Politically exposed persons and heads of international organizations guidance for account-based reporting entity sectors

May 2021

This guidance comes into effect on June 1, 2021.

Financial entities (FEs), securities dealers and casinos (account-based reporting entities) have politically exposed persons (PEPs) and heads of international organizations (HIOs) requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations. However, some requirements and the examples given in this guidance only apply to certain reporting entities (REs).

References to PEPs in this guidance include both foreign and domestic PEPs, unless otherwise specified.

This guidance answers the following questions:

  1. When or for whom must I make a PEP, HIO, family member or close associate determination?
  2. What are the exceptions to making a PEP, HIO, family member or close associate determination?
  3. What measures do I need to take after making a PEP, HIO, family member or close associate determination?
  4. What PEP, HIO, family member or close associate records do I need to keep?

For more information about your obligations in relation to determining who are PEPs, HIOs, and persons related or closely associated to them, and clarity on related terminology and considerations, such as who is considered a member of senior management, see FINTRAC's Politically exposed persons and heads of international organizations guidance.

This guidance includes the following annexes, which summarize when account based REs must make a PEP or HIO determination, establish the source of funds, source of virtual currency (VC) and source of wealth, and retain records:

**Note: Throughout this guidance, all references to dollar amounts (such as $100,000) are in Canadian dollars.

1. When or for whom must I make a PEP, HIO, family member or close associate determination?

You must take reasonable measures to make an account related PEP, HIO, family member or close associate (of foreign PEP only, in certain circumstances) determination:

See Account-related PEP or HIO determination below, for an explanation of your requirements in these instances.

If you are an FE or a casino then you must also take reasonable measures to make PEP, HIO, family member or close associate determinations for the following transactions:

See Transaction-related PEP or HIO determination below, for an explanation of your requirements in these instances.

Account-related PEP or HIO determinations

Account opening

As an FE, a securities dealer, or a casino, you must take reasonable measures to determine whether a person for whom you open an account is a PEP, HIO, family member of one of those persons, or close associate of a foreign PEP.Footnote 1

Authorized user of PPPA (FEs only)

As an FE, you must take reasonable measures to determine whether a person identified as an authorized user of a PPPA is a PEP, HIO, family member of one of those persons, or close associate of a foreign PEP.Footnote 2

Periodic monitoring of existing account holders and authorized users of PPPAs

As an FE, a securities dealer, or a casino, you must periodically take reasonable measures to determine whether a person who holds an account is a PEP, HIO, family member of one of those persons, or close associate of a foreign PEP.Footnote 3

As an FE, you must also periodically take reasonable measures to determine whether an authorized user of a PPPA is a PEP, HIO, family member of one of those persons, or close associate of a foreign PEP.Footnote 4

Detecting a fact about existing account holders and authorized users of PPPAs

As an FE, a securities dealer, or a casino, if you or any of your employees or officers detect a fact that constitutes reasonable grounds to suspect that a person who holds an account is a PEP, HIO, or family member or close associate of one of these persons, you must take reasonable measures to determine whether they are such a person.Footnote 5

As an FE, if you or any of your employees or officers detect a fact that constitutes reasonable grounds to suspect that an authorized user of a PPPA is a PEP, HIO, or family member or close associate of one of these persons, you must take reasonable measures to determine whether they are such a person.Footnote 6

For more information about what it means to detect a fact about a PEP or HIO, see FINTRAC's Politically exposed persons and heads of international organizations guidance.

Transaction-related PEP or HIO determinations

Initiation of an international electronic funds transfer (EFT) in the amount of $100,000 or more

As an FE or a casino, you must take reasonable measures to determine whether a person who requests that you initiate an international EFT in the amount of $100,000 or more is a PEP, HIO, or family member or close associate of one of these persons.Footnote 7

Final receipt of an international EFT in the amount of $100,000 or more

As an FE or a casino, you must take reasonable measures to determine whether a beneficiary for whom you finally receive an international EFT in the amount of $100,000 or more is a PEP, HIO, or family member or close associate of one of these persons.Footnote 8

Receipt of cash or an amount of VC equivalent to $100,000 or more (casinos only)

As a casino, you must take reasonable measures to determine whether a person from whom you receive cash or an amount of VC equivalent to $100,000 or more is a PEP, HIO, or family member or close associate of one of these persons.Footnote 9

Transfer of an amount of VC equivalent to $100,000 or more (FEs only)

As an FE, you must take reasonable measures to determine whether a person who requests that you transfer an amount of VC equivalent to $100,000 or more is a PEP, HIO, or family member or close associate of one of these persons.Footnote 10

Receipt of an amount of VC equivalent to $100,000 or more for remittance to a beneficiary (FEs only)

As an FE, you must take reasonable measures to determine whether a beneficiary for whom you receive an amount of VC equivalent to $100,000 or more is a PEP, HIO, or family member or close associate of one of these persons.Footnote 11

Payment in the amount of $100,000 or more to a PPPA (FEs only)

As an FE, you must take reasonable measures to determine whether a person who makes a payment in the amount of $100,000 or more to a PPPA is a PEP, HIO, or family member or close associate of one of these persons.Footnote 12

2. What are the exceptions to making a PEP, HIO, family member or close associate determination?

You do not have to make a PEP, HIO, family member or close associate determination (as applicable) for the following:

  1. If you previously determined that a person is a foreign PEP or a family member of a foreign PEP.Footnote 13
  2. If you are an FE or securities dealer you do not need to determine if a person who is a member of a group plan account is a PEP, HIO or a family member or close associate of a PEP or HIO, if:Footnote 14
    • the person's member contributions are made by the sponsor of the group plan or by payroll deduction; and 
    • the identity of the entity that is the plan sponsor has been verified in accordance with subsection 109(1) or 112(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations.
  3. If you are an FE, you do not have to make a PEP determination or keep the associated records for your activities in respect of the processing of payments by credit card or by prepaid payment products for a merchant.Footnote 15

3. What measures do I need to take after making a PEP, HIO, family member or close associate determination?

Account-related measures

Foreign PEPs

As an FE, a securities dealer or a casino, when you open an account, conduct periodic monitoring, or detect a fact, and you determine that a person who holds an account or is an authorized user of a PPPA (FEs only) is a foreign PEP or family member or close associate of a foreign PEP, you must:Footnote 16

Domestic PEPs or HIOs

As an FE, a securities dealer or a casino, when you open an account, conduct periodic monitoring, or detect a fact, and you determine that a person who holds an account or is an authorized user (FEs) is a domestic PEP, HIO, or family member or close associate, of a domestic PEP or HIO, and based on your risk assessment, you consider there to be a high risk of a money laundering (ML) or terrorist activity financing (TF) offence being committed, you must:Footnote 17

When you detect a fact about an existing account, and determine that a person is a close associate of a domestic PEP or HIO, and based on your risk assessment, you consider there to be a high risk of an ML or TF offence being committed, you must:Footnote 18

Prescribed timing for taking measures

When you open an account for or detect a fact about a PEP, HIO, or family member or close associate of one of these persons, you have 30 days after the day on which you open the account or you detect a fact to, as applicable:Footnote 19

Transaction-related measures

Foreign PEPs

FEs

When you initiate an international EFT for a person in the amount of $100,000 or more or you process a payment to a PPPA for a person in the amount of $100,000 or more and determine that the person is a foreign PEP, or a family member or close associate of a foreign PEP, you must:Footnote 20

When you transfer an amount of VC equivalent to $100,000 or more for a person that you determine is a foreign PEP, or a family member or close associate of a foreign PEP, you must:Footnote 21

When you receive for a beneficiary an international EFT or an amount of VC equivalent to $100,000 or more and determine that the beneficiary is a foreign PEP, or a family member or close associate of a foreign PEP, you must ensure that a member of senior management reviews the transaction.Footnote 22

Casinos

When you initiate an international EFT in the amount of $100,000 or more, finally receive an international EFT for a beneficiary in the amount of $100,000 or more, or receive cash, or an amount of VC equivalent to, $100,000 or more, and determine that a person is a foreign PEP, or a family member or close associate of a foreign PEP, you must:Footnote 23

Domestic PEPs or HIOs

FEs

When you initiate an international EFT in the amount of $100,000 or more or process a payment to a PPPA in the amount of $100,000 or more, for a person that you determine is a domestic PEP, HIO, or family member or close associate of a domestic PEP or HIO and, based on your risk assessment, you consider there to be a high risk of an ML or TF offence being committed, you must:Footnote 24

When you transfer an amount of VC equivalent to $100,000 or more, and determine that a person is a domestic PEP, HIO, or family member or close associate of a domestic PEP or HIO, and based on your risk assessment, you consider there to be a high risk of an ML or TF offence being committed, you must:Footnote 25

When you receive for a beneficiary an international EFT or an amount of VC equivalent to $100,000 or more and determine that the beneficiary is a domestic PEP, HIO, or family member or close associate of a domestic PEP or HIO, and based on your risk assessment, you consider there to be a high risk of an ML or TF offence being committed, you must ensure that a member of senior management reviews the transaction.Footnote 26

Casinos

When you initiate an international EFT in the amount of $100,000 or more, finally receive for a beneficiary an international EFT in the amount of $100,000 or more, or receive cash or an amount of VC equivalent to $100,000 or more, and determine that a person is a domestic PEP, HIO, or family member or close associate of a domestic PEP or HIO, and based on your risk assessment, you consider there to be a high risk of an ML or TF offence being committed, you must:Footnote 27

Prescribed timing for taking measures

As an FE or a casino, for the transactions referred to above, you have 30 days after the day on which the transaction is conducted to, as applicable:Footnote 28

4. What PEP, HIO, family member or close associate records do I need to keep?

You must keep the following records related to your determination that a person is a PEP, HIO, or a family member or close associate of a PEP or HIO:

PEP and HIO account records

If you determine that a person is a foreign PEP, a family member, or close associate of a foreign PEP, a high-risk domestic PEP, high-risk HIO or high-risk family member or high-risk close associate of one of these persons, and you obtained the approval of a member of senior management to keep an account open, you must keep a record of:Footnote 29

In the case of family members and close associates of PEPs and HIOs, you may also want to keep a record of the nature of the relationship between the person and the PEP or HIO, as applicable.

Retention: You must keep PEP and HIO account records for at least five years from the day the account to which they relate is closed.Footnote 30

PEP and HIO transaction records

If as an FE or a casino, you review one of the above-mentioned transactions (see Transaction related PEP or HIO determinations) for which you have made a PEP or HIO determination, you must keep a record of:Footnote 31

In the case of family members and close associates of PEPs and HIOs, you may also want to include in the record the nature of the relationship between the person and the PEP or HIO, as applicable.

Retention: You must keep transaction records for at least 5 years from the day on which the last business transaction is conducted.Footnote 32

Annex 1 — When to make a PEP or HIO determination — Account-based REs

When to make a PEP or HIO determination Do I need to make a PEP or HIO determination?
Casinos Financial entities Securities dealers
Account opening Yes Yes Yes
Authorized user of a PPPA Yes
Periodic review of account holders Yes Yes Yes
Periodic review of authorized users of PPPAs Yes
Detect a fact about account holders Yes Yes Yes
Detect a fact about authorized users of a PPPAs Yes
Initiate international EFT in the amount of $100,000 or more Yes Yes
Final receipt for a beneficiary of international EFT in the amount of $100,000 or more Yes Yes
Receipt in the amount of cash or VC equivalent to $100,000 or more Yes
Transfer of an amount of VC equivalent to $100,000 or more Yes
Receives an amount of VC equivalent to $100,000 or more for remittance to a beneficiary Yes
Payment to a PPPA in the amount of $100,000 or more Yes

Annex 2 — Establishing the source of funds, source of VC and source of wealth — Account-based REs

When to make a PEP or HIO determination Do I need to establish the source of funds, source of VC, and source of wealth for PEPs or HIOs? Timing for establishing source of funds or source of wealth
Casinos Financial entities Securities dealers
Account opening Yes Yes Yes 30 days after the day on which you open the account or detect a fact
Authorized user of a PPPA Yes
Periodic review of account holders Yes Yes Yes
Periodic review of authorized users of PPPAs Yes
Detect a fact about account holders Yes Yes Yes
Detect a fact about authorized users of a PPPAs Yes
Initiate international EFT in the amount of $100,000 or more Yes Yes 30 days after the day on which the transaction is conducted
Final receipt for a beneficiary of international EFT in the amount of $100,000 or more Yes  
Receipt in the amount of cash or VC equivalent to $100,000 or more Yes
Transfer of an amount of VC equivalent to $100,000 or more Yes (not source of funds)
Beneficiary receives an amount of VC equivalent to $100,000 or more  
Payment to a PPPA in the amount of $100,000 or more Yes

Annex 3 — Retention of PEP and HIO records — Account-based REs

PEP or HIO records Do I need to keep PEP or HIO records? Record retention
Casinos Financial entities Securities dealers
Account opening Yes Yes Yes At least five years from the day the account to which they relate is closed
Authorized user of a PPPA Yes
Periodic review of account holders Yes Yes Yes
Periodic review of authorized users of PPPAs Yes
Detect a fact about account holders Yes Yes Yes
Detect a fact about authorized users of PPPAs Yes
Initiate international EFT in the amount of $100,000 or more Yes Yes At least 5 years from the day on which the last business transaction is conducted.
Final receipt for a beneficiary of international EFT in the amount of $100,000 or more Yes Yes
Receipt of cash or an amount of VC equivalent to $100,000 or more Yes
Transfer of an amount of VC equivalent to $100,000 or more Yes
Beneficiary receives an amount of VC equivalent to $100,000 or more Yes
Payment to a PPA in the amount of $100,000 or more Yes
Date Modified: