Know your client requirements

When to verify the identity of persons and entities

This guidance explains when you are required to verify the identity of persons and entities. The requirement to verify the identity of your clients (persons or entities) is determined by the type of transaction or activity they are undertaking.

Methods to verify the identity of persons and entities

This guidance describes the methods you can use to verify the identity of persons and entities; who can identify a client on your behalf; and related records that you must keep.

Methods to verify the identity of persons and entities

Business relationship requirements

A business relationship is a relationship that is established between a reporting entity and a client to conduct financial transactions or provide services related to those transactions. Business relationship obligations are applicable to reporting entities in all sectors.

Business relationship requirements

Ongoing monitoring requirements

Ongoing monitoring is the process of reviewing and keeping identification, business relationship and beneficial ownership information up-to-date. In addition, ongoing monitoring is a process for reassessing the level of risk associated with your client’s transactions and activities. Enhanced ongoing monitoring, as a prescribed special measure, is triggered when a business relationship is considered to pose a high risk. Ongoing monitoring obligations are applicable to reporting entities in all sectors.

Ongoing monitoring requirements

Beneficial ownership requirements

As of June 1, 2021, all reporting entity sectors will have beneficial ownership obligations when verifying the identity of an entity. Beneficial owners are the individuals who directly or indirectly own or control 25% or more of a corporation or an entity other than a corporation. In the case of a trust, they are the trustees, the known beneficiaries and the settlors of the trust.

Beneficial ownership requirements

Third party determination requirements

A third party is a person or entity who instructs another person or entity to conduct a transaction or activity on their behalf. Third party obligations are applicable to reporting entities in all sectors, but only for certain transactions and activities.

Third party determination requirements

Politically exposed persons and heads of international organizations

All reporting entity sectors have politically exposed person (PEP) and head of an international organization (HIO) obligations. These obligations include determining whether a person is a foreign or domestic PEP, HIO, or a family member or close associate of a foreign or domestic PEP, as applicable. These obligations are explained in the following:

This content is archived and is being kept online until March 31, 2022 for reference purposes only.

FINTRAC provides guidance to help businesses understand their obligations under the PCMLTFA and its associated Regulations and how they may be assessed in an examination. However, this should not be considered to be legal advice. Please refer to the PCMLTFA and its associated Regulations for the full description of the obligations.

Date Modified: