When to verify the identity of persons and entities—Securities dealers


March 2021

This guidance comes into effect on June 1, 2021.

This guidance on client identification describes when securities dealers 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 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 securities dealer, you must verify the identity of clients for the following:

  1. Large cash transactions
  2. Large virtual currency (VC) transactions
  3. Suspicious transactions
  4. Accounts—account holders and persons authorized to give instructions

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 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 amount, and including transactions that would normally be exempt from client identification requirements, before sending a Suspicious Transaction Report (STR).Footnote 7

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

Account holders

You must verify the identity of every person for whom you open an account before the first transaction, other than the initial deposit, is carried out on the account.Footnote 8 You must also verify the identity of every corporation and entity other than a corporation for which you open an account, within 30 days after the day on which the account is opened.Footnote 9

Persons authorized to give instructions

You must verify the identity of every person who is authorized to give instructions on an account before the first transaction, other than the initial deposit, is carried out on the account.Footnote 10

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 11

You cannot open an account for a person, corporation, or other entity if you cannot verify their identity in accordance with the Regulations.Footnote 12

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 13 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 my 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 14

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 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 only if:

Public bodies, very large corporations and trusts

When opening an account, you do not have to verify the identity of a person or entity if the account is for:Footnote 21

Account openings

You do not have to verify the identity of a person who opens an account, or is authorized to give instructions in respect of an account in the following circumstances:Footnote 22

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 23

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: