FINTRAC Policy Interpretations

Reporting

Reasonable measures for reporting

Question:

What do I need to do to meet my “reasonable measures” obligations for obtaining reporting information once the regulatory amendments come into force?

Answer:

The obligation to take reasonable measures currently applies to certain information found within the reporting Schedules of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), and will continue to apply when the amended Regulations come into force on June 1, 2021. In this context, “reasonable measures” are the steps a reporting entity (RE) must take to obtain certain information for reporting purposes, as prescribed by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“Act”) and its associated Regulations. An RE must describe these steps in its compliance program’s policies and procedures.

The obligation to take reasonable measures requires an RE to take steps to obtain information for reporting purposes, which differs from the requirement to report the information that an RE has obtained. Specifically, the language at subsection 52(1) of the current PCMLTFR and subsection 152(1) of the amended PCMLTFR requires that an RE take its reasonable measures steps before determining that it was unable to obtain and report the information.

Pursuant to subsection 52(1) of the PCMLTFR:

The requirement to report information set out in Schedules 1 to 6 does not apply to a person or entity in respect of information set out in an item of any of those Schedules that is not marked with an asterisk if, after taking reasonable measures to do so, the person or entity is unable to obtain the information. [Emphasis added]

The exception to reporting non-mandatory information (fields not marked with an asterisk) found at subsection 52(1) of the current PCMLTFR is mirrored in subsection 152(1) of the amended PCMLTFR, which comes into force on June 1, 2021.

For further clarity, reporting information that has been obtained by an RE must be reported. For example, if an RE verifies a person’s identity and keeps the associated record as a paper copy at one location, the RE is considered to have obtained all of the information contained in that paper record and, as such, this information must be reported as applicable. This is required even where the reportable transaction is conducted at another of the RE’s locations and retrieving this information from the other location may require additional steps by the RE.

That said, the obligation to take reasonable measures to obtain information for reporting purposes does not apply to information that is “not applicable in the circumstances”. Currently, this is reflected in the reporting Schedules of the PCMLTFR, by use of the phrase “if applicable” within specific Parts and items. As of June 1, 2021, the use of “if applicable” within the reporting Schedules will be replaced by a blanket clarification found at subsection 152(3) of the amended PCMLTFR, which states:

For greater certainty, a person or entity is not required to report information set out in any item of Schedules 1 to 6 that is not applicable in the circumstances.

Information that is “not applicable in the circumstances” is information that may not apply in a particular situation. For example, if a client requested the initiation of a reportable electronic funds transfer (EFT) in person, then the information required in Schedule 2, Part C, item 13 (“Type of device used by person who makes request online”) of the amended PCMLTFR would not be applicable, as the transaction was not conducted online. If the information is not applicable in the circumstances, then the RE does not need to take reasonable measures to obtain, nor is the RE required to report it. Subsection 152(3) of the amended PCMLTFR applies to both mandatory fields (those marked with an asterisk) and non-mandatory fields (those not marked with an asterisk).

It is FINTRAC’s expectation that REs will take the reasonable measures outlined in their policies and procedures to obtain applicable information for all non-mandatory fields (those not marked with an asterisk), per subsection 52(1) of the PCMLTFR and 152(1) of the amended PCMLTFR. Should an RE not take steps to obtain information that is applicable in the circumstances and subject to the reasonable measures requirement, the RE would be considered to be non-compliant.

To assess compliance with this requirement, FINTRAC will review the RE’s:

  • policies and procedures, to ensure the RE’s process for obtaining reportable information is documented and applied appropriately in practice; and
  • records, to ensure that where the RE was able to obtain reportable information, the RE documented and reported the information. If the RE had the information in its records, but did not include it in a report, as required, the RE would be considered to be non-compliant.

Finally, FINTRAC will be exercising exceptional and transitionary flexibility in how it assesses and enforces certain obligations under the amended PCMLTFR from June 1, 2021 until updates to the current reporting forms are implemented. Specifically, measure #4 of the Notice on forthcoming regulatory amendments and flexibility outlines that FINTRAC will be flexible when assessing and enforcing an RE’s application of the obligation to take reasonable measures to obtain the specified non-mandatory (those not marked with an asterisk) reporting information for certain reports. For further information on the Measures, please consult the Notice on forthcoming regulatory amendments and flexibility.

As always, FINTRAC will make an assessment based on all of the facts and will apply a reasonable approach to citing instances of non-compliance.

 

Date answered: 2021-08-19

PI Number: PI-11501

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Reporting

Regulations: 152(1), 152(3)

LVCTR – field clarification for Part A

Question:

I’m looking for definitions on:

Part A - Information with Respect to Reporting Person or Entity and Place of Business Where Transaction Is Conducted or Attempted

  • Identification number assigned to person by Centre
  • Identification number assigned to entity by Centre
  • Number that identified place of business

Also, who is the “Centre”?

Answer:

Please note that the requested numbers you identify relate to the reporting entity who is required to submit the report. When a person or entity enrolls in FINTRAC’s web reporting system they are assigned identifiers for themselves and their business location(s). The “Centre” refers to FINTRAC.

Date answered: 2021-05-17

PI Number: PI-11483

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Reporting

Guidance: Reporting large virtual currency transactions to FINTRAC

Delayed 24-hour rule reporting requirements under the Flexible Measures Notice and confirmation of different parties to aggregate on

Question:

Will the requirement to aggregate multiple transactions over $10,000 that occur in a 24 hour period be delayed beyond June 1, 2021 for large cash transaction reports (LCTRs)?

Can you clarify what is meant by “beneficiary” for aggregation under the 24 hour rule for large cash transaction reports (LCTRs) and electronic funds transfer (EFT) reports? We understand it to be the same as the conductor, but want to confirm. Also, can you please define ‘beneficiary’ vs. ‘on behalf of’

We would also appreciate if you could confirm if the following scenarios are correct and whether an LCTR is required as per the obligations pre-June 1st and post-June 1st:

1. PersonA deposits 3 transactions withing a 24-hr period - (txns by the same individual/entity)

  • $3000 into account of PersonB
  • $4000 into account of PersonC
  • $4000 into account of PersonD

2. PersonE receives 3 cash deposits into their account(s), each conducted by a different person – (txns on behalf of same individual/entity)

  • $3000 from PersonF
  • $4000 from PersonG
  • $4000 from PersonH

3. PersonA deposits 1 transaction of $3000 into their own account & PersonB deposits $8000 into PersonA’s account – (combination of by and on behalf of)

Answer:

FINTRAC has published guidance on the amendments to the 24-hour rule under the amended PCMLTFR that may assist you. Please note that the updated guidance includes the following disclaimer:

This guidance on the 24-hour rule explains the requirements under the PCMLTFR that are in effect as of June 1st, 2021. From June 1st, these obligations will apply only to the reporting of large virtual currency transactions. The obligations will apply to large cash transactions, electronic funds transfers, and casino disbursements when FINTRAC updates the report forms for those transactions. Until then, reporting entities should continue to apply the 24-hour rule as outlined in FIN 4 (pre-June 1, 2021).

Further details can be found in the Notice on forthcoming regulatory amendments and flexibility and the message concerning FINTRAC's Implementation of Regulatory Amendments.

Please note that this page will be updated to include additional information as the revised report forms become available.

For your first question, measure #3 of the Notice on flexibility indicates that while the amended 24-hour rule will come into force on June 1st, 2021, REs are expected to continue reporting as they currently do until the updated forms are implemented. For further clarity, REs are not expected to aggregate and report LCTRs and EFTRs according to the amendments to the 24-hour rule until the updated forms allow for this. During this time, REs are expected to be updating their processes, as well as, their policies and procedures to ensure compliance with the amended obligations.

The person or entity that conducts the cash transaction or requests the initiation of the electronic funds transfer is the conductor of the transaction. The conductor of the transaction may or may not also be the beneficiary of the transaction. To clarify, FINTRAC’s Guidance Glossary includes the following definitions of ‘beneficiary’ and ‘on behalf of’:

  • Beneficiary - A beneficiary is the individual or entity that will benefit from a transaction or to which the final remittance is made.
  • Third Party [also known as “on behalf of party” and “instructing party”] - Any individual or entity that instructs another individual or entity to act on their behalf for a financial activity or transaction.

For further clarity, the flexible measures, including measure #2 of the Notice which applies to aggregating transactions based on the beneficiary, are intended to allow REs to continue to report as they currently do until FINTRAC implements the updated forms. FINTRAC still expects REs to obtain and report information regarding all applicable parties to a transaction (conductor, third/instructing party, and beneficiary where possible), and to keep the applicable records.

You provided three scenarios and requested FINTRAC’s confirmation of the reporting obligation. For the purposes of this response we are assuming that all three scenarios involve the RE receiving cash (in CAD) within a 24 hour static window.

Provided Scenario

1. Person A deposits 3 transactions within a 24-hr period:

  • $3000 into account of Person B
  • $4000 into account of Person C
  • $4000 into account of Person D

Parties to the transaction

  • Person A is the conductor of $11,000 worth of cash deposits,
  • Person B, Person C, and Person D are each a beneficiary, and
  • There does not appear to be a third party.

Pre-June 1st Reporting Obligation

  • LCTR required because the RE knows, pursuant to paragraph 3(1)(a) of the current PCMLTFR, that the cash deposits were within a consecutive 24 hour period, collectively total more than $10,000 CAD, and are all conducted by the same person, Person A.

Post-June 1st Reporting obligations

  • LCTR required because the RE knows, pursuant to subsection 126(a) of the amended PCMLTFR, that the cash deposits were within a consecutive 24 hour period, collectively total more than $10,000 CAD, and are all conducted by the same person, Person A.

Provided Scenario

2. Person E receives 3 cash deposits into their account(s), each conducted by different people:

  • $3000 from Person F
  • $4000 from Person G
  • $4000 from Person H

Parties to the transaction

  • Person E is the beneficiary of $11,000 worth of cash deposits,
  • Person F, Person G, and Person H are each a conductor, and
  • There does not appear to be a third party.

Pre-June 1st Reporting Obligation

  • LCTR not required as there is no requirement in the current PCMLTFR to aggregate transactions based on the beneficiary of a cash transaction.

Post-June 1st Reporting obligations

  • LCTR required because the RE knows, pursuant to subsection 126(c) of the amended PCMLTFR, that the cash deposits were within a consecutive 24 hour period, collectively total more than $10,000 CAD, and are for the same beneficiary, Person E.
  • However, measure #2 of the Notice will delay the enforcement of the obligation to aggregate transactions based on the beneficiary for the LCTR and EFTR until the updated reporting forms are implemented. Therefore, FINTRAC will not expect an LCTR to be reported for this transaction if it occurs after June 1, 2021, but before the updated reporting form is available.

Provided Scenario

3. Person A deposits 1 transaction of $3000 into their own account & Person B deposits $8000 into Person A’s account

Parties to the transaction

  • Person A is the conductor and beneficiary of the $3,000 deposit,
  • Person B is the conductor of the $8,000 deposit,
  • Person A is also the beneficiary of the $8,000 deposit, and
  • There does not appear to be a third party.

Pre-June 1st Reporting Obligation

  • LCTR not required as there is no requirement in the current PCMLTFR to aggregate transactions based on the beneficiary of a cash transaction.

Post-June 1st Reporting obligations

  • LCTR required because the RE knows, pursuant to subsection 126(c) of the amended PCMLTFR, that the cash deposits were within a consecutive 24 hour period, collectively total more than $10,000 CAD, and are for the same beneficiary, Person A.
  • However, measure #2 of the Notice will delay the enforcement of the obligation to aggregate transactions based on the beneficiary for the LCTR and EFTR until the updated reporting forms are implemented. Therefore, FINTRAC will not expect an LCTR to be reported for this transaction if it occurs after June 1, 2021, but before the updated reporting form is available.

Please note that an RE must not combine aggregation types. The RE must determine who the relevant parties to a transaction are and then determine if, within a 24 hour period, there are reportable transactions based on the same conductor, third party, or beneficiary in accordance with their 24 hour rule obligations.

Date answered: 2021-05-10

PI Number: PI-11471

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Reporting

Guidance: Transaction reporting guidance: the 24-hour rule

Regulations: 126

Device identifier number for LVCTR

Question:

We understand, after reading the Large virtual currency transaction Reporting Guidance, that reporting entities will have to report the device identifier number, such as the Media Access Control (MAC) address or the International Mobile Equipment Identity (IMEI), if the transaction occurs online.

However, this information cannot be easily obtained nor retrieved.

In this respect, what are FINTRAC's expectations if reporting entities are unable to retrieve the device identifier number?

Answer:

As you know, according to the amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), which will come into force June 1st, 2021, REs are required to report the number that identifies a device (i.e., the individual identifier for that device type) in certain reports, as per the reporting Schedules. This reporting field applies to electronic funds transfer reports (EFTRs), LVCTRs, suspicious transaction reports (STRs), and terrorist property reports (TPRs).

Given that the number that identifies a device is not a mandatory reporting field, the requirement is that REs take reasonable measures to obtain this information when it is applicable (e.g., for transactions conducted online), and if obtained they must report it. The requirement to report this information does not apply if, after taking reasonable measures to do so, the RE is unable to obtain the information, or if it is not applicable in the circumstances (e.g. a transaction is conducted in person). If the information is not applicable in the circumstances, then the RE does not need to take reasonable measures to obtain it, nor is the RE required to report it.

Please note that the obligation to take reasonable measures for reporting purposes requires an RE to take steps to obtain information, which differs from the requirement to report the information that an RE has already obtained. It is FINTRAC’s expectation that REs will take the reasonable measures steps outlined in their policies and procedures to obtain applicable information for all non-mandatory reporting fields (those not marked with an asterisk), including the number that identifies a device. In cases where the information cannot be obtained by technological means or through your established systems or applications, an alternative may be to ask the client to provide the information at the time of the transaction.

Date answered: 2021-04-22

PI Number: PI-11491

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Reporting

Guidance: Reporting large virtual currency transactions to FINTRAC

Device identifier number

Question:

I'm hoping someone can provide some insight into the upcoming requirements for on-line transactions, namely the reporting of the device's unique identifier number. It seems this information is not relayed across the internet, and thus it is difficult to capture. Can you let me know what is expected for this requirement?

Answer:

According to the amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), which will come into force June 1st, 2021, reporting entities (REs) are required to include the number that identifies a device (i.e., the individual identifier for that device type) in certain reports, as per the reporting Schedules. This reporting field applies to electronic funds transfer reports (EFTRs), large virtual currency transaction reports (LVCTRs), suspicious transaction reports (STRs), and terrorist property reports (TPRs).

Given that the number that identifies a device is not a mandatory reporting field, the requirement is that REs take reasonable measures to obtain this information when it is applicable (e.g., for transactions conducted online), and if obtained they must report it. The requirement to report this information does not apply if, after taking reasonable measures to do so, the RE is unable to obtain the information, or if it is not applicable in the circumstances (e.g. the transaction is conducted in person). If the information is not applicable in the circumstances, then the RE does not need to take reasonable measures to obtain it, nor is the RE required to report it.

Please note that the obligation to take reasonable measures requires an RE to take steps to obtain information for reporting purposes, which differs from the requirement to report the information that an RE has obtained. It is FINTRAC’s expectation that REs will take the reasonable measures steps outlined in their policies and procedures to obtain applicable information for all non-mandatory reporting fields (those not marked with an asterisk), including the number that identifies a device. In cases where the information cannot be obtained by technological means or through established systems or applications, an alternative may be to ask the client to provide the information at the time of the transaction.

Date answered: 2021-04-22

PI Number: PI-11489

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Reporting

LVCTRs and VC IOUs

Question:

Am I required to submit an LVCTR when a client adds a virtual currency (VC) IOU (e.g. representing a claim on an amount of BTC) to their custodial wallet held by our company? If a client trades VC IOUs, will I be required to report an LVCTR to FINTRAC when the VC IOU is received or would I only be required to submit a report after the trade has occurred and our client withdraws (i.e. claims) the VC IOU? The IOUs in questions are traded on the XRP ledger.

Answer:

As per the PCMLTFR:

  • Subsection 1(2) virtual currency means:
    • (a) a digital representation of value that can be used for payment or investment purposes, that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds; or
    • (b) a private key of a cryptographic system that enables a person or entity to have access to a digital representation of value referred to in paragraph (a).
  • Paragraph 30(1)(f) – MSBs shall report the receipt from a person or entity of an amount of $10,000 or more in virtual currency (VC) in a single transaction;
  • Section 36 – MSBs shall keep the following records:
    • (g) if they transfer an amount of $1,000 or more in virtual currency at the request of a person or entity;
    • (h) if they receive an amount of $1,000 or more in virtual currency for remittance to a beneficiary;
    • (j) a virtual currency exchange transaction ticket in respect of every virtual currency exchange transaction.
  • Subsection 124.1(1) – MSBs shall, with respect to a virtual currency transfer that they are required to keep a record of:
    • (a) include, with the transfer, the name, address and, if any, the account number or other reference number of both the person or entity who requested the transfer and the beneficiary; and
    • (b) take reasonable measures to ensure that any transfer received includes the information referred to in paragraph (a).

First, it is important to note that MSBs are only required to submit an LVCTR when they are in receipt of VC (in an amount of $10,000 or more) from a person or entity. You specify that a client adds a virtual currency (VC) IOU (e.g. representing a claim on an amount of BTC) to their custodial wallet held by our company and that the client can trade VC IOUs. Based on this, it would seem that the IOU itself would be considered as a VC, as defined by the PCMLTFR. Therefore, when you are in receipt of these IOUs in an amount equivalent to $10,000 CAD or more, in one or more transactions within a consecutive 24-hour period, you are required to submit an LVCTR to FINTRAC.

As such, when the client deposits VC into your custody, you are in receipt of VC and if the amount is equivalent to $10,000 CAD or more, an LVCTR is required. It is our understanding that when your client trades their IOUs with another user of the XRP ledger, they receive the traded IOU into their wallet with you. Therefore, you would be in receipt of VC and if the amount is equivalent to $10,000 CAD or more an LVCTR is required.

While you are not required to submit an LVCTR to FINTRAC when you send VC on behalf of a client, you should consider the scenarios you’ve outlined against the obligations outlined above.

Date answered: 2021-04-19

PI Number: PI-11481

Activity Sector(s): Money services businesses

Obligation(s): Reporting

Guidance: Reporting large virtual currency transactions to FINTRAC

Regulations: 1(2), 30(1)(f), 36, 124.1(1)

LVCTR not required when receiving VC for own purposes and not for client

Question:

As a registered MSB with FINTRAC, do I need to report the receipt of virtual currencies over $10,000 in value when I am simply transferring them from another FINTRAC registered virtual currency exchange for storage in my own wallet. i.e. I am the owner and beneficiary of the funds?

 

Answer:

Pursuant to paragraph 30(1)(f) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), as of June 1st, 2021, a money services business (MSB) shall report the receipt from a person or entity of an amount of $10,000 or more in virtual currency (VC) in a single transaction.

If, as an MSB, you are in receipt of your own virtual currency for your own purposes, then an LVCTR would not be required. However, if you are receiving the virtual currency in order to credit it to a client’s wallet or to complete an exchange request for a client, for example, then an LVCTR would be required.

Date answered: 2021-03-26

PI Number: PI-11479

Activity Sector(s): Money services businesses

Obligation(s): Reporting

Regulations: 30(1)(f)

LVCTR requirements

Question:

What is a large virtual currency transaction and when is it required to be reported?

Answer:

A person or entity subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) has the obligation to submit a report to FINTRAC when it receives an amount of $10,000 or more in virtual currency in a single transaction. The report in this case is the Large Virtual Currency Transaction Report (LVCTR).

Please note that both funds and virtual currency are defined in the PCMLTFR:

  • Virtual currency means:
    • (a) a digital representation of value that can be used for payment or investment purposes, that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds; or
    • (b) a private key of a cryptographic system that enables a person or entity to have access to a digital representation of value referred to in paragraph (a).
  • Funds means:
    • (a) cash and other fiat currencies, and securities, negotiable instruments or other financial instruments that indicate a title or right to or interest in them; or
    • (b) a private key of a cryptographic system that enables a person or entity to have access to a fiat currency other than cash.
      • For greater certainty, it does not include virtual currency. 

As such, it is the receipt of the equivalent of $10,000 CAD in virtual currency that triggers the obligation to submit an LVCTR to FINTRAC.

Date answered: 2021-03-15

PI Number: PI-11477

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Reporting

Guidance: Reporting large virtual currency transactions to FINTRAC

Regulations: 1(2)

LVCTR reporting for e-transfers from a VC dealer

Question:

I have seen incoming and outgoing interac e-transfers to companies that I have determined deal in Bitcoin. Would these be considered to be virtual currency transactions?

For example, my client receives an e-transfer from a company. I know this company deals in Bitcoin. Would this be considered a virtual currency transaction (reportable if $10,000 or more is received)?

Answer:

First, please note that both funds and virtual currency are defined in the amended Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (amended PCMLTFR):

  • Virtual currency means:
    • (a) a digital representation of value that can be used for payment or investment purposes, that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds; or
    • (b) a private key of a cryptographic system that enables a person or entity to have access to a digital representation of value referred to in paragraph (a).
  • Funds means:
    • (a) cash and other fiat currencies, and securities, negotiable instruments or other financial instruments that indicate a title or right to or interest in them; or
    • (b) a private key of a cryptographic system that enables a person or entity to have access to a fiat currency other than cash.
  • For greater certainty, it does not include virtual currency. 

As such, it is the receipt of the equivalent of $10,000 CAD in virtual currency that triggers the obligation to report a large virtual currency transaction. For greater certainty, the receipt of funds by means of an e-transfer from a business that deals in virtual currency would not trigger the obligation to report a large virtual currency transaction.

However, these e-transfers should be considered against your obligation to report incoming and outgoing international electronic funds transfers (EFTs), if applicable.

Date answered: 2021-03-05

PI Number: PI-11495

Activity Sector(s): Money services businesses

Obligation(s): Reporting

Guidance: Reporting large virtual currency transactions to FINTRAC

Regulations: 1(2)

EFTs – pre-authorized debits and direct deposits

Question:

What are pre-authorized debits and direct deposits for the purpose of the amended definition of electronic funds transfers (EFTs)?

Answer:

Neither the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) nor its associated Regulations define the terms “direct deposit” or ‘pre-authorized debit.” However, it is generally understood that a direct deposit is :

  • a transaction where a payor enters into an agreement with a payee to have funds electronically transferred into, or credit to, the payee’s account at a financial institution;
  • originated by a business as the payor (e.g., employer);
  • a recurring transaction; and
  • one that requires that the payee’s account details be shared with the payor so that the payor can initiate the transaction (e.g., for the purpose of payroll deposit).

Alternatively, it is generally understood that a pre-authorized debit:

  • is a transaction where a payor enters into an agreement with a payee to have that payee debit funds from the payor’s account;
  • originated by a business as the payee (e.g., utility provider);
  • require an agreement between the financial entity holding the payor’s account and the payee to the transaction; and
  • allows the payee to initiate the debit transaction (e.g., for the purpose of paying a utility bill).

In light of the amendments to the definition of EFT within the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), FINTRAC has had to assess its position with respect to the reportability of certain transfer transactions. Specifically, the definition of  EFT now “means the transmission – by any electronic, magnetic or optical means – of instructions for the transfer of funds, including a transmission of instructions that is initiated and finally received by the same person or entity. In the case of SWIFT messages, only SWIFT MT-103 messages and their equivalent are included. It does not include a transmission of instructions for the transfer of funds :

  • (a) that is carried out by means of a credit or debit card or a prepaid payment product if the beneficiary has an agreement with the payment service provider that permits payment by that means for the provision of goods and services ;
  • (b) that involves the beneficiary withdrawing cash from their account;
  • (c) that is carried out by means of a direct deposit or a pre-authorized debit;
  • (d) that is carried out by cheque imaging and presentment;
  • (e) that is both initiated and finally received by persons or entities that are acting to clear or settle payment obligations between themselves; or
  • (f) that is initiated or finally received by a person or entity referred to in paragraphs 5(a) to (h.1) of the Act for the purpose of internal treasury management, including the management of their financial assets and liabilities, if one of the parties to the transaction is a subsidiary of the other or if they are subsidiaries of the same corporation.”

Therefore, should a transmission of instructions for the transfer of funds be carried out by means of a direct deposit or a pre-authorized debit, which are not EFTs, a prescribed reporting entity (RE)

i) would not have reporting obligations,

ii) would not have associated record-keeping obligations, and

iii) would not have the associated obligations that from the above, such as the travel rule requirements.

With the above in mind, we turn to consideration of ACH Network transactions. It is understood by FINTRAC that ACH Network transactions consist of direct deposits and direct payments where direct deposits are payments deposited directly to an account, and direct payments are debits of funds for making payments, whether they are sent or received. Further it is understood that for ACH Network transactions to take place, there must be an agreement between the parties, and detailed account information is required, to allow for the debiting or crediting of the relevant accounts, as the case may be.

Given the nature of the transactions carried out by means of the ACH Network in the United States, it would appear these transactions are direct deposits and pre-authorized debits, and, as such, these transactions do not trigger the EFT obligations, as these are exceptions to the definition of EFT.

That said, should it be possible for persons or entities to use the ACH Network for transactions other than direct deposit or pre-authorized debit transactions, then these must be considered against the RE’s EFT obligations under the PCMLTFA and its associated Regulations.

Finally, while EFT obligations may not be applicable to these transactions, we remind REs of the obligation, pursuant to section 7 of the PCMLTFA, to report to FINTRAC every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that

  1. the transaction is related to the commission or the attempted commission of a money laundering offence; or
  2. the transaction is related to the commission or the attempted commission of a terrorist activity financing offence.

Date answered: 2020-12-21

Answer updated on: 2021-08-20

PI Number: PI-11105

Activity Sector(s): Financial entities

Obligation(s): Reporting

Regulations: 1(2)

Act: 9(1)

EFTs for credit card payments

Question:

Where a financial entity receives a cross border funds transfer from a client and the funds transfer is for the purpose of paying the client’s credit card account with the financial entity, is the transaction an electronic funds transfer (EFT) within the meaning of the Regulations?

In our view, we believe that such a transmission would not in fact constitute an EFT for the purposes of the Regulations. Our reasoning for this view is as follows:

  • the funds transfer falls within the exception found in subsection (e) of the definition of an EFT. Specifically, subsection (e) of the definition provides that an EFT does not include a transmission of instructions for the transfer of funds that is both initiated and finally received by persons or entities that are acting to clear or settle payment obligations between themselves.
  • we note the use of the word “persons” in this exemption. As you are aware, the term “person” is defined in the PCMLTFA to mean an individual. As such, it is clear that this exception is not limited to the “clearing and settlement” of payment obligations by financial institutions in the traditional sense but extends beyond that to the payment and settlement of payment obligations between persons and organizations more generally. If this exception was meant to be limited to financial or similar institutions, the use of the word “person” in subsection (e) of the definition would have no meaning.
  • as you may be aware, the principles of statutory interpretation presume that the legislature avoids superfluous or meaningless words, that it does not speak in vain and as such every word in a statute is presumed to make sense and to have a specific role to play in advancing the legislative purpose. In that regard, in the case Hill v. William Hill (Park Lane) Ltd. [1949] A.C. 530, at 546 (H.L.). the court noted:
    • When the legislature enacts a particular phrase in a statute the presumption is that it is saying something which has not been said immediately before. The rule that a meaning should, if possible, be given to every word in the statute implies that, unless there is good reason to the contrary, the words add something which would not be there if the words were left out.
  • as such, in our view, in the circumstances described above, subsection (e) of the definition of an EFT should provide an exception from the definition of an EFT where the transmission of the instruction is both initiated (in this case, by the client) and finally received (in this case by the financial institution) to settle payment obligations (the obligation of the client to pay its credit card account at the financial institution) between themselves.

As such, we are of the view that a funds transfer received by a financial institution from its client to repay a credit card account (or similar account) would not be considered an EFT under the Regulations.

Given that there is currently no guidance on these provisions of the amended Regulations, I would ask that FINTRAC confirm our interpretation above.

Answer:

As you note, the definition of an EFT has been amended and states:

  • electronic funds transfer means the transmission — by any electronic, magnetic or optical means — of instructions for the transfer of funds, including a transmission of instructions that is initiated and finally received by the same person or entity. In the case of SWIFT messages, only SWIFT MT-103 messages and their equivalent are included. It does not include a transmission of instructions for the transfer of funds:
    • (a) that is carried out by means of a credit or debit card or a prepaid payment product if the beneficiary has an agreement with the payment service provider that permits payment by that means for the provision of goods and services;
    • (b) that involves the beneficiary withdrawing cash from their account;
    • (c) that is carried out by means of a direct deposit or a pre-authorized debit;
    • (d) that is carried out by cheque imaging and presentment;
    • (e) that is both initiated and finally received by persons or entities that are acting to clear or settle payment obligations between themselves; or
    • (f) that is initiated or finally received by a person or entity referred to in paragraphs 5(a) to (h.1) of the Act for the purpose of internal treasury management, including the management of their financial assets and liabilities, if one of the parties to the transaction is a subsidiary of the other or if they are subsidiaries of the same corporation.

Where a financial entity (FE) receives an incoming EFT of $10,000 or more from a client in another country, the FE would have a reportable EFT. In this case, the FE would be in receipt of client initiated instructions to transfer funds from the client’s account at a foreign financial institution to their credit card account with the FE.

The exception noted at (e) above does not apply to this scenario. A client repaying an outstanding loan or, as in this case, a credit card account, is not understood to be a person or entity clearing or settling payment obligations within the meaning of the exception to an EFT. As you are aware, entities other than FEs have EFT obligations under the Act and its associated Regulations, including money services businesses (MSBs), which can be both persons and entities.

Date answered: 2020-11-27

PI Number: PI-11475

Activity Sector(s): Financial entities

Obligation(s): Reporting

Regulations: 1(2)

Life insurance – EFT reporting

Question:

Will life insurance companies be subject to EFT reporting when they offer loans to the public?

Answer:

Pursuant to subsection 1(2) of the PCMLTFR a financial entity means:  

  • (c) a life insurance company, or an entity that is a life insurance broker or agent, in respect of loans or prepaid payment products that it offers to the public and accounts that it maintains with respect to those loans or prepaid payment products, other than:
    • (i) loans that are made by the insurer to a policy holder if the insured person has a terminal illness that significantly reduces their life expectancy and the loan is secured by the value of an insurance policy;
    • (ii) loans that are made by the insurer to the policy holder for the sole purpose of funding the life insurance policy; and
    • (iii) advance payments to which the policy holder is entitled that are made to them by the insurer;

In addition, pursuant to the PCMLTFR:

  • Subsection 1(2)
    • electronic funds transfer means the transmission — by any electronic, magnetic or optical means — of instructions for the transfer of funds, including a transmission of instructions that is initiated and finally received by the same person or entity. In the case of SWIFT messages, only SWIFT MT-103 messages and their equivalent are included.
    • final receipt, in respect of an electronic funds transfer, means the receipt of the instructions by the person or entity that is to make the remittance to a beneficiary.
    • initiation, in respect of an electronic funds transfer, means the first transmission of the instructions for the transfer of funds.
  • Subsection 7(1) - a financial entity shall report the following transactions and information to the Centre:
    • (b) the initiation, at the request of a person or entity, of an international electronic funds transfer of $10,000 or more in a single transaction;
    • (c) the final receipt of an international electronic funds transfer of $10,000 or more in a single transaction;

This means that when a life insurance company or entity that is a life insurance broker or agent is deemed to be a financial entity, it will have the obligations associated with the financial entities sector, including electronic funds transfer (EFT) reporting. This deeming only applies for the specific activities listed above. A life insurance company or entity that is a life insurance broker or agent is not required to consider all of its life insurance activities against the financial entity obligations, only those specific activities that trigger associated financial entity obligations.

For example, a life insurance company will be extending a mortgage loan to a foreign borrower, the life insurance company advances funds to the borrower and the borrower subsequently repays the loan. It is assumed that the amount of funds advanced and received is CAD $10,000 or more.

In this situation, it does not appear that the life insurance company is transmitting client initiated instructions for the transfer of funds across the Canadian border. As such, there is no reportable outgoing EFT (EFTO). This is because the life insurance company is carrying out the provision of funds according to the mortgage lending arrangement. As such, the instructions are to fulfill the terms of the arrangement and not to transfer funds from the borrower’s account with the life insurance company to the borrower’s account in the US, for instance.

However, when the life insurance company, as the deemed FE, finally receives the incoming EFT from the foreign borrower’s bank in the US, it is in receipt of client initiated instructions for the transfer of funds across the Canadian border and has a reportable incoming EFT (EFTI). In this situation, the life insurance company, as the deemed FE, is the final recipient with the obligation to report and the foreign borrower is the beneficiary of the EFTI.

Date answered: 2020-10-16

Answer updated on: 2021-08-20

PI Number: PI-11103

Activity Sector(s): Life insurance

Obligation(s): Reporting

Regulations: 1(2), 7(1)

Act: 9(1)

Suspicious transaction associated with a third party credit card provider

Question:

Do I need to submit an STR if a company with which I’m associated alerts me to irregular client activities?

Answer:

Pursuant to section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), every reporting entity (RE) shall, in accordance with the regulations, report to the Centre every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that:

  1. the transaction is related to the commission or the attempted commission of a money laundering (ML) offence; or
  2. the transaction is related to the commission or the attempted commission of a terrorist activity financing (TF) offence.

First, it is important to note that it is only those persons and entities subject to the PCMLTFA that have obligations under the Act and its associated Regulations, including the obligation to submit STRs to FINTRAC. As such, FINTRAC cannot impose obligations on persons and entities not subject to the PCMLTFA and, therefore, a business that is not subject to the Act does not have the obligation to submit STRs. However, should a member of the public wish to voluntarily provide FINTRAC with information about any suspicions of ML/TF, they may do so using our Web form. More information on providing voluntary information can be found on our website.

Where an RE has reached reasonable grounds to suspect that a transaction, attempted or completed in the course of their activities, is related to the commission or attempted commission of an ML/TF offence, then an STR must be submitted to FINTRAC. However, where an RE, after completing their review and assessment, does not reach its reasonable grounds to suspect threshold, an STR is not required.

STRs are one of the most valuable report types submitted to FINTRAC. In addition to the prescribed information, Part G of the STR form allows for an expansion on the descriptive details surrounding a transaction that is derived from an RE’s assessment of what they are seeing through their business interactions and activities. Additional information, such as additional account numbers, locations, relationships, and background information are all additional details that FINTRAC uses in its analysis and production of financial intelligence disclosures.

In completing the STR form, Part G is mandatory and requires the RE to provide a detailed description of their grounds to suspect that the transaction or attempted transaction is related to the commission of an ML/TF offence. The narrative should include the explanation of their assessment and should focus on the question: "Why do you think the transaction is suspicious of ML/TF?" Note that context, for the purpose of completing an STR, is information that clarifies the circumstances or explains a situation or transaction. A transaction may not appear suspicious in and of itself. However, a review of additional contextual elements surrounding the transaction, such as underlying credit card transactions, may create the suspicion. More information on completing Part G of the STR form can be found on our website.

Therefore, where an RE has reached reasonable grounds to suspect that a transaction (completed or attempted) is related to ML/TF, an STR must be submitted to FINTRAC. If the credit card transactions form part of the RE’s assessment and determination that the transaction has reached the reasonable grounds to suspect threshold then this information must be included in Part G. The amount of detail and information to be provided will depend on the situation and the information available to the RE, but should be enough to answer the question of why the RE thinks the transaction is suspicious.

For instance, where an RE reaches reasonable grounds to suspect that the payments from Person A’s chequing account and the associated cash deposits are related to the commission or attempted commission of an ML/TF offence, then they must submit an STR. In Part G, the RE must outline the reasons why they are suspicious of the transactions detailed in Parts B through F, in this case, the notification from ABC Company of the suspicious credit card transactions, which led the RE to investigate the payments and to discover the cash deposits, which were outside of Person A’s normal behaviour.

Finally, the RE must conduct a risk assessment of any service it provides, as part of its overall compliance program. This is to ensure that appropriate controls are put in place to mitigate any risks and apply special measures, as necessary. In addition, as with all of its activities, an RE must consider any financial transaction(s) conducted through a service it offers, if applicable, against its obligation to submit STRs, should there be reasonable grounds to suspect that the transaction(s) are related to the commission or the attempted commission of a ML/TF offence.

Date answered: 2020-08-24

Answer updated on: 2021-08-20

PI Number: PI-10883

Activity Sector(s): Financial entities

Obligation(s): Reporting

Act: 7

STR for victim of fraud

Question:

Is a suspicious transaction report (STR) required to be filed if I determine, or suspect, that a client is a victim of fraud, whether the transaction is completed or not?

Answer:

Pursuant to section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), every person or entity referred to in section 5 shall, in accordance with the regulations, report to the Centre every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that:

  1. the transaction is related to the commission or the attempted commission of a money laundering (ML) offence; or
  2. the transaction is related to the commission or the attempted commission of a terrorist activity financing (TF) offence.

The PCMLTFA defines an ML offence as an offence under subsection 462.31(1) of the Criminal Code, which indicates the need for the commission in Canada of a designated offence or an act or omission anywhere that, if it had occurred in Canada, would have constituted a designated offence. Where a designated offence means:

  • (a) any offence that may be prosecuted as an indictable offence under this or any other Act of Parliament, other than an indictable offence prescribed by regulation, or
  • (b) a conspiracy or an attempt to commit, being an accessory after the fact in relation to, or any counselling in relation to, an offence referred to in paragraph (a).

For a transaction to qualify as a suspicious transaction, reportable under the PCMLTFA and it associated Regulations, you must have reasonable grounds to suspect that it is related to the commission or attempted commission of either an ML offence or a TF offence. An ML offence typically involves various acts committed with the intention to conceal or convert property or the proceeds of property (such as money) knowing or believing that these were derived from the commission of a designated offence, which could include drug trafficking, bribery, or fraud. It is, therefore, for the reporting entity to determine whether they have reasonable grounds to suspect that a transaction or attempted transaction is related to an ML/TF offence.

For example, if you suspect that the purchase or attempted purchase of virtual currency is related to the commission or attempted commission of an ML/TF offence, then an STR would be required. However, if you determine, following an assessment of facts, context and indicators that the suspicion of ML/TF does not exist for the completed or attempted transaction, then you would not submit an STR on those transactions.

Where you have reached reasonable grounds to suspect and, as such, must submit an STR to FINTRAC, you must take reasonable measures to identify the individual(s) who conduct or attempt to conduct the suspicious transaction before submitting the STR.

Finally, if you receive confirmation of fraudulent transactions, and you have reasonable grounds to suspect that these transactions are related to an ML/TF offence, an STR must be submitted to FINTRAC. The STR could be solely based on the fraud factor, or it could also outline a series of other suspicious transaction indicators that may on their own seem insignificant, but together may raise higher suspicions.

More information on STRs, as well as, ML/TF indicators can be found on our website.

Date answered: 2020-08-06

Answer updated on: 2021-08-20

PI Number: PI-10876

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Reporting

Guidance: Reporting suspicious transactions to FINTRAC

Act: 7

Sharing Suspicious Transaction Reports (STR)

Question:

Is a reporting entity allowed to share a suspicious transaction report (STR) upon request from the person on whom the report was submitted?

Answer:

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) sets out a regime in which the information contained in financial transaction reports sent to FINTRAC (including Suspicious Transaction Reports (STRs)) is protected from disclosure except in very limited circumstances. The Act also includes specific provisions aimed at protecting the personal information under FINTRAC's control. For example, the PCMLTFA is founded on a prohibition on disclosure (s. 55(1), PCMLTFA). Any disclosure of information or intelligence by FINTRAC must fall under one of the exceptions to this prohibition. Outside of these exceptions, FINTRAC is prohibited from disclosing the contents of financial transaction reports, or even acknowledging their existence.

While reporting entities (REs) are not subject to the same prohibitions, consideration must be given to section 8 of the PCMLTFA, which prohibits REs from disclosing that they have made, are making or will make a report under section 7, or disclosing the contents of such a report, with the intent to prejudice a criminal investigation, whether or not a criminal investigation has begun. Worth noting is the reference to the “whether or not” element, as an RE will not be in a position to know that an investigation is ongoing, nor that one may begin. So, while the intent to prejudice may not be explicit, the disclosure may have the same unintended consequences.

FINTRAC strongly believes that STRs should be regarded as highly sensitive documents, given the role FINTRAC plays in the fight against money laundering and terrorist activity financing in Canada, and the fact that STRs are a key source of FINTRAC’s intelligence holdings. REs collect and collate data for STRs in order to comply with their legislated obligations under the PCMLTFA, and, as such, the purpose of STRs is quite singular and should not relate to the business or financial activities of organizations operating outside Canada’s anti-money laundering and anti-terrorism financing regime.

The potential harm that could occur from the disclosure of the information in these financial transactions reports is great, and includes compromising:

  1. police and national security investigations that are both ongoing or could be undertaken in the future;
  2. sources of the information/intelligence within the reports, placing those sources at risk of retaliation; and
  3. FINTRAC’s compliance activities, given that data provided by REs is always provided in confidence and that confidence is expected to be maintained by all parties.

Further, FINTRAC relies on the information included within STRs to support disclosure of financial intelligence to police and other law enforcement and national security organizations, in the interest of detecting, preventing and deterring money laundering and the financing of terrorism; in fact, a financial intelligence disclosure could be based entirely on a single STR if it is complete enough to meet one of FINTRAC’s thresholds for disclosure.

From FINTRAC’s perspective, it is not in the public interest for REs to disclose financial transaction reports and the information contained therein. Even beyond this, the collection or disclosure of financial transaction reports, including STRs, without a valid purpose and authority, may infringe on legislated privacy protection obligations. Almost all information within financial transaction reports is personal information about an identifiable individual and is considered financial intelligence by FINTRAC, collected for the sole purpose of reporting to FINTRAC.

Date answered: 2020-07-15

PI Number: PI-10662

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Reporting

Act: 8

List of entities for Terrorist Property Reports

Question:

Do we only have to submit a Terrorist Property Report if we match a name on the lists published online?

Answer:

Pursuant to subsection 7.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), reporting entities must submit TPRs to FINTRAC. The submission of a TPR is prompted after the threshold to disclose is met under the Criminal Code or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (RIUNRST).

Under the Criminal Code, persons and entities must disclose the existence of property in their possession or control that they know is owned or controlled by or on behalf of a terrorist group. A terrorist group can include a number of different persons and entities, including a listed entity. The Criminal Code states that a listed entity is one that appears on a list under section 83.05 of the Code. This list is a public means of identifying a person or entity as being associated with terrorism.

Under the RIUNRST, persons and entities must disclose the existence of property in their possession or control that they have reason to believe is owned or controlled by or on behalf of a listed person. The RIUNRST defines a listed person as a person or entity that appears on a list published in the Schedule in the RIUNRST.

Therefore, reporting entities must determine whether they have property in their possession or under their control that they know or believe is owned or controlled by or on behalf of a terrorist group or listed person, as defined by the Criminal Code and the RIUNRST. In making this determination, a reporting entity should refer to the list under section 83.05 of the Criminal Code and the schedule of the RIUNRST (links provided above).

However, through the course of a reporting entity’s normal business activities, they may also come across a variety of information that leads them to determine that their client is part of a terrorist group, such as:

■          Publicly-available information or media articles stating that the client has carried out or facilitated terrorist activity; or

■          Official, publicly-available lists relating to terrorist activity (for example, the European Union (EU) lists).

In that case, the reporting entity must determine whether their threshold to disclose under the Criminal Code or the RIUNRST has been met and, thereby, prompting the submission of a TPR to FINTRAC.

Date answered: 2019-08-23

PI Number: PI-9972

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Reporting

Act: 7.1

NAICs codes in LCTR

Question:

Is it possible to use the North American Industry Calassificaiton System (NAICS) code in the "Type of Business" field of the Large Cash Transaction Report (LCTR)?

Answer:

The guidance that we have consistently given is to be as descriptive as possible. We’ve indicated to reporting entities that they must provide information that clearly describes the business or occupation rather than using general terms. After reviewing the 6-digit NAICS codes, it would appear that these offer the necessary level of description to be used to describe the "Type of Business" in field F2 of the Large Cash Transaction Report, but only if they include “NAICS” or “SCIAN”  along with the 6-digit code.   
 

Date answered: 2018-06-01

Answer updated on: 2021-08-20

PI Number: PI-9118

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Reporting

Regulations: Schedule 1

Legal land description as an address

Question:

I am seeking clarification regarding whether a legal land description satisfies the requirements of an address when the conventional civic address does not exist.

Answer:

FINTRAC has previously indicated that the address referred to in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) is the physical address where the client lives or where the physical location of the place of business is found. In cases where the client resides in an area where there is no civic address, a description, in as much detail as possible, of all information or features that may be useful to locate the physical location of the person is required.

For intelligence purposes, obtaining a precise description of an address allows FINTRAC to analyze evidence and to establish connections between a client’s physical location, financial transactions and trends that are suspected of being related to money laundering, terrorist financing or other threats to the security of Canada. This is also of great importance when disclosing intelligence to partners, which can contribute to criminal investigations by identifying new targets or hidden proceeds of crime and by disclosing facts that are necessary in obtaining warrants. 

Therefore, to address your question, it has been determined that a legal land description can be acceptable, so long as the legal land description is specific enough to pinpoint the physical location where the client lives.

That said, if the legal land description refers to an area or a parcel of land on which multiple properties are located, the legal land description would not, in this case, be sufficient. It could replace the absence of a postal code, but would not in itself be an address for the purpose of the PCMLTFR.

Date answered: 2017-05-31

Answer updated on: 2021-08-20

PI Number: PI-7654

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Record Keeping, Reporting

Address for transient Canadian or foreign clients

Question:

What type of information should be provided in reports for the address of clients who are transient and do not have a set physical address? For example, people living in cars, RV’s, working in camp and then staying in a motor home on their days off and people visiting Canada and travelling/living in Canada with only an RV and no fixed address.

Answer:

While it appears that you have inquired about the implications for reporting only, it is important to highlight the fact that a client’s address is also required to fulfil certain record keeping obligations and may be required to verify a client’s identity, depending on the method used.

FINTRAC has previously indicated that the address referred to in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) is the physical address where the client lives or where the physical location of the place of business is found.

Therefore, for Canadian residents, their permanent Canadian address is required, even if that is not where they are currently residing; for foreign clients travelling in Canada for a short period of time, their foreign residential address is required; and should the foreign client be living in Canada for a longer period of time (e.g. a student or new comer to Canada), then the client’s temporary Canadian address should be provided.

Date answered: 2016-10-25

Answer updated on: 2021-08-20

PI Number: PI-7650

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Record Keeping, Reporting

LCTR for the value of precious metal coins

Question:

A client brings a dealer in precious metals and precious stones (DPMS) the value of $10,000 in precious metal coins for which the DPMS gives the client $10,000 cash. Would the DPMS be required to submit a large cash transaction report (LCTR) and would coins be part of the definition of cash?

Answer:

The answer to your question is yes – the DPMS would be required to submit an LCTR under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations.

According to section 66 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “ A dealer in precious metals and precious stones that receives an amount of $10,000 or more in cash in a single transaction in connection with an activity referred to in section 65 shall report the transaction to the Centre, together with the information set out in Schedule 1, unless the amount is received from a financial entity or public body or from a person who is acting on behalf of a client that is a financial entity or public body.”

Subsection 1(2) of the PCMLTFR defines cash as “coins referred to in section 7 of the Currency Act, notes issued by the Bank of Canada under the Bank of Canada Act that are intended for circulation in Canada or coins or bank notes of countries other than Canada.” Paragraphs 7(1)(a) and (b) of the Currency Act state that “a coin is current for the amount of its denomination in the currency of Canada if it was issued under the authority the Royal Canadian Mint Act or the Crown in any province of Canada before it became part of Canada and if the coin was, immediately before October 15, 1952, current and legal tender in Canada.”

Therefore, it appears that if the DPMS receives the value of $10,000 CAD or more in precious metal coins this would be the same as the receipt of $10,000 CAD or more in cash. As a result, the DPMS would be obligated to report the transaction to FINTRAC as a large cash transaction under section 66 of the PCMLTFR.

Date answered: 2016-05-20

Answer updated on: 2021-08-20

PI Number: PI-6424

Activity Sector(s): Dealers in precious metals and stones

Obligation(s): Reporting

Regulations: 1(2), 66

Occupation information as Unemployed

Question:

Is “unemployed” an acceptable occupation in all cases (record keeping and FINTRAC reporting), or only in the case of Large Cash Transaction Reports (LCTRs) and Suspicious Transaction Reports (STRs)?

Answer:

“Unemployed” is an acceptable occupation in all reporting and record keeping cases, as applicable.

Date answered: 2014-11-18

Answer updated on: 2021-08-20

PI Number: PI-6258

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Record Keeping, Reporting

Quick Drops are associated with Accounts

Question:

When the cash is sent by courier, can a Money Services Businesses report a large cash transaction as a quick drop?

Answer:

Money Services Businessess can accept cash from a courier, they just can’t accept it as quick drops because quick drops are associated with accounts and Money Services Businessess aren’t recognized as having accounts in the Regulations.

Date answered: 2014-02-26

Answer updated on: 2021-08-20

PI Number: PI-6106

Activity Sector(s): Money services businesses

Obligation(s): Reporting

Regulations: Schedule 1

Terrorist Property Report - Obligation

Question:

Our question concerns the Terrorist Property Report (TPR). If an IDE firm has completed a Monthly Suppression of Terrorism Form with a positive report, must the IDE firm also complete the FINTRAC Terrorist Property Report? If so, must the FINTRAC Terrorist Property Report be completed for any customer of the IDE firm, or only Canadian customers?

While the Monthly Suppression of Terrorism Form contains only aggregate customer information, the FINTRAC Terrorist Property Report requires disclosure of personal customer information. Our concern is that laws in the local jurisdiction of a non-Canadian customer may prohibit an IDE firm from providing personal information of a non-Canadian customer to a non-local (e.g. Canadian) governmental authority. As a comparison, we have been told that firms operating in multiple jurisdictions (including Canada) would not provide personal information concerning Canadian customers to a non-Canadian financial regulator.

I understand that there may be alternative ways for a Canadian financial regulator such as FINTRAC to cooperate with financial regulators outside of Canada to share information on terrorist property. For example, I understand that there are various judicial or administrative processes under which information may be shared. On this basis, I’m hoping that you can confirm that an IDE firm that files a positive Monthly Suppression of Terrorism Form need not also file a Terrorist Property Report, if the terrorist property in question belongs only to non-Canadian customers of the IDE firm, and the IDE firm reports the terrorist property to the relevant government agency in the non-Canadian customer’s home jurisdiction.

Answer:

Subsection 7.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) indicates that every person or entity required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism must also make a report on it to the FINTRAC.

Therefore, if the entity is required to complete a Monthly Suppression of Terrorism Form, it will also be required to complete a TPR for submission to FINTRAC. Terrorist property reporting requirements apply to any IDE clients, whether they are Canadian clients or foreign clients, with respect to their activities in Canada only.

Date answered: 2013-09-27

Answer updated on: 2021-08-20

PI Number: PI-5621

Activity Sector(s): Securities dealers

Obligation(s): Reporting

Act: 7.1(1)

Postal codes for record keeping / reporting obligations

Question:

All the research I have done on various government websites is conclusive that civic address consists of: "the number, the street or road name, and the community name assigned to residential, commercial, institutional and industrial buildings." No mention of Postal Code anywhere.

Further, Canada Post tells us that: "The Postal Code is an integral part of every postal address in Canada. The Postal Code was designed to aid in sorting mail by both mechanized and manual methods. It also enables the Customer to pre-sort mail, thereby bypassing a number of sorting processes within Canada Post and reducing costs."

So, here are my questions: 

Does FINTRAC require Postal Code to be included in reports as part of a civic address? Also, what is required for international clients or First Nations clients when it is difficult to find the civic address? Could P.O. Boxes be acceptable?

Answer:

A "valid", "full", or "civic" address does not require a postal code.

In terms of international or foreign addresses, there is no specific formula. It should be information relevant to help locate the person physically. It is difficult to give you a complete answer since every country has its own conventions.

In regards to First Nations clients, we would suggest that if they do not have a civic address, then they should provide as many details as possible in regards to where their personal housing unit is situated (i.e. the name of the street, and the name of the reserve they are on or any other similar type of information).

Unfortunately, our policy interpretation in regards to the civic/personal address would not allow any relief in this case, P.O. Boxes would still not be acceptable.

Date answered: 2012-11-05

Answer updated on: 2021-08-20

PI Number: PI-5464

Activity Sector(s): Accountants, British Columbia notaries, Casinos, Dealers in precious metals and stones, Financial entities, Life insurance, Money services businesses, Real estate, Securities dealers

Obligation(s): Record Keeping, Reporting

Date Modified: