When to verify the identity of persons and entities—Financial entities


March 2021

This guidance comes into effect on June 1, 2021.

This guidance on client identification describes when financial entities (FEs) 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 guidance.

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 an FE, 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 or redeeming money orders, traveller's cheques or other similar negotiable instruments of $3,000 or more
  5. Initiating an international electronic funds transfer (EFT)—or any other EFT that is a SWIFT MT-103 message or its equivalent—of $1,000 or more
  6. Remitting funds to the beneficiary of an international EFT of $1,000 or more
  7. Transferring VC in an amount equivalent to $1,000 or more
  8. Remitting VC to a beneficiary in an amount equivalent to $1,000 or more
  9. Foreign currency exchange transactions of $3,000 or more
  10. VC exchange transactions in amounts equivalent to $1,000 or more
  11. Accounts—account holders and persons authorized to give instructions
  12. Credit card accounts—account holders
  13. Prepaid payment product (PPP) accounts
    • Account holders
    • Authorized users
    • Payments of $1,000 or more to PPP account
  14. Trusts—settlors or co-trustees of a trust

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 1 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 2

**Note: This obligation is subject to the 24-hour rule.Footnote 3

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 4 This includes a situation where you are deemed to have received VC 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

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 7

d. Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments of $3,000 or more

You must verify the identity of every person who requests that you issue or redeem money orders, traveller's cheques or similar negotiable instruments of $3,000 or more when the transaction is being requested. Footnote 8

e. Initiating an international electronic funds transfer (EFT)—or any other EFT that is a SWIFT MT-103 message or its equivalent—of $1,000 or more

You must verify the identity of every person who requests the initiation of an international EFT or any other EFT that is a SWIFT MT-103 or its equivalent, including domestic SWIFT MT-103, of $1,000 or more when the transaction is being requested.Footnote 9

f. Remitting funds to the beneficiary of an international EFT of $1,000 or more

You must verify the identity of every person you remit funds to who is the beneficiary of an international EFT of $1,000 or more when the transaction takes place.Footnote 10

g. Transferring VC in an amount equivalent to $1,000 or more

You must verify the identity of every person who requests the transfer of VC in an amount equivalent to $1,000 or more when the transaction is being requested.Footnote 11

h. Remitting VC to a beneficiary in an amount equivalent to $1,000 or more

You must verify the identity of every person you remit VC to as the beneficiary of a transfer that is equivalent to $1,000 or more when the transaction takes place.Footnote 12

i. Foreign currency exchange transactions of $3,000 or more

You must verify the identity of every person who requests a foreign currency exchange of $3,000 or more when the transaction takes place.Footnote 13

j. VC exchange transactions in amounts equivalent to $1,000 or more

You must verify the identity of every person who requests that you exchange VC for funds, funds for VC, or one VC for another, in an amount equivalent to $1,000 or more when the transaction is being requested.Footnote 14

k. Accounts—Account holders and persons authorized to give instructions

Account holders

You must verify the identity of every person, corporation, and entity other than a corporation for which you open an account.Footnote 15 You must do this before the first transaction other than when the initial deposit is carried out.Footnote 16

Persons authorized to give instructions

You must verify the identity of every person authorized to give instructions on an account before the first transaction, other than the initial deposit, is carried out on the account.Footnote 17

This includes verifying the identity of the individual members of a group plan account who are authorized to give instructions, when a contribution to the plan is made in respect of the member.Footnote 18

You cannot open an account for a person, corporation, or other entity if you cannot verify their identity in accordance with the Regulations.Footnote 19

l. Credit card accounts—account holders

You must verify the identity of every person, corporation, and other entity for which you open a credit card accountFootnote 20 before the credit card can be activated.Footnote 21 If credit cards are issued for persons other than the account holder, you must record their information if they are authorized to give instructions on an account, but you do not have to verify their identity.

For example, a parent applying for a credit card account requests that a credit card be issued on that account for their child, and that child be authorized to give instructions on that account. In this example, the parent's identity has to be verified because the parent is the account holder, the child's identity does not need to be verified.

If there are two or more co-applicants for a credit card account (in other words, if a credit card account is opened in the name of more than one person), the identification requirement applies to all co-applicants.

m. Prepaid payment product (PPP) accounts

Account holders

You must verify the identity of every person, corporation, and other entity for which you open a PPP accountFootnote 22 before the PPP account is activated.Footnote 23

Authorized users

You must also verify the identity of every authorized user of the PPP accountFootnote 24 before the first transaction is carried out.Footnote 25

Payments of $1,000 or more to PPP Accounts

You must verify the identity of every person, corporation, and other entity that makes a payment of $1,000 or more to a PPP accountFootnote 26 when the transaction takes place.Footnote 27

n. Trusts—settlors or co-trustees of a trust

If you are a trust company, you must verify the identity of every person who is the settlor of an inter vivos trust for which you are a trustee.Footnote 28

You must also verify the identity of a corporation or an entity other than a corporation that is the settlor of an institutional trust for which you are a trustee.Footnote 29

You must verify the identity of any person who is authorized to act as co-trustee of a trust.Footnote 30 If an entity is authorized to act as co-trustee of a trust, you must verify its identity and the identity of all persons authorized to give instructions on its behalf (up to three).Footnote 31

You must verify the identity of a person or an entity within 15 days after the day on which the trust company becomes the trustee.Footnote 32

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 33 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 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 34

Large cash transactions

You do not have to verify the identity of a person or entity that conducts a large cash transaction if:

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 37

When you transfer or receive VC as compensation for the validation of a transaction that is recorded in a distributed ledger or you exchange, transfer or 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 38

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:

Payment card processing activities

Client identification requirements do not apply to processing credit card or PPP payments on behalf of a merchant.Footnote 41

Public bodies, very large corporations and trusts

When opening an account, including a credit card account, PPP account or trust account, you do not have to verify the identity of a person or entity if it is for:Footnote 42

Account openings

You do not have to verify the identity of the person that opens an account, is authorized to give instructions in respect of an account, opens a credit card account, or is the settlor or co-trustee of a trust in the following circumstances:Footnote 43

Other activities exempted from client identification requirements

You do not have to verify the identity of persons and entities, as listed in this guidance, for the following:Footnote 44

These exceptions do not apply to large cash transactions, large VC transactions, or suspicious transactions.

Group Plans

If you open a group plan account, other than those for which exceptions already apply, you do not have to verify the identity of the individual members of the plan if:

Date Modified: