Beneficial ownership requirements


March 2021

This guidance comes into force on June 1, 2021.

Beneficial ownership requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations apply to all reporting entities (REs).

The concealment of beneficial ownership information is a technique used in money laundering and terrorist activity financing schemes. Identifying beneficial ownership removes the anonymity of the individuals behind the transactions and account activities, which is a key component of Canada's anti-money laundering and anti-terrorist financing regime. By collecting beneficial ownership information and confirming its accuracy, REs are performing an important step to mitigate the risk of money laundering and terrorist activity financing, and ultimately, to protect the integrity of Canada's financial system.

This guidance answers the following questions:

  1. Who are beneficial owners?
  2. When must I obtain beneficial ownership information?
  3. When must I confirm the accuracy of beneficial ownership information?
  4. Are there circumstances where I do not have to obtain beneficial ownership information and confirm its accuracy?
  5. What beneficial ownership information do I need to obtain and confirm the accuracy of?
  6. How do I obtain the required beneficial ownership information?
  7. How do I confirm the accuracy of beneficial ownership information?
  8. What if I cannot obtain beneficial ownership information or confirm its accuracy?
  9. How do I verify the identity of an entity's chief executive officer or of the person who performs that function?
  10. What if there are no beneficial owners?
  11. What beneficial ownership records do I need to keep?

This guidance contains the following annexes, which provide examples of records for ownership, control and structure:

1. Who are beneficial owners?

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. If the trust is a widely held trust or a publicly traded trust, they are the trustees and all persons who own or control, directly or indirectly, 25% or more of the units of the trust.Footnote 1

Beneficial owners cannot be other corporations, trusts or other entities. They must be the individuals who are the owners or controllers of the entity. It is important to consider and review the names found on official documentation in order to confirm the accuracy of the beneficial ownership information. It may be necessary to search through many layers of information in order to confirm who are the beneficial owners, as the names found on official documentation may not always reflect the actual beneficial owners.

2. When must I obtain beneficial ownership information?

You must obtain beneficial ownership information when you verify the identity of an entity in accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR).Footnote 2 For more information about when you are required to verify the identity of entities, see your sector's guidance on When to identify persons and entities.

The beneficial ownership information that you must obtain varies depending on whether the entity is a corporation, an entity other than a corporation (such as a partnership), a trust, or a widely held or publicly traded trust. The specific beneficial ownership information that you must obtain for each type of entity is detailed in section "5. What beneficial ownership information do I need to obtain and confirm the accuracy of?".

3. When must I confirm the accuracy of beneficial ownership information?

You must take reasonable measures to confirm the accuracy of the beneficial ownership information when you first obtain it and in the course of conducting ongoing monitoring of your business relationships.Footnote 3

4. Are there circumstances where I do not have to obtain beneficial ownership information and confirm its accuracy?

You do not have to obtain beneficial ownership information and take reasonable measures to confirm its accuracy in the following situations:

  1. For a group plan account held within a dividend or a distribution reinvestment plan. This includes plans that permits purchases of additional shares or units by the member with contributions other than the dividends or distributions paid by the plan sponsor, if the sponsor is an entity:Footnote 4
    • whose shares or units are traded on a Canadian stock exchange; and
    • that operates in a country that is a member of the Financial Action Task Force.
  2. If you are a financial entity, beneficial ownership requirements do not apply to your activities in respect of the processing of payments by credit card or prepaid payment product for a merchant.Footnote 5
  3. If you are a life insurance company, broker or agent, and you deal in reinsurance, beneficial ownership requirements do not apply to you for those dealings.Footnote 6

All RE sectors

The beneficial ownership requirements do not apply if you are not required to verify the identity of an entity under the Regulations because of a related exception. This is because your obligation to verify identity for a particular transaction, activity, or client does not apply in that circumstance.

5. What beneficial ownership information do I need to obtain and confirm the accuracy of?

When you verify an entity's identity in accordance with the PCMLTFR, you must obtain the following information about beneficial owners:Footnote 7

Corporations

Trusts

Widely held or publicly traded trusts

Entities other than corporations or trusts

In all cases, you must obtain information establishing the ownership, control and structure of the entity.Footnote 8

You must also take reasonable measures to confirm the accuracy of the information when you first obtain it and in the course of the ongoing monitoring of your business relationships.Footnote 9

If you verify the identity of a not-for-profit organization, you must also determine if the entity is:Footnote 10

6. How do I obtain the required beneficial ownership information?

To obtain beneficial ownership information, which includes information on the ownership, control and structure, you could have the entity provide it, either verbally or in writing, or you could search for publicly available information.

For example:

7. How do I confirm the accuracy of beneficial ownership information?

You must take reasonable measures to confirm the accuracy of the beneficial ownership information that you obtain.Footnote 11 These reasonable measures cannot be the same as the measures you used to obtain the information.

Your reasonable measures could include referring to official documentation or records. For example, for a corporation or other entity, you could refer to records such as, but not limited to, the:

It is also acceptable to have a client sign a document to confirm the accuracy of the beneficial ownership information you obtained, which includes information on ownership, control and structure. In this case, it is possible for one document to be used to satisfy the two steps—namely to obtain the information and to confirm its accuracy by means of the signature.

In the case of a trust, you could confirm the accuracy of the information by reviewing the trust deed, which should provide you with the information needed.

Other reasonable measures can include:

As a best practice, you should also confirm whether a not-for-profit organization is a charity registered with the Canada Revenue Agency by consulting the charities listing on the Canada Revenue Agency website.

The reasonable measures that you take to confirm the accuracy of beneficial ownership information, which includes ownership, control, and structure information, must align with your risk assessment of the entity's risk for money laundering or terrorist activity financing offences. The reasonable measures you take with entities assessed to pose a high risk must go further to help you understand and confirm the beneficial ownership, as well as establish the overall ownership, control, and structure of that entity. 

The reasonable measures that you take with entities that have a complex business structures must go further to ensure that you are able to understand and confirm the accuracy of beneficial ownership, which includes establishing the ownership, control and structure of that entity. This does not mean, however, that you need to consider or treat a complex entity as posing a high risk. You need to choose reasonable measures that are appropriate to the situation.

8. What if I cannot obtain beneficial ownership information or confirm its accuracy?

If you are unable to obtain the beneficial ownership information, to keep it up to date in the course of the ongoing monitoring of business relationships, or to confirm its accuracy, when it is first obtained, or during the course of ongoing monitoring then you must:Footnote 12

For more information on enhanced ongoing monitoring, see FINTRAC's Ongoing monitoring requirements guidance.

9. How do I verify the identity of an entity's chief executive officer or of the person who performs that function?

The PCMLTFR does not require that you verify the identity of the chief executive officer or of the person who performs that function in accordance with the prescribed methods. However, you could use one of the methods outlined in the Methods to verify the identity of persons and entities guidance to meet this obligation.

Additionally, there is no record keeping obligation if you have identified the chief executive officer or a person who performs that function using the prescribed methods to verify identity. However, during a FINTRAC examination, you could be asked to demonstrate the reasonable measures that you took to identify the chief executive officer or person who performs that function.

10. What if there are no beneficial owners?

You may obtain information confirming that there is no individual who directly or indirectly owns or controls 25% or more of a corporation, a widely held or publicly traded trust, or an entity other than a corporation or trust. This is not the same thing as being unable to obtain the beneficial ownership information.  

If you determine that there is no individual who directly or indirectly owns or controls 25% or more of a corporation, a widely held or publicly traded trust, or an entity other than a corporation or trust, you must keep a record of the measures you took and the information you obtained in order to reach that conclusion.Footnote 13 However, you are still required to obtain and take reasonable measures to confirm information about the ownership, control and structure of the entity.

11. What beneficial ownership records do I need to keep?

You must keep a record of the beneficial ownership information you obtain and of the measures you take to confirm the accuracy of the information.Footnote 14

The measures that you take to confirm beneficial ownership information can be part of your overall policies and procedures, so a separate record may not be needed. You only need to keep an individual record of the specific measures you take to confirm the accuracy of beneficial ownership information in situations where the measures differ from those that are documented in your policies and procedures.

For a corporation, you must record:Footnote 15

  1. the names of all directors of the corporation;
  2. the names and addresses of all persons who directly or indirectly own or control 25% or more of the shares of the corporation; and
  3. information establishing the ownership, control and structure of the corporation.

For a trust, you must record:Footnote 16

For a widely held or publicly traded trust, you must record:Footnote 17

For an entity other than a corporation or trust, you must record:Footnote 18

If you verify the identity of a not-for-profit organization, you must also keep a record that indicates whether the entity is:Footnote 19

In situations where no individual directly or indirectly owns or controls 25% or more of a corporation, a widely held or publicly traded trust, or an entity other than a corporation or trust, you must keep a record of the measures you took to confirm the accuracy of the information, as well as the information you obtained in order to reach that conclusion. The date you took the measures should also be included as a best practice.

Retention: You must keep these records for at least five years from the day the last business transaction is conducted.Footnote 20

Annex 1—Example of a record of beneficial ownership information for a corporation

Scenario:

ABC Canada Inc., a privately held corporation incorporated under the Canada Business Corporations Act, carries out a transaction or activity for which you have to verify its identity, triggering your beneficial ownership obligations. You learn that ABC Canada Inc. is owned by John Brown and Green Company Ltd. You discover that John owns 15% of the shares in the company (15 of the 100 total) and that Green Company Ltd. owns 85% of the shares (85 of 100 total). Since Green Company Ltd. owns and controls more than 25% of ABC Canada Inc., you need to find the beneficial owners, who cannot be a corporation or an entity. You inquire further and discover that Tina Grey owns 70% of Green Company Inc.'s shares and her two children, Alex and Lucy Grey, each own 15% respectively. Next, you learn that ABC Canada Inc.'s board of directors is made up of:

Diagram 1—Beneficial ownership information for a corporation

In this example, you must record:

  1. The names of all directors of ABC Canada Inc.:
    • James Lochlin (chair);
    • Jane Smith;
    • Mark Jones;
    • Tammy Maki; and
    • Lisa Bailey.
  2. The names and addresses of all of the persons who directly or indirectly own or control 25% or more of the shares of ABC Canada Inc.:
    • The name and address of Tina Grey, who owns 70% of Green Company Ltd. Since Green Company Ltd. owns 85% of ABC Canada Inc.'s shares, and Tina owns 70% of Green Company Ltd.'s shares, Tina indirectly owns and controls more than 25% of the shares of ABC Canada Inc.
  3. The information establishing the ownership, control and structure of ABC Canada Inc., including:
    • the ownership of ABC Canada Inc. being shared between John Brown (15%) and Green Company Ltd. (85%);
    • the ownership of Green Company Ltd. being shared between Tina Grey (70%), Alex Grey (15%), and Lucy Grey (15%);
    • the control of ABC Canada Inc. significantly being held by Green Company Ltd. and specifically Tina Grey (who indirectly owns and controls more than 25% of ABC Canada Inc.'s shares);
    • the structure of ABC Canada Inc., including that it is a privately held corporation, and
    • other structure details about ABC Canada Inc., including the positions held by each director and any organization chart.
  4. The reasonable measures you took to confirm the accuracy of the information:
    • the steps you took as reasonable measures to confirm the accuracy of this information; and
    • any official documents obtained to support the measures you took.

Annex 2—Example of a record of beneficial ownership information for an entity that is neither a corporation nor a trust

Scenario:

Rainbow Services, a partnership, carries out a transaction or activity for which you have to verify its identity, thus triggering your beneficial ownership obligations. You learn that Howard White and Betty Green are the two partners in this partnership. Betty is the general partner and is responsible for operating the day-to-day operations and Howard is the limited partner who has invested funds into the partnership. All decisions related to the partnership must be unanimous, and either partner can decide to end the partnership.

Diagram 2—Beneficial ownership information for an entity that is neither a corporation nor a trust

In this example you must record:

  1. The names and addresses of all persons who directly or indirectly own or control 25% or more of Rainbow Services:
    • Howard and Betty's names and addresses, as the partners who equally own and control the partnership.
  2. The information establishing the ownership, control and structure of Rainbow Services, including that:
    • the ownership and control of Rainbow Services is held equally between Howard (50%) and Betty (50%), the structure of Rainbow Services, including that it is a partnership between Howard and Betty, and
    • any other structure details about Rainbow Services, including any organizational chart.
  3. The reasonable measures you took to confirm the accuracy of the information:
    • the steps you took as reasonable measures to confirm the accuracy of this information; and
    • any official documents obtained to support the measures you took, such as a copy of the partnership agreement.

Annex 3—Example of a record of beneficial ownership information for a trust (other than a widely held or publicly traded trust)

Scenario:

A trust carries out a transaction or activity for which you are required to verify its identity, triggering your beneficial ownership obligations. You learn that Robert Jones established a spousal trust for his wife Sue. He transferred assets into the trust and designated Joe Johnson as the trustee.

Diagram 3—Beneficial ownership information for a trust (other than a widely held or publicly traded trust)

In this example you must record:

  1. The names and addresses of all trustees, known beneficiaries and known settlors of the trust:
    • Robert's name and address, as he is the settlor;
    • Joe's name and address, as he is trustee; and
    • Sue's name and address, as she is the beneficiary.
  2. The information establishing the ownership, control and structure of the trust, including:
    • The beneficial ownership information is reflected in the information required to be obtained for the trust:
      • Robert is the settlor and can modify or revoke the terms of the trust;
      • Joe is the trustee and controls the assets in the trust; and
      • Sue, as the beneficiary, is the only person entitled to receive the assets or income from the trust.
      • The structure of the trust, including that it is a spousal trust.
  3. The reasonable measures you took to confirm the accuracy of the information:
    • the steps you took as reasonable measures to confirm the accuracy of this information; and
    • any official documents obtained to support the measures you took, such as the trust agreement.
Date Modified: