Financial Transactions and Reports Analysis Centre of Canada
http://www.fintrac-canafe.gc.ca
Common menu bar links
Foreign Exchange Dealers And Money Services Businesses
Changes applicable to foreign exchange dealers and money services businesses are explained below. Unless otherwise specified, these changes come into effect on June 23, 2008.
The definition of a money services business will be modified to include a foreign exchange dealer. This means that information concerning the obligations related to foreign exchange activities will be included with information about the obligations of a money services business. This also means that the “foreign exchange dealer” reporting entity type will no longer exist for fields on suspicious transactions reports, large cash transaction reports and terrorist property reports.
Table of Contents
- Changes affecting reporting
- Changes affecting record keeping and client identification
- 2.1 Client identification
- 2.2 Beneficial ownership
- 2.3 Politically exposed foreign persons
- 2.4 Other changes in record keeping
- 2.5 Ongoing service agreement
- 2.6 Remittance or transmission of funds
- 2.7 Client information record
- 2.8 Date of birth on records
- Changes affecting your compliance regime
- Registration
Back to the Summary of Changes
View this document in .pdf format (43 kb)
1. Changes affecting reporting
1.1 Electronic funds transfer reports
Effective June 30, 2007, if you send or receive an electronic funds transfer (EFT) with more than one beneficiary, the 24‑hour‑rule will not apply for any of the amounts under $10,000 if it was sent at the request of a public body, a very large corporation, or the administrator of a federally or provincially regulated pension fund.
The following changes will come into effect on June 23, 2008.
1.2 Suspicious transaction reports
When you submit a suspicious transaction report to FINTRAC, you will have to keep a copy of it.
Currently, the requirement for you to report a suspicious transaction applies only when the financial transaction was completed. Once the changes come into effect, the requirement will also apply to attempted transactions.
In addition, when you have to report a suspicious transaction to FINTRAC, you will also have to take reasonable measures before the transaction is reported, to identify the individual who conducted the transaction. This will not apply in the following circumstances:
- if you had already identified the individual as required; or
- if you believe that doing so would inform the individual that you are submitting a suspicious transaction report.
2. Changes affecting record keeping and client identification
Currently, as part of the large cash transaction record, you do not have to keep information that is readily available in other records that you have to keep under these rules. As of June 30, 2007, this will also apply to any other record you have to keep under these rules. In other words, if you keep information in one record, you will not have to keep the same information in any other record.
The following changes will come into effect on June 23, 2008.
2.1 Client identification
Doubts about information collected
Currently, if you have identified an individual before, you do not have to do so again if you recognize the individual. Once the changes come into effect, if you have doubts about the information collected concerning an individual’s previous identification, you will have to identify that individual again.
Individuals not physically present
Currently, if you have to identify an individual who is not physically present, you can use an agent to verify identification on your behalf (see the heading below about use of an agent or mandatary).
Once the changes come into effect, unless you use an agent or mandatary, you will be able to use a combination of two of the following methods:
- referring to an independent identification productor, with the individual’s permission, referring to a credit file;
- obtaining an attestation concerning an identification document for the individual from a commissioner of oaths or a guarantor;
- confirming that a cheque drawn on a deposit account with a financial entity (other than one that is exempt from identification requirements) has cleared; and
- confirming that the individual has a deposit account with a financial entity (other than one that is exempt from identification requirements).
The two methods in the first bullet involving an identification product and a credit file cannot be combined, nor can the methods involving a cleared cheque and the confirmation of a deposit account described in the last two bullets.
You should rely on a combination of these methods only if the individual’s information obtained is consistent within each method and with the information in your records.
Identification information in records
When you have to identify an individual in connection to a record you create or a transaction the individual carries out, you will have to include information about how the individual was identified in the record you are required to keep. This already applies to client information records, transaction tickets and large cash transaction records, but once the changes come into effect, it will apply to any record you have to keep and for which you have to identify the client.
Use of an agent or mandatary
If you rely on agents or mandataries to identify any of your clients, you will have to enter into a written agreement or arrangement with them to do so. You will also have to obtain from the agent or mandatary the customer information that was obtained according to the agreement or arrangement.
This will only be acceptable when the agent or mandatary identifies an individual using an original identification document.
2.2 Beneficial ownership
When you have to confirm the existence of an entity, you will have to take reasonable measures to obtain, and if obtained, keep a record of the following information about the entity’s beneficial ownership:
- If the entity is a corporation:
- the name and occupation of all directors of the corporation; and
- the name, address and occupation of all individuals who directly or indirectly own or control 25% or more of the shares of the corporation;
- If the entity is an entity other than a corporation:
- the name, address and occupation of all individuals who directly or indirectly own or control 25% or more of it.
If this information cannot be obtained, you will have to keep a record explaining why beneficial ownership could not be determined.
If you have to confirm the existence of an entity that is a not-for-profit organization, you will also have to determine and keep a record about the following:
- whether or not that entity is a registered charity for income tax purposes; or
- if that entity is not a registered charity, whether or not it solicits charitable financial donations from the public.
2.3 Politically exposed foreign persons
A politically exposed foreign person will be defined as an individual who holds or has held one of the following offices or positions in or on behalf of a foreign country:
- a head of state or government;
- a member of the executive council of government or member of a legislature;
- a deputy minister or equivalent;
- an ambassador or an ambassador’s attaché or counsellor;
- a military general or higher rank;
- a president of a state‑owned company or bank;
- a head of a government agency;
- a judge; or
- a leader or president of a political party in a legislature.
A politically exposed foreign person will also include the following immediate family members of the individual described above:
- spouse or common‑law partner;
- mother or father;
- child;
- brother, sister, half-brother or half-sister; or
- spouse’s or common‑law partner’s mother or father.
Determination
Once the changes come into effect, you will have to take reasonable measures to determine if an individual who is the initiator or the beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign person. This will have to be done within 14 days of the transaction.
If you determine that an individual is a politically exposed foreign person, you will also have to do the following:
- take reasonable measures to establish the source of funds used by the initiator for the transaction; and
- within 14 days after the transaction occurred, get a member of senior management to review the transaction.
Once you have determined that an individual is a politically exposed foreign person, you will not have to do it again.
Records
Once a transaction has been reviewed as explained above, you will 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 funds, if known, 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.
2.4 Other changes in record keeping
Client credit files and internal memoranda
Currently, if you are a foreign exchange dealer, you have to keep any client credit files that you create in the normal course of business. In addition, if you are a foreign exchange dealer, you have to keep any internal memorandum you receive or create concerning services you provide to your clients in the normal course of business. These two requirements will apply to any money services business, whether or not they engage in foreign exchange dealing.
2.5 Ongoing service agreement
In addition, once the changes come into effect, when you enter 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, you will have to keep the following:
- a record of the name, address, date of birth and occupation of every individual who has signed the agreement on behalf of the entity;
- a client information record for the entity; and
- a list containing the name, address and date of birth of every employee authorized to order transactions under the agreement.
You will also have to confirm the existence of the entity with which you have the agreement. In addition, if the entity is a corporation, you will have to find out its name, address and the names of its directors. However, if the entity is a public body, a very large corporation or a subsidiary of either, you do not have to identify it.
2.6 Remittance or transmission of funds
Record for remittance or transmission of funds
Currently, if you remit or transmit $3,000 or more by any means or through any individual, entity or electronic funds transfer network, you have to keep a record of the name and address of the client who initiated the transaction. Once the changes come into effect, this will apply when you remit or transmit an amount of $1,000 or more. In addition, the record will also have to include the following:
- the telephone number and principal business or occupation of the client initiating the transaction;
- if the client is an individual, the date of birth;
- the reference number and date of the transaction;
- the name of the individual or entity to whom the amount is remitted or transmitted; and
- the amount and currency of the transaction.
Information to include with transfers
For every EFT that you send at the request of a client, when the EFT network can carry the information, you will have to include originator information with it. Originator information means the name, address and, if any, the account number or reference number of the client who requested it. If you send EFTs as a member of the SWIFT network, these requirements will also apply to domestic MT103 messages. These requirements do not apply to the following transfers:
- that use credit or debit cards, when the recipient has an agreement with the payment service provider for the payment of goods and services;
- where the recipient withdraws cash from their account;
- that use direct deposits or pre-authorized debits; or
- that use cheque imaging and presentment.
You will also have to take reasonable measures to ensure you receive the information mentioned above for any incoming EFT, including a domestic MT103.
Effective June 23, 2009, the requirement to transmit originator information in EFTs will no longer be subject to the capability of the EFT network.
The following changes will come into effect on June 23, 2008.
Client identification for funds transfers
Currently, you have to identify an individual in the following cases:
- when you issue or redeem money orders, traveller’s cheques or other similar negotiable instruments of $3,000 or more; and
- when you transmit or remit $3,000 by any means through any individual or entity; and
- when you conduct a foreign exchange transaction of $3,000 or more.
Once the changes come into effect, you will have to identify an individual when you remit or transmit an amount of $1,000.
You will not have to identify individuals who are listed as authorized to conduct a transaction on behalf of their employer, when you have an ongoing service agreement with the employer as described above.
2.7 Client information record
When you have to keep a client information record, you have to identify the corporation or the entity other than a corporation within 30 days rather than the current six months after the client information record is created. You will not have to keep a client information record unless you have an ongoing service agreement with an entity (as described above). In these cases, you will have to identify the entity. In addition, if the entity is a corporation, you will also have 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.
2.8 Date of birth on records
You currently have to record the name and address of a person for whom you either issue or redeem traveler’s cheques, money orders or similar negotiable instruments of $3,000 and more. Once the changes come into effect, you will also have to record the person’s date of birth.
When you have to keep a large cash transaction record, or a record about an individual as a third‑party, you will have to include the individual’s date of birth on that record. Currently, this only applies to certain records when you have to identify an individual.
3. Changes affecting your compliance regime
In addition to appointing a person responsible for implementing your compliance regime, once the changes come into effect, you will have to include the following:
- develop, apply and keep up to date written compliance policies and procedures. If you are an entity, they need to be approved by a senior officer;
- assess and document the risk related to money laundering and terrorist activity financing in a way that is appropriate to you considering:
- your clients and your business relationships;
- your products, delivery channels and geographic areas where you do your business activities; and
- any other relevant factor.
- develop and maintain a written ongoing compliance training program for your employees, agents or other individuals authorized to act on your behalf;
- establish and document a review of your policies and procedures, risk assessment and training program for their effectiveness. The review will have to be done every two years by either an internal or external auditor or by an individual of your organization if you do not have an auditor.
If you are an entity, within 30 days after the above review, its findings, any updates to your compliance policies and procedures, including the status of their implementation, will have to be reported in writing to one of your senior officers.
If you determine that the risk is high for money laundering or terrorist financing, you will have to take measures to mitigate the risk, and take reasonable measures to:
- keep client identification and beneficial owner information up to date; and
- conduct ongoing monitoring of financial transactions to detect suspicious transactions.
4. Registration
As of June 23, 2008, you will have to be registered with FINTRAC if any of the following applies to you:
- you are engaged in the business of foreign exchange dealing, remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
- you issue or redeem money orders, traveller’s cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).
To apply for registration, you will have to provide identifying information as well as other specific business information to FINTRAC. You will have to notify FINTRAC of any changes to that information within 30 days and you will have to renew your registration every two years. If you cease your activities, you will also have to advise FINTRAC within 30 days.
