannot rely on debits and/or pre-authorized payments as these are not cheques drawn on an account.

With respect to [Company MM], the ability to transfer funds from another financial institution to [Company MM] does not necessarily confirm that the individual actually holds a deposit account at that other financial entity, but merely that they have access to a deposit account.

2. We have indicated in past that the regulations are silent under subsection 67(c) on how you must confirm that information (i.e., how to confirm that they hold a deposit account, the name of the FE and the account number). However, past guidance has been that in addition to confirming a deposit account by means of copy of the client’s bank statement, a legible fax or scanned copy of a bank statement, an original bank statement addressed to the client that contains all of the information, or electronically issued statements , a reporting entity can confirm a deposit account by confirming verbally with the financial entity where the account is held, by letter from that financial entity to either the client or the RE, or even by email (as long as it is indicated that it is a deposit account).

Date answered: 2014-03-07

PI Number: PI-6114

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: Schedule 7, 67(c)

Payments Processing - Bulk transactions, P2B transactions and Ascertaining ID Non-face-to-face

Question:

Company ABC is a Canadian entity providing various services through the DEF payment platform. The DEF platform is an e-wallet system primarily used to facilitate payments to merchants for goods and services; however, a small percentage of clients may use the service to send funds between user e-wallets. ABC does not own the DEF platform and is merely the Canadian licensee for said platform. Here are some questions raised by ABC:

1. Bulk Transactions
A Canadian merchant made a bulk payment to 100 or more affiliates for payroll, commission payouts, and rewards purposes. The total aggregate amount of the bulk payment was over $10,000. The end recipients were located in Canada as well as other parts of the world. Company ABC has additionally now clarified that it is holding e-wallet accounts for Canadian members only and that if a Canadian member makes a payment to a non-Canadian DEF e-wallet holder, for example, to someone in the United Kingdom, it would be deducted from the Canadian safeguarded balances and credited to the safeguarded balances of the UK DEF entity. Moreover, ABC's auditors have advised it to report these bulk transactions since the Canadian member made transactions over $10,000 within a 24 hour period. Here are the two questions:
- Would these be reportable transactions?
- If these transactions are reportable, would ABC be required to report all the transactions or only those going to non-Canadian e-wallet holders? (i.e. if a merchant sends 50 payments to Canadian e-wallet holders and 50 payments to non-Canadian e-wallet holders)

2. Person to Business (P2B) transactions
Company ABC would like clarification with respect to transactions in which a customer pays a merchant for a good or service using the DEF platform, also referred to as a Person to Business (P2B) transaction. ABC has described a scenario in which a merchant is selling goods online, such as computers, and a Canadian customer pays via their DEF e-wallet account. The total for the purchase is $1,250 CAD. ABC further indicated they have been advised that, “P2B payments are not considered remittances, but payments for services. That has been FINTRAC's administrative practice.” ABC needs clarification as to whether P2B transactions would be considered payment processing.

3. Ascertaining Identity (Non-Face-to-Face)
Company ABC has requested guidance with respect to whether it is required to ascertain identity when a transaction of $1,000 or more is remitted or transmitted. ABC has specified that their system requires a member to become “Verified” using a combination of methods (Credit File Method, Attestation Method and Confirmation of Deposit Account) prior to obtaining a DEF account. ABC is now inquiring whether they need to ascertain a member’s identity each time they remit or transmit funds or whether they can avail themselves of the general exception to identification on the grounds they recognize the individual. Should they be required to ascertain identification for these transactions, ABC has presented the following two options:
i) They will disallow any remittances over $1000 CAD within a 24 hour period or;
ii) They will allow the remittance to go through only after undergoing a manual voice confirmation.

4. Other questions
1) Does FINTRAC intend to apply the same guidelines for a traditional Money Services Businesses to an account based e-wallet platform?
2) If yes, do the 2 choices above conform to the spirit of the rules?
3) If no, will FINTRAC consider an account-based method as a reasonable approach to recognizing the individual?

Answer:

1. Bulk transactions
FINTRAC has previously taken the position, and continues to uphold the position that persons or entities engaged in the business of utility payments, payroll and commission services, and certain tuition payment services, that involve the “remitting or transmitting of funds by any means or through any person, entity or electronic funds transfer network” are not considered to be Money Services Businessess because they are not engaged in the business of doing remittance or transfers of funds. In other words, they don’t provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds is simply a corollary of their actual service. These types of transactions would fall under payment processing activities.

Applying this logic to the scenario provided by Company ABC, namely, a Canadian merchant making a bulk payment to 100 or more affiliates for “payroll, commission payouts, and rewards purposes,” it would appear that these transactions would be considered payment processing, which is not subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations. Therefore, these would not be reportable transactions.

2. Person to Business (P2B) transactions
As previously mentioned, FINTRAC upholds the position that certain payments including utility payments, and payroll and commission services and certain tuition payment services, are considered to be payment processing and are not subject to the PCMLTFA and its associated Regulations. The scenario Company ABC described, in which a customer pays a merchant for a good using his or her other Money Services Businesses account, would not fall under payment processing and would be considered a transfer of funds, which is subject to the PCMLTFA and its associated Regulations.

3. Ascertaining Identity (Non-Face-to-Face)
Pursuant to paragraph 59(1)(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every money services business (Money Services Businesses) shall ascertain the identity of every person who conducts the remittance or transmission of $1,000 or more by any means through any person or entity. Paragraph 62(2)(b) of the PCMLTFR goes on to state that the identity shall be ascertained at the time of the transaction.

As paragraph 64(1)(b) of the PCMLTFR states, if the person is not physically present when the transaction is conducted, the identity of a person shall be ascertained:

(i) by obtaining the person’s name, address and date of birth AND
(A) confirming that one of the following entities has identified the person in accordance with paragraph (a), namely,
(I) an entity, referred to in any of paragraphs 5(a) to (g) of the Act, that is affiliated with the entity ascertaining the identity of the person,
(II) an entity that carries on activities outside Canada similar to the activities of a person or entity referred to in any of paragraphs 5(a) to (g) of the Act and that is affiliated with the entity ascertaining the identity of the person, or
(III) an entity that is subject to the Act and is a member of the same association as the entity ascertaining the identity of the person, AND
(B) verifying that the name, address and date of birth in the record kept by that affiliated entity or that entity that is a member of the same association corresponds to the information provided in accordance with these Regulations by the person, OR

(ii) subject to subsection (1.3), by using one of the following combinations of the identification methods set out in Part A of Schedule 7, namely,
(A) methods 1 and 3,
(B) methods 1 and 4,
(C) methods 1 and 5,
(D) methods 2 and 3,
(E) methods 2 and 4,
(F) methods 2 and 5,
(G) methods 3 and 4, or
(H) methods 3 and 5.

As the above makes clear, ABC is required to ascertain, at the time of the transaction, the identity of every person who conducts the remittance or transmission of $1,000 or more. Subsection 63(1) of the PCMLTFR provides an exception to ascertaining identity where the identity of a person has previously been ascertained according to section 64 of the PCMLTFR and the individual recognizes this person. Guideline 6C goes on to specify that an individual can only be recognized visually or by voice.

4. Other questions
FINTRAC does not recognize Money Services Businessess as having accounts and as such, the guidelines apply equally to all Money Services Businessess in Canada, regardless of whether they may be utilizing e-wallets. Company ABC has asked whether they should simply disallow any remittances over $1000 within a 24-hour period in order to avoid identification obligations. This is a business decision to be made by ABC and as such, FINTRAC is unable to comment on same. ABC has also suggested using manual voice confirmation as a means of recognizing a member who has already been identified under section 64 of the PCMLTFR. ABC has already indicated that each member is initially identified using non-face-to-face methods. Given this, a member could not be recognized by voice as he or she was not present when initially identified by ABC. The only acceptable methods of ascertaining identification are those identified in section 64 of the PCMLTFR.

Date answered: 2014-02-26

PI Number: PI-6103

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 59(1)(b), 62(2)(b), 64, 64(1)(b)

Agent or Mandatary for Ascertaining Identification Purposes

Question:

An investment manager registered in the Province of British Columbia accepts money from a Japanese private corporation whose officers are all Japanese. The Japanese corporation has never been to Canada and the investment manager has never visited Japan. The investment manager has no affiliates in Japan and does need to be registered under Japanese law. It would seem that there is no way under the PCMLTFA for the British Columbia investment manager to verify the identity of the Japanese corporation or its officers.

Is there an acceptable method for verifying the identity of non-Canadian individuals (other than a face-to-face meeting, which is not really feasible in the current circumstances)?

Answer:

Subsection 64.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), allows for the investment manager registered in British Columbia to not have an affiliate, by giving the option for the investment manager to enter into a written agreement or arrangement with someone in Japan to act as an agent or mandatary for ascertaining identification purposes. The agent or mandatary then ascertains the identity of the investment manager’s client using the face-to-face identification measures outlined in subsection 64(1). The investment manager must then obtain from the agent or mandatary the customer information obtained by the agent or mandatary under that agreement or arrangement (64.1(2) PCMLTFR).

Date answered: 2014-02-26

PI Number: PI-6102

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64(1), 64.1(1), 64.1(2)

Client ID - Non-face-to-face method

Question:

A client of Company ABC has received a request from a non-Canadian entity (run by individuals who are also non-Canadians) to invest in a fund that they run. They are able to meet the requirements to verify the existence of the foreign entity, but they have no way of ascertaining the identity of the non-Canadian individuals who are authorized to give instructions on behalf of the possible investor because all the methods of ascertaining identity rely on there being some Canadian connection.

Is there an acceptable method for verifying the identity of non-Canadian individuals (other than a face-to-face meeting, which is not really feasible in the current circumstances)?

Answer:

Pursuant to subsection 64.1(1), a person or entity that is required to take measures to ascertain identity under subsection 64(1) or (1.1) may enter into a written agreement or arrangement with an agent or mandatary for the purposes of taking the identification measures described in that subsection.

Alternatively, pursuant to subparagraph 64(1)(b)(i), if the person is not physically present, the identity shall be confirmed by:
• obtaining the person’s name, address and date of birth;
• confirming that an entity that carries on activities outside Canada similar to the activities of a person or entity referred to in any of paragraphs 5(a) to (g) of the Act and that is affiliated with the entity has identified the person in accordance with paragraph 64(1)(a); and
• verifying that the name, address and date of birth in the record kept by that affiliated entity corresponds to the information provided in accordance with these Regulations by the person.

For the purposes of subparagraph 64(1)(b)(i), an entity is affiliated with another entity if one of them is wholly-owned by the other or both are wholly-owned by the same entity.

Date answered: 2014-02-21

PI Number: PI-6101

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64.1(1), 64(1)(b)(i)

Ongoing Service Agreement Requirements

Question:

I have a concern regarding the ongoing service agreement requirements. The guideline seems vague on whether the Money Services Businesses has to actually identify the individual who is representing a corporate entity, for the purposes of establishing an ongoing service agreement and thus carrying out countless EFTs. The ID of the corporation must be ascertained, and the name, DOB and address of the person who has signing authority, but it does not explicitly state the id must be seen on the individual. I understand that employees who are listed as authorized conductors of transactions do not have to be IDed, but it does not seem right that the individual providing the authority itself does not need to be identified. The fact that we require the powers to bind, showing that person X has the authority to make decisions on behalf of the company would indicate the need to verify the identification of person X. I have been told this is not the case.

Answer:

There is no requirement in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMTLFA) and its associated Regulations for an Money Services Businesses to ascertain the identity of the entity representative who establishes the ongoing service agreement. The ascertaining identity obligations relate mostly to the corporation or the entity with which the Money Services Businesses entered into an agreement.

Date answered: 2014-02-18

PI Number: PI-6097

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 9

Regulations: 29, 53

Address when the purchaser or seller is a corporation

Question:

When a purchaser or seller is a corporation, should the representative indicate his or her own business address, or can they provide the address of the corporation on whose behalf they are acting?

Answer:

In situations in which the real-estate broker or sales representative is required to ascertain a person's identity, in accordance with subsection 64(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), such as in the case of a large cash transaction record (section 53 of the PCMLTFR) or to ascertain the identity of the person conducting the transaction (paragraph 59.2(1)(a)of the PCMLTFR), the address to be obtained is the home address of the person in question.

However, if the address is only for record-keeping purposes, as in the case of a client information record (paragraph 39(1)(b) of the PCMLTFR), and not to ascertain the person's identity but simply to have a record of information regarding a purchase or sale, the reporting entity can provide either the home address or the business address.

Date answered: 2014-02-07

PI Number: PI-5693

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 39(1)(b), 53, 59.2(1)(a), 64(1)

Recording the Occupation of Parent for Youth Account

Question:

A RE is being cited under 14(c) for failure to record the occupation of the parent/guardian of a youth opening an account. 54(2) speaks to ascertaining ID of the parent/guardian of the youth, but does not speak to occupation. 67 speaks to recording the ID type, number, and place of issue, but again does not mention occupation.

Answer:

Pursuant to paragraph 14(c) of the PCMLTFR, every financial entity, upon the opening of an account other than a credit card account, must keep a record of the name and address of the client and their date of birth and the nature of their principal business or their occupation. In the case you have described, the client would be the youth under 12 years of age. Therefore, according to paragraph 14(c), the financial entity must record the youth’s principal business or occupation, as applicable. In this respect, the PCMLTFR is clear that the financial entity must only record the principal business or occupation of the client (as applicable), and not the principal business or occupation of the mother, father or guardian.

Additionally, paragraph 54(1)(a) of the PCMLTFR indicates that every financial entity shall ascertain the identity of every person who signs a signature card in respect of an account, other than a credit card account. Subsection 54(2) of the PCMLTFR further clarifies that, for the purpose of paragraph 54(1)(a), where the person who signs a signature card is under 12 years of age, the financial entity shall ascertain the identity of the father, mother or guardian of the person in accordance with subsection 64(1), which does not have an occupation component. As such, the financial entity was correct in not recording the occupation of the parent/ guardian.

Date answered: 2014-02-05

PI Number: PI-5692

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 14(c), 54(1)(a), 54(2)

Alberta Signature Verification Form as a valid piece of ID

Question:

Does the Alberta government “signature verification form” is an acceptable form of identification for financial institution account openings?

Please note that the SVF is only used for identification purposes – it has no other use. The issuance of the document is restricted to a limited clientele. And, we confirm that the use of the SVF does not disqualify FI’s from our indemnification, in relation to the ID requirement.

Answer:

Paragraph 54(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to sections 62 and 63, every financial entity shall in accordance with subsection 64(1), ascertain the identity of every person who signs a signature card in respect of an account, other than a credit card account, that the financial entity opens, except in the case of a business account the signature card of which is signed by more than three persons authorized to act with respect to the account, if the financial entity has ascertained the identity of at least three of those persons”.

There are three conditions that will make a document acceptable for identification purposes:

• The document must have a unique identifier number
• The document must have been issued by a provincial, territorial or federal government
• The document also has to be a valid one and cannot have expired

These conditions are applicable at the time the identity is ascertained.

It was previously agreed to that the Alberta Signature Verification Form meets these three conditions. Upon review of the additional information provided in Mr. ABC’s e-mail, namely that this document is issued for the purpose of identifying an individual, and not solely to indemnify a financial institution from loss, and based on the understanding that the Government of Alberta has a process to identify individuals when issuing the Signature Verification Form, FINTRAC confirms that the Alberta Signature Verification Form can be used as an acceptable method of face-to-face identification, as required by paragraph 64(1)(a) of the PCMLTFR.

Date answered: 2014-01-21

PI Number: PI-5684

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54(1)(a), 64(1)(a)

Co-trustee of an individual pension plan (IPP)

Question:

What are my identification verification obligations for a co-trustee in the case of an individual pension plan (IPP) where the participant acts as co-trustee?

Answer:

According to section 55 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations), every trust company shall, where an entity is authorized to act as a co-trustee, confirm the existence of the entity and ascertain its name and address in accordance with section 65 or confirm the existence of the entity in accordance with section 66, as the case may be, and in accordance with paragraph 64(1), ascertain the identity of all persons—up to three—who are authorized to give instructions with respect to the entity's activities as co-trustee; and in accordance with subsection 64(1), ascertain the identity of each person who is authorized to act as co-trustee.

Moreover, paragraph 62(2)(i), specifies that section 55 does not apply in respect of the opening of a registered plan account, including a locked-in retirement plan account, a registered retirement savings plan account and a group registered retirement savings plan account.

Therefore, although an IPP is not a pension fund governed by federal or provincial legislation, it is nonetheless a registered retirement savings plan registered with the CRA pursuant to the Income Tax Act according to which paragraph 62(2)(i) applies.

Date answered: 2013-12-31

PI Number: PI-5675

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 55, 62(2)(i), 64(1), 65, 66

Initial Deposit does not include Transfer "in kind"

Question:

Does the initial deposit permitted under paragraph 64(2)(a) of the PCMLTFR includes the transfer "in kind" of securities held with a broker?

Answer:

Paragraph 64(2)(a) of the PCMLTFR states that “The identity shall be ascertained […] in the cases referred to in paragraph 54(1)(a), subsection 57(1) and paragraph 60(a), before any transaction other than an initial deposit is carried out on an account”.

Initial deposit is not defined in the Act or the PCMLTFR, but should not be construed as investment ("in kind").

Thus, measures must be taken to verify the client's identity when an account is opened, before performing an operation.

Date answered: 2013-12-19

PI Number: PI-5665

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(2)(a)

ID Exemption - Public Body and Large Corporation

Question:

I need guidance regarding the record-keeping and ascertaining identity exemptions under section 62 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). Although I do not believe pensions fall under one of these exemptions, certain pension funds may be exempt based on certain information. I have discussed two pension plans: one that is managed and administered by an entity that is run by a joint trusteeship, one of the trustees being the Government of Ontario, and a second pension plan, the trustee of which happens to be a large Canadian public company.

Answer:

Paragraph 62(2)(m) of the PCMLTFR provides an exemption for ascertaining identity and record-keeping in instances where, the entity in respect of which a record is otherwise required to be kept is a public body, or a corporation that has minimum net assets of $75 million and whose shares are traded on a Canadian stock exchange or a stock exchange designated under subsection 262(1) of the Income Tax Act, and operates in a country that is a member of the Financial Action Task Force.

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 is only entities that clearly fall under one of these two categories (public body or large corporation) that can benefit from the exemption related to record keeping and ascertaining identity.

Date answered: 2013-12-05

PI Number: PI-5658

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 1(2), 62(2)(m)

Assumable Mortgage - ID Requirements

Question:

Is it possible to have guidance regarding an entity’s obligations to ascertain identity when a mortgage held with this entity, Credit Union A, is subsequently assumed by a different individual who is not a member of Credit Union A. A member with a residential mortgage held by Credit Union A sold his home to another individual, who has assumed the mortgage on behalf of the member. The new mortgage owner is not required to open an account with Credit Union A and that this individual will pay the mortgage through direct payments to Credit Union A from his bank account at a different financial institution. As part of this process, the entity receives the land title documents, which include the name and address of the new owner, as well as information specific to the transaction. The entity does not receive this individual’s financial history.

Answer:

There is nothing in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) nor its associated regulations that would require your entity to ascertain the non-member’s identity in the situation you have described. That being said, Credit Union A still has the obligation, as an entity subject to Part 1 of the PCMLTFA, to report any suspicious transactions that may occur in its dealings with this individual. Pursuant to section 7 of the PCMLTFA, your entity must report every financial transaction that occurs or that is attempted in the course of its activities 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 related to the commission or the attempted commission of a terrorist activity financing offence. This means when Credit Union A is required to send a suspicious transaction report to FINTRAC, before the transaction is reported, it also has to take reasonable measures to identify the individual who conducted it.

Date answered: 2013-12-05

PI Number: PI-5657

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Act: 7

Non-Face-to-Face questions

Question:

Here are two general questions concerning the Non-face-to-face method:

1. When is an MSB required to report an electronic funds transfer (EFT) that it conducts on behalf of a client?

2. If the client is not physically present, how is he or she identified by the MSB?

Answer:

1. Section 28, paragraphs (b) and (c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) creates the following MSB reporting obligations with respect to EFTs:

• 28. (1) 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.

2. As paragraph 64(1)(b) of the PCMLFTR states, if the person is not physically present when the client information record is created or the transaction is conducted, the identity of a person shall be ascertained:

(i) by obtaining the person’s name, address and date of birth AND
(A) confirming that one of the following entities has identified the person in accordance with paragraph (a), namely,
(I) an entity, referred to in any of paragraphs 5(a) to (g) of the Act, that is affiliated with the entity ascertaining the identity of the person,
(II) an entity that carries on activities outside Canada similar to the activities of a person or entity referred to in any of paragraphs 5(a) to (g) of the Act and that is affiliated with the entity ascertaining the identity of the person, or
(III) an entity that is subject to the Act and is a member of the same association as the entity ascertaining the identity of the person, AND

(B) verifying that the name, address and date of birth in the record kept by that affiliated entity or that entity that is a member of the same association corresponds to the information provided in accordance with these Regulations by the person, OR

(ii) subject to subsection (1.3), by using one of the following combinations of the identification methods set out in Part A of Schedule 7, namely,
(A) methods 1 and 3,
(B) methods 1 and 4,
(C) methods 1 and 5,
(D) methods 2 and 3,
(E) methods 2 and 4,
(F) methods 2 and 5,
(G) methods 3 and 4, or
(H) methods 3 and 5.

Schedule 7, Part A includes the following five identification methods:

IDENTIFICATION PRODUCT METHOD
1. This method of ascertaining a person’s identity consists of referring to an independent and reliable identification product that is based on personal information in respect of the person and a Canadian credit history of the person of at least six month’s duration.

CREDIT FILE METHOD
2. This method of ascertaining a person’s identity consists of confirming, after obtaining authorization from the person, their name, address and date of birth by referring to a credit file in respect of that person in Canada that has been in existence for at least six months.

ATTESTATION METHOD
• 3. (1) This method of ascertaining a person’s identity consists of obtaining an attestation from a commissioner of oaths in Canada, or a guarantor in Canada, that they have seen one of the documents referred to in paragraph 64(1)(a) of these Regulations. The attestation must be produced on a legible photocopy of the document (if such use of the document is not prohibited by the applicable provincial law) and must include
(a) the name, profession and address of the person providing the attestation;
(b) the signature of the person providing the attestation; and
(c) the type and number of the identifying document provided by the person.
(2) For the purpose of subsection (1), a guarantor is a person engaged in one of the following professions in Canada:
(a) dentist;
(b) medical doctor;
(c) chiropractor;
(d) judge;
(e) magistrate;
(f) lawyer;
(g) notary (in Quebec);
(h) notary public;
(i) optometrist;
(j) pharmacist;
(k) professional accountant (APA [Accredited Public Accountant], CA [Chartered Accountant], CGA [Certified General Accountant], CMA [Certified Management Accountant], PA [Public Accountant] or RPA [Registered Public Accountant]);
(l) professional engineer (P.Eng. [Professional Engineer, in a province other than Quebec] or Eng. [Engineer, in Quebec]); or
(m) veterinarian.

CLEARED CHEQUE METHOD
4. This method of ascertaining a person’s identity consists of confirming that a cheque drawn by the person on a deposit account of a financial entity, other than an account referred to in section 62 of these Regulations, has been cleared.

CONFIRMATION OF DEPOSIT ACCOUNT METHOD
5. This method of ascertaining a person’s identity consists of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of these Regulations.

Date answered: 2013-11-15

PI Number: PI-5647

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 28(1)(b), 28(1)(c), 64(1)(b), Schedule 7 - Part A

ID Driver of Armoured Car

Question:

The caller works for an armoured car company. They are in charge of transporting large sums of money from a customer to a credit union. The caller indicates that the credit union is identifying their employees as if they were the client doing the transaction however all they do is physically transport the funds and they are not the source of the transaction. He indicated that other banks have never asked them to do this.

Note that the driver must be identified in a case of an LCT, except in a quick drop situation.

Answer:

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.

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”.

Having said that, if the driver uses a quick drop and then the conductor’s name does not need to be provided.

Date answered: 2013-11-06

PI Number: PI-5643

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 7, 6G

Regulations: 12(1)(a), 53

Sale or purchase of a business

Question:

Here are a few questions about the sale of a corporation:

1. Do the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) and its regulations apply if a real estate broker sells a business worth $40 million and a building worth $1 million even though the transaction is not subject to the Quebec Real Estate Brokerage Act?

2. In order to conduct the transaction, can a real estate broker or sales representative rely on a list of employees authorized to sell its buildings combined with other documents provided as proof of the corporation's existence?

Answer:

1. The Real Estate Brokerage Act is a provincial act and therefore has no jurisdiction in the federal domain. In addition, the Real Estate Brokerage Act legislates in a specific area not related to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and is therefore not applicable to this situation. According to section 37 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations), 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. This includes the buying or selling of land, buildings and houses. In the example you gave, the real estate broker would be subject to the Act and Regulations only with respect to the sale of the $1 million building.

2. According to subsection 39(1)(b) of the Regulations, when a real estate broker or sales representative acts as an agent in respect of the purchase or sale of real estate, he or she must keep a client information record in respect of every purchase or sale of real estate. In addition, subsection 39(1)(c) of the Regulations stipulates that where the client information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision related to the power to bind the corporation in respect of transactions with the real estate broker or sales representative must be kept. This could be a certificate of incumbency, the articles of incorporation or the bylaws of the corporation that set out the officers duly authorized to sign on behalf of the corporation, such as the president, treasurer, vice-president and comptroller. In this regard, Guideline 6B: Record Keeping and Client Identification for Real Estate indicates that if there were changes subsequent to the articles or bylaws that relate to the power to bind the corporation regarding the account and these changes were in effect at the time the account was opened, then the board resolution stating the change would be included in this type of record.

In addition, subsection 59.2 of the Regulations states that, "Subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1),
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors."

In light of the above, it is clear that, when buying or selling a business, the real estate broker must have proof that the person conducting the transaction has the power to bind the corporation in respect of transactions with the real estate broker. Furthermore, this proof must be in the form of an official document, a copy of the part of the official corporate records or a board resolution to that effect. Therefore, the list of employees who can sell a corporation's buildings must be officially ratified or approved by the board to meet the requirement set out in subsection 39(1)(c) of the Regulations.

Date answered: 2013-11-01

PI Number: PI-5640

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 37, 39(1)(b), 39(1)(c), 59.2

Large corporation exemption under paragraph 62(2)(m) of the PCMLTFR

Question:

You have asked several questions about an MSB that is conducting foreign currency exchange transactions.

You have indicated that this MSB, MSB #1 receives foreign denomination coins from various airlines and subsequently pays the airlines for these coins in Canadian currency at an exchange rate set by MSB #1. You have advised that these transactions are deemed to be foreign currency exchanges. With respect to MSB #1’s operations, you have asked the following questions:

1. Do the airlines that MSB #1 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 MSB #1 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 MSB #1 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:

32. 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 MSB #1 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 MSB #1 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 MSB #1 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 MSB #1 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. I am providing you with the link to FINTRAC Guideline 6C: Record Keeping and Client Identification for Money Services Businesses.

Date answered: 2013-11-01

PI Number: PI-5639

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 32, 59(1)(c), 59(2), 59(4), 62(2)(m)

Acquiring Mortgage Portfolio from a non-reporting entity

Question:

Background

A Canadian Schedule I Bank (the Buyer) is in the process of acquiring a group of residential mortgages initiated after 2008 from a mortgage company (the Seller) to which it is not affiliated, who is not and has never been a covered reporting entity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). However, the seller opened the mortgage accounts using voluntarily adopted robust anti-money laundering processes to conform to legislative standards as if they were covered (including the maintenance of a documented and up-to-date compliance regime to conduct record-keeping, client identification, voluntary suspicious activity reporting, third party and politically exposed foreign person determination, as well as terrorist property screening/reporting). The Seller would continue to service the accounts after the sale.

The Seller Identification Process of all Mortgage Accounts Opened

At the time of funding, the Seller conducted record-keeping and identification procedures by way of a solicitor acting on behalf of the lender face-to-face with the borrower(s). The related information and documentation, listed below, is contained within the mortgage file and is readily verifiable.
i. All details for and a photocopy of one (or in some cases, two) pieces of valid unexpired identification (at least one of which is government-issued)
ii. A solicitor’s final report wherein the solicitor confirms that such identification was validated by him
iii. A Canadian credit bureau report
iv. Pay stub/job letter and/or T4 or Notice of Assessment
v. Pre-authorized debit form faxed by the lawyer’s office
vi. Void cheque with borrower’s name on it
vii. Details of each borrower, including their full name, address, date of birth, telephone number and occupation
viii. Bank statement confirmation of down-payment source

The solicitor conducted the record keeping and identification procedures as per their agreement with the lender (the Seller) which did not explicitly mention the agreement to ascertain identification as per the need for requirements under PCMLTF Regulations S64.1(1), although it did specify that the lawyer would complete the forms (which included client identification information) on their behalf. However, by relying on a Canadian credit bureau report and the solicitor attestation, the lender (the Seller) was ascertaining client identification through the combination method as outlined under the PCMLTF Regulations S64(1)(b)(ii)(D) – credit file method & attestation method. No re-identification procedures were conducted on renewal, since the Seller views a renewal as the continuance of an account, not as a new one.

Questions

Both the buyer and the seller would like to understand their legislative requirements under the PCMLTFA in regards to the acquisition of residential mortgage and specifically:

1. Given that the Seller continues to service the assets, and the mortgage holders will not be signing a new agreement with the Buyer (who is assuming the contracts), is the Buyer obligated to conduct identification in connection with subsection 54(1) of the PCMLTF Regulations?
2. If the answer to (1) is affirmative, can the Buyer relying on any exemptions to ascertain identification under sections 62, 63, or of the PCMLTF Regulations.
3. Would the answers to the preceding questions be any different if the Seller had been a covered entity at the time of the under the PCMLTFA at the time of the inception of the mortgage?

Answer:

Section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that every financial entity shall ascertain the identity of a person, corporation, or entity other than a corporation, at the time an account is opened.

For acquired client accounts from a non-reporting entity, there is an account opening situation and the acquiring entity must ascertain the identity and keep records of each newly acquired account holder. Since the non-reporting entity was not subject to the PCMLTFA, the clients were not previously identified and records were not kept in accordance with the PCMLTFA and its associated Regulations.

Every reporting entity is required to carry out a risk assessment of their clients and business relationships. As such, an acquiring entity is required to conduct a risk assessment of the newly acquired account holders.

Should the risk assessment lead to a high risk designation, then the acquiring entity would be required to carry out special measures for identifying clients, keeping records, and monitoring financial transactions in respect of the activities that pose a high risk, in accordance with subsection 9.6(3) of the PCMLTFA, and further detailed in section 71.1 of the PCMLTFR.

Date answered: 2013-10-29

PI Number: PI-5637

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54, 71.1

Act: 9.6(3)

Testamentary trust: Identification obligation for beneficiaries

Question:

Do all beneficiaries of a testamentary trust have to be identified if we do not know whether they will all receive something?

If a trust entitles trustees to give everything to one of the beneficiaries of the testamentary trust, chosen at their discretion, I conclude that each beneficiary has the potential to receive 100%; therefore, I would require information for all beneficiaries. However, it is a given that some or even all of the beneficiaries could receive 0% and therefore would not have to be identified. What does FINTRAC require in this case? All beneficiaries as I have been doing? Or no beneficiaries and a statement to the effect that since the % is undetermined, none of the beneficiaries have to be identified.

Answer:

Subsections 57(1) and (4) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations) indicate:

57. (1) Subject to section 62 and subsection 63(1), every securities dealer shall ascertain, in accordance with subsection 64(1), the identity of every person who is authorized to give instructions in respect of an account for which a record must be kept by the securities dealer under subsection 23(1).
(4) Subject to section 62 and subsection 63(3), every securities dealer shall, in accordance with section 66, confirm the existence of every entity, other than a corporation, for which it opens an account.

In addition, subsection 11.1(b) of the Regulations stipulates that:

• 11.1 (1) Every financial entity or securities dealer that is required to confirm the existence of an entity in accordance with these Regulations when it opens an account in respect of that entity, every life insurance company, life insurance broker or agent or legal counsel or legal firm that is required to confirm the existence of an entity in accordance with these Regulations and every money services business that is required to confirm the existence of an entity in accordance with these Regulations when it enters into an ongoing electronic funds transfer, fund remittance or foreign exchange service agreement with that entity, or a service agreement for the issuance or redemption of money orders, traveller’s cheques or other similar negotiable instruments, shall, at the time the existence of the entity is confirmed, obtain the following information:
(a) in the case of a corporation, the names of all directors of the corporation and the names and addresses of all persons who own or control, directly or indirectly, 25 per cent or more of the shares of the corporation;
(b) in the case of a trust, the names and addresses of all trustees and all known beneficiaries and settlors of the trust.

In the past, we have taken the position that beneficiaries have no direct or indirect control with regard to the trust. In fact, only the settlors of the trust can give instructions in respect of the trust, in accordance with the terms of the trust agreement. It is thus the settlors, and not the beneficiaries, who have control of the trust. Even when the beneficiaries acquire their property, each beneficiary controls only his or her own part and cannot make decisions with regard to the trust itself.

In light of the above, when a securities dealer opens an account on behalf of a trust, the dealer is not obligated to identify the beneficiaries of the trust.

Date answered: 2013-10-03

PI Number: PI-5629

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 4, 11.1(b), 57(1), 57(4)

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

PI Number: PI-5628

Activity Sector(s): Financial entities

Obligation(s): Reporting, Ascertaining Identification

Guidance: 6G, 7

Regulations: 1(2), 12(1), 53

Client Information Record in respect of every Purchase or Sale of Real Estate

Question:

An agent of your CFO would like to issue a monthly cheque to the daughter of his fiancé. We would obtain an updated signed "know your client" from the agent with a descriptive note to describe that a monthly cheque would be issued to the daughter (name included in full) of his fiancé (name included in full). In addition an acceptable original photo ID will be reviewed or 2 acceptable alternative methods would be reviewed for the third party. Is it acceptable to approve this based on this described method of documenting?

Answer:

Pursuant to section 39 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), when a real estate broker or sales representative acts as an agent in respect of the purchase or sale of real estate, they must keep a receipt of funds record in respect of every amount that they receive in the course of a single transaction and a client information record in respect of every purchase or sale of real estate. Where the receipt of funds record or the client information record is in respect of a corporation, they must also include 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 real estate broker or sales representative.

Subsection 1(2) of the PCMLTFR defines a “client information record” as a record that sets out a client’s name and address. If the client is a person, it should set out their date of birth and the nature of their principal business or their occupation. If the client is an entity, it must set out the nature of their principal business.

Additionally, a “receipt of funds record” must contain the following information:

• the name of the person or entity from whom the amount is in fact received and
o 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
o where the amount is received from an entity, their address and the nature of their principal business;

• the date of the transaction;

• 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;

• the purpose and details of the transaction, including other persons or entities involved and the type and form of the transaction;

• 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

• the amount and currency of the funds received.

In the situation you have described above, the real estate broker has the obligation to gather the information required to complete a receipt of funds record and a client information record.

Date answered: 2013-10-01

PI Number: PI-5626

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6B

Regulations: 1(2), 39

Third party cheques

Question:

We usually do not approve third party cheques and only do so for certain exceptions. Can you confirm which methods would be acceptable for third party cheques issued?

Answer:

Currently, there is no identification obligation under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act or the PCMLTFR that would apply in relation to the third party in the situation you have described.

Date answered: 2013-09-30

PI Number: PI-5625

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Physical review of original acceptable identification document in person

Question:

In cases where we have reviewed an acceptable document in person and the document has a signature that appears to be different from the account documents signed to open the account is it acceptable to use another alternate method such as a bank statement, cheque cleared into the account, attestation method or credit file as an additional source of identification?

Answer:

Pursuant to subsection 64(1) of the PCMLTFR, when identifying an individual in person, reference must be made to either the individual’s birth certificate, driver’s license, provincial health insurance card, passport or other similar document. For a document to be acceptable for identification purposes, it must have a unique identifier number. The document must also have been issued by a provincial, territorial or federal government. The methods you refer to can only to be used when the individual is not physically present.

Date answered: 2013-09-30

PI Number: PI-5624

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64(1)

Expired Identification

Question:

In cases where we have a receive an expired drivers licence and attached is the government issued temporary issued certificate letter (with the drivers license ID) is this an acceptable identification document ? I know that FINTRAC guidelines state that an expired licence is not acceptable however when we are also provided with the temporary certificate (with the identifier drivers license#) is it then acceptable?

Answer:

As explained in our Guideline 6E under the section “How to identity an individual”, there are three conditions that will make a document acceptable for identification purposes:

• The document must have a unique identifier number
• The document must have been issued by a provincial, territorial or federal government
• The document also has to be a valid one and cannot have expired

Based on the foregoing, if the identification in question is expired but the individual has a temporary government issued document in place of the identification, this may be acceptable provided it fulfills the three conditions mentioned above.

Date answered: 2013-09-30

PI Number: PI-5623

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64(1)

Attestation method for identification

Question:

Can you confirm if it is OK for the attestor to attach a copy the respective document reviewed to the certification form document? From what I understand the FINTRAC guidance states that the document reviewed needs to be on the back of the certificate document signed by the attestor.

Answer:

I direct you to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), Schedule 7, subsection 3(1), which requires that the attestation be produced on a legible photocopy of the document and must include the name, profession and address of the person providing the attestation as well as their signature and the type and number of the identifying document provided by the person. As this provision indicates, the attestation must physically appear on the document.

Date answered: 2013-09-30

PI Number: PI-5622

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: Schedule 7, 3(1)

Accepted piece of ID - Signature Verification Form - Alberta

Question:

The Ministry of Finance for Alberta is trying to come up with a solution to assist Albertans with limited or no identification that receive government assistance to establish a banking relationship rather than using MSBs to cash their government cheques. The scheme works when a prospective client goes to an Alberta Government office and through an interview process their identity is established. The government office gives the client a carbon copy of their “signature verification form” and then the client can use the form to establish a banking relationship relying in part on an indemnity contract they (the FI) have with the provincial government to protect the FI from fraud or other losses.

The underlying question being whether this form issued by the provincial government of Alberta can be considered ID for the purposes of account opening with an FI. While it is valid and may have a unique identifier, it is ultimately a “form” and essentially a piece paper. See attachment for a presentation relating to the initiative and with a copy of said form.

Answer:

Paragraph 54(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to sections 62 and 63, every financial entity shall in accordance with subsection 64(1), ascertain the identity of every person who signs a signature card in respect of an account, other than a credit card account, that the financial entity opens, except in the case of a business account the signature card of which is signed by more than three persons authorized to act with respect to the account, if the financial entity has ascertained the identity of at least three of those persons”.

There are three conditions that will make a document acceptable for identification purposes:

• The document must have a unique identifier number
• The document must have been issued by a provincial, territorial or federal government
• The document also has to be a valid one and cannot have expired

These conditions are applicable at the time the identity is ascertained.

After conducting our research, it appears that the Signature Verification Form is an acceptable piece of identification and is issued for identification purposes.

Date answered: 2013-09-19

PI Number: PI-5617

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54(1)(a)

Confirmation of a Deposit Account

Question:

Does the following approach confirm the existence of an individual’s deposit account held at another financial entity in accordance with the PCMLTFR? This option would involve a new Non-Face-to-Face method.

This method of ascertaining a person’s identity consists of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of these Regulations.

The new Non-Face-to-Face method option would only be available for individuals applying for a personal deposit account in their sole name. Individuals seeking to open a joint account would be referred to the branch.

Non-face-to-face Identification

The new Non-Face-to-Face method, used in conjunction with the credit file method (as prescribed in the PCMLTFR), would confirm that the applicant has a deposit account with another financial entity through a series of controlled steps and electronic data validation:

• During the application process, the applicant is prompted to enter deposit account information (i.e., account, bank/institution and transit number for a deposit account) held in the applicant’s sole name with the other financial entity, as well as the relevant online banking credentials (i.e., online banking access ID and password);
• In order to execute the step above within the relevant Bank ABC online account application screen, the client would be directed to refer to a personal cheque or an account statement of the deposit account at the other financial entity, in order to obtain the account, transit number and bank/institution number details;
• Through an intermediary web service, provided by a third party vendor which specializes in providing this type of service to financial institutions, the new Non-Face-to-Face method would access the applicant’s online banking credentials, to facilitate the instant electronic data exchange and validation.

When the new Non-Face-to-Face method verification system logs into the other financial entity, it confirms that:

• the deposit account provided is active, by providing the account balance detail as well as the account balance “since date” (accounts reporting a $0.00 balance would not be accepted);
• the first and last name associated with the account, according to the records of the other financial entity, fully match the information provided by the applicant;
• the account type is a chequing or a savings personal deposit account (only personal deposit accounts would be acceptable);
• the account, bank/ institution and transit numbers match those provided by the applicant; and
• the individual’s online credentials (online banking access ID and password) are valid and active

Confirmation details would be retained by Bank ABC in accordance with the PCMLTFR as a record that the validation activity was completed successfully. Details would include, at minimum, the date the confirmation was completed, the name of the other financial entity involved, the account number and account type that was subject to the verification, as well as the name of the account holder.

As a result of this process, the relevant applicant details validation occurs in real-time. The new Non-Face-to-Face method verification system will match selected data points provided during the new Non-Face-to-Face method verification process against data points available at the other financial entity. These data points, set out above, would have been programmed in the system, through pre-established matching rules, determined by Bank ABC.

•Where, based on the information provided by the prospect client during the internet account opening application, a full data match cannot be confirmed through the new Non-Face-to-Face method verification system, the Bank ABC internet account application would be suspended and the applicant will be directed to visit a branch to complete the application with a Bank ABC employee, face-to-face.

Regulatory Interpretation

Based on the description of the confirmation of deposit account method as outlined in Schedule 7, it is our view this method does not require another financial entity to provide independent confirmation of existence of the deposit account. Rather, it requires that Bank ABC “confirm that the person has a deposit account with a financial entity”. The new Non-Face-to-Face method would confirm that the individual has an active deposit account.

In our view Bank ABC’s proposed new Non-Face-to-Face method verification method would comply with the PCMLTFR with respect to the non-face-to-face identification method for the confirmation of deposit account.

Answer:

Subparagraph 64(1)(b)(ii) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that non-face-to-face identification can be done by using a combination of identification methods as set out in Part A of Schedule 7, the confirmation of deposit account method being one. This method of ascertaining a person’s identity consists of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of the PCMLTFR. For the deposit account method, paragraph 67(c) of the PCMLTFR requires that the client name, the deposit account number, the financial entity name and the date of the confirmation be recorded.

Based on the information you have provided, it appears that new Non-Face-to-Face method will confirm that the applicant has a deposit account with another financial entity as per Part A of Schedule 7 of the PCMLTFR, and would satisfy one of the two combination methods required.

Date answered: 2013-09-09

PI Number: PI-5609

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 62, 64(1)(b)(ii), Schedule 7 - Part A, 67(c)

Agency agreement between two Acadian credit unions

Question:

A credit union wants to offer an inter-credit union service, meaning it wants to serve as an agent for other Acadian credit unions by completing loan forms for students who have existing accounts with various credit unions in the Acadian network.

Is it necessary to conclude an agency agreement between the two credit unions that want to offer agency services (inter-credit union)?

Note that the legal advisor of the Acadian [reporting entity] indicated that Acadian credit unions are members of the same [reporting entity] and that they meet the definition of co-members set out in Guideline 6G: Record Keeping and Client Identification.

Answer:

Subclause 64(1)(b)(i)(A)(III) and clause 64(1)(b)(i)(B) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations state:

• 64. (1) In the cases referred to in sections 53, 53.1, 54, 55, 56, 57, 59, 59.1, 59.2, 59.3, 59.4, 59.5, 60 and 61, the identity of a person shall be ascertained, at the time referred to in subsection (2) and in accordance with subsection (3)
(b) if the person is not physically present when the account is opened, the credit card application is submitted, the trust is established, the client information record is created or the transaction is conducted,

(i) by obtaining the person’s name, address and date of birth and
(A) confirming that one of the following entities has identified the person in accordance with paragraph (a),
(III) an entity that is subject to the Act and is a member of the same association as the entity ascertaining the identity of the person.

AND

(B) verifying that the name, address and date of birth in the record kept by that affiliated entity or that entity that is a member of the same association corresponds to the information provided in accordance with these Regulations by the person.

There is nothing in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act or the associated regulations to indicate that an agency agreement is required between entities that are members of the same association.

Date answered: 2013-08-28

PI Number: PI-5606

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)(b)(i)(A)(III), 64(1)(b)(i)(B)

Acceptable ID and record keeping - T4As, SIN

Question:

Based on the information you have provided we understand, and will be advising Company ABC accordingly, that they may satisfy their obligations under subsection 59.2(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations with respect to a party represented by a mere poster by:

a) asking the party represented by a mere poster for an identification document when the party is present; or
b) using an agent or mandatory and/or to use an appropriate combination of the identification methods used to identify individuals who are not physically present to identify the party represented by a mere poster (“alternate ID method”).

If, after applying (a) or (b), the Company ABC has not been able to confirm the identify or existence of the party represented by the mere poster, they will be required to document the steps they took under (a) or (b), as the case may be, to confirm the identity or existence of the party. Please advise us if our understanding is incorrect.

Non-exhaustive list of acceptable pieces of identification to ascertain the identity of people

We understand that T4As are issued by Service Canada and not an employer. In addition, T4As contain two unique identifier numbers: Social Insurance Number and OAS number. The document needs to be government issued, have a unique identifier, and must be valid. Since T4As meet all the criteria, does this alter FINTRAC’s opinion on whether T4As may be used for identification purposes?

Recording of SIN Cards

Whether the Company ABC are required to document the SIN number of the client on client information records given the statement in FINTRAC’s Guideline 6B.

If not required to document SIN, how would FINTRAC prefer Company ABC account for this in their files? Would merely noting on their client ID form that they saw the SIN number suffice?

Answer:

With respect to your question as to whether the T4As may be used for identification purposes, FINTRAC’s position remains the same that this document is not an acceptable piece of identification because it is not issued for identification purposes.

With respect to your question on how the real estate broker or sales representative must keep a record of the SIN, as per subsection 67(a) of the PCMLTFR, the real estate broker or sales representative must keep a record of the piece of identification used to verify the identity of the person. If the piece of identification used is the SIN, the record must include:

• the name of that person;
• the type of the piece of identification used;
• the reference number of the piece of identification used; and
• the place where it was issued.

Date answered: 2013-08-16

PI Number: PI-5596

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6B

Regulations: 67(a)

Deposit Account Method: Non-face-to-face Identification

Question:

Does ABC Inc.’s confirmation of deposit account method satisfy the combination method?

Answer:

You have indicated that ABC Inc. was cited for failing to correctly identify acceptable methods of ascertaining identity for non-face-to-face transactions. More specifically, ABC Inc.’s confirmation of deposit account method does not satisfy the combination method. ABC Inc. submitted a letter written by its lawyer requesting a review of its procedure for confirmation of a deposit account and a retraction of the citation.

In its letter, ABC Inc. states it, “operates an online money transfer business” and “uses electronic identity verification procedures to identify and authenticate the customer”. Subparagraph 64(1)(b)(ii) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that non-face-to-face identification can be done by using a combination of identification methods as set out in Part A of Schedule 7, the confirmation of deposit account method being one. ABC Inc. has indicated it utilizes method 1 (identification product method) in combination with method 2 (credit file method) if the client pays with his or her credit card. If the client pays using his or her debit, ABC Inc. has indicated it uses a combination of methods 1 and 5 (confirmation of deposit account). In this regard, ABC Inc. indicates that, “customers who choose to pay through direct bank transfer methods (debit card payment) also go through a similar verification system as they are required to login to their bank’s online transactional website to authorize the payment. The bank’s assigned PIN issued to the customer is used for authentication.”

We have indicated in previous policy interpretations that confirming an amount from a deposit account does not confirm the person actually holds the account, but merely proves that the person has access to the deposit account. Therefore, confirming transfer amounts alone would not meet the criteria of confirmation that a person holds a deposit account.

The following is a non-exhaustive list of means of confirmation that a person holds a deposit account:

• A copy of the client’s bank statement
• A legible fax or scanned copy of a bank statement
• An original or electronically issued bank statement addressed to the client that contains all of the information

We have also indicated to reporting entities in the past that they can confirm a deposit account by either confirming verbally with the financial entity where the account is held, by letter from that financial entity to either the client or the RE, or even by email (as long as it is indicated that it is a deposit account).

While reviewing the lawyer’s letter, I noted several issues with the manner in which ABC Inc. identifies its non-face-to-face clients. As part of the first level of authentication, ABC Inc. indicates it compares the, “personal data recorded by the customer during the registration process with information held by credit reference agencies. The minimum standard of confirmation required is at least one match of the customer’s full name, current address and their date of birth.” This appears to fall under identification method 2, which consists of confirming the individual’s name, address and date of birth by referring to a credit file in respect of that person in Canada that has been in existence for at least six months. Subparagraph 64(1)(b)(ii) of the PCMLTFR makes it clear this method can only be combined with methods 3 (attestation method), 4 (cleared cheque method) or 5 (confirmation of deposit account method).

As previously mentioned above, ABC Inc.’s second level of authentication varies depending on how the customer pays for the transaction. Should the client pay using a credit card, ABC Inc.’s system, “relies on a fraud screening authentication system which requires that the customer processes the transaction through Verified by Credit Secure.” The information captured with this system includes 3D Secure results, card issuer information, the location of the card issuer and customer at the time of the transaction, and the results of a complex fraud scoring system that checks, among other things, card usage. After reviewing this information, which included screen shots of this system, I am of the view that this process does not correspond to one of the identification methods outlined in Schedule 7, Part A of the PCMLTFR. Given that ABC Inc.’s first level of authentication equates to identification method 2, it should be combined with methods 3, 4 or 5. As such, ABC Inc.’s non-face-to-face identification methods do not satisfy the combination method of identification if the customer pays via credit card or debit.

Date answered: 2013-08-09

PI Number: PI-5592

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 64(1)(b)(ii), Schedule 7 - Part A

Purchase of insured mortgage

Question:

Bank ABC would like clarification as to whether there are requirements to fulfill in order to ensure that the insured mortgages purchased are compliant with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

Answer:

Section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that every financial entity shall ascertain the identity of a person, corporation, or entity other than a corporation, at the time an account is opened.

With respect to the mortgages purchased from third parties, Bank ABC must consider whether an account is opened. If an account is opened, Bank ABC is required to fulfill all the related obligations under the PCMLTFA and its associated Regulations, including that the client is identified in accordance with section 64 of the PCMLTFR and record kept in accordance with section14 of the PCMLTFR. Please note that the facts are crucial in making this determination. And unfortunately, this is not a determination that can be done by FINTRAC, at this time.

Date answered: 2013-07-29

PI Number: PI-5586

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 14, 54, 64

Parties who are not represented by a real estate broker or sales representative, in the course of a real estate transaction

Question:

Can I have more information about : Legislative requirement to ascertain the identity of the other parties, who are not represented by a real estate broker or sales representative, in the course of a real estate transaction?

Answer:

Subsection 59.2(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), […] Where one or more but not all of the parties to a real estate transaction are represented by a real estate broker or sales representative, each real estate broker or sales representative that represents a party to the transaction shall take reasonable measures to ascertain the identity or confirm the existence of the parties that are not so represented”.

Therefore, in the case of a real estate transaction where some parties are represented by a real estate broker or sales representative and other parties are not represented, each real estate broker or sales representative, who represents a party to the transaction, must take reasonable measures to identify or confirm the existence of the parties who are not represented.

There are no clarifications of the concept of “reasonable measures” in the provisions and it is not defined in the Act or Regulations. However, in this context, reasonable measures to identify an individual include asking the individual for an identification document. They also include using either of the options available to identify individuals who are not physically present. Our Guideline 6B: Record Keeping and Client Identification for Real Estate, provides some guidance as to FINTRAC’s policy regarding the concept of reasonable measures.

In this situation, if the real estate broker or sales representative is unable to identify or confirm the existence of the parties who are not represented, they will have to keep a record of the measures taken to identify these parties and the reason they were unable to identify or confirm their existence.

Date answered: 2013-07-26

PI Number: PI-5583

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2(3)

List of acceptable pieces of ID

Question:

Can I have more information about : Non-exhaustive list of acceptable pieces of identification to ascertain the identity of people?

Answer:

Paragraph 64(1)(a) of the PCMLTFR states that “In the cases referred to in sections 53, 53.1, 54, 55, 56, 57, 59, 59.1, 59.2, 59.3, 59.4, 59.5, 60 and 61, the identity of a person shall be ascertained, at the time referred to in subsection (2) and in accordance with subsection (3), […] by referring to the person’s birth certificate, driver’s licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document”.

As previously explained, a real estate broker or sales representative must identify of:

• Any individual who conducts a large cash transaction;
• Any individual or entity for whom they have to keep a client information record or a receipt of funds record;
• Any individual for whom they have to send a suspicious transaction report (reasonable measures and exceptions apply).

Subsection 4.6 How to identify an individual of Guideline 6B: Record Keeping and Client Identification for Real Estate, cited above and available on our Web site, provides guidance regarding the acceptable identification documents to use to identify an individual.

There are three conditions that will make a document acceptable for identification purposes:

• The document must have a unique identifier number;
• The document must have been issued by a provincial, territorial or federal government; and
• The document also has to be a valid one and cannot have expired.

We have previously determined that the following pieces of identification can be used to ascertain the identity of people:

• Driver’s License issues in Canada
• Passport
• Provincial Health Card (except for those issues by Ontario, Manitoba and Prince Edward Island)
• Birth Certificate issued in Canada by a provincial government
• Old Age Security Identification Card issued by the Government of Canada
• Certificate of Canadian citizenship
• Certificate of naturalization issued by the Government of Canada
• Permanent Resident Card issued by the Government of Canada
• Certificate of Indian Status issued by the Government of Canada
• Form IMM 1442 issued by Citizenship and Immigration Canada
• Form IMM 1000 issued by Citizenship and Immigration Canada
• British Columbia Identification Card issued by Insurance Corporation of British Columbia;
• Photo ID issued by an Alberta Registry Agent
• Photo ID issued by Saskatchewan Government Insurance Card
• Photo ID issued by Service Nova Scotia and Municipal Relations
• Photo ID issued by PEI’s Department of Transportation and Public Works
• Photo ID Document issued by Service New Brunswick
• Photo ID issued by Newfoundland and Labrador’s Department of Government Services and Lands
• Photo ID issued by Northwest Territories Department of Transportation
• Age of majority card issued by the Provincial or Federal Government

We would like to reiterate that this list is not exhaustive. Other pieces of identification, issued abroad, may also be acceptable if there is a Canadian equivalent.

As per subsection 67(a) of the PCMLTFR, the real estate broker or sales representative must keep a record of the piece of identification used to verify the identity of the person. The record must include:

• the name of that person;
• the type of the piece of identification used;
• the reference number of the piece of identification used, and
• the place where it was issued.

With respect to your question concerning the use of a T4 and T4A as a piece of identification, FINTRAC’s position is that neither of these documents would be an acceptable piece of identification. In fact, these documents are issued by an employer not by a provincial, territorial or federal government, and are not issued for identification purposes.

Date answered: 2013-07-26

PI Number: PI-5582

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 64(1)(a), 67(a)

Ascertaining ID - Valid ID

Question:

If the driver’s license was valid when we took the original ID, can we use the same form for repeat business by the same customer, after the driver’s license has expired? While I understand from section 4.2 of the guidelines that a real estate agent does not need to confirm their identity again if they recognize the individual and have no doubts about the identification information previously collected. What is unclear is whether “doubts” relates to validity of ID?

Answer:

Paragraph 59.2(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), […] in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction”.

Paragraph 64(1)(a) of the PCMLTFR states that the identity of a person shall be ascertained by:

“referring to the person’s birth certificate, driver’s licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document.”

As explained in our Guidelines (in the section “how to identity an individual”), there are three conditions that will make a document acceptable for identification purposes:

• The document must have a unique identifier number
• The document must have been issued by a provincial, territorial or federal government
• The document also has to be a valid one and cannot have expired

These conditions are applicable at the time the identity is ascertained, and every time the identity is ascertained.

However, if a real estate broker or sales representative recognizes the client and have no doubts about the identification information previously collected, the real estate broker or sales representative does not need to ascertain their identity again.

That means:

• If the real estate broker or sales representative recognizes the client and has the record, there is no need to ascertain the same identity;
• If the real estate broker or sales representative recognizes the client and does not have the record, the real estate broker or sales representative needs to ascertain the identity of the client;
• If the real estate broker or sales representative does not recognize the client, the real estate broker or sales representative needs to ascertain the identity of the client.

For the exception under subsection 63(1) of the PCMLTFR to apply, our Act and its associated regulations do not require that the document still be valid when the real estate broker or sales representative recognizes the client. The real estate broker or sales representative is not, at this time, required to keep a record of the expiry date of the document used to ascertain the client’s identity.

However, it should be noted that it is at the real estate broker or sales representative’s discretion to use or not the exception prescribed in subsection 63(1) of the PCMLTFR.

Date answered: 2013-07-19

PI Number: PI-5577

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2(1),(a) 63(1), 64(1)(a)

BYID: Acceptable piece of identification

Question:

You have asked whether the BYID card issued by the Alcohol and Gaming Commission of Ontario is an acceptable form of ID.

Answer:

The identity of a person shall be ascertained by referring to the documents listed under subsection 64(1)(a) of the PCMLTFR, namely, "the person’s birth certificate, driver’s licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document”.

As explained in our Guideline 6 (in the section “How to identity an individual”), there are three conditions that will make a document acceptable for identification purposes:

• The document must have a unique identifier number
• The document must have been issued by a provincial, territorial or federal government
• The document also has to be a valid one and cannot have expired
These conditions are applicable at the time the identity is ascertained.

After conducting some research, it appears that the BYID card does have a unique identifier and is issued by the Liquor Control Board of Ontario, which is a provincial Crown corporation. There is no expiration date for a BYID card. Therefore, it would appear that the BYID card meets the three conditions that make a document acceptable for identification purposes.

Date answered: 2013-07-18

PI Number: PI-5574

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)(a)

Previously obtained Attestation and Bank Statements acceptable?

Question:

Following an exam of an MSB that utilizes the combination method of identification (attestation and bank statement), the RE is questioning whether he needs to obtain a recent copy of an account statement and attestation for each transaction.

In other words, are copies of previously obtained attestation and bank statements acceptable as long as the date received is different ?

Answer:

Subparagraph 64(1)(b)(ii) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that the identity of a person not physically present when the account is opened, the credit card application is submitted, the client information record is created or the transaction is conducted can be ascertained by a combination of methods found in Part A of Schedule 7 of the PCMLTFR. These methods include attestation and confirmation of the deposit account. You have indicated that the RE in question has previously utilized this combination of methods to identify his clients and is now asking whether copies of these previously obtained attestations and bank statements are an acceptable means of identification if they are simply re-sent.

While the PCMLTFR does not specify whether copies of previously obtained attestation and bank statements are acceptable if the date received is different, as a best practice, the RE may want to ensure documentation is up to date when identifying a client using this combination of methods.

Date answered: 2013-07-09

PI Number: PI-5572

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 64(1)(b)(ii), Schedule 7 - Part A

Exclusion of in-kind transfer in the initial deposit

Question:

Does the initial deposit permitted under paragraph 64(2)(a) of the Regulations include an in-kind transfer of securities held by another broker?

In the event that an account is opened exceptionally only for depositing securities, while awaiting verification of the identity of one of the authorized officers, we restrict all account transactions, but after a reasonable amount of time, we realize that we will not be able to ascertain the officer's identity, so we have to close the account because a restricted account cannot be left open indefinitely. Therefore, the securities will have to be sold and the client will be issued a cheque. Could this act in itself potentially constitute money laundering?

This leads me to conclude that an initial deposit cannot be an in-kind transfer to another broker. Does FINTRAC agree?

This is not an issue if a cheque is deposited because a cheque would simply be issued to the client and the account would be closed.

Answer:

Paragraph 64(2)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations states that “The identity shall be ascertained […] in the cases referred to in paragraph 54(1)(a), subsection 57(1) and paragraph 60(a), before any transaction other than an initial deposit is carried out on an account”.

Initial deposit is not defined in the Act or the PCMLTFR, but should not be construed as investment ("in kind").

Thus, in this example, measures must be taken to verify the client's identity when an account is opened, before performing an operation.

Date answered: 2013-06-20

PI Number: PI-5570

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64(2)(a)

Attestation Method

Question:

What is the attestation method?

Answer:

(1) This method of ascertaining a person’s identity consists of obtaining an attestation from a commissioner of oaths in Canada, or a guarantor in Canada, that they have seen one of the documents referred to in paragraph 64(1)(a) of these Regulations. The attestation must be produced on a legible photocopy of the document (if such use of the document is not prohibited by the applicable provincial law) and must include

(a) the name, profession and address of the person providing the attestation;
(b) the signature of the person providing the attestation; and
(c) the type and number of the identifying document provided by the person.

(2) For the purpose of subsection (1), a guarantor is a person engaged in one of the following professions in Canada:

(a) dentist;
(b) medical doctor;
(c) chiropractor;
(d) judge;
(e) magistrate;
(f) lawyer;
(g) notary (in Quebec);
(h) notary public;
(i) optometrist;
(j) pharmacist;
(k) professional accountant (APA [Accredited Public Accountant], CA [Chartered Accountant], CGA [Certified General Accountant], CMA [Certified Management Accountant], PA [Public Accountant] or RPA [Registered Public Accountant]);
(l) professional engineer (P.Eng. [Professional Engineer, in a province other than Quebec] or Eng. [Engineer, in Quebec]); or
(m) veterinarian.

Date answered: 2013-06-10

PI Number: PI-5565

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 64(1)(a)

Non-Face-to-Face: Affiliate Method

Question:

Bank ABC (Canada) has affiliate banks around the world who are all owned by the same parent. The issue of whether these banks are affiliates is not in question but the issue stems from how the affiliate method is being utilized. The regulations state that the reporting entity must confirm that the affiliate has the client’s name, address and DOB on file and that the information matches with what the reporting entity has from the client.

In the case of Bank ABC, the client opening an account either:
a) Proceeds to an affiliate (outside of Canada) to have their identification ascertained. Bank ABC sent an email to their affiliate asking the affiliate to identify the client with no evidence of an existing account with the affiliate. The account application contained a form stating that the identification was seen physically by the affiliate. Bank ABC did not send the client’s name, address and DOB to verify that the information matched. To me this would be more of an agent method even though the reporting entity states it is the affiliate method.
OR
b) The client is going straight to the affiliate (outside of Canada) to open the account. The account application has the application along with a bank statement held by the client with the affiliate bank. However, the bank statement from the affiliate is dated after the initial transaction was conducted with Bank ABC. Once again the client’s name, address and DOB were not matched to any information held by the affiliate.

Does the reporting entity have to initiate the affiliate method by sending the client’s name, address and DOB to the affiliate? Or can the affiliate just send the information to the reporting entity after the client visited the affiliate location?

Also, based on the two scenarios provided, I am trying to confirm whether it is appropriate to cite a deficiency or not. The crux on the issue seems to be whether the identification was ascertained by the affiliate prior to confirming the information. If the client’s ID was ascertained at the time of confirming it, I believe it would be the agent method without an agent agreement.

Answer:

Clause 64(1)(b)(i)(B) of the PCMLTFR indicates that the identity of a person shall be ascertained, if the person is not physically present when the account is opened, the credit card application is submitted, the trust is established, the client information record is created or the transaction is conducted, by obtaining the person’s name, address and date of birth and confirming that an entity that carries on activities outside Canada similar to the activities of a person or entity referred to in any of paragraphs 5(a) to (g) of the Act and that is affiliated with the entity ascertaining the identity of the person, has identified the person in accordance with paragraph 64(1)(a), AND verifying that the name, address and date of birth in the record kept by that affiliated entity corresponds to the information provided in accordance with these Regulations by the person.

To identify an individual using the affiliate method for non-face-to-face ascertaining identification, the reporting entity (or the reporting entity’s agent if they have one) has to first obtain the individual's name, address and date of birth. Then, they have to confirm that one of the following has identified the individual by referring to an original identification document:

• a financial entity (paragraphs 5(a), (b), (d), (e), and (f) of the Act), life insurance company (paragraphs 5(c) of the Act) or securities dealer (paragraph 5(g) of the Act) affiliated with them;
• an entity affiliated with them and whose activities outside Canada are similar to those of a financial entity, life insurance company or securities dealer; or
• another financial entity that is a member of their financial services cooperative association or credit union central association of which they are also a member.
In your case, confirmation that an entity affiliated with Bank ABC (Canada) and whose activities outside Canada are similar to those of Bank ABC, has identified the individual by referring to an original identification document.

To use the affiliate option, Bank ABC has to verify that the individual's name, address and date of birth provided to them corresponds with the information kept in the records of the entity affiliated with Bank ABC.

Based on subsection 64(1.2) of the PCMLTFR, in this context, an entity is affiliated with another entity if they fully own it or it fully owns them, or they are both fully owned by the same entity.
Not all reporting entities or agents of reporting entities can use this method, as this can only be used if they have affiliates or co-members.

With respect to the two scenarios:

As per 64.1(1) of the PCMLTFR, a reporting entity can use an agent to carry out the ascertaining of ID. However, 64.1(1) of the PCMLTFR clearly states that “a person or entity that is required to take measures to ascertain identity under subsection 64(1) or (1.1) may rely on an agent or mandatary to take the identification measures described in that subsection only if that person or entity has entered into an agreement or arrangement, in writing, with that agent or mandatary for the purposes of ascertaining identity.” As such, the reporting entity must enter into a written agreement with the agent or mandatary that will be carrying out the identification measures described in 64(1) or (1.1) for the purposes of ascertaining identity.

Given the international nature of their relationship, it might be worthwhile to reiterate the requirements of the PCMLTFA as they relate to face-to-face and non-face-to-face identification methods (i.e., non-face-to-face don’t tend to be applicable internationally.)

I personally think that the affiliate method can work, if all the elements are present.

However, please note that it is not up to the affiliated entity to receive the client’s information from Bank ABC to confirm that the client’s information is consistent, but the reverse, as stated below:

“To identify an individual using the affiliate method for non-face-to-face ascertaining identification, the reporting entity (or the reporting entity’s agent if they have one) has to first obtain the individual's name, address and date of birth. Then, […] in your case, confirmation that an entity affiliated with Bank ABC and whose activities outside Canada are similar to those of Bank ABC, has identified the individual by referring to an original identification document.”

Date answered: 2013-06-05

PI Number: PI-5563

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)(b)(i)(B), 64(1.2), 64.1

Act: 5

Ascertaining ID - Non Face-to-face: Equifax eID Compare

Question:

I wanted to touch base with regarding the conversation we had last week about the use of the Equifax eID solution. Our aim is to use this tool, when satisfying requirements when an "Individual not physically present". We are specifically looking for clarification of suitability of this tool when utilizing Option 2 where we are:

- Confirming that a cheque drawn on a deposit account with a financial entity (other than one that is exempt from identification requirements) has cleared; and
- Confirming that the individual has a deposit account with a financial entity (other than one that is exempt from identification requirements).

Answer:

In response to your question regarding non-face-to-face identification methods for reporting entities, Equifax eID Compare may only be acceptable as an identification product method, as per schedule 7 of the PCMLTFR, if Equifax eID Compare falls under the definition of an identification product method which states, “This method of ascertaining a person’s identity consists of referring to an independent and reliable identification product that is based on personal information in respect of the person and a Canadian credit history of the person of at least six month’s duration”.

By identification product, we mean a product that is offered by independent businesses, in which they provide a series of specific questions to be asked to the client based on information drawn from that individual’s Canadian credit history (can only be used if they have at least 6 months of credit history). The key here is that the questions asked are so precise that only the person concerned can answer the questions.

According to subsection 64(1)(b)(ii) of the PCMLTFR, if a reporting entity uses an acceptable identification product method, method 1 as per schedule 7, to identify non-face-to-face clients, this method must be combined with one other of the following methods:

• Attestation (method 3)
• Cleared cheque (method 4)
• Confirmation of deposit account (method 5)

Please note that there are other products, in addition to Equifax eID Compare, available commercially for the identification product method. FINTRAC does not endorse nor advertise any products, companies, or provider of consumer information.

Date answered: 2013-06-05

PI Number: PI-5562

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: Schedule 7, 64(1)(b)(ii)

Use of credit facility

Question:

A potential credit card based solution to manage its account receivables more efficiently. Would you agree?

Answer:

Section 14.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to subsection 62(2), every financial entity shall, in respect of every credit card account that it opens, keep a credit card account record that includes

(a) where the account is opened in the name of a client that is a person or an entity other than a corporation, the name and address of the client and

(i) if the client is a person, their date of birth and the nature of their principal business or their occupation, as applicable, and

(ii) if the client is an entity other than a corporation, the nature of their principal business;

(b) where the account is opened in the name 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 the account;

(c) the name, address and telephone number of every holder of a credit card for the account;

(d) the date of birth of every holder of a credit card for the account, if that information is known after reasonable measures have been taken by the financial entity to obtain it;

(e) every credit card application that the financial entity receives from the client in the normal course of business;

(f) a copy of every credit card statement that the financial entity sends to the client, if the information in the statement is not readily obtainable from other records that are kept and retained by it under these Regulations; and

(g) where the financial entity has obtained approval under paragraph 67.1(b) to keep the account of a person that has been determined to be a politically exposed foreign person open

(i) the office or position in respect of which the person was determined to be a politically exposed foreign person,

(ii) the source, if known, of the funds that are or are expected to be deposited in the account,

(iii) the date of the determination that the person was a politically exposed foreign person,

(iv) the name of the member of senior management who gave the approval to keep the account open, and

(v) the date of that approval.”

We would like to remind Bank ABC of their obligations under the PCMLTFR to fulfill all requirements when the credit card account is opened by a person and when the credit card account is opened by an entity.

When a financial entity opens a credit card account, for an individual or an entity that is not a corporation, they have to keep a record of the name, address and principal business or occupation of that individual or entity. If the record is about an individual, it also has to include the individual's date of birth. For a credit card account opened for a corporation, the financial entity has 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 a financial entity opens any credit card account, they have to keep a record of the name, address, telephone number and date of birth of every holder of a credit card for that account. For the date of birth, they have to take reasonable measures to obtain it.

Date answered: 2013-05-31

PI Number: PI-5558

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 14.1

Non-face-to-face: Independent Data Source Method

Question:

How can we determine if a specific product can be used as the independent data source method?

Answer:

The Independent Data Source Method is an identification method only available for credit card accounts, and this method is specifically described as the consulting of an independent database that is compiled from a directory of a telecommunications entity (such as Canada 411).

Credit card accounts are deemed less risky; therefore the combination of methods for NFTF identification that can be used for credit card accounts are far less restrictive than the ones prescribed for a regular account opening.

Schedule 7 of the PCMLTFR lists the NFTF identification methods. Part B and C define what the Independent Data Source Method is:
“This method of ascertaining a person’s identity consists of consulting a reputable and independent database that is compiled from a directory of a telecommunications entity and that contains the names, addresses and telephone numbers of individuals in order to confirm the person’s name, address and telephone number.”

The following elements must be considered in order to determine if a specific product can be used as the independent data source method:
1. Database is reputable and independent;
2. Database complies names, addresses and telephone numbers of individuals from a directory of a telecommunications entity; and
3. Database is used to confirm the person’s name, address and telephone number.

If the product combines all three elements, it will appear that it can be used as an independent data source method.

Date answered: 2013-05-29

PI Number: PI-5557

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: Schedule 7-Part B and C

Confirmation of a Deposit: Use of Micro Deposit

Question:

Does the use of a micro deposit would meet the requirements of the deposit account method?

Answer:

For the deposit account method, paragraph 67(c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) requires that the client name, the deposit account number, the financial entity name and the date of the confirmation be recorded. We have indicated in previous policy interpretations that confirming an amount from a deposit account does not confirm the person actually holds the account, but merely proves that they have access to a deposit account.

Therefore, confirming transfer amounts alone would not meet the criteria of confirmation that a person holds a deposit account.
The following is a non-exhaustive list of means for the confirmation that a person holds a deposit account:

• a copy of the client’s bank statement
• a legible fax or scanned copy of a bank statement
• an original or electronically issued bank statement addressed to the client that contains all of the information

Date answered: 2013-05-21

PI Number: PI-5555

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 67(c)

PEFP: Judge - Confirmation of Interpretation

Question:

Our position is that “judge” in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) is a reference to senior judicial positions. Does FINTRAC agree?

Answer:

Paragraph 9.3(3)(h) of the PCMLTFA states that “For the purposes of this section, “politically exposed foreign person” means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state: […] judge […]”

The meaning of a “judge” in the PCMLTFA is comparable to the definition of a judge in Canada found in other federal or provincial Canadian legislation, for example, the Judges Act and other provincial legislation. In understanding that there is a process an individual undergoes to be elected or appointed as a judge, seniority would not be a factor in determining whether a judge is a judge.

FINTRAC does not agree with your view that the position of “judge” only includes senior judicial positions.

Date answered: 2013-05-14

PI Number: PI-5552

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Act: 9.3(3)(h)

Acceptable piece of identification: Nexus cards

Question:

Can Nexus cards be used as a piece of identification?

Answer:

As explained in our Guidelines (in the section “how to identity an individual”), there are three conditions that will make a document acceptable for identification purposes:

• The document must have a unique identifier number
• The document must have been issued by a provincial, territorial or federal government
• The document also has to be a valid one and cannot have expired

These conditions are applicable at the time the identity is ascertained.

After conducting some research, it appears that the Nexus card has a unique identifier number at the back of the card, is issued by Canada Border Services Agency (CBSA), and is valid for five years. Therefore, the Nexus card meets the three conditions that make a document acceptable for identification purposes.

Date answered: 2013-05-09

PI Number: PI-5548

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)(a)

ID Verification Requirements for Account Transfers in bulk between two Companies

Question:

123 Inc. (“123”) has recently acquired the Calgary Branch of 456 Inc. (“456”). A bulk transfer of all clients accounts of the said branch was initiated and completed April 1, 2013; this was approved by the IIROC.

456 is in the process of winding down.

All employees (which includes 5 registered individuals) of 456’s Calgary branch have transferred as well and are currently 123 employees.

ID verification of client accounts of said bulk transfer was conducted while client accounts were at 456.

We are currently in the process of re-papering client accounts which includes conducting ID verification once again. IIROC has given us 60 days to re-paper and conduct ID verification; they do not require us to have ID verification completed prior to the first trade done by the clients as long as it is done within 60 days.

Accounts that have not had ID verification and re-papering conducted within the allotted 60 days will be restricted.

It is our intent to be able to provide clients who transferred their accounts to 123 with minimal disruption to service provided to their accounts. In light of this and circumstances indicated above, we would appreciate guidance on FINTRAC’s position is with regards to conducting ID verification for clients of the bulk transfer.

Answer:

For accounts acquired from a non-reporting entity, there is an account opening situation and the acquiring entity must ascertain the identity and keep records of each newly acquired account holder. The clients were not previously identified and records were not kept in accordance with the PCMLTFA and its associated Regulations, since the non-reporting entity is not subject to Part 1 of the PCMLTFA.

For accounts acquired from a reporting entity, where the acquiring entity determined no accounts are opened, there is no legislative requirement for the acquiring entity to repeat the process to ascertain the identity of each newly acquired account holder. The acquiring entity is responsible for ensuring that the acquired client accounts were previously identified in accordance with section 64 of the PCMLTFR and records kept in accordance with section 23 of the PCMLTFR.

Should the acquiring entity add any account(s) to the profile of an acquired client, the acquiring entity shall ascertain the ID of the client at the time the new account is added. The exceptions outlined in the regulations (paragraph 62(1)(c) and section 63 of the PCMLTFR) pertaining to ascertaining the identity would not apply.

123 indicated that all employees of 456’s Calgary branch have transferred as well and are currently 123 employees. In this case, the exception outlined in section 63 of the PCMLTFR may apply. But here are some comments:

Subsection 63(1) of the PCMLTFR states that “Where a person has ascertained the identity of another person in accordance with section 64, the person is not required to subsequently ascertain that same identity again if they recognize that other person”.

This exception is attached to the PERSON ascertaining the ID of the client, not the RE.

That means:

• If the person recognizes the client and has the record, there is no need to ascertain the same identity;
• If the person recognizes the client and does not have the record, the person needs to ascertain the identity of the client;
• If the person does not recognize the client, the person needs to ascertain the identity of the client.

Therefore, this exemption for client identification will only apply when the same employee (who performed the identification from 456’s Calgary branch) is now working with 123, recognizes the client, and has the record.

Date answered: 2013-05-08

PI Number: PI-5547

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 23, 62(1)(c), 63, 63(1), 64

Client Identification for Bulk account Transfers

Question:

I recently encountered a question from one securities dealer regarding the bulk account transfers from one securities firm to another.

The reporting entity is also seeking clarification as they were previously told by their Director that “client identification” for account transfers between securities dealers were always automatically exempted as they had been previously identified by the other securities dealer.

It is’ my understanding that the exemption for client identification does not automatically apply unless the same employee (who used to perform the identification from Firm A) is now working with firm B as well.

Hence, if the acquirer (firm B) only purchases the book or asset from acquire (firm A), the exemption doesn’t automatically apply. Is it correct?

If my understanding above is correct, the reporting entity is also asking whether our agency should allow their members a reasonable time frame to contact their clients for the re-identification process if the re-identification is required. They have concerns that their members are audited by FINTRAC during the client re-identification process and cited for deficiencies on the situation above. According to the reporting entity, depending on the structure of the dealer firm, the dealer may still be able to perform the trading on the accounts that they transfer before the re-identification process takes place.

Answer:

Subsection 63(1) of the PCMLTFR states that “Where a person has ascertained the identity of another person in accordance with section 64, the person is not required to subsequently ascertain that same identity again if they recognize that other person”.

This exception is attached to the PERSON ascertaining the ID of the client, not the RE.

That means:

• If the person recognizes the client and has the record, there is no need to ascertain the same identity;
• If the person recognizes the client and does not have the record, the person needs to ascertain the identity of the client;
• If the person does not recognize the client, the person needs to ascertain the identity of the client.

Therefore, this exemption for client identification will only apply when the same employee (who used to perform the identification from Firm A) is now working with Firm B, and has the record.

In a case where the acquiring entity (Firm B) only acquirers the portfolio of Firm A, here are some comments:

Every securities dealer shall ascertain the identity of a person, corporation, or entity other than a corporation, at the time an account is opened in accordance with section 57 of the PCMLTFR.

The acquiring entity must consider whether the accounts are opened in order to determine the associated identification obligations.

There is no account opening if an entity transfers over client accounts where:

• Clients were previously identified and records kept in accordance with the Act and its associated Regulations, or, legislative requirements to ascertain the identity did not exist at the time the account was opened (prior to June 12, 2002);
• Only immaterial changes were made to the account; and
• Transactional history follows.

However, should the acquiring entity add any account(s) to the profile of an acquired client, the acquiring entity shall ascertain the ID of the client at the time the new account is added. The exceptions outlined in the PCMLTFR (paragraph 62(1)(c) and section 63) pertaining to ascertaining ID would not apply.

The acquiring entity is responsible for ensuring that the acquired client accounts were previously identified in accordance with section 64 of the PCMLTFR and records kept in accordance with section 23 of the PCMLTFR.

Furthermore, in accordance with subparagraph 71(1)(c)(i) of the PCMLTFR, every reporting entity is required to carry out a risk assessment of their clients and business relationships. As such, an acquiring entity is required to conduct a risk assessment of the newly acquired account holders. Should the risk assessment lead to a high risk designation, then the acquiring entity would be required to carry out special measures for identifying clients, keeping records, and monitoring financial transactions in respect of the activities that pose a high risk, in accordance with subsection 9.6(3) of the PCMLTFA, and further detailed in section 71.1 of the PCMLTFR.

As a best practice, reporting entities will continue to be encouraged to review and update account information, as appropriate, when acquiring these accounts in the process of a merger or acquisition.

Ultimately, the newly acquired account holders become the responsibility of the acquiring entity, and it is for that entity to not only ensure compliance with the PCMLTFA and its associated Regulations, but to review the risk that these newly acquired clients may pose to the entity, and/or the Canadian financial system.

Date answered: 2013-05-08

PI Number: PI-5546

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 23, 57, 62(1)(c), 63, 64, 71(1)(c)(i)

Act: 9.6(3)

Ascertaining Identity of an Non-Account Holder

Question:

When a business makes a purchase, who is not an account holder, is the ascertaining identification requirement apply to the individual procuring the transaction or the entity who is making the purchase of the negotiable instruments?
Specifically, [ the reporting entity] sells negotiable instruments for corporate sales programs in bulk. I need to understand how to interpret this section of the act when no individual is present for the sale. An entity will complete an order form for the purchase in a non-face to face transaction.

The guidance indicates to ascertain the identity of the 'individual'. Should that be interpreted to include an entity if the entity is making the purchase?

Answer:

According to Section 54(1) of the PCMLTFR “Subject to sections 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
(i) a transaction whereby the financial entity issues or redeems money orders, traveller’s cheques or other similar negotiable instruments in an amount of $3,000 or more,
(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, or
(iii) a foreign currency exchange transaction of $3,000 or more;
Therefore, according to subsection 54(1)(b) of the PCMLTFR, the reporting entity must ascertain the identity of the individual who is purchasing the negotiable instruments. In the example provided by the reporting entity, the individual procuring the transaction must be identified. You may want to remind the reporting entity that they must also take reasonable measures to conduct a third party determination, if the reporting entity has to keep a large cash transaction record.

Date answered: 2013-04-26

PI Number: PI-5536

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54(1)

Ascertaining ID - Credit Cards

Question:

The caller would like some clarifications in regards to client identity for credit card accounts. The financial entity has a contract with intermediaries which offer credit cards to businesses. The intermediary's customers are businesses who provide employees with the cards. The caller would like to know if they have to obtain specific id from the corporate firms or the actual employees who are using the cards on a day to day basis.

Answer:

To answer to your question, yes, when a financial entity issues a credit card to a corporate firm, which is used on a day to day basis by its employees, there is specific identification that is required to be obtained from the corporate firm.

Section 14.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), states that “Subject to subsection 62(2) every financial entity shall, in respect of every credit card account that it opens, keep a credit card account record that includes

(b) where the account is opened in the name 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 the account;
(c) the name, address and telephone number of every holder of a credit card for the account;
(d) the date of birth of every holder of a credit card for the account, if that information is known after reasonable measures have been taken by the financial entity to obtain it;
(e) every credit card application that the financial entity receives from the client in the normal course of business;
(f) a copy of every credit card statement that the financial entity sends to the client, if the information in the statement is not readily obtainable from other records that are kept and retained by it under these Regulations; and
(g) where the financial entity has obtained approval under paragraph 67.1(b) to keep the account of a person that has been determined to be a politically exposed foreign person open

(i) the office or position in respect of which the person was determined to be a politically exposed foreign person,
(ii) the source, if known, of the funds that are or are expected to be deposited in the account,
(iii) the date of the determination that the person was a politically exposed foreign person,
(iv) the name of the member of senior management who gave the approval to keep the account open, and
(v) the date of that approval.”

Furthermore, Section 54.1 of the PCMLTFR indicates that “Subject to subsections 62(1) and (2) and section 63, every financial entity shall

(b) where the financial entity opens a credit card account in the name of a corporation, confirm the existence of and ascertain the name and address of the corporation and the names of its directors in accordance with section 65;”

Date answered: 2013-04-12

PI Number: PI-5533

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 14.1, 54.1

Registered deposit brokers and agency agreements

Question:

A registered deposit broker may act as an agent for client identification purposes for more than one financial institution through an agency agreement between the principal(s) and its agent.

Answer:

A registered deposit broker acting as an agent for identification purposes for two or more financial institutions may rely on his previous identification of a customer

1) if the agent agreements between the registered deposit broker and the various financial institutions are in force at the time of the first client identification of a customer; and

2) if the client information is still valid (e.g. address of customer is still valid).

In other words, if a registered deposit broker who has identified a customer for one financial institution wants to use that identification with respect to the opening of an account with a second financial institution, the registered deposit broker must already have an agent agreement in place, and in force, with the second financial institution at the time of the client identification of said customer.

Furthermore, the caveat to this policy includes having up-to-date client information.

Date answered: 2013-04-10

PI Number: PI-5529

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Bank of Canada Noon Rate

Question:

Our internal auditors have raised a question with regard to the Bank of Canada noon rate. Specifically, section 2 of the PCMLTFR states:

"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."

FINTRAC's Guidelines 7, 8 and 10 seem to provide further interpretation by stating that the noon rate should only be used for reporting purposes: "For this purpose only, use the last noon rate provided by the Bank of Canada available at the time of the transaction."

The question is: should the Bank of Canada noon rate also be used when determining the CAD $3,000 threshold for ascertaining client identity?

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.”

It was 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. Therefore, the reporting entity should use the conversion rate they used to perform the transaction in order to determine whether the threshold of CAD 3,000 was reached to fulfill their record keeping and client identification obligations.

Date answered: 2013-04-02

PI Number: PI-5524

Activity Sector(s): Casinos

Obligation(s): Ascertaining Identification

Guidance: 6F

Regulations: 2

Attestation Method: "A person engaged in one of the following professions in Canada"

Question:

Is a person who is engaged in one of the professions listed in subsection 3(2) of Schedule 7 and who works in a Canadian embassy a "person who engages in one of the following professions in Canada"?

Answer:

Under Article 5(f) of the Vienna Convention on Consular Relations (the Convention) signed in 1963, consular functions include "acting as notary and civil registrar and in capacities of a similar kind, and performing certain functions of an administrative nature, provided that there is nothing contrary thereto in the laws and regulations of the receiving State."

his function may only be exercised by a consular officer outside his/her consular district if he/she obtains the consent of the receiving State (Article 6 of the Convention).

Based on what I remember from my international public law courses, an embassy is not considered part of the sovereign territory of the represented state. However, it enjoys diplomatic immunity, which includes the inviolability of its consular premises.

Date answered: 2013-03-21

PI Number: PI-5523

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: Schedule 7

Ascertain the identity of elderly people

Question:

I would like to have more information on this subject:

The legislative requirement to ascertain the identity of elderly people.

Answer:

A real estate broker or sales representative must identify the following individuals or entities when they engage in any of the activities:

• Any individual who conducts a large cash transaction;
• Any individual or entity for whom they have to keep a client information record or a receipt of funds record;
• Any individual for whom they have to send a suspicious transaction report (reasonable measures and exceptions apply).

Subsection 4.6 How to identify an individual of Guideline 6B: Record Keeping and Client Identification for Real Estate, provides guidance regarding the acceptable identification documents to use to identify an individual.

There are three conditions that will make a document acceptable for identification purposes:

• The document must have a unique identifier number;
• The document must have been issued by a provincial, territorial or federal government; and
• The document also has to be a valid one and cannot have expired.

No exceptions apply for elderly people with no valid documents.

Date answered: 2013-03-08

PI Number: PI-5517

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 53

Requirements applicable for reporting entities on First Nations Reserves

Question:

Are PCMLTFA requirements fully applicable for reporting entities situated on First Nations reserves?

Answer:

Every person or entity referred to in section 5 is subject to Part 1 of the PCMLTFA. There is no exemption pertaining to reporting entities located on a First Nation reserve.

Date answered: 2013-03-06

PI Number: PI-5509

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Act: 5

PEFP Determination

Question:

Following a positive politically exposed foreign person (‘PEFP’) determination is there a prescribed requirement to obtain details in relation to family members of the PEFP that already hold accounts at the same financial institution?

Answer:

Section 54.2 of the PCMLTFR states that “Subject to section 62 and subsection 63(5), every financial entity shall
(a) in accordance with subsection 67.1(2), take reasonable measures to determine whether a person for whom the financial entity opens an account is a politically exposed foreign person;
(b) take reasonable measures, based on the level of the risk referred to in subsection 9.6(2) of the Act, to determine whether a person who is an existing account holder is a politically exposed foreign person;
(c) in accordance with subsection 67.2(3), take reasonable measures to determine whether the person who initiates an electronic funds transfer of $100,000 or more is a politically exposed foreign person; and
(d) in accordance with subsection 67.2(3), take reasonable measures to determine whether the person who is the beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign person.”

When a person is determined to be a PEFP, then the following family members are also PEFPs:
• mother or father of the person;
• child of the person;
• spouse or common-law partner of the person;
• mother or father of the person’s spouse or common-law partner and
• any other child of the person's mother or father.
Although, there is no requirement to conduct a PEFP determination for all existing clients; reporting entities are only required to do so for existing customers that have been deemed higher risk (based on the level of the risk referred to in subsection 9.6(2) of the Act) for money laundering or terrorist financing.

Date answered: 2013-03-06

PI Number: PI-5508

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54.2

Act: 9.6(2)

Identifying an individual not physically present

Question:

Can credit unions utilize the ‘affiliate or co-member’ method stated in guideline 6G in circumstances, where the credit union identifying the individual on behalf of another credit union does not already hold an account with the individual in question?

Answer:

Subsection 64(1) of the PCMLTFR states that “In the cases referred to in sections 53, 53.1, 54, 55, 56, 57, 59, 59.1, 59.2, 59.3, 59.4, 59.5, 60 and 61, the identity of a person shall be ascertained, at the time referred to in subsection (2) and in accordance with subsection (3),
(a) by referring to the person’s birth certificate, driver’s licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document; or
(b) if the person is not physically present when the account is opened, the credit card application is submitted, the trust is established, the client information record is created or the transaction is conducted,
(i) by obtaining the person’s name, address and date of birth and
(A) confirming that one of the following entities has identified the person in accordance with paragraph (a), namely, […]
(III) an entity that is subject to the Act and is a member of the same association as the entity ascertaining the identity of the person, and
(B) verifying that the name, address and date of birth in the record kept by that affiliated entity or that entity that is a member of the same association corresponds to the information provided in accordance with these Regulations by the person”.
The affiliate or co-member method can only be used if the person, whom Credit Union A is identifying on behalf of Credit Union B, already has the records.

Date answered: 2013-03-06

PI Number: PI-5507

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)

Identifying an individual

Question:

Are the following sufficient evidence in relation to identifying an individual not physically present in relation to the ‘cleared cheque or deposit account’ method stated in guideline 6G?
• A photocopy of a bank or credit union account statement made by the employee identifying the individual, and noted as a ‘true copy’ (or other words to that effect) on the photocopy; or
• A hard copy of an ‘online’ bank or credit union account statement that has been printed from the computer of the employee identifying the individual. The individual being identified will have logged in to his or her online account on the employee’s computer.

Answer:

The following are acceptable methods in relation to the “confirmation of deposit account method” indicated in Schedule 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (Regulations):
• a copy of the client’s bank statement
• a legible fax or scanned copy of a bank statement; there are no legislative requirements under the PCMLTFA that this copy be notarized
• an original or electronically issued bank statement addressed to the client that contains all of the information
FINTRAC does not require that the employee of the financial entity to make or print the copy of the statements. However, the reporting entity may wish to have additional controls/procedures in place if they feel it is necessary.

Date answered: 2013-03-06

PI Number: PI-5506

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: Schedule 7

Face-to-Face vs Non Face-to-Face Issue

Question:

Bank ABC relies on interceptors or agents to complete credit card application either in various retail stores or at events. The applicant is physically present when the interceptor or agent completes the application and ascertains identification of the applicant by referring to one piece of government issued identification. However during the credit adjudication process, Bank ABC may use the identification methods referred to in Part B of Schedule 7 of the PCMLFTR when either one of the scenarios below occur.
Scenario #1:
An agent accepts an invalid identification document, for example an Ontario Health Card, to identify client.
The credit adjudication process discovers the error during end-of-day batch processing.
The customer identification then proceeds to non-face-to-face method of identification at the time of credit card activation.
Scenario #2:
An agent accepts a credit card application without viewing or recording government issued identification documentation.
The credit adjudication process discovers the missing information during end-of-day batch processing.
The customer identification then proceeds to non-face-to-face method of identification at the time of credit card activation.

Answer:

Section 54.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to subsections 62(1) and (2) and section 63, every financial entity shall
(a) where the financial entity opens a credit card account in the name of a person, ascertain their identity in accordance with subsection 64(1.1)”.
Subsection 64(1.1) of the PCMLTFR states that “In the case referred to in paragraph 54.1(a), the identity of a person shall be ascertained by a person or entity, at the time referred to in subsection (2) and in accordance with subsection (3)”.
Paragraph 64(2)(b.2) of the PCMLTFR states that the identity shall be ascertained “in the case referred to in paragraph 54.1(a), before any credit card is activated”.
Subsection 64(3) of the PCMLTFR states that “Unless otherwise specified in these Regulations, only original documents that are valid and have not expired maybe referred to for the purpose of ascertaining identity in accordance with paragraph (1)(a) or (1.1)(a)”.
Despite the instances where applicants were not identified in accordance with section 64 of the PCMLTFR when the interceptor or agent completed their credit card application, it appears that the reporting entity has to complete a credit adjudication process prior to activating credit cards. Because the reporting entity realized that the applicants had not been identified, according to section 64 of the PCMLTFR, before their credit cards were activated, the reporting entity’s approach to proceed to a non-face-to-face method of identification is adequate.

Date answered: 2013-03-01

PI Number: PI-5505

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54.1, 64(1.1), 64(2)(b.2), 64(3)

Address to be reported

Question:

Is the address that is reported in the BIC search sufficient, even if there is no street number and the reporting entity cannot determine if it is a complete address? If it is not sufficient, what should they report as an address?

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.

Date answered: 2013-02-28

PI Number: PI-5503

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Acquisition of a portfolio

Question:

The bank XYZ signed an agreement to purchase the Canadian [Company ABC]. The Canadian operations of [Company ABC] include the operating companies, [123 Limited (123)] and [456 Company (456)]. [456] is a Reporting Entity under the PCMLTFR and [123] is not. The acquisition is expected to close in February subject to receipt of all required governmental and regulatory approvals.
As part of the pre-acquisition due diligence, the bank XYZ reviewed the AML program of [456], including OSFI's 2012 Supervisory letter with respect to [456] which contained information on its AML program emanating from its 2011 and 2012 AML examinations. Overall, the review was satisfactory with two outstanding issues related to the independent audit and inherent risk ratings.
Subsequent to the closure of the acquisition in February, new business will be booked with bank XYZ and will follow existing bank XYZ processes in compliance with applicable AML laws and regulations.
Existing [123] and [456] business will be transferred to bank XYZ during 2013. The bank XYZ will migrate only that information to bank XYZ which is held with [123] and [456] for existing clients. As [123] is not a reporting entity, we expect that information to be limited and will not comply with the PCMLTFR. While [123] started to gather client identification and record keeping information that complies with the PCMLTFR over the last year or so in the event those loans were booked on [456], that has not always been the case.
The bank XYZ intends to take an approach whereby existing [123] and [456] accounts will be converted to XYZ's systems with existing information and then, should the personal clients obtain another account or product with bank XYZ, reasonable measures will be taken to update the client information. For any non-personal clients where we do not have documentation that confirms existence of the entity, if that client applies for a new account or product with the bank XYZ, we will take additional steps to obtain beneficial ownership and director information as required currently.
We believe that this approach conforms to expectations expressed by FINTRAC for acquisitions.

Answer:

Section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that every financial entity shall ascertain the identity of a person, corporation, or entity other than a corporation, at the time an account is opened (section 54.1 of the PCMLTFR applies to cases where a credit card account is opened). In the case of the acquisition of a portfolio, the acquiring entity must consider whether or not the accounts are opened, so as to determine the associated identification obligations.
FINTRAC has determined that there is no account opening in a situation where an entity transfers over client accounts where:
• the clients were previously identified and records kept in accordance with the PCMLTFA and its related Regulations or at the time the account was opened there may not have existed the legislative requirements to ascertain the identity (prior to June 12, 2002);
• only immaterial changes were made to the account, namely, change of account number, logo, branding, new card and ancillary services; and
• transactional history follows.

For accounts acquired from a reporting entity, where the acquiring entity determined no accounts are opened, there is no legislative requirement for the acquiring entity to repeat the process to ascertain the identity of each newly acquired account holder. The acquiring entity is responsible for ensuring that the acquired client accounts were previously identified in accordance with section 64 of the PCMLTFR and records kept in accordance with section 14 of the PCMLTFR (section 14.1 of the PCMLTFR applies to cases where a credit card account is opened).
Should the acquiring entity add any account(s) to the profile of an acquired client, the acquiring entity shall ascertain the ID of the client at the time the new account is added. The exceptions outlined in the regulations (paragraph 62(1)(c) and section 63 of the PCMLTFR) pertaining to ascertaining the identity would not apply.

For accounts acquired from a non-reporting entity, there is an account opening situation and the acquiring entity must ascertain the identity and keep records of each newly acquired account holder. The clients were not previously identified and records were not kept in accordance with the PCMLTFA and its related Regulations, since the non-reporting entity is not subject to Part 1 of the PCMLTFA.
Furthermore, in accordance with subparagraph 71(1)(c)(i) of the PCMLTFR, every reporting entity is required to carry out a risk assessment of their clients and business relationships. As such, an acquiring entity is required to conduct a risk assessment of the newly acquired account holders. Should the risk assessment lead to a high risk designation, then the acquiring entity would be required to carry out special measures for identifying clients, keeping records, and monitoring financial transactions in respect of the activities that pose a high risk, in accordance with subsection 9.6(3) of the PCMLTFA, and further detailed in section 71.1 of the PCMLTFR.

Date answered: 2013-02-08

PI Number: PI-5494

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 14.1, 54.1, 62(1)(c), 63, 64, 71(1)(c)(i), 71.1

Act: 9.6(3)

Identification method: Confirmation of deposit account

Question:

I would like to obtain additional information on types of methods that qualify as methods for identifying a private person for the purpose of opening a deposit account. More specifically, I would like to know the various options available to financial institutions under Method 5 in Schedule 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, i.e. the "Confirmation of Deposit Account Method." Your guidelines appear to be silent as to the method that a financial institution can use to confirm the existence of a deposit account with another financial institution and as to whether or not official confirmation of the account's existence must come unquestionably from the bank itself.

I would like more specific information as to whether the "Penny Test" method, whereby a financial institution makes a small deposit into the account that the future client claims to have in another financial institution. Subsequently, the client must confirm the amounts deposited by the financial institution into the said account in order to be able to open its new account. Does this method qualify as a "Confirmation of Deposit Account Method"?

Answer:

If the person is not physically present, the reporting entity must use a combination of two identification methods in the person's absence, as stated in paragraph 64(1)(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations.

One of these methods consists in verifying the identity of a person through confirmation that the person is the holder of a deposit account with a financial entity (which must be used jointly with another acceptable identification method). For each of the two identification methods in the person's absence, the information of that person (or of the client) must correspond to the information that the reporting entity has in the file. The information must also correspond to one or the other method.

We have already informed reporting entities that they can provide oral confirmation of a deposit account with the financial entity in which the account is held, or provide written confirmation by the financial entity to the client or the reporting entity, or provide confirmation by email (as long as the email specifies that it is a deposit account). In the past, the following methods were also recognized as acceptable and sufficient:

• a copy of the client's bank statement;
• a readable faxed copy or scanned copy of the bank statement;
• an original bank statement or an original bank statement sent electronically and addressed to the client that contains all of the required information.

The depositing of funds into a so-called "Penny Test" account, as described in your email below, is not an acceptable method of confirming that a person has a deposit account, because it does not allow the reporting entity to confirm that it is indeed a deposit account.

Date answered: 2013-01-22

PI Number: PI-5487

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)(b)

Account opening and sanctions

Question:

Are there any FINTRAC regulations against opening a business account for a client that will be receiving large wire transfers from Libya and Azerbaijan.

Answer:

The only circumstance where a reporting entity is prohibited from opening an account is described in Section 9.2 of the PCMLTFA which states that “no person or entity referred to in section 5 shall open an account for a client, in the prescribed circumstances, if it cannot establish the identity of the client in accordance with the prescribed measures”.

When a reporting entity’s risk assessment determines that risk is high for money laundering or terrorist financing for a particular client, they have to take prescribed measures to identify clients, keep records and monitor financial transactions for activities related to that high risk (as per paragraph 71.1(c) of the PCMLTFR).

In addition, through FINTRAC advisories concerning Financial Action Task Force (FATF) statements, and Special Economic Measures Act (SEMA), FINTRAC advised reporting entities that they “should give special attentions to transactions in relation to the specific countries listed” or that they “should consider the advisory when deciding whether to file a suspicious transaction report in respect to financial transactions” link to countries mentioned and that they were “encourage to undertake enhanced customer due diligence with respect to clients and beneficiaries involved in those transactions.”

Date answered: 2013-01-21

PI Number: PI-5486

Activity Sector(s): Financial entities, Casinos, Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E, 6F, 6G

Regulations: 71.1 (c)

Act: 9.2

Exception of client examination

Question:

FACTS
The head office of the firm XYZ Inc. is located in Montréal and all its employees work at that particular location. XYZ does not have any affiliates in the US, but the firm is registered to work in US soil in the securities sector. XYZ mainly deals with institutional clients, such as pension funds.

For the opening of an American pension fund account, the advisors do not verify the identity of the signing authorities, because the chief compliance officer of XYZ believes that similarly to Canadian pension funds and as per paragraph 62(2)(k), American pension funds are exempted from the ascertaining identity obligations. Also, according to the compliance officer, the American legislation contains exemptions regarding the identification of signing authorities for pension funds and as such, for American institutional clients, XYZ applies the American legislation.

QUESTION
Does the exemption prescribed under paragraph 62(2)(k) of the Regulations also apply to pension funds based outside of Canada?

Answer:

Subsection 5(g) de la Proceeds of Crime (Money Laundering) and Terrorist Financing Act states 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 Act.

Provincial authorization means that the activities must be carried out in Canada.

The following are a few comments regarding the case described below:

1. If the account is opened in Canada:
The exception to record-keeping and ascertaining identity set out in paragraph 62(2)(k) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations applies to "the opening of an account 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." Because this is a U.S. pension fund account, the exception set out in paragraph 62(2)(k) of the Regulations cannot apply. Under subsection 57(1) of the Regulations, XYZ Inc., in accordance with subsection do 64(1), must ascertain "the identity of every person who is authorized to give instructions in respect of an account for which a record must be kept by the securities dealer under subsection 23(1).

2. If the account is opened in another country:
XYZ Inc. has no obligation under our Act and associated regulations.

Date answered: 2013-01-18

PI Number: PI-5485

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 62(2)(k), 57(1), 64(1), 23(1)

Act: 5(g)

Opening of account concept

Question:

FACTS

The firm XYZ Inc. is a portfolio and discretionary investment fund management firm. Company 123 does not hold the assets of these clients. The clients are giving a discretionary management mandate to Company 123.

XYZ Inc. says that its clients either already have an account or are opening an account with a securities broker or securities custodian that will carry out the transactions.
Company 123 is sending the documentation to the discount broker or the securities custodian (if an account has to be opened).

XYZ Inc. says that it will not assign an account number, but instead will assign a client reference number to ensure that the discount broker has carried out the transactions. The instructions for transactions always include the client account number.

QUESTION

Is XYZ Inc. opening an account within the meaning of section 57(1)?

Answer:

Because it is authorized under provincial legislation to trade in securities or other financial instruments, or provide portfolio management and investment counselling services (under subsection 5(g) of the Act), XYZ Inc.is a reporting entity subject to our Act and the obligations therefrom.

According to the information provided in Section 1.3.7 of the Agreement concluded between Mr. Smith ("the Client") and XYZ Inc. ("the Manager"), in which it is clearly stated that the Client has assigned the Manager the mandate to "open and maintain, in the Client's interest, one or several accounts with firms that are members of a securities regulatory agency, such as the Autorité des marchés financiers (AMF), the Investment Industry Regulatory Organization of Canada (IIROC) or a recognized brokerage firm that it chooses at its own discretion," it appears that XYZ Inc. itself is not opening accounts to carry out its clients' transactions. Instead, XYZ Inc. is authorized by its clients to provide portfolio management and investment counselling services on accounts opened with other securities brokers or custodians.

However, the term "account" is not defined in law. So, because there is a business relationship established between XYZ Inc. and its clients, and because XYZ Inc. assigns a reference number, there is an account opened and this gives rise to the obligations to ascertain identity and keep records.

Other securities brokers or securities custodians also have responsibilities relative to the opening of an account and other interaction between them and their clients.

To reduce their workload, XYZ Inc. and other securities brokers or securities custodians could draw up a written agreement to allow XYZ Inc.to fulfil obligations related to the opening of an account with other securities brokers or securities custodians.

Date answered: 2012-12-11

PI Number: PI-5475

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 57(1)

Act: 5(g)

Ascertaining ID

Question:

The lawyer is requesting to know whether he should be identified by a real estate agent in the course of a court-ordered foreclosure – the lawyer represents a bank in this case. The lawyer was previously referred to the subsection 62 (l) and (m) in the PCMLTFR. The lawyer applied Section 10.1 of the PCMLTFA which states, “Sections 7 and 9 do not apply to persons or entities referred to in subsection 5(i) or (j) who are, as the case may be, legal counsel or legal firms, they are providing legal services.”

The lawyer indicates he is only providing legal services and states that he is not the seller, but merely representing the bank.

In this case, is he exempt from the obligation to be identified by the real estate agent (reporting entity)?

Answer:

Our understanding in this case is that the lawyer is seeking an exemption under the legislation by which he would not be required to be identified by a real estate agent in a transaction. It is important to note that in this instance, the real estate agent is the reporting entity to which the PCMLTFA and its associated Regulations apply. As such, the exemptions apply to the real estate agent’s record keeping and identification requirements, rather than what the lawyer is allowed to potentially refuse to give.

That said, when an external individual is engaged to represent a corporation that qualifies for the exception under paragraph 62(2)(m) of the Regulations, there is no legislative requirement to identify either the person conducting the transaction, or the large corporation. In this particular case, should the lawyer admit to representing the bank, then the real estate agent would not be required to carry out the record keeping and the associated ascertaining identity requirements.

Date answered: 2012-11-16

PI Number: PI-5467

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 62(2)(m)

Act: 10.1

Principal/agent relationship

Question:

ABC Inc. is considering entering a Principal Agent relationship with an online German Bank. The German bank for a fee will offer ABC Inc. money transfers to its clients who they already have client ID. If the deal goes through the online German bank will become ABC Inc.'s agent and take customer transactions and conduct KYC for ABC Inc. The online German Bank has a pre-existing written KYC agent/mandatary agreement with German post office outlets. ABC Inc. will NOT directly have a written agreement with the German post office outlets.

ABC Inc. wants to know if they can (under s.64.1(1)) rely on the ID collected by the German post office outlet for the online German Bank to fulfill their ID requirement.

Question: Can a MSB's agent (from a principal agent relationship) enter into an agent/mandatary agreement for client identification purposes for the principal's transaction?

Answer:

As per 64.1(1) of the Regulations, a reporting entity can use an agent to carry out the ascertaining of ID. However, 64.1(1) clearly states that “a person or entity that is required to take measures to ascertain identity under subsection 64(1) or (1.1) may rely on an agent or mandatary to take the identification measures described in that subsection only if that person or entity has entered into an agreement or arrangement, in writing, with that agent or mandatary for the purposes of ascertaining identity.” As such, the reporting entity must enter into a written agreement with the agent or mandatary that will be carrying out the identification measures described in 64(1) or (1.1) for the purposes of ascertaining identity.

Given the international nature of the proposed principal/agent relationship, it might be worthwhile to reiterate the requirements of the PCMLTFA as they relate to face-to-face and non-face-to-face identification methods (i.e., non-face-to-face don’t tend to be applicable internationally.)

I would also suggest that ABC Inc. be reminded that the onus is on them to ensure the identification obligations are being met. Should the identification carried out by the agent not be sufficient for the purposes of the PCMLTFA and its associated Regulations, FINTRAC would pursue the matter with ABC Inc.

Date answered: 2012-10-22

PI Number: PI-5461

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 64.1(1), 64(1), 6(2)

Third party determination and PEFP

Question:

As it relates to loans initiated at a car dealership and then forwarded to a financial institution to fund. Which party would be required to make the above determinations? Would it be the car dealership, or would it be the financial institution? I think it is quite clear that an agent can ascertain ID but an agency agreement is required per section 64.1. Section 64.1 does not mention PEFP determination or third party.

So, who can make the 3rd party and Pefp determinations? Does the credit union have to do it? If the agent can do it, does this need to be specified in the agency agreement?

Answer:

Subsection 64.1 (1) of the PCMLTFR stipulates that " A person or entity that is required to take measures to ascertain identity under subsection 64(1) or (1.1) may rely on an agent or mandatary to take the identification measures described in that subsection only if that person or entity has entered into an agreement or arrangement, in writing, with that agent or mandatary for the purposes of ascertaining identity".

If the credit union has entered into an agreement with the car dealership concerning the provisions of section 64.1 of the PCMLTFR, this agreement would normally have to set out the dealership's obligations with regard to its role as a mandatary. This would also include third party determination and politically exposed foreign person determination. The credit union can delegate these tasks, but, at the end of the day, the primary responsibility with regard to these obligations rests with the credit union.

Date answered: 2012-09-26

PI Number: PI-5455

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64.1

Acquisition of credit card portfolio

Question:

Information with respect to the credit card portfolio acquisition:

1 All product features and benefits of the credit cards will remain the same other than the fact that the insurance on the product will be different. While the existing card has Travel Accident Group Insurance (TAI) and Purchase Security, the new XYZ bank product will have Purchase Security and Extended Warranty. XYZ bank will not provide the TAI insurance type on the card. In addition, a few minor non-material changes will be made e.g. interest rate changes, but the card holders will be provided with 60 days notice of the changes.

2. XYZ bank has recently learned that it cannot obtain the Bank Identification Number of the current issuer and, as such, the clients will be sent a new card with the XYZ bank and retailer branding.

3. More importantly, while the card "number" on the face of the plastic will change, and the card will be branded with the XYZ bank as the new issuer, the actual account of the card holder will remain the same. XYZ bank will be conducting a systematic conversion to transfer all outstanding credit / debit balances and applicable transactional data (eg. all loyalty points transfer) to the new account to enable a seamless transition for the client. In addition, the credit bureaus are notified the account has transferred to XYZ bank.

Ultimately, no are changes being made to the conditions for the acquired accounts as the points above do not impact the conditions for the acquired accounts and are not material, particularly from an AML perspective. Consequently, these are not "new accounts" and XYZ bank will be able to rely on the record keeping and ID verification undertaken by the current issuer.

Answer:

In accordance with section 54.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) every financial entity shall ascertain the identity of a person, corporation, or entity other than a corporation, at the time a credit card account is opened.

In the case of the acquisition of a credit card portfolio, the acquiring entity must consider whether or not credit card accounts are opened, so as to determine the associated identification obligations. It is the position of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) that where no new accounts are opened, no changes are made to the acquired accounts, and/or no changes are made to the conditions with respect to the acquired accounts, then there is no legislative requirement for the acquiring entity to repeat the process to ascertain the identity of each newly acquired credit card account holder.

That said, in accordance with subparagraph 71(1)(c)(i), every reporting entity is required to carry out a risk assessment of their clients and business relationships. As such, XYZ bank is required to conduct a risk assessment of the newly acquired credit card account holders. Should the risk assessment lead to a high risk designation, then XYZ bank would be required to carry out special measures for identifying clients, keeping records, and monitoring financial transactions in respect of the activities that pose a high risk, in accordance with subsection 9.6(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), and further detailed in section 71.1 of the PCMLTFR.

Finally, as a best practice, reporting entities are encouraged to review and update credit card account information, as appropriate, when acquiring these accounts in the process of a merger or acquisition. Ultimately, the newly acquired credit card account holders become the responsibility of the acquiring entity, and it is for that entity to not only ensure compliance with the PCMLTFA and its related Regulations, but to review the risk that these newly acquired clients may pose to the entity, and/or the Canadian financial system.

Since XYZ bank is opening new credit card accounts, I recommend that they look at the guidances in regard of Financial Entities obligations.

Date answered: 2012-09-24

PI Number: PI-5452

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54.1, 71(1)(c)(i), 71.1

Act: 9.6(3)

Ascertaining ID of an exempt entity

Question:

A lawyer is seeking an exemption under the legislation by which he would not be required to be identified by a real estate agent in a transaction.

Is this possible?

Answer:

It is important to note that in this instance, the real estate agent is the reporting entity to which the PCMLTFA and its associated Regulations apply. As such, the exemptions apply to the real estate agent’s record keeping and identification requirements, rather than what the lawyer is allowed to potentially refuse to give.

That said, when an external individual is engaged to represent a corporation that qualifies for the exception under subsection 62(2)(m) of the Regulations, there is no legislative requirement to identify either the person conducting the transaction, or the large corporation. In this particular case, should the lawyer admit to representing ABC, then the real estate agent would not be required to carry out the record keeping and the associated ascertaining identity requirements.

Date answered: 2012-08-16

PI Number: PI-5440

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 62(2)(m)

ID requirements

Question:

Scenarios:

1)
a) The buyer gets in touch with the Bank re: need for funds for home purchase, so the Bank (Lender) transfers the amount to the Notary

b) The buyer brought to their real estate agent a cheque as a deposit on the purchase. The agent sent the funds to the sellers real estate agent. Once the sale is approved, the sellers real estate agent transfers these funds to the Notary to become part of the total purchase price.

c) The buyer transfers to the notary an amount that they have on hand to be part of the purchase of the home.

As it currently stands, in all of the above, the notary is only ascertaining the identity of the buyer. While they are maintaining, in their records, information on the Bank and Real estate agent they are not carrying out the ascertaining of identity as outlined in 64-66 of the PCMLTFR. Is this understanding of how it currently works correct?

2)

a) The buyer transfers to the notary an amount that they have on hand to be part of the purchase of the home.

b) The buyer gets in touch with the Corp/institutional lender re: need for funds for home purchase, so the lender transfers the amount to the Notary.

As it currently stands, in the above, the notary is only ascertaining the identity of the buyer. While they are maintaining, in their records, information on the corp/institutional lender they are not carrying out the ascertaining of identity as outlined in 64-66 of the PCMLTFR. Is this understanding of how it currently works correct?

3)

a) the buyer’s lawyer transfers funds to the Notary for the purchase of property by their client.

b) the Notary then transfers the funds to the seller

As it currently stands, in the above, the notary is only ascertaining the identity of the buyer. While they are maintaining, in their records, information on the lawyer they are not carrying out the ascertaining of identity as outlined in the PCMLTFR. Is this understanding of how it currently works correct?

Answer:

We’ve reviewed the various scenarios provided and have the following comments:

In accordance with section 33.2(1), BC Notaries subject to the PCMLTFR, are required to keep a receipt of funds record (unless the amount is from a financial entity or public body) for every transaction of $3000 or more and that record must contain all the information required under the definition of “receipt of funds record” found under subsection 1(2). Furthermore, where the receipt of funds record pertains to a corporation, the BC Notary must obtain a part of the official records that contains any provision relating to the power to bind the corporation.

BC Notaries are also required to keep, in accordance with 33.2(2), a large cash transaction record, unless the amount was received from a financial entity or public body. If a large cash transaction record is required, then the receipt of funds record is not.

When a receipt of funds record is required, BC Notaries, must:

in accordance with 64(1), ascertain the identity of every person who conducts the transaction
in accordance with 65, confirm the existence and ascertain the name and address of every corporation on whose behalf the transaction is conducted
in accordance with 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.

In the scenarios presented, it is important to remember that the BC Notary must ascertain the identity of every person who conducts the transaction. This would be the person in front of the BC Notary or the person actually carrying out the transaction.

When a large cash transaction record is required, BC Notaries must ascertain identification in accordance with section 53 of the Regulations and carry out a third party determination.

Date answered: 2012-08-08

PI Number: PI-5437

Activity Sector(s): British Columbia notaries

Obligation(s): Ascertaining Identification

Guidance: 6J

Regulations: 1(2), 33.2(1), 33.2(2), 53, 64(1), 65, 66

Client ID for a corporate purchase of real estate

Question:

What client identification measures are required for a client who, from out of province (so, presumably, non face-to-face), is purchasing a condo on behalf of his corporation? He is incorporated as an individual (he has a medical practice), so in a sense he is representing himself.

I know the client will require documents confirming the existence of the corporation (certificate of status and list of directors), but will the client require
a) A document authorising him to act on the corporation’s behalf, and/or
b) Methods of non face-to-face identification?

If so, what would this entail (especially for option (a), since it seems he would be authorising himself)?

Answer:

Real estate agents or brokers are subject to record keeping requirements under section 39 of the PCMLTFR. Requirements include keeping receipt of funds records, client information records, and large cash transaction records, which involve ascertaining identity. While the individual is making the purchase on behalf of the corporation, he is, essentially, the corporation. Much the same as a lawyer hired by a corporation to conduct a purchase/sale of real estate is considered to be the corporation for record keeping and identification purposes.

Assuming the individual is the client of the real estate agent or broker, the real estate agent or broker is required to keep a receipt of funds or large cash transaction record and a client information record, for which the real estate agent must then ascertain identity and carry out a third party determination (client information or large cash transaction record requirement). According to section 59.2(1) (a), (b), and (c), real estate agents or brokers must ascertain the identity of every person who conducts the transaction, and confirm the existence of the corporation or the entity on whose behalf the transaction is conducted.

As such, the client should be prepared to:
a) be identified in accordance with subsection 64(1) and (we assume) the non-face-to-face methods outlined therein, and
b) provide documents confirming the existence of the corporation

Of course, should the individual’s corporation fall under the exception in outlined in paragraph 62(2)(m), then the real estate agent would not be required to carry out the record keeping and client identification requirements outlined above.

Date answered: 2012-08-03

PI Number: PI-5436

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 39, 59.2(1), 64(1), 62(2)(m)

Agent or mandatary is a chief of police - sec.64.1 of the Regulations

Question:

I just want to check whether, following a review at the CP, a copy of the agreement with the agent or mandatory is sufficient, and whether the agent or mandatory can be a chief of police.

Answer:

Subsection 64.1(1) of the Regulations states that “a person or entity that is required to take measures to ascertain identity under subsection 64(1) or (1.1) may rely on an agent or mandatary to take the identification measures described in that subsection only if that person or entity has entered into an agreement or arrangement, in writing, with that agent or mandatary for the purposes of ascertaining identity.”

Upon checking the ID verification form, we determined that it does not constitute a written agreement between the entity and the agent or mandatary. There do not appear to be any provisions setting out the obligations of the parties or authorizing the agent or mandatary to take ID verification measures on behalf of the entity.

When an entity uses the services of an agent or mandatory to meet its client ID verification requirements, the entity must (1) have signed a written agreement with the agent or mandatory for this purpose; and (2) obtain from the agent or mandatory the client information obtained under the agreement the entity has entered into with the agent or mandatory. If both these conditions are met, i.e., a written agreement and the obtaining of client information, anyone, including an entity, can act as an agent or mandatory.

So, a chief of police may also act as an agent or mandatory if the two above conditions are met.

Date answered: 2012-07-24

PI Number: PI-5432

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64.1

Ascertain ID- Service provider arrangements

Question:

One of our client is interested in taking care of ID & Address proof verifications of their non-face-to-face customers.

Does FINTRAC have any guidelines for service providers, in this regard? Do we have the permission from FINTRAC to undertake such tasks on behalf of reporting entities in Canada?

Answer:

Reporting entities have the possibility of using service providers to meet different requirements prescribed by Part I of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

When reporting entities register or enrol with FINTRAC they have to list their service provider(s) with respect to future reporting. For your information, a service provider is a person or entity that offers a service to its clients. They enter into an agreement with a client to fulfill part or all of their client’s obligations.

It is important to note that a service provider cannot create a legal or contractual relationship on behalf of their client with a third party, they are only executing the mandate given to them.

With respect to your question on ascertaining identity, subsection 64.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that reporting entities have the ability to rely on an agent or mandatary to take the identification measures prescribed, if the reporting entity enters into an agreement, in writing, with that third party to take the identification measures to meet their identity verification obligations.

The term agent or mandatary that is used within subsection 64.1(1) is only for the purpose of identifying “on behalf of” and represents only a very limited mandate that is given to the service provider (i.e. the mandate is solely to identify on their behalf of the service provider’s client).

Date answered: 2012-05-24

PI Number: PI-5409

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64.1(1)

Act: Part 1

Notary public

Question:

Commissioner of Oaths could witness a signature with an attestation, recent credit check, etc.

Can you please clarify Notary Public?

The reason we are asking is that we need to know if non-members who work with the Department of Justice can have their signatures
witnessed and their identities verified through Notary Publics they work with.

Answer:

A Notary Public means a person who is a member of the Society of Notaries Public of the Province or the Law Society of the Province or is appointed by the Ministry of the Attorney General (Ministry of Justice) of the Province. Each province has its own rules.

It seems that your Requester is from Nova Scotia. In Nova Scotia, Notaries public are people who are recognized by the government as being able to witness and certify that signed documents are valid and have been signed by the correct person. In Nova Scotia, all lawyers automatically become notaries public upon passing the bar exam. The person can also be appointed by the Minister of Justice to be a Notary Public.

A Notary Public can attest and sign the document. Whether the Notary Public is a co-worker of the person having their signatures witnessed and their identities verified is not an issue.

No changes with respect to Commissioner of Oaths witnessing.

Date answered: 2012-05-10

PI Number: PI-5408

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: Schedule 7, 64(1)(a)

Firearms acquisition certificate

Question:

Would a firearms acquisition certificate (FAC) be an acceptable piece of government-issued ID for client ID purposes? As far as I can tell, a FAC is not a license; however, it is issued by a provincial government.

Answer:

Paragraph 64(1)(a) of the PCMLTFR states that the identity of a person shall be ascertained by:

“referring to the person’s birth certificate, driver’s licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document”

As explained in our Guidelines (in the section “how to identity an individual”), there are three conditions that will make a document acceptable for identification purposes:

- The document must have a unique identifier number
- The document must have been issued by a provincial, territorial or federal government
- The document also has to be a valid one and cannot have expired

With respect to the firearms acquisition certificate (FAC), I confirm that we can accept this piece of government-issued ID for client ID purposes, if all three conditions are met.

Date answered: 2012-03-30

PI Number: PI-5398

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)(a)

Credit card acquiring business

Question:

I wanted to get a better understanding of our reporting requirements as per applicable FINTRAC Guidelines.

I do understand that as a regulated financial entity under the Trust and Loan Companies Act, we would be obligated to abide by FINTRAC Guidelines. However, given the nature of our operations (Credit Card Acquiring Business), as a financial entity, it appears that we may be exempt from certain reporting requirements.

Our review of the 10 FINTRAC Guidelines has revealed a key piece of information about how Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) would be applicable to a Credit Card Acquiring Business.

According to Guideline 6G (Record Keeping and Client Identification for Financial Entities), If you are carrying on activities as a Credit Card Acquiring Business, the record-keeping requirements explained in this guideline do not apply to those activities. Credit Card Acquiring Business is a financial entity that has an agreement with a merchant to provide the following services:
• enabling a merchant to accept credit card payments by cardholders for goods and services and to receive payment for credit card purchases;
• processing services, payment settlements and providing point-of-sale equipment (such as computer terminals); and
• providing other ancillary services to the merchant.

Given that we are a Credit Card Acquiring Business, this would mean that we are exempt from record keeping and client identification requirements.

It is important to inform you that we are neither a deposit taking nor a lending institution. Given that our business activities are limited to the bulleted points mentioned above, merchants are our primary and only clients. We never have access to customer information when our products and services enable merchants to accept credit or debit card payments from a customer in exchange for goods and services.

With regards to our clients (merchants), it goes without saying that they all have banking relationship with federally regulated deposit taking institutions (DTIs). It is our understanding that those DTIs would be primarily responsible for record keeping and client identification of these merchants. Is this correct?

Answer:

Despite the fact that your company will be involved in the credit card acquiring business, if you fall within the definition of financial entity, under Subsection 1(2) Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, you have obligations, regardless of the type of products or services you offer, including implementing a compliance regime.

There are no exceptions under our Act or Regulations that would permit you not to have a compliance regime.

However, if you register as a trust and loans company under the Trust and Loan Companies Act, and if you are carrying on activities as a credit card acquiring business, the record-keeping and client identification requirements explained in our guideline 6G (Record Keeping and Client Identification for Financial Entities) do not apply to those activities.

Date answered: 2012-02-03

PI Number: PI-5382

Activity Sector(s): Financial entities

Obligation(s): Record Keeping, Ascertaining Identification

Guidance: 6

Regulations: 1(2)

Act: 9.6

List of acceptable pieces of ID

Question:

What pieces of ID are acceptable?

Answer:

The person's identity is ascertained by means of the documents listed in paragraph 64(1(a) of the PCMLTFR, namely
“the person’s birth certificate, driver’s licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document.”

As explained in our guidelines (in the section entitled “How to Identify an Individual”), for a document to be acceptable for identification purposes, three conditions must be met:

• The document must have a unique identifier number.
• The document must have been issued by a provincial or territorial government or the federal government.
• The document has to be valid and cannot have expired.

Other documents can be used to verify the identity of a client, such as a certificate of Indian status or a card issued by any of the following:

• the Insurance Corporation of British Columbia;
•Alberta Registries;
•Saskatchewan Government Insurance;
•the Department of Service Nova Scotia and Municipal Relations;
•the Department of Transportation and Public Works of the Province of Prince Edward Island;
•Service New Brunswick;
•the Department of Government Services and Lands of the Province of Newfoundland and Labrador;
•the Department of Transportation of the Northwest Territories; or
•the Department of Community Government and Transportation of the Territory of Nunavut

We have checked the list submitted and it seems to be acceptable. However, we would like to make the following comments:

1. British Columbia Identification card: it does not specify that the card was “issued by the Insurance Corporation of British Columbia.”
2. Alberta identification card/Photo ID issued by an Alberta Registry Agent: the English and French versions are not the same.
3. Old-age security ID cards issued by the federal government, which seem to include the bearer's SIN; age of majority cards issued by the provincial or federal government: is the bearer's identity ascertained before these cards are issued? Also, they must meet the three conditions listed above.

We should also add that the list is not exhaustive. ID documents issued abroad must also be considered, if they are the equivalent of an acceptable Canadian document, as well as other documents that meet the three conditions listed above.

Date answered: 2012-01-31

PI Number: PI-5380

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)

Bank identification- expiry

Question:

With regard to the identification required by financial institutions to open bank and financial products, if the identification documents have expiry dates, is it mandatory to enter them?

I was able to get hold of the following information, in Guideline 6G, Record Keeping and Client Identification for Financial Entities (July 2010), 4.12 How to identify an individual, p. 26:

"The document also has to be a valid one and cannot have expired."

This refers to the validity of the document at the time it is submitted, we agree on this point.

So, what happens when it expires?
Must a new document be submitted? Do the officers of financial institutions have to consider the validity of the documents at the time they are recorded or at the time of subsequent identity checks? These questions stem from the fact that some documents have no expiry date (eg, birth certificates, social insurance cards), while others must automatically be renewed (eg, driver's licence, health insurance cards in some provinces, passports, immigration documents, etc).

Answer:

If a person has ascertained the identity of another person pursuant to section 64 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, you do not have to do it again if you recognize the person. There is no obligation, under our legislation, to again identify the expiry date of the identification card. However, under the legislative provisions of the compliance regime, if the client is deemed "high risk", section 71.1 of the Regulations calls for taking reasonable measures to update client identification information at least every two years.

In the case of a major operation in declarable cash, while the declaring entity may recognize the person pursuant to subsection 63(1) and thus be exempt from ascertaining the identity again, the declaring entity must still do a third party determination in every case.

Date answered: 2012-01-09

PI Number: PI-5373

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64, 71.1, 63(1)

Issue of ABC Holdings and the 62(2)(h) exemption

Question:

Issue of ABC and the 62(2)(h) exemption.

Does the exemption under 62(2)(h) of the Regulations apply to ABC ?

Answer:

This exemption is reserved for accounts opened in the name of an affiliate of a financial entity.

The account being opened in this case is opened in the name of ABC.
ABC is a holding company owned by another individual, which is not owned by the banks or affiliates.
Nominee directors of John and Smith are authorized to trade on behalf of ABC;
John and Smith are subsidiaries/affiliates of the Bank of the Bahamas and in turn a subsidiary/affiliate of the Bank in Canada a financial entity.
For the exemption under 62(2)(h) to apply, the affiliate in whose name the account is opened must carry out activities that are similar to those referred to in paragraphs 5(a) to (g).

Therefore the exemption referred to in paragraph 62(2)(h) does not apply.

This would then require you to ascertain identification of the signatories of ABC. If you have not done so and someone has done so on your behalf then you need to have agreements in place for them to obtain ascertain identification on your behalf.

Date answered: 2010-12-23

PI Number: PI-5366

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 62(2)(h)

Act: 5(a) to (g)

Swift and identification obligation

Question:

Clarification on requirement of 3b of guideline 6G ref 4.12. Can we satisfy this requirement by receiving the funds from an account in the clients name with a regulated financial institution, and holding a copy of the MT103 (Swift message) as the evidence? If one couples this with requirement 1a, supplied by Equifax (provided satisfactorily matched), then my assessment would be that we have complied with the identification requirements.

Answer:

The SWIFT payments/messages, do not confirm 1) who is the account holder and 2) that the account is a deposit account. Therefore, the MT103 message is not acceptable and does not meet the legislative requirement of the Confirmation of Deposit Account Method.

Date answered: 2010-04-24

PI Number: PI-5352

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)

Video Conference to Ascertain ID

Question:

A client can not be present to open an account. Same client sent to the Financial Institution recognized identification documents such as original Canadian passport. Would it be acceptable to have a video conference with the client to ascertain his identity under the Act?

Answer:

No. This would not be an acceptable method of identification. We have indicated that you cannot "identify" (under non face to face methods s. 64(1)) or "recognize" a person (under s. 63(1)) via videoconference or video camera. First it is not a recognized prescribed method of non face to face identification within our legislation, and secondly it would be somewhat difficult to identify or recognize via a video as not all images are very clear or accurate.

Date answered: 2010-03-29

PI Number: PI-5340

Activity Sector(s): Accountants, Financial entities, British Columbia notaries, Casinos, Dealers in precious metals and stones, Life insurance, Money services businesses, Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 63(1), 64(1)

Proceeds of crime deposited by police - public body or must be identified?

Question:

The Police Department is routinely taking large amounts of cash seized from proceeds of crime to the Police Credit Union and requests a cheque for the amount brought in to be made payable to the provincial Minister of Finance as a civil forfeiture. The credit union has not been reporting this to FINTRAC. As the Police Department is a department within the City would it be correct to assume the exception to reporting for LCTRs applies in this case because the cash is being received from an incorporated municipality? Or could you equally argue that once the cash is seized it now belongs to the province, therefore the cash is being received from the government, so is also exempt? Or, do they need to report this?

Answer:

The Policy Department falls within the definition of a public body under subsection 1(2) i.e. another incorporated municipal body or an agent of any of them. Therefore, the PD does not have to be identified by the Police Credit Union (exception at 62(2)(m)).

Date answered: 2010-03-16

PI Number: PI-5338

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 1(2), 62(2)(m)

Must a guarantor for a loan be identified?

Question:

To confirm, an FE is NOT required to conduct CDD for a guarantor for loan accounts.

Answer:

As discussed, there is no mention of legislative requirements of client identification in regards to the guarantor of a loan. Unless the guarantor is also a signatory or an account holder, then of course there would be the required obligations to identify, etc. The only mention of guarantor in our regs. is in relation to the attestation method for the non face to face client identification method (so a different context altogether than a guarantor for a loan).

The only thing I can think of, maybe part of the record keeping obligations of keeping the client credit file if created. However, again it would not be a client ID obligation, but more a record keeping obligation in regards to the client's credit file (that would include the part about having a guarantor?).

Date answered: 2010-03-11

PI Number: PI-5331

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 54(1)

Clarification of "account"

Question:

In regards to the interpretation of an account, if a securities dealer is ONLY providing investment advice through a written agreement with the client, do we consider that an "account" with all the requirements under the PCMLTFA (client ID, PEFP, etc.)?

Answer:

We have indicated that no it was not an account.

Date answered: 2010-03-10

PI Number: PI-5330

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 23(1)

Cleared cheques and opening accounts

Question:

If a Bank has money in trust for the purpose of putting it in an account that is not yet open, would the Bank need a signature card (even though it is holding the money pending the opening of the account)?

Answer:

A Bank could have money in trust for the purpose of putting it in an account that is not yet open. Until the bank opens the account it would not need a signature card (even though it is holding the money pending the opening of the account).

It is up to the financial entities to determine when exactly the account is opened. For example the FE may keep the initial deposit in trust and truly open the account only when the individual has been identified. Therefore, the process or procedure of account opening may vary from sector to sector and from RE to RE within a same sector.

As a reminder, the cleared cheque/signature card would need to be kept for 5 years (as a record).

Date answered: 2010-02-26

PI Number: PI-5327

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 54(1)

Video Conference to Ascertain ID

Question:

We would like to know whether the following method is acceptable for ascertaining client ID. Is it in line with the Regulations?

• The potential client cannot be present when the account is opened, because he is out of the country;
• He sends us his original passport or another identity document that meets requirements;
• The representative and the client meet via videoconference;
• The representative is thus able to compare the document.

Answer:

No. This method of identification via a videoconference does not fall within the legislative prescribed requirements within our Act and regulations when identifying an individual non-face-to-face.

There are two different ways to identity - when the person is physically present (and a videoconference does not qualify as a physical presence i.e. as in face to face) or 2) non face to face with the prescribed combinations of methods allowed within our legislation, under subsection 64 of our regulations.

Furthermore, we would like to point out that the clarity/texture/grain of the videoconference can hinder a proper visual of a person's feature thus making it very difficult to compare a picture and the person on the video camera - which could possibly lead to a number of mistaken identities.

Date answered: 2010-02-12

PI Number: PI-5316

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64

Should this document not be sufficient then I will need to cite under 39(1)(c)?

Question:

Is a copy of a Deed of Sale, which includes a paragraph relating to a Resolution of the Board of Directors of the Corporation: ABC Inc., be used as a Binding Resolution? The Notary acknowledges that is it true and was signed in his/her presence.

Answer:

No the document/deed of sale attached does not meet the legislative record keeping requirement that fall on the real estate agent in regards to 1) confirming the existence of the corporation and 2) binding resolution.

The deed of sale refers to a resolution - this resolution is the binding document that should be part of the record kept by the real estate agent.
Furthermore, the real estate agent should also have either a CIDREQ copy or any other acceptable documents attesting to the existence of the company that is buying.

Date answered: 2010-02-10

PI Number: PI-5313

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 39(1)c

Are there any issues or legal requirements that could prevent a member from opening a new folio without physically going to the caisse?

Question:

Second option - Open a folio at a new caisse where the person is not yet a member. Is it still possible to be compliant without the member physically going to the new caisse?

Answer:

In this case, there is an exemption in paragraph 64(1)(b) - Once the client's name, address and DOB have been received, the Caisse Populaire can check the consistency of the information in the file from the other CP (entity belonging to the same group or the same association) to ensure that the information is identical. However, there are still record keeping obligations to be met, including: the intended use of an account, third party determination and PEFP (in this case) and any other legislative record keeping obligations associated with opening a new account.

Date answered: 2010-02-10

PI Number: PI-5312

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)b

Are there any issues or legal requirements that could prevent a member from opening a new folio without physically going to the financial entity?

Question:

First option - Open a new folio at a Caisse Populaire where the person is already a member. Are there any issues or legal requirements that could prevent a member from opening a new folio without physically going to the caisse?

Answer:

A.1. Despite the fact that, in this case, the client (member) is exempt under paragraph 62(1)(c) for identification purposes, the information should still be updated as if it were a new account. According to 14(c.1): a record that sets out the intended use of the account, as well as makes a third party determination (not PEFPs because they are exempt under paragraph 62(1)(c)).

Date answered: 2010-02-10

PI Number: PI-5311

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 62(1)c, 14(c.1)

Definition of "Guarantor"

Question:

We would like to obtain some details concerning the definition we should use for "Guarantor" (as mentioned in Guideline 6E and provided below)
Guideline 6E: Record Keeping and Client Identification Obligations - Securities dealers
"In this context, a guarantor has to be an individual engaged in one of the following professions in Canada:

• a dentist, a medical doctor or a chiropractor;
• a judge, a magistrate or a lawyer;
• a notary (in Quebec) or a notary public;
• an optometrist or a pharmacist;
• an accredited public accountant (APA), a chartered accountant (CA), a certified general accountant (CGA), a certified management accountant (CMA), a public accountant (PA) or a registered public accountant (RPA);
• a professional engineer (P. Eng., in a province other than Quebec) or engineer (Eng. in Quebec); or
• a veterinarian."

Could a retired person who engaged in one of these professions be considered a guarantor?

Answer:

No, a guarantor must still be engaged in his profession in order to attest and ascertain a person's identity within the attestation method found in our legislation.

Schedule 7, subsection 3(2) states in English - a guarantor is a person engaged in one of the following professions - a retired guarantor would not be "engaged" in the profession anymore.

“In French it also reads" : un répondant est la personne qui exerce au Canada l'une des professions..." - donc pour être en mesure de se qualifier pour cette tâche il faut que le répondant exerce (temps présent) au moment de l'attestation.

Furthermore, most of the professions enumerated in the list found in subsection 3(2) require a valid licence or being part of a professional association to practice, and a retired guarantor would normally not be licensed or otherwise part of his professional association anymore (as he would not be paying his professional fees e.g. lawyer).

Date answered: 2010-01-26

PI Number: PI-5302

Obligation(s): Ascertaining Identification

Guidance: 6, 6E, 4.12, Schedule 7

Regulations: 3(2)

MSB enters into an ongoing service agreement for EFT's and FX

Question:

Compliance Officer requests confirmation that pursuant to Subsection 11.1 of the Regulations, an MSB is only required to obtain and take reasonable measures to confirm the information in relation to the existence of an entity when it enters into an "ongoing" service agreement for EFT's and FX.

If they do not enter into an agreement, they do not have to obtain and confirm the information in relation the existence. Correct?

Answer:

The MSB is only required to obtain and take reasonable measures to confirm the information in relation to the existence of an entity when it 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.

If the MSB does not enter into such agreements it does not have to obtain and take reasonable measures to confirm the information in relation to the existence of a corporation (sec. 32 and sub. 59(2) and (3)).

Date answered: 2010-01-22

PI Number: PI-5299

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 11.1, 32, 59(2), 59(3)

Existence- entity other than corporation- resolution

Question:

A former PI stated that, in the absence of any other document, a letter from the entity other than a corporation was sufficient to satisfy the "existence" obligation.

Would a resolution document from the entity other than a corporation meet the definition of a document that establishes the "existence"?

Answer:

A resolution from an entity other than a corporation (a non incorporated body) would be acceptable. However, the document would have to be dated, signed (indicate who the signatory in relation to the entity is) and the resolution should be current.

Date answered: 2010-01-21

PI Number: PI-5296

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54(1)(e), 66

ID requirements of a name change: marriage certificate

Question:

A financial institution had several members recently who have married. They have been providing the Marriage Certificate received at these ceremonies by the Officiant. We are aware that in order to change their Driver's Licence, payroll and multiple other ID, this certificate is sufficient. A change of name on a SIN card; however, must have a Vital Statistics document to make this change.

Can you please clarify the ID requirements of a name change in relation to validation of this type of marriage certificate as name change ID or whether Vital Statistics documents must be attained before an FI changes a member's name after a marriage has taken place?

Answer:

Unfortunately a marriage certificate does not constitute a valid identification document. Therefore, if an individual underwent a name change as a result of his/her marriage, then the reporting entity should require a valid document to identify the individual that would reflect the name change (such as the new driver's licence or other valid document with the name change) and not rely on a marriage certificate.

Date answered: 2010-01-04

PI Number: PI-4758

Activity Sector(s): Accountants, Financial entities, British Columbia notaries, Casinos, Dealers in precious metals and stones, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)

Use of Credit File in the Non face-to-face method

Question:

This method of ascertaining a person's identity consists of confirming after obtaining authorization from the person, their name, address and date of birth by referring to a credit file in respect of that person in Canada that has been in existence for at least six months.

We have encountered situations whereby a potential customer has an established credit file but the file is inactive as it has not had any activity for at least six months. Would it be appropriate to interpret the following portion of the above statement (.." been in existence for at least six months.") to mean that a credit file being used should be "existing and active" for at least six months?

Answer:

As indicated, the file must be in existence for at least six months... not active in the last six months.

However, although the credit file may not have been active within the last 6 months, it must have been active at one point i.e. that credit must have been given based on that credit file (such as credit card, loan, line of credit etc.).
In other words, a simple enquiry in regards to credit would not be sufficient, the file must also include that some form of credit was given.

Date answered: 2009-12-09

PI Number: PI-4748

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6

Are Tax free savings accounts exempt under the Act?

Question:

Can you please confirm that a tax free savings account (TFSA) qualifies as a "registered plan account" in subsection 62(2)(i)
of the Regulations such that the sections and subsections of the Regulations outlined in subsection 62(2) do not apply to TFSAs?

Answer:

Yes the TFSA is considered as a registered plan account

Date answered: 2009-12-04

PI Number: PI-4747

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 62, 62(2)(i)

ID Requirements for existing Credit Union clients

Question:

We would like to confirm the following:
If a membership for one of our members was opened prior to June 12, 2002 there is no requirement to collect ID unless:

a) we have no signature card (in Credit Union's case this is an account agreement) on file
b) we don't recognize the individual
c) we have processed a transaction that is a 'triggering event' for which ID is required
d) we have determined the membership is regarded as high risk as per risk based approach assessment which requires us, at a minimum, to update ID every two years

Answer:

The following statements are correct:

If a membership for one of our members was opened prior to June 12, 2002 there is no requirement to collect ID unless:
a) we have no signature card (in Credit Union's case this is an account agreement) on file
c) we have processed a transaction that is a 'triggering event' for which ID is required
d) we have determined the membership is regarded as high risk as per risk based approach assessment which requires us, at a minimum, to update ID every two years

However, as for "we do not recognize the individual" - in order for subsection 63(1) to apply, there must be a first client identification done under section 64. If the membership was opened prior to June 12, 2002, there was never a client identification done under section 64 to start with, so therefore, the exemption applicable under 63 (i.e. if you recognize) can't be used in this case.

Date answered: 2009-12-03

PI Number: PI-4746

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 63(1), 64

Attestation Method

Question:

Many provincial privacy commissions are prohibiting photocopying of identification. In our regulations, it does state that for the attestation method includes photocopying identification unless prohibited by provincial legislation.

I recall that you did state that if the attestor records the ID details and states they have viewed the original id and sign it (original signature), that it would be sufficient. I just want to make sure if that is still correct before we advise some REs.

If REs are prohibited from photocopying Identification, is the attestation method still available to them?

Answer:

Yes it would be sufficient.

Date answered: 2009-12-02

PI Number: PI-4745

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 63(1), 64(1), Schedule 7

Identification Requirements for a Canadian Investment Dealer opening an institutional account for US securities dealer

Question:

We are opening an institutional brokerage account for a US securities dealer who is members of ABC. Could you please clarify what are the client identification requirements for such a client, including for those individuals for whom they are acting?

Answer:

In regards to subsection 9(5)(2) of the Regulations the explanation is the following:
- In the case of the opening of an account by a securities dealer referred to in that subsection, we can take for granted that the account opened by the "foreign" securities dealer will be used by or on behalf of a third party (i.e. on behalf of the client of the "foreign" securities dealer) - therefore there is no exemption to take reasonable measures to determine if the account is going to be used on behalf of a third party as it is always going to be used on behalf of a third party.

However, the record keeping for 3rd party won't be required - the rationale being that 1) the foreign dealer is not a Canadian securities dealer and 2) the foreign dealer is in a country that is a member of FATF record keeping requirement.

Date answered: 2009-11-24

PI Number: PI-4735

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 9(5)(a), 23(1)

Canadian National Institute of the Blind (CNIB) card

Question:

I received a question from ABC (a securities firm). They'd like to know whether the CNIB card is an acceptable ID as a client of theirs only has this ID. The client claims that other securities firms/banks are accepting this ID.

Answer:

We discussed the issue and came to the conclusion that this card is not an acceptable identification document within our legislation. CNIB is a charitable organization and is one of the world’s largest private agencies committed to vision health issues - however, their card is not a government issued document.

Date answered: 2009-11-16

PI Number: PI-4727

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6A

Regulations: 64(1)(a)

Guideline 6B - Credit Unions

Question:

We have determined that credit unions are not exempt from client identification requirements. Real Estate agents would still have to create Client Identification Records when conducting a real estate transaction - with a binding corporate record and ID of the individual.
• since they are not publicly traded.

It seems odd but Credit Unions do not fit the description within the exemptions in G6B.

Was there an opinion on this as they are exempt from LCTRs and Records of Funds requirements?
Have there been any changes with regards to these entities being exempt from Client Identification Requirements?

For clarification we should post who is exempt on upcoming changes to the website and FAQs.

Answer:

There have been no changes since. We will include this in the list of questions to post on our website.

Note: Credit Unions are not considered as “large corporations” with assets of $75 million dollars or more and are not “publicly traded”.

Date answered: 2009-11-12

PI Number: PI-4722

Activity Sector(s): Financial entities

Obligation(s): Record Keeping, Ascertaining Identification

Guidance: 6B

Regulations: 62(2)(m)

Question for Confirming Corporation's Existence

Question:

In the past, we have accepted faxed corporate certificates during examinations. However, given that for non-face to face identification of an individual they must send in the original attestation and original bank statement, I wanted to double check this one.

I was reviewing section 65(1) and it states "by referring to its certificate of corporate status." Does this mean it has to be the original or is a copy sufficient?

Answer:

Yes a copy of the certificate of corporate status would be sufficient and would fulfill the legislative requirement found in subsection 65(1). However, please note that if during an examination you would have doubts regarding the authenticity of the information provided (i.e. for example you think the copy provided was modified), then you could certainly ask to see the original and put the burden on the reporting entity to provide that document.

Date answered: 2009-11-06

PI Number: PI-4715

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 65(1)

Identifying both spouses in a joint account

Question:

A joint account was transferred from another broker to XYZ Bank Direct Brokerage.

One of the spouses was identified, but we are having trouble identifying the other one. The clients are out of the country and are too far away from a XYZ Bank branch.

Until we find a way to identify the unidentified spouse, my understanding of our discussion is that we cannot allow any closing transactions (for example, to protect the client if the market falls), and we cannot allow the entire account to be closed and a cheque to be issued to the clients. The only possible solutions would be to complete the identification or to allow the clients to transfer the account elsewhere to another brokerage firm (thereby transferring the identification problem to another firm).

Could you please confirm?

Answer:

Reporting Entity must identify both clients/spouses before any transaction (other than the initial deposit) takes place. If XYZ Bank wants to sell shares, they will need to have identified both parties prior to doing so.

Date answered: 2009-11-03

PI Number: PI-4710

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54(1)

Account transfer / identification problem

Question:

A joint account has been transferred to the Bank from another securities dealer.

One of the account holders has been identified, but we are having difficulty identifying the other. The clients are abroad, and are not close to a Bank branch.

From what I understand from our discussion, until we find a way of identifying the unidentified account holder, we cannot allow any closing transactions (eg, to protect the client in the event of a market decline) and we cannot liquidate the entire account and issue a cheque to the clients. The only possible solutions would be to complete the identification or allow the clients to transfer the account elsewhere, to another securities firm (and thus transfer the identity problem to that firm).

Can FINTRAC confirm the Bank's approach?

Answer:

After discussion we came to the conclusion that the initial transfer of shares (to the securities dealer by the new clients as they open their account) or the deposit of funds is both considered as "initial deposits".

Therefore, the bank will unfortunately have to id the client(s) before any other transaction take place (including the transfer of the content of account to another securities dealer.

Date answered: 2009-11-03

PI Number: PI-4709

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E41., 6E4.12

Regulations: 57(1), 62, 63(1), 64(1)

Identifying the client, EFT

Question:

A customer goes to his/her credit union and asks the credit union for a wire transfer of money to the USA. The credit union then asks XYZ Inc. to make the transfer (often without the final customer’s knowledge).

Who should identify the final customer who went to the credit union, the MSB or the credit union employee who calls XYZ Inc.?

Answer:

The MSB will have to identify under subsection 59(1) of the Regulations the employee of the credit union as being the client who conducts the transaction and not the initial client (that went to the credit union and who initiated the wire transfer).

Date answered: 2009-11-02

PI Number: PI-4708

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 59(1)(b)

Client ID for EFT & FX

Question:

ABC Inc. is a registered MSB but we currently have an application before OSFI to obtain a banking license. We are at an advanced stage in our application and I have written a draft of AML/ATF procedures for the bank. There was one area in Guideline 6G where I have trouble interpreting the requirement or obligation being imposed. Following is a précis of the section of 6G:

Client identity for electronic funds transfers
You have to identify any individual who requests an electronic funds transfer (EFT) of $1,000 or more, at the time of the transaction. This does not apply if that individual is authorized to act regarding such an account.

Client identity for foreign currency exchange transactions
Any individual who conducts a foreign currency exchange transaction of $3,000 or more must be identified at the time of the transaction. This does not apply if that individual is authorized to act regarding such an account.

Only a person who is not authorized to transact on the account needs to be identified.

Q1. How is it that an unauthorized person would ever be permitted to transact in an account to start out with?

Answer:

The version shown below that you provided to ABC Inc. is correct. We should emphasize the fact that as a financial entity, the legislative requirements are certainly different and more cumbersome than when they were registered/operating as a MSB. The entity will have to adjust to their new status and include the requirements applicable to financial entities.

ABC Inc. need to consider Guideline G6 for Financial Entities whereby the sections you pointed out read in their entirety as follows:
4.7 Client identity for electronic funds transfers
You have to identify any individual who requests an electronic funds transfer (EFT) of $1,000 or more, at the time of the transaction. This does not apply if that individual has signed a signature card for an account with you or is authorized to act regarding such an account.
4.8 Client identity for foreign currency exchange transactions
You have to identify any individual who conducts a foreign currency exchange transaction of $3,000 or more at the time of the transaction. This does not apply if that individual has signed a signature card for an account with you or is authorized to act regarding such an account.
Once ABC Inc. becomes a Bank it will be subject to all the legislative requirements of the PCMLTFA and associated regulations applicable to the financial entities such as client identification, record keeping, reporting, and all other required obligations of the financial entities.
FINTRAC considers Bank's reporting entities that open and maintain accounts on behalf of their customers, both individual and corporate and in doing so Banks should fulfill all the required legislative obligations attached to account opening under the PCMLTFA and associated regulations including those that require the acquisition of a signed signature card regardless whether or not this was ABC Inc. prior practice when it was a MSB.
As a Bank, ABC Inc. would also be subject to OSFI Guideline B-8 and you should ensure that you are equally conscious of your obligations under their guidance.

Date answered: 2009-10-21

PI Number: PI-4706

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 14(m), 59(1)c)

Recording the principal business of a corporation

Question:

A question has recently come up regarding information to be recorded in respect to opening an account for businesses or other entities.

Accounts for individuals or entities other than corporations

If the account is opened for an individual or an entity that is not a corporation, you have to keep a record of the name, address and principal business or occupation of that individual or entity. For more information about recording business or occupation, see subsection 3.2, under the heading "Contents of a large cash transaction record".

Why is it not necessary to record the principal business of a corporation?

Answer:

The regulations do not require to record keep the nature of business for corporation, so no RE do have to record that information in the case of corporations.

The obligations to record keep the occupation or to record keep the principal business apply only to individuals or to entities other than corporations.

Date answered: 2009-10-09

PI Number: PI-4700

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 14

Ascertaining ID

Question:

Background

An existing corporate customer is located in the U.S.A. and it maintains a deposit account with us. The customer’s corporate identity and the identity of all three authorized signers on the corporate signature card have been properly verified when the account was opened.

a) Combination Method (attestation and deposit account)
The new signer’s ID (e.g., U.S. passport or driver licence) is verified and certified by a U.S. lawyer or notary public. The new signer also provides a confirmation from a bank located in the U.S.A. confirming that he/she has a deposit account with the bank in the USA.

b) Combination Method (attestation and Cleared Cheque)
The new signer’s ID (e.g., U.S. passport or driver licence) is verified and certified by a U.S. lawyer or notary public. The new signer also provides a cleared cheque confirming a cheque drawn on a deposit account that the new signer has with a bank (in the USA) has cleared.

c) Via Video or web-camera Conference
We conduct the ID verification with the new signer (who lives in the USA) via web camera. The new signer in the USA shows us his/her ID (original of U.S. passport or a driver licence) via the web camera (close up look), we view and confirm his/her name, date of birth, ID reference number, expiry date and place of issuance. A copy of his/her ID is then sent to us by mail, fax or email.

Questions:
1. If one of the signer on an existing signature card is to be replaced with a new signer, do we need to verify the new signer's identity by referring to an original identification document?
2. If the answer is “yes” for question 1, would any of the following method acceptable to FINTRAC?

Answer:

No, a web camera is not an acceptable method of identification. We had given out a policy interpretation in the past to that effect. This method of id is not part of the methods of identification permitted for the non-face-to face verification of identity in our legislation.

A word of caution for 2 a) and b) Because the new client seems to be a US citizen, 1) the entity may rely on a US lawyer or notary public identifying on its behalf only if the entity and the man datary have entered into a written agreement to that effect (as per subsection 64.1).
The entity, in the case described above, may not use the attestation method as defined in our Regulations as the guarantor is not a guarantor in Canada, and 2) a) and b) in regards to the cleared cheque or the deposit account method, the financial entity must be a branch (if in the US) of a Canadian Bank.

Date answered: 2009-10-06

PI Number: PI-4697

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)(ii), Schedule 7

Insurance policies under the PCMLTF Regulations and segregated funds

Question:

Are most insurance policies exempt under the PCMLTF Regulations due to the fact that regulations are tied to s. 306 Income Tax Act? Do life insurance representatives need to ascertain ID when offering segregated funds?

Answer:

s. 306 refers to life insurance policies only, but not annuities. In this case, records on non-registered annuity policies can be requested. Further to the clarifications provided on the nature and content of segregated funds, and that they are in fact annuities, this life insurance product is covered for all aspects of the regime

Date answered: 2009-09-29

PI Number: PI-4696

Activity Sector(s): Life insurance

Obligation(s): Ascertaining Identification

Guidance: 6A

Regulations: 56

Deposit account confirmation

Question:

What is an acceptable method to FINTRAC to verify that a deposit account exists so that that method, in combination with another method, can be used to verify the identity of a client under non-face-to-face circumstances?

A) Confirm that a cheque drawn on a deposit account that the individual has with a financial entity has cleared.
B) Confirm that the individual has a deposit account with a financial entity.

Would withdrawing a micro payment be acceptable, instead of depositing one?

Answer:

Section A is acceptable in regards to the cleared cheque method. However, in regards to the confirmation of deposit account method, the depositing of funds in an account is not an acceptable way to confirm if the person has a deposit account (as it wouldn't indicate to the reporting entity that it is a deposit account per se).

We have indicated in the past to reporting entities that they can confirm that it is a deposit account by either confirming verbally with the financial entity where the account is held, by letter from that financial entity to either the client or the RE, or even by email (as long as it is indicated that it is a deposit account).

Date answered: 2009-09-28

PI Number: PI-4695

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)(ii), Schedule 7

Person's occupation when on disability

Question:

I have an interesting question for you regarding a person’s occupation or principal business requirements. If someone states he is ‘on disability' (and not working), does FINTRAC regard 'disability' as an acceptable occupation similar to unemployed or do we need to attempt to find out what they were employed as before receiving disability?

Answer:

In this particular case, to protect the privacy of the clients (and follow the OPC recommendations), it is advised that the Reporting entities indicate "unemployed" to fill our occupation as opposed to "disability" (as one we do not know if it is permanent or temporary) and when or if the client will ever go back to work.

Date answered: 2009-09-21

PI Number: PI-4684

Activity Sector(s): Casinos

Obligation(s): Ascertaining Identification

Guidance: 10A, 10B

Regulations: Schedule 8 - D10

Purchasing real estate from a builder

Question:

We purchased a ready to move home from a builder. We took possession over a month ago, and he is now asking us for copies of our driver's licences and information about our occupations.

I understand that the federal guidelines apply to real estate. We purchased the land separately, as well as contracted the construction of the foundation, utilities and mechanical ourselves. Essentially, we general contracted the build of the home.

You may also wish to note that we secured funds for this build via a mortgage with our bank that is now registered on the land title and these transactions were also handled by our lawyer.

As we did not purchase "real estate" from the builder, are we required to provide him with the information he has requested?

Answer:

Homebuilders have legal requirements if they fall into the legal definition as a real estate developer. Your builder should know if they meet the definition. All these legal obligations apply to the developer, not you as the client.

To clarify how that legal definition of real estate developer is applied, I am including the following summary:
Effective February 20, 2009, if you are a real estate developer, these requirements apply to you when you sell to the public a new house, a new condominium unit, a new commercial or industrial building, or a new multi-unit residential building. A real estate developer means an individual or an entity other than a real estate broker or sales representative who in any calendar year after 2007 has sold the following to the public:
• at least five new houses or condominium units;
• at least one new commercial or industrial building;
• at least one new multi-unit residential building each of which contains five or more residential units; or
• at least two new multi-unit residential buildings that together contain five or more residential units.
Just to close the loop on this question, we just wanted to add that the builder (if he falls within the definition of a real estate developer within our legislation) is required to identify the client before selling the house.

Should the real estate developer have the sale or all sales handled by a real estate broker then we have indicated in the past that the real estate broker/agent would then have that obligations (there is no need for dual identification RED and agent in that case).

It would be a question of fact in determining whether the RED or the real estate agent have the obligations.

Date answered: 2009-09-12

PI Number: PI-4678

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 1(2), 59.5(a)

Customer Identification - Real Estate Agent

Question:

Facts:
-A real estate broker has mandate to sell a property which belongs to the Caisse populaire
-the property belongs to the Caisse populaire due to non-payment of the mortgage by its previous (reprise de financement)
-the real estate agents has a copy of the judgment transferring title of the property from the previous owner to the Caisse populaire
-as per the telephone conversation which I had with the broker last week, the standard operation procedure to follow in cases involving the sale of foreclosed properties, is for Caisse populaire to mandate a representative of the [reporting entity] to represent the Caisse populaire for the sale of the foreclosed properties; however the listing contract is with the Caisse populaire and not the [reporting entity]
-the real estate broker has the mandate to sell a foreclosed property belonging to the Caisse populaire; but the person representing the Caisse populaire in the transaction is an employee of the [reporting entity].

Question:
Does the real estate broker in the scenario described above have any record keeping and client ID obligations?

Answer:

The CP is a body corporate, and a body corporate falls within Fintrac's definition of "entity" under the Act. And so the following should be noted:
1- A client information record (CIR) on the entity should be created, i.e. the CP;
2- ID the representative;
3- third party determination - Subsection 10 (1) indicates that every person or entity that is required to keep a CIR in respect of a client shall take reasonable measures to determine whether the client is acting on behalf of a third party - so the RE would have to make 3rd party determination, however, the response may be NIL.
4- confirm the existence of the Caisse populaire, and an entity other than a corporation
5- binding resolution is not needed as the Caisse populaire is an entity other than a corporation and the binding resolution is only required if the CIR is in respect of a corporation.

Date answered: 2009-09-11

PI Number: PI-4675

Activity Sector(s): Financial entities, Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6G

Regulations: 39(1)(b), 59.2(1)

Client Identification

Question:

1- 64(2)(a) states that the CP must ID the client before performing any account transaction. Can we consider the first payment that the client makes on the contract to be the first transaction? If so, the CP can ID the client upon receipt of the contract by using the techniques specified, which are based on whether or not the client is present.

2- An email was sent to the CU to determine if their credit company is an entity that is a member of the same group as the CPs as set out in clause 64(1)(b)(i)(B).

2a- Since their credit company is an intermediary between the dealership and the CP, can we make a blanket assumption that the credit company is an identification agent for all CPs in Quebec? Could FINTRAC accept this solution?

3- If the credit company can be an agent, does that mean that it must sign an agency agreement with all car dealerships since they are ultimately the ones who identify clients?

Answer:

2 - The regulations require that there is a written agreement - so yes the CP would need to list all the dealerships mandated to act as their agents. However, here is a reprieve. There would be no need to have all the dealerships sign that agreement - whereas the signing of the document would normally indicate that they agree to ID on behalf of the CP - instead if de facto the dealership(s) ID the clients, send the client information to the CU and "act" as though they are identifying on behalf of the CP, then implicitly that would indicate that the dealerships agree to act as the agents of the CP for identification purposes.

Date answered: 2009-09-10

PI Number: PI-4671

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(2)(a), 64(1)(b)(i)(B), 64.1

Act: 6.1

Mandatary/Agent

Question:

Can a mandatary/agent under 64.1, whether or not the mandatary is a reporting agent, benefit from the recognition exception to customer identification found in subsections 63(1) of the regulations?

Answer:

A mandatary can benefit from the recognition exception under 63(1), whether the mandatary is a reporting entity or not in itself.

Date answered: 2009-09-03

PI Number: PI-4668

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 63(1), 64.1

Recognition of On-line transaction

Question:

What does it mean to recognize an individual customer so that the exemption in subsection 63(1) of the regulations applies to the transaction? In the case of real world exam situations with MSBs who offer online wire transfers, does this mean that each and every time that a customer conducts an on-line wire transfer in excess of $1,000 or a foreign exchange in excess of $3,000, the MSB must apply one of the acceptable methods for non face-to-face customer identification?

Answer:

Yes, this is what is prescribed in the regulations presently.

Date answered: 2009-09-02

PI Number: PI-4665

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 63(1)

Act: 6.1

Valid Identification

Question:

Is the Quebec Bar Association's member card a valid piece of identification under the Act? It has an expiry date and a unique identifier number.

Answer:

The Bar Associations member cards are not a government issued identification card, therefore, are not acceptable as a valid identification document under our legislation.

Date answered: 2009-08-31

PI Number: PI-4664

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 64(1)

Act: 6

Client ID exception

Question:

Company ABC is wholly owned by the Ontario government, but I do not know if their financial statements are consolidated with those of the province. Do they qualify as an exception for ID requirements?

Answer:

After verification, ABC company is defined as a crown corporation, however in vertu of the Electricity Act, 1998, it is not considered as an agent of the Crown (i.e. as an agency of the province) -below is the subsection that deals with the ABC company in the Electricity Act and it reads as:
Status: (2) ABC company and its subsidiaries are not agents of Her Majesty for any purpose, despite the Crown Agency Act. 2002, c. 1, Sched. A, s. 11.

Therefore, if is not an agent of Her Majesty (the province) then it does not fit in our definition of a "public body" found is subsection 1(2). And by ricochet then the ABC company does not benefit of the exemption of identification requirement found under subsection 62(2)(m).

Date answered: 2009-08-10

PI Number: PI-4647

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 62(2)(m), 1(2)

REs in Quebec using health cards from Ontario

Question:

Can a RE in QC use the Ontario (or PEI or Manitoba) Health card?

Answer:

In Quebec, the reporting entity cannot request to see a client's health card for identification purposes, but the reporting entity can accept the health card only if the client presents and uses it as an identification document. So in other words if the customer has voluntarily presented his health card, then the reporting entity can use it for ID purposes.

In Ontario, Manitoba or Prince Edward Island, it is prohibited by the provincial legislation to refer to the health card (as an identification document) - so the health cards cannot be used for the purpose of identifying the person in these provinces.

Date answered: 2009-08-07

PI Number: PI-4646

Activity Sector(s): Casinos

Obligation(s): Ascertaining Identification

Guidance: 6F

Regulations: 64(1)(a)

Client ID obligations for foreign clients

Question:

Do Canadian MSB with agents in a foreign jurisdiction (or another MSB with whom they have a relationship) have obligations in regards to performing client ID on the originating client for an EFTI (this client would be located in a foreign jurisdiction)?

Answer:

No.

Date answered: 2009-08-05

PI Number: PI-4642

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C,8

Regulations: 30(e)

Identifying beneficiaries in a transaction

Question:

Are MSBs required to identify the beneficiary of a transaction if $1K or more, or is the only mandatory information the beneficiary name?

Answer:

MSBs are not required to identify the beneficiary of a transaction – the only mandatory information is the name of the beneficiary as per subsection 30(e).

Date answered: 2009-08-05

PI Number: PI-4641

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 30(e), 59(b)

Ascertaining ID for recurring non-face to face transactions

Question:

Do MSBs need to ascertain client ID for reoccurring online customers and other non-face to face customers every time they wish to conduct a transaction? The issue is what does it mean to recognize.

Answer:

Yes the MSBs need to ascertain the identity for reoccurring online customers and other NFTF, unless they recognize the individual (visually or verbally).

Date answered: 2009-08-05

PI Number: PI-4640

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 63

Ascertaining ID for couriers delivering funds for transactions

Question:

Do MSBs need to ascertain the identity of couriers, mail man, etc. who are delivering funds for a transaction under s. 59.(1)?
If yes, does this apply only to LCT, all cash transactions over applicable threshold, or all transactions over applicable threshold?

Answer:

The MSBs need to identify the person conducting the transaction i.e. the sender. The MSBs however does not need to identify the delivery person, except in the case of a LCT – then the MSB must id the courier and make a third party determination.

Date answered: 2009-08-05

PI Number: PI-4639

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 7

Regulations: s. 59.(1)

Pièce d'identité - Certificat de naissance antérieur à 1994 (Québec)

Question:

If an individual does not have one of the three (3) identity documents mentioned in the Regulations (eg, an elderly person), would a birth certificate be acceptable?

In cases like this, for Quebec, does FINTRAC require the birth certificate that has been provided by the Bureau de l'état civil since 1994, or would any other birth certificate (dating from before 1994 and produced by a parish) be acceptable?

Answer:

Yes a birth certificate is expressly permitted as an identification document in subsection 64(1)(a), and we do not request the one emitted by the Directeur de l'État civil (so the pre-1994 certificate is acceptable).

Date answered: 2009-07-23

PI Number: PI-4631

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64(1)(a)

Non-face to face verification inquiry

Question:

To open an account with an MSB, I provided the documents they required - a copy of my passport, a recent utility bill and a copy of my Canadian bank statement.

What nobody told me at the time is that FINTRAC, according to the MSB, requires verification of my name, address and birthdate with Equifax,

For some reason which nobody has been able to identify yet, that verification with Equifax fails.The MSB cannot (or will not) tell me why; an Equifax representative cannot be reached by phone.

Thus for the better part of the last two days, my account application with the MSB has come to a grinding halt.

I took a look through the FINTRAC website to find some information about that verification process with Equifax, but was unable to find any reference to it.

Since I found it a bit strange that the Federal Government would use a private company, like Equifax, to verify name, address and birthdate, rather than use one of their own departments that already has all this information, I decided to write this email.

Can you confirm that it is a FINTRAC requirement, as the MSB claims, that my name, address and birthdate be verified by Equifax?
I don't really understand the purpose since all that information is in my passport, a copy of which I had sent to the MSB. It essentially says that the information in the passport can't be trusted and information a private company has on file is more trustworthy.
Somehow that doesn't make any sense to me.

I have also emailed Equifax (since they are not reachable by phone) to try to find out why this "verification" process keeps failing. I have a number of credit cards and also two lines of credit and I have received credit reports from Equifax before, so this verification failure is a bit of a mystery especially since I have lived at the same address since 1978.

Answer:

In regards to your question on the non-face-to-face identification methods, here are a few comments in reply to the concerns you have raised.

The objective of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) is to help detect and deter money laundering and the financing of terrorist activities. It is also to facilitate investigations and prosecutions of money laundering and terrorist activity financing offences. This includes reporting, record keeping, client identification and compliance regime requirements for money services businesses (and other reporting entities covered under our Act).

To identify an individual that is physically present, a money services business must refer to the individual's birth certificate, driver's licence, passport, record of landing or permanent resident card or other similar document. Those original identification documents can be used only if the individual is physically present at the time the money services business identifies his client.

If the individual is not physically present, the money services business has to use a combination of two methods of non-face-to-face identification methods, as found in subsection 64(b) of the PCMLTFA.

One of these methods is to use the credit file method (it should be noted that this said method would have to be combined to another acceptable method of identification such as for example the confirmation of deposit account method).

In regards to the credit file method, the money services business, can with the individual's permission, refer to a credit file. The credit file must have been in existence for at least six months. Products for the credit file methods are available commercially, such as those used for credit ratings.

In each of the two methods of non-face-to-face identification methods used, the individual's (or client's) information has to be consistent with what the money services business has in his records. The information also has to be consistent from one method to the other. For example, if each of the identification methods used, has the name, address and date of birth information about the individual/client, all of it has to agree with the information the money services business already has in his records. If the information is not consistent, the client identification or the information may not be accurate.

Please note that FINTRAC does not endorse nor advertise any of the credit ratings companies or any provider of consumer information.

Date answered: 2009-07-16

PI Number: PI-4627

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 64(b)

ID obligations through ATM money orders

Question:

Is the credit union who accepts the ATM money order deposit of another credit union's customer-owner in their own ATM to assume it is the person who owns the account (of the other credit union) who deposited the money order?

Answer:

Refer to our FIN 5 - having said this - yes in the absence of other evidence to the contrary, the CU may assume that it is the person that owns the account who deposited the money order.

Date answered: 2009-07-10

PI Number: PI-4623

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: FIN-5

Identification requirements - Government agencies/corporations

Question:

It's been my understanding that FRFI's are exempt from client identification requirements when setting up accounts with provincial/federal government agencies/corporations. (e.g. Office of the Public Guardian, Corporations set up to administer legislative acts) Please confirm if this is the case.

Answer:

You will probably want to consult with legal counsel on the applicability of exception to some organizations. For example, within the brief list in your email the Office of the Public Guardian does not qualify by virtue of the fact that it is neither a subsidiary nor a corporation as set out in 62(2) (m&n).

UBS will have to look at each agency/corporation on a case by case basis to determine whether the exception applies. This test would likely be a part of your policies and procedures and where necessary it will be referenced within your Risk Based Approach ( RBA). Your client should be able to provide you with the appropriate documentation/background -which is usually readily available on their website- and you'll have to make a determination as to whether they do or do not meet the exception under 62(2) (m&n).

Date answered: 2009-07-02

PI Number: PI-4617

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 62(2)

A sister company who performs client ID obligations under the PCMLTFA

Question:

To verify, an entity is not in violation of any FINTRAC ruling if it allows its clients to fill up application forms for account opening (in a bank in the Philippines which happens to be a sister company) in the entity's offices here in Canada. The role of entity's Canadian company is merely to authenticate or validate that the person who filled up and signed the application form is who she says she is. It is going to be a special service to clients who wants to open accounts in the Philippines for saving purposes and/or to fund their travel expenses when they go visit. The entity will have nothing to do with the actual account opening, account handling, etc.. although the remitter may later send remittances for credit to that account.

Answer:

If the entity in Canada enters an agreement to perform client identification for the sister company it will not be in violation of the PCMLTFA, because the sister company being a bank located in the Philippines and is not doing business in Canada. However, if the client subsequently asks the Canadian Company to remit money into their Philippines bank account, the client then becomes a client of the Canadian company and the company is required to perform the appropriate client identification, record keeping, reporting and other legislative obligations under the PCMLTFA.

Date answered: 2009-06-26

PI Number: PI-4612

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 1(2)

Military ID

Question:

There seems to be confusion among reporting entities about the acceptance of Canadian Military identification as being a valid form of ID.

It was previously advised that Military ID was the equivalent to employer ID therefore unacceptable as identification. Acceptance of this would open up accepting RCMP ID, other police force ID, etc.

Could you please provide clarification on this.

Answer:

In regards to this issue - the military ID was deemed acceptable because this card is more than just an employment card as it has an international purpose of identifying the military when abroad, something that other employment cards such as the police force card or firefighter card lacks.

I think what we are getting at is we want to avoid opening the debate on the acceptability of "employment" card that is a means usually for an individual to be identified as an employee of an organization or an agency, however, not as a means of identification of the said individual.

Date answered: 2009-06-26

PI Number: PI-4611

Activity Sector(s): Accountants, Financial entities, British Columbia notaries, Casinos, Dealers in precious metals and stones, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)(a)

Marriage certificate as a ID in opening an account

Question:

According to the criteria outlined in the FINTRAC guidelines, the marriage certificate should be an acceptable form of ID.

It is issued by the provincial government, it has a registration number.

Couple of thoughts:
We would not have any way of knowing if it was valid?
we would not know if they presently married or divorced (doesn't really matter here) but does not expire.
Is a Marriage Certificate, issued by the Provincial Government acceptable Identification.

Answer:

Definitely no - a marriage certificate is not an identification document or identity document in any way. The certificate is only to attest that the parties are married. It does not in any way "prove" or ascertain the identity of either of the individuals named in the document.

Date answered: 2009-06-25

PI Number: PI-4607

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)(a)

Updating Client ID after an offer is signed

Question:

Real Estate Agent - If after the offer is signed, there is a change in the client, and the RE agent knows about it, does he need to identify the "new" client?

Answer:

If the client should change after the offer is signed, even though the real estate agent may be aware of that change, no, the real estate agent would not need to identify the "new" or "modified" client.

The rationale behind this answer is since we have "defined" the transaction in the real estate world as being the offer signed and conditions lifted, we do not want to go back on our interpretation and indicate that there should be dual client identification at different periods within the real estate transaction, I think that would just create additional confusion in this sector.

In other words, the client id takes place before or at the time of the signature of the offer, and should the parties change afterwards, there is no need to identify the "new" or modified parties. Having said this, however, should this raise the "STR" flags then the reporting entity should file an STR to report it (for example, this becomes a trend i.e. number of transactions take place where the client changes etc.).

Date answered: 2009-06-24

PI Number: PI-4605

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Confirmation on guideline 6A

Question:

We would like to get a confirmation concerning some information in guideline 6A, Record Keeping and Client Identification for Life Insurance Companies, Brokers and Agents, under item 4.2, General exceptions to client identification (direct connection), in the first bullet in the section entitled Certain types of transactions, to wit:
“the purchase of a policy that is an exempt policy (ie a policy issued for insurance protection and not for significant investment purposes as defined in subsection 306(1) of the Income Tax Regulations).”
The guideline indicates what is meant by an exempt policy, “policy issued for insurance protection and not for significant investment purposes,” while the Regulations do not provide any details (Regulations paragraph 62(2)(a) – direct connection). We would like to confirm if this detail in the guideline is intended for temporary insurance policies with no investment component and critical illness insurance policies also with no investment component.

Answer:

The exemption found in subsection 62(2)(a) refers to an exempt policy as defined in subsection 306(1) of the Income Tax Regulations. This exempt policy is not covered under our legislation (and is a policy that has no savings component i.e. does not have an investment component). However, the definition of what and when a policy is exempted is found in subsection 306(1) of the tax regulations and not within our regulations (not Fintrac guidelines).

Date answered: 2009-06-08

PI Number: PI-4594

Activity Sector(s): Life insurance

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6A

Regulations: 62(2)(a)

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 occurs (from the initiator of the EFT to the MSB).

Date answered: 2009-05-29

PI Number: PI-4593

Activity Sector(s): Financial entities, Money services businesses

Obligation(s): Reporting, Ascertaining Identification

Guidance: 6C

Regulations: 63(1)

Client ID and record keeping obligations when a client is a bank

Question:

A real estate broker is asking about their client ID and record-keeping obligations in cases where his client is a bank.
If I interpret 62(m) correctly, in cases where the broker's client is corporation which meets the definition of 62(m), and I presume all of Canada's major banks meet said definition, then the broker need not keep a client info record for the bank. Now, since section 59.2 speaks of identifying in respect of records which must be kept, and section 62(2)(m) obviates the obligation to keep said records, than ipso facto, no record equals no client ID, for both the bank and the person representing the bank in said transaction.

Am I correct in my interpretation?

Answer:

The only exemption applicable in that case (i.e. real estate sector and client is a financial entity) is the one found at 62(m) - the banks are mostly publicly traded and have a minimum net assets of $75M therefore they can benefit from this client identification exemption.

However, this exemption does not apply to Credit Unions as they are to my knowledge not publicly traded. The person conducting the transaction must also be identified.

It should be noted that this is an incongruity, because most other sectors when the client is a financial entity benefit from the client identification and record keeping obligation exemptions. The real estate sector does not benefit from this exemption when their client is a financial entity; the only exemption that applies in their case is 62(m) via the publicly traded big corporation.

Date answered: 2009-05-26

PI Number: PI-4589

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6B

Regulations: 39(1), 59.2, 62(2), 62(2)(m)

Bank purchasing credit card business

Question:

A small Alberta bank that previously was not in the credit card business has purchased a credit card portfolio and needs some info on how to ID.

As for my questions that we discussed, I will try to be thorough on each one so they hopefully are clear. Again, each of these is coming out of the scenario where our bank purchased an existing non-regulated entity. All of the existing staff of that entity is now employed by the bank so we have consistency in that regard. Senior management of that entity has also remained and is part of the bank. The processes and products (including brands) are all remaining. The purpose of my questions comes from trying to both properly, and with the most efficiency, complete our requirements to I.D. all of the existing clients which came to the bank through the acquisition.

With regards to non face-to-face identification on Credit Card portfolio. We have existing credit checks in the credit files and also the practice is to do update beacon scores two times a year. Would it be acceptable to just utilize an Identification product on each file to fulfill the second part of the identification process without redoing all the credit checks? Of course we would need to build a process to explore and identify any clients for which the information no longer matched. Hopefully this will be a reduced number.

2. In Guideline 6G in outlines in section 4.2 that “you do not have to identify an individual as described in subsections 4.5 to 4.10, nor do the requirements described in subsection 7.1 for new accounts apply, if that individual already has an account with you”. While this would apply if you are already dealing with an individual with an existing account and they then opened up a new Credit Card – I am just wanting to clarify that the reverse is in fact NOT an option – i.e.: if you have an existing credit card account and they open a new loan account – you cannot rely on the existing client I.D. under the credit card due to the “special” situations (combining certain I.D options) that can be utilized just for credit cards.

3. With regards to credit card accounts that are in the name of a Ltd. company but where the reliance is on say the husband and wife,
father and son etc. (who own the company) who have signed the application as well as co-borrowers – can we rely solely on the
identification of just the individuals and not obtain the usual identification for the corporation (i.e.: proof of corporate existence, power to bind, beneficial ownership etc). This would be for situations where the individuals that own the company all sign the application due to the fact that the company has no financials or for some other credit reason. We are curious just from the perspective that if we can rely solely on the individuals then there are options under non face-to-face I.D. methods that are obviously not available for corporations.

Answer:

This is not a new account. The bank absorbs the credit card business, and although the methods of client identification may differ from a credit card business as opposed to the requirements applicable to bank accounts, we are still talking about existing credit card accounts whereas the non-face-to-face client id was done.

In the case of a merger or the acquisition of a business, the question that the RE must ask themselves really is the following: Is this a new account that is created? If not, then there is no requirement to redo the client identification.

On a "risk-based approach" note - the financial entity will have to risk assess their merged clients and part of this assessment may lead to the financial entity "rating" some of these clients as high risk, thus will have to monitor and keep up to date those accounts (including the identification information). Also, as a "best practice" the financial entity may want to review and update the credit card accounts information for all clients part of the merger.

In regards to question no. 2 - it is a loophole - but yes, you can rely on an existing credit card account information and client id to open another account. Again as a best practice the financial entity may want to update the information. If deemed high risk client then subsection 71.1 applies.

In regards to question no. 3 - no 14.1 (record keeping) and 54.1 (Ascertaining identity) apply, therefore if the client is a
corporation then you must ascertain the existence of the corporation, power to bind, directors, ownership etc. (i.e. all the other corporate requirements).

Date answered: 2009-05-26

PI Number: PI-4588

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 71.1, 54.1, 14.1

Electoral Account

Question:

1) It would be the FIs responsibility as the FI is opening the account. Is that correct?

2) If the account is opened in the name of the Financial Agent, no beneficial ownership determination, but only third party determination. Is that correct?

3) If account opened in the name of NPO such as an electoral organization, then must determine beneficial ownership, hence must make a determination if the NPO solicits donations. Is that correct?

Answer:

Firstly, I believe that the financial electoral agent cannot be a public body as it would be a conflict of interest... the financial agent cannot be "connected" to government in any way, therefore could not fall into the public body category.

Therefore there are no exemption applicable and the opening of the account would follow the normal legislative requirements (i.e. either individual opening the account, or opening of a corporate account).

Date answered: 2009-05-11

PI Number: PI-4434

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54, 62(2)(m)/(n)

Act: 1(2)

Opening and identification

Question:

When opening an estate, we go ahead with the identification. Must we identify again if the estate later decides to open a trust? Should we ask for the identity document again even when the same people are opening the trust?

Answer:

Since a new account is being opened, yes, you must identify the clients. However, if you recognize them, you do not have to verify their identity again. But if you have any doubts, you are obliged to verify the identity of the people again.

Date answered: 2009-05-11

PI Number: PI-4433

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 63(1), 63(1.1)

Obligation to verify the beneficiaries

Question:

1. Is it mandatory to verify or ascertain the identity of beneficiaries of over 25%?

2. If so, do beneficiaries include: specific legatees, universal legatees and residual legatees (succession + prolonged administration), as well as the institute and the substitute, usufructuaries and bare owners (usufruct) and beneficiaries (testamentary trust)?

3. In addition, is the 25% calculated on the basis of the total value of the estate (information unknown and difficult for us to obtain) or on the value of assets held by the Bank?

Answer:

Just one clarification to start with in the case of a trust, section 11.1 does not apply:

1. In the case of an estate, there is no obligation to identify the "beneficiaries" of the estate (ie, the legatees), since they have no control over the account. In principle, the trustee (if it is a trust) or the administrator/executor (succession) will be the persons authorized to give instructions with regard to the account.

2. No, the beneficiaries have no control over the account - they will receive the products of the estate once it is liquidated.

3. In the case of corporations, persons directly or indirectly control 25% of shares (in terms of voting rights). So situations involving shares with multiple voting rights must be taken into account. In the case of entities other than corporations, the question of who controls what must be asked (eg, $3M estate, of which $1M is held by the bank) - 3 liquidators, only two of whom have signing power for the bank account, and five beneficiaries:

1. Ben. A - right in 10% of funds held by the bank;
2. Ben. B - right in 50% of the entire estate except the bank assets (25%X (3-1) = 750K = 25% in all);
3. Ben. C - holding foundation - right in 50% of the estate, except the bankassets
4. Ben. D - right in 25% of funds held by the bank;
5. Ben. E - foundation to be created, entitled to 65% of funds held by the bank;
6. Ben. F - Right to residue of the estate (specific legatee)
If entire estate

-the two liquidators with authority over the account;
-Beneficiaries B, C and F*, if on the basis of the bank only.
-the two liquidators with authority over the account;
-Beneficiaries D, E and F*

* F: Beneficiary F (residuary legatee) must always be determined, since in the event of the refusal of some beneficiaries, he could end up with indirect control of the estate.

Date answered: 2009-05-11

PI Number: PI-4432

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 11.1

Identification Exception

Question:

When we identify a person, is it valid for life?

Answer:

When you have confirmed a person's identity, you are not obligated to verify his or her identity again if you recognize him or her during a subsequent activity that would normally require identity verification. However, if you have any doubts about the identity information already collected, you must verify the person's identity again.

Date answered: 2009-05-11

PI Number: PI-4431

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 63(1), 63(1.1)

Identification card

Question:

When an identification card expires, must we identify the person again?

Answer:

No. According to our legislation, there is no obligation to identify clients again when their identification cards expire. However, under the legislative provisions regarding the compliance regime, if a client is believed to be high-risk, section 71.1 requires that you take reasonable measures at least every two years to keep client identity information up to date.

Date answered: 2009-05-11

PI Number: PI-4430

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 71.1(a)

Identification - a liquidator

Question:

We are a reporting entity separate from the bank. However, could we benefit from an exemption from identification given our philosophy ("one client, one bank")? For example, a deceased person had an account at ABC Financial and the liquidator who opens an estate account at ABC Financial is a client of the bank. The liquidator has already been identified by the bank. Could we benefit from an exemption since ABC Financial is a subsidiary of the bank?

Answer:

There is no exception currently in effect. The only other possibility is for ABC Financial to sign an agency agreement (section 64.1 of the Regulations) in which the bank will act as an agent of ABC Financial.

Date answered: 2009-05-11

PI Number: PI-4429

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64(1)

Exemptions for Client ID: Section 32 and Financial Entities as clients

Question:

If the company is a public body or large corporation, would the exemption in 59(6) apply only to confirming the existence of the entity, or also to the other record keeping obligation in section 32?

Specifically, would a public body or large corporation still need to provide the MSB with the "name, address, date of birth and occupation of every person who has signed the agreement on behalf of the entity...and a list containing the name, address and date of birth of every employee authorized to order transactions under the agreement" ?

Answer:

No the exemption found in 59(6) applies only to confirming the existence of the entity and not to the record keeping obligation under section 32. Therefore, the MSB will have to keep a record of the name, address, DOB and occupation of every person who signed the agreement, a client information record with respect to the entity and a list containing name, address, DOB of every employee authorized to order transactions under the agreement.

In other words for a public body or large corporation you keep a CIR, list of employees (section 32) but you do not need to ascertain the existence of the entity (59(6)).

Date answered: 2009-05-11

PI Number: PI-4428

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 62(2)(m), 32

Brokerage firm and identification

Question:

We are a brokerage firm. If the bank has already identified the client, are we exempt from verification (eg an existing bank client becomes involved in an estate as a liquidator who gives instructions).

Answer:

No. You must identify the clients. The brokerage firm is a reporting entity separate from the bank.

Date answered: 2009-05-11

PI Number: PI-4427

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64(1)

Accounts Opened by POA

Question:

Determining the identification requirements for the following scenario:

Securities Dealer opened a non-registered account in the name of Person A (Beneficial Owner). However, the authorization to open the account and all instructions executed on the account were given by Person B (who holds a POA granted by Person A).

Under Fintrac Guidelines, it is clear that Person B must be identified by the Securities Dealer.

Can you clarify if the Securities Dealer is required to identify Person A if Person A never places instructions on the account themselves?

Answer:

The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations require the dealer to ascertain the identity of any person(s) authorized to give instructions in respect of the account. It comes down to a question of fact concerning the account holder. For example, if the account holder is infirm or has been declared mentally incompetent, they would be unable to give instructions and therefore the identity obligations would only apply to the person holding POA. However, if the account holder simply wishes to have someone else not named on the account give instructions, then both parties would have to be identified.

Date answered: 2009-05-08

PI Number: PI-4424

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 57(1)

Securities - Discretionary account

Question:

When a client gives a portfolio manager (ST) a discretionary management mandate (carte blanche), must the person who signs (gives) the mandate be identified under section 57(1)?

The client claims that he did not identify the person because he is (is becoming) "the person authorized to give instructions for an account".

Answer:

Even if a management mandate is given to a portfolio manager, the client is the person who has the account and who assigns the mandate, so the client must be identified. Ultimately, in this case, the client holding the account is still the person "responsible" for the account and can, at any time, decide to give instructions regarding the account directly (without going through the portfolio manager).

Date answered: 2009-05-08

PI Number: PI-4423

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 57(1)

Canadian Passport as valid client ID

Question:

If an RE uses a Canadian passport to ascertain is place of issue the city in which the passport was issued or simply stating Canadian passport sufficient?

Answer:

Place of issue of a passport is the country that issued the passport. So Canada is sufficient.

Date answered: 2009-05-07

PI Number: PI-4582

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Selling to band councils and exemptions to receipt of funds obligations

Question:

If the individual from the Band Council is not seen face-to-face, then the entity must appoint someone (we call this person an agent or mandatary) to do the identification on its behalf. This agent/mandatary will be in the same location as the client so that they will see original identification, document and send it to the entity for its record. Also note, there must be a written agreement between the entity and the agent.

As for the corporation, being the Band Council, they must also be identified / confirmed.

Also note, that once the entity has done the ID and confirmed the corporation once, and the entity deals with them again, the entity does not have to go through the ID process again.

Answer:

In the scenario, the RED will identify the individual that is conducting the transaction on behalf of the band council (face to face or if non face to face either with two of the prescribed methods, or by appointing an agent to identify on your behalf), and you then ascertain the existence of the band council.

As for the receipt of funds record - we would just like to indicate that the RED keeps a receipt of funds record, with the information prescribed and would identify the individual providing the funds and ascertain the existence of the band council (because it is not a public body, nor an agent of the Crown and does not benefit from any exemption).

Date answered: 2009-05-04

PI Number: PI-4577

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B (3.1)

Regulations: 39.7

Act or Reg references for client ID requirements

Question:

A lawyer who is asking where it refers in the PCMLTFA or its associated Regulations regarding a specific ID requirement of a real estate developer. Specifically, they want to know where is states (besides in the guidelines) that a real estate developer must ID only the individual who is acting on behalf of a corporation and not all signing officers, i.e. a corporation has several signing officers and it states in section 4.7 in GL6 that you confirm the names only (not verify identity) but in section 3.4 (para 3) it states that when it is an entity you have to identify the individual conducting the transaction in addition to obtaining the necessary corp. docs. They are saying it doesn't use the specific word corporation (only entity). They want to know exactly where it states in the PCMLTFA or its associated Regulations to do the above.

Answer:

Under subsection 59.5(a) it is a legislative requirement for the RED to identify every person who conducts the transaction as in the person (or persons if more than one) who is before the RED buying the new house or building i.e. signing the contract - if that person is acting on behalf of a corporation, the RED must also confirm the existence of the corporation (subsection 59.5 (b).

There is no need to identify the signing officers - however, when the RED identifies the person or persons conducting the transaction that are acting on behalf of a corporation, the RED must also under subsection 39.7(1)(c) keep a copy of the provision to bind - such as for example a resolution authorizing the person conducting the transaction to bind the corporation with this contract.

When confirming the existence of a corporation under subsection 65 you ascertain the existence of the corporation (by referring to its certificate of corporate status) - i.e. you confirm it exists, you confirm its name and its address. You must also confirm the name of its directors (but there is no need to identify them).

In a nutshell, the subsections that the lawyer is looking for are the following:

59.5(a) ID the person; and then
if acting on behalf of a corporation:
- 59.5(b) ascertain existence of corporation (and the information required), and
- 39.7(1)(c) power to bind.

If we are talking about an entity (other than a corporation) - you ID the person 59.5(a) and you confirm the existence of the entity 59.5(c) that refers to subsection 66 on how to ascertain the existence of an entity.

Date answered: 2009-04-30

PI Number: PI-4576

Activity Sector(s): Accountants, Financial entities, British Columbia notaries, Casinos, Dealers in precious metals and stones, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 59.5(a), 59.5(b), 39.7(1)(c), 65,

Ascertaining ID with First Nations Corporation

Question:

In regards to the documents required when ascertaining the ID of a non-corporate entity such as a native band when purchasing land or real estate. Since there is no exemption stated specifically for native bands I was wondering if there was some specific wording that we can use when providing assistance in regards to what documentation would be sufficient for the ROF and KYC requirements.

Answer:

The Indian Act comprises a section applicable to the elections of chiefs and band councils. There are also regulations that may apply in regards to the election process of the councils, such as "Indian Bands Council Method of Election Regulations" that specify the methods of election.

There is also a list of tribal councils available on the Indian and Northern Affairs Canada website - the tribal councils and its members are listed by provinces if they have received funding by INAC.

In other words, there is a process in place for band councils election and their existence - probably the easiest way to ascertain of their existence would be for the reporting entity to consult the INAC website and ensure that the council is listed, or the reporting entity may also request a document from the band member attesting to his election as a member to that council (which would ascertain the existence of the said council), or any other document in circulation in relation to the creation or the election of members on the tribal council.

Here are the excerpts from the Indian Act (re: principle sections applicable to the elections of chiefs and band councils):

Elected councils
74. (1) Whenever he deems it advisable for the good government of a band, the Minister may declare by order that after a day to be named therein the council of the band, consisting of a chief and councillors, shall be selected by elections to be held in accordance with this Act.

Composition of council
(2) Unless otherwise ordered by the Minister, the council of a band in respect of which an order has been made under subsection (1) shall consist of one chief, and one councillor for every one hundred members of the band, but the number of councillors shall not be less than two nor more than twelve and no band shall have more than one chief.
Regulations

(3) The Governor in Council may, for the purposes of giving effect to subsection (1), make orders or regulations to provide
(a) that the chief of a band shall be elected by
(i) a majority of the votes of the electors of the band, or
(ii) a majority of the votes of the elected councillors of the band from among themselves, but the chief so elected shall remain a councillor; and

(b) that the councillors of a band shall be elected by
(i) a majority of the votes of the electors of the band, or
(ii) a majority of the votes of the electors of the band in the electoral section in which the candidate resides and that he proposes to represent on the council of the band.

Electoral sections
(4) A reserve shall for voting purposes consist of one electoral section, except that where the majority of the electors of a band who were present and voted at a referendum or a special meeting held and called for the purpose in accordance with the regulations have decided that the reserve should for voting purposes be divided into electoral sections and the Minister so recommends, the Governor in Council may make orders or regulations to provide for the division of the reserve for voting purposes into not more than six electoral sections containing as nearly as may be an equal number of Indians eligible to vote and to provide for the manner in which electoral sections so established are to be distinguished or identified.
R.S., c. I-6, s. 74.

Eligibility
75. (1) No person other than an elector who resides in an electoral section may be nominated for the office of councillor to represent that section on the council of the band.

Nomination
(2) No person may be a candidate for election as chief or councillor of a band unless his nomination is moved and seconded by persons who are themselves eligible to be nominated.
R.S., c. I-6, s. 75.

Regulations governing elections
76. (1) The Governor in Council may make orders and regulations with respect to band elections and, without restricting the generality of the foregoing, may make regulations with respect to

(a) meetings to nominate candidates;
(b) the appointment and duties of electoral officers;
(c) the manner in which voting is to be carried out;
(d) election appeals; and
(e) the definition of residence for the purpose of determining the eligibility of voters.

Secrecy of voting
(2) The regulations made under paragraph (1)(c) shall provide for secrecy of voting.
R.S., c. I-6, s. 76.

Eligibility of voters for chief
77. (1) A member of a band who has attained the age of eighteen years and is ordinarily resident on the reserve is qualified to vote for a person nominated to be chief of the band and, where the reserve for voting purposes consists of one section, to vote for persons nominated as councillors.

Councillor
(2) A member of a band who is of the full age of eighteen years and is ordinarily resident in a section that has been established for voting purposes is qualified to vote for a person nominated to be councillor to represent that section.
R.S., 1985, c. I-5, s. 77; R.S., 1985, c. 32 (1st Supp.), s. 14.

Tenure of office
78. (1) Subject to this section, the chief and councillors of a band hold office for two years.

Vacancy
(2) The office of chief or councillor of a band becomes vacant when
(a) the person who holds that office
(i) is convicted of an indictable offence,
(ii) dies or resigns his office, or
(iii) is or becomes ineligible to hold office by virtue of this Act; or

(b) the Minister declares that in his opinion the person who holds that office
(i) is unfit to continue in office by reason of his having been convicted of an offence,
(ii) has been absent from three consecutive meetings of the council without being authorized to do so, or
(iii) was guilty, in connection with an election, of corrupt practice, accepting a bribe, dishonesty or malfeasance.

Disqualification
(3) The Minister may declare a person who ceases to hold office by virtue of subparagraph (2)(b)(iii) to be ineligible to be a candidate for chief or councillor of a band for a period not exceeding six years.

Special election
(4) Where the office of chief or councillor of a band becomes vacant more than three months before the date when another election would ordinarily be held, a special election may be held in accordance with this Act to fill the vacancy.
R.S., c. I-6, s. 78.

Governor in Council may set aside election
79. The Governor in Council may set aside the election of a chief or councillor of a band on the report of the Minister that he is satisfied that
(a) there was corrupt practice in connection with the election;
(b) there was a contravention of this Act that might have affected the result of the election; or
(c) a person nominated to be a candidate in the election was ineligible to be a candidate.

R.S., c. I-6, s. 79.

Regulations respecting band and council meetings

80. The Governor in Council may make regulations with respect to band meetings and council meetings and, without restricting the generality of the foregoing, may make regulations with respect to
(a) presiding officers at such meetings;
(b) notice of such meetings;
(c) the duties of any representative of the Minister at such meetings; and
(d) the number of persons required at such meetings to constitute a quorum.

R.S., c. I-6, s. 80.

Date answered: 2009-04-29

PI Number: PI-4421

Obligation(s): Ascertaining Identification

Guidance: 6

Third party (account openings) and other account related questions

Question:

A daughter has a power of attorney or a court order for her father
- the daughter opens an account at a CP in the name of the father
- the daughter signs the signature card and is identified

1. Whose information should be gathered for 14(c). Daughter or father?
2. The father did not sign the signature card. If, at one point, the father would want to carry out transactions, would the RE be in non compliance if a signature card was not signed?

Answer:

1. The Daughter's information as it is the daughter that opens the account, and signs the signature card. However, if the father wants to carry out transactions in that account, then the father would also have to be identified and sign a signature card. If he doesn't then he will not be able to carry out transactions in the account, only the daughter.
2. In order for the father to carry out transactions in the account, he would need to sign a signature card, and be identified. The RE would only be in non compliance if it permitted the father to carry out transactions in the account although the father did not sign a signature card, and was not identified.

Date answered: 2009-04-27

PI Number: PI-4418

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 9(1), 14(c), 14(a)

Inquiry about the use of SIN cards

Question:

The use of my Social Insurance Number is between myself as a citizen of Canada and my government. There is no requirement in law, for me to produce my Social Insurance Number to anyone else except where I am personally involved in a financial transaction. I have the right to refuse to provide my Social Insurance Number and not be denied service.

My company, an Insurance Agency, is licensed by the Financial Services Commission of Ontario (FSCO) to conduct insurance business. In any insurance transaction in which I am involved, it is as a representative of the Insurance Agency.

My government has told me that my corporation does not have a Social Insurance Number and that since it is the corporation conducting the business, I am not required to provide to any third party including the Major Life Insurance Companies with whom my company is contracted, my personal Social Insurance Number.

The Life Insurance Companies in Canada are now claiming that FINTRAC has changed the rules of my government and that FINTRAC requires that I provide them (The insurance companies with whom my company is contracted), with my personal Social Insurance Number, even though it is my company that is conducting the business and it is my company that will receive the appropriate compensation and tax assessment documentation, not me as an individual.

My question: is FINTRAC instructing that Life Insurance Companies in Canada are required to demand a Social Insurance Number where the business they are dealing with is a corporate entity?

Answer:

The answer to your question is "no", neither FINTRAC nor the PCMLTFA requires that any person or entity demand a Social Insurance Number from any individual in any circumstances.

The PCMLTFA does allow those that are subject to the Act to accept Social Insurance Cards as a means of identification, if the individual that must be identified chooses to provide that card as proof of identification rather than providing his or her driver's licence, passport or similar document as a means of identification. However, in no case is any Social Insurance Number to be provided to FINTRAC.

Date answered: 2009-04-23

PI Number: PI-4415

Activity Sector(s): Life insurance

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64

Services agreement and LCTR reporting

Question:

We are having some difficulties reporting the following transaction scenario. It involves an entity with which we have an ongoing Service agreement who does transactions on behalf of another entity.

Example:

Entity A, does transactions on behalf of Entity B.

With regards to third party transactions my understanding is as follows:

Before June 2008:

Individual is always treated as the primary client and the entity was always treated as a third party.

After 2008:

Entity is primary client as long as a service agreement is in place.

It does not appear that the reporting portal has been updated to accommodate these changes making it very difficult to report. I am hoping you can clarify for us.

Answer:

The MSB would still need to identify the indivdiual bringing the large cash amount, regardless of whether or not an ongoing service agreement exists. The MSB would be covered for LCTRs regardless of the ongoing service agreement.

Date answered: 2009-04-17

PI Number: PI-4410

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Obligation to verify signers information before conducting a transaction

Question:

If we are opening an account for corporation or other entity, if there are several signors, can we conduct transactions before verifying all signors?

For example, if there are multiple signors and it will take time to meet all of them based on geographic location etc., would we be able to conduct transactions based on instructions from those individuals who have been verified or do we need to wait until all (maximum of 3) have been verified in order to proceed with conducting transactions?

Answer:

The regulations are quite clear in obtaining three signatures for signing officers to open an account.

If only one or two signature(s) are obtained, you can accept the initial deposit however you cannot do any other transactions.

You must have complete information to transact in the account.

Date answered: 2009-04-16

PI Number: PI-4569

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 54(a)

Client identify for non-face-to-face account opening

Question:

We plan to start offering on-line membership applications using a combination of cleared cheque and credit bureau to meet identification requirements. Would you please provide clarification regarding the following clause in Guideline 6G:

"To identify an individual using this option, you have to use a combination of two of the following methods. In each of the two methods you use, the individual's information has to be consistent with what you have in your records. The information also has to be consistent from one method to the other. For example, if each of the methods you use has the name, address and date of birth information about the individual, all of it has to agree with what you have in your records."

Question: It is quite possible that the address showing on the credit file will not necessarily match the address given on the application (eg. if they moved within the last year or two.). What due diligence is required to ensure that we comply with the above clause in such cases?

If the client provides the RE with both the current and former address is this sufficient.

Answer:

The credit file method allows verification of "consistent information". If a person has recently moved then their address may not be the same (exact). However the RE would then be able to confirm other information within the credit file to ensure it is consistent with that particular person.

Therefore in answering your question: there doesn't have to be an exact address match but there must be some information in their credit file that can be used to determine consistency, that the person you are dealing with is the same person.

Date answered: 2009-04-16

PI Number: PI-4568

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Ascertaining ID

Question:

XYZ Ltd. has signed a contract with ABC to have their sales representatives conduct onsite transactions; so XYZ Ltd. is representing ABC. On the sales contract, the seller is always ABC. In this case, the sales rep is responsible to ascertain the identity of the seller and to make reasonable efforts to ID the buyer if the buyer is not represented.

If during an examination, we discover that XYZ Ltd. has never ascertained the identity of the seller (ABC) and that during the exam sample period, 25 transactions have been completed, do we cite 1 instance of failure to ascertain ID or 25 instances?

Answer:

The deficiency is not identifying their client. Had they identified ABC once they would not have had to do it again for the next 25 times. However since they did not do it in the first place they have 25 instances of non compliance even though it is the same seller.

This is an easy fix for the RE, get ABC identified.

Date answered: 2009-04-16

PI Number: PI-4567

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 65(2)(e)

Exemptions to client ID

Question:

This question is about the exemption from the client ID requirements in the regulations for the large corporation (minimum net assets of $75 million on its last audited balance sheet).

The regulations exempt such corporations where their shares are traded on a Canadian stock exchange or on a stock exchange outside Canada that is designated by the Minister of Finance and where they operate in a country that is a member of the Financial Action Task Force (FATF). It is the word "operate" that I would like to have clarified. Does this mean that the corporation has to operate solely in an FATF country, or can it operate in both FATF and non-FATF countries? For example, if a corporation is headquartered in a non-FATF country, but carries on business globally and has offices in a number of countries, including FATF countries (and satisfies the stock exchange requirement), does this meet the requirements of the exemption?

Also could you please advise on the interpretation of paragraph 62(2)(m) according to the question below?

Answer:

The exemption provided for in paragraph 62(2)(m) would apply to corporations that operate in an FATF country, whether or not they also operate in non-FATF countries. I base this opinion on the following reasoning:
paragraph 62(2)(m) does not refer to corporations that "only" operate in FATF countries (if the exemption was meant to be restricted to corps. that operate only in FATF countries, the text would have to be written in an explicit fashion);
if the corp. operates in at least one FATF country, it means that a RE in that FAFT country that deals with the corp. would have done an ML and TF risk assessment with respect to that corp., taking into account its world-wide operations, thereby offering some comfort in respect of the corp's non-FATF operations;
if the corp. operates in at least one FATF country, it means that the corp (even if it is not a RE) has that aspect of its operations that are subject to an AML-ATF regime that is comparable to Canada's regime.
I would add that: I think that the country where the corp. has its headquarters is not a useful criteria, since a corp. can have its HQ in a country and have little or no business activity in that country. Also, you may wish to run this question through the Policy Interpretation Working Group, since the above is the view of Legal Services, but other sectors of FINTRAC may want to ignore this view and take a different interpretation for policy reasons.

Date answered: 2009-03-27

PI Number: PI-4559

Activity Sector(s): Accountants, Financial entities, British Columbia notaries, Casinos, Dealers in precious metals and stones, Life insurance, Money services businesses, Securities dealers, Real estate

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 62(2)(m)

Exemptions for Client ID: Section 32 and Financial Entities as clients

Question:

Credit Union is currently negotiating a contract with ABC to supply us with a program to sell foreign currency drafts for our members.

ABC has asked for the date of birth of our executives who will be signing the contract with them on behalf of the CU as well as the birth date of each of our employees that will be accessing the ABC program to sell foreign drafts.

In the past we have had several contracts with businesses that have supplied us with foreign currency drafts and we have never provided them with this information.

Can you please verify if ABC needs to obtain this personal information from us or if we can hold the information ourselves and supply it if requested for audit or compliance requirements.

Answer:

There is no exemption applicable in regards to the service agreement MSB / Credit Union. The financial entity exemption is in the case of LCTRs, not client information record.

The two exceptions in 59(6) are only for public body or large corporation (or subsidiaries) - and the CU does not qualify as either. Big banks would be considered as a large corporation most likely, however, not the CU as they are not publicly traded.

Therefore, if the CU and the MSB get into a service agreement, all the related obligations/requirements would apply. However, it should be noted that if the service agreement is verbal (i.e. there are no signatories) then the obligation of name/address/DOB/occupation of each of the signatories would not apply.

Date answered: 2009-03-25

PI Number: PI-4555

Activity Sector(s): Financial entities, Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C, 6G

Regulations: 32, 59(6)

Clarification on acceptable information for address of a client

Question:

A client from a small town in Canada provides their Drivers Licence, which has a PO Box on it, to the RE when cashing in chips or tickets for values $10,000 or greater or buy-ins of $10,000 or greater
The RE accepts the government-issued picture identification (Driver's Licence) and records the address as listed on the ID (i.e., PO Box 1234"

Should we be citing the RE for failing to obtain the required information for address (i.e. civic address); even though the provincial jurisdiction, in which the RE operates in may accept PO Box as acceptable form of address information for a Driver's Licence?

Answer:

We have indicated in the past to reporting entities that a P.O. Box does not constitute a "valid" address (i.e. we are looking for a civic address and not a postal box that would not represent where the person lives).

Therefore, yes the RE is off side if they do not record a "civic" address and record keeps only a P.O. Box.

So the RE when they identify the client and use the driver's licence as the identification document will have to go the extra mile and request a civic address or rural address (and not just use the P.O. Box indicated on the driver's licence as the address of the client).

Date answered: 2009-03-13

PI Number: PI-4543

Activity Sector(s): Casinos

Obligation(s): Ascertaining Identification

Guidance: 6F

Regulations: 60(a), 60(b), 64(1)

Real Estate Policy Interpretation

Question:

If a client gives a deposit cheque, but the RED does not deposit the cheque during the rescission period, is it still considered a transaction and hence a receipt of funds record? The RED is arguing that taking a cheque and not depositing it is not a transaction, hence do not need to Identify a client.

client information record is the only time when the purchase and sale is complete. So in this case, only need to identify when all the conditions on the offer to purchase is met.

Answer:

When you receive funds, then a receipt of funds record needs to be kept. In other words, when the developer receives the cheque, then he needs to keep a receipt of funds record including ascertaining ID. Whether it is deposited or not is irrelevant to this obligation

Date answered: 2009-03-06

PI Number: PI-4536

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 39.7(1), 59.5

Immigrant Investor Program

Question:

I have some concerns with respect to their process for IIP clients and am wondering if it is compliant with the requirements under section 23 of the Regulations. Here is a brief summary:

1. John Smith, a citizen and resident of Morocco, wants to immigrate to Canada and chooses to do so through the Quebec IIP.

2. Mr. Smith is referred to XYZ Capital, an authorized financial intermediary under the program.

3. A XYZ investment advisor meets with Mr. Smith in Morocco and has him sign an Investment Agreement and Power of Attorney. The Investment Agreement is one of the required documents for participation in the IIP.

4. Mr. Smith then goes through the application process to immigrate to Quebec. If he is approved, he must then open an account with XYZ to facilitate the $400,000 investment required under the terms of the IIP.

Here's where it gets tricky:

5. Once Mr. Smith has been approved, the XYZ investment advisor then completes an XYZ account application on behalf of the client and also signs on behalf of the client in all the required areas. At no point in our records review did we find an account application that had been completed by the client.

Is this permitted? Does the fact that the client completed an Investment Agreement and Power of Attorney meet the requirements under s.23, or should the client also be completing the account application form?

Answer:

A signature card is a fairly large concept and is defined in our Regs as "any record that is signed by a person who is authorized to give instructions in respect of the account". However, there needs to be a nexus between the signature and the fact that the signee is the person authorized to give instructions. The power of attorney also needs to clearly spell out that the dealer is authorized to open an account on behalf of his client. Documents also need to record the intended use of the account.

Date answered: 2009-02-26

PI Number: PI-4533

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 1(2), 23

Consulates as valid ID

Question:

Can you assist in determining whether or not a consulate ID is a government accepted ID?

Answer:

Since the consulate ID is not specifically mentioned as acceptable identification in our literature/regs, there are various criteria to use to see if it is acceptable.

For a document to be acceptable for identification purposes it must have a unique identifier number and also be issued by a provincial, territorial or federal government.

The document must also be valid therefore not expired. It must be an original and not a copy of a document.

A valid foreign identification document may also be acceptable if it would be equivalent to an acceptable Cdn identification document. I.e. a foreign passport

Personally I have never seen a consulate ID don't know if it has these items.

Please let us know if so then I would say acceptable identification, if not no

Date answered: 2009-02-26

PI Number: PI-4532

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)(a)

Appendix B - Client Identification Record Checklist: Corporations and other "Entities"

Question:

Our question relates to "Client Information required at time of transaction:" of Appendix B.

Under the name of representative that you would fill in, there is a check box for "Information about the representative and ID has been collected." Our specific question is for the representative ID, do you then have to complete a Client Identification Record Checklist: Individuals (Appendix A) for the representative or simply obtain the ID?

Answer:

Your question relates to forms that have not been created by FINTRAC and therefore we cannot comment on them. One of our representatives has contacted you and understood that your question was related to real estate developers and their obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. More specifically, whether in the case of the purchase of real estate by an entity (corporation, association, etc), should the identity of the individual conducting the transaction be verified in addition to confirming the existence of the entity for which the individual in question is conducting the transaction. The answer is yes. Real estate transactions conducted by corporations or other entities are subject to several requirements including: confirming the existence of the entity, ascertaining the identity of every person conducting the transaction (representative of the corporation) and keeping related records. These requirements are explained in details in Guideline 6B for real estate and summarized in industry specific information sheets on FINTRAC's website.

Date answered: 2009-02-23

PI Number: PI-4528

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

RED

Question:

Scenario
- Developer has a licenced real estate sales rep on site doing agreements
- Buyer comes in and does the deal giving all ID etc to realtor
- THEN buyer wants to get some upgrades to the home and deals DIRECTLY with the developer to pay for these upgrades

Question
- Is the developer required to ID and do receipt of funds records on the upgrades?

Answer:

Yes any funds that are received by the real estate developer in relation to the purchase of a new home are subject to the obligation of keeping a receipt of funds record.

Date answered: 2009-02-16

PI Number: PI-4527

Activity Sector(s): Real estate

Obligation(s): Record Keeping, Ascertaining Identification

Guidance: 6B

Regulations: 39.7(1)(a)

Registered Disability Savings Plans: Exemption to client ID

Question:

We believe the Registered Disability Savings Program (RDSP) falls under the exceptions set out in section 62(2)(i):

62(2) Sections 14, 14.1, 19, 20.1 and 23, subsection 33.2(1), section 33.4, subsections 36(1), 39(1) and 39.7(1), sections 43, 49, 54, 54.1, 54.2, 55, 56, 56.1, 57, 57.1 and 59.1, subsection 59.2(1) and sections 59.3, 59.4, 59.5, 60 and 61 do not apply in respect of
...

(i) the opening of a registered plan account, including a locked-in retirement plan account, a registered retirement savings plan account and a group registered retirement savings plan account; [emphasis added]

RDSPs are grouped by the Canada Revenue Agency under the same plans as RRSPs and RESPs.

Given the above, and what appears to be the intention of the legislators to provide an exception for registered plans/accounts, in our view the phrase "registered plan account" set out in section 62(2)(i) is sufficiently broad to capture RDSPs.

Could FINTRAC please confirm our understanding?

Answer:

You are right! So it is part of the exemption under 62(2).

Date answered: 2009-02-16

PI Number: PI-4526

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 62(2)

Deposit Verification Method

Question:

From the Guideline:
You can use the following methods.

Confirm that a cheque drawn on a deposit account that the individual has with a financial entity has cleared. This means a cheque that was written by the individual, cashed by the payee and cleared through the individual's account. It does not include pre-authorized payments as these are not cheques written by the individual.
Confirm that the individual has a deposit account with a financial entity.

During the time the new regulations were being discussed Finance, OSFI, FINTRAC and the Canadian Bankers Association had several meetings and consultations to discuss the requirements. One area that was not discussed to any great degree and, in my mind, was not really flushed out in the consultations was the provision allowing an FI to confirm that the individual has a deposit account with a financial entity as highlighted below. I have reviewed the regulations and I believe it lacks detail on this point.

Are there certain criteria or expectations an FI must meet to satisfy this requirement? In my mind there are many ways to meet this requirement. Obviously some are more onerous and intrusive than others. I ask this because I am aware of one institution that is relying on receiving a payment via EFT where the FI is a Payee under Bill Payments and the money pushed to the FI provides details of the Payor and confirms the deposit account exists with that entity.

Is this sufficient to meet this requirement? If not, what would be the expectation of FINTRAC to satisfy this requirement? Is there a standard process to satisfy this method? Are you aware of any FIs that use this method currently? If so, how are they discharging this obligation? Will you consider alternatives?

Answer:

As in the securities case I think they have expanded the methods to include bill payments and I believe that our position remains that the only methods available to REs are the ones prescribed in the regs.

The only concession we have done is that we have indicated that an original bank statement is also acceptable.

The problem we have with all the other "alternatives" proposed by the reporting entities is that they are not safe nor secure, as law enforcement have indicated to us in the past, scanned documents and photocopies of document can all be altered very easily.

Date answered: 2009-02-13

PI Number: PI-4519

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)(b), Schedule 7

Acceptability of photocopy ID.

Question:

Can you please get back to me re: accepting a photocopy/scan of a bank statement. My personal view is that a bank statement (copy or otherwise) in conjunction with the bill payment and the other required method (i.e., attestation, credit file, etc.) would be more than acceptable for the purposes of client identification.

Answer:

We believe that our regulations do not allow a photocopy or scan of a bank statement (even if it is combined with bill payment and another method). The regulations are written is such a way that when a photocopy is permitted, the applicable subsection indicates it. Furthermore, modifying a photocopy/scan is extremely easy.

Date answered: 2009-02-13

PI Number: PI-4518

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64(1), Schedule 7

Exception subsection 62(3) - wide or narrow interpretation

Question:

Is there a wide or narrow interpretation of the term group plan account? Do we only have to demonstrate the existence of the association? Which document would be sufficient?

Answer:

FINTRAC does have a "wide" policy interpretation in regards to what constitutes a group plan account, however, in order to determine if it is that, we would need to know what is the account for, as the title is not sufficient information to permit it to be qualified as a group plan account.

Date answered: 2009-02-06

PI Number: PI-4514

Activity Sector(s): Life insurance, Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 62(3)

Validity of an identification document

Question:

I have a client who is blind and lives in Ontario and who wants to open an account with us in our division. The portfolio manager who verified the client's identity at a meeting with her gave us a photocopy of the Canadian National Institute for the Blind card, since the health insurance card cannot be used in Ontario and, obviously, the client does not have a driver's licence.

I looked on the Web site of the CNIB and found that the card can be used as an identification document. It has a unique identification number and includes a photo of the individual, her birth date and the expiry date (validity). I would be comfortable accepting a card like this, but I simply want to make sure that FINTRAC shares my opinion. I feel that this card meets FINTRAC's criteria, as described in your guidelines. See the link to the CNIB Web site, below.

Answer:

No unfortunately the identity card emitted by this organization is not a valid government issued document. It is a card issued by a non-for-profit organization that has a charitable status. We suggest that since the client obviously does not have a driver's licence, that they request her birth certificate.

I also noted that the CNIB website may be a bit misleading - the website indicates that their identity card can be used to open a bank account - it may be used, however, if the bank accepts it, the bank will be offside with our legislative requirements.

Date answered: 2009-01-29

PI Number: PI-4509

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

14(l) vs 54(1)(b)(i) - Regulatory Change Suggested

Question:

There seems to be a lack of symmetry in the Regulations, for which we need a position.

14(l) applies to the "redemption" of Money Orders for $3000 or more. So, the reporting entity need not record keep for the redemption of any other type of product

Yet, 54(1)(b)(i) states that the reporting entity must ID a client for the issuance and "redemption" of MO, TCs, and similar negotiable instruments of $3000 or more. ID applies to the redemption of all these products yet Record keeping only applies to MO for the redemption

1- Do we enforce ID for the redemption of all the product types mentioned?

Answer:

There is a lack of symmetry between the record keeping obligation found in subsection 14(l) that only covers the redemption of money orders and the obligation to identify of subsection 54(1)(b)(i) that on the other hand applies to the redemption of money orders, but also of traveller's cheque, and similar negotiable instruments.

Having said this, in response to your question - yes identification applies to all the product types mentioned in subsection 54(1)(b)(i) i.e money orders, traveller's cheques and other similar negotiable instruments.

The problem lies that in the absence of a corresponding record keeping obligation in regards to the redemption of traveller's cheques and other similar instruments (such as the one found in subsection 14(l) applicable to the redemption of MO) it will be more difficult for regional officers to ensure the compliance with 54(1)(b)(i) in that case.

Date answered: 2009-01-22

PI Number: PI-4497

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 14(l), 54(1)(b)(i)

Trust Company client ID obligations

Question:

What is FINTRAC's decision on the review of the Trust Co obligation to obtain the settlor's DOB, nature of business and occupation?

Answer:

Concerning the application to Trust Companies of the requirement to obtain the exclusion of Trust Companies from the entities exempt from the requirement to obtain and retain records of the settlor’s date of birth, nature of principal business / occupation in respect of registered plans (s 62(2)(i)).We would like to confirm that the Trust Companies do not benefit from the exemption found in subsection 62(2)(i) in this particular case.

Date answered: 2009-01-21

PI Number: PI-4496

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 62(2)(i)

Acceptable forms of ID

Question:

Can you give me a list of Identity product companies acceptable to FINTRAC?

Can you provide the criteria or an application that an Identity product company must provide to FINTRAC to be an acceptable Identity Product company?

Answer:

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and related regulations provide various methods of identification that can be used for the purpose of ascertaining identity under the PCMLTFA. Methods that can be used in non-face-to-face situations are set out in Schedule 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and are as well explained in Guideline 6.

Date answered: 2009-01-21

PI Number: PI-4495

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: Schedule 7

OSFI Question re assuming mortgages

Question:

When a RE purchases a book of mortgage business from a non-RE, would our interpretation be that the acquiring RE is "opening a new account" and as such would be responsible for meeting the ascertaining ID and recordkeeping obligations.

For example,a Corporation (an RE under the PCMLTFA) purchased a book of mortgages from a non-RE for which they did not met the PCMLTFA obligations with respect to ascertaining ID and recordkeeping, does the acquiring RE have to now ascertain the appropriate ID and keep a record?

Answer:

It would be a question of fact in determining if we are talking about new accounts or not.

First, if the corporation renegotiates, modifies or registers a new mortgage, then yes definitely we are talking about the opening of new accounts (with all the required obligations under our Act and regulations).

However, if there are no changes in the mortgage per se and we are talking of a "behind the scene" change of creditor, and the debtor may not even be aware of that change, then it would most probably not be considered as the opening of new accounts (again the facts are crucial in determining that).

Date answered: 2009-01-08

PI Number: PI-4485

Activity Sector(s): Financial entities, Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6B, 6G

Regulations: 64

Applicability of PCMLTFA on US Broker-Dealers

Question:

I have read the FINTRAC officer’s response dated December 9, 2008 and I am not certain I fully understand the rationale for his decision and believe there may be some misunderstanding as to the role of the Canadian parent company which I would like to attempt to clarify. Specifically, in his correspondence FINTRAC's officer states, and I quote:

“The Act and Regulations require that Canadian dealers keep records in respect of every account it opens and that it ascertain the identity of every person authorized to give instructions in respect of that account. However, the Act and Regulations do not provide any exemption from those obligations in accounts opened by foreign citizens or residents, even if those citizens or residents are also customers of a U.S. dealer and even if the U.S. dealer is affiliated with the Canadian dealer.”

I completely agree with the FINTRAC's interpretation of the applicability of the Act and Regulations on those accounts opened by a Canadian dealer on its books and records. There appears to be some suggestion in the FINTRAC officer’s response however, that the Canadian dealer is opening accounts for foreign citizens or residents on its books and records.

Our US registered broker dealer is considered to be self clearing in the United States as all customer accounts are carried on the books and records of the US broker dealer, not on the books and records of the Canadian parent. All accounts are opened by registrants of the US broker dealer, using account documentation that only reflects the name of the US broker dealer, in an account range that is solely dedicated to customer accounts of the US broker dealer. There is no co-mingling of assets, information or client records between the two entities.

At no time does the Canadian parent open an account for these customers on its books and records; rather it simply provides certain services to the US broker dealer such as the execution of trades and the settlement those trades with Canadian custodians. There is no interaction, communication or facilitation of business between customers resident in the US and the Canadian parent.

In reviewing the FINTRAC officer’s response, it occurred to me that perhaps the best way to provide the greatest degree of separation between the two entities for the purposes of AML legislation and to remove any confusion would be for our firm to open an omnibus account for the US broker dealer so that we can clearly demonstrate that all orders to execute and settle trades are coming directly from the US broker dealer which has an exemption available to it.

It would be most appreciated if you could consider this information in this email and advise if this solution would meet with the provisions of the Act and Regulations and in keeping of the spirit and intent of both.

Answer:

As long as the U.S. broker-dealer is the only one able to give instructions in regards to the account opened with the Canadian Securities dealer, and that the U.S. individuals/clients cannot go directly to the Canadian securities dealer, than yes what they propose would be acceptable. However, again the U.S. broker-dealer would have to be identified by the Canadian Securities dealer!

Date answered: 2008-12-23

PI Number: PI-4477

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 57(1), 64(1)

Estate accounts

Question:

Regarding estate accounts and securities dealers. Do the requirements under s. 11.1 of the regulations (beneficial ownership) apply in the following scenarios:

1. John Smith has an existing account with the dealer and dies. The account is renamed "Estate of John Smith" and the estate process begins.

2. The dealer receives a transfer-in of an entirely new account under the name "Estate of Jane Doe".

The dealer I spoke with had some concerns because he believes an estate is nothing more than a testamentary trust.
Would you think the dealer is obligated to identify any persons authorized to give instructions in respect of the account, but I'm not sure about the beneficial ownership requirements.

Answer:

The account renamed "Estate of John Smith" is a new account and the persons authorized to give instructions would need to be identified (usually it would be the executor).
Because we are talking about persons, then there is no beneficial ownership requirement.

As for a testamentary trust, there will be a trustee (or trustees) named in the will of the testator (i.e. the deceased) that will be handling the trust after the death of the testator. Usually the trustee or trustees named are individuals. Therefore, again there would be no beneficial ownership requirement.

You may want to clarify though with the dealer if for the testamentary trust, if he has encountered an entity being named as the trustee.

Date answered: 2008-12-19

PI Number: PI-4475

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B, 6E

Regulations: 11

Cleared cheque or deposit account method question

Question:

We have noticed that fewer and fewer people these days are using paper cheques so I want to clarify the FINTRAC identity requirement when using the Cleared cheque or deposit account method.

FINTRAC’s website states that “You can use either of the following methods, but you cannot combine them:”

Confirm that a cheque drawn on a deposit account that the individual has with a financial entity has cleared. This means a cheque that was written by the individual, cashed by the payee and cleared through the individual's account. It does not include pre-authorized payments as these are not cheques written by the individual.
Confirm that the individual has a deposit account with a financial entity.

In the case of the second bullet point, what methods are acceptable to FINTRAC for confirming that the individual has a deposit account with a financial entity aside from a cleared cheque?

Also, while the first bullet point sates that “It does not include pre-authorized payments as these are not cheques written by the individual”, does this refer to situations where the individual has signed a pre-authorized debit form and his or her bank has verified the signature and allowed the debit to proceed?

Answer:

Debit and/or pre-authorized form were not an acceptable way to confirm that the client has a deposit account with a financial entity.

Date answered: 2008-12-19

PI Number: PI-4474

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 64(1)

Bill Payment as acceptable identification

Question:

We cited the RE for failing to properly ID their clients in non-face-to-face situations because they were using electronic bill payments instead of cleared cheques. The RE is arguing that he is in compliance because it satisfies the confirmation that the person holds an account in the person's name with a financial entity.

I'm pretty sure that in the past we have said this is not acceptable, but can you please review and confirm.

Answer:

I have reproduced the deposit account method, as found in Schedule 7:

Confirmation of Deposit Account Method
5. This method of ascertaining a person’s identity consists of confirming that the person has a deposit account with a financial entity, other than an account referred to in section 62 of these Regulations.

We have indicated in the past that the regulations are silent under subsection 67(c) on how you must confirm that information (i.e. how to confirm that they hold a deposit account, the name of the FE and the account number).

It may be more difficult in this day in age with all the privacy concerns to confirm the information by calling the financial entity. Alternatives to this, as we have indicated as being acceptable, are: confirm the information by requesting a letter either from the financial entity to the Securities Dealers or the FE to the client with that information. Or again, to use an original bank statement addressed to the client that contains all that information (including the account number).

However, you cannot consider that the deposit account is verified upon consultation of a bill payment record. Unfortunately, the fact that the client has paid a bill, does not confirm that he holds a deposit account with a financial entity (as he may have paid cash the bill or from an account that is not a deposit account) - furthermore I believe the bill payment record does not capture the account number.

Again, the purpose of this exercise is to be able to compare if the individual's information is consistent with what they have in their records, plus is consistent from one method to the other.

Date answered: 2008-12-01

PI Number: PI-4461

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: Schedule 7, 67(c), 62

Subsection 67(c)

Question:

A lawyer is asking for an "advance ruling" from FINTRAC regarding paragraph 67(c) of the PCMLTFR.

When an MSB confirms a customer's identity using the account verification technique, does the financial entity that holds the account need to confirm the account number? Or, is it sufficient for the MSB to confirm the customer holds an account with the financial entity and receive the account number from the client?

Answer:

The easiest way to obtain all that information at once, is of course with a cleared cheque.

Having said this however, the regulations are silent under subsection 67(c) on how you must confirm that information (i.e. how to confirm that they hold a deposit account, the name of the FE and the account number).

It may be more difficult in this day in age with all the privacy concerns to confirm the information by calling the financial entity.

Alternatives to this, could be to confirm the information by requesting a letter either from the financial entity to the MSB or the FE to the client with that information. Or again, to use an original bank statement addressed to the client that contains all that information.

Date answered: 2008-11-28

PI Number: PI-4459

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 67(c)

Tax Free Savings Accounts

Question:

Relative to the new Tax Free Savings Accounts. Are these accounts exempt from the question of “intended use of account” similar to Registered products? Since people are going to be depositing to take advantage of the tax free feature, it would seem to me that it would be similar in that way to the registered products.

Answer:

The TFSA (or new Tax Free Savings Account) falls within the exception found in subsection 62(2)(i) as a registered plan account/savings plan.

Date answered: 2008-11-25

PI Number: PI-4456

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 62(2)(i)

Re-issuing of credit cards as new accounts

Question:

A provincially regulated financial institution is buying the credit card business from a federally regulated bank in Alberta. There is no government issued ID on file for these cards, almost all of which were issued prior to June 23, 2008. They are already in the credit card business but are not taking any of the employees of the previous credit card issuer. They will be issuing new cards and new numbers to the credit card holders. Are these considered new accounts and do they need to be ID.

Answer:

Yes these should be considered as new accounts, therefore, the credit card holders will need to be identified,

The reason being that ATB is not absorbing the credit card business (like a merger, when both businesses merge, with all employees etc.), but rather simply buying the credit card business, and furthermore, ATB has indicated that they would be issuing new cards (with new numbers).. so more reasons to see it as all new accounts being created in regards to the credit card issuance.

Date answered: 2008-11-25

PI Number: PI-4455

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)

Nursing Licence from Ontario as a prescribed ID?

Question:

Is a Nursing Licence from Ontario a prescribed piece of ID?

Answer:

On the website of The College of Nurses of Ontario (CNO)- it is the governing body for the 145,000 registered nurses (RNs) and registered practical nurses (RPNs) in Ontario. It works in partnership with the government. It operates under the Regulated Health Professions Act, 1991, and the Nursing Act, 1991, and ensures that all nurses practising in Ontario have met the basic requirements for safe nursing practice.

However, in the annual report, although the College’s Council is composed of 14 RNs and seven RPNs who are elected by their peers, as well as 18 public members who are appointed by the lieutenant-governor, it does not indicate anywhere that it reports or falls under the provincial government.

Consequently, the RNs must register with the College (and a number of questions/type of information must be provided), however since I can't find anything that determines that the College is part of government or a corporation reporting to government, the identification document that is emitted by the College, would not be deemed a government issued identification document.

Date answered: 2008-11-25

PI Number: PI-4454

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)(a)

Request- client identity - using married name but ID in Maiden name

Question:

What is your response to this situation by a credit union – the member is widowed (going by her married name) but all her ID is in her maiden name. She wants to open an account, which she can do but how should the credit union proceed with identifying the individual before any transactions other than the initial deposit takes place?
also a brief summary:

- the client want to open up a very first account with the CU
- the client married last year in NS and has a marriage certificate that shows her married name (her new legal name I assume) Note: I know that this is not a valid piece of ID for the PCMLTFA
- the client, however, does not have any other prescribes ID document under her married name.
- all the client's ID is under her maiden name

Please advise on how to proceed?

Answer:

If all her identification documents are under her maiden name, I wouldn't stop to consider her marriage certificate (i.e. married name - which may or may not be the same person). If she has a valid driver's licence or other government I.D document under her maiden name, then these are the documents that should be utilized. A marriage certificate is not a valid government issue identification document.

Date answered: 2008-11-24

PI Number: PI-4453

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)

INTERAC Payment in lieu of a cleared cheque

Question:

I received a call from a service provided who deals in providing KYC information to securities brokerages. His question was in relation to the 5 non face to face methods and more specifically it dealt with the use of an interac money transfer in lieu of a cleared cheque. They do understand that they are required to have either a credit bureau or credit file report IN ADDITION to another non face to face method, they were looking at an online method to receive the equivalent of a cleared cheque.

Answer:

Unfortunately, no Interac does not qualify as one of the 5 non face to face methods of identification. More specifically Interac is not the equivalent of a cleared cheque, although Interac may indicate that there was a transfer of money, it does not go towards identifying the client.

Date answered: 2008-11-24

PI Number: PI-4452

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 64(1)(b), Schedule 7

Trust deed - 57(1)

Question:

1: Does this mean that, regardless of the other conditions of the trust deed, in this case the requirement of two out of three signatories to carry out an action (see made in cash below), the Regulations require that the identity of all trustees be verified?

2: If there were five trustees, would paragraph 62(1)(a) apply?

Answer:

Our legislation requires the identification of all persons authorized to act concerning the account (up to three, paragraph 62(1)(a), regardless of the conditions in the trust deed.

1: Consequently, if the conditions of a trust were broader than the obligations set out in our legislation, it is incumbent on the trustees to ensure that their obligations are in line with the trust deed in order to make all their actions binding on third parties with whom they transact. In other words, we must fulfill the obligations under our legislation (and not those of the trust deed).

2: I should have stated that under paragraph 62(1)(a), if the dealer opens a corporate account and has already identified at least three people who are authorized to give instructions concerning the account, but has not identified all the other people authorized to give instructions (ie subsection 57(1) does not apply), then the dealer would only have to identify three of the five trustees (the signatories on the account who are authorized to give instructions), under paragraph 62(1)(a).

Date answered: 2008-11-19

PI Number: PI-4405

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 57(1), 62(1)(a)

Act: 6.1

Trust deed - 57(1)

Question:

A securities dealer has asked the following question:

- The account was opened in the name of the family trust.
- The trustees are not beneficiaries.
- The trust deed stipulates that two signatories are required to carry out any action in the trust’s name.
- Two of the three signatories were identified.

Q: Is the dealer obligated to identify the three beneficiaries or is identifying two of the three signatories sufficient?

Answer:

No. The dealer does not have to identify the beneficiaries of the family trust, but he or she must identify the trustees. In accordance with subsection 57(1), the dealer must identify all people authorized to give instructions concerning the account. In a trust, the trustees are the administrators of the trust, carry out actions for the trust and, therefore, give instructions with regard to the opening of an account with a securities dealer.

Consequently, in this situation, since there are three trustees who are authorized to give instructions, all three must be identified.

Date answered: 2008-11-19

PI Number: PI-4404

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 57(1)

"The opening of account" in relation to the operational situation - paragraph 65(2)(d)

Question:

Day 1: Account belonging to a corporation.
The person authorized to trade on behalf of the corporation (hereinafter referred to as the Client) meets with the securities dealer.

Day 7: The Client meets the representative again.
The broker identifies the Client, but one document is still missing.
The Client signs and dates the account initiation form (day 7).
The Client makes an initial deposit.

Day 10: The company “opens” the account and assigns it an account number, but imposes a restriction on all transactions.

Day 40: The company completes the verification of corporate existence.

Day 45: The Client provides his or her passport. The Client makes a transaction.

A) Does the period described in 65(2)(d) begin on Day 7 (date the account initiation form was signed, which is tangible proof in an investigation situation) or on Day 10 when the company “opened the account” in its systems?

B) In other words, when does FINTRAC consider that the “opening of the account,” in accordance with 65(2)(d), has taken place?

Answer:

The account is opened at the time of the initial deposit. So it would be on Day 7.

Date answered: 2008-11-18

PI Number: PI-4402

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(2)(a), 65(2)(d)

Act: 6.1

RE in Quebec using Ontario Health Card.

Question:

We know that Health Cards cannot be used for ID for PEI, ONT, MN. Can a RE in QC use the Ontario (or PEI or Manitoba Health card?

Answer:

Finally, subsection 64(1)(a) states that the provincial health insurance card can be used only if allowed by the applicable provincial legislation. Ontario's provincial legislation indicates that the information on the Ontario health insurance card can be used only with health service providers. Thus, by extension, an entity in Quebec cannot use the Ontario health insurance card.

The same argument applies in the case of health insurance cards from PEI or Manitoba!

Date answered: 2008-11-12

PI Number: PI-4396

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)(a)

Place of issue definition

Question:

Could you please confirm that the "place of issue" for client ID is the "government" that issued the ID and not the "city" where the document was obtained.

For example: BC for a BC Driver's license or Canada for a Canadian passport. Therefore, if an Australian passport was issued in the Australian consular office in Vancouver, the "place of issue" is Australia, not Vancouver.

Some of the REs suggested that our guideline on this issue is very ambiguous; therefore, some clarification on our website will need to be provided.

Answer:

The place of issue is not the "city" where the document was obtained, but the "jurisdiction" that emitted/issued the document.

As per your example, the place/jurisdiction of issuance would be Australia (as it is an Australian issued passport)

Date answered: 2008-11-05

PI Number: PI-4395

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64(1)(a), 67(a)

Existence of a Corporation under ongoing service agreement

Question:

It seems that the compliance officer is under the impression that you ascertain the existence of a corporation only when there is an ongoing service agreement in place? For all other client information record, the MSB only IDs the individual, and does a third party determination (corporation) - however does not ascertain the existence of the corporation nor the beneficial ownership ?

Answer:

Yes, under 59(2) you confirm the existence of the corporation when you are required to keep a client information record and under section 32, you are required to keep a client information record when you enter into an ongoing service agreement.

Therefore, if the MSB does not enter into an ongoing service agreement with the entity, you are right, the MSB only has to identify the individual, with a third party determination.

Date answered: 2008-10-30

PI Number: PI-4392

Activity Sector(s): Money services businesses

Obligation(s): Beneficial Ownership, Ascertaining Identification, Record Keeping

Guidance: 6C

Regulations: 11.1, 32, 59(2), 65

Practical application of exemptions – beneficial owners

Question:

When a section is cited, like in subsection 62(2), are all the subsections also included? For example, when section 57 is mentioned, does this also mean subsections 57(1), 57(2) and 57(3) are part of the exemption?

Answer:

Yes. If section 57 is cited, it means the entire section (paragraphs one to four inclusively, five having been revoked). While, if only subsection 57(1) is cited, then it refers only to subsection (1) of section 57. Therefore, if exempt under 62(2), there is no need to meet the obligations set out in 11.1.

Date answered: 2008-10-29

PI Number: PI-4386

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 57

Identification Products

Question:

As one of the methods available in a non-face-to-face identification process, what are you considering to be "an identification product"?

Answer:

By identification product, we mean a product that is offered by independent businesses, in which they provide a series of specific questions to be asked to the client based on information drawn from that individual’s Canadian credit history (can only be used if they have at least 6 months of credit history). The key here is that the questions asked are so precise that only the person concerned can answer them. You must always use this method in combination with another method, listed in Schedule 7 of the PCMLTFR.

You must also record information about the methods used. Section 67 of the PCMLTFR sets out the specific information that must be kept in relation to each method.

Date answered: 2008-10-27

PI Number: PI-4383

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64, 67, Schedule 7

Attestation Method of ID through fax or email

Question:

We’ve been using the attestation method as one of the ways of identifying an individual who is not present. Can the attestation be sent to us via fax or email?

Answer:

Under section 67(g), the PCMLTFR refers to the attestation - which means the original. In other words, the reporting entity will have to receive the original attestation (with the original signature of the guarantor or commissioner of oaths). Once the reporting entity has seen the original signature, then it can scan the document (and discard the attestation), and all the legislative requirements will be fulfilled.

The rationale behind this, is that a photocopy, or a fax, can easily be falsified (law enforcement have indicated that numerous times) - so our regulations indicate that the original attestation (i.e. with the original signature) is required.

Date answered: 2008-10-21

PI Number: PI-4382

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 67(g)

Acceptable non-face-to-face ID

Question:

The client is out of town but mailed to the reporting entity an original of his government-issued birth certificate.

Is this acceptable? The PCMLTFR states that in face to face situations you may identify a client by referring to the original of a government issued ID document. Is it also acceptable to use this method in a situation where a client is not present and forwards the original document to an RE via mail or courrier as in the case mentioned above?

Or in cases involving non face to face transactions, are reporting entities limited to using strictly non face to face methods to ID clients?

Answer:

My answer was no this is not an acceptable method of non-face-to-face identification of the client as per our regulations.

Date answered: 2008-10-21

PI Number: PI-4381

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 64(1)(b), Schedule 7-Part A

When to ascertain the existence of a corporation

Question:

For MSBs, when does the requirement to confirm the existence of the corporation kick in ----- only if the company conducts a transaction over $1K (for the EFTs, or $3K for the fx), or does the amount matter?

Answer:

If issuance or redemption of money orders, traveller's cheques etc.. of $ 3000 or more. If remittance or transmission of $ 1000 or more, FX transaction of $ 3000 or more.. - then confirm the existence of a corporation plus record keep the power to bind. Unless the MSB has entered into a service agreement with the entity, or if the existence of that corporation has already been ascertained.

Date answered: 2008-10-14

PI Number: PI-4379

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 59

Question regarding identification of an individual

Question:

I have an individual who is a member of Caisse 1 and has a debit card for this caisse, obtained when he opened his account (and his identity was verified at that time). He arrives at Caisse 2, which is a member of the same [reporting entity] as Caisse 1. He is not a member of Caisse 2, but he presents his debit card and asks to make a foreign currency exchange transaction of over $3,000. Caisse 2 has access to the information concerning the client contained in the computer systems of the caisse network (info 18). Caisse 2 can ask the member to confirm the information contained in the system. Would FINTRAC consider this an acceptable way to identify the individual, or would the Caisse have to ask for an identification document, such as a driver's licence?

Answer:

the regulations would not permit this as a mean of identifying the person, because the person does not have an account with Caisse # 2 - therefore, Caisse # 2 would have to identify the person (identification document such as the driver's licence).

Date answered: 2008-10-10

PI Number: PI-4378

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Identifying a church

Question:

Do you ID a church?

Answer:

Yes you ID the person conducting transaction and ascertain existence of church (if corp.)

Date answered: 2008-10-08

PI Number: PI-4374

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 65

Identification obligation

Question:

A senior has an account with the CU, has an agreement with the CU, that his monthly payment for his senior's residence accommodation will be automatically taken from his account, that a "certified cheque/more like a bank draft" will be issued from the CU Manager's trust account to the senior's residence.

Assuming that the payments are $ 3000/month - in light of 54(1)(b) - would you need to ID the manager? Because he issues a similar negotiable instrument in an amount of $ 3000 and has not been authorized to act with respect of the account, and then you can recognize - however why it is bugging me is that the money is really coming from the senior's account? or would 14(k) apply? you record keep the client/senior information, because the CU received the amount, then the CU then issues a similar negotiable instrument to pay the bill, and that is it.

The twist is also that when the senior opened his account, it was opened before the ID requirement, so he was not ID when he opened the account.

Answer:

You wouldn't have to ID either the person holding the account at the CU nor the manager of the trust account. You also do not have to keep a record of that transaction.

Firstly 14(k) does not apply, because the CU is not receiving money in consideration of the issuance of traveller's cheques, money orders, or similar negotiable instrument. The transfer of money from the senior's account to the CU's trust account resembles a pre-authorized payment to cover his monthly residence rent. And there are no legislative requirements in that case to identify the senior.

As for the "certified cheque" emitted by the CU's trust account to the senior's residence, there are no legislative requirements to identify the manager of the trust account - and 54(1)(b) does not apply, because the manager is emitting a CU cheque from the CU's own "account", not the senior's account.

In regards to the fact that the senior has never been identified (since his account was opened at the CU prior to our identification requirements coming into force) - we have already indicated in prior policy interpretations that there are no legislative requirements to identify a person that has opened an account (prior to our legislation and/or legislative requirements. The reason being that legislative requirements do not apply retroactively).

However, should a client/account be deemed high risk, then under section 71.1(a) reasonable measures would have to be taken to keep the client identification information up to date.

Date answered: 2008-09-29

PI Number: PI-4364

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 71.1(a), 54(1)(b), 14(k)

Retirement compensation arrangement

Question:

A retirement compensation arrangement is a plan under the Income Tax Act, but it's not a registered retirement plan. Paragraph 62(2)(k) of the PCMLTFR is not applicable. Would another provision apply to these arrangements, such as 62(2)(i)?

Answer:

No, paragraph 62(2)(i) does not apply to retirement arrangements. Also, no other exemption provision apply to this. Although the retirement arrangements certainly have a fiscal impact, it's not a registered retirement plan.

Date answered: 2008-09-25

PI Number: PI-4360

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 62(2)(i)

Act: 6.1

Obligation to confirming the existence of an entity before cashing of a cheque

Question:

A lady who is in the art business and who is involved with a group of artists who have formed for the specific purpose of creating a unique work. This is funded through the ABC Art of Toronto. What happens is, they are paid out by the ABC Art of Toronto on the sale of their unique art work. The check would be made out to the particular ad-hoc group which would be a group name that the ABC Art would have given them. When this lady went to cash the cheque at the bank the bank would not let her cash her check until their confirmed the existence of this corporation or non-entity. In this case it would be considered a non-entity although the section in our guidelines mention that "In the case of an entity other than a corporation, refer to a partnership agreement, articles of association or any other similar record that confirms the entity's existence". The lady told me that no similar record exists. What should she do?

Answer:

I re-read the regs - our regs do not require that when cashing a cheque the bank confirm the existence of the entity (to which the cheque is made).

However, if the individual has no account, or if the entity doesn't have an account, then probably the Bank is asking to open an account on behalf of this entity (and then confirm the existence of it before any transaction take place other than the initial deposit), or the Bank has its own procedures that if a cheque is made to an entity and an individual cashes it (although the individual has an account already opened) then the Bank has to confirm the existence of the entity (for its own protection as well).

Here is the definition of partnerships:
"Ad hoc group" refers to a group of artists formed for the specific purpose of creating a unique work.

artists' collective or group:
Two or more people contributing to a common creative goal. (Some Canada Council sections require that a collective have a minimum of three members.) The collective or group need not have an established administrative structure or maintain a site, but it must be represented by one member who takes administrative and artistic responsibility for a proposed project. The collective or group must demonstrate accountability to the artists engaged in its activities, and it must be able to receive a grant payable to its name. A group usually forms for a specific project; a collective may undertake a series of projects or activities.

Partnership: A partnership is an agreement in which two or more persons combine their resources in a business. In order to establish the terms of the business and to protect partners/shareholders in the event of disagreement or dissolution of the business, a partnership/shareholders agreement should be drawn up with the assistance of a lawyer. Partners share in the profits according to the terms of their agreement.
General Partnership
All members share the management of the business and each is personally liable for all the debts and obligations of the business. This means that each partner is responsible for and must assume the consequences of the actions of the other partner(s).

Limited Partnership
Some members are general partners who control and manage the business and may be entitled to a greater share of the profits, while other partners are limited and contribute only capital. Limited partners take no part in control or management and are liable for debts to a specified extent only. A legal document, outlining specific requirements, must be drawn up for a limited partnership.

Either way, I think this artist should draft up (or have a lawyer draft up) a partnership agreement and then she will be able to cash that cheque

Date answered: 2008-09-25

PI Number: PI-4359

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

TFSA - Question

Question:

Will FINTRAC be putting out any guidance on whether the new Tax Free Savings Account (“TFSA”) will be exempt from the client identification requirements similar to registered retirement savings plan and registered education savings plans?

Answer:

In order to be exempted under 62(2)(i), the plan has to be a registered plan (usually described or announced as such), with fiscal implications under our income tax legislation.

For example, we have indicated that the new Tax Free Savings Account (TFSA) announced in the 2008 Budget was a plan that was exempted under 62(2)(i), as it is a registered plan with fiscal implications

Date answered: 2008-09-24

PI Number: PI-4356

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 62(2)(i)

Credit Cards- ID Product can serve as a 2 in 1?

Question:

In recent discussions with the Equifax representative in Montreal, they told us that the Equifax identification product is equivalent to the combination of two methods (2 in 1) for the credit card since the verification covers both the confirmation data from the customer's credit bureau as well as its data appearing in Canada 411.

Can you please confirm if, in fact, FINTRAC deems that the ID product can serve as both the ID product (Schedule 7 Part B, Identification Product #1) "AND" the Independent Data Source Method (Schedule 7, Part B, #3)?

Answer:

Yes we concur that it can serve as both the ID product and the Independent data source Method.

Date answered: 2008-09-19

PI Number: PI-4352

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: Schedule 7-Part B- section 1, Schedule 7- Part B- section 3

RBA question

Question:

Scenario - Client opens CU account in 1990, was identified, no record keeping requirement at that time. New CU policy to identify all clients - Client refuses to be identified..

Does the client have to be identified?

Answer:

I do not believe that there is a requirement to identify the client, and that if the client refuses to be identified (please note that he is not involved in a LCT or any other transaction that would require a client identification), well it is not a requirement by our legislation so really there is nothing we can say about this refusal!

However, should he be deemed high risk - then there is the obligation to keep the client information up to day (however, not to identify him, just to keep the client info accurate ).

Date answered: 2008-09-08

PI Number: PI-4335

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 53, 53.1, 54, 54.2, 55, 64

Act: 9.6

Blanket mandatary for an entity with 4 legal entities

Question:

Entity has four legal entities - can we set up a 'blanket' mandatary agreement between each of the legal entities and then any licensed employee could ascertain identification for another of our employees in a different legal entity?

Answer:

We have indicated in the past that yes you can set up a "blanket" mandatary agreement between legal entities - (corporation with another corporation), indicating that the corporation will ID on your behalf (or for you). However, since the identification will be done by a person, all employees of the corporation would be covered by this agreement (and you may want to indicate that all employees are covered, and how it will be done!).

Date answered: 2008-09-08

PI Number: PI-4334

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 64.1

Account opened for a person under 12 year old

Question:

If account was opened for a child under 12 years old - parent is identified at the time.

Child is now 15 years old - does he need to be identified? Are we considering it as a new account? Even though he may have signed the signature card when he was under 12?

Answer:

Teen does not need to be identified unless a trigger to reascertain identity occurs. I do not believe it ever becomes a new account.

Date answered: 2008-09-08

PI Number: PI-4333

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 54(2), 64(1)

FINTRAC guidance for Bill payment in Canada

Question:

What are the client identification requirements, if any, based on the fact that we are planning on using the Bill Payment system in Canada again, as we are currently using debit cards, and Pre-authorized Debit transactions since we switched from our biller in 2007.

Our intent is to start accept payments from consumers who wish to use the Bill Payment services from the various banks here in Canada. These payments would be accepted to our Payment Service Provider as per their arrangement with their banks. On pre-determined schedule basis, these payments would be bulked up and settled to our Canadian bank account. Once we receive the funds then we would settle these funds to our merchants.

The question we have is, as the initial payments are done by the consumer through their bank account to the PSP, would they be subject to the client identification requirements as outline in the regulations? From our understanding of reading section 3.7 of Guideline 6C, it would seem that it is not. This is further clarified by definition of what constitutes an EFT under the regulation from the amendments to section 19, subsection (2) of SOR/2007-122 as to the definition of an EFT, quote --
"other than the transfer of funds within Canada". This is also further defined in the same document under the title,
"Consultation" on page 1287, which states, "the record keeping requirements applicable to financial entities for funds transfers of $1,000 or more have been limited to international electronic funds transfers". And again, in the same document, on page 1289 under section 1, subsection one, the definition of EFT as follows, "other than the transfer of funds within Canada".

In addition, like Pre-Authorized Debit, under the CPA H1 rule, Bill Payment has similar rules and regulations under the CPA H6 rule which we intent to follow.

This is not to be confused with the other side of our business which we report for international funds transfers for our merchants.
Meaning, today we report international electronic funds transfers of $10,000 or more. This is not in question, and we agree based on our interpretation, that this will not change, and we will continue to report.

Answer:

If it is strictly bill payments in Canada - there would be no obligation.

However at the end of the e-mail, there seems to be another side to his business - is he enrolled as a MSB for that (it would seem so because he alludes to reporting requirements).

We are wondering if there are two separate businesses, or just one entity that operates on one hand a MSB and also a bill payment business. It would really be a question of fact to see how this business is set up and how intertwined they are. We have determined in the past in certain cases that one side of the house could be operating a MSB with all the reporting requirements, and on the other side operate another type of business not at all related to a MSB (and that part would not fall within the MSB requirements). But again, we would need to have some additional details on that other side of his business before we can take a position.

Date answered: 2008-09-05

PI Number: PI-4329

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 6C

Regulations: 1(2), 28, 29, 30, 31, 32, 59

Act: 5(h)

Valid documentation for declaration of less than $75M in assets

Question:

The guidelines indicate that if a corporation has $75M in assets that the agent is not required to validate the corporation's identity. The question was if the client signs an affidavit stating that there assets are greater than $75M is this sufficient documentation?

Answer:

The company must also be traded on a recognized stock exchange, as noted in the guidelines. Consequently, the information on assets should be publicly available.

Date answered: 2008-08-28

PI Number: PI-4327

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 62(2)(m)

Letter of intent as a trigger for validation obligations

Question:

If there is a letter of intent which may trigger an offer to purchase does this trigger the validation process as a letter of intent is not binding.

Answer:

No, a letter of intent would not trigger the existence of a corporation obligation.

Date answered: 2008-08-28

PI Number: PI-4326

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 37, 59.2

ID Obligations where the Buyer is a real estate agent

Question:

In a situation where we are representing the seller and the buyer who is a real estate agent, should we still validate the buyer or are they considered to be represented by an agent?

Answer:

This depends. Are they handling the transaction through their brokerage as an agent, or independently? If it's the latter, then the buyer is an unrepresented party.

Date answered: 2008-08-28

PI Number: PI-4325

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2(3), 59.2(4)

ID Obligations for publically traded corporations

Question:

If we are representing a public corporation that is publicly traded, we do not need to validate the identity of the corporation but we still need to validate the identity of the individual that we are dealing with. Please confirm

Answer:

"Public body" in the context of these regulations means a government entity. Publicly-traded corporations are only exempt if they have a minimum $75 million in assets, as noted above and are publicly traded on a Cdn stock exchange .

In both cases, there is no legislative requirements to identify either the person conducting the transaction, or the large corporation.

Neither the existence of the corporation nor the identity of the individual you are transacting with must be ascertained if the transaction is with a public body or a publicly-traded corporation with a minimum $75 million in assets.

Date answered: 2008-08-28

PI Number: PI-4324

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 62(2)(m)(n)

ID Obligations for lease-turned disposition cases

Question:

A 30 year lease is deemed to be a disposition, do we need to validate their identity?

Answer:

No.

Date answered: 2008-08-28

PI Number: PI-4323

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 37, 59.2(1)

ID obligation in sale of share cases

Question:

When there is a sale of shares of a company that has real estate assets do we need to validate their identity?

Answer:

I presume that there is a liquidation of all assets of the company? if so, in regards to the real estate properties being sold.. yes the real estate broker will have to identify who is conducting the transaction, the corporation, and a 3rd party determination (if another entity is involved in the liquidation of the assets).

Date answered: 2008-08-28

PI Number: PI-4322

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 37, 59.2(1)

ID obligation in cases of lease transactions

Question:

If there is a lease transaction that has an option to purchase the building afterwards do we need to validate their identity?

Answer:

Only when/if the building is actually purchased, not at the time of the lease.

Date answered: 2008-08-28

PI Number: PI-4321

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 37, 59.2(1)

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 - i.e. 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 identification and the 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 a large corporation 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, the real estate has to 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

PI Number: PI-4316

Activity Sector(s): Financial entities, Real estate

Obligation(s): Record Keeping, Ascertaining Identification, Reporting

Guidance: 6B

Regulations: 62(2)(m), 39(1)(a), 39(1)(b)

Obligations when buying a book of business

Question:

A regulated entity (in Alberta - bank, securities and insurance) is looking to buy a book of business (they won't say exactly but I am assuming they are credit files) from a non-regulated entity (therefore non- acceptable ID on file). If the purchase goes through, are these considered new accounts and do they have to ID and PEFP these customers before putting them on the books? Or can they wait and ID them as they get to each file during their risk based review?

Answer:

These should be considered as new accounts - especially in light of the fact that the non-regulated entity may have not properly identified as per our requirements. Plus the reporting entity has basically bought a list of clients and accounts (I assume), and it's not the merging of two companies.

Date answered: 2008-08-20

PI Number: PI-4315

Activity Sector(s): Financial entities, Life insurance, Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6A, 6G, 6E

Regulations: 64(1), 54(a), 54(d), 54(e), 54(2), 54.1, 54.2(a), 54.2(b), 56, 56.1, 57, 57.1

Liquidating Trades

Question:

I asked if liquidating trades were allowed for accounts that had not had AML verification complete for the purpose of covering margin calls or short positions. My understanding was that for new accounts opened after June 23, 2008, no trades are allowed other than initial deposit and/or transfer in of securities. You clarified that this was correct and that FINTRAC and the Act/Regulations do not distinguish between client and dealer initiated transactions.

Answer:

The regulations state that client identity must be ascertained before any transaction other than the initial deposit.

Date answered: 2008-08-20

PI Number: PI-4314

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 57(1), 62(2)(a)

Act: 9.2

Attestation Method

Question:

I asked if the attestation could be on a separate page attached to photocopy of ID. You indicated that this would be acceptable if the attestation page makes specific reference to the document used and the number of the document i.e. Passport Number.

Answer:

"The attestation must be produced on a legible photocopy of the document"; so no that wouldn't be sufficient.

Date answered: 2008-08-20

PI Number: PI-4313

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: Schedule 7- Part A- section 3

Realtors obligation to ID the person in regards to the Agreement of Purchase and Sale has been assigned to

Question:

The Purchasers (my clients) have completed all the corporation forms and I have their I.D. as well as articles of incorporation etc. However, in the Agreement of Purchase and Sale they had an assignment clause in the offer. Now the deal is closing on Friday and I have been informed that upon closing the deal will not close in their name but will be assigned to a new owner. I do not know who the party is that the deal will close under, but I do know the name of the person who has been representing the assignee. I have NO reason to believe that this is a suspicious transaction, just that we live in a small town and the new owner does not want other developers in the area to know they are buying this highly sought after piece of property at this time (which is a fairly common occurrence up here between developers). I have met with a representative of the assignee, but cannot be sure that in fact, he is the one whose name will be going on title. Can you please tell me if I need to get any additional documentation and what happens if I cannot find out who the person is that the Agreement of Purchase and Sale has been assigned to.

Answer:

Our interpretation means that there is no obligation for the realtor to find out who the person is that the Agreement of Purchase and Sale has been assigned to. If she does not know for a fact who the assignee will be, she has no obligations to find out.

Date answered: 2008-08-18

PI Number: PI-4311

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2

ID Obligations for real estate agent when lawyer is handling the sale

Question:

I am representing 2 parties (corporations) that are purchasing a piece of development land that was not listed for sale. The Vendors have no realtor representation and are handling the sale through their lawyer. The Vendor is an Estate, not an individual. Question 1 - since I am not representing the Sellers and their lawyer is, do I need to get any ID and if so, since it is an estate, who do I get I.D. from?

Answer:

ID the two buyers (individuals and confirm existence of the corporations), and take reasonable measures to identify the lawyer (not necessarily the same person as executor) and indicate that the transaction is being conducted on behalf of the estate (don't believe the formal 3rd party determination requirements apply here, as the client info record is not required for the unrepresented parties).

Date answered: 2008-08-18

PI Number: PI-4310

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2(1)(a), 59.2(1)(b)

Life Insurance and Exempt Policies

Question:

The life insurance company would like to seek clarification if we could still examine client information records for annuities and segregated funds. It is our understanding that these products do not meet the exemption for subsection 306(1) of the IT Regulations. Do we need to scope out all client ID from future examinations? The Life Insurance company would still like to examine some records especially records that are still captured under the PCMLTFA.

Answer:

For the purposes of the Income Tax Act, "exempt policy" at any time means a life insurance policy (other than an annuity contract or a deposit administration fund policy) in respect of which the following conditions are met at that time...

In other words s. 306 refers to life insurance policies, other than an annuity contract or a deposit administration fund policy, so both of these do not fall within 62(2) of our regs., and can be scoped in future examinations for client identification under our act and regulations.

Date answered: 2008-08-14

PI Number: PI-4309

Activity Sector(s): Life insurance

Obligation(s): Ascertaining Identification

Guidance: 6A

Regulations: 62(2)

Blanket exemptions for foreign banks with privacy policies

Question:

One of our credit unions sent a trace to a Swiss Bank requesting the ordering customers complete address. The Swiss Bank advised that Swiss Law protects the personal privacy of customers and it states that only to the extent a customer waives protection of secrecy rules is a bank free to reveal the name and/or customer information.

It is unlikely with the Swiss Banking laws in place that many wires receive from Switzerland will be complete with the originators full address, postal code and country. Can the credit union consider this country has blanket approval and not need to send out further trace requests or does the response from the Swiss bank only cover any further incoming wire transfers for the same receiving beneficiary?

Answer:

For this question, we must distinguish here between two separate and distinct obligations in our Act and Regulations regarding wires, namely:
1- the travel rule (9.5(b) Act) and 66.1(1)(2)
2- EFTR Incoming (12(1)(c) Regs and Schedule 6)

#1-For the travel rule, the Act says that a RE must take "reasonable measures" to obtain the name, address, and if any, account number (reference number) of the originator. I believe that Policy Interpretation ruled, in a previous email, that should a RE send one traces back to "that" Swiss bank that would be sufficient as reasonable measures and that the RE would not have to do so again for any of the incoming wires from that bank, irrespective of the beneficiary. I believe this, as stated, has already been decided.

What I may see as an additional question from CU central, is that can this "notion or blanket exclusion" apply to all Swiss Banks because we know that is how the country operates. In other words, the RE would not have to send a trace or two to other Swiss banks because we know there privacy (secrecy) laws. I believe that we should not allow this blanket exception because AML regimes, in my opinion, do not want to favour or endorse secrecy laws (in certain countries it is more a secrecy law than privacy law). The RE should still have to send a trace or two to ask for the originator information for each bank from which it receives an EFTI as a reasonable measure.

#2-EFTR Incoming- What strikes me more is the fact that in a paragraph above it says "waives protection of secrecy rules is a bank free to reveal the name and/or customer information."

Well, once more, assuming that, as in most cases, the CU is non-SWIFT (if so, it must report in Non-SWIFT, irrespective of whether its service provider received it in SWIFT) , then according to schedule 6, Part B, originator full name and account number, if applicable, are mandatory. So if the statement in quotations holds true, then the RE is non-compliant for the EFTR incoming if the name of the originator is not provided. How are they addressing that issue? The Regs do not provide an exception here (unless it is a 24 rule - 52(3) Regs)

Date answered: 2008-08-13

PI Number: PI-4305

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 12(1)(c), 66.1(1)(2), Schedule 6-Part B, 52(3)

Act: 9.5(b)

Exemptions Client ID for Charities

Question:

There is a popular fiscal strategy for donation to charity organization which is to donate securities in order to permit client to take advantage of the elimination of capital gains tax on donated securities.

This means that each time a client choose to give to a particular charity organization, we have to open an account for that charity organization where the sole objective is to receive donated securities and immediately liquidate them and send the proceed to their bank account.

Would it be acceptable to FINTRAC if we would not identify individual who gives orders on the account under the conditions that:

1. the charity has a CRA registration number and is subject to CRA rules and annual reporting on the use of funds

2. the account is used solely for the liquidation of donated securities

Answer:

No, unfortunately the exemptions found in 62(2) (and more specifically 62 (2)(i) do not cover account opening for charities.

Date answered: 2008-08-06

PI Number: PI-4300

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 62(2)(i)

Power to Bind question

Question:

Is the "power to bind" document required when the person signing is listed as one of the principles on the Joint Registry of Stocks website document? If they are the owner why would we need to verify that they have signing authority?

Answer:

Although the person is listed as one of the principles (or owners) on the Joint Registry of Stocks website, it does not necessarily implied that this *specific person* is the one who is duly authorized to sign on behalf of the corporation. In order to fulfill the legal requirements (both for the Receipt of funds record and the Client information record), a copy of the part of the official corporate records showing the provisions relating to the power to bind the corporation regarding the transaction must be kept. This document should set out the officer(s) duly authorized to sign on behalf of the corporation, as explained in Guideline 6B, sections 3.3 and 3.4.

Date answered: 2008-07-31

PI Number: PI-4298

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 39(1)(c)

Power to Bind question

Question:

For corporate identification verification, the following is mandatory:

The type and source of verification record to confirm existence of the corporation (e.g. certificate of corporate status, published annual report, government notice of assessment).

And,

A copy of corporate record showing authority to bind corporation regarding transaction (e.g. certificate of incumbency, articles of incorporation, by-laws setting out duly authorized to sign on behalf of corporation)

Would printing of the Registry of Joint Stocks info satisfy both of those requirements? Is the second point specific to non-profits? Could you clarify these points?

Answer:

Corporate identification verification is possible with the Registry of Joint Stocks in Nova Scotia. However, the authority to bind the corporation to the transaction could/should be verified with, among possible options, the articles of incorporation setting out who is duly authorized to sign on behalf of the corporation or any resolution of the corporation that binds it to the transaction. Note that both of these methods to document/verify the authority to bind the corporation to the transaction cannot be accomplished through the Registry of Joint Stocks as "power to bind" are not listed. Said otherwise, "corporate identification verification" and "power to bind" are two different requirements to fulfill when the client is a corporation.

In the case of an entity other than a corporation (often call "non-profits"), the existence shall be confirmed by referring to a partnership agreement, articles of association or other similar record that ascertains its existence. Again, the record used may be in paper form or in an electronic version that is obtained from a source that is accessible to the public. Note that in this instance (entity other than a corporation) the regulations do not specifically ask to document/verify the "power to bind". It would however constitute a best practice to do so.

Date answered: 2008-07-31

PI Number: PI-4297

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2(1)(b), 59.2(1)(c), 39(1)(c)

Privacy act and requesting ID

Question:

It has been brought to my attention that asking for ID prior to it being needed (i.e. at closing) is going against the Privacy Act.

Has this been brought up to anyone else? Is this correct?

Answer:

The Privacy Act only applies to the handling of personal information by federal government departments and agencies (including FINTRAC - we are subject to it), but the private sector is not covered by it in any way. Realtors are subject to the federal Personal Information Protection and Electronic Documents Act (PIPEDA) in most provinces, and to similar provincial legislation in several provinces. PIPEDA places restrictions on businesses in the collection of data, including how it must be kept and protected, a requirement to inform customers of why information is being collected, and to not collect unnecessary information. There are stipulations for the collection of data that is required by law, but no reference to at what point this information can or cannot be collected. There is no prohibition on collecting data that you know you will need to fulfil an obligation at a later time.

While we are not in the position to be giving advice on privacy legislation to realtors, it is reasonable to say that there is nothing that prevents realtors from asking a client for ID prior to closing if they so choose, without the need for a consent form. (and keeping in mind that in most cases, they will have asked the same person for ID at the time of the deposit anyway)

Date answered: 2008-07-23

PI Number: PI-4294

Obligation(s): Ascertaining Identification

Guidance: 6B

Identification of executors in the case of deceased

Question:

For example, A dies appointing his wife B and his lawyer C and trust company as executors. There is a Will (possibly even a probated Will) appointing all 3 parties jointly.

Can they be identified simply as executors of the estate, or must further inquiries be made to identify them in their individual capacities apart from the estate.

Answer:

You need to identify your client(s) and any individual that provides you with funds by consulting an acceptable ID document. It is not acceptable to simply indicate in a record the names of the executor/attorney/etc and the fact that they are acting for the estate without identifying them.

Date answered: 2008-07-23

PI Number: PI-4293

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2(1)(a), 39(1)(b)

Identification of Entities: trustees, executors and attorneys

Question:

Executors, trustees and attorneys (as in one who holds a power of attorney). Are they identified only in their legal capacity?

Answer:

Must ascertain the identity of each individual who is a party to the purchase or sale of real estate or who provides funds, and determine whether a third party is giving instructions with respect to the transaction.

Date answered: 2008-07-23

PI Number: PI-4292

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2(1), 39(1)(b)

Identification of Entities: limited partnerships

Question:

Again with a limited partnership, could you stop with the general partner? If the general partner were a corporation, is it necessary to identify that corporation?

Answer:

You must confirm the existence of the partnership and ascertain the identity of individuals acting on its behalf.

Date answered: 2008-07-23

PI Number: PI-4291

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 66

Identification of Entities: Joint venture

Question:

If for example, there was a joint venture of a corporation and two individuals. Do you stop at the joint venture itself, or do you go further and look to identify the corporation and the individuals?

Answer:

You must confirm the existence/ascertain the identity of your client. In the case of a joint venture, confirm the existence of each legal entity you are dealing with and identify the individuals that carry out the transaction on behalf of the entity(ies). If a corporation is a party to the transaction, you must also keep a copy of documents that relate to the power to bind the corporation with respect to the transaction.

Date answered: 2008-07-23

PI Number: PI-4290

Obligation(s): Ascertaining Identification

Guidance: 6

Regulations: 64, 65

Identification in the case of deceased

Question:

For example, A dies appointing his wife B and his lawyer C and the trust company as executors. There is a Will (possibly even a probated Will) appointing all 3 parties jointly.

Can matters simply be left there? Or, is it necessary to identify the deceased, A as an individual? Then, the same question as it pertains to the wife, lawyer and trust company.

Answer:

This depends on who is conducting the transaction with you. You need to identify your client for the purpose of a client information record - so depending on how the transaction is conducted, it is possible that the lawyer and/or the wife will need to be identified. The existence of the trust company does not need to be confirmed, regardless of whether they are involved in conducting the transaction, because they are exempt as per 62(m) of the Regulations (large corporation exemption). In the case of the receipt of funds, identify any individual that provides you or another agent/broker with funds in respect of the transaction. No need to obtain any identification information on the deceased.

Date answered: 2008-07-23

PI Number: PI-4289

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2(1), 39(1)(a), 62(m)

ID Obligation

Question:

Ascertaining ID

1) Financial Institutions having Conduct of Sale re: foreclosure- Ascertaining ID not required- yes?
2) Property Management Company through Public Trustee (Public Body) chooses a real estate Company to list property for an owner who has died- Ascertaining ID - yes or no? - If yes, whose ID do we ascertain?
3) Executor of an estate- yes or no?

Answer:

1) Have to confirm existence of FI and identify employee unless the FI meets the large corporation exemption in 62(m) (which of course most of them do)

2) Depends on whether the realtor deals directly with the public trustee or with the property management company. No ID if their client is the public trustee, but if their client is the property management company, must confirm the ID of the management company and ID the individuals acting for it.

3) Yes, ID the executor.

Date answered: 2008-07-18

PI Number: PI-4280

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 62(m), 59.2(1)

Cleared cheque

Question:

One part of the requirement to verify the identity of a client when the advisor is not meeting the client can be a cleared cheque or an account verification. When can the dealer consider a cheque to be cleared? Is it reasonable to consider it is cleared after five business days? If not, how many days? If no assumption is allowed and no actual cleared cheque is presented, does the dealer have to confirm with the bank that the cheque has been cleared?

Answer:

The dealer can consider the cheque to be cleared either when the money is in his account (if the cheque is made out to him) or by confirming by phone with the bank or with a stamped scanned image of the cleared cheque (stamped by the bank).

Date answered: 2008-07-18

PI Number: PI-4279

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 67(b)

Cleared cheque

Question:

One part of the requirement to verify the identity of a client when the advisor is not meeting the client can be a cleared cheque or an account verification. Yes, they are aware of the combined methods. When a client transfers money online from his or her bank account to their investment account with their dealer, which the dealer believes that the client can do as a bill payment or transfer, can the bank account be considered verified when the client's investment account is credited?

Answer:

No you can't consider that the bank account as verified based on the fact that the client's investment account is credited. Unfortunately, the dealer, although he would receive the money, would not know the name of the person from which bank account the $ comes from.

Date answered: 2008-07-18

PI Number: PI-4278

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 57, 64(1)(b), Schedule 7

Business account, changing signing authorities- Requirement to ID

Question:

If the business is changing signing authorities is it necessary to identify the new signing people that are signing?

Answer:

No the regulations only require that you ascertain the ID of every person who signs a signature card in respect of an account - however that ID takes place only at the opening of the account. For a business if the financial entity must only ascertained the identity of at least three of those persons that are authorized to act with respect to the account.

Therefore, "At account opening, the individual that sign the signature cards must be identified; however, there appears not to be an ongoing obligation to ID new signing authorities", is accurate, as there is nothing in our regulations that indicate that new signing officers need to be identified!

However, should this client/business be deemed high risk, then the CU would have to take reasonable measures to keep the client ID information up to date.

Date answered: 2008-07-18

PI Number: PI-4277

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 14(b), 54(1)(a), 64(1), 62(2), 1(2)

Acceptable ID: Photo image of cleared cheque

Question:

One part of the requirement to verify the identity of a client when the advisor is not meeting the client can be a cleared cheque or an account verification. Not many banks return the cheques to the clients once the cheques are cleared. Some banks provide the reduced photo image on the monthly statement. Will the photo image on the statement be considered as a cleared cheque?

Answer:

Photo image on the statement is acceptable.

Date answered: 2008-07-18

PI Number: PI-4276

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: Schedule 7-Part A, 67(b)

14(b) Power to bind

Question:

Our questions lies with the second paragraph of guideline 6, which is recited:

This could be a certificate of incumbency, the articles of incorporation or the bylaws of the corporation that set out the officers duly authorized to sign on behalf of the corporation, such as the president, treasurer, vice-president, comptroller, etc.

Does the phrase "that set out the officers duly authorized to sign on behalf of the corporation, such as the president, treasurer, vice-president, comptroller, etc" apply to all three records, namely certificate of incumbency, the articles of incorporation or the bylaws of the corporation, or does the phrase apply only to the last record "bylaws of the corporation"? Do articles of incorporation bind the corporation regarding accounts without actually naming the specific individuals authorized to sign on the account? If so, are these acceptable? There are differing opinions on this. Does the document have to specifically relate to a specific account being opened or can it be a generic statement (record) that binds the entity to accounts it opens "in general" (a generic statement)? We believe that a generic statement is acceptable.

Answer:

A general statement is fine. It is not necessary to actually name the person by name - so secretary, VP etc is sufficient, and as long as you have grounds to believe that you have the secretary (or the person that has the power to bind the corporation) before you.

Does the phrase "that set out the officers duly authorized to sign on behalf of the corporation, such as the president, treasurer, vice-president, comptroller, etc" apply to all three records, namely certificate of incumbency, the articles of incorporation or the bylaws of the corporation, or does the phrase apply only to the last record "bylaws of the corporation"? No it does not apply only to the last record "bylaws" of the corporation but to all the three records.

Date answered: 2008-07-18

PI Number: PI-4275

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 14(b)

Use of cleared cheque method without proper ID according to s64

Question:

Cleared cheque method or confirmation of an account when the client was not previously identified according to 64(1)(a) by the institution on which the cheque is being drawn or where the account is held

2.1 Particularly in an affiliate relation, can a reporting entity use the cleared cheque method or confirmation of an account method when it knows that the financial entity on which the cheque is drawn or where the account exists did not originally properly identify the client according to 64(1)(a)?

Legally, according to the Regulations, I believe the answer is "yes" it can use these methods despite the client not having been identified or properly identified in the first place by the other affiliate. Nothing in the Regulations obliges a reporting entity (even an affiliate that would naturally have more information about how a client was identified (or not) by another affiliate) to ensure that the client was properly identified by another reporting entity when it decided to use these methods. Specifically, section 64(1)(b)(i)(A) where it says "must have been identified in accordance with 64(1)(a) does not apply to 64(1)(b)(ii). The latter also makes no reference to 64(a) nor does schedule 7. However, from a policy standpoint FINTRAC may wish to take a different stance.

Answer:

Yes - for the cleared cheque method, there is no obligation to confirm identification under 64(1)!

Date answered: 2008-07-17

PI Number: PI-4267

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1), 67(b), Schedule 7

ID Obligations: Foreign Governments

Question:

How do we respond to IDing for foreign governments?

Answer:

After speaking with IR and checking again through DFAIT, the best I've been able to come up with that comes close to the definition of a partnership agreement, articles of association or any other similar record that confirms the entity's existence" is this document produced by Foreign Affairs. It is frequently updated and available to the public, indicates that each diplomatic mission contained therein is recognized by the Canadian government, and lists the address and officers of the mission.

I would suggest that the realtor conserve a copy of this document (or at least the section that refers to the relevant diplomatic mission). The realtor could also ask the high commission for a document that confirms its legal status, and revert to the DFAIT document if the realtor is unable to provide one.

Date answered: 2008-07-17

PI Number: PI-4266

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2(1)(c), 66

Corp doc for builders

Question:

I have received another question from a real estate sales person who represents multiple builders / developers - this person wants to know if having the Tarion registration would be acceptable for corporation identification as all builders have a lengthy process to go through to get registered with Tarion and get a number

Answer:

Based on section 4.7 of GL6B, and having consulted Tarion's registry, I think that Tarion registration would count as an acceptable publicly-available record that confirms the corporation's existence, its name and its address. The realtor would also have to obtain the names of the corporations directors separately. The realtor could either print out the builder's info from the registry and keep a copy, or keep a record of the builder's registration number, address and the fact that the info was obtained from the Tarion registry on the Tarion website.

Date answered: 2008-07-17

PI Number: PI-4265

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2(b), 39(1)(b)

Cleared cheque method definition

Question:

Schedule 7: “This method of ascertaining a person’s identity consists of confirming that a cheque drawn by the person on a deposit account of a financial entity, other than an account referred to in section 62 of these Regulations, has been cleared"

67(b) if a confirmation of a cleared cheque from a financial entity is relied on to ascertain the person’s identity, the name of the financial entity and the account number of the deposit account on which the cheque was drawn;

Issue: What constitutes the cleared cheque method?:

Here are the options that we would like you to provide a policy interpretation on:

1.1- a prospective client writes and sends a cheque payable to the reporting entity itself (client wants to open an account with reporting entity). The cheque then clears. (eg. a $0.50 cheque payable to the reporting entity). I believe this was the method FINTRAC accepted in the past.

1.2- the client sends (fax, mail, email) a cleared cheque that was payable to an entity other than the reporting entity (e.g. a merchant) and the reporting entity can "evidently and clearly" see that the cheque was cleared.

1.3- an affiliate (e.g. XYZ Securities), for which a client wishes to open an account non face to face, verifies with its affiliate (XYZ Bank) that XYZ Bank already has a cleared cheque on file? To be clear, the client wants to open an account, non face to face with XYZ Securities. XYZ Securities does not obtain a cheque payable to it or cleared cheque payable to another entity from the client. Instead, XYZ Securities contacts (phone, email, fax, computer system) its affiliate, XYZ Bank, to determine if XYZ Bank, at which the client has an account, already has a cleared cheque on file. Is this acceptable as part of the cleared cheque method? Would there be any independence issue between the entities involved?

1.4 Can a reporting entity simply contact (email, call) at the request of the prospective client another, unrelated reporting entity (e.g. bank) to ask this reporting entity (Bank) if it has a cleared cheque on file for the client?

1.5- if you agree that the cleared cheque method does not only apply to circumstances when a client actually writes a cheque payable to the reporting entity, are there any other instances that come to mind, other than the others I cited above, that could also be acceptable?

If 1.2 to 1.4 are acceptable, then could you please comment on the "age" of the cleared cheque used? That is, how recent must the cleared cheque be?

Answer:

In regards to the cleared cheque method, 1.1., 1.2, 1.3 we agree with you.

1.4 Can a reporting entity simply contact (email, call) at the request of the prospective client another, unrelated reporting entity (eg bank) to ask this reporting entity (Bank) if it has a cleared cheque on file for the client? Yes he could, however in the absence of a business relationship - much riskier process, so that would most certainly play in your risk assessment. As for the "age" of the cleared cheque - well, that would be part of the policies and procedures of the reporting entity to determine what is their limit (as there is nothing to that effect either in the Act or the regs about the cleared cheque method).

Date answered: 2008-07-17

PI Number: PI-4264

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: Schedule 7, 67(b)

The concept of 'guardian' in the case of Children under 12 years of age

Question:

Under subsection 54(2), can the reporting entity identify an aunt, uncle, grandparent, or godparent instead of a mother, father, or guardian? Does guardian mean "legal guardian'' or is the term guardian interpreted loosely so that it does not mean legal guardian, but rather someone who has the informal (not legal) supervision of the child.

Answer:

Regarding the children under 12 years of age and the concept of guardian.

The term "guardian" found in our regulations refer to the "de facto" authority and supervision of the child, therefore has a more broader scope than the "legal guardian" of a child.

Therefore, yes it could be the aunt, uncle or godparent that could be identified, as long as they have a "de facto" authority and supervision of the child (as well, please note that it could well be a temporary de facto supervision of the child).

Date answered: 2008-07-15

PI Number: PI-4263

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 54(2)

Non Face To Face ID- Co-member- Credit Unions from different provinces

Question:

64(1)(b)(i)(A)(III)

(III) an entity that is a member of the same association — being a central cooperative credit society as defined in section 2 of the Cooperative Credit Associations Act— as the entity ascertaining the identity of the person, and

Question: When the Credit Union identifies a client by contacting a credit union in another province – is this considered “by association” even though we do not share the same Credit Union Central? All Credit Union Centrals belong to the Credit Union Central of Canada

Answer:

In regards to your question, the answer is no a CU in PEI could not use a CU in NB, BC or Manitoba by association. At this time, the only exception to this would be ON and BC (because their respective Centrals merged - so the CUs are now part of the same association). In other words they can rely on credit unions members of the same provincial association.

Date answered: 2008-07-15

PI Number: PI-4262

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64(1)(b)(i)(A)(III), 64(1.21)(a)

ID for Someone not Physically present

Question:

A 15 year old child that would like to join our Credit Union and open a savings account. He lives in Thunderbay and can’t come into the office for us to verify his ID.

We have received one piece of identification from him, the Attestation Method.

He doesn’t have a bank account so we can’t use the cleared cheque or deposit account method, he also has no loans or credit cards so we can’t use the credit file method to ID him. Could you recommend what other Identification method we could use?

Answer:

Our suggestion in this particular case, would be for the CU to get into a written agreement with an agent to identify the 15 year old on their behalf.

The other alternative is if that CU is affiliated to another CU and wants to use the affiliate/same association method under the Act, and rely on the identification conducted by another CU.

Date answered: 2008-07-14

PI Number: PI-4255

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: 6G

Regulations: 64.1, 64(1)(b)(i)(B) 64(1.2), 64(1.21)(a)

Grandfather rule in regards to client ID

Question:

A question from a securities dealer regarding the accounts they opened prior to June 2002. The dealer is aware that they don't need to go back to their clients to identify them for the accounts opened prior to June 2002.

Based on the Guideline 6 general exceptions the dealer quoted me (see the guideline 6e section 4.2 red highlight below), they are under the impression that if these same clients (the one the dealer obtained during the grandfathering period) open further accounts , they don't have to identify such clients either as the clients had a prior account with the dealer.

The Regulation section 63 only refers to the situation if the person (or dealer) has ascertained the client's identity. However, our Guideline seems to give a mixed message by referring that the exception will apply if one of the following situations occurs:

  • Once dealer has confirmed the existence
  • For an individual who has account with the dealer

Although I am fully aware that the exception only applies when the client has been previously ascertained, I need clarification from you to answer the following two questions:

  1. How do we explain the wording written on our Guideline?
    You do not have to identify an individual as described in subsection 4.5, nor do the requirements described in subsection 7.1 for new accounts apply, for an individual who already has an account with you.
     
  2. To what extent does the grandfathering rule apply?
    The dealer does not have an issue regarding the clients obtained after June 2002 as the client identification regime in their firm has fully implemented. Therefore, for further account opening, they can always rely on the previous identification. However, for the clients they obtained during the grand fathering period, they are convinced that the exception (as indicated above) would apply.

Answer:

There are two exemptions to client identification that securities dealers may use. The first is subsection 63(1) which is a general provision that applies to all reporting entities. It is the exemption you outlined in your email below that says "where a person has ascertained the identity of a client in accordance with 64, the person is not required to subsequently ascertain that identity again if they recognize that other person".

The second one is set out in paragraph 62(1)(c) and says that you do not need to ascertain a person's identity if that person already has an account with you. This one is the easiest exemption to apply as you do not need to recognize the person to do away with the identification. All you need is for that person to have an account with you. This exemption would also constitute the exemption easiest to examine/verify too.

Guideline 6 for SD explains both options to securities dealers.

So, to answer your question. The dealer is right. If the client wants to open a second account, the dealer can rely on the fact that the client has already an account and no identification is required to open a subsequent account. This would also apply in the event where there was never any identification conducted such as in the case of accounts opened prior to the existence of our regime.

That being said, if as part of their risk assessment they identify clients that are high risk they have to keep the client information on those clients up-to-date (71.1(a) of the Regs) . The nature of client information depends on the nature of the record that is normally be kept, it would generally include name, address, telephone number, date of birth and occupation.

Date answered: 2008-06-26

PI Number: PI-4244

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance: 6E

Regulations: 63(1), 62(1)(c), 71.1(a)

Exemption to Client ID

Question:

Where an account is opened in the name of a non-exempt non-personal entity, and a financial entity / securities dealer / life insurance company / investment fund (all as referenced in 62(2)(l)) / publicly traded corporation (the latter as defined in 62(2)(m)) / wholly owned subsidiary of a 62(2)(m) corporation / has been appointed to give instructions in respect of that account (i.e. is a signing authority), there is no requirement to comply with client ID and record keeping requirements (e.g., sections 14, 23, 54, 57) in respect of the otherwise non-exempt non-personal account holder. This is the case regardless of whether there is an additional signing officer that has been appointed.

Actual Case: The business is opening an account in the name a non-exempt entity and a bank (who would meet the exemptions as they are a wholly owned sub of another bank) will be appointed as authority to act on the account. Initially, the business discussed with the bank and advised them that we would need to ID them and their employees that would be acting on behalf of the bank. The bank refused to provide the information. They are aware that they would be exempt if they opened the account in their name and don't see this as any different.

Answer:

The exemption at 62(2)(l) applies to the opening of an account either in the name of, or in respect of which instructions are authorized to be given, by a financial entity.

In this case the exemption applies to the opening of the account in respect of which instructions are authorized to be given by a financial entity, and no client identification or record keeping are required. There are no limits to this exemption.

Date answered: 2008-06-25

PI Number: PI-4239

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6G

Regulations: 62(2)(l)

Date of birth obligation for existing accounts

Question:

A reporting entity was wondering as to the retroactivity of obtaining date of birth on accounts which were opened previously to the provisions of the PCMLTFA coming into force; must they go back and obtain the date of birth for those clients whose accounts were opened 20 years ago?

Answer:

The PCMLTFA cannot be applied retroactively, however, in light of section 71.1 of the PCMLTFR and following the securities' dealer risk assessment - if the clients are deemed to have high risk accounts - then the securities' dealer would need to take reasonable measures to update the client information and ultimately the date of birth would need to be obtained.

Date answered: 2008-06-25

PI Number: PI-4238

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6E

Regulations: 71.1

Acceptable ID

Question:

Is a Veteran's Affair health card is an acceptable piece of ID to comply with FINTRAC?

Answer:

Pursuant to paragraph 64(1)(a) of the PCMLTFR, the identity of a person is ascertained by referring to the person's birth certificate, driver's licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document. Based on our understanding of "other similar document" as a card or document issued by a provincial, territorial or federal government that has a unique identifier number, it seems that the Veterans Affairs health ID card is acceptable for our purposes.

Date answered: 2008-06-25

PI Number: PI-4237

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 64(1)(a)

Date Modified: