FINTRAC Policy Interpretations

Other

1. Is a school a public body?

Question:
Would a public school be considered a public body?
Answer:

An entity is considered a public body for the purposes of the PCMLTFA and its associated Regulations when it meets the definition identified at subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). In accordance with that definition it is evident that a public school is not a department or agent of Her Majesty in right of Canada or of a province, it is not 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 it is not an organization that operates a public hospital. Therefore, a public school does not meet the definition of a public body as per the PCMLTFA and its associated Regulations.

Date Answered: 2015-12-21

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

2. Sales of precious metals and coins by Financial Entities

Question:
Could you provide us with clarifications regarding the requirements of dealers in precious metals and stones (DPMS)? More specifically, we are a financial entity that offers a suite of precious metals and collectible numismatic coins for sale in branches and online and we would like to know whether this activity makes us subject to the requirements of a DPMS, rather than those of a financial entity, for these transactions?
Answer:

Pursuant to subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a DPMS “means a person or an entity that, in the course of its business activities, buys or sells precious metals, precious stones or jewellery.” Section 39.1 of the PCMLTFR further specifies that it is only when a DPMS engages in the purchase or sale of precious metals, precious stones, or jewellery in an amount of $10,000 or more in a single transaction that it becomes subject to Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). This type of transaction must occur at least one time before an entity is subject to the on-going requirements of a DPMS. That said, because the bank is already subject to Part 1 and Part 1.1 of the PCMLTFA and its associated Regulations as a financial entity, and because the requirements for financial entities already capture the requirements of the DPMS sector, the bank's activities involving the sale of precious metals and coins fall under the purview of its activities as a financial entity and are subject to the applicable obligations (e.g. large cash and suspicious transaction obligations). In the event that the bank carried out the sale or purchase of precious metals, stones, or jewellery through a subsidiary that was considered a separate legal entity, in an amount of $10,000 or more in a single transaction, then that separate legal entity would be subject to the requirements of a DPMS for its DPMS-related activities.

Date Answered: 2015-12-04

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Other
Regulations: 1(2), 39.1
Act: Part 1, 1.1

3. Share transfer for property

Question:
A real estate contract was signed with a seller for the sale of a commercial property, the seller found a buyer and both agreed to a share transfer, instead of a traditional exchange of funds for property. The transaction had not been placed on the market and no advertising was done by the broker. The seller and the buyer knew eachother and they wanted advice from a real estate broker for the transaction. Does the real estate broker have any obligations associated with this transaction?
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. Therefore, based on the information provided, the broker did not “act as an agent in respect of the purchase or sale of real estate”, therefore the broker is not required to fulfil the obligations of Part 1 of the Act. If, however, this is not the case and the broker believes they were engaged in this activity, then all obligations must be met.

Date Answered: 2015-12-04

Activity Sector: Real estate
Obligation: Other
Act: 5(j)

4. Public body definition

Question:
"Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, a public body is defined as “an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them.” However, under subsection 3.1 of the FINTRAC Guideline 6G: Record keeping and client identification – Financial entities, there is a reference to an “incorporated municipal body.” Consequently, we would like to ask for FINTRAC's interpretation of what is meant by “an incorporated Canadian municipal body.” This term seems to limit the definition in section 1 of the PCMLTFR to an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them, whereas the definition in the Regulations seems to only talk about incorporated bodies for cities and other municipal bodies.
Answer:

First, we should stress that the Act and its regulations always take precedence over our guidelines. Under subsection 1(2) of the PCMLTFR, “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.” Subsection 3.1 of FINTRAC Guideline 6G sets out the list of entities that meet the definition of public body without limitation: •a Canadian provincial or federal department or Crown agency; •an incorporated Canadian municipal body (including an incorporated city, town, village, metropolitan authority, district, county, etc.); or •a hospital authority. A hospital authority means an organization that operates a public hospital and that is designated to be a hospital authority for GST/HST purposes. There is therefore no need to limit the definition set out in subsection 1(2) of the PCMLTFR to public bodies as long as the above-mentioned definition is met.

Date Answered: 2015-06-09

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

5. Purity of precious metal

Question:
Are you aware of any line in the sand in terms of the purity of the metal in goods bought and sold to be considered a DPMS?  For instance, if I am selling coins but the gold content is only 20% gold?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines precious metal as “gold, silver, palladium or platinum in the form of coins, bars, ingots or granules or in any other similar form”. Precious metal has not been further defined. Coin dealers are covered under the regime when they purchase or sell coins that contain any prescribed precious metals. It does not matter whether the quantity of precious metals is negligible or not. If the coin does contain precious metals - even in the smallest quantity - it constitutes precious metals in the form of a coin. Therefore, whether the coin content 20% gold, or is plated with 10k, 14k gold (as long as it qualifies as gold in Canada) it would fall under the definition of precious metal.

Date Answered: 2015-06-02

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

6. Prepaid Cards as Monetary Instruments

Question:
Are gift cards considered monetary instruments by FINTRAC?
Answer:

The term "negotiable instruments" is not defined in the PCMLTFA nor the PCMLTFR. However, we have said in the past that negotiable instruments would include a bank draft and/ or a cheque (certified or not). The Cross-border Currency and Monetary Instruments Reporting Regulations (CCMIRR) provides further guidance through its definition of monetary instruments. According to subsection 1(1) of these regulations, monetary instruments mean the following instruments in bearer form or in such other form as title to them passes on delivery, namely, (a) securities, including stocks, bonds, debentures and treasury bills; and (b) negotiable instruments, including bank drafts, cheques, promissory notes, travellers' cheques and money orders, other than warehouse receipts or bills of lading. Moreover, section 2 of the Financial Administration Act (FAA), defines a negotiable instrument as including, “any cheque, draft, travellers cheque, bill of exchange, postal note, money order, postal remittance and any other similar instrument.” Therefore, at this point in time, prepaid cards are not covered as monetary instruments.

Date Answered: 2015-05-27

Obligation: Other
Regulations: 1(1)

7. Request for financial info

Question:
Also I find it a little confusing as to why fin-trac is asking for my most recent financial information, Value of Assets, Gross Revenue and Net Revenue. Could you please advise where in the legislation it provides that FINTRAC can ask for this information as I really don’t see the connection here.
Answer:

Subsection 63.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) states that “for an examination under subsection 62(1), an authorized person may also serve notice to require that the person or entity provide, at the place and in accordance with the time and manner stipulated in the notice, any document or other information relevant to the administration of Part 1 or 1.1 in the form of electronic data, a printout or other intelligible output.” As such, this provision allows FINTRAC to request additional information, such as financial information, from a reporting entity during the course of an exam, so long as notice is served and the information is relevant to the administration of Part 1 or 1.1 of the Act. In other words, the request must be documented and the information must be relevant to the exam.

Date Answered: 2015-05-14

Activity Sector: British Columbia notary
Obligation: Other
Act: Part 1, 1.1, 63.1(1)

8. Mortgage Lending Companies

Question:
In a couple of provinces, namely Ontario and BC, the business of lending money on the security of mortgages is an activity that is regulated, requiring licensing as a mortgage brokerage in Ontario and registration as a mortgage broker in BC. In most of the other provinces (except, perhaps Saskatchewan), if a person is lending their own money on the security of mortgages, there is no licensing or registration requirement. The key elements of the business model of such a client (I will call such client the “lender” in this email) would be as follows: - The lender is a Canadian resident (usually a Canadian corporation that is formed under federal or provincial corporate legislation). - The lender is not a deposit taking institution and does not carry on any business of banking. It is not a federally regulated bank, - The lender is licensed as a mortgage brokerage in Ontario and is subject to the regulatory regime for mortgage brokerages administered by FSCO. The lender is also registered as a mortgage broker in BC, and is subject to the regulatory regime for mortgage brokers administered by FICOM. - The lender maintains a trust account at a Canadian bank for certain purposes such as receiving third party deposit money in advance of a transaction for good faith deposits under loan commitments. Such trust account is subject to audit by the provincial regulator. - The primary business of the lender is lending its own money to borrowers on security that primarily consists of mortgages of commercial properties in Canada. The properties can be in any class of commercial real estate, such as hotels, industrial, office, retail, etc. - The lender funds the mortgages from its own resources, i.e. from the equity of the lender. In some cases, however, it may enter into borrowing arrangements with other financial institutions, which borrowings are secured by a charge over its portfolio of mortgages. The money that it borrowers would also be used to fund mortgages orginated by the lender. - The lender typically holds the mortgages for its own account and services the mortgages over the term of the loan. - In some cases, the lender may sell certain of its mortgage loans to third party buyers. - In other cases, the lender may sell certain of its mortgages to issuers who issue securities backed by a pool of mortgages through pubic market transactions or private placements, but always in compliance with applicable securities laws. - The mortgages are held by the lender in its own name on title to the mortgaged land. When I look at the types of entities required to report to FINTRAC, none seem to capture the lender I have described in my fact situation. My question, therefore, is whether such a lender as I have described would have to gather aml and identification information and/or report to FINTRAC?
Answer:

For an individual or an entity to be subject to the PCMLTFA it must fall within one of the following categories outlined in section 5 of the PCMLTFA: • Financial entities • Life insurance • Securities dealers • Money services businesses • British Columbia notaries • Accountants • Real estate • Dealers in precious metals and stones • Casinos Based on the information you have provided, it appears that your clients do not fall within the definition of a financial entity, nor any other sector subject to the PCMLTFA. In addition, you state that “the primary business of the lender is lending its own money to borrowers on security that primarily consists of mortgages of commercial properties in Canada,” as such, your clients appear to be mortgage lending companies. FINTRAC has said in the past that mortgage lending companies are not covered under the PCMLTFA and its associated Regulations, unless they are loan companies regulated by a Provincial Act (i.e. that accept deposit liabilities). Therefore, given that your clients do not appear to fall under any of the categories identified at section 5 of the PCMLTFA, and appear to be mortgage lending companies, they do not have any legislative obligations under the PCMLTFA or its associated Regulations.

Date Answered: 2015-05-05

Obligation: Other
Regulations: 1(2)
Act: Part 1, 1.1,

9. Authorization of a representative

Question:
Our questions are about FINTRAC's authorizing or cancelling a representative form. 1. What are FINTRAC's obligations arising from this authorization? In other words, what are the limits of this authorization? 2. Could the consent given by the entity to deal with a person other than itself be somewhat equivalent to its intent to no longer be FINTRAC's contact?
Answer:

There is a general principle of law that allows any individual or entity the right to be represented by the person of his/her/its choice. This is not based on the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Moreover, a representative's authorization or cancellation form allows FINTRAC to share the information about compliance with any representative designated by the reporting entity. The form is only one of the tools which may be used by the reporting entity to express its consent. The reporting entity may use any other tool. 1. Starting from the principle that the reporting entity authorized a representative, FINTRAC is required to respect this authorization within the limits established by the reporting entity for any issues related to its compliance. To the extent that the designated representative has been authorized by the reporting entity, FINTRAC must comply with the reporting entity's authorization, and send its correspondence to the designated representive; 2. Yes, within the limits established by the reporting entity, it can designate its representative for all issues related to compliance. Moreover, it allows exclusivity by indicating “Please fill in this form to allow (FINTRAC) to deal with a person or business other than you as representative." This means that FINTRAC is authorized to deal with the designated representative only.

Date Answered: 2015-04-28

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

10. Accountant Sector Questions

Question:
Question 1: Please define “Accounting Services”, and the concept of “to the public”, and explain the rationale and basis for those positions. Question 2: Which of the following activities does FINTRAC consider to constitute “Accounting Services”: i) Assurance services ii) Specified auditing procedures iii) Compilation engagements iv) Forensic accounting v) Financial investigation vi) Financial litigation support services vii) Tax advisory services viii) Tax return preparation ix) Bookkeeping x) Trust administration xi) Escrow services xii) Corporate finance xiii) Clerical administration xiv) Chief Financial Officer services xv) Chief Operating Officer services xvi) Payroll administration xvii) Bank reconciliation services Question 3: Our question relates to various scenarios where accountants might be considered to be engaged in, or to be giving instructions on behalf of any person or entity, in respect of the following activities (“Triggering Activities”): i) receiving funds; ii) paying funds; and Neither “Receiving”, nor “Paying” are defined terms in the PCMLTFA. There are various scenarios which might be considered Triggering Activities, and would like your clarity in that regard. Receiving Funds 1) Would an Accountant be considered to have “received funds” if: a) In the case of funds in the form cash or negotiable instruments, the Accountant physically collects the funds from the client’s safety deposit box on behalf of their client; b) In the case of funds in the form cash or negotiable instruments, the Accountant physically gets funds from the client’s customer on behalf of their client; c) In the case of funds in the form cash or negotiable instruments, the Accountant receives a deposit into their bank account from the client’s customer on behalf of their client; d) In the case of funds in the form cash or negotiable instruments, the client receives a deposit into their account from a customer, an account which is monitored by their Accountant; e) In the case of electronic funds (such as an EFT), the Accountant receives a deposit into their bank account from the client’s customer on behalf of their client; and, f) In the case of electronic funds (such as an EFT), the client receives a deposit into their account from a customer, an account which is monitored by their Accountant. Paying Funds 2) Would an Accountant be considered to have been “paying funds” on behalf of their client, if: a) If an Accountant pays for services on behalf of the client, using the Accountant’s cash; b) If an Accountant pays for services on behalf of the client, using the client’s cash; c) If an Accountant pays for services on behalf of the client, by mailing a cheque drawn on the Accountant’s account to the payee; d) If an Accountant pays for services on behalf of the client, by preparing a cheque drawn on the client’s account, but signed by the client, and mailed by the Accountant to the payee; e) If an Accountant pays for services on behalf of the client, by preparing a cheque drawn on the client’s account, but signed by the Accountant as an authorized signatory, and mailed by the Accountant to the payee; f) If an Accountant pays for services on behalf of the client, by preparing a cheque drawn on the client’s account, but signed by the Accountant as an authorized signatory, and mailed by the client to the payee; g) If an Accountant pays for services on behalf of the client, by preparing a wire transfer drawn on the client’s account, using internet banking privileges, but which is authorized for release by the client; Question 4: What distinguishes a transfer on behalf of a client in the case of an Accountant, and a client remittance in the case of an MSB? Is it conceivable that a single entity could be considered to be at once an Accountant conducting a transfer on behalf of a client and an MSB remitting/transmitting funds at a client’s instruction? If so, is it to the reporting entity to choose on which basis they will comply (Accountant or MSB) Question 5: When all triggering activities are performed on behalf of an employer, an Accountant is exempted from the PCMLTFA requirements. While a Chief Financial Officer (CFO) would normally be an employee (with an employment contract), it is conceivable and common that a Chief Financial Officer (CFO) who is an Accountant is hired as a subcontractor, or indeed, that an Accounting Firm is contracted to perform the functions of a CFO, and that in the course of their duties, they conduct triggering activities. The CFO who is technically an employee clearly benefits from the exemption, and yet it is not clear that the contract-CFO enjoys that same exemption, despite the similarity in role and function. Could you please confirm that both contract CFOs who are Accountants, and contract CFOs who are Accounting Firms, enjoy the same exemption as their employee counterparts. Also, please confirm whether contract CFO services would be considered to be accounting services offered to the public.
Answer:

Answer 1: The terms “accounting services” and “to the public” are not defined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) or the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). Answer 2: Subsection 34(1) of the PCMLTFR states “subject to subsections (2) and (3), every accountant and every accounting firm is subject to Part 1 of the Act when they (a) engage in any of the following activities on behalf of any person or entity, namely, (i) receiving or paying funds, (ii) purchasing or selling securities, real properties or business assets or entities, or (iii) transferring funds or securities by any means; or (b) give instructions on behalf of any person or entity in respect of any activity referred to in paragraph (a).” Therefore, it is only when an accountant or accounting firm engages in one of these activities that it becomes subject to Part 1 of the Act. If the listed services include the activities identified at subsection 34(1) of the PCMLTFR, then the accountant or accounting firm has obligations it must fulfil. Answer 3: It will always be a question of fact to determine whether an activity falls under subsection 34(1) of the PCMLTFR, and specifically what it may be categorized as (i.e. receiving/paying funds or giving instructions). Answer 3 - 1) (a - f): Most of the scenarios identified, with the exception of merely monitoring a client’s account, would likely fall under the activities described at subsection 34(1) of the PCMLTFR. That is, most of the scenarios may constitute receiving funds on behalf of a client or giving instructions for the receipt of funds on behalf of a client. Therefore, the accountant or accounting firm engaging in these activities, excluding solely monitoring a client’s account, would likely be subject to the PCMLTFA and its associated Regulations. Answer 3 - 2) (a - f): These scenarios would likely fall under the activities described at subsection 34(1) of the PCMLTFR. That is, each scenario may constitute paying funds on behalf of a client or giving instructions for the payment of funds on behalf of a client. Therefore, the accountant or accounting firm engaging in these activities would likely be subject to the PCMLTFA and its associated Regulations. Answer 4: The PCMLTFR defines an accountant as “a chartered accountant, a certified general accountant or a certified management accountant” and an accounting firm as “an entity that is engaged in the business of providing accounting services to the public and has at least one partner, employee or administrator that is an accountant.” A money services business (MSB) is defined as “a person or entity referred to in paragraph 5(h) of the Act.” That is, a person or entity who engages in the following activities: - Foreign exchange dealing; - Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or - Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity). An accountant/accounting firm conducting a transfer on behalf of its client would not be considered to also be operating as an MSB. However, should an accountant/accounting firm provide MSB activities outside of its services as an accountant/accounting firm then it would be required to also register as an MSB. Answer 5: Subsection 34(2) of the PCMLTFR indicates that “subsection (1) does not apply in respect of an accountant when they engage in any of the activities referred to in paragraph (1)(a) or (b) on behalf of their employer.” This subsection does not make any reference to accounting firms, only accountants. The PCMLTFR defines an accountant as “a chartered accountant, a certified general accountant or a certified management accountant”. Therefore, this subsection only applies to accountants who engage in the triggering activities on behalf of their employer. Additionally, subsection 34(2) of the PCMLTFR is specific to accounting activities carried out on behalf of an employer. It is a question of fact to be able to determine whether an accountant is an employee. In fact, contract employment does not automatically suggest a legal employer/employee relationship. To assist you in your determination, the Canada Revenue Agency’s (CRA) standards, used to determine employment status for tax purposes, may be useful for assessing employment status within Canada.

Date Answered: 2015-04-28

Activity Sector: Accountant
Obligation: Other
Guidelines: FIN-1, FIN-2
Regulations: 34(1), 34(2)
Act: 5(h), 5(j)

11. Is the Office de stabilisation des caisses populaires acadiennes a “public body?”

Question:
The Office de stabilisation des caisses populaires acadiennes (the Board) was created under a public law, the New Brunswick Credit Unions Act (section 194). Its powers to supervise Acadian credit unions stem from this Act. In our opinion, the public organization exemption should apply. According to our research, the Board reports to the Superintendent of Credit Unions (New Brunswick), which reports to the Government of New Brunswick. Please let me know whether this information is sufficient to allow us to use the public body exemption.
Answer:

Under subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, a public body is: a) any department or agent of Her Majesty in right of Canada or a province; b) an incorporated city, town, village, metropolitain 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. Moreover, we have said previously that the issue of knowing whether an entity is considered a public body is a question of fact, to be resolved on a case-by-case basis. The government's level of involvement has to be determined and that there is a significant degree of government control over the entity, to be considered an agent of the government; in other words. how the government is actually involved. To better understand, it has to be determined who exercises ongoing influence on the body's governance and decision-making. We have reviewed the New Brunswick Credit Unions Act, and it seems that the Board is not a public body. The New Brunswick Credit Unions Act does not contain any indication to the effect that the Board is an agent of Her Majesty, the Board (and not her Majesty or the provincial crown) owns its own assets, the purpose of the entity is not a public body, and the Office exercises the rights, powers and privileges of a corporation (and is not an agent of the Crown). We should also add that subsection 194(1) of the New Brunswick Credit Unions Act stipulates that the Board “is continued as a body corporate.

Date Answered: 2015-04-08

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

12. Is the New Brunswick Liquor Corporation a Public Body exempt from LCTRs?

Question:
I am seeking guidance in regards to an LCTR Public Body exemption for a financial entity. Here are some facts about this situation: • The account in question is a New Brunswick Liquor Corporation store, which is an accountholder at said financial entity. • According to the website the New Brunswick Liquor Corporation is a Provincial crown corporation responsible for the purchase, importation, distribution and retail activity for all beverage alcohol in the province of New Brunswick. • There are two types of New Brunswick Liquor stores that can be opened o Corporate stores: which are owned and operated by NB Liquor Corporation and, o Agency stores which are privately owned. Q1. Is this account exempt from LCTR reporting as the New Brunswick Liquor Corporation is a Provincial Crown Corporation? Q2. If the above answer is yes, would the exemption apply to all stores both corporate and agency, or only to the corporate stores? As per the definition of public body in the PCMLTFR, where a public body is defined as (a) any department or agent of her Majesty in right of Canada or of a province, and exceptions to reporting under 12.(1)(a) of the PCMLTFR where 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, I am of the opinion that it would be exempt, however due to the nature of the two types of stores that can be opened I would appreciate you guidance on this matter.
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines a 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. Also, as you’ve stated paragraph 12(1)(a) of the PCMLTFR states that “subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre: (a) the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body.” Given that subsection 2(2) of the New Brunswick Liquor Corporation Act states that “the Corporation is, for all purposes of this Act, an agent of Her Majesty in right of the Province of New Brunswick,” it would appear as though the New Brunswick Liquor Corporation is considered a Public Body as per the PCMLTFR. As such, paragraph 12(1)(a) of the PCMLTFR applies for all accounts opened for New Brunswick Liquor Corporation stores. Activities carried out on behalf of the New Brunswick Liquor Corporation, by privately owned agency stores, would also be considered exempt as these activities are ultimately regulated by the New Brunswick Liquor Corporation.

Date Answered: 2015-03-02

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

13. Certificaition Request

Question:
We are writing to respectfully request your assistance in complying with one of the conditions set forth by our parent company. In particular, our parent company has requested a certificaiton confirming they are authorized to examine us as a subsidiary. For your reference, we were registered with FINTRAC last year.
Answer:

FINTRAC does not provide certification, endorsement, accreditation or any other type of confirmation regarding a reporting entity’s obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Therefore, FINTRAC cannot assist your parent company with its enquiry

Date Answered: 2015-02-09

Activity Sector: Money services business
Obligation: Other

14. Sale of dental practices

Question:
As a Real Estate agent, would my obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) extend to my activities when I am acting as a sales representative for the sale of dental practices?
Answer:

We will respond to your question by assuming that when you sell a dental practice, you are selling three categories of assets: the tangible assets of the practice (the furniture, fixtures and equipment owned by the practice) ; the practice’s accounts receivable, including the revenue due to the practice prior to the sale; and the “goodwill”, including the practice’s reputation, trained support staff, established client base and accompanying medical records, practice history and practice location. Guideline 6B states: “A real estate broker or real estate sales representative means an individual or an entity that is registered or licensed in a province to sell or purchase real estate. If you are a real estate broker or real estate sales representative, you are subject to the obligations explained in this guideline when you act as an agent regarding the purchase or sale of real estate. This includes the buying or selling of land, houses, commercial buildings, etc. Such activities trigger these obligations whether or not you get a commission for the real estate transaction and whether or not you have fiduciary duties regarding it. These obligations do not apply to you for activities related to property management. This means that if you only deal in property management transactions, such as leases or rental management, not purchases or sales, the obligations explained in this guideline do not apply to you.“ Because the obligations that apply to Real Estate sales professionals are limited to their activities when they “act as an agent for the purchase or sale of real estate”, it appears that, unless you are also selling real estate in combination with your other activities (more specifically the sale of dental practices) then those activities would not be covered under the PCMLTFA and do not carry obligations under the PCMLTFA.

Date Answered: 2014-12-01

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

15. Payment processing and the application of section 66.1 of the PCMLTFR

Question:
Why are payment processors not covered by the Act? What is the application of section 66.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR)?
Answer:

1. Payment processing: Paragraph 5(h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) states that a person or entity is an MSB if they are engaged in the business of any of the following activities: • Foreign exchange dealing; • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity). FINTRAC has previously taken the position that persons or entities engaged in the business of utility bill payments, tuition fees payments, payroll and commission payments, and mortgage and rent payments 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 MSBs, because they are not engaged in the business of doing remittance or transfers of funds. In the same way, if the only reason a person or entity sends funds in a foreign currency is to pay the client's bills that are in a different country (or who invoice in a foreign currency), that tends to indicate the person or entity is in the payment processing business, as opposed to being engaged in the business of foreign exchange dealing. In other words, the services of remitting and/or transferring funds or foreign exchange dealing are incidental to the payment of utility bill, tuition fees, payroll and commission, or mortgage and rent. The transfer or exchange of funds is simply a corollary of their actual service of processing the payments. 2. Application of section 66.1 of the PCMLTFR: Pursuant to section 9.5 of the PCMLTFA, “Every person or entity that is referred to in section 5 and that is prescribed shall, in respect of a prescribed electronic funds transfer that occurs in the course of their financial activities, a) include with the transfer the name, address, and account number or other reference number, if any, of the client who requested it, and any prescribed information; b) take reasonable measures to ensure that any transfer that person or entity receives includes that information; and c) take any prescribed measures.” This section is also known as the “travel rule”. The travel rule applies to financial entities, MSBs and casinos. The type of transfer to which the travel rule applies is defined in subsection 66.1(2) of the PCMLTFR and clarified in subsection 66.1(3) of the PCMLTFR. Subsection 66.1(1) of the PCMLTFR states that “The prescribed persons or entities for the purpose of section 9.5 of the Act are every financial entity, money services business and casino that is required to keep a record under these Regulations in respect of an electronic funds transfer referred to in subsection (2). Subsection 66.1(2) of the PCMLTFR states that “Subject to subsection (3), the prescribed electronic funds transfers to which section 9.5 of the Act applies are those as defined in subsection 1(2), but including transfers within Canada that are SWIFT MT 103 messages. (3) For greater certainty, subsection (2) does not apply in respect of (a) a transfer carried out using a credit or debit card, if the recipient has an agreement with the payment service provider permitting payment by such means for the provision of goods and services; (b) a transfer where the recipient withdraws cash from their account; (c) a transfer carried out by means of a direct deposit or a pre-authorized debit ; or (d) a transfer carried out using cheque imaging and presentment.” Subsection 1(2) of the PCMLTFR defines an EFT as the transmission of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included. This does not include domestic SWIFT MT 103 messages. Section 9.5 of the PCMLTFA requires entities referred to in section 5 to include certain information with prescribed electronic funds transfers when they occur in the course of their financial activities. Subsection 66.1(2) of the PCMLTFR goes on to specify that the prescribed electronic funds transfers to which section 9.5 of the Act applies are those as defined in subsection 1(2), but include transfers within Canada that are SWIFT MT 103 messages. As such, the only domestic EFTs to which the obligations set out in section 9.5 of the Act applies are SWIFT MT 103 messages. Section 66.1 of the PCMLTFR is in the context of including information on EFT. This does not specifically carve out payment processors of being subject to Part 1 of the PCMLTFA.

Date Answered: 2014-11-06

Obligation: Other
Guidelines: 4, 8
Regulations: 1(2), 66.1
Act: Part 1, 5(h), 9.5

16. Exemption entitlement under the Freedom of Information Act

Question:
Are we bound by the United States "Freedom of Information Act" and if so, what steps must be taken to abide by it?
Answer:

Because laws generally do not apply extra-territorially, we are not bound by the United States Freedom of Information Act.

Date Answered: 2014-10-24

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

17. Foreign securities dealer's exception

Question:
My question relates to foreign entities that rely on a registration exemption under provincial securities laws and confirmation that they are required to apply Canadian anti-terrorists financing requirements only to their Canadian clients and/or operations?
Answer:

FINTRAC administers the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations. As such, we can only comment and provide guidance on matters pursuant to the PCMLTFA and its associated Regulations. That said, pursuant to subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a securities dealer is defined 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”. In the example that you provided, the foreign securities dealer is authorized by the province to be engaged in the activities described under subsection 1(2) of the PCMLTFR, under an International Dealer Exemption. Consequently, the foreign securities dealer is subject to the PCMLTFA for its Canadian activities, and has to develop and apply policies and procedures consistent with record keeping, client identification and compliance regime requirements for its Canadian activities only. These obligations also include a requirement for reporting under subsection 7.1(1) of the PCMLTFA, which states that “Every person or entity referred to in section 5 that is required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism shall also make a report on it to the Centre, in the prescribed form and manner.” It should be noted that the PCMLTFA does not specify how this obligation is to be applied, and it does not prescribe any specific review or monitoring of lists for terrorist property reporting purpose. The Canadian Securities Administrators may be better placed to provide additional comments on the applicability of those other requirements in the context of foreign entities with activities in Canada. Alternatively, the government departments responsible for the administration of these Federal requirements may be able to assist.

Date Answered: 2014-09-09

Activity Sector: Securities dealer
Obligation: Other
Regulations: 1(2)
Act: 5(g), 7.1(1)

18. Obligations in regard to Real estate broker or sales representative

Question:
What level of service offered by a real estate broker or sales representative can make them subject to the obligations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations?
Answer:

As stated in paragraph 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines a real estate broker or sales representative as "a person or entity that is registered or licensed under provincial legislation in respect of the sale or purchase of real estate." Section 37 of the PCMLTFR further states that "every real estate broker or sales representative is subject to Part 1 of the Act when they act as an agent in respect of the purchase or sale of real estate." It was outlined that mere posting is defined in the Consent Agreement between the Canadian Real Estate Association and the Commissioner of Competition, as “a listing on a Member Board’s ABC System in respect of which the Member has chosen or agreed not to provide services to the Seller other than submitting the listing for posting on a Member Board’s ABC System.” It is this understanding of mere posting, that has led FINTRAC to conclude that mere posters are not subject to the PCMLTFA and its associated Regulations. While FINTRAC is not in a position to outline those specific activities that may render a real estate broker or sales representative subject to the PCMLTFA and its associated Regulations, we reiterate that merely posting the listing on a Board’s ABC System has been determined not to be acting as an agent in respect of the purchase or sale of real estate. You have suggested that some real estate brokers or sales representatives may be providing services beyond that of mere posting, which would suggest that these individuals are no longer subject to FINTRAC’s interpretation of the facts and may therefore be acting in respect of the purchase or sale of real estate, making them subject to the PCMLTFA and its associated Regulations.

Date Answered: 2014-08-29

Activity Sector: Real estate
Obligation: Other
Regulations: 1(2), 37
Act: 5(j)

19. Various definitions

Question:
1) What is the definition of redemption? 2) Does the very definition of EFT mean the wire transfer is international? 3) In s. 39(1)(a), what is meant by “otherwise”? What are some other examples than a cheque “in trust”?
Answer:

1. Pursuant to subsection 14(l), it is only if the FE is redeeming the money order that a record is required to be kept. Therefore, if the FE is redeeming a money order issued by the FE or is redeeming based on an agent/principal relationship with the issuer, then this record is required. If the FE is just cashing a money order issued by another entity, one with which there is no agent/principal relationship, then the record-keeping requirement outlined in subsection 14(l) does not apply. 2. By definition “electronic funds transfer” refers to international transactions only. Unless the reference is to prescribed EFTs, which are prescribed in 66.1(2) and include domestic MT 103 messages. 3. If the real estate agent receives a cheque made out to a real estate agent, either directly, to his/her brokerage, or in trust, then the real estate agent must complete an ROFR. If the real estate agent receives a cheque made out to anyone else, subject to subsection 39(4) of the PCMLTFR (e.g. lawyers, financial institutions), then no ROFR is required.

Date Answered: 2014-08-22

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Real estate, Trust and/or loan company
Obligation: Other
Guidelines: 6G
Regulations: 14(l), 30(e), 43(f), 66.1(2)

20. Application of subsection 6(2) of the PCMLTFR

Question:
Does subsection 6(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) apply in a situation where a reporting entity is engaged to act outside of Canada on behalf of an international entity?
Answer:

Subsection 6(2) of the PCMLTFR applies where a person or entity is an agent of or is authorized to act on behalf of another reporting entity. In that case, if Company A conduct any activities in Canada for the Country1-based Partnership, in their capacity as a securities dealer, then these activities may be subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations, as applicable.

Date Answered: 2014-07-29

Activity Sector: Securities dealer
Obligation: Other
Regulations: 6(2)

21. Exception to client identification

Question:
Is there an exception for verification of identity in the case of a public trustee (physical person) whose employee handles the sale of property of an incompetent person.
Answer:

Real estate brokers and agents have obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, including the obligation to ascertain the identity of their clients. An exception to ascertaining identity is set out in subsection 62(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, and applies when the transaction is made for a public body or corporation with very substantial assets. In this case, the Public Curator of Quebec is not a public body, since, although it is headed by a department (that is, the Minister of Health and Social Services is responsible for application of the Act which confers its powers), it does not appear to act on behalf of the Department or as an agent of the Department. Consequently, the Public Curator, or a person employed by the Public Curator who manages the estate of an incompetent person as part of his or her duties, would be subject to identity verification when selling a property. In addition, in the case of an incompetent person, this person cannot give instruction — meaning that a third party determination is not required.

Date Answered: 2014-06-19

Activity Sector: Real estate
Obligation: Other
Guidelines: 6B
Regulations: 62(2)(m)

22. L'Office municipal d'habitation de Lévis (OMH)

Question:
Is the Office municipal d'habitation de Lévis (OMH) a public body?
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. We have already said that it would be a question of fact, on a case to case basis, to determine if an entity is considered a public body. The real matter is determining the government’s involvement and what is the significant degree of governmental control over the entity, for it to be considered an agent of the government, i.e. how is the government actually involved? Looking at who exercises a degree of ongoing influence in the body’s governance and decision-making gives you a better understanding. With respect to the OMH, we reviewed the Act respecting the Société du Québec and noted the following: • The Société is an agent of the state. Its assets are part of the domaine of the state. • The government appoints: ○ members of the board, other than the chair of the board and the chief executive officer, taking into account the competency and experience profiles approved by the board of directors. ○ the chair of the board of directors, for a term of at least five years. ○ the chief executive officer, taking into account the competency and experience profiles approved by the board. ○the vice-presidents of the Société, the number of whom it determines, and who carry out their duties on a full-time basis. • The Société's books and accounts are audited annually by the Auditor General, as well as whenever ordered by the government; the reports must be included with the Société's annual report. • Any neighbourhood improvement program must be confirmed by the government. • With the prior authorization of the government and upon the recommendation of Treasury Board, the Société may borrow money on notes, bonds or other securities, at a rate of interest and under any other conditions determined by the government. Based on this information, we can conclude that the government has a significant degree of control over the OMH, its corporate body, its board members, its improvement programs, etc. Therefore, the OMH qualifies as a public body. "

Date Answered: 2014-06-12

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

23. Clarification on subsection 65(2) of the PCMLTFA

Question:
Can FINTRAC use the information it receives from any agency or body that regulates or supervises persons or entities to whom Part 1 of the Act applies?
Answer:

Subsection 65(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) states that “For the purpose of ensuring compliance with Part 1, the Centre may disclose to or receive from any agency or body that regulates or supervises persons or entities to whom Part 1 applies information relating to the compliance of those persons or entities with that Part”. Subsection 65(3) of the PCMLTFA states, in part, that “[…] any information disclosed by the Centre under subsection (2) may be used by an agency or body referred to in subsection (2) only for purposes relating to compliance with Part 1”. To ensure compliance with Part 1, FINTRAC can provide information relating to the compliance of a reporting entity to, or receive it from, any regulators of that reporting entity. The limitation in subsection 65(3) of the PCMLTFA means that information disclosed by FINTRAC to the regulator can only be used to ensure compliance with Part 1 of the Act. There is no limitation on how to use compliance information received by FINTRAC from a regulator of a reporting entity. That means, in a case where compliance information was received by FINTRAC from a regulator of a reporting entity, it can be used by FINTRAC to ensure compliance with Part 1. This also means that if a regulator provided specific compliance information about a reporting entity to FINTRAC, FINTRAC can use this information and cite the reporting entity. A word of caution, if an AMP is issued, it is recommended by the PI Function and Legal Services that FINTRAC does not rely only on the information provided by the regulator to issue an AMP to an RE since it could be difficult for FINTRAC to provide evidence in court (should the RE chose to appeal the AMP) to justify the imposition of the AMP (i.e. FINTRAC would have to rely on the affidavit – or other evidence – of the employee of the regulator who saw the non-compliance, and FINTRAC is not responsible for the supervision of that employee). Even before any appeal of an AMP, it could be difficult for FINTRAC to evaluate the representations of the RE in respect of a NOV if FINTRAC had relied only on the information provided by the regulator. Finally, before using any compliance information provided by a regulator, FINTRAC should check the language in its MOU with that regulator to make sure that the MOU does not prohibit the disclosure of the compliance information received (i.e. most MOUs state that the information provided by the regulator is provided “in confidence” and should be protected from unauthorized disclosure by appropriate measures). The question of whether or not FINTRAC could advise an RE (in a proceeding linked to an AMP or Findings letters) that the non-compliance referred to in the AMP (or Findings letter) was discovered – and evidenced - only by an examination of the regulator, would have to be looked into.

Date Answered: 2014-05-28

Obligation: Other
Act: Part 1, 65(2), 65(3)

24. Applicability of PCMLTFA on Government Departments

Question:
I have a question regarding the applicability of the Act. Specifically, I would like to have clarification on the meaning of s.5(l), "departments and agents of Her Majesty in right of Canada or of a province that are engaged in the business of accepting deposit liabilities". If a conditionally refundable deposit of money is required from an applicant as part of their application to a government program, would the Act apply to the government department accepting the deposit? Would the Act apply to a government department that collects a fee for a service?
Answer:

Pursuant to subsection 5(l) of the PCMLTFA, Part 1 of the Act applies to departments and agents of Her Majesty in right of Canada or of a province that are engaged in the business of accepting deposit liabilities, that sell money orders to the public or that sell prescribed precious metals, while carrying out the activities described in regulations made under paragraph 73(1)(c). Section 45 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) further specifies that every department and agent of Her Majesty in right of Canada or of a province is subject to Part 1 of the Act when it accepts these deposit liabilities in the course of providing financial services to the public. As such, unless the government department that charges fees for services or offers a program for which the applicant must provide a refundable deposit, is doing so in the course of providing financial services to the public, the government department is not subject to Part 1 of the PCMLTFA.

Date Answered: 2014-04-02

Obligation: Other
Act: 5(l)

25. Public body -Commission de construction

Question:
The investment management reporting entity operates in the securities sector and is registered with the Autorité des marchés financiers (AMF) as a portfolio manager. This reporting entitiy opened a portfolio management account for the Commission de la construction du Québec (CCQ). Created in 1987, the CCQ is responsible for applying the Act respecting labour relations, vocational training and manpower management in the construction industry (Act R-20). The issue here is to determine whether the CCQ is considered as a public body under the PCMLTFA, which would allow the reporting entity to meet the conditions required to qualify for the exemption in paragraph 62(2)(m).
Answer:

Subsection 1(2) of the PCMLTFR defines “public body” as (a) any department or agent of Her Majesty in right of Canada or of a province; (b) an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them; and (c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or any agent of such an organization. It seems to me that the Commission de la construction du Québec (CCQ) is a public body established under Quebec's Act respecting labour relations, vocational training and manpower management in the construction industry (Act R-20). After looking into the government's involvement and the extent of the government's control over the CCQ, we note that the CCQ has a duty to administer Act R-20, and that the President and the members of the Board of Administration are appointed by the government. Consequently, the CCQ falls under the definition of public body set forth in paragraph 1(2)(a). As concerns the CCQ, the reporting entity can avail itself of the exemption in paragraph 62(2)(m) of the Regulations.

Date Answered: 2014-03-20

Activity Sector: Securities dealer
Obligation: Other
Guidelines: 6E
Regulations: 1(2), 62(2)(m)

26. Obligations of a charity as a DPMS

Question:
Can a charity be a dealer in precious metals and stones?
Answer:

As per subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a dealer in precious metals and stones “means a person or an entity that, in the course of its business activities, buys or sells precious metals, precious stones or jewellery. It includes a department or agent of Her Majesty in right of Canada or of a province when the department or agent is carrying out the activity, referred to in section 39.1, of selling precious metals to the public.” A dealer in precious metals or stones that buys or sell precious metals, stones or jewellery that total $10,000 or more in a single transaction is subject to the PCMLTFA and its associated Regulations, which include the obligations to report to FINTRAC, keep records, identify clients, and have a compliance regime. Once the $10,000.00 threshold has been met, even just once, an entity is considered a DPMS subject to the Act and Regulations for as long as that entity is in a position to, in the course of its business activities, buy or sell precious metals, precious stones or jewellery. Once an entity demonstrates otherwise (e.g., through dissolution of the company or a change in business licensing or structure) they are no longer subject to the DPMS obligations of the PCMLTFA and its associated Regulations. Should it be determined that a reporting entity is in non-compliance with the PCMLTFA and its associated Regulations, FINTRAC has the authority to cite an entity on instances of non-compliance and issue an administrative monetary penalty (AMP). Our response would be measured and proportionate to the non-compliance identified and we remain committed to working with reporting entities.

Date Answered: 2014-01-24

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

27. Complaint Against a Reporting Entity Business Practices

Question:
I am basically an internet multilevel marketing whereby I often use payment processors for my financial transactions. I do not have any office nor affiliates in Canada. What happened was that I got scammed/mugged by company ABC inc. I am a member of this payment processor and was falsely accused of purchasing illegal dollars from another member which honestly did not do such a thing. I have contacted and asked them to prove the above action, but they could not do it. Instead, they gave me unrealistic and ridiculous reasons that I have bought illegal dollars ($300) from another member and deducted that amount from my account. They even claimed that I defrauded their payment system which again can not be proven. The tranaction took place over the internet and Company ABC inc. that claims itself to conform to the Fintrac anti money laundering policies has failed to do so and in fact violated such procedures. There were several members who suffered the same loss as me and they were victims of illegal business practice committed by Company ABC. Thus, I would be very grateful if you could help me and other victims to find a fair resolution with Company ABC.
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. We ensure entities are in compliance with the identification, record-keeping, compliance program and reporting requirements of the PCMLTFA and its associated Regulations, so as to facilitate the detection, prevention and deterrence of money laundering and the financing of terrorist activities. Reporting entities subject to the PCMLTFA and its associated Regulations must send FINTRAC certain reports (e.g., electronic funds transfer reports, large cash transaction reports, etc.), and are required to use FINTRAC’s web-based tool, F2R, to send these reports, if they have the technical ability to do so. Based on the information you have provided, you are not a reporting entity; rather you would like to report a complaint to FINTRAC with respect to actions carried out by Company ABC. FINTRAC’s web-based tool, F2R, is not meant for this, so we cannot enrol you. Should you have suspicions that activities by this entity may relate to money laundering or the financing of terrorist activity, please follow the steps outlined on FINTRAC’s “Providing voluntary information about suspicions of money laundering or of the financing of terrorist activities”. However, it is important to note that, although FINTRAC administers the PCMLTFA and its associated Regulations, to which Company ABC is subject as a money services business in Canada, we do not oversee the day-to-day business operations of the company, or any reporting entity subject to the PCMLTFA. As a business in Ontario, Company ABC may be subject to the consumer protection and business licensing statutes administered by the Consumer Protection Branch of the Ministry of Business and Consumer Services of Ontario. We encourage you to raise your concerns with the Consumer Protection Branch.

Date Answered: 2014-01-22

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

28. Registered Deposit Brokers are not Reporting Entities

Question:
There was a policy interpretation of Deposit Brokers back in 2006 which stated: "The deposit broker is not a securities dealer as defined in the Regulations. As a consequence, the credit union cannot avail themselves of the exception to subsection 9(1) of the Regulations provided by subsection 9(4)." We would like to confirm that this interpretation still stands. Based on what they do "A Deposit Broker is an independent financial professional who specializes in guaranteed investment products such as GICs, term deposits, RRSPs, RRIFs and LIFs. It isn't easy to find this degree of specialization in a world that is inclined to focus on investments that carry higher risk and require sophisticated investor market knowledge" , they are not Securities Dealers and they still do not fall under our purview. Can you please confirm?
Answer:

Registered Deposit Brokers are not reporting entities subject to the PCMLTFA. However, they may act as the agent of a reporting entity at which point they would be required to carry out the applicable requirements for the PCMLTFA. As with any principal/agent situation, the principal, as the reporting entity, would be ultimately responsible for the appropriate application of the PCMLTFA. That said, securities dealers may also engage in deposit broker activities. In these instances, they would be covered as a principal reporting entity under paragraph 5(g) in addition to the requirement to have an agent agreement in place with the financial institutions.

Date Answered: 2014-01-14

Activity Sector: Securities dealer
Obligation: Other Other
Guidelines: 6E
Act: 5(g)

29. Casino - Covered or not?

Question:
Last year, the provincial government merged the ABC 123 and the ABC 456 Commission. We are now the ABC 123. A question recently came up from our executive management, would our 123 retail outlets fall under the FINTRAC legislation reporting requirements?
Answer:

As outlined in section 5(k) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), Part 1 applies to casinos, as defined in the Regulations, including those owned or controlled by Her Majesty. In subsection 1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) “ ‘casino’ means a person or entity that is licensed, registered, permitted or otherwise authorized to do business under any of paragraphs 207(1)(a) to (g) of the Criminal Code and that conducts its business activities in a permanent establishment (a) that the person or entity holds out to be a casino and in which roulette or card games are carried on; or (b) where there is a slot machine, which, for the purposes of this definition, does not include a video lottery terminal. It does not include a person or entity that is a registered charity as defined in subsection 248(1) of the Income Tax Act and is licensed, registered, permitted or otherwise authorized to carry on business temporarily for charitable purposes, if the business is carried out in the establishment of the casino for not more than two consecutive days at a time under the supervision of the casino. (casino)” Should the 123 stores be conducting business activities in a permanent establishment held out to be a casino and in which roulette or card games are carried on; or where there is a slot machine, which, for the purposes of this definition, does not include a video lottery terminal, then the 123 stores may be reporting entities subject to the PCMLTFA and its associated Regulations. However,a provincial government announced the amalgamation of ABC 123 and ABC 456 into a new entity – ABC 123, with the responsibility of operating 123 stores. As such, it may be the ABC 123 that is the reporting entity required to assume all regulatory compliance responsibilities related to casino activities, both table games and slot operations, should these be carried out in the 123 stores.

Date Answered: 2013-12-30

Activity Sector: Casino
Obligation: Other
Regulations: 1(1)
Act: 5(k)

30. Content of an agency agreement

Question:
Does an agency agreement have to meet the following minimum criteria in order to be considered an “agreement in writing" within the meaning of section 64.1 of the Regulations? 1. Be entitled "Agency agreement" and/or include a paragraph clearly stating the role of the third party and the reporting entity. 2. Include a clarification to the effect that the agent shall act in accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (hereinafter referred to as the Act) and its regulations. 3. Not include erroneous information on how to identify clients. 4. Contain the signatures of the reporting entity's representative and the agency's representative?
Answer:

Subsection 64.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) indicates 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." Moreover, subsection 64.1(2) of the Regulations states that, "A person or entity that enters into an agreement or arrangement referred to in subsection (1) must obtain from the agent or mandatary the customer information obtained by the agent or mandatary under that agreement or arrangement." When an entity uses the services of an agent or mandatary to meet its requirement to ascertain the identity of its clients, the entity must (1) have entered into a written agreement or arrangement for this purpose. The entity must also (2) obtain from the agent or mandatary the customer information obtained under the agreement or arrangement. If these two conditions are met with respect to the written agreement or arrangement and customer information has been obtained, anyone, including an entity, can act as an agent or mandatary. The PCMLTFR does not prescribe what should be included in the written agreement or arrangement between the parties. We note that we have already stated, in the past, that the written agreement or arrangement must include provisions specifying the obligations of each party and provisions authorizing the agent or mandatary to act on behalf of the entity to take measures to ascertain identity. Also, in the past, we said that it was necessary to reiterate the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) relating to identification methods to be used depending on whether the client was present or absent. However, it is not necessary to reiterate this in the written agreement or arrangement. The reporting entity can use other means of conveying identification methods to be used by its agent or mandatary. It is the reporting agency's responsibility to ensure that the policies, procedures and tools used to comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) and the PCMLTFR, such as an agency agreement or arrangement, at least meet the requirements of the Act and its associated Regulations. Given the differences between the various industries and reporting entities within these industries, the reporting entities are better positioned than we are to establish their written agreements or arrangements. Thus, FINTRAC is not in a position to create a "basic" agency agreement template for reporting entities to be used, as needed.

Date Answered: 2013-12-20

Activity Sector: Securities dealer
Obligation: Other
Guidelines: 6E
Regulations: 64.1(1)

31. OMERS Sponsors Corporation - Public Body

Question:
Does OMERS Sponsors Corporation fit in the definition of a "public body"? If not does OMERS qualify under the registered pension plan exception?
Answer:

Public Body Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines public body as: (a) any department or agent of Her Majesty in right of Canada or of a province; (b) an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them; and (c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or any agent of such an organization. As stated in previous policy interpretation determinations, it is a question of fact to determine whether an entity is considered a public body. Subsection 22(2) of the OMERS Act 2006 states that “the Sponsors Corporation is not a Crown agency and it is not a local board as defined in subsection 1 (1) of the Municipal Act, 2001.” Therefore, it is our understanding that OMERS Sponsors Corporation does not fit the definition of a "public body" as found in subsection 1(2) of the PCMLTFR. Should the reporting entity believe otherwise, we would encourage as a best practice to maintain evidence to support their determination. Pension Plan Exception According to paragraph 62(2)(k) of the PCMLTFR, the exception to record-keeping and ascertaining identity, which the RE is referring to below, includes 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. While the Regulations do not define the concept of an “account”, the real estate sector is not recognized as having accounts. The prescribed account opening obligations apply only to financial entities, securities dealers and casinos. As the real estate sector does not have accounts, the exception found in paragraph 62(2)(k) of the PCMLTFR cannot be applied by same. Although there are references to general exceptions in FINTRAC’s guidelines, Guideline 6B for Real Estate has no reference to this specific exception.

Date Answered: 2013-12-17

Activity Sector: Real estate
Obligation: Other
Guidelines: 6B
Regulations: 1(2), 62(2)(k)

32. Accounts opening

Question:
• Company ABC provides outsourced chief investment officer services to ultra-high net worth Canadian families by selecting and monitoring managers and funds for their clients • More specifically, Company ABC assists their clients in determining their risk tolerance and appropriate return objectives, which they document in an investment policy, and then helps to implement these policies through the selection of a variety of managers and/or funds • Company ABC advises that the client opens the holding account with the fund manager. “We select and monitor managers and funds for our clients and they then open accounts directly with those managers and funds”. As this indicates, Company ABC does not seem to be directly opening the accounts that will be holding the funds. • In addition to monitoring services, Company ABC also prepares quarterly reviews of each client’s holdings that are discussed with their clients to ensure they understand their various holdings • There is a direct contract or agreement between the client and the manager or fund that has been selected • Company ABC’s relationship agreement form is very similar to the type of form used by money managers for account opening and ensures that Company ABC obtains the client information needed to assist them in preparing the account opening materials for the managers with whom they will be opening accounts • Company ABC’s clients are able to hold their entire portfolios and continue all manager relationships regardless of whether they continue to deal with Company ABC • There is no account for any client at Company ABC that holds any of their assets • Company ABC is registered as a portfolio manager as they provide investment advice to their clients, but this advice is implemented solely through accounts opened with outside managers and funds. Does Company ABC open accounts for its clients?
Answer:

If Company ABC 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, they are considered a securities dealer subject to Part 1 of the PCMLTFA and its related regulations. Based on the information provided by Company ABC, namely, that, “We provide an advisory and monitoring service to our clients, and facilitate their dealings with managers by reviewing and preparing documentation and providing quarterly reviews of their combined holdings across their managers,” it would appear that Company ABC is providing investment advice. As a securities dealer under the PCMLTFA, certain legislative requirements apply to Company ABC, namely: • reporting STRs, TPRs, LCTRs; • record keeping; • having a compliance regime; and • ascertaining identity. An “account” is not defined in the PCMLTFA and can potentially mean different things depending on the context. In the given situation, Company ABC has advised that they do not have client accounts that hold their clients assets but that they complete relationship agreement forms that require sufficient client information to enable them to open accounts with various fund managers on their clients’ behalf. Based on the foregoing, it would appear as though Company ABC is a securities dealer subject to Part 1 of the PCMLTFA and its associated regulations that is opening accounts for its clients.

Date Answered: 2013-12-17

Activity Sector: Securities dealer
Obligation: Other
Act: 5(g)

33. DPMS - Foreign Gold

Question:
Company ABC has signed an agreement with Company DEF to purchase Gold Dore bars from their operations in Ghana. […] the Seller is paying for the shipment of their product to the Buyer’s chosen refinery. We have selected a refinery in Texas. The refinery will process the shipment and pay out within 24 hours after final assay. Payments will be directed to the company’s bank account at Bank A, NY. […] After all payouts have been made, the balance of the funds will be transferred to the company’s bank accounts in Canada.” The headquarter is located in Canada. Does our company is considered a dealer in precious metals and stones (DPMS) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines a DPMS as an individual or an entity that buys or sells precious metals, precious stones or jewellery, in the course of its business activities. Precious metal includes gold, silver, palladium or platinum in the form of coins, bars, ingots or granules or in any other similar form. A DPMS will be subject to Part 1 of the PCMLTFA and its associated regulations if it is ever engaged in the purchase or sale of precious metals, precious stones or jewellery in an amount of $10,000 or more in a single transaction (s. 39.1 of the PCMLTFR). In other words, it is not subject to these requirements if it is engaged only in purchases or sales of less than $10,000 per transaction. The purchases or sales referred to above exclude those carried out for, connected with, or for the purpose of: • manufacturing jewellery; • extracting precious metals or precious stones from a mine; or • cutting or polishing precious stones. Based on the information you have provided, it would appear that your entity is engaged as a DPMS in Canada as per the PCMLTFA and its associated Regulations and has the following obligations. You must report any large cash transaction of $10,000 or more you receive, and have record keeping obligations in regards to that transaction. You must also report any suspicious transactions, as well as terrorist property reports. You also have a number of other record keeping obligations, ascertaining identity in certain situations, third party determination, and you must also implement a compliance regime.

Date Answered: 2013-12-05

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

34. Caisse as a financial entity - Exclusion of Quebec

Question:
As of July 31, 2010, all Centrals are recognized as financial entities (FEs). Centrals (except in Quebec) are covered only when they deal with the public (i.e., FEs not members of the credit union). Electronic funds transfers (EFTs) are only reportable by the Centrals if they are initiated by the Central's clients. Why is Quebec excluded?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations defines "financial services co-operative" as "a financial services co-operative that is regulated by An Act Respecting Financial Services co-operatives, R.S.Q., c. C-67.3, or An Act Respecting the Movement of the RE, S.Q. 2000, c. 77, other than a caisse populaire." Furthermore, subsection 11.2(1) stipulates that "Part 1 of the Act applies to financial services co-operatives." This subsection does not impose any limits in terms of which activities of financial services co-operatives are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act; hence, all activities carried out by financial services co-operatives, such as the Caisse, are therefore subject to Part 1 of the Act. In this regard, the Caisse populaire (as a financial services co-operative that is not a central credit union) differs from central credit unions, which are only subject to the Act when they provide services for the public (as stipulated in subsection 11.2(2) of the Regulations). Furthermore, financial services co-operatives are considered as "financial entities" according to the definition in subsection 1(2) of the Regulations. As a result, when conducting all their activities (and not just those activities offered to the public), they must comply with the obligations imposed on financial entities. The Caisse has also confirmed that clients requesting an electronic funds transfer are aware that it is ultimately carried out through the Caisse. In the conditions governing international money transfers, it is stipulated that "the business agrees and acknowledges that the execution of some transactions covered hereunder or stemming here from may be entrusted by the Caisse to a third party and, in this capacity, for the transactions entrusted to it, this agent is bound to the same obligations, and benefits from the same waivers of liability, as the Caisse." Finally, the Caisse has already informed us that it only offers its services to the following clients: components of the Movement, the public and parapublic sectors, governments and large businesses. The Caisse does not act as a service provider in its dealings with its clients.

Date Answered: 2013-12-02

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Other
Regulations: 1(2), 11.2(1), 11.2(2)
Act: 5(b)

35. Public Body Exemption - LCTR

Question:
The CU needs to know whether public body is exempted for both LCTR and EFT. I explained to her that the exemption only applies to LCTR, not EFT and I could not provide her the rationale behind. The CU however, insisted that they wanted to know the reason. Could you provide me with rationale?
Answer:

Paragraph 12(1)(a) of the PCMLTFR states that “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre: the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body”. Paragraphs 12(1)(b) and (c) of the PCMLTFR state that “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre: […] the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be”. This exemption only applies in the case of LCTRs because it is expressly written in the Regulations. It does not apply to EFTRs because the Regulations are silent about it. As for what is the policy intent of this exception, the Department of Finance would be in a better position to answer this question.

Date Answered: 2013-11-29

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

36. Legislative changes

Question:
Would the public be informed if any legislative changes should be made that might apply to types of businesses not currently covered under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act?
Answer:

To answer your question, in the event of future regulatory changes, FINTRAC would produce guidance to help interpret any amendments and this guidance would be published in advance of a coming into force date.

Date Answered: 2013-10-02

Activity Sector: Money services business
Obligation: Other

37. Agent of an Assurance Company

Question:
ABC Inc is primarily a pension and benefits consulting company. We are an agent of an Assurance Company, who hold our licenses. The majority of our business is commission based, with no more that 15% being fee for service. We work primarily with corporations and unions on their benefit and retirement plans. Less than 10% of our revenue is for sales of individual term life insurance. We also sell individual disability and critical illness insurance, which amounts to less than 5% of our income. We currently have in force 3000 individual and critical illness policies that are part of mandatory programs with unions or employers. Through specialty underwriters we provide disability continuation programs for terminated employees - primarily executives. We do not accept cash and cheques are payable directly to the insurers. Fee for services are billed to our clients and paid directly to our firm. Any annuities sold (which for us amounts to 1 every 2 years or so) are purchased with registered funds. ABC Inc carries Errors and Omissions Insurance above the maximum required both for the corporation and the two licensed individuals within the company. ABC Inc is registered in every province and territory in Canada and is licensed in every province and territory, with the exception of Quebec (which we are currently working towards). Based on this information, which transactions do we have to report to FINTRAC?
Answer:

The legislative requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) are applicable to life insurance companies, brokers or independent agents. However, if you are a life insurance agent and an employee of a life insurance company or broker, these requirements are the responsibility of the life insurance company, except with respect to reporting suspicious transactions and terrorist property, which is applicable to both. Life insurance broker or agent is defined under subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) as, “a person or entity that is registered or licensed under provincial legislation to carry on the business of arranging contracts of life insurance.” A life insurance company is defined as, “a life company or foreign life company to which the Insurance Companies Act applies or a life insurance company regulated by a provincial Act.” Subsection 6(2) of the PCMLTFR specifies that, where a person or entity who is subject to the requirements of these Regulations, other than a life insurance broker or agent, is an agent of or is authorized to act on behalf of another person or entity referred to in any of paragraphs 5(a) to (l) of the Act, it is that other person or entity rather than the agent or the authorized person or entity, as the case may be, that is responsible for meeting those requirements. You have advised that ABC Inc is “an agent of an Assurance Company”, that it does not accept cash and that cheques are payable directly to the insurers. Given the foregoing, it appears as though ABC Inc is life licensed and authorised to sell life insurance. Since ABC Inc falls within one of the above definitions, it is covered under the PCMLTFA and has certain obligations. Based on the information you provided, namely that ABC Inc does not accept cash and that cheques are payable directly to the insurers, it appears that you must only report suspicious transactions, as well as terrorist property. You additionally have to implement a compliance regime. Should your business model change in the future, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

Date Answered: 2013-09-20

Activity Sector: Life insurance broker or agent, Life insurance company
Obligation: Other
Regulations: 1(2), 6(2)

38. 2 year review

Question:
1. If, during a 1st exam, only the 2-year review of the 5 regime elements is cited as deficient (missing/total absence) because the RE failed to conduct a review in the two year period window that was available to it since its last review (two years ago), FINTRAC could return within 6 months for example and expect that the would have started, as a remedial action, the two-year that it failed to perform previously, correct? (I say yes) • If we expect a RE to start a “missing” two year review within 6 months, then technically we could cite for “missing” in a second exam if the RE failed to start it, correct? 2. Because the RE missed the two year window, does this mean that a new two-year window re-starts, whereby which a RE that “starts” the review within 6 months following the first exam’s findings still benefits from a two year window from the date of the findings to fully complete the 2-year review for which it was originally cited? (I don’t think the 2-years re-starts. But if not, at what point in time after the findings do we expect the RE to have completed it?). 3. If in the first exam, PPs, RBA, Training and Review were cited as deficient (missing/total absence), you agree that we cannot expect the RE to have started a review within 6 months for example because the review relies on the other 3 elements, correct? RCO should scope out the review for follow up exams in these cases.
Answer:

Paragraph 71(1)(e) of the Proceeds of Crime Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that a person or entity shall implement the compliance program by “instituting and documenting a review of the policies and procedures, the risk assessment and the training program for the purpose of testing their effectiveness, which review is required to be carried out every two years by an internal or external auditor of the person or entity, or by the person or entity if they do not have such an auditor”. Subsection 37(1) of the Interpretation Act defines the expression “year” by “any period of twelve consecutive months”. Based on the above, our position is that a review must be started no later than 24 months from the start of the previous review and completed prior to the start of the next review. 1. In a case where only the 2-year review, out of the 5 elements of an RE’s compliance program, is cited as deficient, it is our position that at the time FINTRAC returns to examine the same RE (for example, 6 months after this deficiency was cited), the 2-year review must have started. If the RE has not started the 2-year review, FINTRAC can cite the 2-year review as deficient. 2. The date the review starts is also the date the clock starts. This means that if the RE missed the 2-year window and started its 2-year review 6 months later, the clock re-starts and the RE will have 24 months to complete it. 3. In a case where the 2-year review and other elements of the compliance program were cited as deficient, our position is that at the time FINTRAC returns to examine the same RE (for example 6 months after these deficiencies were cited), the 2-year review must have started. The other elements of the compliance program must be reviewed, even if missing. The idea is that if the RE has a compliance program, it must be reviewed. The 2-year review will show what elements of the compliance program are missing and need to be developed or improved.

Date Answered: 2013-08-22

Obligation: Other
Regulations: 71(1)(e)

39. Development of Sound Business and Financial practices

Question:
I’m looking for answers on minimum standards for the development of sound business and financial practices for ensuring that FIs have adequate “know your customer” and “anti-money laundering” controls and procedures in place as well as for identifying report / escalation requirements in case of ML/FT activity.
Answer:

I understand that you are seeking clarification on the minimum standards for sound business and financial practices for ensuring financial entities have adequate anti-money laundering controls and procedures in place. Also, you are seeking further information on identifying reporting requirements for financial entities. Regarding your questions about financial entities implementing adequate controls and procedures to fulfill their compliance obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), I can suggest you visit FINTRAC’s website. This link provides specific information about the requirements of financial entities in relation to performing customer due diligence (also known as ascertaining identity), submitting reports, and having a compliance regime, among other obligations under the PCMLTFA and its associated Regulations. While you may have already read the information above, as well as other FINTRAC publications, I would like to reinforce that FINTRAC does not provide the specific information about sound business and financial practices that you are requesting. FINTRAC’s guidance is not prescriptive; however, it explains the minimum requirements of reporting entities to fulfill their obligations while providing them with flexibility in doing so. Lastly, FINTRAC is not in the position to endorse specific products and services.

Date Answered: 2013-07-23

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

40. Watches - Considered jewellry or not

Question:
Does watches can be considered jewellery within the definition of a “dealer in precious metals and stones” found in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR)?
Answer:

Subsection 1(2) of the PCMLTFR defines a dealer in precious metals and stones as, “a person or an entity that, in the course of its business activities, buys or sells precious metals, precious stones or jewellery.” The PCMLTFR also defines jewellery as “objects that are made of gold, silver, palladium, platinum, pearls or precious stones and that are intended to be worn as a personal adornment”. It additionally explains that precious metals include gold silver, palladium or platinum and precious stones include diamonds, sapphires, emeralds, tanzanite, rubies or alexandrite. As such, a watch would be considered jewellery if it is made of the aforementioned precious metals, stones and/ or pearls.

Date Answered: 2013-07-22

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

41. Cash-in-Transit Corporation - Not covered

Question:
Is the ABC Cash-in-Transit Corporation subject to Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act)?
Answer:

Based strictly on the information you shared with us, i.e., that you offer "cash-in-transit" services, including "cash custody; collection and processing of deposits from financial and commercial institutions; preparation and delivery of cash orders; and replenishment and settlement of ATMs," at this stage, you do not appear to be subject to Part 1 of the Act.

Date Answered: 2013-07-18

Obligation: Other
Regulations: 1(2)

42. Financial Entity

Question:
ABC is a cooperative registered with the BC Corporate Registry, meeting the requirements of the Cooperative Association Act. Our membership primarily consists of caregivers and temporary workers from the Philippines. The business ventures the cooperative collectively decided on undertaking are a money remittance service to the Philippines and micro-lending to it's members. These 2 business activities are very important to our members and are services frequently availed of by our members from a multitude of providers across the Lower Mainland. 1. Money Remittance Service to the Philippines Background Our membership base consists primarily of caregivers and temporary foreign workers from the Philippines who send money home to their families 3 to 4 times a month. There is a need to provide this service to our members in a cost effective manner by eliminate costly intermediary costs. The cooperative will maintain an office in Vancouver to carry out its business activities including the processing of remittance transactions. We have chosen to partner with the Bank XYZ, the Philippines' largest bank, to be our last-mile partner in the Philippines, delivering the remittance to the intended beneficiaries' accounts. We will be using Bank XYZ remittance system to process the transactions. Transactions Flow 1. The customer, who is a registered cooperative member, will transact at our business location. 2. The customer indicated the amount to be sent to the Philippines, the identified beneficiary and the form of remittance. This may be a bank-to-bank transfer, door-to-door delivery to the home of the beneficiary or the beneficiary my pick up the remittance at one of Bank XYZ's remittance centers or authorized pick-up point across the Philippines. 3. The beneficiary will pay via a debit card at our bank-provided POS device. No cash will be accepted by the cooperative. This will allow for better monitoring of remittance transactions. 4. The cooperative will check the name of the member against FBI terrorist databases prior to completing the transaction. 5. Once approved, the funds will be released in the Philippines by Bank XYZ, our delivery partner. The cooperative will be maintaining a bank account in the Philippines to allow for the immediate release of remittance funds for the beneficiaries. 6. The cooperative will send the payments collected in Canada to the Philippines via wire transfer at the end of the week, or if the account in the Philippines has been depleted. Cooperative Profit The cooperative will profit from transaction fees and a small spread in the foreign exchange conversion. 2. Micro Lending to Cooperative Members Background The majority of our membership base are in Canada under a temporary workers' visa, and are therefore all employed. Many are new to Canada and have to still build up their credit rating and are, in many cases, unable to apply for credit cards or bank loans. The intention of the cooperative is to provide an avenue wherein our members can available of short term (a maximum of 6 months) loans to augment personal cash flow shortages. Transaction Flow 1. The customer, who is a registered cooperative member, will transact at our business location. 2. The customer applies for a short term consumer loan, which is limited to twice (200%) the value of their shares with the cooperative. 3. The loan committee assesses the application. Once approved, a pre-authorized debit agreement is signed. 4. The cooperative will collect loan payments twice a month from it's customers via debit from their bank account. Cooperative Profit The cooperative profits from charging it's customers 2% per month on the consumer loan. Does ABC needs to register as an MSB in order to trade foreign exchange and engage in a money remittance business?
Answer:

The financial entity sector includes banks (those listed in Schedule I or II of the Bank Act) or authorized foreign banks with respect to their operations in Canada, credit unions, caisses populaires, financial services cooperatives, credit union centrals (when they offer financial services to anyone other than a member entity of the credit union central), trust companies, loan companies and agents of the Crown that accept deposit liabilities. Based on the information you provided, namely that “ABC is a cooperative registered with the BC Corporate Registry, meeting the requirements of the Cooperative Association Act”, it appears that your entity is a financial entity and has legislative requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

Date Answered: 2013-07-18

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

43. Foreign Securities Dealer - Covered or not

Question:
I am a foreign securities dealer exempt from registration in Ontario but doing business under the International Dealer Exemption. I would like to know if a foreign securities dealer is required to report transactions regarding clients outside of Canada to FINTRAC.
Answer:

It is a question of fact to be able to determine what obligations a foreign securities dealer must fulfill. If you would like us to provide a full determination, we encourage you to submit the complete business model of your client outlining his/her activities in Canada along with the Authorizing a Representative Form attached to this e-mail. But here are some general comments: 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”. A foreign securities dealer, even if operating in Canada under an International Dealer Exemption, is authorized by the province to be engaged in the activities described under subsection 1(2) of the PCMLTFR. The person or entity only needs to be 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 to be subject to Part 1 of our Act. As a securities dealer under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), certain legislative requirements apply, namely: • reporting suspicious transactions, terrorist property and large cash transactions; • record keeping; • having a compliance regime; and • ascertaining identity. The “authorized under provincial legislation” indicates that the activities must be conducted in Canada; your client has to develop and apply policies and procedures consistent with record keeping, client identification and compliance regime requirements for its Canadian activities only. It is important to note that to be "authorized" does not necessarily mean that the person or entity must be "registered" with the respective provincial securities commission. Any person or entity that deals in securities in their province is still subject to provincial securities legislation and would therefore meet the PCMLTFA definition of securities dealer. Subsection 7.1 (1) of the PCMLTFA states that “Every person or entity referred to in section 5 that is required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism shall also make a report on it to the Centre, in the prescribed form and manner. In a case where a securities dealer operating under the IDE determines that one of its non-Canadian clients is listed on the Suppression of Terrorism Report, FINTRAC would expect to receive a report of such information if the securities dealer operating under the IDE makes a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism.

Date Answered: 2013-06-10

Activity Sector: Securities dealer
Obligation: Other
Guidelines: 4, 6E
Regulations: 1(2)
Act: 5(g), 7.1(1)

44. Financial Services Association: Cooperative credit associations and cooperative retail associations

Question:
Are Cooperative Credit Associations and Cooperative Retail Associations subject to Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)?
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”. The PCMLTFR also defines credit union central as “a central cooperative credit society, as defined in section 2 of the Cooperative Credit Associations Act, or a credit union central or a federation of credit unions or caisses populaires that is regulated by a provincial Act other than one enacted by the legislature of Quebec”. The definition of financial entity in the PCMLTFA and the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations (PCMLTFSTR Regulations) has been modified on July 31, 2010 to include credit union centrals when the credit union central offers services to anyone other than a financial entity that is a member of that credit union central, based on paragraph 5(j) of the Act. They came in under this paragraph in the Act because they have a triggering activity, and it’s only when this activity is triggered that they are subject to the Act. Subsection 11.2 (1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Part 1 of the Act applies to financial services cooperatives. (2) Every credit union central is subject to Part 1 of the Act when it offers financial services to a person or entity other than a financial entity that is a member of that credit union central.” With respect to Cooperative Retail Associations, they are subject to Part 1 of the PCMLTFA if they fall within the definition of financial entity. More specifically, ABC is an association that is organized and operated on cooperative principles, permitted to act as a deposit-taking institution, and subject to the same restrictions and safeguards as other deposit-taking institutions. ABC may provide services to non-members, and take deposits from non-members, and is regulated by the Cooperative Credit Associations Act. Therefore, ABC is subject to Part 1 of the PCMLTFA since they fall within the definition of financial entity.

Date Answered: 2013-05-27

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Other Other
Regulations: 1(2), 11.2, 45
Act: Part 1

45. Valcartier and Bagotville military bases – Public body or not?

Question:
Do Canadian military bases meet the definition of "public body" as set forth in subsection 1(2)? And, if so, I should imagine that the reporting entitity is not required to submit LCTRs for cash deposits of $10,000 or more made by base personnel, as stipulated in paragraph 12(1)(a)?
Answer:

Subsection 1(2) of the PCMLTFR defines a public body as (a) any department or agent of Her Majesty in right of Canada or of a province; (b) an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them; and (c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or any agent of such an organization. The Valcartier and Bagotville bases are Canadian Forces bases in Quebec that operate within the Canadian Forces, which is "a department of Her Majesty in right of Canada." They were established under the National Defence Act. Consequently, the Valcartier and Bagotville bases are Canadian Forces bases that fall under the definition of public bodies. Therefore, as provided for in paragraph 12(1)(a) of the Regulations, the reporting entity is not required to submit LCTRs to the Centre for cash deposits of $10,000 or more made by base personnel.

Date Answered: 2013-05-07

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

46. Representative present during an examination

Question:
Does a reporting entity have the right to be represented or assisted by a third party during a FINTRAC examination?
Answer:

There are no specific conditions in our Act and its associated Regulations permitting an individual to represent a reporting entity. Hence, anyone that a reporting entity has authorized to represent it must be accepted by the Centre as the representative of the reporting entity.

Date Answered: 2013-05-07

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

47. Securities dealer (APPQ) – Covered or not?

Question:
Does a entity such as the Association des policières et policiers provinciaux du Québec (APPQ) meet the definition of "securities dealer" set forth in our Regulations and, as a result, is it subject to Part 1 of our Act?
Answer:

According to paragraph 5(g) of the PCMLTFA, "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. In the past: We focused on the term "authorized" when determining whether an investment fund management entity falls under the definition of "securities dealer" and, as such, is subject to Part 1 of the Act. We also maintained that, if it was possible to find the name of the entity or individual in the provincial register of businesses and individuals authorized to practice, then the business or entity was clearly authorized. On this basis, we declared investment fund managers to be reporting entities pursuant to paragraph 5(g) of the PCMLTFA. New elements taken into consideration for our new position: By definition, investment fund managers "direct the business, operations or affairs of an investment fund. They organize the fund and are responsible for its management and administration. For example, a mutual fund is an investment fund. A firm that manages a mutual fund must therefore register as an investment fund manager." Even though an investment fund manager may be registered in the provincial register of businesses and individuals authorized to practice as an investment fund manager, this does not seem to bestow upon it the authority to conduct security trading activities or to provide investment advice for unit holders. In fact, the investment fund manager's role can be summarized as that of creating investment fund products for its members. These products are then distributed by securities dealers who provide portfolio management and investment advice services. Pursuant to Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations, investment fund managers are exempt from Division 1 (under Part 13) - Dealing with Clients - Individuals and Firms, and Division 1 (under Part 14) - Handling Accounts - Firms.. The AMF (Autorité des marchés financiers) has confirmed that "portfolio management is limited to firms registered in the 'advisor' category, and that it is not one of the activities of an investment fund manager." The AMF also noted that the word "management" in the expression "investment fund management" should be taken to mean the "implementation of all of the human and material resources of a firm or organization for the achievement of its business objectives." Finally, the legislator's intention does not appear to be to subject investment fund managers that create investment products. These managers are not involved in the trading of securities or other financial instruments, or in the provision of portfolio management and investment advice services. These concepts do not include the business objective management. Hence, the security dealers category does not include investment fund managers whose sole responsibility is the creation of investment products. In light of the facts presented by the APPQ, this entity does not appear to be subject to Part 1 of our Act, as it does not fall under the securities dealers category.

Date Answered: 2013-04-10

Activity Sector: Securities dealer
Obligation: Other
Guidelines: 6E
Regulations: 1(2)
Act: 5(g)

48. Tax service company

Question:
Is our tax service company a reporting entity?
Answer:

MSBs have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities: - Foreign exchange dealing; - Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or - Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity). Based solely on the information you provided, namely that the business is “the country’s leading tax service company…providing fast and accurate tax preparation services, to offering reliable bookkeeping and accounting support”, it appears that Company ABC is in the business of providing tax services assistance. Therefore, Company ABC is not, at this time, engaged as an MSB as per the PCMLTFA and its associated Regulations. You do not have to register your entity as an MSB with FINTRAC. However, in regards to being covered as an accountant or an accounting firm, subsection 34(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), states that “subject to subsections (2) and (3), every accountant and every accounting firm is subject to Part I of the Act when they: (a) engage in any of the following activities on behalf of any person or entity, namely, (i) receiving or paying funds, (ii) purchasing or selling securities, real properties or business assets or entities, or (iii) transferring funds or securities by any means; (b) give instructions on behalf of any person or entity in respect of any activity referred to in paragraph (a). Subsection 1(2) of the PCMLTFR defines accountant as “a chartered accountant, a certified general accountant or a certified management accountant”. Accounting firm is defined as “an entity that is engaged in the business of providing accounting services to the public and has at least one partner, employee or administrator that is an accountant”. The obligations for accountants and accounting firms apply only while they are carrying out the triggering activities described above. This means accountants and accounting firms are subject to Part I of the Act, but only when they conduct the above activities on behalf of any individual or entity, or give instructions relating to these activities on behalf of any individual or entity. Should you determine that Company ABC is engaged in any of the activities above, you will be required to contact FINTRAC to enroll as a reporting entity.

Date Answered: 2013-04-02

Activity Sector: Accountant, Money services business
Obligation: Other
Guidelines: FIN-1
Regulations: 1(2), 34(1)
Act: 5(h)

49. Public Trustee of Nova Scotia as Public Body

Question:
Does Public Trustee of Nova Scotia can be considered as a Public Body?
Answer:

In subsection1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, public body is defined as follows: (a) any department or agent of Her Majesty in right of Canada or of a province; (b) an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them; and (c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or any agent of such an organization. The fact that the Public Trustee of Nova Scotia received a power of attorney or a court order from the Supreme Court of Nova Scotia to sell a propery on behalf a mentally incapable person does not the status of public body on the Public Trustee. Consequently, the Public Trustee cannot invoke the exceptions provided for public bodies. The Public Trustee of Nova Scotia must be identified because he or she is the person executing the operation. The Public Trustee would be a third party only if this party received instructions from antoher person. However, as a general rule, we have pointed out that the persons executing a power of attornery or a court order are not usually third parties.

Date Answered: 2013-02-04

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

50. Foreign bank operating in Canada

Question:
When is a foreign bank Schedule 3 Bank, operating in Canada, subject to the PCMLTFA?
Answer:

Any authorized foreign banks, in respect of their business in Canada, are subject to Part 1 of the PCMLTFA. There is no triggering activity test; there are simply covered because they are permitted to carry on business in Canada under the Bank Act. The Bank Act defines authorized foreign bank as “a foreign bank that is the subject of an order under subsection 524(1)”.

Date Answered: 2013-02-01

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

51. Confirmation of the existence of a public body - Casino

Question:
I have a question regarding how FINTRAC governs Casinos and thought maybe you could best answer that. It is my understand that Casino 123 is government owned, does that therefore make them exempt from the PCMLTFA as a Government entity?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines “public body” as: (a) any department or agent of Her Majesty in right of Canada or of a province; (b) an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them; and (c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or any agent of such an organization. As per subsection 59(2) and (3) of the PCMLTFR, you are required to confirm the existence of any corporation or entity, for which you have to keep a client information record, within 30 days of creating this record. In the case of a corporation, in addition to confirming its existence, you have to determine the corporation's name, address and the names of its directors within 30 days of creating the client information record. As per subsection 59(6) of the PCMLTFR, you do not have to perform any of the above identification measures if the entity is a public body or a corporation with which you have an ongoing service agreement referred to in section 32 of the PCMLTFR. The same is true regarding a subsidiary of either of those entities if the financial statements of the subsidiary are consolidated with those of the public body or corporation. In this context, it only applies to a corporation that has minimum net assets of $75 million on its last audited balance sheet. The corporation's shares have to be traded on a Canadian stock exchange or on a stock exchange outside Canada that is designated by the Minister of Finance. The corporation also has to operate in a country that is a member of the Financial Action Task Force (FATF). Section 32 of the PCMLTFR states that “every money services business 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”. If you have an ongoing service agreement with a casino, you are not required to confirm the existence the casino if you determine that this casino is a public body or a corporation as described above.

Date Answered: 2012-12-21

Activity Sector: Money services business
Obligation: Other
Guidelines: 6C
Regulations: 1(2), 59(2), 59(3), 59(6), 32

52. Exception of Universities as public bodies

Question:
Universities are not public bodies. Our regs define a public body as any department or agent of Her Majesty in right of Canada or of a province. An University at Kingston was created by Royal Charter which is amended and added to by an Act of Parliament (Bill S-1001). Consequently, is the University at Kingston an agent of her majesty and thus a Public Body ?
Answer:

Subsection 1(2) of the PCMLTFR defines public body as: (a) any department or agent of Her Majesty in right of Canada or of a province; (b) an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them; and (c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or any agent of such an organization. We have said in the past that it would be a question of fact, on a case to case basis, to determine if a school is considered a public body. The structure in regards to schools is not uniform either provincially, and even more so nationally. Therefore, it would depend on each school. The real matter is determining the government’s involvement and what is the significant degree of governmental control over the school board, to be considered an agent of the government, i.e. how is the government actually involved? The school board having taxation powers or having public elections for trustees of the school board does not equate being an agent of the crown. However, looking at who exercise a degree of ongoing influence in the body’s governance and decision-making, namely who elects or names the board of directors, the director, etc. can give you a better understanding. The basic issue comes down to determining who the school board answers to and how the government is involved. With respect to the University at Kingston, we reviewed the ABC University Introduction (October 2011) document and note the following: • The University was created by Royal Charter; • The Royal Charter has been amended when the composition of the Board of Trustees and University Council was changed (made by the Parliament of Canada which has exclusive jurisdiction over any changes to the Charter of the University); However, there is nothing conclusive permitting to establish that the government has a significant degree of control over the University, its Corporate Body, its Trustees, Senate or University Councils. Therefore, ABC University does not qualify as a public body.

Date Answered: 2012-12-12

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

53. s.62(2)(m)- Definition of public body

Question:
Section 62(2)(m) makes reference to a "public body" : "...where the entity is... a PUBLIC BODY...and operates in a country that is a member of the FATF..." How should we interpret "public body" ? Is it the PCMLTFR definition only that should be applied? Or is it the general definition of public body (i.e. States of the Netherlands)?
Answer:

Below is the response to your question regarding Section 62(2)(m) making reference to a "public body." Section 62(2)(m) of the PCMLTFR is in regards to “instances where the entity in respect of which a record is otherwise required to be kept is a public body…” This section of the PCMLTFR is specifically referring to how public bodies are considered within the context of record-keeping and ascertaining identity; however, subsection 1(2) of the Regulations defines “public body” in itself. 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. Since we are provided with a definition of “public body” in the Regulations, it is this definition we can apply in our policy interpretations, and The States of the Netherlands does not satisfy this definition in that it is none of a) through c) in the definition provided above.

Date Answered: 2012-12-05

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

54. Exemption under paragraph 62(2)(k) of the Regulations

Question:
XYZ Inc.has its head office in Montreal and all its employees work there. XYZ has no subsidiaries in the US; however, the company is duly registered to carry out business in the US in the securities sector. XYZ Inc. works primarily with institutional clients, e.g., managing pension funds. When opening US pension fund accounts, advisors do not take steps to identify signatories, since the head of compliance at XYZ believes that, as is the case for Canadian pension funds, and pursuant to 62(2)(k), US pension funds are exempt from identification obligations imposed by law. Furthermore, according to the compliance officer, US law includes an exemption regarding the identification of pension fund signatories; hence, XYZ applies the US law in the case of American insitutional clients. QUESTION : 1) Does the exemption under paragraph 62(2)(k) of the Regulations also apply to a pension fund based outside Canada?
Answer:

As stipulated in paragraph 5(g)of the PCMLTFA, Part 1 of the Act applies to "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." Pursuant to the provincial authorization, the activities must be carried out in Canada. The following are some comments regarding the case described below: 1. If the account in opened in Canada: As you clearly indicated, the exception to bookkeeping and ascertaining identity provided for in paragraph 62(2)(k) of the PCMLTFR 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." Since this case involves the opening of a US pension fund account, the exception provided for in paragraph 62(2)(k) of the PCMLTFR does not apply. Pursuant to subsection 57(1) of the PCMLTFR, XYZ Inc. must 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)." 2. If the account is opened in a foreign country: XYZ Inc. has no obligations under the PCMLTFA and its associated Regulations.

Date Answered: 2012-11-16

Activity Sector: Securities dealer
Obligation: Other
Regulations: 23(1), 57(1), 62(2)(k), 64(1)
Act: 5(g)

55. Reporting entity- status determination by FINTRAC

Question:
Description of the activities: Established in Quebec, the company has acquired expertise in the area of catalyst recovery, and operates at the national and international levels. The company's revenue base is derived from the refining of precious metals from automotive catalysts. First of all, the catalysts are bought from suppliers in Quebec, the other Canadian provinces, the US and other countries. Most of the catalysts are bought individually, with the price determined according to the amount of metals contained in each model and the value of the metals at the time of purchase. The precious metals in question are platinum (Pt), palladium (Pd) and rhodium (Rh). Our facilities include a laboratory where the metal content of catalysts is analyzed in order to determine the price for each catalyst category. The catalysts are opened up at our plant so that the ceramic material containing the metals can be recovered. It is then roughly ground up. The end product is wrapped and sent to a refinery in Columbus, Montana, where it is analyzed to determine the actual quantities of each metal. The price of the metals is determined based on market value and according to a prior agreement with our client. We conduct our own analyses to determine the approximate value of each batch and also to ensure that our results match those of the refinery.
Answer:

You explained that the company usually buys the catalysts from scrap yards, and that you recover the ceramic containing the precious metals from the catalysts and sell the ceramic with the precious metals to a US company, which has the necessary equipment to melt the ceramic and the precious metals. The company does not receive the precious metals, as they are sold along with the ceramic. I then asked you why the following appears on your website: "Thus offering the best financial services, checks, bank wire transfers and cash. We can also help on the transportation and customs services if needed." You stated that these were the methods of payment available when you bought catalysts. You added that you do not provide MSB services in addition to what you do. I also gave an example: if I, as an individual, wanted to send funds electronically to my mother in France, could I use your money transfer services? Your answer was no. As was explained above, a dealer in precious metals and stones means an individual or an entity that buys or sells precious metals, precious stones or jewellery, in the course of its business activities. According to the regulations, "precious metals include gold, silver, palladium or platinum whether in coins, bars, ingots, granules or in any other similar form." You are subject to the requirements listed below if you ever engage in the purchase or sale of precious metals, precious stones or jewellery in an amount of $10,000 or more in a single transaction. In other words, you are not subject to these requirements if you engage only in purchases or sales of less than $10,000 per transaction. The purchases or sales referred to above exclude those carried out for, connected with, or for the purpose of: - manufacturing jewellery; - extracting precious metals or precious stones from a mine; or - cutting or polishing precious stones. However, metal recovery businesses that conduct transactions exceeding $10,000 that are not connected with the manufacturing, extraction or processing of precious metals may be subject to Part 1 of the Act, as dealers in precious metals and stones. Based on the information you provided us, you do not appear to be a dealer in precious metals and stones and so your company is therefore not subject to our Act and its associated Regulations. Should your business model change, we would appreciate it if you would contact us so that we can review your business model and re-evaluate our interpretation in light of these new facts.

Date Answered: 2012-11-08

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

56. Canadian depository for securities dealers

Question:
We have received some questions internally as to the application of the PCMLTFA to various financial entities. 1. Is the ABC Securities a reporting entity under s.5 of the PCMLTFA? 2. Are XYZ reporting entities under s.5 of the PCMLTFA? 3. How does s.5 PCMLTFA apply to the various entities involved in the distribution channel of mutual funds? Are mutual funds trusts and mutual funds corporations subject to s.5 of the Act?
Answer:

1. Is ABC Securities a reporting entity under s.5 of the PCMLTFA? Subsection 5(g) of the PCMLTFA 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 our Act. The principal objective of the ABC Securities is to contribute to the improved efficiency of the financial sector of the Canadian economy through provision of automated facilities for clearing of securities transactions and custody of securities. The ABC Securities has been recognized as clearing agencies by the OSC and l’Autorité des marchés financiers. ABC Securities is owned by the major Canadian chartered banks and by the Investment Industry Regulatory Organization of Canada (IIROC) and the TSX Inc. It is our opinion that ABC Securities does not fall under the 5(g) of the PCMLTFA, and therefore is not subject to any obligations under our Act. Their mandate is to build a centralized depository service and create an electronic clearing and settlement system to handle the trading volumes on Canada’s exchanges and over-the-counter markets, in other term, an on-line, real-time national clearinghouse for money market and equity transactions. 2. Are XYZ reporting entities under s.5 of the PCMLTFA? XYZ reporting entities manage investment funds, sponsored by labour organizations, that have a specific mandate to invest in small to medium-sized businesses. XYZ reporting entities may be incorporated pursuant to enabling legislation either federally or in a variety of provinces, and is subject to restrictions set out in the legislation. In particular, it must have a labour union sponsor, which controls the fund but has no ownership interest, is open only to individual investors (who need not have a high net worth), and must invest in firms based within the sponsoring jurisdiction. To encourage this mandate, governments offer generous tax credits to investors in XYZ reporting entities. Subsection 5(g) of the PCMLTFA 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 our Act. The definition of a securities dealer does not refer to registration but rather to being “authorized” to provide investment management services or advice. Therefore, the fact that one is exempted assumes that a provincial authority “authorizes” the entity to operate without being registered. Therefore, exempted entities, such as XYZ reporting entities that are exempted from registration, are covered under our Act. With respect to question 3, DoF states that “However, the application of the Act must be assessed on a case-by-case basis as persons or entities would only be captured where the both (a) are “authorized under provincial legislation” and (b) they conduct the activities designated under the section 5 definition” – under 5(g) of the PCMLTFA the person or entity only needs to be 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 to be subject to Part 1 of our Act. With respect to commenting “on the specific responsibilities and structure of a Mutual Fund Trust or Corporation to determine what obligations, if any, they may be subject to under the PCMLTFA”, it would be a question of fact to determine what obligations Mutual Fund Trust or Corporation must fulfill. These Mutual Fund Trust or Corporation are invited to communicate with FINTRAC if they have additional questions.

Date Answered: 2012-09-26

Activity Sector: Securities dealer
Obligation: Other
Regulations: 1(2)
Act: 5(g)

57. Covered

Question:
The business activity of ABC is outlined as such: 1) Client contacts ABC to buy natural coloured diamonds. 2) Once the quantity and price is agreed upon, the client is informed that payment is required and is put in touch with ABC’s Associate company in Florida. 3) The client then sends the payment to ABC’s Associate company in Florida. 4) ABC’s Associate company then sends the diamonds to the client in Canada. 5) ABC’s Associate company sends a commission payment to ABC in Canada. Are these activities covered by the PCMLTFA?
Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines a dealer in precious metals and stones (DPMS) as “a person or entity that, in the course of its business activities, buys or sells precious metals, precious stones or jewellery.” However, as indicated in Section 39.1 of the PCMLTFR, it is only once a dealer in precious metals or stones engages in the purchase or sale of precious metals, precious stones or jewellery in an amount of $10,000 or more in one transaction, regardless of how it is paid, that they become subject to the PCMLTFA and the obligations outlined therein. If ABC has engaged solely in the activity outlined in steps 1-5 above, namely acting as a broker, then it is not subject to the Act.

Date Answered: 2012-09-11

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

58. Factoring entities

Question:
I am having trouble pinpointing the activity sectors of certain REs that I have found to constitute ‘factoring entities’. Based on research I’ve done, as well as the Wikepedia definition, I am unsure as to whether or not these entities are covered by our Act. ‘Factoring entities’ are mentioned in various pieces of legislation, including the Trust and Loan Companies Act itself, but I still cannot make the necessary conclusions. There is no rush on this, but would you mind looking into this and potentially offering insight as to whether or not these REs would be covered by us, and if so, the activity sector in which they belong?
Answer:

For an entity to be a reporting entity subject to the PCMLTFA, it must fall within one of the categories of reporting entity outlined in section 5 of the Act. ‘Factoring entities’ do not fit into any of the categories (a)-(m) to classify them as persons or entities subject to the PCMLTFA. Therefore, ‘factoring entities’ are not covered under the PCMLTFA and cannot be assigned a Sector or Activity

Date Answered: 2012-09-06

Obligation: Other

59. Foreign securities dealers

Question:
Application of the PCMLTFA to foreign securities dealers trading securities with Canadians on the basis of the international dealer registration exemption, on the basis that the Act applied to them as dealers authorized to trade securities in Canada, I think you had mentioned that the obligation of those international dealers to comply with the Act was only relevant for the Canadian clients of those foreign dealers. They did not have to apply the same Canadian laws and procedures to all of their international business with foreign clients (e.g. in their home jurisdiction) as well. I think I also read this once in some Ontario Securities Commission notice around when these requirements first came out, but I can't locate that now. Can you confirm that I am correctly summarizing the scope of the application of the Act to the business of these foreign international dealers?
Answer:

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

Date Answered: 2012-08-29

Activity Sector: Securities dealer
Obligation: Other
Guidelines: 6E
Regulations: 1(2)
Act: 5(g)

60. Costume jewellery

Question:
I understand that costume jewellery is not always covered but depdending on the amount of precious metal or stones in the piece, it could be considered jewellery. I thought that the amount of precious metal or stones used had to be 10%, but I am not sure where that is listed. Also, is it 10% of the weight or 10% of the value?
Answer:

A dealer in precious metals and stones means an individual or an entity that buys or sells precious metals, precious stones or jewellery, in the course of its business activities. A DPMS is subject to the PCMLTFA if they have ever engaged in the purchase or sale of precious metals, precious stones or jewellery in an amount of $10,000 or more in a single transaction. Entities dealing purely with costume jewellery that do not contain any of the precious stones or precious metals are not typically covered. For example, stones or metals such as cubic zirconia and rhodium are not captured by the regime. That said, as long as the costume jewellery contains precious metals (gold, silver, palladium or platinum), stones (diamonds, sapphires, emeralds, tanzanite, rubies or alexandrite) or pearls, in any quantity, and equals a value of $10,000 in a single transaction; the costume jewellery would be covered. This is similar to what we’ve said about coin dealers in past. It does not matter whether the quantity of precious metals is negligible or not. If the coin does contain precious metals - even in the smallest quantity - it constitutes precious metals in the form of a coin. In regards to your question, the second a precious metal or stone constitutes any part of the item, the full value of the item has to be included in the calculation of the $10,000 or more. We cannot expect our compliance officers to be able to calculate the % of precious metals or stones in any particular item, so even the smallest amount of precious metals or stones means that the item is covered. If a retail store combines the purchase of items containing even negligible amounts of precious metals or stones with the purchase of items containing absolutely no precious metals or stones, then they do not have to consider the latter items in the calculation of $10,000 or more. Only items containing precious metals or stones need to be considered in the calculation of $10,000 or more.

Date Answered: 2012-08-23

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

61. Deposit brokers

Question:
Does FINTRAC expect and require the same level of compliance from deposit brokers in Canada as it does for credit unions? Also, is there anything a credit union should do to confirm that the deposit broker is meeting FINTRAC requirements beyond it being stated as such in the contract between the credit union and the broker?
Answer:

A Deposit Broker is an independent financial professional who specializes in guaranteed investment products such as GICs, term deposits, RRSPs, RRIFs and LIFs. It isn't easy to find this degree of specialization in a world that is inclined to focus on investments that carry higher risk and require sophisticated investor market knowledge. They are not Securities Dealers and they still do not fall under our purview. As a result, registered Deposit Brokers are not reporting entities subject to the PCMLTFA. However, they may act as the agent of a reporting entity at which point they would be required to carry out the applicable requirements for the PCMLTFA. As with any principal/agent situation, the principal, as the reporting entity, would be ultimately responsible for the appropriate application of the PCMLTFA. That said, securities dealers may also engage in deposit broker activities. In these instances, they would be covered as a principal reporting entity under paragraph 5(g) in addition to the requirement to have an agent agreement in place with the financial institutions.

Date Answered: 2012-08-16

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Other
Regulations: 6(1)
Act: 5(g)

62. Investment fund manager - Covered or not

Question:
ABC is not a reporting entity because, given the nature of its registration category, it does not conduct securities trading. According to the Autorité des marchés financiers, ABC is authorized to practice in the following registration categories: Investment fund manager
Answer:

After reading ABC's representations, we note that the corporation has stated that it is not involved in the distribution of its fund's shares; rather, it manufactures and issues a financial product that is distributed by other intermediaries, which are responsible for trading. ABC also states that it does not solicit investors, nor does it meet with them to offer them its funds. ABC receives purchase or redemption instructions directly from the securities dealers with whom it has distribution agreements. It simply carries out these instructions. According to subsection 5(g) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, “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. Determining whether an entity such as ABC falls under the definition of “securities dealer” provided in our Regulations, and is therefore subject to Part 1 of our Act, is a question of fact. The emphasis must be on the word “authorized.” It is a fact that the Autorité des marchés financiers has authorized ABC to conduct activities relating to the provision of financial advice and the sale of financial products and, specifically, to manage an investment fund. An investment fund manager is defined as follows: “The investment fund manager directs or manages the business, operations or affairs of an investment fund. The manager creates the fund and oversees its management and administration. Mutual funds are a type of investment fund; consequently, the corporation that manages a mutual fund must be registered as an investment fund manager.” ABC appears to be involved in securities trading: it manufactures and issues a financial product that is distributed by other intermediaries, which are responsible for trading. It follows purchase and redemption instructions. Finally, the fact that the name of the entity or individual can be found in the Register of Firms and Individuals Authorized to Practise is further evidence that the entity of individual is authorized. In our view, therefore, ABC is a reporting entity within the meaning of subsection 5(g) of the Act.

Date Answered: 2012-08-14

Activity Sector: Securities dealer
Obligation: Other
Regulations: 1(2)
Act: 5(g)

63. Once a DPMS always a DPMS?

Question:
“Once a DPMS always a DPMS? A DPMS is subject to the PCMLTFA as soon as he conducts a trigger transaction and will remain subject to the regime until it can be demonstrated that the DPMS will no longer purchase or sell precious metals, stones or jewellery in a transaction above $10,000 or more.” My question is what constitutes demonstrated?
Answer:

“A DPMS is subject to the PCMLTFA as soon as he conducts a trigger transaction and will remain subject to the regime until it can be demonstrated that the DPMS will no longer purchase or sell precious metals, stones or jewellery in a transaction above $10,000 or more” we have the following comments. First of all, once a DPMS always a DPMS. After the initial one-time purchase or sale of $10,000 or more a DPMS becomes subject to the PCMLTFA. From that point on, even if they continue to solely carry out $500 transactions, they are a DPMS. Because they are set up as a DPMS, they could, presumably, carry out a $10,000 purchase or sale at any moment. As such, it would not necessarily be for the DMPS to demonstrate that they will no longer purchase or sell precious metals, stones or jewellery in a transaction of $10,000 or more, but that they are no longer in a position to act as a DPMS. This could be demonstrated through the dissolution of the company or a change in the business licensing/structure. This is similar to the approach we’ve taken with MSBs. While they may not have carried out an MSB-related activity in months, they are set up to do so, and, as such, still considered an MSB to be registered with FINTRAC.

Date Answered: 2012-07-27

Activity Sector: Dealer in precious metals and stones
Obligation: Other
Guidelines: 6i
Act: 5(i)

64. Definition of DPMS

Question:
When is a DPMS covered? Also, when would exceptions apply?
Answer:

A dealer in precious metals and stones means an individual or an entity that buys or sells precious metals, precious stones or jewellery, in the course of its business activities. It is subject to the requirements listed below if it is ever engaged in the purchase or sale of precious metals, precious stones or jewellery in an amount of $10,000 or more in a single transaction. In other words, it is not subject to these requirements if it is engaged only in purchases or sales of less than $10,000 per transaction. The purchases or sales referred to above exclude those carried out for, connected with, or for the purpose of: • manufacturing jewellery; • extracting precious metals or precious stones from a mine; or • cutting or polishing precious stones. In other words, if all of its purchases and sales are related to these manufacturing, extracting, cutting or polishing activities, it is not subject to these requirements. To clarify the exemption to the triggering activities to become a DPMS, we look at the exception prescribed in s. 39.1 of the regulations: "... other than such a purchase or sale that is carried out in the course of, in connection with or for the purpose of manufacturing jewellery, extracting precious metals or precious stones from a mine or cutting or polishing precious stones, is subject to Part 1 of the Act." Clearly, it is a question of fact to determine the nature of the transaction and not only the nature of their business. A manufacturing company which enters into a transaction of 10,000$ or more that is not related to manufacturing, mining, extracting, etc. would fall under the scope of Part 1 of the Act as a DPMS. So it is important for them to determine if each particular transaction is related to manufacturing jewellery. Being a manufacturing company alone is not an exception.

Date Answered: 2012-07-12

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

65. Agriinvest accounts

Question:
Question as to whether or not Agriinvest accounts are considered to be registered accounts by FINTRAC. Agriinvest accounts are accounts registered with the Federal Government that are tax exempt until funds are withdrawn. They are not listed in 62(2)(i) of the regs (but then neither are TFSAs).
Answer:

The AgriInvest Account offered by financial institutions is not considered as "registered account", since this account is not registered under the Income Tax Act - therefore is not exempted under our legislation.

Date Answered: 2012-05-04

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Other
Guidelines: 6G
Regulations: 62(2)(a)

66. Authorization vs. registration

Question:
1. The following is Island's business model: ABC, is a full service transfer agency headquartered in Florida U.S.A. ABC is registered with the U.S. Securities and Exchange Commission and authorized to conduct stock transfer transactions with the Depository Trust & Clearing Corporation, as well as a participant. We are a participant of the DWAC-FAST system with DTCC. ABC Stock Transfer services include, but not limited to: • Transferring securities related to changes of ownership (i.e. certificates, agreements or other instruments evidencing ownership); • Registering changes of ownership on the books and records of the issuer; • Transferring the records of ownership as a result of corporate actions (e.g., issuance, retirement, redemption, liquidation, conversion, exchange, tender offer, or reorganization); • Dividend disbursement or interest paying-agent activities through escrow accounts. 2. I have a speculation: many of the other Transfer Agents in Canada are also Trust Companies; could it be that their Trust status obliges them to report to FINTRAC? Island is not a Trust Company yet; we are undergoing an application process. Either way, I must make sure that I am compliant with you at this stage. 3. Are you familiar with OFAC? I assume that OFAC and FINTRAC prescribe to the same or similar idea. Question: could Island's daily compliance and reporting to OFAC satisfy FINTRAC's requirements as well? i.e. When we were registering with CDS of Canada, their staff indicated to us that we passed their review automatically being fully registered with the SEC of the U.S. Please advise.
Answer:

If your corporation 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 Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) you would be considered a securities dealer subject to Part 1 of the PCMLTFA and its related regulations. It is important to note that to be "authorized" does not necessarily mean that the person or entity must be "registered" with the respective provincial securities commission. Any person or entity that deals in securities in their province is still subject to provincial securities legislation and would therefore meet the PCMLTFA definition of securities dealer. To this end, I note that ABC is on the recognized transfer agent list of the Clearing and Depository Services Inc. (CDS), which is regulated by the Ontario and Quebec securities commissions and the Bank of Canada, with working and reporting relationships with the Canadian Securities Administrators (CSA), other provincial securities commissions and the Office of the Superintendent of Financial Institutions. As a recognized transfer agent, you enter into relationships with other participants and commit to certain obligations. Depending on the obligations outlined in your agreement with CDS, it is possible that you became 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. Whether or not you became so authorized is a question of fact. If you have any doubts and wish to provide me the agreement you have with CDS, I will be happy to review it. Furthermore, it is a question of fact to determine if you “engage in the business of dealing in securities”. If you wish to submit, for review, your exact business model describing your services in detail, I may be better placed to address this issue. By exact business model I am referring to a complete description of your services without terms like “but not limited to.” Finally, you indicated in your e-mail, that you are undergoing an application process to register as a Trust company. If your application is accepted, your corporation will be considered a financial entity subject to Part 1 of the PCMLTFA and its associated Regulations. Financial entities (including trust companies) are covered based solely on their status as financial entities. This response is based on the information you have provided to date. If your business model changes, you will need to assess the impact of this change as it relates to the PCMLTFA. Should you need any assistance with this assessment, please do not hesitate to contact us again.

Date Answered: 2012-03-13

Activity Sector: Securities dealer
Obligation: Other
Act: 5(g), 5(d)

67. Canada Revenue Agency

Question:
I would like to know if government departments are reporting entities. Section 5 indicates that "...agents of the Crown that accept deposit liabilities" are reporting entities. I am with the Canada Revenue Agency. As we accept deposits from the public for tax liabilities, would we be a reporting entity? If so, are we currently a reporting entity?
Answer:

We can confirm that the Canada Revenue Agency (CRA) is not a reporting entity for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). For your information, section 45 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that: “Every department and agent of Her Majesty in right of Canada or of a province is subject to Part 1 of the Act when it accepts deposit liabilities in the course of providing financial services to the public”. You indicated, that CRA accepts “deposits from the public for tax liabilities”. However, the PCMLTFR clearly states that the accepting of deposit liabilities has to be done in the course of providing financial services to the public. It is FINTRAC’s position that CRA does not provide financial services to the public. One of CRA’s roles is to manage the largest debt collection service in Canada, including receivables arising from income tax, GST/HST, the Canada Pension Plan, Employment Insurance, and defaulted Canada student loans. As outlined in paragraph 123(1) (r.2) of the Excise Tax Act, the definition of financial service does not include debt collection service. Therefore, as a debt collector, CRA is not considered to be providing financial services to the public, and is thus not subject to Part 1 of the PCMLTFA.

Date Answered: 2012-03-08

Obligation: Other

68. Citing deficiencies for high-risk clients

Question:
Can you cite a CP whose at-risk accounts do not indicate the intended use of the account? Would I cite that the update is incomplete?
Answer:

Paragraph 14(c.1) of the Regulations states as follows: “Subject to subsection 62(2), every financial entity shall keep the following records in respect of a transaction or the opening of an account other than a credit card account: (c.1) in respect of every account that it opens, a record that sets out the intended use of the account;” This means that the financial entity is not required to update the information pertaining to the intended use of the account, as it is required to do for the identify information of at-risk clients. Hence, you cannot cite the CP. However, if the intended use of the account is not indicated, regardless of whether or not it is an at-risk account, you have a basis for citing the financial entity.

Date Answered: 2012-03-06

Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union, Trust and/or loan company
Obligation: Other
Regulations: 14 (c.1)

69. Clarification - Online remittance service in Canada

Question:
ABC is in the process of creating the online remittance service in Canada. I would highly appreciate your help in these following question. 1. The updated list of countries to which we will allow remittance transfers to be made in Canada? According to OSFI (The Office of the Superintendent of Financial Institutions) Web site and Lists of persons designated under "SEMA Lists" ( Special Economic Measures Act) "SEMA Lists") are available on the DFAIT (Department Of Foreign affairs and International trade) web site. I would like to have the list of countries that we have to list on the online page. 2 Source of Income (funds) The one we already mentioned : Business, gift, lottery, salary, savings. Is there any more sources that we can add? 3 Purpose of the transaction - The purposes listed are: Business travel Education Expenses Family maintenance Hotel expenses Insurance premium Interest on loans Investment on equity shares Investment in real estate Investment in Securities Medical expenses Other remittances Payment of salaries Personal travel & rules Report of Business Profits Repayment of loans Trade remittance Repatriation of business profit Is there any additional purposes accepted by Canada regulations or do we have to delete any one ?
Answer:

FINTRAC does not have a list of countries to which remittance transfers can be made in Canada. We suggest that you contact the Department of Foreign Affairs and International Trade Canada directly for more information with respect to the “SEMA List”. With respect to your question about the source of the funds, we would like to clarify that this obligation is required when you perform your due diligence measures in respect of Politically Exposed Foreign Persons (PEFP). Paragraph 67.2 (1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations states that: “A financial entity, life insurance company or life insurance broker or agent or money services business that has determined under paragraph 54.2(c), section 56.1 or paragraph 59(5)(a) that a person is a politically exposed person shall take reasonable measures to establish the source of the funds that have been used for the transaction in question.” You have to take reasonable measures to determine whether you are dealing with a politically exposed foreign person for certain electronic funds transfers ($100,000 or more). Once you have determined that an individual is a politically exposed foreign person, you will not have to do it again. You have to keep a record of the following: •the office or position of the individual who is a politically exposed foreign person; •the source of the funds, if known, that were used for the transaction; •the date you determined the individual to be a politically exposed foreign person; •the name of the member of senior management who reviewed the transaction; and •the date the transaction was reviewed. Finally, with respect to your question about the purpose, details and type of transaction (for example, the cash was used to purchase a money order, etc.), including whether any other individuals or entities were involved in the transaction, we would like to clarify that this obligation is required when you process any large cash transaction. Section 29 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations states that: “Subject to subsection 52(2), every money services business shall keep a large cash transaction record in respect of every amount in cash of $10,000 or more that is received from a client in the course of a single transaction, unless the cash is received from a financial entity or a public body.” The information you have to keep in a large cash transaction record includes the following: •the amount and currency of the cash received; •the name, date of birth and address of the individual from whom you received the cash and that individual's principal business or occupation; •the date of the transaction; •the purpose, details and type of transaction (for example, the cash was used to purchase a money order, etc.), including whether any other individuals or entities were involved in the transaction; •how the cash was received (for example, in person, by mail, by armoured car, or any other way); and •if an account was affected by the transaction, include the following: ◦the number and type of any such account; ◦the full name of the client that holds the account; and ◦the currency in which the account's transactions are conducted. FINTRAC is not in a position to advise you on what to add or what to remove from the lists you provided.

Date Answered: 2012-01-16

Activity Sector: Money services business
Obligation: Other
Guidelines: 6C
Regulations: 67.2(1), 31, 29, Schedule 1
Act: 9.3(3)

70. Trust Company: Covered or Not Covered

Question:
A trust company is incorporated under its own private legislation in Saskatchewan. The Department of Justice in Saskatchewan called me regarding this and said certain sections of the both the federal and provincial trust company acts apply to them. My question is whether or not they are covered under our legislation as a reporting entity, as I cannot ascertain if they are also captured under provincial trust legislation.
Answer:

Based on the information provided, we confirm that the Trust company is definitely covered under our legislation as a reporting entity, and fall within 5(e) as trust companies regulated by a provincial Act. Section 13 of their constitutive document explicitly refers to the applicability of the Trustee Act and The Trust Companies Act to them.

Date Answered: 2010-05-13

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

71. Definition is in the PCMLTFA regs. Subsection 1(1)- i.e. see definition below: “public body”

Question:
Does a school board fall under "public bodies" under Proceeds of crime (money laundering) and terrorist financing legislation?
Answer:

PCMLTFA regs. Subsection 1(2) “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. (organisme public)

Date Answered: 2010-02-11

Activity Sector: Accountant, Bank, British Columbia notary, Caisse populaire, Casino, Co-op credit society, Credit Union, Dealer in precious metals and stones, , Life insurance broker or agent, Life insurance company, Money services business, Real estate, Securities dealer, Trust and/or loan company
Obligation: Other
Regulations: 1(2)

72. Members vs non members

Question:
Are other clients who are shareholders of a Central and use their services (i.e. a cooperative association) considered "public"?
Answer:

If a shareholder is a member then no they aren't considered to be public, if not a member than yes.

Date Answered: 2010-01-27

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

73. Members vs non members

Question:
Would a Central's clients who are wholly owned subsidiaries be considered "public". If the wholly owned subsidiaries in turn facilitate transactions for others through Central are they considered to be public?
Answer:

If the subsidiary is a member then no, if the subsidiary is not a member then yes they are considered to be public.

Date Answered: 2010-01-27

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

74. Members vs non members

Question:
Would credit unions who are not members / affiliates of a Central be considered "public" clients? This only happens in Ontario where credit unions are not required to be members of the Central but can use their services.
Answer:

Yes, this is covered by subsection 11.2

Date Answered: 2010-01-27

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

75. Bankruptcy and receivership services

Question:
Background: - XYZ & Associates completed a Compliance Questionnaire back in April 16, 2007 stating they are covered as Accountants because they meet the triggering activities; - Discussions with RE in July 2009. They restated that they have trust accounts and that they meet triggering activities; - After requested documents were submitted by RE and more facts were presented there is some doubt in whether they are covered at all. Rationale: i) They are specifically a bankruptcy firm; ii) They do not provide any accounting activities at all; iii) They maintain trust accounts for the bankruptcy proceedings only and the monies deposited into such accounts are collected by Industry Canada. Could you provide me with some clarification as to whether or not they are covered under the PCMLTFA?
Answer:

An accounting firm that only provides trustee in bankruptcy or receivership services does not fall within the definition of "accounting firm" under the Regulations, as it is not "engaged in providing accounting services to the public". In this case the entity although does identify itself as a an accounting firm is not engaged in providing accounting services to the public and provides only trustee in bankruptcy or receivership services - therefore is not covered by the PC(ML)TFA and associated Regulations.

Date Answered: 2009-09-24

Activity Sector: Accountant
Obligation: Other
Regulations: 1(2), 34(1)

76. Schools, universities as public bodies

Question:
A financial institution wants to know if Universities, schools or CEGEPs are public bodies.
Answer:

No. Universities, schools, or CEGEPs are not public bodies. The questions that must be answered are the following when it comes to determining whether or not the entity is a public body: 1) Is it a department or agent of the crown? 2) Is it an incorporated city town village etc.? 3) Is it an organization that operates a public hospital? In this case, schools/universities/cegeps in general are not/if ever a department or an agent of the crown (or province) and I have never heard of an extension of an agent of the province.

Date Answered: 2009-09-23

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

77. Agent Agreement

Question:
Context: - Many Caisses Populaires use a CFE that opens business accounts for them; - The CFE is not in the same location as the CPs (in the vast majority of the cases); - Any employee at the CFE can open accounts for any of the CPs in the agreement (employees are not assigned necessarily to a given CP) Legal Structure of CFEs: - CFE is not a distinct legal entity; - It is a convention, a group of credit unions (a contract among specific credit unions served by the CFE ). The credit unions in a region get together and agree on terms and conditions. It is a type of consortium or joint venture; - the credit unions bound by the contract are owners of the CFE; - credit unions create a budget for the CFE; - the credit unions remain responsible for the CFE; - credit unions delegate authority to open an account to the CFE. Q1. When we examine CPA, which has signed contracts with other CPs regarding the services of a CFE, can we: A) from the CP A itself, call the CFE to speak to employees who open accounts? B) if we choose to do so, can we go to a CFE (in the course of an exam for CP A) to look at records or interview staff?
Answer:

There are no privacy issue/confidentiality concerns. There is an agreement in place, and therefore they are their agents, and as such legally speaking, you can proceed with the CFEs as the CP's agents.

Date Answered: 2009-09-23

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

78. Definition of a Trust company

Question:
The question is specifically about ABC (Canada) Inc., an organization regulated by the New Brunswick Department of Justice and incorporated under the New Brunswick Companies Act, 1981. Is this a "trust company" within the meaning of our definition although its incorporation does not stem from a "(provincial) Trust & Loan Companies Act" as in certain other provinces but rather under a "Companies Act"? The subquestion is: how do we interpret the expression " trust company regulated by a provincial Act "? As for ABC Bank & Trust Inc. and ABC Trust Company Inc. (Alberta), these are definitely financial entities because they come under the OSFI.
Answer:

In regards to "trust company" our definition indicates that it is either a trust company under the Trust and Loan Companies Act (federal) or a trust company regulated by a provincial Act. The Trust and Loan Companies Act being the primary legislation governing all trust and loan companies in Canada. In the Trust and Loan Companies Act it indicated that the Act applies to every body corporate: 12. This Act applies to every body corporate (a) that is incorporated or continued under this Act, (b) to which the Trust Companies Act applied immediately before the coming into force of this section, or (c) to which the Loan Companies Act applied immediately before the coming into force of this section, and that is not discontinued under this Act. I am not sure if ABC Trust is a trust company per se. However, it would depend if it falls within the definition of a trust company i.e. a company which offers its services to act as trustee, bailee, agent, executor, administrator, receiver, liquidator, assignee, guardian of a minor's estate or committee of a mentally incompetent person's estate and, if not restricted under their Act, receives deposits from the public and lends or invests those deposits. A provincial loan or trust company comes into existence by application to the Minister by one or more persons and, upon approval of the Lieutenant-Governor in Council, letters patent may be issued. An extra-provincial loan or trust company is incorporated under federal legislation or the legislation of another province. Most of the provinces keep a register of "licensed" trust and loan companies and require that these companies be registered in order to operate in their provinces. Our legislation does not require a "licensed" trust company. So we need to determine if ABC falls within the definition of a trust company.

Date Answered: 2009-09-21

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

79. Obligation to verify the existence of an embassy

Question:
We deal with many of the embassies in Ottawa. None of them are registered as corporations or fall into any of the other typical organizational structures such as sole proprietorship, limited partnership etc, or have an ownership structure (they belong to the state they are representing). As you can imagine I am having difficulty in determining the best way to verify the existence of these entity’s. A list of Diplomatic Missions, Consular Posts and other International Organizations is available on the DFAIT web site. Would this be an acceptable way to verify the existence of an entity that is an Embassy?
Answer:

No an embassy is not an entity as per our definition in our regulations. The embassy is somewhat an extension of the country it represents. The reporting entity would not have to confirm the existence of an embassy, as it is not considered as an entity other than a corporation under our legislation.

Date Answered: 2009-09-14

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

80. Mortgage Lending Company

Question:
Is a company that lends out its own money in the form of mortages that is sold to private investors, subject to the PCMLTFA?
Answer:

Unless the loan company is regulated by a provincial Act i.e. that accepts deposit liabilities, it is not a covered entity under the PCMLTFA. A mortgage lending company does not fall within the definition of a financial entity, or any other sector, and therefore does not have any legislative obligations under the Act.

Date Answered: 2009-08-12

Obligation: Other

81. Clarification Request

Question:
Is FINTRAC able to send a clarification request to an MSB based on information found in their incorporation documents? Example: Company lists individual A as the owner/director of the company, but when a search was done by FINTRAC, the documents show individual B as owner president. Therefore the information provided to FINTRAC for registration purposes is incorrect.
Answer:

Yes, a clarification request would be needed in this case, under subsection 11.17(1) in respect of the prescribed information i.e. this case to clarify/verify the discrepancies between the information provided upon registration and the information found further to our oncorp search in regards to Schedule 1 Part B - 7. (a) name and DOB of the CEO, president and every director of the corporation. The registered entity must provide us with the clarifications within 30 days after the day on which our request is made.

Date Answered: 2009-08-11

Activity Sector: Money services business
Obligation: Other
Act: 11.17(1)

82. Brokerage Firms

Question:
A broker has a brokerage licence under A however, does not really operate a brokerage firm as he is just the sole broker of this entity. However, the real "franchisee" is another separate entity B that houses A. This broker claims that B is the one that has the P&Ps and he just uses those, same with the RBA etc... If we ahead with the examination can we cite A as a separate brokerage firm (that is not really one) or the broker himself under B?
Answer:

It would be really important in this particular case to determine who is the reporting entity, as well as what is the relationship between the different entities. The questions that need clarifications are the following: 1) Is the broker the reporting entity? and in order to determine if he is; 2) Is the broker an agent or the employee of the bigger brokerage firm? 3) Does the broker have a contract with the bigger brokerage firm? and what type of agreement does he have with the firm? It is all a question of fact, and if you determine the relation between the sole broker and the bigger brokerage firm, then that will give you the answer as to who is responsible ultimately for all the legislative obligations under our Act and then who should be examined.

Date Answered: 2009-08-11

Activity Sector: Real estate
Obligation: Other
Regulations: 1(2)

83. Application of the Act - Real Estate Developer

Question:
Would a real estate developer be subject to the Act as a result of the following situation: The real estate developer in Canada is selling interest in strata units located abroad (for example, United States), and (a) the purchasers (represented and not represented by a broker) send the purchase funds to the developer in Canada; or (b) the purchasers (represented and not represented by a broker) send the purchase funds to an entity abroad (for example, United States)?
Answer:

Unless there is a significant connection to Canada, the RED would not be subject in this case to our Act. The fact that the RED receives funds would not be in our mind a signification connection to Canada. In this scenario, the units are abroad, the construction is obviously done abroad, the RED seems to have a very limited role in the transaction, and his role is not substantial enough to link it to Canada, especially in light of the fact that the properties are not in Canada.

Date Answered: 2009-08-11

Activity Sector: Real estate
Obligation: Other
Regulations: 1(2)

84. Accounting firm

Question:
Interpretation in respect of the definition of an "accounting firm" under the Regulations (which is defined as an entity engaged in the business of providing accounting services to the public and has at least one partner, employee or administrator that is an accountant). In this respect, you had advised that for an accounting firm that has a separate legal entity that provides trustee in bankruptcy or receivership services, even if that separate legal entity has a partner or employee that is an accountant, it would not be considered an "accounting firm" under the Regulations, as it is not "engaged in providing accounting services to the public". As such, it is my understanding that FINTRAC does not consider the provision of receivership services or trustee in bankruptcy services as providing "accounting services to the public". The second interpretation is in respect of the "triggering activities" for accountants and accounting firms that subject them to Part I of the PC Act. As discussed, the triggering activities set out in section 34 of the Regulations apply whenever an accountant or accounting firm engage in any of the activities set out in section 34(1)(a) or (b) "on behalf of any person or entity". In this respect, you advised me that FINTRAC takes the view that even if trustee in bankruptcy services or receivership services are undertaken by "an accounting firm" as defined in the Regulations, these activities would still not be caught by the Regulations as they are not activities that are undertaken on behalf of any person or entity, as is contemplated by the Regulations. You advised that FINTRAC took this view even if the receivership was a private (and not court appointed) receivership. As such, it is my understanding that FINTRAC does not view the provision of receivership services or trustee in bankruptcy services provided by an "accounting firm" as defined in the Regulations, as being activities that are carried out "on behalf of any person or entity", even in circumstances where there is a privately appointed receiver. Can you please confirm that I have a correct understanding of FinTrac's views on this matter.
Answer:

I have one comment to provide as follows in regards to the paragraph that I have copied: The first interpretation is in respect of the definition of an "accounting firm" under the Regulations (which is defined as an entity engaged in the business of providing accounting services to the public and has at least one partner, employee or administrator that is an accountant). In this respect, you had advised that for an accounting firm that has a separate legal entity that only provides trustee in bankruptcy or receivership services, even if that separate legal entity has a partner or employee that is an accountant, it would not be considered an "accounting firm" under the Regulations, as it is not "engaged in providing accounting services to the public". As noted in the paragraph in bold - we would add "only".

Date Answered: 2009-07-02

Obligation: Other
Regulations: 1(2)

85. Definition of negotiable instruments

Question:
Are certified cheques "other negotiable instruments"? The issuance of a bank draft isn't covered as "other negotiable instrument" either- correct?
Answer:

The term "negotiable instruments" is not defined in our legislation and should therefore be given its common/ordinary meaning. Black's Law Dictionnary defines "negotiable instruments' as "a written or signed unconditional promise or order to pay a specified sum of money on demand or at a definite time payable to order or bearer" which would include a bank draft, cheque (certified or not). The PCMLTFA through the "Cross-border Currency and Monetary Instruments Reporting Regulations" defines "monetary instruments" as meaning the following instruments in bearer form or in such other form as title to them passes on delivery, namely, (a) securities, including stocks, bonds, debentures and treasury bills; and (b) negotiable instruments, including bank drafts, cheques, promissory notes, travellers' cheques and money orders, other than warehouse receipts or bills of lading. Although this definition would apply to these regulations the definition does fall within the common one. Section 2 of the Financial Administration Act (FAA), defines those terms: "money" includes negotiable instruments; "negotiable instrument" includes any cheque, draft, traveller's cheque, bill of exchange, postal note, money order, postal remittance and any other similar instrument. So to conclude and to answer your question , negotiable instruments would include cheque, drafts, etc.

Date Answered: 2009-06-22

Activity Sector: Money services business
Obligation: Other

86. Auctioneers covered or not by Act

Question:
Are auctioneers covered by our act when they auction real estate? In this case (with Auctioneers) they do hold a licence in real estate, but are are not acting as a realtor, but as the auctioneer and receive commission based on auctioneers fees.
Answer:

Auctioneers sell their services and offer "auctioneer" services, although they may hold a real estate licence, when they auction goods and real estate properties, they are not wearing their real estate "hat" so to speak but rather are offering their services and expertise as auctioneers, and have received a specific mandate to auction. Auctioneers have no obligations under our legislation.

Date Answered: 2009-05-07

Activity Sector: Real estate
Obligation: Other
Regulations: 37, 39.5(1)
Act: 5(j)

87. Take overs and responsibility of previous compliance issues

Question:
Credit union 1 taking over Credit Union 2 effective April 1st, 2009. Credit Union 2 will cease to exist as a separate legal entity and will adopt the name of Credit Union 1. I have a couple of questions: 1) Can Credit Union 1 be held responsible for any compliance issues of Credit Union 2 prior to April 1st, 2009? (does this depend on their contract - taking over assets and liabilities?) 2) As well, after April 1, 2009, can credit union 1 ask FINTRAC to provide past compliance information on Credit Union 2?
Answer:

The answer really depends on what legal form the "take over" of CU2 by CU1 (this would be a question of fact). If, legally, credit union 2 is "continued" as part of credit union 1, or is "amalgamated" with credit union 1 (or as part of a new credit union that amalgamates CU 1 and 2, with the name of CU1), then yes, the obligations and information of CU 2 would be those of CU1). However, if CU1 simply buys the accounts of CU2 (and CU 2 ceases to exist), then none of the obligations of CU2 continue with CU1 (and I would argue that CU1 is really opening new accounts and should ID all new persons signing signature cards, and do a new risk assessment based on the new services offered by CU1 to its new account holders. Going forward depending on the facts, the new entity has responsibility for its client records and making a risk assessment on all of their clients.

Date Answered: 2009-04-16

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

88. Reporting entity status determination by FINTRAC

Question:
A bank is inquiring concerning FINTRAC's determination of the status of a potential reporting entity.
Answer:

FINTRAC cannot discuss the status of a potential RE with someone other than that RE or its authorized representative. However pleased be assured, FINTRAC's determination of whether an entity is covered under the Act is based on information that the entity provides to FINTRAC. If the entity omits information or changes its business model FINTRAC reserves the right to change its decision. We do not only rely on what REs tell us and that we also take into account information that we collect on our own (otherwise it seems like we blindly believe everything the RE tells us).

Date Answered: 2009-04-03

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

89. Savings Bonds

Question:
A bank has the following questions: 1- They want more information on the notion of "no deposit liability" as they cannot find it in the act or regs; 2- Then they want to know under what circumstances would 45 apply? They are a bank and they want to ensure that if they deal with a RE that is covered under 45 that the bank (as an agent) gathers all the necessary info.
Answer:

Section 5(l) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (hereinafter, the Act) and section 45 of the related Regulations stipulate that departments and agents of Her Majesty are subject to Part 1 of the Act when they accept deposit liabilities in the course of providing financial services to the public. FINTRAC is of the opinion that the concept of accepting a deposit liability under the Act must be interpreted on the basis of the definition of "deposit" provided in the Canada Deposit Insurance Corporation Act and which applies to federal and provincial institutions. The concept of deposit under section 45 of the Regulations will thus have a limited meaning and will apply only to the deposit of money that is deemed "insurable" under the Canada Deposit Insurance Corporation Act. In other words, a sum of money received from a client for the purchase of savings bonds issued by Épargne Placements Québec in the course of a single transaction does not constitute a deposit within the meaning of the Act. Based on the facts at our disposal, Épargne Placements Québec is not a "federal department or agent of the Crown that accepts deposit liabilities" within the meaning of the Act. First of all, this body is not a federal or provincial institution as defined in the Canada Deposit Insurance Corporation Act, and the money received by this body for the purchase of bonds, RRSPs or other savings products is not a deposit within the meaning of the Canada Deposit Insurance Corporation Act. Épargne Placements Québec is thus not an entity subject to the Act and is not subject to its obligations. However, it is important to point out that a financial entity nevertheless remains subject to obligations under the Act, even if it conducts transactions on behalf of a third party that is not an RE. The RE will be required to implement a compliance regime and report any transactions that are suspicious or related to terrorist property and which take place as part of activities carried out on behalf of a third party which is not an RE.

Date Answered: 2009-04-02

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

90. FINTRAC legislation to insolvency practitioners

Question:
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) does not specifically target insolvency practitioners. The list of “reporting entities” does, however, include accountants (along with financial entities, life insurance brokers, securities dealers, casinos, among others). The issue, therefore, is to what extent are insolvency practitioners required to comply with the reporting obligations under the Act? Insolvency practitioners who are not accountants: (1) If the insolvency practitioner is not an accountant, they fall outside the ambit of the Act and have no reporting requirements under it. Insolvency practitioners who are accountants: (2) If the insolvency practitioner is an accountant who works for an accounting firm that provides general accounting services to the public (one of the “triggering services” under the Act) they may be required to comply with the reporting requirements under the Act. The starting point is that if the insolvency practitioner/accountant is part of an accounting firm that provides general accounting services, they will be covered by the Act and if they carry out any of the “triggering activities” – which are broad in scope – they will be required to fulfill the reporting requirements under the Act. If, however, the accounting firm offers general accounting services and they create a separate legal entity to carry out their insolvency-related services, those practitioners who carry out their insolvency-related work under the separate legal entity will not be considered to be accountants within the meaning of the Act and will have no reporting requirement under it. Moreover, if the insolvency practitioner/accountant is with a firm that does not offer general accounting services but rather only carries out insolvency-related activities they will not be considered to carry out any “triggering activities” and therefore will not have reporting requirements under the Act.
Answer:

If the insolvency practitioner is not an accountant, you are right, they are not covered by our Act and have no legislative requirements or obligations to fulfill under our legislation. Under the definition section of the PCMLTFR, more precisely, subsection 1(2), an accounting firm is defined as an entity that provides accounting services to the public, and secondly, has at least one partner, employee or administrator that is an accountant. Please note that an accounting firm would not be engaged in the business of providing accounting services to the public by reason only of providing services as Receiver or Trustee in Bankruptcy. As of June 23, 2008 if you are an accountant or an accounting firm, and you engage in any of the following triggering activities on behalf of any person or entity: · receiving or paying funds; · purchasing or selling securities, real property or business assets or entities; · transferring funds or securities by any means; · or giving instructions on behalf of any person or entity in respect of any activity listed above then you must comply with the requirements set out by the PCMLTFA and associated regulations. In other words, if your accounting firm falls within the definition of an accounting firm under the PCMLTFA and associated regulations, and engages in any of the triggering activities, while providing accounting services to the public, the accounting firm would be subject to the legislative requirements under the PCMLTFA and associated regulations. However, we must add a precision in regards to what falls within the triggering activities as defined in paragraph 34(1)(a) for accountants or accounting firms. In the case of services rendered by the accountant/accountant firm as trustee in bankruptcy, the services rendered are not activities engaged on behalf of any person or entity. If you are appointed by the court, or if you act as a trustee in bankruptcy, you are not deemed to act on behalf of any person or entity, as you are acting only on your behalf

Date Answered: 2009-03-23

Activity Sector: Accountant
Obligation: Other
Guidelines: FIN-7
Regulations: 34(1)(a), 1(2)

91. Identity theft and human trafficing relation to ML

Question:
Would any of you know if identity theft or human trafficking are predicate offenses for ML?
Answer:

Human trafficking is a predicate offence to money laundering. More nuances need to be brought for identity theft because the offence of "identity theft" does not exist per se. The theft of identity is dealt through the prosecution of various other criminal offences such as personation, fraud or misuse of debit/credit card, forgery, etc. And, most if not all of these offences are predicate offences. Of note, the crime of identity theft is being addressed by Parliament - Bill C-27 creates three new offences which will be predicates for ML and makes other changes to Criminal Code, is in second reading before Parliament.

Date Answered: 2009-03-13

Obligation: Other

92. Public School as Public bodies

Question:
A credit union did not report large cash transactions received from a Public School. The credit union indicated that the money was funds raised by the school for fundraising e.g bake sale, hot dog day etc. My question is are Public Schools considered a Public Body? I want to believe that they are considered a Public Body but I am not sure if the fundraising portion can be exempted.
Answer:

In the case of schools, and school boards, it would be a question of fact, on a case to case basis unfortunately, to determine if they are considered a public body. The structure in regards to schools is not uniform either provincially, and even more so nationally. Therefore, it would depend on each school.

Date Answered: 2009-01-28

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

93. Covered or not: Charity housing

Question:
Is the price of the home reduced or does is sell for fair market value? - There are 70 separately incorporated affiliates across Canada and the majority follow a traditional mortgage approach executed as follows: o A 1st mortgage is registered on title based on the actual fair market value of the cost to build the home (including the fair market value of all donations of land, services and materials) o A 2nd mortgage is also registered on title based on the difference between the 1st mortgage and the appraised value of the home. This second mortgage is a forgivable mortgage which in most cases only starts to be forgiven on a monthly basis after year 10 of living in the home. - In some cases affiliates have stepped away from the above approach and set the 1st mortgage at 75% of the appraised value and the 2nd at 25%. - A third option under consideration has been to sell the home at the appraised value but with monthly mortgage payments limited to a percentage of the household income. - In all cases listed above, the monthly mortgages are based on a strict “0” interest policy and payments set at approximately 30% of the total household income. Do they handle the actual transaction or do you use a real estate company? - In all cases the affiliate manages the transaction along with hired or pro bono legal council. Any idea of the number that would be done in a year? - In 2008, approximately 160 homes across Canada were dedicated (sold). Projections for 2009 are to be close to 200. In each province or across Canada? - Difficult to provide exact numbers per province but I could dig this up if required. Approximately 40% are in Ontario. Is the family required to live in the home for a certain period of time before they can sell? - Partner Families typically remain in the home for an extended period of time. - To prevent flipping a house for quick return there is “first right of refusal” on all sales of the homes. If the entity is not in a position to purchase the house back within the first 10 years, both the 1st and 2nd mortgages are paid out to Habitat and the remaining balance (if any) is returned to the seller to represent their equity. - In a number of communities in Alberta and BC, the property remains in affordable housing (essentially Habitat’s) for perpetuity as these houses are built on leased land. There is a growing trend to retain the property in affordable housing with the house returned to Habitat and the seller receiving only what they have put into the home as far as payments during occupancy. Would this organization be covered under the legislation?
Answer:

Based on the number of units/new homes built, yes this entity meets the definition of a Real estate developer. Furthermore, there are no caveat or exception applicable to them - so they would be covered as a real estate developer, and would have to comply with all the obligations within our Act and Associated Regulations applicable to real estate developers.

Date Answered: 2009-01-22

Activity Sector: Real estate
Obligation: Other
Guidelines: 6B
Regulations: 39.5, 39.6, 39.7
Act: 5(j)

94. Report templates and Privacy

Question:
In regards to privacy. In our F2R User Guide, we say the following: "Templates will expire automatically if they are not accessed at least annually. An automated email message will be sent to alert the F2R Administrator of the imminent expiry seven days before the deletion. If the template has not been accessed within seven days of that email, the template will be deleted." However, in reality, our system has not been built to delete templates. Given the fact that report templates can contain personal information, does Legal see an issue with FINTRAC holding on to templates for several years or should this information be disposed of?
Answer:

We suggest that it would be best if the templates/personal information would be disposed of - however, it would be a question of fact to determine how difficult it is to rid our system of those templates, and how difficult it is to delete that information (costs, what are the required changes, if it is feasible at all, etc..).

Date Answered: 2009-01-05

Obligation: Other

95. Determination of investment club as a reporting entity

Question:
There is an investment club comprised of both individuals and companies who have basically made one of their members act for all of them and buy/sell foreign currency. This elected "agent" is a company that will work through a broker. My question was whether or not this company (acting as an ''agent'') or the investment club itself have any reporting obligations to FINTRAC.
Answer:

A company that is part of an investment club and that buy forreign currency as an investement for that club of which it is a member would not be a reporting entity because of those purchases of foreign currency.

Date Answered: 2008-12-05

Obligation: Other
Regulations: 1(2)

96. The reason why BC notaries are covered

Question:
Why is that only BC notaries have the obligation to report? What is the difference with the rest of Canada?
Answer:

The reason is that unlike other legal counsel and notaries in other provinces, BC notaries are not subject to the solicitor client privilege which precludes them from reporting on their clients. It would constitute for these other lawyers a breach in their professional duties. Notaries in BC are the only ones able to hold funds during sales while other notaries cannot.

Date Answered: 2008-11-12

Activity Sector: British Columbia notary
Obligation: Other
Guidelines: 6J
Regulations: 1(2), 33, 33.1, 33.2
Act: 5(j)

97. Covered or not

Question:
The company's main activity is credit card processing, however, they also do offer some types of EFT and ACH debit services. He explained to me that they only use the EFT service when it come to direct pay deposit.
Answer:

Based on what the company indicated, it seemed at first glance that it would mostly be a payroll type company, therefore would not be covered as a MSB. However, on their website, there is a part of their business that indicates that they also do EFTs in general. Based on that activity, then we came to the conclusion that they seemed to be in the money services business (more specifically in the wiring of money in general, not just related to payroll activities).

Date Answered: 2008-10-03

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

98. Definition of Precious Metal

Question:
Does the term "precious metals" include only certain grades of gold or silver, i.e., the sterling silver and karat gold previously mentioned, or whether it also includes precious metals used in the plating process for costume jewellery.
Answer:

The term "precious metals" is defined as gold, silver, platinum and palladium and has not been further defined. Gold plated jewellery whether plated with 10k, 14k gold (so as long as it qualifies as gold in Canada) would fall under the definition.

Date Answered: 2008-09-24

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

99. Covered or not covererd as a DPMS: a large retail store

Question:
It seems that a company fits the description of a DPMS due to some of the inventory that they carry: A very small selection of jewellery items are made of either 10 or 14 kt gold or sterling silver. They operate in Canada through a 100% owned subsidiary called XYZ Corp. All purchases for XYZ Corp are handled by ABC Inc, once again a wholly-owned subsidiary of XYZ Corp. ABC Inc is located in Illinois; items intended for the Canadian stores are 'sold' via intracorporate sales from ABC Inc to XYZ Corp.
Answer:

XYZ Corporation is subject to the PCMLTFA if it purchases or sell precious metals, precious stones or jewellery in an amount of $10,000 or more pursuant to s. 39.1 of the PCMLTF Regulations. In practice, this would mean that if XYZ Corporation purchases from its American subsidiary ABC Inc for inventory purposes in an amount of $10,000 or more, it would be covered under the legislation.

Date Answered: 2008-09-24

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

100. Difference between legal and reporting entity

Question:
Is there a difference to FINTRAC between a 'reporting entity' and a legal entity'?
Answer:

Yes there is difference between the two. A reporting entity is one as defined in our Act and/or that has obligations under our legislation. A legal entity is not defined, nor covered by our Act (however, it could be covered if the legal entity is also a reporting entity). Usually, a legal entity, means either a corporation and/or an entity that has a legal status (e.g. is legally incorporated under federal or provincial statutes for example).

Date Answered: 2008-09-08

Obligation: Other
Act: 2, 5

101. Life Insurance: Fraternal Benefits

Question:
The life insurance working group has been under the impression that Fraternal Benefit Societies that offer life insurance, of which there are currently 18 in Canada, are covered under our Act. Of the 18, there are ten Canadian Fraternals and 8 Foreign Fraternals. They are regulated by OSFI and subject to the Insurance Companies Act, however, OSFI does classify them differently than the other insurers due to their status as a fraternal benefit society rather than a life insurance company. Can you please advise whether the Act applies to Canadian and/or Foreign Fraternals?
Answer:

We had a look at it and the definition of the life company (within the Insurance Companies Act) do not include fraternal benefit societies. So they would not be covered by our Act. In 2001, 2002 - Finance had written back a reply saying just this.

Date Answered: 2008-08-12

Activity Sector: Life insurance company
Obligation: Other
Regulations: 1(2)
Act: 5(c)

102. Mortage brokers coverage under the PCMLTFA

Question:
Regarding the definition of securities dealer. Securities Dealers mean 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. Since we are referring to the term "Securities", does provincial legislation only refer to the provincial securities legislation? If not, where do we draw the line? Exactly, what type of provincial legislation will apply to this definition for securities dealer? Please kindly clarify if the following description of activities would constitute to a securities dealer? We are in the business of issuing shares to people who wish to invest in our company and then using the proceeds from the issuance or purchase of those shares to lend to Borrowers by way of a mortgage secured by real estate. That is our sole business. - The company issues shares from our office and does not have a transfer agent. - The company has 3 classes of shares with no maturity date. Class A which is voting shares Class B (5-year maturity) Non-Voting shares. These shares are redeemable anytime by the Issuer, but have a 5 year maturity date for the investor Class F (1-year maturity) Non-Voting shares. These shares are redeemable anytime by the Issuer, but have a 1 year maturity for the investor. - There are 3 directors of the company and the day to day management of the company is managed by way of a Management Contract with a management group - We are regulated by FICOM in terms of the mortgage side of our business, and also the BC Securities Commission regarding the issuance of shares, and the reporting thereof to the Securities Commission. - We do not know what the money service business is, and we do not believe we are a securities dealer (we only deal with our own shares). That, I suppose leaves us to fall under the category of financial entity for FINTRAC purposes. - We may be captured under the real estate sector given our business is as a mortgage lender which secures real estate. - In terms of dealing with money, we generally do not accept cash for investors, and have limited any cash transaction to $5,000.00. Most transactions either occur by cheque, or EFT. Many times the cheques or EFT transactions, either for new investments, mortgage payments, or when clients' payout mortgages are in excess of $10,000.
Answer:

Companies who only issue their own shares (privately or publicly) are not considered "securities dealers". Otherwise, just about every corporation in Canada would be considered a reporting entity. They are therefore not a security dealer and are not another type of reporting entity either. Mortgage brokers are not covered under our regime.

Date Answered: 2008-07-02

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

Date Modified: