When to verify the identity of persons and entities — Real estate brokers or sales representatives, and real estate developers

June 2017 

When to identify individuals and confirm the existence of entities - Real estate brokers or sales representatives, and real estate developers

June 2017

This guidance on client identification is applicable to real estate brokers or sales representatives, and real estate developers 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 are 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 clients 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.

Identifying clients

As a real estate broker, sales representative, or a real estate developer, 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.

When there are unrepresented parties, each real estate broker or sales representative representing a party to the transaction must take reasonable measures to identify the individual or confirm the existence of the entity that is unrepresented.  

A real estate developer is considered to be a client if they hire a broker or sales representative to act as their agent for the purchase or sale of real estate. In this situation, the broker or sales representative must meet the obligations under the PCMLTFA and associated Regulations, which include identifying the real estate developer that retained their services.

A real estate developer does not need to be identified if the broker or sales representative representing them is also their employee. In this case, the real estate developer has the obligation to identify their client even if the employee performs this on their behalf. 

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 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 real estate developer, that is an individual or entity, you must identify clients for the activities listed below when you sell to the public a new house, new condominium unit, new commercial or industrial building, or new multi-unit residential building. If you are a real estate developer that is a corporation, you must identify clients for the activities below when you sell to the public a new house, condominium unit, commercial or industrial building, or multi-unit residential building if you are acting on your own behalf, or on behalf of a subsidiary or affiliate.

As a real estate broker, sales representative, or a real estate developer, you are responsible for identifying clients for:

  1. Receipt of funds
  2. Client information records
  3. Large cash transactions
  4. Suspicious transactions

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

1. Receipt of funds

You must identify an individual providing you funds, whether it is in cash or in another form, at the time the transaction takes place. You must also confirm the existence of any entity on whose behalf the funds are received within 30 days.

If you are a real estate broker or sales representative and you receive funds from a client who is represented by another real estate broker or sales representative, it is the other broker or sales representative who has to identify the client for the receipt of funds.

2. Client information records

You are required to identify the individual or confirm the existence of the entity on whose behalf the transaction is conducted when you create a client information record. You are required to identify the individual at the time the transaction takes place, and confirm the existence of the entity on whose behalf the transaction is conducted within 30 days.

As a real estate broker or sales representative, you must keep a client information record for every purchase or sale of real estate. As a real estate developer, you must keep a client information record of every sale of a house, condominium unit, commercial or industrial building and multi-unit residential building. 

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 every individual who conducts or attempts 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 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 also 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

As a real estate broker or sales representative, you are not required to verify the names of the directors when you confirm the existence of a corporation that is a securities dealer.

As a real estate broker, sales representative or real estate developer, 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;
  • identify an individual and/or confirm the existence of an entity for the receipt of funds, or when a client information record is kept, if you conduct the 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 very large corporation;
  • identify an individual or confirm the existence of an entity for the receipt of funds of any amount, if the amount is received from a financial entity or public body;
  • identify an individual who conducts a large cash transaction if the cash is received from a financial entity or public body; or
  • 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 — Real estate brokers or sales representatives, and real estate developers

March 2021

This guidance comes into effect on June 1, 2021.

This guidance on client identification describes when real estate brokers or sales representatives, and real estate developers 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.

If you are a real estate broker or sales representative, you must verify client identity when you act as an agent or mandatary in the purchase or sale of real estate.Footnote 1

If you are a real estate developer, you must verify client identity when you sell to the public a new house, new condominium unit, new commercial or industrial building, or new multi-unit residential building. In addition, if you are a real estate developer that is incorporated, you must verify the identity of clients when you are acting on your own behalf, or on behalf of a subsidiary or affiliate.Footnote 2

In some situations, a real estate developer may be the client of a real estate broker or sales representative if they use the broker or sales representative as their agent for the purchase or sale of real estate. In these instances, the broker or sales representative must meet all the associated requirements, including the requirement to verify identity.

A real estate developer is not considered to be the client of a real estate broker or sales representative when they hire the broker or sales representative as their employee. In this case, the real estate developer, as the employer, has the obligation to identify clients even if the employee performs this on their behalf.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 real estate broker or sales representative, or a real estate developer, you must verify the identity of clients for the following:

  1. Large cash transactions
  2. Large virtual currency transactions
  3. Suspicious transactions
  4. Receipt of funds
  5. Information records
  6. Unrepresented parties

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 transactions

You must verify the identity of every person or entity from which you receive virtual currency (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. Receipt of funds

You must verify the identity of a person from whom you receive funds in any amount at the time the transaction takes place.Footnote 11 You must also verify the identity of a corporation or other entity from which you receive funds in any amount, or on whose behalf the transaction is conducted, within 30 days after the day on which the transaction is conducted.Footnote 12

If a real estate broker or sales representative receives funds from a client represented by another real estate broker or sales representative, then it is the broker or sales representative that holds the relationship with the client providing the funds that has to identify the client.Footnote 13

e. Information records

You must verify the identity of every person or entity for which an information record is kept.Footnote 14

f. Unrepresented parties

When there are unrepresented parties in a transaction, all real estate brokers or sales representatives representing a party to the transaction must take reasonable measures to verify the identity of the person or entity that is unrepresented.Footnote 15

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 16 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 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 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 18

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 19

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 20

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 and have no doubts about the identification information;Footnote 21 or
  • you believe that verifying the identity of the person or entity would inform them that you are submitting an STR.Footnote 22

Receipt of funds

You do not have to verify the identity of a client in connection with the receipt of funds if you received the funds 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 23

Public bodies, very large corporations and trusts

You do not have to verify the identity of a person or entity in connection with the receipt of funds or 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.
Date Modified: