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

February 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. For a holder of any type of account, or an authorized user of a prepaid payment product account (PPPA), at account opening, as part of your periodic review, or if you detect a fact:Footnote 14
    • when the person already has an account with you and opens a subsequent account, if the determination was previously made;
    • for a business account, so long as you have verified the identity of at least three persons authorized to give instructions on the account;
    • an account that is opened at the request of an entity for the deposit by a life insurance company affiliated with the entity of a death benefit under a life insurance policy or annuity if:
      • the account is opened in the name of a beneficiary that is a person,
      • only that death benefit may be deposited into the account, and
      • the policy or annuity contract under which the claim for the death benefit is made has been in existence for a period of at least two years before the day on which the claim is made; or
    • an account that is opened for the sale of mutual funds where there are reasonable grounds to believe that the person's identity has been verified by a securities dealer in accordance with the methods in the Regulations, in respect of:
      • the sale of the mutual funds for which the account has been opened, or
      • a transaction that is part of a series of transactions that includes that sale.
  3. 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 15
    • 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.
  4. You do not need to determine if a person is a PEP, HIO or a family member or close associate of a PEP or HIO, as applicable, or keep the related records for the following (as applicable to your RE sector):Footnote 16
    • the sale of a registered annuity policy or a registered retirement income fund;
    • a transaction that is part of a reverse mortgage (a loan based on the equity of a home) or a structured settlement (a financial or insurance arrangement to resolve a personal injury claim);
    • the opening of an account for the deposit and sale of shares from a corporate demutualization or the privatization of a Crown corporation;
    • the opening of an account in the name of an affiliate of an FE, if that affiliate carries out activities that are similar to those of persons and entities referred to in paragraphs 5(a) to (g) of the PCMLTFA;
    • the opening of a registered plan account, including a locked-in retirement plan account, a registered retirement savings plan account, and a group registered retirement savings plan account;
    • the opening of an account established pursuant to the escrow requirements of a Canadian securities regulator or Canadian stock exchange or any provincial legislation;
    • the opening of an account where the account holder or settlor is a pension fund that is regulated under federal or provincial legislation;
    • the opening of an account in the name of, or in respect of which instructions are authorized to be given by an FE, a securities dealer, a life insurance company, or an investment fund that is regulated under provincial securities legislation;
    • a public body, or its subsidiary if the financial statements are consolidated with those of the public body;
    • a very large corporation or trust, or the subsidiary of either if the financial statements are consolidated with those of the very large corporation or trust; or
    • an account opened solely to provide accounting services to a securities dealer.
  5. 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 17

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 18

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, as applicable, of a domestic PEP or HIO, and you consider them to pose a high risk, you must:Footnote 19

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 you consider (based on your risk assessment) that there is a high risk of the person being involved in an ML/TF offence, you must:Footnote 20

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 21

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 22

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 23

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 24

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 25

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 you consider (based on your risk assessment) that there is a high risk of the person being involved in a money laundering (ML) or terrorist activity financing (TF) offence, you must:Footnote 26

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 you consider (based on your risk assessment) that there is a high risk of the person being involved in an ML/TF offence, you must:Footnote 27

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 you consider (based on your risk assessment) that there is a high risk of the beneficiary being involved in an ML/TF offence, you must ensure that a member of senior management reviews the transaction.Footnote 28

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 consider (based on your risk assessment) that there is a high risk of the person being involved in an ML/TF offence, you must:Footnote 29

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 30

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 31

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 32

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 33

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 34

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: