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Business relationship requirements

Overview

This guidance came into effect on June 1, 2021.

This guidance explains when reporting entities (REs) enter into a business relationship with a client and related obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations. This guidance applies to all REs. However, some requirements and examples may only apply to certain REs.

If you are a life insurance company, or an entity that is a broker or agent, that offers loans or prepaid payment products to the public, or maintains accounts related to these products, other than the excluded types in the Regulations, then you are considered a financial entity for those activities and you can find your business relationship obligations as a financial entity in the guidance below.

Who is this guidance for

  • All reporting entities (REs)

In this guidance

  1. What is a business relationship?
  2. When do I enter into a business relationship with a client?
  3. Are there circumstances where a business relationship is not created?
  4. How much time do I have to determine if I have entered into a business relationship with a client?
  5. What business relationship records do I need to keep?
  6. When does a business relationship end?

This guidance includes examples of the purpose and intended nature of a business relationship for all RE sectors, in Annex 1.

1. What is a business relationship?

A business relationship is a relationship established between an RE and a client to conduct financial transactions or provide services related to financial transactions.   

2. When do I enter into a business relationship with a client?

When you enter into a business relationship varies by RE sector, and depends on the activities and transactions that a client conducts with you. For more information on when you enter into a business relationship with a client, see your sector-specific obligations below.

Financial entities, securities dealers, and casinos

You enter into a business relationship with a client when one of the following occurs:

For more information about your obligations related to when to verify the identity of your clients, see FINTRAC's When to identify individuals and confirm the existence of entities sector-specific guidance.

Accountants, agents of the Crown, British Columbia notaries, dealers in precious metals and stones, and life insurance companies, brokers and agents

You enter into a business relationship with a client the second time that you are required to verify their identity within a 5-year period.Footnote 3 For more information about your obligations related to when to verify the identity of your clients, see FINTRAC's When to identify individuals and confirm the existence of entities sector-specific guidance.

Real estate developer, broker, or sales representative

You enter into a business relationship with a client the first time that you are required to verify their identity.Footnote 4 For more information about your obligations related to when to verify the identity of your clients, see FINTRAC's When to verify the identity of persons and entities — Real estate brokers or sales representatives, and real estate developers.

Money services businesses (MSBs) and foreign MSBs (FMSBs)

You enter into a business relationship with a client:

For more information about your obligations related to when to verify the identity of your clients, see FINTRAC's When to verify the identity of persons and entities — Money services businesses and foreign money services businesses.

3. Are there circumstances where a business relationship is not created?

Financial entities, securities dealers, and casinos

You do not enter into a business relationship when opening an account, for the following circumstances. When you:Footnote 7

All RE sectors

You do not enter into a business relationship that would otherwise have been formed after the first or second time you are required to verify identity (as applicable to your RE sector), if you are not required to verify the identity of a client 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. For example, if your requirement to verify identity does not apply because your client is a public body, a very large corporation, or a subsidiary of either of those, whose financial statements are consolidated, then a business relationship would not be formed.

However, a business relationship would be formed in instances where you have the obligation to verify identity, but the Regulations allow you to not do so for a particular reason. This is because the underlying obligation to verify a client's identity still exists, even if you relied upon the applicable reasoning for not verifying identity. This could occur as the result of a suspicious transaction or attempted transaction, or as the result of not having to re-verify the identity of a client.

For more information about your obligations related to when to verify the identity of your clients, see your sector's When to identify individuals and confirm the existence of entities guidance.

4. How much time do I have to determine if I have entered into a business relationship with a client?

You should determine that you have entered into a business relationship as soon as possible after opening an account or after verifying your client's identity for either the first or second transaction or activity (as applicable to your RE sector) where you had the obligation to do so. As a best practice, you should make a business relationship determination within 30 calendar days of opening the account or of the first or second transaction or activity (as applicable).

5. What business relationship records do I need to keep?

Once you enter into a business relationship with a client, you must keep a record of the purpose and intended nature of the business relationship.Footnote 10 For sector-specific examples of the purpose and intended nature of a business relationship, see Annex 1.

As a best practice, to help you meet your know your client requirements and conduct ongoing monitoring of your business relationships, this record should also:

If you already have a record of this information that is readily available in other records that you are required to keep, you are not required to keep an additional record.Footnote 11 For example, for clients who already hold accounts, you may use the information found in the intended use of the account record, client credit file, credit card account record or a service agreement to satisfy this obligation.

For information on your obligations related to monitoring business relationships with your clients, see FINTRAC's Ongoing monitoring requirements guidance.

Retention: You must keep these records for five years from the day they were created.Footnote 12

6. When does a business relationship end?

Account-based business relationships

A business relationship ends five years after the day on which a client closes their last account with you.

Non-account-based business relationships

A business relationship ends when a period of at least five years has passed since the day of the last transaction that required you to verify the identity of the client.

Annex 1 – Examples of sector-specific purpose and intended nature of a business relationship

RE sector Examples of purpose and intended nature of a business relationship
Accountants
  • Transferring funds or securities
  • Paying or receiving funds on behalf of client
  • Purchasing or selling entities or business assets
Agents of the Crown
  • Buying or cashing money orders
British Columbia notaries
  • Purchasing or selling residential real estate
  • Purchasing or selling entities or business assets
  • Estate planning
Casinos
  • Gaming
Dealers in precious metals or stones
  • Purchasing or selling jewellery
  • Purchasing or selling precious metals (for example, gold, silver, platinum, or palladium)
  • Purchasing or selling precious stones (for example, diamonds, sapphires, emeralds, tanzanite, rubies, or alexandrite)
Financial entities

Personal banking:

  • Managing household expenses and bills
  • Receiving direct deposits for employment or pension income
  • Saving for retirement

Commercial banking:

  • Depositing daily receipts for a business
  • Making payments to employees (payroll)
  • Making payments to suppliers
Life insurance companies, brokers and agents
  • Financial planning and advice
  • Capital preservation
  • Estate planning and preservation
MSBs/FMSBs
  • Foreign exchange for travel or purchase of goods
  • Funds transfers for family support or purchase of goods
  • Buying or redeeming money orders or traveller's cheques
  • Virtual currency exchange to purchase goods
  • Virtual currency transfer to purchase goods or services or for family support
Real estate developers, agents and sales representatives
  • Purchasing or selling residential property
  • Purchasing or selling commercial property
  • Purchase or selling land for commercial use
Securities dealers

Retail:

  • Capital preservation
  • Capital growth
  • Income generation

Institutional or corporate:

  • Private equity funds management
  • Liquidity management
  • Surplus management

Details and history

Published: February 2021

For assistance

If you have questions about this guidance, please contact FINTRAC by email at guidelines-lignesdirectrices@fintrac-canafe.gc.ca.

Date Modified: