When to verify the identity of persons and entities—Departments and Agents of the Crown

June 2017 

When to identify individuals and confirm the existence of entities – Departments and Agents of the Crown

June 2017

This guidance on client identification is applicable to Departments and Agents of the Crown  that sell of redeem money orders or other similar negotiable instruments 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.

Departments and agents of the Crown have specific obligations under the PCMLTFA. These obligations will vary depending on your business activities. This guidance will only describe your client identification requirements if you are a department or agent of the Crown that sells or redeems money orders to the public.

If you are a department or an agent of the Crown that accepts deposit liabilities, your requirements can be found on the financial entities sector page.

If you are a department or agent of the Crown that sells precious metals in the amount of $10,000 or more in a single transaction, your requirements can be found on the dealers in precious metals and stones sector page.

Identifying clients

As a department or agent of the Crown that sells or redeems money orders to the public, 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 a business relationship 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 and 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 creating a client information record or 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 a department or agent of the Crown that sells or redeems money orders to the public, you have to identify clients for:

  1. Client information records
  2. Issuing or redeeming $3,000 or more in money orders or other similar negotiable instruments
  3. Large cash transactions
  4. Suspicious transactions

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

1. Client information records

You are required to identify an individual or confirm the existence of an entity within 30 days of creating a client information record.

2. Issuing or redeeming $3,000 or more in money orders or other similar negotiable instruments

When a client information record is not required, you must identify any individual for whom you issue or redeem negotiable instruments, such as traveller’s cheques or money orders of $3,000 or more, at the time the transaction takes place.

3. 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.

4. 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 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 them.

Keeping client identification information up to date 

You must update client information at a frequency that will vary depending on your risk assessment. As 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 did so previously 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 confirm the existence of an entity or identify an individual when you create a client information record and you do not have to identify an individual when issuing or redeeming money orders or other similar negotiable instruments of $3,000 or more when those transactions are 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 very large corporation.

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

If a client information record is required to be kept for a corporation that is a securities dealer, you do not have to verify the names of the corporation’s directors.

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

  • you have already identified the individual as required and have no doubts about the identification information; or
  • you believe that identifying the individual would inform them that you are submitting a Suspicious Transaction Report.
March 2021 

When to verify the identity of persons and entities—Departments and Agents of the Crown

March 2021

This guidance comes into effect on June 1, 2021.

This guidance on client identification describes when departments and agents of the Crown must verify the identity of persons and entities as required by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations. Details on how to verify the identity of persons and entities are available in FINTRAC's Methods to verify the identity of persons and entities.

This guidance will only describe the client identification requirements of departments and agents of the Crown that issue, sell or redeem money orders in the course of providing financial services to the public.Footnote 1

If you are a department or an agent of the Crown that accepts deposit liabilities, your requirements can be found on the financial entities sector page.Footnote 2

If you are a department or agent of the Crown that sells precious metals in the amount of $10,000 or more in a single transaction, your requirements can be found on the dealers in precious metals and precious stones sector page.Footnote 3

This document answers the following questions:

  1. When do I have to verify the identity of persons and entities?
  2. What is the difference between verifying identity and keeping client identification information up to date?
  3. What are the exceptions to client identification requirements?

**Note: Throughout this guidance, references to dollar amounts (such as $10,000) are in Canadian dollars.

1. When do I have to verify the identity of persons and entities?  

As a department or agent of the Crown, you must verify the identity of clients for the following:

  1. Large cash transactions
  2. Large virtual currency (VC) transactions
  3. Suspicious transactions
  4. Issuing, selling, or redeeming money orders of $3,000 or more

a. Large cash transactions

You must verify the identity of every person or entity from which you receive $10,000 or more in cash when the transaction takes place.Footnote 4 This includes a situation where you are deemed to have received cash because you have authorized another person or entity to receive it on your behalf. Footnote 5

**Note: This obligation is subject to the 24-hour rule.Footnote 6

b. Large virtual currency (VC) transactions

You must verify the identity of every person or entity from which you receive VC in an amount equivalent to $10,000 or more when the transaction takes place.Footnote 7 This includes a situation where you are deemed to have received virtual currency because you have authorized another person or entity to receive it on your behalf.Footnote 8

**Note: This obligation is subject to the 24-hour rule.Footnote 9

c. Suspicious transactions

You must take reasonable measures to verify the identity of every person or entity that conducts or attempts to conduct a suspicious transaction, regardless of the transaction amount, and including transactions that would normally be exempt from client identification requirements, before sending a Suspicious Transaction Report  (STR).Footnote 10

d. Issuing, selling, or redeeming money orders of $3,000 or more

You must verify the identity of every person or entity that requests that you issue, sell, or redeem one or more money orders of $3,000 or more.Footnote 11 In the case of a person, you must verify their identity at the time of the transaction.Footnote 12 In the case of an entity, you must verify their identity within 30 days after the day the information record was created.Footnote 13

2. What is the difference between verifying identity and keeping client identification information up to date? 

As part of your ongoing monitoring requirements for business relationships, you must keep client identification information up to date, at a frequency that will vary based on your risk assessment, and as outlined in your policies and procedures.Footnote 14 This does not require you to re-identify clients in accordance with the methods to verify identity. As explained in the ongoing monitoring guidance, the requirement is only for you to keep client identification information up to date. This is understood to be information that you have about your client such as their name and their address. In the case of a person, this would also include, but is not limited to, the nature of their principal business or their occupation; and in the case of an entity, the nature of its principal business.

3. What are the exceptions to client identification requirements?

You do not have to re-identify a person or an entity if you previously did so using the methods specified by the Regulations in place at the time, and kept the associated records, so long as you have no doubts about the information used.Footnote 15

Large cash transactions

You do not have to verify the identity of a person or entity that conducts a large cash transaction if you receive the cash from a client that is a financial entity (FE) or a public body, or from a person who is acting on behalf of a client that is an FE or a public body.Footnote 16

Large VC transactions

You do not have to verify the identity of a person or entity that conducts a large VC transaction if you receive the VC from a client that is an FE or a public body, or from a person acting on behalf of a client that is an FE or public body.Footnote 17

When you receive VC as compensation for the validation of a transaction that is recorded in a distributed ledger or you receive a nominal amount of VC for the sole purpose of validating another transaction or a transfer of information—you do not need to keep a large VC transaction record and do not need to verify identity.Footnote 18

Suspicious transactions

You do not have to take reasonable measures to verify the identity of the person or entity that conducts or attempts to conduct a suspicious transaction if:

  • you have already verified the identity of the person or entity as required and have no doubts about the identification information;Footnote 19 or
  • you believe that verifying the identity of the person or entity would inform them that you are submitting an STR.Footnote 20

Issuing or selling money orders of $3,000 or more

You do not have to verify the identity of a person or entity from which you receive $3,000 or more for the issuance or sale of one or more money orders, if you receive the amount from a client that is an FE, or a person who is acting on behalf of a client that is an FE.Footnote 21

Public bodies, very large corporations and trusts

You do not have to verify the identity of a person or entity in connection with issuing, selling, or redeeming money orders of $3,000 or more, if the client is:

  • a public body;
  • a very large corporation or trust; or
  • a subsidiary of either those types of entities, if the financial statements of the subsidiary are consolidated with those of the public body or very large corporation or trust.Footnote 22
Date Modified: