When to identify individuals and confirm the existence of entities – Accountants

June 2017

This guidance on client identification is applicable to accountants and accounting firms that are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated regulations.

Details on how to identify individuals and confirm the existence of entities is available in FINTRAC’s guidance Methods to identify individuals and confirm the existence of entities.

Throughout this guidance, references to dollar amounts (such as $10,000) are in Canadian dollars. Furthermore, all references to cash mean money in circulation in any country (bank notes or coins) and does not include cheques, money orders or other similar negotiable instruments.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) specify when you must identify an individual or confirm the existence of an entity, and how you must do this. The point at which you identify a client will vary depending on the activity or transaction that is carried out. Knowing your client includes identifying them in accordance with the Regulations, but you also have further obligations in this regard, such as requirements related to the ongoing monitoring of business relationships, and third party determination. Please refer to FINTRAC’s guidance on these subjects for more information.

**Note: Exceptions to your client identification requirements are listed in the last section of this guidance.

Identifying clients

As an accountant or accounting firm, you must identify individuals and confirm the existence of entities for certain activities and transactions, as listed below. Entities can be corporations, trusts, partnerships, funds, and unincorporated associations or organizations.

When you have to confirm the existence of an entity that is a corporation, you also have to verify its name and address, and the names of the corporation’s directors.

The formation of business relationships and the ensuing obligations are tied to your requirements to identify clients. For non-account-based relationships, you are considered to be in a business relationship with every individual you have had to identify at least twice, and with every entity whose existence you have had to confirm at least twice. If you have not identified an individual or confirmed the existence of an entity because an exception applied, you are still considered to be in a business relationship. If you are in a business relationship you must conduct ongoing monitoring and keep certain records.

You are also required to take reasonable measures to determine if a client is acting on the instruction of a third party when conducting a large cash transaction. In this case, reasonable measures may include asking the individual, or relying on information you may already have about the individual. If you determine that the individual in front of you is acting on someone else's instructions, that “someone else” is the third party.

As an accountant or accounting firm, you are subject to the PCMLTFA and associated Regulations when you engage in any of the following activities on behalf of any individual or entity (other than your employer), or give instructions for the following activities on behalf of any individual or entity (other than your employer):

If you engage in any of the activities listed above as an accountant or accounting firm you are responsible for identifying clients for:

  1. Receipt of funds of $3,000 or more
  2. Large cash transactions
  3. Suspicious transactions

1. Receipt of funds of $3,000 or more

You must identify an individual providing you funds in the amount of $3000 or more in a single transaction, at the time the transaction takes place, whether or not it is in cash or in another form. You must also confirm the existence of any entity on whose behalf the funds are received within 30 days.

2. Large cash transactions

You must identify every individual who conducts a large cash transaction at the time the transaction takes place. A large cash transaction occurs when you receive $10,000 or more in cash in a single transaction. A large cash transaction also occurs when there are multiple cash transactions of less than $10,000 each that total $10,000 or more within a 24 hour period, when you know they are conducted by, or on behalf of, the same individual or entity.

3. Suspicious transactions

You must take reasonable measures to identify individuals who conduct or attempt to conduct suspicious transactions before sending a Suspicious Transaction Report. Reasonable measures in this case may include asking the individual to provide photo identification.

All suspicious transactions and attempted suspicious transactions, including transactions that are normally exempt from client identification requirements, require you to take reasonable measures to identify your clients.

Keeping client identification information up to date

You must update client information at a frequency that will vary based on your risk assessment. As a part of your ongoing monitoring requirements, you must keep all client identification information up to date. High-risk clients’ identification information must be updated more frequently, and you must take any other appropriate enhanced measures.

To keep client identification information up to date, you must take measures such as asking the client to provide information to confirm or update their identification information. In the case of an individual, this may include confirming or updating the information by using the options that are available to identify individuals who are not physically present.

In the case of clients that are entities, measures to keep client identification information up to date may include consulting a paper or electronic record or obtaining information verbally.

Exceptions

You do not have to re-identify an individual or re-confirm the existence of an entity if you previously did so using the methods specified in the Regulations in place at the time and kept the associated records, so long as you have no doubts about the information used.

You do not have to verify the names of a corporation’s directors when you confirm the existence of a corporation that is a securities dealer.

You do not have to identify an individual and/or confirm the existence of an entity if you conduct a transaction for a public body or very large corporation. The same is true regarding a subsidiary of either of those types of entities, if the financial statements of the subsidiary are consolidated with those of the public body or a very large corporation.

You are not subject to the PCMLTFA and associated Regulations as an accountant or accounting firm if the activities you undertake are in respect of an audit, review or compilation engagements, or carried out in accordance with the recommendations set out in the CICA Handbook. Please note that the CICA Handbook was replaced by the CPA handbook in 2013.

You do not have to identify an individual or confirm the existence of an entity for the receipt of funds in an amount of $3,000 or more, if the amount is received from a financial entity or public body.

You do not have to identify the individual who conducts a large cash transaction if the cash is received from a financial entity or public body.

You do not have to take reasonable measures to identify the individual who conducts or attempts to conduct a suspicious transaction only if:

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