Financial Transactions and Reports Analysis Centre of Canada
http://www.fintrac-canafe.gc.ca
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Real Estate
Changes applicable to real estate brokers and sales representatives are explained below. Unless otherwise specified, these changes come into effect on June 23, 2008.
Table of Contents
- Changes affecting reporting
- Changes affecting record keeping and client identification
- 2.1 Receipt of funds record
- 2.2 Client information record
- 2.3 Client identification
- 2.4 Date of birth on records
- Changes affecting your compliance regime
Back to the Summary of Changes
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1. Changes affecting reporting
1.1 Obligations for real estate
If you are a real estate broker or sales representative you have to keep certain records, identify clients and report certain types of transactions to FINTRAC when:
- receiving or paying funds;
- depositing or withdrawing funds; or
- transferring funds by any means.
These obligations have been in effect for several years. Once the changes come into effect, they will apply when you act as an agent in the purchase or sale of real estate. However, these obligations will not apply to you for activities related to property management.
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
2.1 Receipt of funds record
Once the changes come into effect, you will have to keep a new record called a receipt of funds record. The content of this new record will be very similar to that of a large cash transaction record. However, it will apply when you receive any amount, whether or not it is in cash. If you have to keep a large cash transaction record, you will not have to keep a receipt of funds record for the same transaction. Also, if the information in a receipt of funds record is readily available in other records you have to keep under these rules, you do not have to keep it again.
If the receipt of funds record is about an entity, you will have to include the entity’s address and nature of their principal place of business. In addition, if the record is about a corporation, you will also need to keep a copy of the part of the official corporate records showing the provisions that relate to the power to bind the corporation regarding the transaction.
2.2 Client information record
Once the changes come into effect, you will also have to keep a client information record for every purchase or sale of real estate. A client information record will set out your client’s name, address, date of birth and the nature of the client’s principal business or occupation.
If the client information record is about a corporation, you will 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.
2.3 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 product or, 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 any 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 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.
When to identify clients
When you have to identify an individual who conducts a transaction, you have to do so at the time of transaction.
When you have to identify a corporation or other type of entity for which a transaction is conducted, you will have to do so within 30 days after the transaction.
For receipt of funds or client information records
Once the changes come into effect, if you have to keep a receipt of funds record or a client information record, you will have to identify the client who conducts the transaction. If it is conducted on behalf of a corporation or other type of entity, you will have to confirm the identity of that corporation or other entity. In the case of a corporation, you will also have to obtain its directors’ names. However, if the corporation is a securities dealer, you do not need to obtain its directors’ names.
For a real estate transaction
If the parties in a real estate transaction are each represented by a different real estate broker or sales representative, you will have to identify 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 will have to identify or confirm the existence of the parties that are not represented.
Third party determination
A third party determination will still have to be made when you receive an amount of cash of $10,000 or more. In addition, you will also have to make a third party determination when you have to keep a client information record.
2.4 Date of birth on records
When you have to keep a large cash transaction record, a receipt of funds record or any other 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 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 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 information up to date; and
- conduct ongoing monitoring of financial transactions to detect suspicious transactions.
