Guideline 6B: Record Keeping and Client Identification for Real Estate

February 2014

This replaces the previous version of Guideline 6B: Record Keeping and Client Identification for Real Estate Brokers or Sales Representatives issued in July 2010. This version includes guidance on obligations, which come into effect February 1, 2014, to better understand your clients and related business relationships.

Table of Contents

  1. General
  2. Record Keeping and Client Identification Obligations
  3. Records To Be Kept
  4. Client Identity
  5. Ongoing Monitoring of Business Relationship and Related Records
  6. Third Party Determination and Related Records
  7. How Should Records Be Kept?
  8. Penalties for Non-Compliance
  9. Comments?
  10. How to Contact FINTRAC
Glossary of Terms

Guideline 6B: Record Keeping and Client Identification for Real Estate (PDF version, 384 KB)

1. General

The objective of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act is to help detect and deter money laundering and the financing of terrorist activities. It is also to facilitate investigations and prosecutions of money laundering and terrorist activity financing offences. This includes reporting, record keeping, client identification and compliance regime requirements for real estate brokers or real estate sales representatives and real estate developers.

A glossary is included in Appendix 1 to help you understand the most common terms used throughout this guideline.

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.

A real estate developer means an individual or an entity other than a real estate broker or sales representative, who in any calendar year after 2007 has sold the following to the public:

In the context of real estate developers, sales to the public include those to an individual, a corporation or any other type of entity. Sales to be public exclude those between affiliates and those between a subsidiary and its owner. Also in this context, a new house or other building is one that was constructed within the past two years and was not occupied for its intended purpose before being sold. For example, a home occupied by a developer as a sales office would still qualify as a new home, as long as it is sold within two years of being built.

From the day you first meet any of these conditions regarding your sales, you will be considered a real estate developer for the rest of that year. You will also be considered a real estate developer in following years, regardless of whether you meet any of the conditions in those following years. In other words, once you are considered a real estate developer, you will remain as such from that day forward, until there is a substantial and permanent change to your operations.

If you are a real estate developer as defined above, you are subject to the obligations explained in this guideline when you engage in activities relating to the sale of any of the following to the public:

Also, if you are a real estate developer that is a corporation, you are subject to these obligations whether you sell those buildings on your own behalf or on behalf of a subsidiary or affiliate. In this context, an entity is affiliated with another entity if one of them is wholly-owned by the other or both are wholly-owned by the same entity.

If you engage a real estate broker or sales representative to act as your agent for your sales to the public, the obligations explained in this guideline do not apply to you. In this case, the real estate broker or sales representative would be responsible for meeting these obligations. However, if the real estate broker or sales representative is your employee, you remain responsible for meeting these obligations.

If you are a real estate broker or sales representative or a real estate developer, this guideline has been prepared to help you meet your record keeping and client identification obligations.

This guideline uses plain language to explain the most common situations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act as well as the related Regulations. It is provided as general information only. It is not legal advice, and is not intended to replace the Act and Regulations.

Record keeping and client identification obligations for other types of reporting entities are explained by sector in other versions of this guideline (accountants; financial entities; securities dealers; life insurance companies, brokers and agents; money services businesses; agents of the Crown that sell or redeem money orders; casinos; dealers in precious metals and stones; and British Columbia notaries).

For more information about money laundering and terrorist financing, or other requirements under the Act and Regulations applicable to you, see the guidelines in this series:

If you need more help after you read this or other guidelines, call FINTRAC's national toll-free enquiries line at 1-866-346-8722.

Throughout this guideline, several references are provided to additional information that may be available on external websites. FINTRAC is not responsible for the accuracy, reliability or currency of the information contained on those external websites. The links provided are based on information available at the time of publishing of this guideline.

Throughout this guideline, any references to dollar amounts (such as $10,000) refer to the amount in Canadian dollars or its equivalent in foreign currency. Furthermore, all references to cash mean money in circulation in any country (bank notes or coins). In this context, cash does not include cheques, money orders or other similar negotiable instruments.

Your policies and procedures may cover situations other than the ones described in this guideline, for purposes other than your requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. For example, your provincial regulator may require you to apply additional policies and procedures or the retention period for your records may vary for purposes other than what is described in this guideline.

2. Record Keeping and Client Identification Obligations

2.1 Real estate brokers or sales representatives

If you are a real estate broker or sales representative, you have the following record keeping and client identification obligations when you engage in the activities described in section 1. The following summarizes your obligations and the rest of this guideline provides more detail.

Any sale or purchase of real estate

Receipts of funds

Suspicious transactions

Business relationships

2.2 Real estate developers

If you are a real estate developer, you have the following record keeping and client identification obligations when you engage in the activities described in section 1. The following summarizes your record keeping and client identification obligations and the rest of this guideline provides more detail.

Any sale of a new house, a new condominium unit, a new commercial or industrial building, or new multi-unit residential building:

Receipts of funds

Suspicious transactions

Business relationships

2.3 Keeping personal information

The use of personal information in Canadian commercial activities is protected by the Personal Information Protection and Electronic Documents Act (PIPEDA), or by substantially similar provincial legislation. You have to inform individuals concerning the collection of personal information about them. However, you do not have to inform individuals when you include personal information about them in any reports that you are required to make to FINTRAC. You can get more information about your responsibilities in this area from the following:

3. Records to Be Kept

As a real estate professional, you already keep information about your clients or potential clients. In many cases, you will find that what you are already doing is not all that different from what you have as obligations explained in this guideline.

As a real estate broker or sales representative, or as a real estate developer, you have to keep the following records in addition to the records described in sections 5 and 6 when you engage in any of the activities described in section 1:

Details about each of these types of records are provided in subsections 3.2 through 3.5. Also, section 7 explains how your records should be kept.

See section 4 for information about identification requirements that may be associated to the events triggering record keeping requirements.

3.1 General exceptions to record keeping

If you keep information in a record that is already readily available in any other record that you have kept under these rules (as described throughout this guideline), you do not have to keep that information again.

You do not have to keep any of the records described in subsections 3.3 or 3.4 if you conduct a transaction for a public body or a very large corporation. The same is true regarding a subsidiary of either of those entities, if the financial statements of the subsidiary are consolidated with those of the public body or very large corporation.

In this context, a public body means any of the following or their agent:

Also in this context, a very large corporation is one 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). For more information about stock exchanges outside Canada that are designated by the Minister of Finance, refer to the July 2, 2008 news release available in the News area of the Department of Finance's website (http://www.fin.gc.ca).

To find out which countries are members of the FATF, refer to its website (http://www.fatf-gafi.org).

3.2 Large cash transaction records

This is a record for every amount of cash of $10,000 or more that you receive from a client in a single transaction. For example, if your client brings you $10,000 in cash for a deposit on the purchase of a house, you have to keep a large cash transaction record. In addition to this record, a large cash transaction will also require a report to FINTRAC as explained in Guideline 7: Submitting Large Cash Transaction Reports to FINTRAC.

If you know that two or more cash transactions of less than $10,000 each were made within a 24-hour period (that is, 24 consecutive hours), by or on behalf of the same client, these are considered to be a single large cash transaction if they add up to $10,000 or more. In this case, you would have to keep a large cash transaction record, and report the transaction to FINTRAC as explained above.

Do not keep a large cash transaction record or make a large cash transaction report to FINTRAC if the cash is received from a financial entity or a public body. In this context, a financial entity means any of the following:

For information about what is considered a public body in this context, see subsection 3.1.

Contents of a large cash transaction record

For any large cash transaction, the information you have to keep in a large cash transaction record includes the following:

Account information is required in this record if any account was affected. For example, this would include the account into which you deposited the cash, such as the broker, lawyer or notary's in-trust account.

Be as descriptive as possible regarding the business or occupation. Record information that clearly describes it, rather than use a general term. For example, in the case of a consultant, the occupation recorded should reflect the area of consulting, such as "information technology consultant" or "consulting forester." As another example, in the case of a professional, the occupation should reflect the nature of the work, such as "petroleum engineer" or "family physician."

If you have to ascertain the identity of the individual conducting the large cash transaction, see subsection 3.6 for additional information that is required on the large cash transaction record.

3.3 Receipt of funds records

A receipt of funds record is required when you receive any amount, whether or not it is in cash. If you have to keep a large cash transaction record, you do not have to keep a receipt of funds record for the same transaction.

You do not have to keep a receipt of funds record if the funds are received from a financial entity or a public body. For information about what is considered a financial entity in this context, see subsection 3.2. For information about what is considered a public body in this context, see subsection 3.1.

When a real estate broker or sales representative receives funds from a client represented by another real estate broker or representative, it is that other broker or sales representative who has to keep the receipt of funds record. If the client in this situation is a corporation, that other broker or sales representative also has to keep the information about the power to bind the corporation regarding the transaction.

Contents of a receipt of funds record

For any receipt of funds, the information you have to keep in a receipt of funds record includes the following:

Account information is required in this record if any account was affected. For example, if the funds were received by cheque, this would include the account on which that cheque was drawn. However, if the receipt of funds record is about funds received from your client by another real estate broker or sales representative (you have to keep the record in this case, as explained above) you only have to include the number and type of any such account and the full name of the client that holds the account if reasonable efforts enable you to get that information

Account information for a receipt of funds record also includes information about the account into which the funds are deposited, such as the broker's in-trust account. However, if you are required to keep a receipt of funds record for funds received from your client by another real estate broker or sales representative, you are not required to provide the account number or the full name of the account holder for any in-trust account held by another real estate broker or sales representative. In this case, the receipt of funds record would have to indicate that an in-trust account for another broker or sales representative was involved, but the rest of the information about the in-trust account is not required.

If the receipt of funds record is about an entity, you will have to include the entity's name, address and nature of their principal business.

If the receipt of funds record is about a corporation, you also need to keep a copy of the part of the official corporate records showing the provisions relating to the power to bind the corporation regarding the transaction. This could be a certificate of incumbency, the articles of incorporation or the bylaws of the corporation that set out the officers duly authorized to sign on behalf of the corporation, such as the president, treasurer, vice-president, comptroller, etc. If there were changes subsequent to the articles or bylaws that relate to the power to bind the corporation regarding the purchase and these changes were applicable at the time that the record had to be kept, then the board resolution stating the change would be included in this type of record.

If you have to identify the individual conducting the transaction, see subsection 3.6 for additional information that is required on the receipt of funds record.

It is possible that you receive funds from someone who is not your client in a purchase or sale of a property. For example, a young couple makes an offer on a house, but the funds for the associated deposit are given to you by the mother of the husband. In this case, you would have to keep the receipt of funds record about the mother, not the young couple. However, if the young couple gives you the funds (whether the funds were given to them by the mother or anyone else), the receipt of funds record would be about the young couple.

You are not required to determine if a third party is involved in the receipt of funds. However, you do have to make this determination regarding the purchase or the sale, as explained in subsection 5.1.

3.4 Client information records

As a real estate broker or sales representative, you also have to keep a client information record for every purchase or sale of real estate. As a real estate developer, you also have to keep a client information record for every sale of a house, a condominium unit, a commercial or industrial building or a multi-unit residential building.

The client information record sets out the client's name and address, and the nature of the client's principal business or occupation. If the client is an individual, the client information record also has to include the individual's date of birth. If there is more than one individual purchasing or selling, you have to keep a client information record about each individual.

If the client information record is about an entity, in addition to the above-mentioned information about the individual conducting the transaction for the entity, the record also has to include the entity's name and address as well as the nature of the entity's principal business.

If the client information record is about a corporation, you also need to keep a copy of the part of the official corporate records showing the provisions relating to the power to bind the corporation regarding the transaction. This could be a certificate of incumbency, the articles of incorporation or the bylaws of the corporation that set out the officers duly authorized to sign on behalf of the corporation, such as the president, treasurer, vice-president, comptroller, etc. If there were changes subsequent to the articles or bylaws that relate to the power to bind the corporation regarding the transaction, and these changes were applicable at the time that the record had to be kept, then the board resolution stating the change would be included in this type of record.

However, the requirement to keep a record relating to the power to bind does not apply if you also have to keep a large cash transaction record about the purchase or sale of real estate.

3.5 Suspicious transaction report records

When you have to report a suspicious transaction to FINTRAC, you have to keep a copy of the report. See Guideline 3: Submitting Suspicious Transaction Reports to FINTRAC for more information about obligations related to this report.

3.6 Identification information on all records

If you have to ascertain the identity of an individual, as explained in section 4, in association with any of the records mentioned in section 3, you have to keep the individual's name with that record. You also have to keep the following with that record:

Identification documents

If you have to ascertain the identity of the individual using an identification document, the record has to include the type of document you used to confirm the individual's identity, its reference number and its place of issue.

Identification of clients not physically present

If you do not use an identification document but use methods for a client who is not physically present (as described in subsection 4.6), you have to include whichever of the following, according to the methods used:

3.7 Records regarding unrepresented parties for real estate brokers and sales representatives

As explained in subsection 4.1, if there are unrepresented parties in a real estate transaction in which you are involved as a broker or sales representative, you have to take reasonable measures to ascertain the identity of the unrepresented individuals or confirm the existence of the unrepresented entities. If you are not able to do so after taking reasonable measures, you will have to keep a record of the measures you took and why you were unable to ascertain their identity or confirm their existence.

4. Client Identity

4.1 When and how do you have to ascertain client identity?

As a real estate broker or sales representative, or as a real estate developer, you have client identification obligations when you engage in any of the activities described in section 1.

You have to take the following measures to ascertain the identity of individuals to confirm the existence of entities (entities meaning: corporations, trusts, partnerships, funds, and unincorporated associations or organizations), subject to the general exceptions in subsection 4.2.

Subsections 4.3 to 4.5 explain the need to ascertain the identity of an individual when an event triggers the requirement. In these events, you must ascertain the identity of an individual, unless an exception applies as explained in 4.2. However, some exceptions apply for existing clients and transactions with public bodies or large corporations, as explained in subsection 4.2.

See section 3 for information about record keeping requirements that may be associated to the events triggering identification requirements.

Once you have conducted two transactions with a client that require you to ascertain the identity of the client, you have entered into a business relationship with that client. See section 5 for more information on business relationships and related records.

Identification requirements about each party in a real estate transaction for real estate brokers and sales representatives

If the parties in a real estate transaction are each represented by a different real estate broker or sales representative, you have to ascertain the identity of the individual or confirm the existence of the entity that you represent in the transaction. If some parties in a real estate transaction are not represented by a real estate broker or sales representative while other parties are, each real estate broker or sales representative that represents a party to the transaction has to take reasonable measures to ascertain the identity or confirm the existence of the parties that are not represented. In this situation, if you are unable to ascertain the identity or confirm the existence of the parties that are not represented, you will have to keep a record as explained in subsection 3.

4.2 General exceptions to client identification

In addition to the exceptions explained throughout the rest of section 4, the following general exceptions apply to client identification requirements.

Existing clients

Once you have ascertained the identity of an individual as explained in this guideline, you do not have to ascertain their identity again if you recognize the individual (visually or by voice) at the time of a future event that would otherwise trigger the identification requirement. However, if you have any doubts about the identification information previously collected, you will have to ascertain that individual's identity again.

Once you have confirmed the existence of a corporation and confirmed its name, address and the names of its directors (as explained in subsection 4.7), you are not required to confirm that same information in the future.

Once you have confirmed the existence of an entity other than a corporation (as explained in subsection 4.7), you are not required to confirm that same information in the future.

Certain types of transactions

You do not have to ascertain the identity of clients as described in subsection 4.5 if you conduct a transaction for a public body or a very large corporation. The same is true regarding a subsidiary of either of those entities, if the financial statements of the subsidiary are consolidated with those of the public body or very large corporation.

For information about what is considered a public body or a very large corporation in this context, see subsection 3.1.

4.3 Client identity for large cash transactions

You have to ascertain the identity of any individual with whom you conduct a large cash transaction, at the time of the transaction, if you have to keep a large cash transaction record for it, as described in subsection 3.2.

See subsection 4.6 to find out how to ascertain the identity of an individual for a large cash transaction.

4.4 Client identity for suspicious transactions

When you have to send a suspicious transaction report to FINTRAC, you have to take reasonable measures, before the transaction is reported, to ascertain the identity of the individual who conducted or attempted to conduct the transaction. This will not apply in the following circumstances:

In this context, reasonable measures to ascertain the identity of an individual include asking the individual for an identification document. They also include using either of the options available to ascertain the identity of individuals who are not physically present. However, reasonable measures exclude any method that you believe would inform the individual that you are submitting a suspicious transaction report.

It is important to remember that all suspicious transactions and attempted transactions, including transactions that are normally exempt from client identification requirements, require you to take reasonable measures to ascertain your client's identity. See Guideline 2: Suspicious Transactions for more information.

4.5 Client identity for other records

You have the following identification requirements when you have to keep a receipt of funds record, as explained in subsection 3.3, or a client information record, as explained in subsection 3.4.

As explained in subsection 3.3, if you are a real estate broker or sales representative and you receive funds from a client who is represented by another real estate broker or representative, it is that other broker or sales representative who has to keep the receipt of funds record. In this situation, the other broker or sales representative would also have to ascertain the identity of or confirm the existence of the client.

Individuals

You have to ascertain the identity of individuals for whom you keep a receipt of funds record or a client information record. You have to do this at the time of the transaction related to the record.

See subsection 4.6 to find out how to ascertain the identity of an individual for a receipt of funds record or a client information record.

Entities

You have to confirm the existence of any entity for which you have to keep a receipt of funds record or a client information record. You have to do this within 30 days of the transaction related to the record.

In the case of a corporation, in addition to confirming its existence, you also have to determine the corporation's name, address and the names of its directors within 30 days of the transaction related to the record.

To find out how to confirm the existence of a corporation, read the information in subsection 4.7, under the heading "Corporations." To find out how to confirm the existence of an entity other than a corporation, read the information in subsection 4.7 under the heading "Entities other than corporations."

4.6 How to ascertain the identity of an individual

See subsection 3.6 for additional information that is required on certain records when you have to ascertain the identity of individuals.

To ascertain the identity of an individual, refer to the individual's birth certificate, driver's licence, passport, record of landing, permanent resident card or other similar document.

You can refer to an individual's provincial health card, but only if it is not prohibited by provincial or territorial legislation. For example, you cannot refer to an individual's provincial health card from Ontario, Manitoba, Nova Scotia or Prince Edward Island, since health cards cannot be used for this purpose in these provinces. As another example, in Quebec, you cannot request to see a client's health card, but you may accept it if the client wants to use it for identification purposes. If you have questions about the use of health cards for identification, please contact the appropriate provincial issuer for more information.

For a document to be acceptable for identification purposes, it must have a unique identifier number. Also, the document must have been issued by a provincial, territorial or federal government. For example, a birth or baptismal certificate issued by a church would not be acceptable for this purpose. Also, an identification card issued by an employer for an employee (that is, an employee identification card) is not acceptable.

The document also has to be a valid one and cannot have expired. For example, an expired driver's licence would not be acceptable.

A social insurance number (SIN) card can be used to verify the identity of a client, but the SIN (that is, the number itself) is not to be provided to FINTRAC on any type of report. The Office of the Privacy Commissioner (http://www.priv.gc.ca) has produced a fact sheet concerning best practices for the use of SINs. Please consult it for more information on this topic.

Examples of other documents that can be used to verify the identity of a client include a certificate of Indian status or a provincial or territorial identification card issued by any of the following (or their successors):

Valid foreign identification, if equivalent to an acceptable type of Canadian identification document, would also be acceptable for the purposes explained in this guideline. For example, a valid foreign passport is acceptable.

When you refer to a document to ascertain the identity of an individual, it has to be an original, not a copy of the document. In cases where it is not possible for you to view the original yourself, you may choose to use an agent or mandatary to verify the original identification document on your behalf. Even if you use an agent or mandatary, you are responsible for making sure the identification requirements are met.

Use of an agent or mandatary

If you use an agent or mandatary for client identification, you have to enter into a written agreement or arrangement with the agent or mandatary outlining what you expect them to do for you. In addition, you have to obtain from the agent or mandatary the customer information that was obtained according to the agreement or arrangement.

Your agent or mandatary can ascertain the identity of your client for you using an identification document. In cases where your client is not physically present at the conducting of a transaction, your agent or mandatary can also use the options explained below.

Individual not physically present

To ascertain the identity of an individual who is not physically present, you have to use a combination of two of the following methods. In each of the two methods you use, the individual's information has to be consistent with what you have in your records. The information also has to be consistent from one method to the other. For example, if each of the methods you use has the name, address and date of birth information about the individual, all of it has to agree with what you have in your records.

The methods below may not apply for all clients. For example, the methods would not be available to ascertain the identity of a client outside Canada who is conducting a real estate transaction with you, but has no Canadian credit history, no access to a Canadian guarantor and no deposit account with a financial entity. In this case, ascertaining the identity of the client using an identification document may necessitate the use of an agent or mandatary, as explained above.

Identification product or credit file method

You can use either of the following methods, but you cannot combine them:

Products for either of these methods are available commercially, such as those used for credit ratings.

Attestation method

Obtain an attestation that an original identification document for the individual has been seen by a commissioner of oaths or a guarantor. This attestation must be on a legible photocopy of the document and include the following information:

In this context, a guarantor has to be an individual engaged in one of the following professions in Canada:

Cleared cheque or deposit account method

You can use either of the following methods, but you cannot combine them.

For either method, the account has to be with a financial entity, as described in subsection 3.2.

The account cannot be one that is exempt from identification requirements for the financial entity, such as a registered retirement savings plan or a reverse mortgage. For more information about accounts that cannot be used for the cleared cheque or deposit account methods, see Guideline 6G: Record Keeping and Client Identification for Financial Entities.

4.7 Client identity for corporations and other entities

You have to confirm the existence of any corporation or other entity for which you have to keep a client information record or a receipt of funds record, within 30 days of the transaction associated to the record. In the case of a corporation, in addition to confirming its existence, you also have to determine the corporation's name, address and the names of its directors, within 30 days of the transaction.

Corporations

To confirm the existence of a corporation as well as the corporation's name and address, refer to the following documents:

You also have to confirm the names of the corporation's directors. This does not include ascertaining their identity. To confirm the names of the corporation's directors, you may need to see the list of the corporation's directors submitted with the application for incorporation. For real estate brokers or sales representatives, if the client is a corporation that is a securities dealer, you do not need to ascertain the name of the corporation's directors. In this context, a securities dealer means an individual or 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.

The record you use to confirm a corporation's existence can be a paper or an electronic version. Although such information may be available verbally (such as by phone), it is not acceptable for these purposes, as you have to refer to a record. If the record is in paper format, you have to keep the record or a copy of it.

If the record is an electronic version, you have to keep a record of the corporation's registration number, the type and source of the record. An electronic version of a record has to be from a public source. For example, you can get information about a corporation's name and address and the names of its directors from a provincial or federal database such as the Corporations Canada database which is accessible from Industry Canada's website (http://www.ic.gc.ca). As another example, you may also get this type of information if you subscribe to a corporation searching and registration service.

Entities other than corporations

In the case of an entity other than a corporation, refer to a partnership agreement, articles of association or any other similar record that confirms the entity's existence. The record you use to confirm the existence of an entity can be paper or an electronic version. Although such information may be available verbally (such as by phone), it is not acceptable for these purposes, as you have to refer to a record. If the record is in paper format, you have to keep the record or a copy of it.

If the record is an electronic version, you have to keep a record of the entity's registration number, the type and source of the record. An electronic version of a record has to be from a public source.

4.8 Keeping client identification information up to date

Your compliance program has to include an assessment, in the course of your activities, of the risk of money laundering or terrorist financing. Guideline 4: Implementation of a Compliance Regime provides more information about risk assessment requirements. According to this assessment, you will have to keep client identification information up to date as part of your ongoing monitoring obligations.

Measures to keep client identification up to date include asking the client to provide information to confirm or update identification information. In the case of an individual client, this can also include confirming or updating the information by using the same options that are available to ascertain the identity of individuals who are not physically present.

In the case of clients that are entities, measures to keep client identification information up to date include consulting a paper or electronic record as explained in subsection 4.7, or obtaining information verbally to keep client identification information up to date.

The frequency with which client identification information is to be kept up to date will vary depending on your risk assessment of your client. As part of your ongoing monitoring obligations, you have to keep all client identification information up to date. For high-risk clients, you must update client identification information more frequently and perform more frequent monitoring, as well as adopt any other appropriate enhanced monitoring measures (see examples in section 5).

If you have used one of the exceptions found in 4.2 (General exceptions to client identification) where you were not required to ascertain the identity of a client and therefore, do not have any client information in your records, there will be no client information to update as part of your ongoing monitoring obligations as described in section 5 (Ongoing Monitoring of Business Relationship and Related Records), but your other ongoing monitoring obligations still apply.

5. Ongoing Monitoring of Business Relationship and Related Records

Business relationship

A business relationship is a relationship that you establish with a client to conduct financial transactions or provide services related to those transactions.

You enter into a business relationship when you conduct two or more transactions in which you have to:

If you use the exception to ascertaining the identity of a client where you recognize the individual (as described in 4.2 General exceptions to client identification) in the case of a second transaction that requires you ascertain the identity of a client, you have entered into a business relationship with that client nonetheless. This is because it is the requirement to ascertain identity that triggers the business relationship.

You should determine that a business relationship has been established as soon as reasonably practicable following the second transaction requiring that the client's identity be ascertained. As a best practice, this should be done within 30 calendar days.

For real estate brokers, representatives and developers, the business relationship only includes transactions and related activities for which you have to ascertain the identity of your client. However, when you have to send a suspicious transaction report, you must still take reasonable measures to ascertain the identity of the client even if the transactions in question do not normally require it. See section 4 for more information on these transactions and activities.

If you have a client who conducts two or more suspicious transactions, even if you are unable to identify the client, you have still entered a business relationship with that client. This is because suspicious transactions require you to take reasonable measures to identify the client (subject to the circumstances described in section 4.4), and so two or more of these transactions will trigger a business relationship. You must treat this business relationship as high-risk, and undertake more frequent ongoing monitoring and updating of client identification information, as well as any other appropriate enhanced measures (see examples under "Ongoing monitoring" below).

A business relationship is established when two transactions that require you to ascertain the identity of your client occur within a maximum of five years from one another. If a period of five years passes from the last transaction that required you to ascertain the identity of your client, the business relationship with that client ceases.

Once the business relationship is established, you must also:

Ongoing monitoring

Ongoing monitoring means that you have to monitor your business relationship with a client on a periodic basis. Use your risk assessment of the client with whom you have a business relationship to determine how frequently you will monitor that business relationship. The risk assessment requires you to consider each one of your clients when assessing their risk for money-laundering and terrorist activities financing. However, an individual written assessment is not required for each client, so long as you can demonstrate that you put your client in the correct risk category, according to your policies and procedures, and risk assessment. You have to perform ongoing monitoring of each business relationship to:

The above-listed requirements do not need to follow the same timeframe, so long as you monitor your high-risk clients more frequently and with more scrutiny than you do your low-risk clients.

In order to keep client information up to date, you may update the information you have on record every time the client conducts a transaction that requires you to ascertain their identity.

As an example, you may choose to reassess the level of risk associated with a client's transactions and activities, and to determine whether the transactions or activities are consistent with the information you have on your client, for your low-risk clientele, every two years, while performing the same monitoring of your high-risk clients on a more frequent basis. However, depending on the circumstances of your operations, a different ongoing monitoring period for low-risk clients may be appropriate.

In the context of monitoring on a periodic basis, the frequency of your monitoring will vary depending on your risk assessment of your client. As part of your ongoing monitoring obligations, you have to monitor all of your business relationships, and you must monitor business relationships you consider high-risk more frequently, as well as update client identification information and adopt any other appropriate enhanced measures.

Here is a non-exhaustive list of enhanced measures you could take to mitigate the risk in cases of high-risk business relationships:

If as a result of your ongoing monitoring you consider that the risk of a money laundering or a terrorist financing offence in a business relationship is high, your risk assessment in your compliance regime must treat that client as a high risk. In this case, you must conduct more frequent monitoring of your business relationship with that client, update that client's identification information more frequently, and adopt any other appropriate enhanced measures (see examples above).

Guideline 4: Implementation of a Compliance Regime provides more information about risk assessment requirements.

5.1 Business relationship record

When you enter into a business relationship with a client, you have to keep a record of the purpose and intended nature of the business relationship. You also have to review this information on a periodic basis and keep it up to date. This is done to ensure that you continue to understand your client's activities over time so that any changes can be measured to detect high-risk transactions and activities. This may lead you to increase the frequency of ongoing monitoring, update their client identification information more frequently, and adopt any other appropriate enhanced measures (see examples in section 5).

The purpose and intended nature of the business relationship is information that should allow you to anticipate the transactions and activities of your client.

For clients with whom you have a business relationship on the basis that they have completed two transactions that required you to ascertain their identity, or in the case of entities, to confirm their existence; you must document the purpose and intended nature of the business relationship that best describes your dealings with that client.

Here is a short, non-exhaustive list of examples of purpose and intended nature of a business relationship in your sector:

6.Third Party Determination and Related Records

6.1 Third party determination

You have to determine whether there is a third party involved in a transaction when you have to keep any of the following records:

In this context, a third party is an individual or entity other than the individual who conducts the transaction. When you are determining whether a "third party" is involved, it is not about who "owns" the money, but rather about who gives instructions to deal with the money. To determine who the third party is, the point to remember is whether the individual in front of you is acting on someone else's instructions. If so, that someone else is the third party.

In making a third party determination when employees are acting on behalf of their employers, they are considered to be acting on behalf of a third party.

If you determine that there is a third party involved in the transaction, you have to keep a record as explained below. However, you do not have to identify or confirm the existence of a third party.

Reasonable measures

What constitutes reasonable measures will vary in accordance with the context in which they occur, and therefore could differ from one situation to the next. However, reasonable measures would include retrieving the information already contained in your files or elsewhere within your business environment, or obtaining the information directly from the client.

6.2 Third party records

If you determine that there is in fact a third party who gave instructions to the individual conducting the transaction, you have to keep a record of the following information:

For more information about recording business or occupation, see subsection 3.2, under the heading "Contents of a large cash transaction record."

If you are not able to determine that there is in fact a third party, but you have reasonable grounds to suspect that there are instructions of a third party involved, you have to keep a record to indicate the following:

This record must also indicate details of why you suspect the individual is acting on a third party's instructions.

7. How Should Records Be Kept?

You should maintain an effective record keeping system to enable FINTRAC to have access to the records in a timely fashion. Your records have to be kept in such a way that they can be provided to FINTRAC within 30 days of a request to examine them.

For the requirements explained in this guideline, you can keep records in a machine-readable or electronic form, as long as a paper copy can be readily produced from it. For example, if you have a document imaging system, you do not have to produce the original document for these purposes, as long as you can print the imaged one.

The record keeping requirements explained in this guideline are about each record to be kept. Your record keeping system can store the information required for any one record separately, as long as you are able to readily retrieve and put the information together for the record whenever necessary.

You are not required to keep a copy of the reports you make to FINTRAC (other than the suspicious transaction report as explained in subsection 3.5), but you may choose to do so. It is recommended that you keep the information that FINTRAC sends you in the acknowledgement message about each report processed. This provides the date and time the report was received along with its identification number.

Timeframe for keeping records

You have to keep records for five years, as follows:

Employees or contractors who keep records for you

Your employees who keep records (as described in section 3) for you are not required to keep those records after the end of their employment with you. The same is true for individuals in a contractual relationship with you, after the end of that contractual relationship. This means that you have to get and keep the records that were kept for you by any employee or contractor before the end of that individual's employment or contract with you.

8. Penalties for Non-Compliance

Failure to comply with your record keeping or client identification requirements can lead to criminal charges against you. Conviction of failure to retain records could lead to up to five years imprisonment, to a fine of $500,000, or both. Alternatively, failure to keep records or ascertain the identity of clients can lead to an administrative monetary penalty. For more information on penalties, you can also consult the "Penalties for non-compliance" section of FINTRAC's website.

9. Comments?

These guidelines will be reviewed on a periodic basis. If you have any comments or suggestions to help improve them, please send your comments to the mailing address provided below, or by email to guidelines-lignesdirectrices@fintrac-canafe.gc.ca.

10. How to Contact FINTRAC

For further information on FINTRAC and its activities, reporting and other obligations, please go to FINTRAC's website (http://www.fintrac-canafe.gc.ca) or contact FINTRAC:

Financial Transactions and Reports Analysis Centre of Canada
234 Laurier Avenue West, 24th floor
Ottawa ON  K1P 1H7
Canada

Toll-free: 1-866-346-8722

Glossary of Terms

Business relationship record

A record of information about the purpose and intended nature of the business relationship with a client. See subsection 5.1 for more information.

Client information record

A record of information about the client for a purchase or sale of real estate. See subsection 3.4 for more information.

Large cash transaction record

A record of information about the individual from whom you receive $10,000 or more in cash. This is also about the transaction itself. See subsection 3.2 for more information.

New

In the context of real estate developers, a new house, new condominium unit, a new commercial or industrial building or a new multi-unit residential building means one that was constructed within the past two years and was not occupied for its intended purpose before being sold.

Public

In the context of real estate developers, sales to the public include those to an individual, a corporation or any other type of entity. Sales to the public exclude those between affiliates and those between a subsidiary and its owner.

Real estate broker

An individual or an entity that is registered or licensed in a province to sell or purchase real estate.

Real estate sales representative

An individual who is registered or licensed in a province to sell or purchase real estate.

Real estate developer

An individual or an entity, other than a real estate broker or sales representative, who sells new houses or condominium units, new commercial or industrial buildings or new multi-unit residential buildings. See section 1 for more information.

Receipt of funds record

A record of information about the individual or entity from which you receive any amount of funds. This is also about the transaction itself. See subsection 3.3 for more information.

Third party

A third party is an individual or entity other than the individual who conducts the transaction. See section 6 for more information.

Suspicious transaction

A suspicious transaction is one for which there are reasonable grounds to suspect that the transaction is related to a money laundering offence or a terrorist activity financing offence. It can include one that was attempted. See Guideline 2: Suspicious Transactions for more information.

Date Modified: