When to verify the identity of persons and entities — Life insurance companies, brokers and agents

June 2017 

When to identify individuals and confirm the existence of entities – Life insurance companies, brokers and agents

June 2017

This guidance on client identification is applicable to life insurance companies, brokers and agents 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 do 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, the determination of politically exposed persons or heads of international organizations, beneficial ownership, and third party determination.

Identifying clients

As a life insurance company, broker or independent agent, 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 its 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 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 life insurance company, broker or independent agent, you are responsible for identifying clients for:

  1. Client information records

  2. Group plans

  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 who conducts the purchase of an immediate or deferred annuity or a life insurance policy that costs $10,000 or more over the duration of the annuity or policy, regardless of how it is paid for. If the purchase has been made on behalf of a third party, you must identify the person who conducts the purchase but the client information record must be created for the applicant of that life insurance policy or annuity. The conductor must be identified within 30 days of creating this record.

You must confirm the existence of an entity within 30 days of creating a client information record.

You must identify the conductor in the purchase of a group life insurance policy or group annuity but the client information record must be kept for the applicant of the policy or annuity.

2. Group plans

You must identify individual members of a group plan when they make a contribution to the plan, if:

  • the existence of the plan sponsor has not been confirmed; or,

  • the member’s contributions are not made by the sponsor of the plan or by payroll deduction.

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 an individual who conducts or attempts to conduct a suspicious transaction 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.

There are specific exceptions that apply to your requirement to identify clients. You do not have to identify an individual or confirm the existence of an entity in respect of one of the following:

  • the purchase of a policy that is an exempt policy (that is, a policy issued for insurance protection and not for significant investment purposes as defined in subsection 306(1) of the Income Tax Regulations);

  • the purchase of a group life insurance policy that does not provide a cash surrender value or a savings component;

  • the purchase of an immediate or deferred annuity that is paid for entirely with funds that are directly transferred from a registered pension plan or from a pension plan that is required to be registered under the Pension Benefits Standards Act, 1985 or similar provincial legislation;

  • the purchase of an immediate or deferred annuity that is paid for entirely with the funds from the proceeds of a group life insurance policy; or

  • the purchase of a registered annuity policy or a registered retirement income fund.

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

In the case of a group plan, you do not have to identify individual members of the plan if the member’s contributions are made by the sponsor of the plan or by payroll deduction, and you have already confirmed the existence of the entity that is the plan sponsor.

If you conduct a transaction for a public body or very large corporation, you do not have to identify them. 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 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 identify an individual if you have reasonable grounds to believe that another life insurance company, broker or agent identified the individual in accordance with the Regulations, for the same transaction or a transaction that is part of a series of transactions that includes the original transaction.

You do not have to identify a client if you deal in reinsurance. However, this does not apply to suspicious transactions.

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 — Life insurance companies, brokers and agents

March 2021

This guidance comes into effect on June 1, 2021.

This guidance on client identification describes when life insurance companies, brokers and agents must verify the identity of persons and entities under 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 guidance Methods to verify the identity of persons and entities.

This guidance does not apply to life insurance brokers and agents when they are acting as managing general agents.Footnote 1

If you are a life insurance company or an entity that is a broker or an agent that offers loans or prepaid payment products (PPPs) to the public, and maintains accounts in respect of those activities, you are considered to be a financial entity (FE). You can find guidance on financial entities' client identification obligations in FINTRAC's When to verify the identity of persons and entities – Financial 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 my 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 life insurance company, broker or agent, you must verify the identity of clients for the following:

  1. Large cash transactions
  2. Large virtual currency (VC) transactions
  3. Suspicious transactions
  4. Information records
  5. Group plans

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 places.Footnote 2 This includes situations where you are deemed to have received cash because you have authorized another person or entity to receive it on your behalf.Footnote 3

**Note: This obligation is subject to the 24-hour rule.Footnote 4

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 at the time the transaction takes place.Footnote 5 This includes situations where you are deemed to have received VC because you have authorized another person or entity to receive it on your behalf.Footnote 6

**Note: This obligation is subject to the 24-hour rule.Footnote 7

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 8

d. Information records

You must verify the identity of every person or entity for which an information record is kept in connection with the sale of an immediate or deferred annuity or a life insurance policy:Footnote 9

  • for which you are to receive $10,000 or more over the duration of the annuity or policy; or
  • under which you are to remit $10,000 or more to a beneficiary over the duration of the annuity or policy.

This includes verifying the identity of the annuitant or the policy holder listed in the information record that is kept in connection with the sale if you are to receive $10,000 or more over the duration of the annuity or policy.Footnote 10

This also includes verifying the identity of the beneficiary listed in the information record, before you first remit funds or VC to them, in connection with the sale, if you are to remit $10,000 or more over the duration of the annuity or policy.Footnote 11

As applicable, the annuitants or policy holders, and beneficiaries must be identified within 30 days of the creation of the information record.Footnote 12

e. Group plans

In the case of a group life insurance policy or annuity, you must verify the identity of the applicant, for which an information record is kept.Footnote 13 You must also identify the beneficiaries, for which information records are required.Footnote 14

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 all 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 15 You are not required to re-identify clients in accordance with the methods to verify identity. As described in the Ongoing monitoring guidance, the requirement is for client identification information to be kept 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 occupation; and in the case of an entity, the nature of its principal business.

3. What are the exceptions to my client identification requirements?

The client identification requirements in this guidance do not apply if you are dealing in reinsurance, except for those requirements associated with suspicious transactions.Footnote 16

Also, you do not have to re-identify a person or 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.Footnote 17

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 an 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 18 or
  • the transaction involves:Footnote 19
    • the sale of an immediate or deferred annuity that is paid for entirely with funds that are directly transferred from a registered pension plan or from a pension plan that is required to be registered under the Pension Benefits Standards Act, 1985, or similar provincial legislation;
    • the sale of a registered annuity policy or a registered retirement income fund;
    • the sale of an immediate or deferred annuity that is paid for entirely with the proceeds of a group life insurance policy; or
    • part of a reverse mortgage or structured settlement.

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 20

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 21

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 only if:

  • you have already verified the identity of the person or entity and have no doubts about the identification information;Footnote 22 or
  • you believe that verifying the identity of the person or entity would inform them that you are submitting an STR.Footnote 23

Public bodies, very large corporations and trusts

You do not have to verify the identity of a person or entity in connection with an information record if the client is:Footnote 24

  • a public body;
  • a very large corporation or trust; or
  • a subsidiary of 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.

Other activities exempted from client identification requirements

You do not have to verify the identity of persons and entities  for the following activities:Footnote 25

  • the sale of an exempt policy as defined in subsection 306(1) of the Income Tax Regulations;
  • the sale of a group life insurance policy that does not provide for a cash surrender value or a savings component;
  • the sale of an immediate or deferred annuity that is paid for entirely with funds that are directly transferred from a registered pension plan or from a pension plan that is required to be registered under the Pension Benefits Standards Act, 1985,  or similar provincial legislation;
  • the sale of a registered annuity policy or a registered retirement income fund; or
  • the sale of an immediate or deferred annuity that is paid for entirely with funds from the proceeds of a group life insurance policy.

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

Date Modified: