FINTRAC Policy Interpretations

Ascertaining Identification

Third party obligations for real estate transactions

Question:

In the case where it is clear that a third party determination is required, and that the third party (a person not an entity) is physically present and giving instructions to a buyer (unrepresented) in a real estate transaction in the presence of a real estate agent acting for a vendor, what would you consider reasonable measures to determine the identity of the third party who refuses to identify themselves?

Answer:

Pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR):

· 8(1) Every person or entity that is required to keep a large cash transaction record under these Regulations shall take reasonable measures to determine whether the individual who in fact gives the cash in respect of which the record is kept is acting on behalf of a third party.

(2) Where the person or entity determines that the individual is acting on behalf of a third party, the person or entity shall keep a record that sets out

      (a) the third party’s name, address and date of birth and the nature of the principal business or occupation of the third party, if the third party is an individual;

      (b) if the third party is an entity, the third party’s name and address and the nature of the principal business of the third party, and, if the entity is a corporation, the entity’s               incorporation number and its place of issue; and

      (c) the nature of the relationship between the third party and the individual who gives the cash.

(3) Where the person or entity is not able to determine whether the individual is acting on behalf of a third party but there are reasonable grounds to suspect that the individual is doing so, the person or entity shall keep a record that

      (a) indicates whether, according to the individual, the transaction is being conducted on behalf of a third party; and

      (b) describes the reasonable grounds to suspect that the individual is acting on behalf of a third party.

10(1) Every person or entity that is required to keep a client information record under these Regulations in respect of a client shall, at the time that the client information record is created, take reasonable measures to determine whether the client is acting on behalf of a third party.

(2) Where the person or entity determines that the client is acting on behalf of a third party, the person or entity shall keep a record that sets out

      (a) the third party’s name, address and date of birth and the nature of the principal business or occupation of the third party, if the third party is an individual;

      (b) if the third party is a entity, the third party’s name and address and the nature of the principal business of the third party, and, if the entity is a corporation, the entity’s incorporation number and its place of issue; and

      (c) the relationship between the third party and the client.

(3) Where the person or entity is not able to determine that the client in respect of whom the client information record is kept is acting on behalf of a third party but there are reasonable grounds to suspect that the client is so acting, the person or entity shall keep a record that

      (a) indicates whether, according to the client, the transaction is being conducted on behalf of a third party; and

      (b) describes the reasonable grounds to suspect that the client is acting on behalf of a third party.

38 […] every real estate broker or sales representative who, while engaging in an activity described in section 37, receives an amount in cash of $10,000 or more in the course of a single transaction 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 a public body.

67.3 If the reasonable measures taken by a person or entity […] are unsuccessful, the person or entity shall keep a record that sets out the measures taken, the date on which each measure was taken, and the reasons why the measures were unsuccessful.

You present the following situation: a real estate sales representative is acting for a seller and is aware that the unrepresented buyer is acting on behalf of a third party who “refuses to identify themselves”. In this situation, as can be seen above, the real estate sales representative acting for the seller does not have an obligation to make a third party determination in respect of the unrepresented buyer. However, note that since there is an unrepresented party, the seller’s agent must take reasonable measures to identify the unrepresented buyer and keep the applicable records.

That said, if the seller’s agent receives $10,000 or more in cash from the unrepresented buyer, they would be required to submit an LCTR, keep an LCT record, verify the identity of the buyer, conduct a third party determination, and keep the applicable records. For further clarity, the seller’s agent is required to verify the buyer’s identity pursuant to the methods to verify identity set out in the PCMLTFR and would be required to take reasonable measures to determine whether the buyer who provided the cash is acting on behalf of a third party.

The term “reasonable measures” is not defined in the PCMLTFA nor its associated Regulations. However, FINTRAC has indicated that reasonable measures could include asking that individual for an identification document, asking them to provide the required information, or retrieving information already contained in the seller’s agent’s records.

FINTRAC’s guidance with respect to third party determination indicates that where a reporting entity (RE) has taken reasonable measures to make a third party determination but is unsuccessful, they must keep a record of:

  • Whether the client indicated that the transaction was (or was not) on behalf of a third party;
  • The reasons why you suspect that the person is acting on behalf of a third party;
  • The steps you took to make the third party determination;
  • The reason(s) you were unsuccessful; and
  • The date you took these steps.

The steps the RE will take to make a third party determination must be included in the RE’s compliance policies and procedures.

Finally, where an RE has an obligation to make a third party determination and keep the applicable records, or to submit a suspicious transaction report where they have reached reasonable grounds to suspect, and does not do so, then that RE is in non-compliance with the PCMLTFA.

Date answered: 2020-03-20

PI Number: PI-10544

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 8, 10, 38, 67.3

Act: 6.1

Use of the driver’s licence under the dual process method

Question:

How can we use a copy of the driver’s licence under the dual process method?

Answer:

Pursuant to paragraph 64(1)(d) of the PCMLTFR, the dual-process method involves doing any two (2) of the following:

■ referring to information from a reliable source that includes the person’s name and address, and verifying that the name and address are those of the person,

■ referring to information from a reliable source that includes the person’s name and date of birth, and verifying that the name and date of birth are those of the person, or

■ referring to information that includes the person’s name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

In addition, the information must be valid and current, as well as, from different sources.

It would be acceptable under the dual-process method to refer to a photocopy of a valid and current provincial driver’s licence, for instance, that includes the person’s name and address, and a photocopy of a valid and current bank statement from a financial institution that includes the person’s name and confirms that they have a deposit account with that entity. Further, the reporting entity (RE) would need to verify that the name and address are those of the person and verify the information obtained from the bank statement.

As can be seen above, there is no requirement under the dual-process method to authenticate a government-issued photo identification document, nor is there a requirement to verify that the photo match that of the person. Under the dual-process method, it is the information that must be referred to and verified in accordance with the regulations.

Finally, please note that REs are not required to insist on “an original government issued photo-identification for opening an account”. As you know, the PCMLTFR prescribes the methods available to REs to verify identity, which can all be used when a client is physically present or when a client is not physically present. Should a client present the RE with the actual government-issued photo identification document, then it is available to them to verify identity using the government-issued photo identification method. In this case, the document would need to be authentic, valid, and current, and the RE would have to verify that the name and photograph are those of the person.

Date answered: 2019-12-23

PI Number: PI-10416

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): Ascertaining Identification

Guidance: Methods to verify the identity of an individual and confirm the existence of a corporation or an entity other than a corporation

Regulations: 64(1)

Act: 6.1

Documents vs. information under the dual process method

Question:

Do documents have to be authentic under the dual process method?

Answer:

Pursuant to paragraph 64(1)(d) of the PCMLTFR, the dual-process method involves doing any two (2) of the following:

■ referring to information from a reliable source that includes the person’s name and address, and verifying that the name and address are those of the person,

■ referring to information from a reliable source that includes the person’s name and date of birth, and verifying that the name and date of birth are those of the person, or

■ referring to information that includes the person’s name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

In addition, the information must be valid and current, as well as, from different sources.

As noted in the Guidance, information for this purpose may be found in statements, letters, certificates, forms or other sources and can be provided through an original version or you may obtain another version of the information’s original format, such as a fax, photocopy, scan, or electronic image. For further clarity, it is acceptable to rely on a fax, photocopy, scan or electronic image of a government-issued photo identification document as one of the two sources of information required to verify the identity of an individual.

As can be seen above, there is no requirement under the dual-process method to authenticate a document. Rather, under the dual-process method, it is the information that must be referred to and verified in accordance with the regulations.

Date answered: 2019-12-23

PI Number: PI-10414

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): Ascertaining Identification

Guidance: Methods to verify the identity of an individual and confirm the existence of a corporation or an entity other than a corporation

Regulations: 64(1)

Act: 6.1

Electronic image of a document for identification purposes

Question:

Can we use an electronic image of multiple documents to verify identity?

Answer:

The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) prescribes the methods available to reporting entities to verify identity, which can all be used when a client is physically present or when a client is not physically present. These methods are commonly referred to as i) the government-issued photo identification method, ii) the credit file method, and iii) the dual process method. Subsection 64(1.4) of the PCMLTFR further stipulates that a document used to ascertain identity under subsection (1) be authentic, valid, and current and that other information used for that purpose must be valid and current.

Pursuant to subsection 64(1)(d) of the PCMLTFR, the dual process method involves doing any two (2) of the following:

  • referring to information from a reliable source that includes the person’s name and address, and verifying that the name and address are those of the person,
  • referring to information from a reliable source that includes the person’s name and date of birth, and verifying that the name and date of birth are those of the person, or
  • referring to information that includes the person’s name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

In addition, as noted above, where a reporting entity chooses to verify identity by referring to information under the dual process method then the information must be valid and current, as well as, from different sources.

Information for this purpose may be found in statements, letters, certificates, forms or other sources and can be provided through an original version or you may obtain another version of the information’s original format, such as a fax, photocopy, scan, or electronic image. For further clarity, it is acceptable to rely on a fax, photocopy, scan or electronic image of a government-issued photo identification document as one of the two sources of information required to verify the identity of an individual.

Therefore, to answer your question, it would be acceptable under the dual process method to refer to a photocopy of a valid and current provincial driver’s licence that includes the person’s name and address, for instance, and a photocopy of a valid and current Canadian passport that includes the person’s name and date of birth and verifying that the applicable information is that of the person.

Date answered: 2019-10-10

PI Number: PI-10454

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

Obligation(s): Ascertaining Identification

Regulations: 64(1)

Act: 6.1

Record for government-issued photo ID

Question:

Do reporting entities have to keep a copy of the government-issued photo ID?

Answer:

Pursuant to section 64.2 the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) and its subsections, a person or entity that is required under these Regulations to ascertain a person’s identity shall set out in, or include with, that record the person’s name and the following information:

(a) if the person or entity ascertained the person’s identity in accordance with paragraph 64(1)(a), the date on which they did so, the type of document referred to, its number, the jurisdiction and country of issue of the document and, if applicable, its expiry date;

(d) if the person or entity ascertained the person’s identity in accordance with paragraph 64(1)(d), the date on which they did so, the source of the information, the type of information referred to and the account number included in it — or if there is no account number included in it, a number associated with the information;

As such, there is no requirement under the PCMLTFR that a reporting entity take a copy of a person’s identification document. The PCMLTFR requires that reporting entities keep a record that contains the prescribed information, as noted above.

However, as you may know, the restriction on the use of an electronic image of a document has been removed from subsection 64(1.4) of the PCMLTFR. As a result, under the dual process method, it is now acceptable, although not required, to rely on a fax, photocopy, scan or electronic image of a government-issued photo identification document as one of the two sources of information required to verify the identity of an individual.

Date answered: 2019-10-10

PI Number: PI-10452

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): Ascertaining Identification

Regulations: 64(1), 64.2

Act: 6.1

Government-issued photo identification document for verifying ID – Authentic, valid and current

Question:

How do I determine that a document is authentic?

Answer:

Reporting entities must verify the identity of a person pursuant to one of the methods prescribed at subsection 64(1) of the PCMLTFR, which can all be used when a client is physically present or when a client is not physically present. These methods are commonly referred to as i) the government-issued photo identification method, ii) the credit file method, and iii) the dual process method.

Subsection 64(1.4) of the PCMLTFR further requires that a document used to ascertain identity under subsection (1) be authentic, valid, and current and that other information used for that purpose be valid and current.

While the restriction on using an electronic image of a document has been removed from subsection 64(1.4) of the PCMLTFR, other stipulations do exist to ensure the continued effectiveness of the obligation to verify identity. Specifically, if a reporting entity chooses to verify identity by referring to:

1.         A government-issued photo identification document - it must be authentic, valid and current.

a. You can determine the authenticity of a government-issued photo identification document in person by looking at the characteristics of the original physical document and its security features (or markers, as applicable) in the presence of the individual to be satisfied that it is authentic as issued by the competent authority (federal, provincial, territorial government), that it is valid (unaltered, not counterfeit), and current (not expired). 

b.  If an individual is not physically present, the authenticity of a government-issued photo identification document must be determined by using a technology capable of assessing the document’s authenticity. For example, a technology that would compare the features of the government-issued photo identification document against known characteristics (size, texture, character spacing, raised lettering, format, design, etc.), security features (holograms, barcodes, magnetic strips, watermarks, embedded electronic chips, etc.), or markers (logos, symbols, etc.) to be satisfied that it is an authentic document as issued by the competent authority (federal, provincial, territorial government).

2.         Information under the credit file or dual process method, then it must be valid and current, as well as, under the dual process method, from different sources. 

 

As such, an electronic image of a document can be used for either option above, but must also meet the requirements of subsection 64(1.4) of the PCMLTFR. 

Date answered: 2019-09-24

PI Number: PI-9976

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): Ascertaining Identification

Regulations: 64(1), 64(1.4)

Act: 6.1

Dual process for identifying teenagers who are at least 16 years old

Question:

Can we rely on the Child Tax Benefit or RESP statements to identity a teenager who is at least 16 years old, when the tax benefit or the RESP is in relation to the teenager?

Answer:

Pursuant to paragraph 64(1)(d) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), to verify the identity of any person aged 16 years or older, a reporting entity can use the, dual process method, which consists of doing two of the following:

a)         referring to information from a reliable source that includes the person's name and address, and verifying that the name and address are those of the person,

b)         referring to information from a reliable source that includes the person's name and date of birth, and verifying that the name and date of birth are those of the person, or

c)         referring to information that includes the person's name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

For all of the above methods, the reporting entity must keep the records as prescribed at subsection 64.2 of the PCMLTFR, and determine whether the document or information used satisfies the requirements of the PCMLTFR, which state that:

  • if a document is used, it must be authentic, valid and current; or
  • if information is referred to it must be valid and current.

While the requirement when verifying the identity of a child between 12 and 15 years of age is that the address of the parent, tutor or guardian be confirmed, it is the actual address of an individual aged 16 years and older that must be confirmed under the dual process method. For a youth 16+ to be the beneficiary of a Registered Education Savings Plan (RESP), so listed on the RESP statement, does not confirm the youth's address, as the youth is not required to live with the parent to be the beneficiary to the RESP. 

Alternatively, for a parent to be eligible for the Child Tax Benefit, the parent must be living with the child, so it can be assumed that the address on the parent's statement is the address of the youth for whom the Child Tax Benefit is being claimed. However, FINTRAC has indicated in past that a name for identification purposes is commonly understood to include both the first and last name of an individual. As such, the Child Tax Benefit Statement, assuming it includes both the first and last name of the teenager, does meet the criteria to be considered a source of information that includes the person's name and address.

Date answered: 2019-08-20

PI Number: PI-9970

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): Ascertaining Identification

Regulations: 64(1)(d), 64.2

Act: 6.1

Firearms Acquisitions Certificate (FAC) as ID

Question:

Can we accept the Firearms Acquisitions Certificate (FAC) as government-issued photo ID? 

Answer:

Pursuant to paragraph 64(1)(a) of the PCMLTFR, a reporting entity can refer to an identification document that contains the person's name and photograph and that is issued by the federal government or a provincial government or by a foreign government that is not a municipal government, and by verifying that the name and photograph are those of the person.

 

When using this method to verify identification, the reporting entity is required to ensure that the identification document is authentic, valid and current (ss. 64(1.4) PCMLTFR), and that the record-keeping requirements are met, namely that the reporting entity records the person's name, date on which they referred to the identification document, the type of document referred to, its number, the jurisdiction and country of issue of the document and, if applicable, its expiry date (para. 64.2(a) PCMLTFR).

 

Pursuant to the RCMP's website, all Firearms Acquisitions Certificates (FAC) issued under previous laws have expired and need to be replaced with a Possession and Acquisitions Licence (PAL), so it is the PAL that should be considered for purposes of the PCMLTFR.

 

When determining whether a document can be used to verify identity, we must consider whether it is an identification document, and who is the issuer of that document.

 

The PAL is used to identify a person as an individual authorized to possess and register a firearm, and appears to meet most of the criteria that the Government of Canada lays out for a document to be considered an identification document (i.e., name, date of birth, photo), although it is missing a signature.  The PAL is also issued by the RCMP, which is a national police service and an agency of the Ministry of Public Safety Canada. As such, a document issued by the RCMP is issued by the federal government.  

 

Based on the above, the PAL is an identification document issued by the federal government and can be referred to pursuant to paragraph 64(1)(a) of the PCMLTFR.

Date answered: 2019-07-26

PI Number: PI-9968

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): Ascertaining Identification

Guidance: Methods to identify individuals and confirm the existence of entities

Regulations: 64(1)(a), 64(1.4)

Act: 6.1

ID for a teenager who is at least 16 years told

Question:

The rules are specific when a child is under 12 years old, or between 12 and 15 years old, but how do we identify a teenager who is at least 16 years old, but who doesn’t have a driver’s license? Can we rely on a school transcript?

Answer:

As you know, there are methods outlined at subsections 64(1.1) and 64(1.2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) for persons under 12 years of age, and those at least 12 years of age but no more than 15 years of age. Once a person reaches 16 years of age, the requirement is to refer to the methods to ascertain identity outlined at subsection 64(1) of the PCMLTFR, which includes the most flexible option, namely the dual process method, where a person's identity can be ascertained by doing any two of the following:

(i) referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,

(ii) referring to information from a reliable source that includes their name and date of birth, and verifying that the name and date of birth are those of the person, or

(iii) referring to information that includes their name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

Given the flexibility of the dual process method, the option does exist to rely on a student's school transcript as information from a reliable source that includes their name and address. However, should the transcript not include this information, then it cannot be used for this purpose. Should the school be able to provide an alternate document that includes the student's name and address, and a number associated with the information for purposes of record-keeping pursuant to 64.2(d) of the PCMLTFR, then this should satisfy the obligation to ascertain identity once combined with a second reliable source under the dual process method.  This method is not an attestation method, because it is the school (source) pulling information from their records and providing the information to the reporting entity. 

Date answered: 2019-07-24

PI Number: PI-9966

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): Ascertaining Identification

Guidance: Methods to identify individuals and confirm the existence of entities

Regulations: 64(1)(d)

Act: 6.1

Veteran’s Services Card as ID

Question:

Can we accept the Veteran’s Services Card or provincial health cards as government-issued photo ID? 

Answer:

As a reminder, according to subsection 64(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), you have to verify a person's identity (a) by referring to an identification document that contains their name and photograph and that is issued by the federal government or a provincial government or by a foreign government that is not a municipal government, and by verifying that the name and photograph are those of the person.

In addition, according to subsection 64(1.4) of the PCMLTFR, if a document is used to ascertain identity it must be authentic, valid and current. Other information that is used for that purpose must be valid and current.

On our website, in our glossary of terms, we indicate that valid refers to a document or information that appears legitimate or authentic and does not appear to have been altered or had any information redacted. The information must also be valid according to the issuer, for example if a passport is invalid because of a name change, it is not valid for FINTRAC purposes.

For the Veteran's Services Card, DND has specifically indicated that this is "not intended for official use as an identification card and is not recognized as an official identification card" and, therefore, it appears that it is not an "identification document" or "information" that would meet the requirements under section 64 of the PCMLTFR.

With respect to provincial health cards, these are issued for health services purposes and some provinces prohibit their use for any other purpose, including as a piece of ID. In other cases, the provincial legislation allows the card to be used as a form of identification, but doesn't allow the health card number to be recorded by anyone other than a health professional and so REs wouldn't be able to meet the corresponding record-keeping requirement. In fact, the BC government is the only provincial government, that we know of, that allows its health services card to be used as a piece of ID and allows the number to be recorded.

Date answered: 2019-04-12

PI Number: PI-9958

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): Ascertaining Identification

Guidance: Methods to identify individuals and confirm the existence of entities

Regulations: 64(1)(a), and 64(1.4)

Act: 6.1

Ongoing service agreement with an MSB

Question:

Our partner MSB is requiring us to provide our front line staff's  date of birth so that they can order a foreign exchange draft. The section in the PCMLTFR that they are quoting is section 32: 

"Every money services business that enters into an ongoing electronic funds transfer, funds remittance or foreign exchange service agreement with an entity, or a service agreement for the issuance or redemption of money orders, traveller's cheques or other negotiable instruments, shall keep a record of the name, address, date of birth and occupation of every person who has signed the agreement on behalf of the entity, a client information record with respect to the entity and a list containing the name, address and date of birth of every employee authorized to order transactions under the agreement."

While I understand the need to have name, address and DOB on the client (ie. purchaser of the draft), or even more detailed information on the authorized representatives of the relationship, it seems overly onerous to have every single front line teller and employee provide their DOB to a partner. I know we will run into privacy complaints from our staff if we need to implement this.

Answer:

Section 32 of the PCMLTFR requires that a money services business (MSB) that enters into a service agreement to provide ongoing electronic funds transfer, funds remittance or foreign exchange services to an entity, or a service agreement for the issuance or redemption of money orders, traveller's cheques or other negotiable instruments, keep a record of the name, address, date of birth and occupation of every person who has signed the service agreement on behalf of the entity, a client information record with respect to the entity and a list containing the name, address and date of birth of every employee authorized to order transactions under the service agreement.

Should the MSB have entered into such an agreement with you, then the MSB is required to abide by the requirements of section 32 of the PCMLTFR. This means that, in addition to the other prescribed information, the MSB is required to keep a list that contains the name, address and date of birth of every employee authorized to order transactions under the service agreement. Based on the information provided, it would appear that all frontline staff at your entity are able to order foreign exchange drafts under this service agreement. As such, the MSB must have a list that contains the name, address and date of birth of these frontline employees, as employees who can order transactions under the service agreement.  

While your point is taken, it should be noted that subsection 59(1) of the PCMLTFR prescribes transactions for which MSBs are typically required to ascertain the identification, in accordance with subsection 64(1), of every person who conducts the transaction. However, because your employees are ordering the foreign exchange drafts under a service agreement with the MSB, then pursuant to subsection 59(4) of the PCMLTFR, the MSB is not required to constantly ascertain the identification of the ordering employee for these prescribed transactions, because the identification information was previously obtained pursuant to section 32 of the PCMLTFR.  Should a particular employee’s identification information not already be contained within the list kept by the MSB, then the MSB must consider the request against their obligations to ascertain identity outside of a service agreement. 

Date answered: 2018-08-17

PI Number: PI-9128

Activity Sector(s): Financial entities, Money services businesses

Obligation(s): Ascertaining Identification

Regulations: 32

Act: 6.1

Real estate sales representatives acting for themselves

Question:

What happens when one a real estate sales representative is acting for themselves to purchase or sell a property. Normally, we would ascertain the identity of the client using the Individual Identification Information Record (or other Identification forms as needed) for clients. However, when the client and the real estate sales representative are the same person, is there an exemption from the necessity to fill out any identification forms since they are either Buying or Selling for themselves.

Answer:

here are two possibilities to consider when a real estate sales representative is purchasing or selling real estate:

1) Not acting as an agent for the purchase or sale of real estate: where a real estate sales representative is buying or selling real estate, and although doing so without an agent, is not acting for him/herself, then this person becomes just the buyer or seller, and would be considered to be unrepresented. At this point, the obligation to ascertain identification and keep certain records falls to the other real estate sales representative in the transaction, should there be one. 

2) Acting as an agent for the purchase or sale of real estate: where a real estate sales representative is acting for him/herself for the purchase or sale of real estate, and that purchase or sale is to be processed through the sales representative’s brokerage, then the real estate sales representative is actually acting on behalf of the brokerage for this transaction. Because of this, the real estate broker is responsible for ensuring that the obligations are met, including ascertaining identification and keeping the applicable records.  When a real estate sales representative is both the client, and the sales representative on behalf of a brokerage, they cannot ascertain their own identification, so the broker has to ensure a process exists to have the person’s identity ascertained and the applicable records kept (e.g., record of identification information, client information record, etc.).  

Date answered: 2018-06-07

Answer updated on: 2018-06-07

PI Number: PI-9124

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 59.2(1)

Act: 6.1

Ascertaining identity within a reporting entity

Question:

Can you please advise if a real estate brokerage employee is permitted to ascertain the identity of a real estate brokerage client using the face-to-face methods?

Currently, sales representatives are personally identifying their own clients. They then provide any records (client information, receipt of funds, third party, etc.) to their brokerage. However, some sales representatives also use brokerage administrative assistants. Can the administrative assistants identify the sales representative's clients?

Answer:

Pursuant to subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a real estate broker or sales person is defined as a person or entity that is registered or licensed under provincial legislation in respect of the sale or purchase of real estate, and, pursuant to section 37 of the PCMLTFR, every real estate broker or sales representative is subject to Part 1 of the Act when they act as an agent in respect of the purchase or sale of real estate.  However, where a person or a reporting entity is the employee of another reporting entity, it is the employer reporting entity that has the responsibilities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations. If the administrative assistant is an employee of a real estate broker or sales representative, then the administrative assistant would be able to carry out the obligations to ascertain the identification of a person or entity for the real estate broker or sales representative, but the responsibility to meet the obligations remains with the real estate broker or sales representative, as the reporting entity.    

Similarly, pursuant to subsection 6(2) of the PCMLTFR, when one reporting entity is acting as an agent or mandatary of another reporting entity, it is this other reporting entity who has the obligations.  As such, where a real estate sales representative is acting as an agent for a real estate broker, it is the real estate broker who has the obligations under the PCMLTFA and its associated Regulations. The real estate sales representative may conduct transactions, keep records and report, if required, but it is the real estate broker on whose behalf the agent is acting that is ultimately responsible for these obligations.  Based on this, the real estate sales representative who is acting as an agent of the broker, can rely on the employees of the real estate broker to ascertain identification, because the employee who is ascertaining identification is actually doing so for the broker, the reporting entity with the responsibilities under the PCMLTFA and its associated Regulations.   

As an aside, subsection 64.1(1) of the PCMLTFR does allow for a reporting entity to rely on any agent or mandatory to ascertain the identity of a person, as outlined in subsection 64(1) of the PCMLTFR, so long as certain requirements are met. As such, if the administrative assistant is not an employee of the real estate broker or sales person, then the administrative assistant can instead act as an agent or mandatary as long as:
1. there is a written agreement or arrangement in place between the reporting entity and the administrative assistant for the purpose of ascertaining a person’s identity, 
2. the reporting entity gets from the agent or mandatary, all of the information that the agent or mandatary referred to in order to ascertain the person’s identity AND the information that they collected from the person to compare to the identification information; and 
3. the reporting entity is satisfied that the information is valid and current, and that the agent or mandatary ascertained the person’s identity using either the Photo identification method, the Credit file method or the Dual process method

Date answered: 2018-05-14

PI Number: PI-9120

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 6, 59.2(1)

Act: 6.1

Who is conducting the transaction

Question:

The question that I have is regarding Section 59.2 (1) of the PCMLTFR which requires that "Subject to 62(2) and section 63, every real estate broker or sales representative shall in respect of a transaction for which a record is required to be kept under subsection 39(1),

a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;"

In the subsection above, I would like to clarify what the definition of "conducting the transaction" is.  In other words, what constitutes conducting the transaction and what are the thresholds to determine if a party has conducted the transaction. As specific examples:

  1. In a power of attorney situation, are both the grantor and attorney parties who conduct the transaction?
  2. In a trust situation, are both the trustee and beneficiary parties who conduct the transaction?

Answer:

As you have referenced, subsection 59.2(1) of the PCMLTFR states that "Subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1),
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors; and
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.”

Subsection 39(1) of the PCMLTFR states that “Subject to subsections (3), (4), (5), (6), 52(2) and 62(2), every real estate broker or sales representative shall, when engaging in an activity described in section 37, keep the following records:
(a) a receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body;
(b) a client information record in respect of every purchase or sale of real estate; and
(c) where the receipt of funds record or the client information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the real estate broker or sales representative.”

As such, when acting as an agent in respect of the purchase or sale of real estate, a real estate broker or sales representative is required to keep a client information record, and if any amount of funds is received, a receipt of funds record must also be kept. The real estate broker or sales representative is required to verify the identity of every person who conducts the transaction for which these records are kept, and must confirm the existence of every corporation or other entity on whose behalf the transaction is conducted, if applicable.

It will always be a question of fact to determine who conducts a transaction and whose identity must be ascertained, dependent on the particulars associated to the transaction and how it is carried out.

A person who carries out the purchase or sale of real estate on behalf of another person who has granted them with power of attorney, is the person conducting the transaction, so the real estate broker or sales representative is required to keep a client information record and verify the identity of that person. It is important to mention that when a client information record is required to be kept, then in accordance with section 10 of the PCMLTFR, a real estate broker or sales representative must take reasonable measures to determine whether the client is acting on behalf of a third party. If it is determined that a third party is involved, or if it cannot be determined but there are reasonable grounds to suspect that a third party is involved, a record must be kept as specified in section 10 of the PCMLTFR. If the person conducting the transaction is acting on someone else’s instructions, that someone else is the third party. In a power of attorney situation, this will have to be determined on a case-by-case basis and will depend on whether the person granting power of attorney is able to give instructions.  

The same logic applies to a situation involving a trust – who must be identified in accordance with subsection 59.2(1) of the PCMLTFR will have to be determined on a case-by-case basis depending on the facts associated to the transaction and how it is carried out. That said, a trust is included in the definition of an entity at subsection 2(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Therefore, a person who engages in the purchase or sale of real estate on behalf of a trust is typically doing so on behalf of an entity. As such, given the requirement at subsection 59.2(1) of the PCMLTFR, it is likely that both the person who conducts the transaction, and the trust as an entity, will have to be identified in accordance with the specified methods for identification at subsection 64(1) and section 65 or 66, respectively.

The PCMLTFR includes additional provisions to consider in relation to the record keeping and identification requirements for real estate brokers and sales representatives, such as in situations where both parties are represented or when only one party is represented. You may wish to consult the PCMLTFR or the FINTRAC guidance for more information. It is also important to mention that separate requirements exist if funds are received in an amount of $10,000 or more in cash, including the requirement to submit a large cash transaction report (LCTR) to FINTRAC, or if there are reasonable grounds to suspect that a transaction is related to the commission or attempted commission of a money laundering or terrorist activity financing offence, and a suspicious transaction report (STR) must be submitted to FINTRAC.

Date answered: 2018-03-13

PI Number: PI-8461

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 10, 39(1), 59.2(1)

Act: 2(1), 6.1

Reliable source under the dual process method

Question:

1. According to https://www.fintrac-canafe.gc.ca/guidance-directives/client-clientele/Guide11/11-eng, MSB is obligated to confirm: name, DOB and address from at least 2 "independent and reliable sources", having said that, could you please confirm that such information sources can be businesses that are built around the ID/ personal information data

2.Could you please confirm, that children age 12-15 have the same funds' transfer limit reporting requirements, as adults (16+) (https://www.fintrac-canafe.gc.ca/guidance-directives/client-clientele/client/msb-eng)

3. According to the information, that is published in the above-mentioned link, "..... documents or information that contain the individual’s name and confirms that they have a deposit or credit card account with a financial entity".

In the case where funds have been collected from Credit or Debit card online, the card authorization information allows to confirm that the cardholder is authenticated and the Issuing bank institution provides an authorization, based  on the information, provided by the Cardholder:

- Address
- information collector, which contains DOB and/or secure password

which confirms, that "Customer has a debit or credit account with that financial institution" and fulfill FINTRAC requirements. Kindly confirm that.

Answer:

1) The methods explained in the FINTRAC Guidance: Methods to identify individuals and confirm the existence of entities, are a reflection of the requirements outlined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). For the method you are referring to – the dual process method – paragraph 64(1)(d) of the PCMLTFR explains that a person’s identity may be ascertained by doing any two of the following:
(i) referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,
(ii) referring to information from a reliable source that includes their name and date of birth, and verifying that the name and date of birth are those of the person, or
(iii) referring to information that includes their name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

Additional requirements apply to the dual process method. Specifically, subsection 64(1.3) of the PCMLTFR states that “For the purposes of subparagraphs (1)(d)(i) to (iii), the information that is referred to must be from different sources, and neither the person whose identity is being ascertained nor the person or entity that is ascertaining their identity can be a source.” For all methods, including the dual process method, subsection 64(1.4) of the PCMLTFR states that “If a document is used to ascertain identity under subsection (1), it must be authentic, valid and current. Other information that is used for that purpose must be valid and current.” The record keeping requirement for the dual process method is specified at paragraph 64.2(d) of the PCMLTFR, and requires that a record be kept of the person’s name, the date on which their identity was ascertained, the source of the information, the type of information referred to and the account number included in it – or if there is no account number included in it, a number associated with the information.

To address your question, I cannot confirm whether the businesses you have provided websites for can be used as information sources under the dual process method, as it is not exactly clear what information these businesses provide or how you will use them to verify identity. That said, from what was understood by the information that could be gathered from the websites, I would like to point out that “Table 5” in the FINTRAC Guidance: Methods to identify individuals and confirm the existence of entities lists examples under the dual process method which include telecommunications data sources, such as a utility bill provider or Canada 411, whose information may be used to verify a person’s name and address. The examples also include referring to a Canadian credit file that has been in existence for at least 6 months to verify one of the categories of information. If credit file information is referred to, a reporting entity is expected to ensure that its own information and the information referred to from a second source are not included in the credit file information, as per the requirement at subsection 64(1.3) of the PCMLTFR. The list of examples in the FINTRAC Guidance is not exhaustive, so other similar sources and information may be used to fulfil the client identification requirements. Regardless of the sources used, a reporting entity must ensure that all requirements under the PCMLTFR are met for the method used to ascertain identity. 

2) Yes, I can confirm that the same reporting requirements apply for the transfer of funds, regardless of whether the transfer is made at the request of a child (ages 12-15) or an adult (ages 16+). There is no distinction made between the two in the PCMLTFR. Specifically, an MSB must report, in accordance with paragraph 28(1)(b) of the PCMLTFR, the sending out of Canada, at the request of a client, of an electronic funds transfer (EFT) of $10,000 or more in the course of a single transaction; and in accordance with paragraph 28(1)(c) of the PCMLTFR, the receipt from outside Canada of an EFT, sent at the request of a client, of $10,000 or more in the course of a single transaction.

An EFT is defined at subsection 1(2) of the PCMLTFR, as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” Furthermore, a client is defined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) as “a person or entity that engages in a financial transaction with another person or entity.”

Therefore, as you can see, there is no distinction made in the reporting requirements of the PCMLTFR for the transfer of funds conducted by children (aged 12-15) versus adults (aged 16+). Instead, the reporting requirements apply to the type of transaction (in this case, outgoing or incoming EFT) when the threshold amount ($10,000 or more in a single transaction) is met.

3) The requirements for the dual process method are explained above in the answer to question 1. As indicated, under the dual process method, one of the categories of information that can be referred to is specified at subparagraph 64(1)(d)(iii) of the PCMLTFR and consists of referring to information that includes a person’s name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information. To fulfil this requirement, it must be confirmed that the person has the account, and not just that they have access to funds or access to the account, such as by logging-in. Examples that may potentially be used for this are identified in “Table 5” of the Methods to identify individuals and confirm the existence of entities Guidance, and include referring to a credit card or bank statement, or using micro-deposits to confirm the account.

If the requirement at subparagraph 64(1)(d)(iii) of the PCMLTFR can be fulfilled using the process you have explained, namely collecting an amount from a credit or debit account, then it seems this could be acceptable. Again, it is important to ensure that all requirements under the PCMLTFR are met for the method used to ascertain identity.

Date answered: 2018-02-13

Answer updated on: 2019-06-25

PI Number: PI-8474

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): Ascertaining Identification

Guidance: Methods to identify individuals and confirm the existence of entities

Regulations: 1(2), 28(1)(b), 64(1), 64.2

Act: 6.1, 9(1)(b)

Using a credit file that contains previous address information

Question:

1) In a scenario where an individual has recently moved and the address information in their credit file has not been updated with the current address , our questions are as follows:

  • Can former address information contained in the credit file be used to verify identity, or can only the current address be used?
  • Can the current address be matched against a former address contained in the credit file

We propose to obtain both current and former address information from the applicant, and comparing both the current and former address information to current, former (1), and former (2), address fields contained within the credit file, satisfies the “the credit file details must match the… address provided by the individual” requirement.  Further, the comparison of this data will occur “at the time” that we verify the individual’s identity, therefore meeting the ‘timeliness’ component of the guidance.                                                                                                                               

2)     The guidelines explicitly state that the credit file method may not be used, where an individual has already failed verification through that method.  We would like expanded guidance on this.

  • There are many legitimate scenarios where an individual may fail to pass verification through the credit file method (including those described above), that may be resolved through investigation;
  • Does this exclusion apply for all time?  Must REs ensure that an individual who failed the credit file method today cannot reapply using it 10yrs from now?
  • If the fail occurs due to an error contained in the credit file and this is remediated, can the individual reapply using the credit file method?
  • If the individual fails the credit file method using information from one credit file provider, can an RE refer to information contained in the credit file of another provider to attempt verification?

Answer:

In accordance with paragraph 64(1)(c) of the PCMLTFR, a person’s identity may be ascertained “by referring to information that is in their credit file – if that file is located in Canada and has been in existence for at least three years – and by verifying that the name, address and date of birth in the credit file are those of the person”. Subsection 64(1.4) of the PCMLTFR further requires that “If a document is used to ascertain identity under subsection (1), it must be authentic, valid and current. Other information that is used for that purpose must be valid and current.” The record keeping requirement for this method is specified at paragraph 64.2(c) of the PCMLTFR, and requires that a record be kept of the person’s name, the date on which the person’s identity is ascertained, the source of the information and the number of the person’s credit file.

The FINTRAC guidance Methods to identify individuals and confirm the existence of entities clarifies that to verify a person’s identity under the credit file method, the information provided in the credit file must match the name, address and date of birth provided by the person, and if any of the information does not match then another method must be used to ascertain the person’s identity.

1) If the address information differs completely (e.g. only the former address or a wrong address is included) then it would not be possible to match the information. This response is based on the understanding that the credit file did not contain the current address provided by the person at all. However, it seems the issue is actually that the current address provided by the person is contained in the credit file information; it just simply is not labelled as the person’s “current address”. If this understanding is correct, then both the current and former addresses of the person are contained somewhere in the credit file information provided. For instance, the former address may be identified in the header information and labelled as the “current address”, but the actual current address of the person is contained within the details and tradeline information provided. If this is the case, then in accordance with paragraph 64(1)(c) of the PCMLTFR, the credit file method can be used to ascertain identity, as the credit file information referred to contains the name, address and date of birth of the person and can be matched against the information provided by the person despite being labelled incorrectly.
 
2) With respect to a "failed verification", FINTRAC has explained that it is for a reporting entity to determine what “failed verification” means and how it can be overcome. The requirements for each of the methods that may be used to ascertain a person’s identity are explained in the PCMLTFR and supporting information is provided in the FINTRAC guidance. Any method may be used, so long as all of the requirements can be met. The related information provided in the FINTRAC guidance is meant to indicate that when it is not possible to ascertain a person’s identity in accordance with the requirements of a specific method, then that method cannot be used.

Date answered: 2018-02-09

Answer updated on: 2019-06-25

PI Number: PI-8472

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): Ascertaining Identification

Guidance: Methods to identify individuals and confirm the existence of entities

Regulations: 64(1)(c), 64.2(c)

Act: 6.1

Using a credit bureau product to ascertain identification

Question:

We have decided to proceed with an ID Verification product through a credit bureau.  Their documentation, transparency and audit tracking was the most compliant to the AML requirements (in our opinion – erring on the side of caution) – it appears to meet the legislated requirements for non-face-to-face/dual-method identification.

If FINTRAC has a differing opinion on the credit bureau identification product, please share as soon as possible in order to avoid a technical situation that could cause a non-compliance issue.   
                                                                                                                                                                                                                                                                                               For ascertaining identification under the dual process method, one option that does not appear to be listed in  Table 5 (Examples) Column C (confirm a financial account) of the FINTRAC Guideline Methods to Identify Individuals, is accessing their existing online banking through another Canadian FI as confirmation of a financial account.  If the applicant provides the account number, logs into their online banking through a portal and the information (name and account number) is returned to be matched, would that be considered compliant with the second piece of the dual method? The first method would be confirmation of name and date of birth through the credit bureau (SIN always required), the second would be name and account number received from the other Canadian FI electronically.

Answer:

For the dual process method, paragraph 64(1)(d) of the PCMLTFR explains that a person’s identity may be ascertained by doing any two of the following:
(i)                referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,
(ii)               referring to information from a reliable source that includes their name and date of birth, and verifying that the name and date of birth are those of the person, or
(iii)              referring to information that includes their name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

Additional requirements for this method are outlined at subsection 64(1.3) of the PCMLTFR, which states that “the information that is referred to must be from different sources, and neither the person whose identity is being ascertained nor the person or entity that is ascertaining their identity can be a source.” To fulfil the requirements of the dual process method, the record keeping requirement at paragraph 64.2(d) of the PCMLTFR must also be met.

To address the first proposal regarding the use of the identification product from a credit bureau, as you know, FINTRAC does not certify, endorse, or validate any type of product, company, or provider used to fulfil a reporting entity’s obligations. It is for each reporting entity to ensure they are meeting all of their requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations, regardless of the type of products, services or other means used.

With that said, the FINTRAC guidance: Methods to identify individuals and confirm the existence of entities explains that credit file information that has been in existence for at least 6 months may be referred to under the dual process method to verify one of the categories of information (name and address/name and date of birth/name and confirmation of a financial account). Information from a second reliable source is also required, and the information must match the information provided by the person. The reporting entity must ensure that the credit file information referred to does not include its own information or the information referred to from the second source used by the reporting entity under this method.

The guidance further indicates that a reporting entity may also obtain information from a credit bureau as an aggregator, compiling original sources that are referred to as tradelines. If a credit bureau is able to provide information originating from two separate tradelines, then each of the tradelines can be referred to as a source and the information belonging to each of the tradelines may be referred to by the reporting entity to verify two separate categories of information under the dual process method (name and address/name and date of birth/name and confirmation of a financial account). The reporting entity must obtain all of the information about and belonging to each of the original tradeline sources from the credit bureau. For example, to ascertain the identity of a person, the reporting entity could obtain the information of Loan Company A and Financial Entity B from a Canadian credit bureau. Loan Company A’s information would be used to confirm the person’s name and address, and Financial Entity B’s information would be used to confirm the person’s name and date of birth. Loan Company A and Financial Entity B would be the sources of the information referred to, so the reporting entity must obtain and refer to the information belonging to each, and ensure that it matches the information provided by the person.

To address the second proposal, subparagraph 64(1)(d)(iii) of the PCMLTFR specifies that, under the dual process method, a reporting entity may ascertain the identity of a person by referring to information that confirms their name and that they have a deposit account, credit card account, or other loan account with a financial entity, and verifying that information. Logging into a financial account through an online banking portal which returns only the name and account number as a match, confirms that the person has access to an account, but it does not confirm that the person holds the account, or that the account is a deposit account, credit card account, or other loan account. Therefore, it appears this proposed process would not meet the requirements under the dual process method.

Date answered: 2018-01-23

Answer updated on: 2019-06-25

PI Number: PI-8470

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): Ascertaining Identification

Guidance: Methods to identify individuals and confirm the existence of entities

Regulations: 64(1)(d), 64.2(d)

Act: 6.1

Acceptable identification documents for refugee claimants and refugees

Question:

A financial entity is seeking clarification from FINTRAC on the identification requirements for refugee claimants and refugees when opening bank accounts. Specifically, the financial entity has asked whether FINTRAC considers Immigration, Refugees and Citizenship Canada form IMM 1262 to be an acceptable document for ascertaining the identity of such persons.

Answer:

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations have been amended to introduce new methods for ascertaining a person's identity. These new methods are explained in FINTRAC's Guidance: Methods to identify individuals and confirm the existence of entities. Financial entities can now adopt these new methods or use the previous methods (described in Annex 1 of this Guidance) during a transition period up to January 23, 2018, at which point only the new methods will be accepted.

The previous and new methods for ascertaining a person's identity are set out in subsection 64(1) of the previous and current Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). Specifically, the previous methods for ascertaining a person's identity are described at paragraphs 64(1)(a) and (b) and Part A of Schedule 7 to the previous PCMLTFR. The new methods are described in paragraphs 64(1)(a) to (e) of the current PCMLTFR. The various methods include using identification documents issued by a government; confirming the identity verification by a (foreign) entity that is affiliated or that is a member of the same association; using a credit file, an identification product or a cleared cheque; or confirming the existence of a financial account.

Having said that, in the case where a person has no government-issued identification document, no account and no Canadian credit history, the new dual process method seems to be the most suitable method for ascertaining the identity of such persons, under both the previous and new methods. More specifically, under paragraph 64(1)(d) of the present PCMLTFR, the dual process method requires a person's identity to be ascertained "by doing any two of the following:

(i) referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,
(ii) referring to information from a reliable source that includes their name and date of birth, and verifying that the name and date of birth are those of the person, or
(iii) referring to information that includes their name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information".

Subsection 64(1.3) of the current PCMLTFR confirms that for the purposes of the dual process method, "the information that is referred to must be from different sources, and neither the person whose identity is being ascertained nor the person or entity that is ascertaining their identity can be a source". Also, in accordance with subsection 64(1.4) of the present PCMLTFR, "if a document is used to ascertain identity under subsection (1), it must be authentic, valid and current. Other information that is used for that purpose must be valid and current". Financial entities may therefore not consult a photocopy, facsimile or digitally scanned image of a document.

According to the information obtained from the Department of Immigration, Refugees and Citizenship Canada (IRCC), it seems that form IMM 1262 is an acknowledgment of conditions given to persons by IRCC officers when they arrive in Canada. The form is completed with the IRCC officer by the person whose identity must be ascertained and is signed by the person and the officer once completed. IRCC keeps the original version of the form, and a copy is given to the person.

In light of these facts, it seems that form IMM 1262 is not an acceptable document for ascertaining a person's identity when using either the previous or the new methods for ascertaining a person's identity under subsection 64(1) of the PCMLTFR.

Alternatively, FINTRAC Guidance: Methods to identify individuals and confirm the existence of entities provides a non-exhaustive list of reliable sources of information that can be used to ascertain a person's identity. Other documents issued by IRCC may be acceptable for ascertaining a person's identity if all identification and record-keeping requirements are satisfied.

That said, if the requirements cannot be fully satisfied, subsection 64(1.5) of the PCMLTFR stipulates that “in the case of a retail deposit account referred to in subsection 448.1(1) of the Bank Act, if a person or entity cannot ascertain a person’s identity in the manner set out in one of paragraphs (1)(a) to (e), they are deemed to comply with subsection (1) if the person who requests that the account be opened meets the conditions set out in subsection 4(1) or (2) of the Access to Basic Banking Services Regulations". For your information, the Schedule entitled Identification lists IRCC forms IMM 1000, IMM 1442 and IMM 5292 (Part A) and a foreign passport (Part B) as acceptable pieces of identity for ascertaining a person's identity under the Access to Basic Banking Services Regulations.

Date answered: 2017-12-11

Answer updated on: 2019-06-25

PI Number: PI-8156

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: Methods to identify individuals and confirm the existence of entities

Regulations: 64(1)

Employee Identification card

Question:

I would like to know if an employee card is an acceptable document to ascertain the identity of a person under the Government-issued photo identification method.

Answer:

In accordance with paragraph 64(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a person’s identity may be ascertained “by referring to an identification document that contains their name and photograph and that is issued by the federal government or a provincial government or by a foreign government that is not a municipal government, and by verifying that the name and photograph are those of the person.” This has been titled the “government-issued photo identification method” in the FINTRAC guidance Methods to identify individuals and confirm the existence of entities.

As a result, because an employee card is not a government-issued identification document it cannot be accepted in accordance with paragraph 64(1)(a) of the PCMLTFR. Even in the case of an employee card provided by the government as an employer, it is not considered to be an identification document that is government-issued.

Date answered: 2017-12-11

PI Number: PI-8154

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance: Methods to identify individuals and confirm the existence of entities

Regulations: 64(1)(a)

ROFR - who to ascertain identity and keep a record on

Question:

1. Please clarify when an account is “affected” by the transaction when completing a receipt of funds record. Particularly in the case of an electronic funds transfer, cash, or a bank draft that is received, do the requirements differ depending on the form of the funds received?

2. Are we required to ascertain the identity of a person who signs the cheque, but does not physically provide the funds? Are we required to ascertain the identity of both account holders if the cheque is drawn from a joint account even if only one is involved in the real estate transaction?

3. When an entity that is a corporation is buying or selling real estate, are we required to confirm its existence? Must the identity of the person acting on behalf of the corporation be ascertained? Should the corporation be recorded as a third party?

4. Is obtaining account information a reasonable measures requirement at all times, or only when funds are provided directly to the listing agent by a buying agent’s client? For example: Buyer Agent A’s client, John, provides a deposit cheque to Listing Agent B directly. Buyer Agent A only has to take ‘reasonable measures’ to determine John’s account information.

Answer:

Before addressing your specific questions, it is important to review the overarching principles that apply.

• Subsection 39(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to subsections (3), (4), (5), (6), 52(2) and 62(2), every real estate broker or sales representative shall, when engaging in an activity described in section 37, keep the following records:
(a) a receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body;
(b) a client information record in respect of every purchase or sale of real estate; and
(c) where the receipt of funds record or the client information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the real estate broker or sales representative.”

• Subsection 1(2) of the PCMLTFR details the information to be kept in the receipt of funds record, and is described as the following: “in respect of a transaction in which an amount of funds is received, a record that contains the following information:
(a) if the information is not readily obtainable from other records that the recipient keeps and retains under these Regulations, the name of the person or entity from whom the amount is in fact received and
(i) where the amount is received from a person, their address and date of birth and the nature of their principal business or their occupation, and
(ii) where the amount is received from an entity, their address and the nature of their principal business;
(b) the date of the transaction;
(c) the number of any account that is affected by the transaction, and the type of that account, the full name of the person or entity that is the account holder and the currency in which the transaction is conducted;
(d) the purpose and details of the transaction, including other persons or entities involved and the type and form of the transaction;
(e) if the funds are received in cash, whether the cash is received by armoured car, in person, by mail or in any other way; and
(f) the amount and currency of the funds received.”

• In accordance with subsection 39(4) of the PCMLTFR, where the parties to a real estate transaction (buyer and seller) are each represented by a real estate broker or sales representative, and one party provides funds to the other party’s real estate broker or sales representative, it is the real estate broker or sales representative of the party providing the funds that is responsible for keeping the receipt of funds record.

• In relation to subsection 39(4) of the PCMLTFR, subsection 39(5) of the PCMLTFR states that “A real estate broker or sales representative that is responsible for keeping a receipt of funds record under subsection (4) is not required to include in that record any of the following information if, after taking reasonable measures to do so, they are unable to obtain that information:
(a) the number and type of any account that is affected by the transaction; and
(b) the full name of the person or entity that is the holder of that account.”

• Additionally, subsection 39(6) of the PCMLTFR states that “A real estate broker or sales representative that is responsible for keeping a receipt of funds record under subsection (4) and that determines that one or more of the accounts affected by the transaction is a trust account held by another real estate broker or sales representative must include that information in that record but is not required to include
(a) the number of that trust account or those trust accounts; or
(b) the full name of the person or entity that is the holder of that trust account or those trust accounts.”

• Regarding the related identification requirements, subsection 59.2(1) of the PCMLTFR states that “subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1),
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors; and
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.

1. An affected account is any account related to the transaction. This includes any account the funds are drawn from (such as in the case of a cheque, wire transfer, etc.) and any account where the funds are deposited into (such as a broker’s trust account). Information about any account that is affected by a transaction must be kept in the receipt of funds record.

When funds are received in cash, the account information from where the cash was withdrawn is not required to be included in the receipt of funds record. Instead, information about how the cash was received must be included, as per paragraph (e) of the receipt of funds record definition at subsection 1(2) of the PCMLTFR. That said, information about any account the cash is deposited into is considered affected and is to be included in the receipt of funds record.

It should be noted that if each party to a real estate transaction is represented then it is the real estate broker or sales representative of the party providing the funds that must keep the receipt of funds record, and in this case, information about the account number, the type of account, and the full name of the account holder is required to be included in the receipt of funds record if it can be obtained through reasonable measures. Similarly, if both parties are represented, the real estate broker or sales representative is not required to include the account number or the full name of the account holder in the receipt of funds record if the account is a trust account held by another real estate broker or sales representative. In this case, the receipt of funds record would only have to indicate that a trust account for another real estate broker or sales representative was involved.

2. Where a receipt of funds record is required to be kept by a real estate broker or sales representative, they must ascertain the identity of the person who conducts the transaction. The identity of the person who signs the cheque is not required to be ascertained if they are not conducting the transaction, but their information is required to be obtained and kept in the receipt of funds record. Specifically, information about any account affected by the transaction, including the full name of the account holder, or both account holders for a joint account, must be kept in the receipt of funds record, along with all other required information listed in the definition. As indicated for the previous question, if each party to the real estate transaction is represented and information about the account number, the type of account, and the full name of the account holder can be obtained through reasonable measures, this information is required to be included in the receipt of funds record.

3. When acting as an agent in the purchase or sale of real estate, a real estate broker or sales representative must keep a client information record. Where the client information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of the transaction must also be kept. In terms of identification, a real estate broker or sales representative must ascertain the identity of every person who conducts the transaction and confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted, and the names of its directors.

As per section 10 of the PCMLTFR, “every person or entity that is required to keep a client information record under these Regulations in respect of a client shall, at the time the client information record is created, take reasonable measures to determine whether the client is acting on behalf of a third party.” If a third party determination is made, or cannot be made but there are reasonable grounds to suspect this is the case, additional records must be kept. The FINTRAC Guidance: Third party determination requirements, indicates that “A third party is a person or entity who instructs another person or entity to conduct an activity or financial transaction on their behalf. When you are determining whether a third party is giving instructions, it is not about who owns or benefits from the money, or who is carrying out the transaction or activity, but rather about who gives the instructions to handle the money or conduct a transaction or particular activity. If you determine that the individual in front of you is acting on someone else's instructions, that someone else is the third party.” As per section 7 of the PCMLTFR, and as stated in the FINTRAC Guidance, a person that is acting on behalf of their employer is considered to be acting on behalf of a third party, except when depositing cash in the employer’s business account.

4. The information of any account affected by the transaction is required to be included in the receipt of funds record. When certain conditions are met, if this information can be obtained through reasonable measures, then it is required to be included. Specifically, as indicated in the response to questions 1 and 2, if each party to a real estate transaction is represented, then it is the real estate broker or sales representative of the party providing the funds that must keep the receipt of funds record, and information about the account number, the type of account, and the full name of the account holder is required to be included in the receipt of funds record if it can be obtained through reasonable measures. Similarly, if both parties are represented, the real estate broker or sales representative is not required to include the account number or the full name of the account holder in the receipt of funds record if the account is determined to be a trust account held by another real estate broker or sales representative. Instead, the receipt of funds record would only have to indicate that a trust account for another real estate broker or sales representative was involved.

Therefore, in the example you provided where John (a buyer represented by Agent A) provides a cheque to Listing Agent B (the representative of the seller), Buyer Agent A must keep the receipt of funds record and must take reasonable measures to obtain the account number, type of account, and full name of the account holder for any account affected by the transaction. This includes the account from which the cheque is drawn and the account the cheque is deposited into. If Buyer Agent A determines that any account affected by the transaction is a trust account held by another real estate broker or sales representative, such as Listing Agent B or Listing Agent B’s broker, then the receipt of funds record must indicate that a trust account was involved in the transaction, but the number of that trust account or the full name of the trust account holder is not required to be included.

Date answered: 2017-11-14

PI Number: PI-8150

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: Third party determination requirements

Regulations: 39(1), 1(2), 39(4), 39(6), 10, 7

ROFR - Joint account and bank draft

Question:

We would like to obtain guidance about the identification requirements related to the receipt of funds for the real estate sector, specifically in regards to the following situations:

1. When we receive a cheque that is signed by John Doe for an account that is jointly owned by John Doe and Jane Doe, are we required to keep an identification record for Jane Doe?

2. When we receive a bank draft or a certified draft from a financial institution for a deposit from a buyer, it does not indicate whose account the funds originated in. As such, do we need to ascertain the identity of that party or do we consider the funds received from the financial institution?

Answer:

Pursuant to paragraph 39(1)(a) of the Proceeds of Crime (Money laundering) and Terrorist Financing Regulations (PCMLTFR), every real estate broker or sales representative shall, when they act as an agent in respect of the purchase or sale of real estate for an individual, keep certain records, including “a receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body”.

Subsection 1(2) of the PCMLTFR details the information to be kept in the receipt of funds record, and includes “(c) the number of any account that is affected by the transaction, and the type of that account, the full name of the person or entity that is the account holder and the currency in which the transaction is conducted.” An affected account is any account related to the transaction, which includes any account the funds are drawn from (such as in the case of a cheque) and any account where the funds are deposited into (such as a broker’s account).

In accordance with subsection 39(4) of the PCMLTFR, where each party to a real estate transaction (a buyer and a seller) is represented by a real estate broker or sales representative, and one party provides funds to the other party’s real estate broker or sales representative, it is the real estate broker or sales representative of the party providing the funds that is responsible for keeping the receipt of funds record. In this case, as per subsection 39(5) of the PCMLTFR, if the account number, type of account, and the full name of the account holder(s) cannot be obtained through reasonable measures, then this information is not required to be included in the receipt of funds record.

Additionally, in relation to subsection 39(4) of the PCMLTFR, subsection 39(6) of the PCMLTFR states that “A real estate broker or sales representative that is responsible for keeping a receipt of funds record under subsection (4) and that determines that one or more of the accounts affected by the transaction is a trust account held by another real estate broker or sales representative must include that information in that record but is not required to include:

(a) the number of that trust account or those trust accounts; or
(b) the full name of the person or entity that is the holder of that trust account or those trust accounts.”

When a receipt of funds record is required to be kept for an individual, paragraph 59.2(1)(a) of the PCMLTFR states that every real estate broker or sales representative shall “in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction.” As per subsection 59.2(2) of the PCMLTFR, when both parties (the buyer and seller) are each represented by a different real estate broker or sales representative, each real estate broker or sales representative is responsible for identifying the party that they represent.

Therefore, to address both questions, a receipt of funds record is required to be kept by a real estate broker or sales representative when funds are received, and the real estate broker or sales representative must ascertain the identity of the person who conducts the transaction. That means, for the example provided in the first question, if John Doe provides a cheque from the account he holds with Jane Doe, then a receipt of funds record must be kept and John Doe must be identified in accordance with the methods outlined at subsection 64(1) of the PCMLTFR, because he conducts the transaction. Information about any account affected by the transaction, including the full name of the account holder, or both account holders for a joint account, must be kept in the receipt of funds record. So, while the identity of Jane Doe does not have to be ascertained in accordance with subsection 64(1) of the PCMLTFR, her information must be obtained and kept in the receipt of funds record as an account holder of an affected account. The same requirements would apply for a deposit provided by an individual using a bank draft or certified cheque.

It should be noted that, as explained above, if each party to a real estate transaction is represented, then it is the real estate broker or sales representative of the party providing the funds that must keep the receipt of funds record, and in this case, information about the account number, the type of account, and the full name of the account holder is required to be included in the receipt of funds record if it can be obtained through reasonable measures. Similarly, if both parties are represented, the real estate broker or sales representative is not required to include the account number or the full name of the account holder in the receipt of funds record if the account is a trust account held by another real estate broker or sales representative. In this case, the receipt of funds record would only have to indicate that a trust account for another real estate broker or sales representative was involved.

Date answered: 2017-11-14

PI Number: PI-8142

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Regulations: 39(1)(a), 1(2), 64(1)

Foreign component to a real estate transaction

Question:

As a real estate broker or sales representative, I am seeking clarification regarding my obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations when there is a foreign component to a real estate transaction. Specifically, I am wondering whether my company is subject to the PCMLTFA and its associated Regulations when it is acting as an agent in respect of:

· the purchase or sale of foreign real estate by a foreign buyer/seller;
· the purchase or sale of foreign real estate by a Canadian client; or
· the sale of Canadian real estate to a foreign buyer by a Canadian client.

Answer:

Pursuant to subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a real estate broker or sales representative is defined as "a person or entity that is registered or licensed under provincial legislation in respect of the sale or purchase of real estate”. Section 37 of the PCMLTFR further states that every real estate broker or sales representative is subject to Part 1 and Part 1.1 of the PCMLTFA “when they act as an agent in respect of the purchase or sale of real estate”.

In support of your request, you have indicated that your company is licensed provincially in respect of the purchase or sale of real estate. Thus, it appears that your company is a real estate broker or sales representative subject to Part 1 and Part 1.1 of the PCMLTFA. Therefore, your company must fulfill its applicable obligations outlined within the PCMLTFA and its associated Regulations, which include reporting to FINTRAC, keeping records, identifying clients, and implementing a compliance program.

However, the “registered or licensed under provincial legislation” also indicates that the activities must be conducted in Canada. Therefore, your company has to develop and apply policies and procedures consistent with its Canadian activities only. While it is always a question of fact to determine whether the activities are conducted in Canada, the most relevant factors are where the purchase or sale of real estate has taken place and where the real estate is located rather than the location of the buyers or sellers.

As a result, acting as an agent for the purchase or sale of foreign real estate, whether or not the buyer or the seller is located in Canada, is not considered an activity conducted in Canada for which real estate brokers or sales representatives are regulated or licensed under provincial legislation. Consequently, in this instance, your company is not required to comply with the obligations outlined within the PCMLTFA and its associated Regulations.

That said, for the sale of Canadian real estate to a foreign buyer, your company is subject to the obligations under the PCMLTFA and its associated Regulations. Thus, your company must fulfill its ascertaining identity obligations, namely ascertaining the identity of every person who conducts the transaction or confirming the existence of every entity on whose behalf the transaction is conducted, as per subsection 59.2(1) of the PCMLTFR.

However, subsection 59.2(2) of the PCMLTFR provides an exception to the obligations to ascertain identity and states that the real estate broker or sales representative that represents one party is not required to ascertain the identity of the name and address of any other party or confirm their existence when, and only when, the persons or entities that are parties to a real estate transaction are each represented by a different real estate broker or sales representative. Therefore, real estate brokers or sales representatives are not required to ascertain identity of the other parties (foreign or Canadian) only if the other parties are represented by another real estate broker or sales representative, as defined above for the purpose of the PCMLTFA and its associated Regulations. If the person or entity representing the other parties does not fall within the definition of a real estate broker or sales representative (meaning it is not registered or licensed under provincial legislation to carry out its activities), then the other party is deemed to be unrepresented and the exception listed at subsection 59.2(2) of the PCMLTFR cannot be applied. Consequently, in accordance with subsection 59.2(3) of the PCMLTFR, “where one or more but not all of the parties to a real estate transaction are represented by a real estate broker or sales representative, each real estate broker or sales representative that represents a party to the transaction shall take reasonable measures to ascertain the identity or confirm the existence of the parties that are not so represented”.

 

Date answered: 2017-11-01

PI Number: PI-8140

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 1(2),59.2(1),59.2(2),59.2(3)

Act: Part 1

Redacted account numbers

Question:

Would a redacted credit card account number be sufficient to meet the record keeping requirements when ascertaining the identity of a person using the method specified at paragraph 64(1)(d) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), commonly referred to as the dual process method?

Answer:

Paragraph 64(1)(d) of the PCMLTFR states that a person’s identity may be ascertained “by doing any two of the following:

(i) referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,
(ii) referring to information from a reliable source that includes their name and date of birth, and verifying that the name and date of birth are those of the person, or
(iii) referring to information that includes their name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.”

In accordance with paragraph 64.2(d) of the PCMLTFR, when the dual process method is used, a record must be kept that includes the person’s name, the date on which the person’s identity was ascertained, the source of the information, the type of information referred to and “the account number included in it — or if there is no account number included in it, a number associated with the information”.

The record keeping requirement for the dual process method therefore clearly contains the obligation to retain an account number. The term “account number” is generally understood to be the unique number given to an individual account, and it is usually complex enough to eliminate the possibility that more than one person has the same number. If the account number is redacted it is no longer the true account number unique to the individual account. Additionally, this information is required to be included in reports submitted to FINTRAC, as applicable, and is critical for any analysis conducted to ensure that one or more transactions are related. Therefore, this information is essential in aiding FINTRAC to contribute to the public safety of Canadians by helping to protect the integrity of Canada’s financial system through detecting, preventing, and deterring money laundering and the financing of terrorist activity.

As a result, a redacted credit card account number would not be sufficient for meeting the record keeping requirement at paragraph 64.2(d) of the PCMLTFR. Instead, it is FINTRAC’s expectation that reporting entities will record a complete account number, as applicable, when ascertaining the identity of a person using the dual process method at paragraph 64(1)(d) of the PCMLTFR.

Alternatively, persons and entities subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations may choose to use the government-issued photo identification method, the credit file method, or to verify the required information of the dual process method by other means.

Date answered: 2017-10-18

PI Number: PI-8138

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): Ascertaining Identification

Regulations: 64(1)(d)

Acceptable addresses to confirm name and address

Question:

1. I would like to know whether a matching address must be confirmed in addition to verifying a name and date of birth, and a name and a financial account under the dual process method.

2. Additionally, if a matching address is required to be confirmed, I am wondering whether a PO Box on the cheque and on the application would meet the requirements.

Answer:

Paragraph 64(1)(d) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), referred to as the “dual process method” in the FINTRAC Guidance: Methods to identify individuals and confirm the existence of entities, explains that an individual’s identity may be ascertained by doing any two of the following:

(i) referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,
(ii) referring to information from a reliable source that includes their name and date of birth, and verifying that the name and date of birth are those of the person, or
(iii) referring to information that includes their name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

Therefore, to address your questions, a financial entity is not required to ascertain a matching address if it ascertains identity by fulfilling the requirements of subparagraphs 64(1)(d)(ii) and 64(1)(d)(iii) of the PCMLTFR. That being said, paragraph 14(c) of the PCMLTFR requires a financial entity to keep a record when it opens an account in the name of an individual. This record must include the name, address, date of birth, and the nature of principal business or occupation of the individual. A PO box is not a valid or legitimate address. Rather, it is a box allocated to an individual by the post office to receive mail. The address referred to in the PCMLTFR is the physical address where the individual lives.

In addition, it is important for a financial entity to be informed of all additional requirements related to this method. Specifically, subsection 64(1.3) of the PCMLTFR stipulates that “For the purposes of subparagraphs (1)(d)(i) to (iii), the information that is referred to must be from different sources, and neither the person whose identity is being ascertained nor the person or entity that is ascertaining their identity can be a source.” Furthermore, according to subsection 64(1.4) of the PCMLTFR, “If a document is used to ascertain identity under subsection (1), it must be authentic, valid and current. Other information that is used for that purpose must be valid and current.”

With this in mind, when using the dual process method, it is expected that the financial entity will be able to ensure the credit file information it refers to from the credit bureau is not derived from its own information, or the information of the financial entity it intends to use as a second source under the dual process method. It is important that the financial entity obtain this level of detail in the credit file information or products it refers to.

Date answered: 2017-10-12

Answer updated on: 2019-06-25

PI Number: PI-8134

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Regulations: 64(1)(d)

Attestation method

Question:

We would like to know whether the attestation method in Schedule 7 can be used under the new methods to ascertain the identity of a person under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR).

Answer:

The attestation method (which can be found under Annex 1 of the FINTRAC Guidance: Methods to identify individuals and confirm the existence of entities) is an old method described in Schedule 7 of the PCMLTFR that consists of obtaining an attestation from a commissioner of oaths in Canada or a guarantor in Canada (a person engaged in a profession specified in subsection 3(2) of Schedule 7), that they have seen the birth certificate, driver’s licence, provincial health insurance card (where not prohibited by provincial law), passport, or other similar document of a person. The attestation must be produced on a photocopy of the identification document (where not prohibited) and must include the name, profession, address, and signature of the person providing the attestation, as well as the type and number of the identification document.

Under the new methods to ascertain identity, paragraph 64(1)(d) of the PCMLTFR requires that a person’s identity be ascertained by doing any two of the following:

(i) referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,
(ii) referring to information from a reliable source that includes their name and date of birth, and verifying that the name and date of birth are those of the person, or
(iii) referring to information that includes their name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

Additional requirements for this method are outlined at subsection 64(1.3) of the PCMLTFR, which stipulates “For the purposes of subparagraphs (1)(d)(i) to (iii), the information that is referred to must be from different sources, and neither the person whose identity is being ascertained nor the person or entity that is ascertaining their identity can be a source.” Subsection 64(1.4) of the PCMLTFR further requires that “If a document is used to ascertain identity under subsection (1), it must be authentic, valid and current. Other information that is used for that purpose must be valid and current.”

When the dual process method is used, a record must be kept pursuant to paragraph 64.2(d) of the PCMLTFR, of the person’s name, the date on which the person’s identity was ascertained, the source of the information, the type of information referred to, and the account number included in it – or if there is no account number, a number associated with the information.

In order for the attestation document (created when using the attestation method) to be acceptable as information from one source under the dual process method, all requirements of the dual process method would have to be met, including the record keeping requirement. This would necessitate a commissioner of oaths or guarantor in Canada to create and maintain a numbering system so that “a number associated with the information” could be provided and a record could be kept, thus creating an unnecessary burden on persons who are not subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) or associated Regulations. This is not reasonable, therefore the attestation method is not acceptable for use under the new methods to ascertain identity.

Having said that, a reporting entity may decide to enter into an agent agreement with a person for the purposes of ascertaining the identity of the reporting entity’s clients, as per section 64.1 of the PCMLTFR. After January 23, 2018, this agent, or the reporting entity itself, will only be able to use the new client identification methods.

Date answered: 2017-10-05

Answer updated on: 2019-06-25

PI Number: PI-8132

Activity Sector(s): Life insurance

Obligation(s): Ascertaining Identification

Regulations: 64(1)(d),64(1.3),64(1.2),64.2(d)

Account number required for record keeping when applicable

Question:

A requestor has raised concerns with the record keeping requirement at paragraph 64.2(d) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), to be used in accordance with paragraph 64(1)(d) of the PCMLTFR, referred to as the dual process method in the FINTRAC Guidance.

Specifically, the requestor has identified concerns with the requirement to keep a record of the account number when using subparagraph 64(1)(d)(iii) to confirm the existence of a person’s deposit account, credit card account, or other loan account with a financial entity under the dual process method. The concerns raised relate to obtaining and storing the account number, and the fact that financial entities are reluctant to provide this information when requested. As a result, it has been asked for an interpretation of the PCMLTFR to allow for the acceptance of a number other than the account number when using the dual process method to ascertain identity.

Answer:

Paragraph 64(1)(d) of the PCMLTFR explains that for the dual process method, a person’s identity may be ascertained by doing any two of the following:

(i) referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,
(ii) referring to information from a reliable source that includes their name and date of birth, and verifying that the name and date of birth are those of the person, or
(iii) referring to information that includes their name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

In accordance with paragraph 64.2(d) of the PCMLTFR, when the dual process method is used, a record must be kept that includes the person’s name, the date on which the person’s identity was ascertained, the source of the information, the type of information referred to and “the account number included in it — or if there is no account number included in it, a number associated with the information”.

The record keeping requirement for the dual process method clearly contains the obligation to retain an account number, which is applicable when confirming the existence of one of the specified types of financial accounts. A number associated with the information cannot be used in place of an account number when an account is used to ascertain the identity of an individual, as a clear distinction is made between the two. Therefore, the record keeping requirement cannot reasonably be interpreted to allow the recording of another number when an account number exists.

This information is to be included in reports submitted to FINTRAC, and is essential in aiding FINTRAC to contribute to the public safety of Canadians by helping to protect the integrity of Canada’s financial system through detecting, preventing, and deterring money laundering and the financing of terrorist activity.

Persons and entities subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations are not required to use this specific method to ascertain the identity of a person. Alternatively, they may choose to use the government-issued photo identification method, the credit file method, or to verify the required information under the other two categories of the dual process method.

Date answered: 2017-09-29

PI Number: PI-8130

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Regulations: 64(1)(d)

Referring to credit file and tradeline information under the dual process method

Question:

My question is about what is acceptable to ascertain the identity of a person under the dual process method. Specifically, we would like to know whether credit file information and the information of an original tradeline source can be used; whether information from two original tradeline sources can be used; and in both cases, what is the source.

Answer:

Paragraph 64(1)(d) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), referred to as the dual process method in the FINTRAC Guidance, explains that a person’s identity can be ascertained by doing any two of the following:

(i) referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,
(ii) referring to information from a reliable source that includes their name and date of birth, and verifying that the name and date of birth are those of the person, or
(iii) referring to information that includes their name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

Additional requirements for this method are outlined at subsection 64(1.3) of the PCMLTFR, which stipulates “For the purposes of subparagraphs (1)(d)(i) to (iii), the information that is referred to must be from different sources, and neither the person whose identity is being ascertained nor the person or entity that is ascertaining their identity can be a source.” Furthermore, according to subsection 64(1.4) of the PCMLTFR, “If a document is used to ascertain identity under subsection (1), it must be authentic, valid and current. Other information that is used for that purpose must be valid and current.”

Referring to Canadian credit file information:
FINTRAC’s guidance lists a client’s Canadian credit file that has been in existence for at least six (6) months as an example of information under the dual process method that can be used to confirm one of the categories of information (name and address, name and date of birth, or name and that they have a deposit account, credit card account, or other loan account with a financial entity). In this instance, the credit file provider (e.g. a Canadian credit bureau) is considered to be the source and a second source must be used to confirm one of the other categories of information. The reporting entity is expected to ensure that the credit file information referred to is not derived from its own information or the information of the second source used.

For example, to ascertain the identity of a person, a reporting entity refers to the person’s credit file information from a Canadian credit bureau and confirms that the name and address included in the information matches the name and address provided by the person. The Canadian credit bureau is the source and the reporting entity should ensure that its own information is not included in the credit file information referred to. Also, if the credit file information is derived from a bank and loan company's information, then neither the bank nor the loan company should be used by the reporting entity as a second source under the dual process method.

Referring to tradeline information:
The FINTRAC guidance also indicates that a reporting entity may use a product created by a Canadian credit bureau (containing two original tradelines) to ascertain a person’s identity under the dual process method. In this instance, the two original tradeline suppliers are each a different source and their information is provided by the Canadian credit bureau through a product they have created. The reporting entity must obtain the name and the information of each original tradeline source from the credit bureau. The separate information referred to from each tradeline source must be used to each verify one of the categories of information required by the dual process method (name and address, name and date of birth, or name and that they have a deposit account, credit card account, or other loan account with a financial entity).

As an example, to ascertain the identity of a person, a Canadian credit bureau could provide a reporting entity with a product they have created which identifies Loan Company A and all of its information to confirm the person’s name and that they have a loan account, and Bank B and all of its information to confirm the person’s name and address. Loan Company A and Bank B would each be a source, and the reporting person or entity must obtain and refer to the information of each, and ensure it matches the information provided by the person, to ascertain identity under the dual process method.

Logically, because it is acceptable to refer to information from two different original tradeline sources provided by a Canadian credit bureau, referring to information from one tradeline source provided by a Canadian credit bureau could also be acceptable.

Therefore, a reporting entity may refer to credit file information of at least six (6) months existence from a Canadian credit bureau as one source under the dual process method to ascertain the identity of a person. Information from an original tradeline source that is provided by a Canadian credit bureau may be referred to and used as the second source under the dual process method if the tradeline source and all of its information is made available to the reporting entity. The reporting entity must ensure that the credit file information referred to does not contain its own information or the information of the tradeline used as a second source. Similarly, information from two original tradeline sources provided by a Canadian credit bureau may be referred to. All requirements of the dual process method must be met regardless of the information referred to or the source used. This includes the record keeping requirement at paragraph 64.2(d) of the PCMLTFR.

Date answered: 2017-09-20

Answer updated on: 2019-06-25

PI Number: PI-8124

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): Ascertaining Identification

Guidance: Methods to identify individuals and confirm the existence of entities

Regulations: 64(1)(d)

Two 6 month credit files under the dual process method

Question:

In the event that a person has a credit history of less than 3 years such that a reporting entity cannot rely on paragraph 64(1)(c) of the PCMLTFR (credit file method), is it acceptable for the purposes of paragraph 64(1)(d) of the PCMLTFR (dual process method) to rely on two separate credit reports from two different sources. In other words, can a reporting entity rely on a credit report from Credit Bureau A and a credit report from Credit Bureau B for the purposes of paragraph 64(1)(d) of the PCMLTFR with one credit report source confirming name and address and the other credit report source confirming name and date of birth?

Answer:

Pursuant to paragraph 64(1)(d) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), referred to as the dual process method in the FINTRAC Guidance, a person’s identity may be ascertained by doing any two of the following:

(i) referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,
(ii) referring to information from a reliable source that includes their name and date of birth, and verifying that the name and date of birth are those of the person, or
(iii) referring to information that includes their name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

Additional requirements for this method are outlined at subsection 64(1.3) of the PCMLTFR, which stipulates “For the purposes of subparagraphs (1)(d)(i) to (iii), the information that is referred to must be from different sources, and neither the person whose identity is being ascertained nor the person or entity that is ascertaining their identity can be a source.” Subsection 64(1.4) of the PCMLTFR further requires that “If a document is used to ascertain identity under subsection (1), it must be authentic, valid and current. Other information that is used for that purpose must be valid and current.”

The FINTRAC guidance refers to a “client’s Canadian credit file that has been in existence for at least six months” as an example of information from a reliable source under the dual process method. In this instance, the credit file provider (e.g. a credit bureau in Canada) is considered to be the source for the purpose of ascertaining the identity of a person.

Therefore, referring to Canadian credit file information of at least six months existence from two different Canadian credit bureau sources, to confirm two of the categories of information under the dual process method, would appear to be acceptable so long as all of the requirements under the PCMLTFR are fulfilled. The reporting person or entity is expected to be able to confirm that the credit file information referred to from each source is not its own and is not the same information referred to from each source. For example, if the credit file information referred to from the first source was comprised of information from a bank and a loan company, then the credit file information referred to from the second source should not be comprised of information from that same bank and loan company.

 

Date answered: 2017-08-31

Answer updated on: 2019-06-25

PI Number: PI-8116

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): Ascertaining Identification

Regulations: 64(1)(d)

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 rather 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

PI Number: PI-7654

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification, Record Keeping, Reporting

Mobile Service provider

Question:

I am seeking clarification on how to identify a client in a non-face-to-face situation when they have less than 3 years of credit history. Specifically, I would like to know whether a Mobile Service Provider's identification verification product to ascertain the individual's name and address would be an acceptable source to confirm name and address under the dual process method.

Answer:

Pursuant to paragraph 64(1)(d) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), or what is referred to as the ‘dual process method’ in FINTRAC’s guideline, a person’s identity can be ascertained by doing any two of the following:
(i) referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,
(ii) referring to information from a reliable source that includes their name and date of birth, and verifying that the name and date of birth are those of the person, or
(iii) referring to information that includes their name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information.

Subsection 64(1.3) of the PCMLTFR specifies that for the purposes of the dual process method, “the information that is referred to must be from different sources, and neither the person whose identity is being ascertained nor the person or entity that is ascertaining their identity can be a source”. Furthermore, according to subsection 64(1.4) of the PCMLTFR, “If a document is used to ascertain identity under subsection (1), it must be authentic, valid and current. Other information that is used for that purpose must be valid and current”.

Thus, under the dual process method, a reporting entity must refer to authentic, valid and current documents or valid and current information from two independent, reliable sources to ascertain a client's identity. In addition, the information must match the information provided by the client. The source must be reliable, meaning that is must be well known, considered reputable, and can be trusted to verify the client’s identity. Also, the source cannot be the reporting entity, or the client; it must be independent.

As outlined at paragraph 64.2(d) of the PCMLTFR, when the dual process method is used to ascertain the identity of a client, a record must be kept that includes the person’s name, the date on which this method was used, the source of the information, the type of information referred to, and the account number included in it or a number associated with the information if no account number exists.

Therefore, to answer your question, a mobile service provider may be referred to as one acceptable source to ascertain a client’s name and address under the dual process method, so long as it meets all of the requirements and accurate records can be kept. A reporting entity must be able to demonstrate that it referred to two independent and reliable sources when using the dual process method, as per the PCMLTFR.

Date answered: 2017-03-27

Answer updated on: 2019-06-25

PI Number: PI-7656

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): Ascertaining Identification

Guidance: Methods to identify individuals and confirm the existence of entities

Regulations: 64(1)(d), 64(1.3), 64(1.4), 64.2(d)

Operational Briefs and Alerts - Verification of list

Question:

I would like to obtain more information about the Operational Alert: Identification of higher risk currency exchange houses in Daesh - accessible territory in Iraq. Specifically, should Credit Unions compare the names listed in this brief to the names of members in the credit union, and would this comparison be just like the terrorist name/entity compare?

Answer:

Operational Briefs and Alerts provide indicator-based information for reporting entities on specific money laundering and terrorist financing issues, with a focus on methods, threats, and vulnerabilities. These products are intended to support reporting entities in meeting their compliance obligations, to assist them with factors to consider in their risk assessments, and provide an additional information resource when they consider their need for possible risk mitigation.

More specifically, this Operational Alert provides specific guidance to Canadian reporting entities about named foreign financial entities (noted in Appendix A) through which the Canadian financial system could be exposed to Daesh-related terrorist financing. In this context, FINTRAC is reminding all reporting entities subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations of their obligations to submit suspicious transaction reports (STR) and terrorist property reports (TPR) to FINTRAC and to risk assess their clients accordingly.

The requirement to report an STR to FINTRAC is identified at section 7 of the PCMLTFA, which states that “Subject to section 10.1, every person or entity referred to in section 5 shall report to the Centre, in the prescribed form and manner, 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
(a) the transaction is related to the commission or the attempted commission of a money laundering offence; or
(b) the transaction is related to the commission or the attempted commission of a terrorist activity financing offence”.

Regarding the TPR obligation, subsection 7.1(1) of the PCMLTFA stipulates that “every person or entity referred to in section 5 that is 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 shall also make a report on it to the Centre, in the prescribed form and manner”. FINTRAC’s Guideline 5: Submitting Terrorist Property Reports to FINTRAC, and FINTRAC’s website further indicate that a TPR must be sent to FINTRAC, without delay, when reporting entities have property in their possession or control that they know is owned or controlled by or on behalf of a terrorist or a terrorist group.

As part of its compliance program and in accordance with paragraph 71(1)(c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a reporting entity must assess and document its risks in relation to money laundering offences or terrorist activity financing offences. The risk assessment must take into consideration the reporting entity’s: 
• clients and business relationships,
• products and delivery channels,
• geographic location of its activities, and
• any other relevant factor(s).

Therefore, to answer your question, in order to meet the obligations outlined within the PCMLTFA and its associated Regulations, it is recommended that reporting entities compare the names listed in Appendix A to current and future clients. Clients should be assessed as high-risk as applicable, and prescribed special measures must be applied, as required under section 71.1 of the PCMLTFR.

Date answered: 2017-03-07

PI Number: PI-7660

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Compliance Regime, Reporting

Guidance: Compliance Program, 5

Regulations: 71(1)c)

Act: 7, 7.1(1)

Recognizing a client

Question:

I am seeking clarification in regards to the exception to ascertain the identity of an existing client that is recognized by the financial entity. Specifically, FINTRAC's guidance indicates that a financial entity does not need to obtain, for a second time, the identification information of an individual as long as they recognize the individual (visually or by voice).

However, we do not meet our clients face-to-face to ascertain their identity, as we rely on our solicitors to ensure the proper steps have taken place. For example, the original loan funded with a Solicitor and the Solicitor (most often by Borrower's solicitors) verifies the ID and meets with the client, at renewal, the client comes to us directly unless new security documents are required. At the renewal stage, the people involved in processing the loan cannot confirm whether or not they recognize the client. In some cases, our team whom brought in the client may recognize the Borrower but they are not processing the loan, would this qualify as recognizing them, as long as a member of the financial entity can confirm that the client is who they say they are?

Can you please provide some clarification as to what is expected of the financial entity and some guidance in this matter?

Answer:

Amendments have been made to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). Previously, subsection 63(1) of the PCMLTFR specified that “where a person has ascertained the identity of another person in accordance with section 64, the person is not required to subsequently ascertain that same identity again if they recognize that other person”. Subsection 63(1.1) of the PCMLTFR further stated that “Subsection (1) does not apply where the person has doubts about the information collected”. Guideline 6G indicated that an individual could be recognized visually or by voice. However, subsection 63(1) of the PCMLTFR has since been amended, and now explains, “If a person or entity ascertains a person’s identity in accordance with subsection 64(1) and complies with section 64.2 — or if, before the coming into force of this subsection, they ascertained a person’s identity in accordance with subsection 64(1) or (1.1) and complied with section 67, as they read at the time the identity was ascertained — they are not required to ascertain the person’s identity again unless they have doubts about the information that was used for that purpose.” Therefore, pursuant to the amended subsection 63(1) of the PCMLTFR, and in relation to your example – where an existing client wishes to renew a loan, and their identity was previously ascertained – so long as the financial entity (with the obligation to ascertain the client’s identity) has no doubts about the information previously used to ascertain the identity of the client, and a related record was kept, this exception may be applied.

The obligation to ascertain the identity of a client is separate from the obligation to conduct ongoing monitoring of a business relationship. Pursuant to subsection 54.3(1) of the PCMLTFR, “A financial entity that is required to ascertain a person’s identity or confirm an entity’s existence shall (a) conduct ongoing monitoring of its business relationship with that person or entity; and (b) keep a record of the measures taken and the information obtained under paragraph (a).”

A business relationship is defined at subsection 1(2) of the PCMLTFR as “any relationship with a client, established by a person or entity to which section 5 of the Act applies, to conduct financial transactions or provide services related to those transactions and, as the case may be,
(a) if the client holds one or more accounts with that person or entity, all transactions and activities relating to those accounts; or
(b) if the client does not hold an account, only those transactions and activities in respect of which that person or entity is required to ascertain the identity of a person or confirm the existence of an entity under these Regulations.
It does not include any transaction or activity referred to in paragraph 62(1)(a), (b) or (d) or subsection 62(2) or (3).”

Ongoing monitoring is also defined at subsection 1(2) of the PCMLTFR, and means “monitoring on a periodic basis based on the risk assessment undertaken in accordance with subsection 9.6(2) of the Act and subsection 71(1) of these Regulations, by a person or entity to which section 5 of the Act applies of their business relationship with a client for the purpose of
(a) detecting any transactions that are required to be reported in accordance with section 7 of the Act;
(b) keeping client identification information and the information referred to in sections 11.1 and 52.1 up to date;
(c) reassessing the level of risk associated with the client’s transactions and activities; and
(d) determining whether transactions or activities are consistent with the information obtained about their client, including the risk assessment of the client.”

Once a business relationship is established, ongoing monitoring of that business relationship must be performed on a periodic basis in relation to the risk assessment of that client. High-risk clients must be monitored more frequently. As indicated in the definition, one of the purposes of conducting ongoing monitoring is to keep client identification information up to date. This is not the same as the requirement to ascertain the identity of a client as per the specified methods outlined in the PCMLTFR. Instead, to update client information a reporting entity could periodically ask the client to confirm the identification information it has on record. 

Date answered: 2016-11-09

PI Number: PI-7676

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Business Relationship, Ongoing Monitoring

Guidance: Know your client requirements

Regulations: 1(2), 54.3(1), 63(1), 63(1.1)

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 ascertain 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 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

PI Number: PI-7650

Activity Sector(s): Casinos

Obligation(s): Ascertaining Identification, Record Keeping, Reporting

New ID methods - Real Estate Brokers and Agents

Question:

I have several questions in regards to the recent amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), and the FINTRAC Guideline: Methods to ascertain the identity of individual clients.

1. For the Dual Process Method, can FINTRAC provide more details on what would be a “reliable” document or information source?
For example:

  • Is a document signed by a guarantor confirming the client’s date of birth and name or a notarized copy of a document sufficient?
  • Can FINTRAC provide more examples of “information” (rather than “documents”) that may be used to satisfy the Dual Process Method?  The Guidelines cite the example of a “Telephone call…from the financial entity holding the deposit account”. However, may telephone calls from other institutions or Government Bodies be used?

2. For the Dual Process Method, can FINTRAC provide examples of foreign documents that could be used?

  • For example, is a foreign utility bill, foreign bank statement or foreign marriage certificate sufficient if it includes the relevant information (i.e. name and address or name and date of birth)?
  • Is a bank statement from an overseas branch of a Canadian bank sufficient to confirm a financial account?
  • Is a bank statement from the domestic branch of a foreign bank that operates in Canada sufficient?
  • Is a bank statement from the overseas branch of a foreign bank that operates in Canada sufficient?

3. For the Dual Process Method, the Guideline states that “if there is no account number, you must record a reference number that is associated with the information”.

  • Can FINTRAC please provide examples of when a reference number rather than an account number would be used?
  • Is this reference number simply a reference number internal to the reporting entity and when would a reference number be used rather than an account number?

4. For the Photo ID method, the Guidelines require both “Issuing Jurisdiction” and “Country”. We understand this to mean:

  • For an Ontario driver’s license, “Ontario” is the issuing jurisdiction and “Canada” is the country.
  • For a Canadian passport, “Federal Government of Canada” is the issuing jurisdiction and “Canada” is the country.
  • For a Californian driver’s license, “California” is the issuing jurisdiction and “United States” is the country.
  • For a US passport, “Government of United States” is the issuing jurisdiction and “United States” is the country.

5. When a real estate broker or salesperson uses an agent or mandatary to obtain the client information, from the agent/mandatary please confirm our understanding that the broker/salesperson simply needs to look at what the agent/mandatary has given them - they don’t need to compare it to another document.

6. Regarding the amendment to 63(1), and the change from "recognizing" a previously identified client to not having doubts:

  • Are brokers/salespersons required to ascertain a client’s identity where the client’s identity was previously ascertained and the broker/salesperson does not have any doubts about the information but where they do not necessarily recognize the client? For example, in cases where a new salesperson is informed by his broker that a client’s identity has been previously ascertained and the information on file appears complete.

7. Please clarify if FINTRAC requires a client information record and third party records to be kept on unrepresented parties.

Answer:

1. The dual process method involves referring to information from reliable and independent sources. The information may be found in documents from these sources or may be information that these sources are able to provide. If you refer to a document, you must view the authentic, valid and current document. If you refer to information provided from a source, it must be valid and current. The client does not need to be physically present at the time you ascertain their identity.

In reference to a document or an information source, as explained in the FINTRAC Guidelines, “reliable” means that the source is well known and considered reputable, and is one that you trust to verify the identity of the client. You cannot use the same source for the two categories of information, and the source providing the information cannot be the reporting entity or the client; it must be independent. For example, reliable sources can be the federal, provincial, territorial and municipal levels of government, crown corporations, financial entities or utility providers.

Therefore, yes, both a document signed by a guarantor and a notarized copy of a document confirming the client’s date of birth and name are sufficient documents for ascertaining client identity, so long as the documents are authentic, valid, and current. In addition, yes, telephone calls from other institutions or Government Bodies may also be used as acceptable sources of information, so long as the information provided is valid and current, as described in the FINTRAC Guidelines.

2. With respect to the dual process method, all of the examples you provided may be used for the purpose of verifying a client’s name and address, or name and date of birth, so long as they are the authentic documents and refer to information from reliable and independent sources. However, it should be noted that in regards to confirming a client’s name and financial account, the financial account information has to be obtained from a financial entity as defined in the PCMLTFR.

3. To answer your question, no, the reference number could not simply be a reference number internal to the reporting entity. The reference number has to be associated with the information from the source. As explained in the FINTRAC Guidelines, the source is the issuer or provider of information or documents for ascertaining identification. A reference number may be used when no financial account number exists.

4. When using the photo identification method, a reporting entity has record keeping obligations related to:

  • Client’s name
  • Type of document
  • Document number
  • Issuing jurisdiction and country
  • Expiry date
  • Date of verification

We have two corrections related to the examples you provide, regarding the recordkeeping obligations for issuing jurisdiction and country; for a Canadian passport, “Canada” is the issuing jurisdiction and the country, and for a US passport, “United States of America” is the issuing jurisdiction and the country.

5. An agent/mandatary may be used if there is a written agreement or arrangement in place and the reporting entity obtains all the information from the agent/mandatary. The reporting entity must be satisfied that the information obtained by the agent/mandatary is sufficient to meet its ascertaining identity obligations. The information must match the information provided by the client. 

6.Subsection 63(1) of the PCMLTFR states that “If a person or entity ascertains a person’s identity in accordance with subsection 64(1) and complies with section 64.2 — or if, before the coming into force of this subsection, they ascertained a person’s identity in accordance with subsection 64(1) or (1.1) and complied with section 67, as they read at the time the identity was ascertained — they are not required to ascertain the person’s identity again unless they have doubts about the information that was used for that purpose.”

Therefore, so long as the reporting entity (with the obligation to ascertain identity) has no doubts about the information previously used to ascertain the identity of a client, and a related record was kept, this exception may be applied.

7. No, real estate agents and brokers are not required to keep client information records on unrepresented parties to a real estate transaction. However, subsection 59.2(3) of the PCMLTFR identifies that a real estate broker or sales representative that represents either the buyer or seller in a real estate transaction must take reasonable measures to ascertain the identity of any unrepresented party to the transaction. If they are unable to ascertain the identity of the unrepresented party, subsection 59.2(4) of the PCMLTFR identifies that a record must be kept that details the measures taken to ascertain identity and the reasons why the identity could not be ascertained.

In the real estate sector, third party determinations are required when a large cash transaction record and a client information record are kept. Subsection 8(3) of the PCMLTFR, indicates that a reporting entity must keep a record when it is unable to determine whether a conductor of a large cash transaction, for which a large cash transaction record must be kept, is acting on behalf of a third party, but has reasonable grounds to suspect they are doing so. A similar obligation exists in relation to client information records at subsection 10(3) of the PCMLTFR.

Date answered: 2016-09-26

Answer updated on: 2019-06-25

PI Number: PI-6909

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 8(3), 10(3), 59.2, 63(1), 64

Typos/Inaccuracies in the credit file

Question:

The guidelines state that "To be acceptable, the credit file details must match the name, date of birth and address provided by the client. If any of the information does not match, you will need to use another method to ascertain client identity". On occasion, we find the data in the credit file may contain a variation of a name, a typo in the date of birth or more frequently an out dated address. Can we still apply the credit file method?

Answer:

You have indicated that you use the credit file method to ascertain the identity of individual clients.

Pursuant to paragraph 64(1)(c) of the PCMLTFR, a reporting entity can ascertain the identity of a client by referring to a Canadian credit file that has been in existence for at least three years. As indicated in the FINTRAC Guideline, to be acceptable, the credit file details must match the name, date of birth and address provided by the client. If any of the information does not match, you will need to use another method to ascertain client identity.

You have indicated that "on occasion, we find the data in the credit file may contain a variation of a name, a typo in the date of birth or more frequently an out dated address.” In these instances, it is for the reporting entity to determine whether the information contained in the Canadian credit file matches the information collected from the client. If it is a slight typo/error in the address or a misspelled name, a reporting entity may determine the information still matches that which was provided by the client. However, in the case of an incorrect date of birth, it is likely the reporting entity will determine that the information does not match. In this case, the reporting entity cannot rely on the information referred to in the credit file for client identification purposes, and an alternative method (photo identification or the dual process method) for ascertaining the identity of clients must be used.

Date answered: 2016-09-23

PI Number: PI-6907

Activity Sector(s): Casinos

Obligation(s): Ascertaining Identification

Regulations: 64(1)(c)

Nexus/Global Entry Cards acceptable as photo ID

Question:

Are Nexus and/or Global Entry cards acceptable forms of identification under the recently amended Regulations, as well as the previous Regulations?

Answer:

According to FINTRAC’s Guideline: Methods to ascertain the identity of individual clients, various forms of identification for the single process method of government-issued photo identification are acceptable so long as the documents used to ascertain client identity meet all requirements as outlined by the recently amended Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR).

For the Government-issued photo identification method, a reporting entity can rely on valid, current and authentic photo identification issued by a federal, provincial or territorial government to ascertain client identity. They may accept a foreign photo identification document if it is equivalent to a Canadian photo identification document. Photo identification documents issued by a municipal government, Canadian or foreign, are not acceptable.

The reporting entity must view the authentic document of their client in order to compare the client with their photo. 

The photo identification document must:

  1. Indicate the client's name
  2. Have a photo of the client
  3. Have a unique identifier number

It is not acceptable to view photo identification online, through a video conference or through any virtual type of application.  A reporting entity cannot accept a copy or a digitally scanned image of the photo identification. The Guideline provides examples of acceptable government-issued photo identification documents from federal, provincial, and territorial authorities; however, this list is not exhaustive.

You have also asked whether the Nexus card and Global Entry card are acceptable forms of identification as per the old methods of ascertaining identification, which may also be used during the transition period until June 30, 2017. As explained in the previous Guidelines (Guideline 6: Record Keeping and Client Identification), there are three conditions that make a document acceptable for identification purposes:

  1. The document must have a unique identifier number
  2. The document must have been issued by a provincial, territorial or federal government
  3. The document also has to be a valid one and cannot have expired

These conditions are applicable at the time the identity is ascertained.

Therefore to answer both of your questions, based on the new and old methods of ascertaining identity, the NEXUS card and the Global Entry card are acceptable forms of identification in either case. Because the NEXUS card includes the client’s name, has an individual photo, a unique identifier number, is issued by Canada Border Services Agency (CBSA) and is valid for five years, it meets the requirements of being an acceptable form of identification as per the old and new methods. Likewise the Global Entry card, which is issued by U.S. Customs and Border Protection, also meets these requirements because it includes the client’s name, an individual photo, a unique identifier number and is valid until its expiry date.

Date answered: 2016-08-31

Answer updated on: 2019-06-25

PI Number: PI-6901

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): Ascertaining Identification

Regulations: 64

Ascertaining the identity of a child

Question:

I am seeking clarification in regards to FINTRAC’s Guideline: Methods to ascertain the identity of individual clients. After reading the Regulations and the guidance, my interpretation is in situations where the parent or guardian is a client of the financial entity (identity ascertained) the parent or guardian is confirming the child’s address as such an original document, information, acceptable identification is to be presented to confirm the account holder’s address VS relying on information in the financial entity records. Is this correct? Namely, I am wondering whether a financial entity is able to use its records on the parent of the child in order to verify the identity of a child between 12 and 15 years of age in an account opening scenario.

Answer:

According to subsection 64(1.2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “The identity of a person who is at least 12 years of age but not more than 15 years of age may be ascertained by referring under subparagraph (1)(d)(i) to information that includes the name and address of one of the person’s parents or their guardian or tutor and by verifying that the address is that of the person.”

Subparagraph 64(1)(d)(i) states that “referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,” is one acceptable method of ascertaining identification that has to be done in combination with subparagraph 64(1)(d)(ii), or subparagraph 64(1)(d)(iii).

Subsection 64(1.3) of the amended PCMLTFR identifies that “For the purposes of subparagraphs (1)(d)(i) to (iii), the information that is referred to must be from different sources, and neither the person whose identity is being ascertained nor the person or entity that is ascertaining their identity can be a source.”

Therefore, to answer your question as to whether a financial entity is able to use its own records in order to verify the identity of a child between 12 and 15 years of age in an account opening situation, the answer is no. Based on the information outlined, the financial entity cannot use its own records to verify the identity of the child in this case as it cannot be the source for the information.

The Guidance does state, “you could rely on the parent’s bank account statement to confirm their common address and the child’s birth certificate to confirm the child’s name and date of birth”; however, this example assumes that the parent’s information is not from the financial entity opening the account for the child, but a different financial entity at which they hold an account.

Date answered: 2016-08-05

PI Number: PI-6887

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Regulations: 64

Opening an account in its name - exception 62(2)(l)

Question:

We are seeking guidance regarding the application of the exceptions provided under paragraphs 62(2)(j) and 62(2)(l) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) with respect to record-keeping and ascertaining the identity of clients.

By way of background, a law firm acting on behalf of its client has contacted our financial institution to have funds held in escrow until a judgment is handed down, and our financial institution must open a trust account into which a deposit can be made.

The account holder is our financial institution, and the persons authorized to act on the account are employees acting as trustees who are duly authorized by means of corporate resolutions. Deposits in this account will only be released upon an order in a court judgment.

Answer:

Pursuant to subsection 62(2) of the PCMLTFR, there are certain exceptions to the requirements relating to record-keeping and ascertaining identity, namely in the case of 

"(j) the opening of an account established pursuant to the escrow requirements of a Canadian securities regulator or a Canadian stock exchange or any provincial legislation; and
(l) the opening of an account in the name of, or in respect of which instructions are authorized to be given by, a financial entity, a securities dealer or a life insurance company or by an investment fund that is regulated under provincial securities legislation."

It is important to note that, since the entities mentioned in paragraph 62(2)(l) of the PCMLTFR are defined in subsection 1(2) of the PCMLTFR, the application of this exception is very specific.

Based on the information provided, it is our understanding that your financial entity is opening a trust account in its name, and that it is the financial entity's employees, acting as trustees as part of their duties for the financial entity, who are authorized to give instructions in respect of the account. Hence, the exception in paragraph 62(2)(l) of the PCMLTFR appears to apply as long as the financial entity meets all the specified requirements.

Date answered: 2016-07-21

PI Number: PI-6919

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Regulations: 1(2), 62(2)(j), 62(2)(l)

Additional party added to a real estate offer

Question:

We are wondering whether we need to obtain client identity information for an additional party that has been added to an accepted real estate offer?

Answer:

According to section 37 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “Every real estate broker or sales representative is subject to Part 1 of the Act when they act as an agent in respect of the purchase or sale of real estate.”

According to paragraph 59.2(1)(a) of the PCMLTFR, “Subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction”.

Subsection 39(1) of the PCMLTFR states that certain records must be kept by a real estate broker or sales representative when engaging in the activity described in section 37 of the PCMLTFR, and as per paragraph 39(1)(b) of the PCMLTFR, “a client information record must be kept in respect of every purchase or sale of real estate”.

Therefore, to answer your question, you must ascertain the identity, and keep the required records, of every person who conducts the transaction. This includes the party added to the offer, as per the PCMLTFR.

Date answered: 2016-07-20

PI Number: PI-6879

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Regulations: 37, 39(1), 59.2(1)a)

Requirements when a real estate broker or sales representative acts as an agent of a real estate developer

Question:

What are the requirements of a real estate developer to ascertain a client’s identity in situations where it has a real estate broker or sales representative act as its agent for the sale of real estate? In this situation, would the real estate developer, the agent and/or the buyer’s agent be required to ascertain identity?

Answer:

Pursuant to subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “a real estate developer means, on any given day in a calendar year, a person or entity who, in that calendar year and before that day or in any previous calendar year after 2007, has sold to the public, other than the capacity of a real estate broker or sales representative,
a) five or more new houses or condominium units;
b) one or more new commercial or industrial buildings; or
c) one or more new multi-unit residential buildings each of which contains five or more residential units, or two or more new multi-unit residential buildings that together contain five or more residential units.”

According to subsection 39.5(1) of the PCMLTFR, every real estate developer is subject to Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) when
a) in the case of a person or of an entity other than a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building; and
b) in the case of an entity that is a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building on their own behalf or on behalf of a subsidiary or affiliate.

In regards to real estate brokers or real estate sales representatives, they are defined at subsection 1(2) of the PCMLTFR as “a person or entity that is registered or licensed under provincial legislation in respect of the sale or purchase of real estate”. Section 37 of the PCMLTFR states that every real estate broker or sales representative is subject to Part 1 of the PCMLTFA when they act as an agent in respect of the purchase or sale of real estate.

Pursuant to section 59.5 and subsection 59.2(1) of the PCMLTFR, and subject to subsection 62(2) and section 63, every real estate developer and every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under section 39.7 and subsection 39(1) respectively,

a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of the corporation’s directors; and
c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.

In cases where a real estate developer hires a real estate broker or sales representative, not as an employee, but to act as its agent for the purchase and/or sale of real estate, the real estate developer would be the real estate broker’s client and must be identified as so. In this instance, the real estate broker or sale representative would be responsible for all of the associated obligations, including the identification requirements, related to the purchase and/or sale of the real estate outlined under the PCMLTFA and its associated Regulations.

As to whether the “buyer’s agent is obligated to ascertain anyone’s identity”, subsection 59.2(2) of the PCMLTFR specifies that “Where the persons or entities that are parties to a real estate transaction are each represented by a different real estate broker or sales representative, the real estate broker or sales representative that represents one party is not required to ascertain the identity or the name and address of any other party or confirm their existence”.

Therefore, the buyer’s agent is responsible for ascertaining the identity of their client (the buyer) in this scenario, as required by the PCMLTFA and its associated Regulations.

Date answered: 2016-06-28

PI Number: PI-6430

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 1(2), 37, 39.5(1), 59.2, 59.5

Failure to ID client in the sale of real estate

Question:

What should a real estate broker or sale representative do when a seller refuses to provide identification? Could this result in a fine?

Answer:

FINTRAC administers the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations, and ensures that entities subject to this legislation are in compliance with the obligations outlined therein. The obligations established for the real estate sector, and other sectors, provide important measures for countering criminal behaviour in order to deter criminals from operating within the legitimate economy. For example, the simple requirement to identify a customer when they are purchasing or selling real estate is an important measure of deterrence as it eliminates the anonymity of the transaction. Compliance with the law also ensures that FINTRAC receives information that serves as the foundation of its analysis and intelligence. FINTRAC provides disclosures of financial intelligence to its partners when it has reasonable grounds to suspect the information would be relevant to investigations or prosecutions of money laundering and terrorist activity financing offences. These disclosures may contain information provided by reporting entities, including real estate brokers and sales representatives. 

Real estate brokers and sales representatives are subject to the PCMLTFA and its associated Regulations when they act as an agent in respect of the purchase or sale of real estate. Once subject, specific obligations must be met when engaging in these activities.

In accordance with the record keeping obligations for real estate brokers and agents, outlined at section 39 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a client information record must be kept in respect of every purchase or sale of real estate. As identified at subsection 1(2) of the PCMLTFR, a client information record means a record that sets out a client’s name and address and, if the client is a person, their date of birth and the nature of their principal business or their occupation, as applicable.

When a record, such as the client information record, is required to be kept in respect of a transaction, subsection 59.2(1) of the PCMLTFR specifies that client identification must be obtained. As such, except as identified in subsection 62(2) and section 63 of the PCMLTFR, every real estate broker and sales representative must:
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors; and
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.

As a result, when representing a client for the purchase or sale of real estate, client identification information must be obtained. Failure to do so, or to keep the necessary records, results in non-compliance with the obligations of the PCMLTFA and its associated Regulations. By being non-compliant, FINTRAC has legislative authority to issue administrative monetary penalties (AMPs), depending on the severity of the violation, up to $100,000 for individuals and up to $500,000 for entities (e.g. corporations). As well, a failure to meet the obligations outlined in Part 1 of the PCMLTFA and its associated Regulations could also result in criminal penalties.

Therefore, when a client refuses to provide identification, it is for the real estate broker or sales representative to determine whether or not to proceed with the transaction, knowing it can be cited for non-compliance. Reasonable measures are only acceptable when dealing with an unrepresented party, namely a party to the transaction that is not represented by a real estate broker or agent.

Date answered: 2016-06-22

PI Number: PI-6427

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 1(2), 37, 39, 59.2

Obligations for credit cards and loans

Question:

  1. Signature Card for Entity Clients - What are the obligations in regards to maintaining a signature card for entities? More specifically, when opening a:
    a. credit card account only (i.e. purchasing/travel cards)
    b. loan account only (i.e. direct lending facilities or syndicated facilities)
     
  2. Client Identity for Entity Clients - What are the obligations in regards to ascertaining the identity of authorized signers? More specifically, when opening
    a: a. credit card account only (i.e. purchasing/travel cards)
    b. loan account only (i.e. direct lending facilities or syndicated facilities)
     
  3. Non-Face-to-Face Verification - Is there a requirement to ascertain the identity of authorized signers when opening a credit card account for an entity? Is it permissible to use the combination of Identification product and credit file methods for non-face-to-face verification of authorized signers?
     
  4. Client Identity - The majority of our entities are referrals from other Financial Institutions in Canada and the identity of these entities have already been ascertained by the referring financial institutions. Is it permissible for our organization to rely on the referring financial institutions to provide confirmation that the identity of these entities has been verified?

Answer:

1a. As specified in paragraph 14(a) of the PCMLTFR, there is no obligation for a financial entity to keep a signature card when opening a credit card account. However, section 14.1 of the PCMLTFR, states that, subject to subsection 62(2), every financial entity must keep, in respect of every credit card account that it opens, a credit card account record. The record must contain the name, address, and telephone number of every holder of a credit card for the account. Reasonable measures must also be taken to obtain the date of birth of every credit card holder for the account.

Given you specify that your client base consists of corporations and partnerships, if the credit card account is opened in the name of an entity other than a corporation, the record must also include the name and address of the client and the nature of their principal business. If the account is opened in the name of a corporation, the record must include the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of the account.

1b. Pursuant to paragraph 14(a) of the PCMLTFR, and subject to subsection 62(2) of the PCMLTFR, a financial entity is required to keep a signature card in respect of each account holder, for every account that it opens, other than a credit card account. This includes loan accounts.

2a. To answer your question, section 54.1 of the PCMLTFR states, “Subject to subsections 62(1) and (2) and section 63, every financial entity shall:
(b) where the financial entity opens a credit card account in the name of a corporation, confirm the existence of and ascertain the name and address of the corporation and the names of its directors in accordance with section 65; and
(c) where the financial entity opens a credit card account in the name of an entity other than a corporation, confirm the existence of the entity in accordance with section 66.”

2b. For loan accounts, paragraph 54(1)(a) of the PCMLTFR states, “Subject to sections 62 and 63, every financial entity shall in accordance with subsection 64(1), ascertain the identity of every person who signs a signature card in respect of an account, other than a credit card account, that the financial entity opens, except in the case of a business account the signature card of which is signed by more than three persons authorized to act with respect to the account, if the financial entity has ascertained the identity of at least three of those persons.”

If the account is opened for a corporation, paragraph 54(1)(d) of the PCMLTFR requires that a financial entity also, in accordance with section 65, confirm the existence of and ascertain the name and address of the corporation, and the names of the corporation’s directors. If the account is opened for an entity other than a corporation, paragraph 54(1)(e) of the PCMLTFR requires that a financial entity also, in accordance with section 66, confirm the existence of the entity.

3. As indicated in the response to 2a. above, when opening credit card accounts in the name of corporations, a financial entity must confirm the existence of and ascertain the name and address of the corporation and the names of its directions in accordance with section 65 of the PCMLTFR. For credit card accounts opened in the name of entities other than corporations, a financial entity must confirm the existence of the entity in accordance with section 66. The non-face-to-face identification methods may only be used to ascertain the identity of individuals that are not physically present, and therefore do not apply.

4. If by “referrals”, you mean that accounts are acquired from other financial entities subject to the PCMLTFA and its associated Regulations, then the client identification performed by the other financial entity may be relied upon, so long as:

  • the clients were previously identified and records were kept in accordance with the PCMLTFA and its associated Regulations, or the accounts were opened prior to the legislative requirements to ascertain identity coming into force on June 12, 2002;
  • only immaterial changes were made to the accounts such as, the accounts were given new numbers, logos and branding, new cards were issued and ancillary services were added or removed; and
  • the transactional history of the accounts follows.

The acquiring financial entity is responsible for assessing the acquired client accounts against the criteria outlined above to ensure each item is met. If the acquiring financial entity determines that the criteria has been met, then there is no requirement to repeat the process of ascertaining the identity of each newly acquired account holder. However, should the acquiring financial entity open any additional accounts for an acquired client, then it must ascertain the identity of the client at that time.

Additionally, pursuant to subparagraph 71(1)(c)(i) of the PCMLTFR, the acquiring financial entity is required to conduct a risk assessment of each newly acquired account holder and to keep a record of the purpose and intended nature of the business relationship. This information has to be reviewed on a periodic basis and kept up-to-date. If the acquiring financial entity identifies a client as high-risk, the business relationship with that client must be monitored more frequently, the client identification information must be updated more frequently, and other enhanced measures must be taken to mitigate the risk.

Date answered: 2016-06-09

PI Number: PI-6425

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Regulations: 14(a), 14.1, 54(1)(a), 54.1, 71(1)(c)(i)

Sharing of clients' personal information

Question:

As accountants, can we share clients’ personal information with a third party, such as another accountant who is involved in the transaction?

Answer:

To address your question, there is no specific legislative prohibition in the PCMLTFA or its associated Regulations preventing a reporting entity from sharing a client’s personal information. That said, section 8 of the PCMLTFA, that pertains to suspicious transaction reporting, states that “No person or entity shall disclose that they have made a report under section 7, or disclose the contents of such a report, with the intent to prejudice a criminal investigation, whether or not a criminal investigation has begun”. As a result, a reporting entity cannot share the contents of a suspicious transaction report (STR), or that they have submitted an STR to FINTRAC, with any other entity if the intent is to impair a criminal investigation (whether an investigation has begun or not).

Additionally, it should be mentioned that the use of personal information in Canadian commercial activities is protected by the Personal Information Protection and Electronic Documents Act (PIPEDA), or by substantially similar provincial legislation. Therefore, for more information and greater clarification, you may wish to redirect your question to the Office of the Privacy Commissioner of Canada or Industry Canada (Privacy For Business).

Date answered: 2016-05-17

PI Number: PI-6423

Activity Sector(s): Accountants

Obligation(s): Ascertaining Identification

Guidance:

Act: 8

Customer due diligence

Question:

I am seeking more information regarding the obligation for securities dealers to ascertain the identity of their clients. More specifically, what is the detailed definition of the “customer due diligence” principle?

Answer:

Neither the Guidelines, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations or an existing policy interpretation defines customer due diligence. However, this is generally understood to encompass the measures taken to identify or prevent foreseeable risks, so, in relation to customers, includes measures to ascertain identification, keep records, assess the risks associated with the clients and their activities, and monitor clients and/or business relationships.

To this end, all of the securities dealer obligations associated with the above, would be part of their client due diligence pursuant to the PCMLTFA and its associated Regulations. In addition, pursuant to section 57.3 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), securities dealers are required to perform enhanced customer due diligence when they consider that the risk of money laundering offence or terrorist activity financing offence is higher and to apply the prescribed special measures in accordance with section 71.1 of the PCMLTFR.

Date answered: 2016-03-18

PI Number: PI-6406

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Regulations: 57.3

Subsidiary of a crown corporation

Question:

A crown corporation has a pension plan under which there is a section 149 (Income Tax Act) Company. Is this company considered a subsidiary of a crown corporation and therefore subject to the exception in 62(2)(n) of the PCMLTFR as long as its financial statements are also consolidated with the crown corporation?

Answer:

The realty advisor has indicated that a numbered company is a subsidiary of a public body or very large corporation to which 62(2)(m) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) applies. Research suggests that, to protect the plans' assets, real estate holdings for Canadian pension plans are often held through a limited liability vehicle such as a corporation, rather than directly by the pension plan. That said, given that the crown corporation is an entity to which the exception in 62(2)(m) of the PCMLTFR can be applied, then the exception in 62(2)(n) of the PCMLTFR can be applied to the numbered company, as it is a subsidiary that consolidates its financial statements with that public body or very large corporation.

Date answered: 2016-02-17

PI Number: PI-6392

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 62(2)(m), 62(2)(n)

Changes regarding persons authorized to give instructions on an account

Question:

Our existing client is an entity. When an account was opened a few years ago, the identities of three people authorized to give instructions about the account were ascertained in accordance with the Regulations. Recently, one of the people authorized to provide instructions was replaced by a new person. As a result, should we ascertain the identity of this new person?

Answer:

Subparagraph 23(1)(a)(i) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) requires that the securities dealer keep a signature card that bears the signature of the person who is authorized to give instructions in respect of the account.

Out of this obligation, stems the requirement, pursuant to subsection 57(1) of the PCMLTFR, and subject to section 62 and subsection 63(1), for every securities dealer to ascertain, in accordance with subsection 64(1), the identity of every person who is authorized to give instructions in respect of an account for which that signature card was kept. Pursuant to paragraph 64(2)(a) of the PCMLTFR, ascertaining the identity of the person for who a signature card is kept, must be carried out before any transaction other than an initial deposit is carried out on an account.

There is, however, an exception whereby a securities dealer is not required to ascertain the identity of all who are authorized to give instructions in respect of a business account, as long as the identity of at least three of those persons authorized has been ascertained [paragraph 62(1)(a) of the PCMLTFR]. For this exception to apply, the identity of at least three persons authorized to instruct on the account has to continue to be ascertained. Therefore, if one of the three formerly identified persons has since left the company, the identity of another person must be ascertained so that the number of persons whose identity has been ascertained is maintained at three. Should there not be three people whose identity was ascertained when the business account was opened, then the reporting entity is required to fulfill the obligation to ascertain the identity of any other person who signs a signature card to be authorized to give instructions in respect of the account.

Date answered: 2016-01-15

PI Number: PI-4450

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 23(1)(a)(i), 57(1), 62(1)(a), 64(2)(a)

Ascertaining identity - Sale by judicial authority

Question:

What are the requirements for real estate brokers and agents to ascertain the identity of their clients? In particular, is it necessary to ascertain the identity of a bailiff hired by a very large corporation following the exercise of a hypothecary right by a financial institution?

Answer:

Real estate brokers and sales representatives are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) when they act as an agent in respect of the purchase or sale of real estate.

In accordance with paragraph 59.2(1)(a) of the PCMLTFR, subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), ascertain , in accordance with subsection 64(1), the identity of every person who conducts the transaction. As such, the real estate broker or sales representative must ascertain the identity of the person conducting the transaction. The real estate broker or sales representative must then consider where or not there is a corporation or an entity other than a corporation, on whose behalf the transaction is being conducted, to determine whether or not there are additional obligations related to ascertaining of identity, pursuant to paragraphs 59.2(1)(b) and (c) of the PCMLTFR.

That said, the paragraph 62(2)(m) of the PCMLTFR contains an exception whereby the real estate broker or sales representative is exempt from certain identification and record-keeping obligations in instances where the entity in respect of which a record is required to be kept is a public body, or a corporation that has minimum net assets of $75 million on its last audited balance sheet and whose shares are traded on a Canadian stock exchange or a stock exchange designated under subsection 262(1) of the Income Tax Act, and operates in a country that is a member of the Financial Action Task Force. Where the huissier has been engaged to represent a public body, or a corporation that qualifies for the exception under subsection 62(2)(m) of the Regulations, there is no legislative requirement to identify either the person conducting the transaction, or the large corporation or public body.

Date answered: 2016-01-07

PI Number: PI-4449

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 59.2, 62(2)(m)

Act: 5(j)

Address used for account opening

Question:

Our credit union typically requires its account holders to provide the physical location where business transactions are conducted, but is finding it difficult to gather this information from corporations that do not have a physical location. As such, could you confirm whether it would be acceptable to use the entity’s legal address (lawyer’s address), in situations such as these?

Answer:

As per the account opening obligations outlined at subsection 54(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), and subject to section 62 and 63, every financial entity must, in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation for which the financial entity opens an account and the names of the corporation’s directors.”

Section 65 specifies the existence of a corporation shall be confirmed and its name and address and the names of its directors shall be ascertained by referring to:

  • its certificate of corporate status,
  • a record that it is required to file annually under the applicable provincial securities legislation,
  • or any other record that ascertains its existence as a corporation.

Therefore, in situations where a corporation does not have a physical location, it may use its legal address so long as it is identified on the record used to confirm its existence in accordance with section 65 of the PCMLTFR.

Date answered: 2015-12-23

PI Number: PI-4447

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 54(1), 65

Client ID for an estate sale

Question:

Who or what supporting documentation should be looked at for client identification purposes, when an estate is being sold?

Answer:

Pursuant to subsection 39(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) every real estate broker or sales representative, when acting for the purchase or sale of real estate, must keep certain records, namely:

  • a receipt of funds record of every amount that they receive in the course of a single transaction, unless received from a financial entity or public body;
  • a client information record in respect of every purchase or sale of real estate;
  • a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation, if the receipt of funds record or the client information is in respect of a corporation.

When any of these records are required to be kept, the real estate broker or sales representative must, in accordance with subsection 64(1) of the PCMLTFR, ascertain the identity of every person who conducts the transaction, and subsequently confirm the existence of any corporation or entity other than a corporation, on whose behalf the transaction is conducted.

Even in an estate sale, there is a person who is acting for the purchase or sale. This person must be identified, and the associated records kept.

Date answered: 2015-12-23

PI Number: PI-4446

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 39(1), 64(1)

Selling property for clients that are corporations

Question:

Could you provide clarification on the obligations of real estate agents to ascertain identity when selling property for clients that are corporations? More specifically, where it is stated that a real estate agent must identify the corporation’s signing officer and what would happen if a signing officer refused to provide their ID?

Answer:

Pursuant to section 39 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), when a real estate broker or sales representative acts as an agent in respect of the purchase or sale of real estate, they must keep a client information record in respect of every purchase or sale. Subsection 1(2) of the PCMLTFR specifies that a client information record means a record that sets out a client’s name and address and, in the case of a client that is a corporation, the nature of their principal business. When a client is a corporation, section 39 of the PCMLTFR also requires that a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation, in respect of transactions with the real estate broker or sales representative, be kept.

Subsection 59.2(1) of the PCMLTFR further indicates that “subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1),
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors.”

Therefore, in addition to obtaining and keeping a record of the name and address of the corporation, the nature of the principal business, and a copy of the part of its official corporate records that contains any provision relating to the power to bind the corporation, a real estate agent must confirm the existence of and ascertain the names of a corporation’s directors in accordance with section 65 and ascertain the identity of the individual who conducts the transaction in accordance with subsection 64(1).

If the corporation’s signing officer is conducting the transaction, their identity must be ascertained by the real estate agent in accordance with subsection 64(1) of the PCMLTFR.

Date answered: 2015-12-22

PI Number: PI-4445

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 1(2), 39, 59.2(1), 64(1)

Verification of terrorist lists

Question:

What are FINTRAC's expectations about verifying that settlors, trustees and beneficiaries of a trustee are not the persons or entities on the lists required by the United Nations Resolutions on the Suppression of Terrorism (RIUNRST) and/or the United Nations Al-Qaida and Taliban Regulations (UNAQTR).

Answer:

The Act and Regulations do not specify that a financial entity must ensure that the settlors, trustees and/or beneficiaries of a trust, for whom an account is opened, are not persons or entities registered on the lists referred to by the Regulations establishing a list of entities in application of subsection 83.05(1) of the Criminal Code and/or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (RIUNRST) and/or the United Nations on Al-Qaida and Taliban Regulations (UNAQTR).

However, every financial entity must establish and implement a program in accordance with the Regulations aimed at ensuring their compliance with parts 1 and 1.1 of the Act. The program must, in particular, provide for the development and application of the principles and measures allowing the person or the entity to be evaluated during the activities, the risks of a money laundering offence or a terrorist activity financing offence. Risk analysis must take into consideration the clients and business relationships of the person or the entity, its products and distribution methods, the geographic location of activities and any other appropriate criteria.

In keeping with the FINTRAC guidelines on compliance policies and procedures, a financial entity must know its clients in order to assess risk. Knowing your clients is not limited to identification or record-keeping requirements. It is about understanding who your clients are, including their activities, transaction patterns, how they operate and so on. As such, FINTRAC expects that financial entities anticipate other risk mitigation options, such as confirming whether the person is listed in the Regulations Establishing a List of Entities made under subsection 83.05(1) of the Criminal Code, and/or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (RIUNRST) and/or the United Nations on Al-Qaida and Taliban Regulations (UNAQTR).

That said, in accordance with subsection 7.1(1) of the Act, it is the responsibility of any person or entity referred to by the Act that is required to disclose information under subsection 83.1 of the Criminal Code under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism to report to the Centre in the manner prescribed. By doing this, a financial entity must be aware of whether a client is listed or not in the Regulations Establishing a List of Entities made under subsection 83.05(1) of the Criminal Code, and/or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (RIUNRST) and/or United Nations on Al-Qaida and Taliban Regulations (UNAQTR) to make sure that the financial entity complies with all the applicable laws and regulations.

Date answered: 2015-12-10

PI Number: PI-6385

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Act: Part 1,1.1, 7.1(1)

Real estate transaction with employee as client

Question:

A real estate broker has an employee that is a board member of a separate company that wants to buy a property. The separate company has employed the real estate broker for the purpose of the purchase. Does the real estate broker have the obligation to ascertain the ID of the employee that is a board member of the company? Pursuant to paragraph 62(2)(n) of the PCMLTFR, could the purchaser of the transaction be exempted?

Answer:

The exception outlined in paragraph 62(2)(n) of the PCMLTFR requires that the entity be a subsidiary of an entity referred to in paragraph 62(2)(m) or a public body AND that their financial statements be consolidated. If both conditions are met, then the exception can be applied.

That said, if there is no exception pursuant to paragraph 62(2)(n) or other that may be applied, then the real estate broker or sales representative shall, when engaging in an activity described in section 37, keep the following records:

(a) a receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body;

(b) a record, respect of every purchase or sale, that sets out a client’s name and address and

(a) if the client is a person, their date of birth and the nature of their principal business or their occupation, as applicable; and
(b) if the client is an entity, the nature of their principal business; and

(c) where the receipt of funds record or the client information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the real estate broker or sales representative.

Where a real estate broker or sales representative is required to keep a record, then they must ascertain the identity of the person conducting the transaction AND the corporation, or the entity that is not a corporation, as appropriate.

In this case, the real estate broker is subject to the requirements to keep records and ascertain identity even though the individuals conducting the transaction are also employees, acting in their capacity as board members of the Corporation. The exception can be applied if the Corporation is an entity referred to in paragraph 62(2)(m), or a subsidiary of an entity referred to in 62(2)(m) with whom they also consolidate their financial statements.

Date answered: 2015-12-07

PI Number: PI-6383

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 37, 62(2)(m), 62(2)(n)

Timing of ID

Question:

Do real estate agents have 30 days to record the identification of their clients? Is this 30-day period a recommendation or an obligation?

Answer:

Real estate agents must ascertain the identity of persons for whom they must keep statements of receipt of funds (large cash transaction records) or client information records. Real estate agents must do this when doing the document-related transaction. It is only when the real estate agents must confirm the existence of an entity for which they must keep receipt of funds records or client information records that they must do it within 30 days following the date when the transaction associated with the document was performed.

Date answered: 2015-11-18

PI Number: PI-6372

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Obligations for Trust Account

Question:

Our client is a financial entity. One of their members is a condominium developer who wants to open a trust account at the financial entity. This account will be used for individuals who are purchasing condos to pay their deposits to hold the condo units as the condo is being built.

Does the financial entity have an obligation to verify the identities of all individuals depositing money into that trust account for the purposes of paying a condominium deposit? Or is it sufficient for them to have all relevant information on the condominium developer only?

  • The deposits are for large amounts
  • Many purchasers are international
  • BUT they do not have accounts with the financial entity in their own name and they are only doing one single transaction to the financial entity

Answer:

As per section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a financial entity is required to ascertain the identity of all persons or confirm the existence of all corporations, or entities other than corporations, when an account is opened. Paragraph 54(1)(a) of the PCMLTFR further specifies that, for persons, “subject to sections 62 and 63, every financial entity shall, in accordance with subsection 64(1), ascertain the identity of every person who signs a signature card in respect of an account, other than a credit card account, that the financial entity opens, except in the case of a business account the signature card of which is signed by more than three persons authorized to act with respect to the account, if the financial entity has ascertained the identity of at least three of those persons.”

Therefore, the financial entity is only required to ascertain the identity of the condominium developer, when it opens the account, as he is the account holder. However, given that you state “the deposits are for large amounts” and “many purchasers are international”, the financial entity may also be required to obtain information on each individual depositor for the purposes of fulfilling the large cash transaction (LCT) requirements or electronic funds transfer (EFT) requirements.

Paragraph 12(1)(a) of the PCMLTFR states that subject to section 50 and subsection 52(1), every financial entity shall report the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body. As per Schedule 1, the individual depositors information would be required under Part D, as this part requires the credit union to report information about the individual who conducted the transaction (that is not a deposit into a business account), not the information about the account holder.

Similarly, paragraph 12(1)(c) of the PCMLTFR specifies that every financial entity must report the receipt from outside Canada of an EFT, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be. Subsection 1(2) of the PCMLTFR defines EFT as “the transmission – through any electronic, magnetic or optical device, telephone instrument or computer – of instructions for the transfer of funds, other than the transfer of funds within Canada. In the case of SWIFT messages, only SWIFT MT 103 messages are included.” Schedule 3 and 6 require that information be obtained on the client initiating the EFT. As such, information on the individual depositors who provide instructions for the transfer of funds to the credit union must also be obtained.

Date answered: 2015-07-29

PI Number: PI-6340

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 1(2), 12(1)(a),(c), 54, 54(1)(a), Schedule 1

Exemptions for First Nations band

Question:

Are there any exemptions that apply to the client identification requirements of a real estate transaction for a First Nations band?

Answer:

Subsection 59.2(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1),
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors; and
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.

Exceptions to these requirements are identified at subsection 62(2) and section 63 of the PCMLTFR, however, no specific exception for First Nations bands exists. The only possible exception would be identified at paragraph 62(2)(m) of the PCMLTFR, that is if the First Nations band was identified as a public body. However, First Nations bands do not appear to fall under the definition of public body as defined under subsection 1(2) of the PCMLTFR, which states that “”public body” means:
(a) any department or agent of Her Majesty in right of Canada or of a province;
(b) an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them; and
(c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or any agent of such an organization.”

First Nations bands are not a department or agent of Her Majesty in right of Canada, or of a province; they are not incorporated or an agent of an incorporated entity; and they do not operate a public hospital designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act. As they are not explicitly listed under this definition they are therefore excluded from it.

As a result, there are no exceptions under the PCMLTFA or its associated Regulations that apply to a First Nations band when engaging in real estate transactions.

Date answered: 2015-07-29

PI Number: PI-6335

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 1(2), 59.2(1), 62(2), 63

Verify the identity of persons authorized to give instructions

Question:

I am asking for a policy interpretation under subsection 57(1) of the PCMLTFR about the meaning of “every person" and about knowing whether a securities dealer must ascertain the identity of “every person who is authorized to give instructions in respect of an account," even if such person does not necessarily exercise this authority in the trust deed, or rather if the securities dealer must ascertain the identity of only those persons who, in fact, at the time the account is opened, are those giving instructions for said account.

Answer:

Subsection 57(1) of the Regulations stipulates that “Subject to section 62 and subsection 63(1), every securities dealer shall, in accordance with subsection 64(1), ascertain the identity of every person who is authorized to give instructions in respect of an account for which a record must be kept by the securities dealer under subsection 23(1)." On this topic, section 2 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act specifies that "person means an individual."

While every person that is authorized to give instructions in relation to an account must be identified, the determination of knowing which persons is a question of fact.

In this respect, subsection 62(1) stipulates that "subsections 57(1) and 57.1(1) ... do not apply in respect of
(a) the opening of a business account in respect of which ... the securities dealer ...has already ascertained the identity of at least three persons who are authorized to give instructions in respect of the account."

Consequently, when more than three persons are authorized to give instructions on a business account and when the securities dealer has already ascertained the identity of three of these persons, this means that they are exempt from verifying the identity of other persons with authority to give instructions on the account. Thus, if five people are authorized to give instructions on the account, the securities dealer is required to identify at least three of them, since the exception at subsection 62(1) applies to the other two. Conversely, if only two people are authorized to give instructions on the account, only these two people must be identified. Any other person would have to be identified by the securities dealer when they are able to give instructions on the account.

Moreover, pursuant to paragraph 64(2)(a) of the Regulations, identity must be ascertained in the cases provided in paragraph 54(1)(a), subsection 57(1) and paragraph 60(a), before any transaction is made in the account, except for the initial deposit. Consequently, if three persons are able to provide instructions related to an account, the securities dealer must identify these three people before any transactions are conducted on the account.

Date answered: 2015-07-28

PI Number: PI-6334

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Regulations: 57(1), 62(1), 64(2)a)

Lawyer making purchase/sale on behalf of a company

Question:

Are the names of the Directors of a company required when the purchase or sale of real estate is conducted by a lawyer on behalf of the company?

Answer:

Real estate agents or brokers are subject to record keeping requirements under section 39 of the PCMLTFR, which include keeping receipt of funds records, client information records, and large cash transaction records.

Subsection 59.2(1) of the PCMLTFR further requires that “subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1),
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors; and
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.”

As per section 8 of the PCMLTFR, when a large cash transaction record is required to be kept, a real estate agent or broker must also take reasonable measures to determine whether the individual who provides the cash is acting on behalf of a third party. If it is determined that the individual is acting on behalf of a third party, a real estate agent or broker shall keep a record that sets out:
(a) the third party’s name, address and date of birth and the nature of the principal business or occupation of the third party, if the third party is an individual;
(b) if the third party is an entity, the third party’s name and address and the nature of the principal business of the third party, and, if the entity is a corporation, the entity’s incorporation number and its place of issue; and
(c) the nature of the relationship between the third party and the individual who gives the cash.

Similarly, in respect of every client information record that is kept, section 10 of the PCMLTFR requires that a real estate agent or broker take reasonable measures to determine whether a client is acting on behalf of a third party. If it is determined that the client is acting on behalf of a third party, a record must be kept that sets out:
(a) the third party’s name, address and date of birth and the nature of the principal business or occupation of the third party, if the third party is an individual;
(b) if the third party is an entity, the third party’s name and address and the nature of the principal business of the third party, and, if the entity is a corporation, the entity’s incorporation number and its place of issue; and
(c) the relationship between the third party and the client.

While the lawyer is making the purchase or sale on behalf of the corporation, the lawyer is, essentially, operating as the physical body of the corporation. The lawyer is therefore considered to be the client for record keeping and identification purposes and the real estate agent or broker is required to keep a receipt of funds or large cash transaction record and a client information record, for which the real estate agent or broker must then ascertain identity and carry out a third party determination (client information or large cash transaction record requirement). As stated above, according to paragraphs 59.2(1)(a), (b), and (c), real estate agents or brokers must ascertain the identity of every person who conducts the transaction, and confirm the existence of the corporation or the entity on whose behalf the transaction is conducted. As such, the lawyer should be prepared to: a) be identified in accordance with subsection 64(1) of the PCMLTFR, and b) provide documents confirming the existence of the corporation, including the names of the directors in the case of a corporation. Of course, should the lawyer’s corporation fall under the exception outlined in paragraph 62(2)(m) of the PCMLTFR, then the real estate agent or broker would not be required to carry out the record keeping and client identification requirements outlined above.

The real estate agent or broker is required to take reasonable measures to determine if there is a third party involved in the transaction, and it is only when they determine that there is in fact a third party involved in the transaction that the record keeping obligation kicks in. In addition, if an employee is acting on behalf of their employer, the employee is considered to be acting on behalf of a third party.

If the real estate agent or broker is not able to determine that there is in fact a third party, but the real estate agent or broker has reasonable grounds to suspect that there are instructions of a third party involved, the real estate agent or broker has to keep a record to indicate the following:

  • in the case of a large cash transaction, whether, according to the individual giving the cash, the transaction is being conducted on behalf of a third party; or
  • in the case of a client information record, whether, according to the client, the transaction is being conducted on behalf of a third party.

This record must also indicate details of why the real estate agent or broker suspects the individual is acting on a third party's instructions.

Finally, as per section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, an STR is expected to be submitted to FINTRAC when the real estate agent or broker has reasonable grounds to suspect that:
“(a) the transaction is related to the commission or the attempted commission of a money laundering offence; or
(b) the transaction is related to the commission or the attempted commission of a terrorist activity financing offence.”

A single indicator, such as not being able to determine if there is a third party involved in the transaction, is not necessarily indicative of reasonable grounds to suspect money laundering or terrorist financing activity. However, if a number of indicators are present during a transaction or a series of transactions, then the real estate agent or broker might want to take a closer look at other factors prior to making the determination as to whether the transaction must be reported.

Date answered: 2015-07-08

PI Number: PI-6329

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 8, 10, 39, 59.2(1), 62(2)(m), 64(1)

Act: 7

Employee identification

Question:

As part of a compliance file, I have an interpretation question about the employees of a company having access to its account to perform online transactions (Web access).

The regulations have two definitions that can link an individual to a business account to perform transactions. Either this individual is a signatory for the account or he/she can act on behalf of the employer who holds the account (on behalf of a third party, in the case of the employer, the company). Many companies can provide Web access to their accounts so employees can act within the account for business transactions: account payment, money transfers, exchange transactions, etc. In the case above, is the employee always considered to be acting on the employer's behalf, who would then be considered the third party (the employer)?  

If that is indeed the case, what is the document requirement for the employee who acts on behalf of their employer for bank transactions online if the employee is not considered a third party or a signatory? Must an employee acting in this way on their employer's behalf for online transactions be a signatory for the company's account? For example, the Chief Financial Officer gives his accountant (also an employee) access to the company's account on the Internet. Which documentary requirement must the financial institution meet about the accountant who may intervene in the Internet account?

Answer:

Financial entities have client identification obligations. They must take measures to verify the identity of persons and confirm the existence of entities. Entity means a legal person, trust, partnership, fund and association or unincorporated organization when they open accounts or when they make certain transactions with financial entities.

Paragraph 54(1)(a) of the Proceeds of Crime and Terrorist Financing Regulations stipulate: “In accordance with subsection 64(1), ascertain the identity of every person who signs a signature card in respect of an account, other than a credit card account, that the financial entity opens, except in the case of a business account the signature card of which is signed by more than three persons authorized to act with respect to the account, if the financial entity has ascertained the identity of at least three of those persons.”

This means that if more than three persons are authorized to act for the business account, the financial entity must ascertain the identity of at least three of them. However, under paragraph 62(1)(a) of the Regulations, the financial entity does not have to ascertain the identity of a person when a business account is opened for which the financial entity has already ascertained the identity of three people who are authorized to act for this account. In fact, subsection 62(1) stipulates: “Paragraphs 54(1)(a) and (b), 54.1(a), 54.2(a) and 55(a) and (e), paragraphs 57(1) and 57.1(1) and paragraphs 60(a) and (b) do not apply in respect of (a) at the opening of a business account in respect of which the financial entity . . . has already ascertained the identity of at least three persons who are authorized to give instructions for the account.” Subsection 1(2) of the Regulations defines a signature card as “any record that is signed by a person who is authorized to give instructions in respect of the account.”

The persons who sign the signature card are thus authorized to issue instructions for a specific account. Financial entities are not required to ascertain the identity of persons employed by a business that has access to the account unless they have less than three authorized persons, i.e., who sign a signature card or who carry out a trigger activity under paragraph 54(1)(b) of the Regulations:
"in accordance with subsection 64(1), ascertain the identity of every person who has not signed a signature card in respect of an account held with the financial entity and has not been authorized to act with respect to such an account but who conducts (i) a transaction whereby the financial entity issues or redeems money orders, traveller's cheques or other similar negotiable instruments in an amount of $3,000 or more, (ii) an electronic funds transfer, as prescribed by subsection 66.1(2), in an amount of $1,000 or more sent at the request of a client, or (iii) a foreign exchange transaction of $3,000 or more."

With regard to employees acting on behalf of their employer, who holds the account, section 7 of the Regulations stipulates that "For the purposes of these Regulations, a person acting on behalf of their employer is considered to be acting on behalf of a third party except when the person is depositing cash into the employer’s business account." Financial entities must take reasonable measures to determine whether there is a third party when they are required to keep a major cash transaction record and every time they open an account and must keep a signature card or an account operating agreement. For this purpose, when employees act on behalf of their employer, they are considered to be acting on behalf of a third party. The only exception is when an employee deposits an amount in cash in his or her employer's account. In such a case, the employee is not considered to be acting on behalf of a third party. This exception only applies when the account in which the employee deposits an amount in cash is a business account (commercial account).

Date answered: 2015-07-07

PI Number: PI-6328

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Regulations: 1(2), 7, 54(1), 62(1)

ID obligations for Trust accounts

Question:

Regarding trust accounts and the ID obligations of financial entities that open these types of accounts, I am seeking clarification as to whether it is sufficient for a financial entity to identify the trustee only, or to provide general information about the owners of a trust when opening a trust account. I would also like to know whether the obligations set out in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations have to be strictly adhered to in all situations involving trusts (e.g. deeming a trust, opened by a parent for a child, as high risk if beneficial ownership information cannot be obtained).

Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines financial entity as “an authorized foreign bank, as defined in section 2 of the Bank Act, in respect of its business in Canada or a bank to which that Act applies, a cooperative credit society, savings and credit union or caisse populaire that is regulated by a provincial Act, an association that is regulated by the Cooperative Credit Associations Act, a financial services cooperative, a credit union central, a company to which the Trust and Loan Companies Act applies and a trust company or loan company regulated by a provincial Act. It includes a department or agent of Her Majesty in right of Canada or of a province when the department or agent is carrying out an activity referred to in section 45.”

Pursuant to paragraph 54(1)(e) of the PCMLTFR, every financial entity must, in accordance with section 66, confirm the existence of every entity, other than a corporation, for which it opens an account. Section 66 of the PCMLTFR specifies that the existence of an entity must be confirmed before any transaction is conducted, other than the initial deposit, by referring to a partnership agreement, articles of association or another similar record that ascertains its existence. As per section 2 of the PCMLTFA, entity is defined as “a body corporate, a trust, a partnership, a fund or an unincorporated association or organization.”

If the financial entity is a trust company, then section 55 of the PCMLTFR states that, in addition to complying with section 54, it must
“(a) in accordance with subsection 64(1), ascertain the identity of every person who is the settlor of an inter vivos trust in respect of which the company is required to keep records under section 15;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation that is the settlor of an institutional trust in respect of which the company is required to keep
records in accordance with section 15;
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, that is the settlor of an institutional trust in respect of which the company is required to keep records in
accordance with section 15;
(d) where an entity is authorized to act as a co-trustee of any trust
(i) confirm the existence of the entity and ascertain its name and address in accordance with section 65 or confirm the existence of the entity in accordance with section 66, as the case may be, and
(ii) in accordance with subsection 64(1), ascertain the identity of all persons — up to three — who are authorized to give instructions with respect to the entity’s activities as co-trustee; and
(e) in accordance with subsection 64(1), ascertain the identity of each person who is authorized to act as co-trustee of any trust.”

The term inter vivos trust is further defined in subsection 1(2) of the PCMLTFR to mean “a personal trust, other than a trust created by will”. Additionally, subsection 15(2) of the PCMLTFR identifies an institutional trust as “a trust established by a corporation, partnership or other entity for a particular business purpose”.

As per subsection 11.1(1) of the PCMLTFR, every financial entity that is required to confirm the existence of an entity when it opens an account in respect of that entity, must obtain, at the time the existence of the entity is confirmed, the following information:
(a) in the case of a corporation, the names of all directors of the corporation and the names and addresses of all persons who own or control, directly or indirectly, 25 per cent or more of the shares of the corporation;
(b) in the case of a trust, the names and addresses of all trustees and all known beneficiaries and settlors of the trust;
(c) in the case of an entity other than a corporation or trust, the names and addresses of all persons who own or control, directly or indirectly, 25 per cent or more of the entity; and
(d) in all cases, information establishing the ownership, control and structure of the entity.

Reasonable measures must also be taken to confirm the accuracy of the information obtained. In the event this information cannot be obtained or confirmed, the financial entity must,
a) take reasonable measures to ascertain the identity of the most senior managing officer of the entity; and
b) treat that entity as high risk for the purpose of subsection 9.6(3) of the Act and apply the prescribed special measures in accordance with section 71.1 of the PCMLTFR.

If the financial entity is a trust company, section 11 of the PCMLTFR states that, for an inter vivos trust, it must keep a record with the name and address of each of the known beneficiaries as well as the date of birth and occupation or nature of principal business for all beneficiaries that are persons and the nature of principal business if the beneficiaries are entities.

Therefore, in light of these provisions, it would appear that in the case of a trust, a financial entity is required to confirm the existence of the trust and unlike the beneficial ownership information required to be gathered for corporations and entities other than corporations or trusts, that is the names and addresses of all persons who own or control, directly or indirectly, 25 percent or more of the entity, the trust requirement does not specify the requirement down to the person. As such, the financial entity is only required to obtain and take reasonable measures to confirm the names and addresses of all trustees and all known beneficiaries and settlors of the trust, which can be entity names and addresses.

We have said in the past that the beneficiary of a trust does not control the trust (by definition, if a beneficiary controls a trust, it is no longer a trust), and the beneficiary does not "own" a trust (the property that the settlor has put in the trust is the property of the trust, and is controlled by the trustee).

FINTRAC has also said in the past that in the case of a parent opening a trust for a child who will ultimately be the beneficiary, the beneficial ownership requirements do not apply. Beneficial ownership information is only required when accounts are opened for entities and not for individuals.

Date answered: 2015-06-19

PI Number: PI-6316

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Regulations: 1(2), 11, 11.1(1), 15(2), 54(1)e, 55, 66

Act: 1(2)

Personal ID for business account

Question:

We have recently been contacted by our Bank 1, requiring us to update our account record. Our company was incorporated in the 1980s and has been in business since. We have had accounts with two other banks for several years. Instead of asking for a corporate cheque for validation, Bank 1 asks for SINs and a personal cheque from each of the signatory directors (3 for their bank). After explaining to them that most of our transactions will be performed by our account administrator, Bank 1 asked for the SIN and personal cheque of our accounts administrator also.

I am reading FINTRAC Guidelines about Corporations and as far as I see, there is no requirement of individual information. "In the case of a corporation, in addition to confirming its existence, you also have to determine the corporation's name, address and the names of its directors." By contacting our two other banks, Bank 1 should be able to validate "the corporation's name, address and the names of its directors". In fact, our Bank 1 account is tied to our other two bank accounts.

Are you able to confirm whether this requirement is legitimate? In particular, can you direct me to the Act and regulations that require that?

Answer:

As per paragraph 54(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, financial entities have to ascertain the identity of any individual who signs a signature card for an account that they open (other than a credit card account) before any transaction (other than the initial deposit) is carried out. In cases where a business account has more than three individuals authorized for it, they have to ascertain the identity of at least three of those individuals.

Date answered: 2015-04-21

PI Number: PI-6301

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Regulations: 54(1)(a)

Client Identification for a Dower Right

Question:

A real estate broker has a potential client that they would sell a property for. The client is the husband who is on the title. The wife is on the Dower Right, which means they need her permission to sell the property, but she is not on the title, nor is she a client. Do they need to ID her as a client? Also, do they need any other additional information on the client information records?

Answer:

Paragraph 59.2(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), […] in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction”.

That means, if the wife, who is on the Dower Right, is not the person or one of the persons conducting the transaction, there is no requirement to ascertain her identity.

With respect to the client information records, paragraph 39(1)(b) of the PCMLTFR states that “Subject to subsections (3), (4), (5), (6), 52(2) and 62(2), every real estate broker or sales representative shall, when engaging in an activity described in section 37, keep the following records […] a client information record in respect of every purchase or sale of real estate”. Subsection 1(2) of the PCMLTFR defines client information record as “a record that sets out a client’s name and address and […] if the client is a person, their date of birth and the nature of their principal business or their occupation, as applicable”.

There is no legislative or regulatory requirement to keep a record of the Dower Right. However, it is our understanding that some real estate brokers or sales representatives will keep a record of it. Again, there is no legislative or regulatory requirement under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations to keep such a record. We understand that this is a best practice that establishes who has rights on the real estate property.

Please note that when a real estate broker or sales representative is required to provide documents to one of FINTRAC’s Compliance Officers it is for the purpose of examining whether the real estate broker or sales representative’s clients were properly identified as per subsection 64(1) of the PCMLTFR as well as whether records were properly kept as per subsection 39(1) of the PCMLTFR. If available, the record on the Dower Right may be requested in order to facilitate FINTRAC’s examination.

Date answered: 2015-03-02

PI Number: PI-6289

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 1(2), 39(1)(b), 59.2(1)(a), 64(1)

Obligations and Exception for a type of Trust account

Question:

What record keeping and client identification obligations do we have for a specific type of trust account we open? Also, do the exceptions listed under section 62 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) apply?

Answer:

Based on the information you provided, it is our understanding that you open this specific type of trust account for companies who receive provincial approval to operate a community economic development investment fund (CEDIF) and “raise capital through an exempt public offering in Nova Scotia.” These trust accounts are opened in the name of your entity, and its employees are identified as signers for the account, however, it appears that instructions for the account are given by the CEDIF approved company.

Reporting entities subject to the PCMLTFA have record keeping and reporting obligations, including client identification obligations. They must take certain measures to ascertain the identity of individuals or to confirm the existence of entities.

Having said that, paragraph 62(2)(l) of the PCMLTFR provides an exception to record-keeping and ascertaining identity for reporting entities when “the opening of an account in the name of, or in respect of which instructions are authorized to be given by, a financial entity, a securities dealer or a life insurance company or by an investment fund that is regulated under provincial securities legislation” occurs. Of course, the exceptions are not mandatory, so it is for the reporting entity to decide whether it will apply them or not.

Date answered: 2015-01-16

PI Number: PI-6279

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance:

Regulations: 62(2)(l)

Ascertaining the identity of the person who signed the signature card

Question:

The money laundering regulations do not stipulate a time and place for signing the signature card. Only section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) indicate that the identity of the person who signs the signature card must be ascertained prior to all transactions, except for the initial deposit. However, in the case of student accounts, the identity of the person who signs the signature card is usually ascertained during the first withdrawal, allowing a number of deposits to be made following the initial deposit.

That way, a student can make a number of deposits into the account (deposits at school or by transfers) before the signature card is signed and before the identity of the student (or his/her parent, depending on the situation) has been ascertained.

We understand that FINTRAC is aware of this situation and that to date, no non-compliance findings have been made in relation to this procedure.

ABC would therefore like confirmation from FINTRAC that it is compliant with the requirements for opening an account, even though a signature card for a student account may have been signed upon the first transaction, and not during the first transaction following the initial deposit.

Answer:

We agree with ABC’s statement that neither the Proceeds of Crime (Money Laundering) and Terrorist Financing Act(PCMLTFA), nor its regulations, specify exactly when the signature card has to be signed and that “Only section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) indicate that the identity of the person who signs the signature card must be ascertained prior to all transactions, except for the initial deposit.”

In this case, FINTRAC is of the opinion that the fact that the signature card was not created before the identity of the student (or his/her father, mother or guardian under subsection 54(2) of the PCMLTFR) was ascertained does not constitute a violation of the PCMLTFA or its regulations.

Date answered: 2014-12-16

PI Number: PI-6271

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 54

International adviser exemption - Covered?

Question:

Our question concerns ABC, who is a foreign securities dealer and whether it is required to ascertain identity?

Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines securities dealer as “a person or entity that is authorized under provincial legislation to engage in the business of dealing in securities or any other financial instruments or to provide portfolio management or investment advising services.” Paragraph 5(g) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) excludes from the definition of securities dealer “persons who act exclusively on behalf of such an authorized person or entity.” In the past, we have established that foreign securities dealers (including those relying on the international adviser exemption, are authorized by the province to be engaged in the activities described under subsection 1(2) of the PCMLTFR. Therefore, such a securities dealer has to have in place policies and procedures consistent with reporting, record keeping, client identification and compliance regime requirements for its Canadian activities only.

Based on the information you have provided, it would appear as though ABC is subject to the PCMLTFA and its associated regulations. Although you state that “ABC relies on the international adviser exemption in each of the Canadian Provinces” and “ABC does not believe that its private placement business is subject to Canadian anti-money laundering requirements”, ABC is still responsible for reporting to FINTRAC, when applicable.

Additionally, pursuant to section 11.1 of the PCMLTFR, ABC must obtain beneficial ownership information, and take reasonable measures to confirm the accuracy of that information, in relation to account openings and transactions for clients that are corporations or entities, other than corporations.

Date answered: 2014-12-02

PI Number: PI-6263

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 1(2), 11.1, 64

Act: 5(g)

Reporting requirements and obligations for real estate agents when selling property to foreign clients.

Question:

What are the reporting requirements and obligations for real estate agents when selling property to foreign clients?

Answer:

Pursuant to Section 37 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “Every real estate broker or sales representative is subject to Part 1 of the Act when they act as an agent in respect of the purchase or sale of real estate” and the Regulations do not make a distinction based on whether the real estate agent or broker is acting for a foreign client. Consequently, the obligations for Real Estate agents are the same whether their clients are in Canada or not.

 

Date answered: 2014-09-22

PI Number: PI-6238

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 37

Client identification

Question:

Could you clarify when a security dealer is considered to be `opening an account” ?

Answer:

It appears that the Securities dealer (SD) is an entity “authorized under provincial legislation to engage in the business of dealing in securities or any other financial instruments, or to provide portfolio management or investment advising services”, as per subsection 5(g) of the PCMLTFA, and that they are a securities dealer subject to Part 1 of the PCMLTFA and its associated regulations. As such, the SD is subject to certain legislative requirements, namely:

  • reporting STRs, TPRs, LCTRs;
  • record keeping;
  • having a compliance regime; and
  • ascertaining identity.

More specifically, you have asked us to confirm if a SD is considered to be opening an account as per the PCMLTFA when they enter into agreements to distribute funds to clients through two separate channels – a direct channel, and a Broker / Dealer channel. An “account” is not defined in the PCMLTFA and can potentially mean different things depending on the context.

With regard to the “Direct Channel”, the SD has provided the following information:

  • “Corporation 1, registered as an EMD, acts in the capacity of a dealer for the Funds in distributing/selling the Funds directly to clients;
  • The client relationship is between Corporation 1 and the clients, therefore we must ensure that the Funds are eligible for the clients prior to executing the transaction on their behalf;
  • In order to meet our obligations under securities legislation and client identification requirement imposed by AML Legislation, Corporation 1 ensures that steps are taken to established the identity of the clients and to ensure that we have sufficient information;
  • Through the Subscription Agreement, KYC form, W-8BEN/W-9 and other supporting documentations, Corporation 1 ensures that we have sufficient information with respect to the clients’:
  • Identity and existence; Personal circumstances; Investment needs and objectives; Financial circumstances; Risk tolerance; Investment knowledge and experience; Time horizon.
  • Corporation 1 engages in meaningful dialogues with clients throughout the year to ensure any material changes that the clients may have are properly assessed and documented.”

For the Direct Channel as presented by Corporation 1 , and based on the above information, as a securities dealer (SD), Corporation 1 is opening an account in the name of their client.

For the Broker/Dealer Channel, Corporation 1 provided the following information:

  • “Corporation 1 is not the dealer in these transactions, but rather the registered Investment Dealer is;
  • For these transactions, Corporation 1 merely acts in the capacity of a portfolio manager (PM) and IFM for the Funds;
  • The registered Investment Dealer, in its capacity as the dealer, facilitates the transaction in the Funds between their client and Corporation 1 through FundSERV;
  • The client relationship is between the Investment Dealer and the client;
  • The registered Investment Dealer is responsible for, among other things, supervisory oversight, obtaining KYC information, determining the suitability of the trade and other obligations under securities legislation as it relates to the client;
  • Notwithstanding the registered Investment Dealer’s obligations, Corporation 1 still requires the Subscription Agreement and the W-8BEN/W-9 forms to be completed along with the tax identification information for all investors for reporting purposes to CRA.”

In this case, for the Broker/Dealer Channel, it is possible that Corporation 1 is opening accounts for their client as a PM (even if those accounts are not for deposit taking purpose) since it seems that they do complete agreement forms that require sufficient client information that would enable them to open accounts with their clients. If Corporation 1 determines that they are opening accounts, they would have all associated obligations. However, if it is just the Investment Dealer that is opening an account, it’s the Investment Dealer – not Corporation 1 – who has obligations under the PCMLTFR since, from a PCMLTFA perspective, the client is dealing with the Investment Dealer, and not with Corporation 1. It is possible that both entities are opening accounts and, therefore, have the associated obligations.

This is also consistent with what we have indicated in the past: “Even if a management mandate is given to a portfolio manager, the client is the person who has the account and who assigns the mandate, so the client must be identified. Ultimately, in this case, the client holding the account is still the person "responsible" for the account and can, at any time, decide to give instructions regarding the account directly (without going through the portfolio manager).”

Date answered: 2014-09-08

PI Number: PI-6228

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance:

Act: 5(g)

Confirming existence of an entity

Question:

Is there a requirement for the Dealer in precious metals and stones to confirm the existence of an entity?

Answer:

As pointed out, in the DPMS sector there is typically no requirement to confirm the existence of an entity because, for this sector, the ascertaining of identity is triggered only by LCTRs and STRs where the identity of the individual has to be ascertained.

That said, pursuant to subsection 9.6(3) of the PCMLTFA, if the person or entity considers that the risk referred to in subsection 9.6 (2) is high, the person or entity shall take prescribed special measures for identifying clients, keeping records and monitoring financial transactions in respect of the activities that pose the high risk.

These prescribed special measures are the development and application of written policies and procedures for :

a) taking enhanced measures based on the risk assessment undertaken in accordance with subsection 9.6(2) of the Act to ascertain the identity of any person or confirm the existence of any entity in addition to the measures required in sections 54, 54.1, 55, 56, 57, 59 and 59.1, subsection 59.2(1), section 59.3, subsection 59.4(1) and sections 59.5, 60 and 61; and

(b) taking any other enhanced measure to mitigate the risks identified in accordance with subsection 9.6(3) of the Act, including,
(i) keeping client identification information and the information referred to in section 11.1 up to date, and
(ii) in addition to the measures required in sections 54.3, 56.3, 57.2, 59.01, 59.11, 59.21, 59.31, 59.41, 59.51, 60.1 and 61.1, conducting ongoing monitoring of business relationships for the purpose of detecting transactions that are required to be reported to the Centre under section 7 of the Act.

In this respect, DPMS are required to take enhanced measures to ascertain the identity of any person or confirm the existence of any entity because this requirement is in addition to any of those outlined in the ascertaining of identity requirements of the other sectors. Furthermore, DPMS must take any other enhanced measure to mitigate the risks identified, including keeping high risk client information up to date and conducting ongoing monitoring of business relationships for the purpose of detecting suspicious transactions. Again, these enhanced measures are in addition to the ongoing monitoring requirements outlined for the other sectors, so they apply to the DPMS sector.

Date answered: 2014-07-18

PI Number: PI-6178

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

Obligation(s): Ascertaining Identification

Act: 9.6(2), 9.6(3)

Identification exception for foreign government

Question:

Are there exceptions to the identification regulations when the client is a foreign government?

Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations) defines public body as:

a) any department or agent of Her Majesty in right of Canada or of a province;
b) an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them; and
c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or any agent of such an organization.

A foreign government is not a public body as defined in the Regulations. Consequently, the identification exemption does not apply in cases where a foreign government or one of its representatives is involved in a real property transaction which requires the identification and confirmation of the existence of the entity under 59.2(1)(c) or 66

Date answered: 2014-07-02

PI Number: PI-6170

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 1(2), 59.2(1)c), 66

Definition of Negotiable instruments

Question:

Is cashing a cheque the same as redeeming a negotiable instrument and therefore, ID must be ascertained?

Answer:

Pursuant to subparagraph 54(1)(b)(i) of the PCMLTFR, when a financial entity issues or redeems a money order, traveller’s cheque or other similar negotiable instrument for a person who has not signed a signature card in respect of an account held with the financial entity and has not been authorized to act with respect to such an account, they must ascertain the identity of the person carrying out that transaction. Furthermore, subsection 14(l), the record-keeping obligation when redeeming, is very specific to the redemption of money orders, so does not apply to the redemption of travellers’ cheques or other similar negotiable instruments.

That said, although a cheque is a negotiable instrument, whether it is paid to order, paid to bearer, endorsed or not endorsed, it is not an “other similar negotiable instrument” for the purpose of the record-keeping and ascertaining of identification requirements of the PCMLTFR. Those negotiable instruments for which records have to be kept when issued, and ID has to be kept when issued or redeemed are other instruments similar to money orders and travellers’ cheques. This does not include cheques.

Date answered: 2014-06-27

PI Number: PI-6168

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Regulations: 14(I), 54(1)(b)(i)

Retirement compensation arrangement for large corporations

Question:

A large corporation – xyz wants to open an account with us for a retirement compensation arrangement for its executives.

The retirement compensation arrangement is not a subsidiary of xyz. The retirement compensation arrangement's financial statements are not consolidated with xyz's financial statements. However, there may be certain assets or liabilities in xyz's financial statements related to the funding of the retirement compensation arrangement Furthermore, all of the information about the retirement compensation arrangement can be found in the notes to xyz's financial statements. 

In light of the context, should we consider this as opening an account for a large corporation?

Answer:

The fact that the retirement compensation arrangement (RCA) is referred to in the corporation's financial statements or in the notes to the financial statements does not mean that the RCA is a subsidiary of the entity.

An RCA is a plan or an agreement between an employer and an employee, whereby the employer or the employee makes contributions to a custodian of the RCA trust, and under which the custodian may be required to make distributions to the employee or another person on, after, or in view of the employee's retirement, the loss of an office or employment, or any substantial change in the services the employee provides. When a reporting entity opens an RCA, the custodian has a trust account opened for the RCA.

When a reporting entity opens a trust account, it has certain obligations. However, pursuant to paragraph 62(2)(m) of the PCMLTFR, the requirements for securities dealers set forth in sections 23 and 57 of the PCMLTFR do not apply when the entity for which the client information record has to be kept is a large corporation with minimum net assets of $75 million on its last audited balance sheet, whose shares are traded on a Canadian stock exchange or a stock exchange referred to in subsection 262(1) of the Income Tax Act, and which operates in a country that is a member of the Financial Action Task Force.

Therefore, when a reporting entity opens a trust account for the RCA of a client that is a large corporation, the requirements set forth in sections 23 and 57 do not apply. The fact that the RCA is not a subsidiary of the entity is of no consequence, since the RCA is an account, not another entity for which an account has been opened.

You can also remind the reporting entity of its requirements under section 11.1 of the PCMLTFR with respect to the trustees.

Date answered: 2014-03-31

PI Number: PI-6127

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Regulations: 11.1, 62(2)(m)

Ongoing Service Agreement Requirements

Question:

I have a concern regarding the ongoing service agreement requirements. The guideline seems vague on whether the Money Services Businesses has to actually identify the individual who is representing a corporate entity, for the purposes of establishing an ongoing service agreement and thus carrying out countless EFTs. The ID of the corporation must be ascertained, and the name, DOB and address of the person who has signing authority, but it does not explicitly state the id must be seen on the individual. I understand that employees who are listed as authorized conductors of transactions do not have to be IDed, but it does not seem right that the individual providing the authority itself does not need to be identified. The fact that we require the powers to bind, showing that person X has the authority to make decisions on behalf of the company would indicate the need to verify the identification of person X. I have been told this is not the case.

Answer:

There is no requirement in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMTLFA) and its associated Regulations for an Money Services Businesses to ascertain the identity of the entity representative who establishes the ongoing service agreement. The ascertaining identity obligations relate mostly to the corporation or the entity with which the Money Services Businesses entered into an agreement.

Date answered: 2014-02-18

PI Number: PI-6097

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance: 9

Regulations: 29, 53

Address when the purchaser or seller is a corporation

Question:

When a purchaser or seller is a corporation, should the representative indicate his or her own business address, or can they provide the address of the corporation on whose behalf they are acting?

Answer:

In situations in which the real-estate broker or sales representative is required to ascertain a person's identity, in accordance with subsection 64(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), such as in the case of a large cash transaction record (section 53 of the PCMLTFR) or to ascertain the identity of the person conducting the transaction (paragraph 59.2(1)(a)of the PCMLTFR), the address to be obtained is the home address of the person in question.

However, if the address is only for record-keeping purposes, as in the case of a client information record (paragraph 39(1)(b) of the PCMLTFR), and not to ascertain the person's identity but simply to have a record of information regarding a purchase or sale, the reporting entity can provide either the home address or the business address.

Date answered: 2014-02-07

PI Number: PI-5693

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 39(1)(b), 53, 59.2(1)(a), 64(1)

Co-trustee of an individual pension plan (IPP)

Question:

What are my identification verification obligations for a co-trustee in the case of an individual pension plan (IPP) where the participant acts as co-trustee?

Answer:

According to section 55 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations), every trust company shall, where an entity is authorized to act as a co-trustee, confirm the existence of the entity and ascertain its name and address in accordance with section 65 or confirm the existence of the entity in accordance with section 66, as the case may be, and in accordance with paragraph 64(1), ascertain the identity of all persons—up to three—who are authorized to give instructions with respect to the entity's activities as co-trustee; and in accordance with subsection 64(1), ascertain the identity of each person who is authorized to act as co-trustee.

Moreover, paragraph 62(2)(i), specifies that section 55 does not apply in respect of 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.

Therefore, although an IPP is not a pension fund governed by federal or provincial legislation, it is nonetheless a registered retirement savings plan registered with the CRA pursuant to the Income Tax Act according to which paragraph 62(2)(i) applies.

Date answered: 2013-12-31

PI Number: PI-5675

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Regulations: 55, 62(2)(i), 64(1), 65, 66

ID Exemption - Public Body and Large Corporation

Question:

I need guidance regarding the record-keeping and ascertaining identity exemptions under section 62 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). Although I do not believe pensions fall under one of these exemptions, certain pension funds may be exempt based on certain information. I have discussed two pension plans: one that is managed and administered by an entity that is run by a joint trusteeship, one of the trustees being the Government of Ontario, and a second pension plan, the trustee of which happens to be a large Canadian public company.

Answer:

Paragraph 62(2)(m) of the PCMLTFR provides an exemption for ascertaining identity and record-keeping in instances where, the entity in respect of which a record is otherwise required to be kept is a public body, or a corporation that has minimum net assets of $75 million and whose shares are traded on a Canadian stock exchange or a stock exchange designated under subsection 262(1) of the Income Tax Act, and operates in a country that is a member of the Financial Action Task Force.

Subsection 1(2) of the PCMLTFR defines “public body” as
(a) any department or agent of Her Majesty in right of Canada or of a province;
(b) an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them; and
(c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or any agent of such an organization.

It is only entities that clearly fall under one of these two categories (public body or large corporation) that can benefit from the exemption related to record keeping and ascertaining identity.

Date answered: 2013-12-05

PI Number: PI-5658

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 1(2), 62(2)(m)

Assumable Mortgage - ID Requirements

Question:

Is it possible to have guidance regarding an entity’s obligations to ascertain identity when a mortgage held with this entity, Credit Union A, is subsequently assumed by a different individual who is not a member of Credit Union A. A member with a residential mortgage held by Credit Union A sold his home to another individual, who has assumed the mortgage on behalf of the member. The new mortgage owner is not required to open an account with Credit Union A and that this individual will pay the mortgage through direct payments to Credit Union A from his bank account at a different financial institution. As part of this process, the entity receives the land title documents, which include the name and address of the new owner, as well as information specific to the transaction. The entity does not receive this individual’s financial history.

Answer:

There is nothing in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) nor its associated regulations that would require your entity to ascertain the non-member’s identity in the situation you have described. That being said, Credit Union A still has the obligation, as an entity subject to Part 1 of the PCMLTFA, to report any suspicious transactions that may occur in its dealings with this individual. Pursuant to section 7 of the PCMLTFA, your entity must report every financial transaction that occurs or that is attempted in the course of its activities in respect of which there are reasonable grounds to suspect that the transaction is related to the commission or the attempted commission of a money laundering offence or related to the commission or the attempted commission of a terrorist activity financing offence. This means when Credit Union A is required to send a suspicious transaction report to FINTRAC, before the transaction is reported, it also has to take reasonable measures to identify the individual who conducted it.

Date answered: 2013-12-05

PI Number: PI-5657

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Act: 7

Sale or purchase of a business

Question:

Here are a few questions about the sale of a corporation:

  1. Do the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) and its regulations apply if a real estate broker sells a business worth $40 million and a building worth $1 million even though the transaction is not subject to the Quebec Real Estate Brokerage Act?
     
  2. In order to conduct the transaction, can a real estate broker or sales representative rely on a list of employees authorized to sell its buildings combined with other documents provided as proof of the corporation's existence?

Answer:

  1. The Real Estate Brokerage Act is a provincial act and therefore has no jurisdiction in the federal domain. In addition, the Real Estate Brokerage Act legislates in a specific area not related to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and is therefore not applicable to this situation. According to section 37 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations), every real estate broker or sales representative is subject to Part 1 of the Act when they act as an agent in respect of the purchase or sale of real estate. This includes the buying or selling of land, buildings and houses. In the example you gave, the real estate broker would be subject to the Act and Regulations only with respect to the sale of the $1 million building.
     
  2. According to subsection 39(1)(b) of the Regulations, when a real estate broker or sales representative acts as an agent in respect of the purchase or sale of real estate, he or she must keep a client information record in respect of every purchase or sale of real estate. In addition, subsection 39(1)(c) of the Regulations stipulates that where the client information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision related to the power to bind the corporation in respect of transactions with the real estate broker or sales representative must be kept. This could be a certificate of incumbency, the articles of incorporation or the bylaws of the corporation that set out the officers duly authorized to sign on behalf of the corporation, such as the president, treasurer, vice-president and comptroller.

In addition, subsection 59.2 of the Regulations states that, "Subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1),
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors."

In light of the above, it is clear that, when buying or selling a business, the real estate broker must have proof that the person conducting the transaction has the power to bind the corporation in respect of transactions with the real estate broker. Furthermore, this proof must be in the form of an official document, a copy of the part of the official corporate records or a board resolution to that effect. Therefore, the list of employees who can sell a corporation's buildings must be officially ratified or approved by the board to meet the requirement set out in subsection 39(1)(c) of the Regulations.

Date answered: 2013-11-01

PI Number: PI-5640

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Regulations: 37, 39(1)(b), 39(1)(c), 59.2

Large corporation exemption under paragraph 62(2)(m) of the PCMLTFR

Question:

You have asked several questions about an MSB that is conducting foreign currency exchange transactions.

You have indicated that this MSB, MSB #1 receives foreign denomination coins from various airlines and subsequently pays the airlines for these coins in Canadian currency at an exchange rate set by MSB #1. You have advised that these transactions are deemed to be foreign currency exchanges. With respect to MSB #1’s operations, you have asked the following questions:

  1. Do the airlines that MSB #1 deals with meet the large corporation exemption under paragraph 62(2)(m) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR)?
  2. In general, can MSBs avail themselves of this exemption?
  3. If MSB #1 can rely on this exemption, does it have to identify the individual conducting those particular transactions and submit a large cash transaction report (LCTR)?
  4. If they do have to identify the individual, would this be the individual that authorizes MSB #1 to engage in these transactions or do they have to identify the individual from who they pick up the coins?

Answer:

To respond to the above questions, it is necessary to refer to paragraph 59(1) of the PCMLTFR, which requires that MSBs ascertain the identity of every person who conducts a foreign currency exchange transaction of $3,000 or more. Subsection 59(2) goes on to state that MSBs must confirm the existence of every corporation in respect of which they are required to keep a client information record and ascertain the name and address of the corporation and the names of the corporation’s directors. However, subsection 59(6) makes it clear that subsection (2) does not apply in respect of an entity referred to in paragraph 62(2)(m) with which the MSB has entered into a service agreement referred to in section 32. Section 32 of the PCMLTFR reads as follows:

32. Every MSB that enters into an ongoing electronic funds transfer, funds remittance or foreign exchange service agreement with an entity, or a service agreement for the issuance or redemption of money orders, traveller’s cheques or other negotiable instruments, shall keep a record of the name, address, date of birth and occupation of every person who has signed the agreement on behalf of the entity, a client information record with respect to the entity and a list containing the name, address and date of birth of every employee authorized to order transactions under the agreement.

As such, an MSB is only required to keep a client information record when it enters into an ongoing service agreement.

Where an MSB has an ongoing agreement with an entity referred to in paragraph 62(2)(m), subsection 59(6) of the PCMLTFR states that subsection 59(2) does not apply. This means that, where an MSB enters into an ongoing agreement with an entity referred to in paragraph 62(2)(m), it must:

  • ascertain the identity of the person conducting the foreign currency exchange transaction (paragraph 59(1)(c) of the PCMLTFR) unless this individual is acting on behalf of their employer pursuant to an ongoing service agreement under section 32 of the PCMLTFR (paragraph 59(4) of the PCMLTFR)
  • keep a record of the name, address, date of birth and occupation of every person who has signed the agreement on behalf of the entity (section 32 of the PCMLTFR)
  • keep a client information record with respect to the entity (section 32 of the PCMLTFR)
  • keep a list containing the name, address and date of birth of every employee authorized to order transactions under the agreement (section 32 of the PCMLTFR)

Where an MSB enters into an ongoing agreement with an entity that does not fall under paragraph 62(2)(m), it must comply with subsection 59(2) as well as section 32. As such, it will be required to:

  • ascertain the identity of the person conducting the foreign currency exchange transaction (paragraph 59(1)(c) of the PCMLTFR) unless this individual is acting on behalf of their employer pursuant to an ongoing service agreement under section 32 of the PCMLTFR (paragraph 59(4) of the PCMLTFR)
  • confirm the existence of the corporation (subsection 59(2) of the PCMLTFR)
  • ascertain the name and address of the corporation and the names of the corporation’s directors (subsection 59(2) of the PCMLTFR)
  • keep a record of the name, address, date of birth and occupation of every person who has signed the agreement on behalf of the entity (section 32 of the PCMLTFR)
  • keep a client information record with respect to the entity (section 32 of the PCMLTFR)
  • keep a list containing the name, address and date of birth of every employee authorized to order transactions under the agreement (section 32 of the PCMLTFR)

Conclusion

In response to questions 1 and 2 above, namely, whether paragraph 62(2)(m) applies to MSB #1 and MSBs in general, if an MSB has an ongoing agreement with an entity that meets the requirements of 62(2)(m) of the PCMLTFR, it does not have to confirm the existence of the corporation; however, it still has the obligation to ascertain the identity of the person conducting the transaction, in addition to the record keeping obligations listed above. As such, paragraph 62(2)(m) of the PCMLTFR has a limited application with respect to MSBs.

Question 3 above asks whether MSB #1 must identify the individual conducting the transaction(s) and whether it must submit an LCTR. As discussed above, MSBs must ascertain the identity of every person who conducts a foreign currency exchange transaction of $3,000 or more pursuant to paragraph 59(1)(c). As to whether MSB #1 must submit an LCTR for these transactions, paragraph 28(1)(a) of the PCMLTFR affirms that every MSB must report the receipt from a client of an amount in cash of $10,000 CAD or more in the course of a single transaction, unless the cash is received from a financial entity or a public body.

Question 4 asks whether MSB #1 must identify the individual who authorizes these transactions or the individual from who they are picking up the coins. As paragraph 59(1)(c) of the PCMLTFR indicates, MSBs must ascertain the identity of every person who conducts a foreign currency exchange transaction of $3,000 or more. This must be done at the time of the transaction.

Date answered: 2013-11-01

PI Number: PI-5639

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Regulations: 32, 59(1)(c), 59(2), 59(4), 62(2)(m)

Acquiring Mortgage Portfolio from a non-reporting entity

Question:

Background: A Canadian Schedule I Bank (the Buyer) is in the process of acquiring a group of residential mortgages initiated after 2008 from a mortgage company (the Seller) to which it is not affiliated, who is not and has never been a covered reporting entity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). However, the seller opened the mortgage accounts using voluntarily adopted robust anti-money laundering processes to conform to legislative standards as if they were covered (including the maintenance of a documented and up-to-date compliance regime to conduct record-keeping, client identification, voluntary suspicious activity reporting, third party and politically exposed foreign person determination, as well as terrorist property screening/reporting). The Seller would continue to service the accounts after the sale.

The Seller Identification Process of all Mortgage Accounts Opened

At the time of funding, the Seller conducted record-keeping and identification procedures by way of a solicitor acting on behalf of the lender face-to-face with the borrower(s). The related information and documentation, listed below, is contained within the mortgage file and is readily verifiable.

  • All details for and a photocopy of one (or in some cases, two) pieces of valid unexpired identification (at least one of which is government-issued)
  • A solicitor’s final report wherein the solicitor confirms that such identification was validated by him
  • A Canadian credit bureau report
  • Pay stub/job letter and/or T4 or Notice of Assessment
  • Pre-authorized debit form faxed by the lawyer’s office
  • Void cheque with borrower’s name on it
  • Details of each borrower, including their full name, address, date of birth, telephone number and occupation
  • Bank statement confirmation of down-payment source

The solicitor conducted the record keeping and identification procedures as per their agreement with the lender (the Seller) which did not explicitly mention the agreement to ascertain identification as per the need for requirements under PCMLTF Regulations S64.1(1), although it did specify that the lawyer would complete the forms (which included client identification information) on their behalf. However, by relying on a Canadian credit bureau report and the solicitor attestation, the lender (the Seller) was ascertaining client identification through the combination method as outlined under the PCMLTF Regulations S64(1)(b)(ii)(D) – credit file method & attestation method. No re-identification procedures were conducted on renewal, since the Seller views a renewal as the continuance of an account, not as a new one.

Questions: Both the buyer and the seller would like to understand their legislative requirements under the PCMLTFA in regards to the acquisition of residential mortgage and specifically:

  1. Given that the Seller continues to service the assets, and the mortgage holders will not be signing a new agreement with the Buyer (who is assuming the contracts), is the Buyer obligated to conduct identification in connection with subsection 54(1) of the PCMLTF Regulations?
  2. If the answer to (1) is affirmative, can the Buyer relying on any exemptions to ascertain identification under sections 62, 63, or of the PCMLTF Regulations.
  3. Would the answers to the preceding questions be any different if the Seller had been a covered entity at the time of the under the PCMLTFA at the time of the inception of the mortgage?

Answer:

Section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that every financial entity shall ascertain the identity of a person, corporation, or entity other than a corporation, at the time an account is opened.

For acquired client accounts from a non-reporting entity, there is an account opening situation and the acquiring entity must ascertain the identity and keep records of each newly acquired account holder. Since the non-reporting entity was not subject to the PCMLTFA, the clients were not previously identified and records were not kept in accordance with the PCMLTFA and its associated Regulations.

Every reporting entity is required to carry out a risk assessment of their clients and business relationships. As such, an acquiring entity is required to conduct a risk assessment of the newly acquired account holders.

Should the risk assessment lead to a high risk designation, then the acquiring entity would be required to carry out special measures for identifying clients, keeping records, and monitoring financial transactions in respect of the activities that pose a high risk, in accordance with subsection 9.6(3) of the PCMLTFA, and further detailed in section 71.1 of the PCMLTFR.

Date answered: 2013-10-29

PI Number: PI-5637

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Regulations: 54, 71.1

Act: 9.6(3)

Armoured Car - Quick Drop Deposits and in Branch Deposits

Question:

Here are questions with respect to quick drop deposits and in branch deposits:

  1. When is the deposit considered a quick drop vs. in branch?
  2. The driver of the armoured car drops off the secured bag with the front receptionist who does not post any transactions. Is this a quick drop or in branch?
  3. The driver of the armoured car brings the secure bag in a supervised area where two staff members complete a physical check of the bag to ensure it is properly sealed and the staff signs the armoured car receipt. The bag is placed in a vault then verified and posted at a later time. Is this a quick drop as the bag was received in a supervised area or is it considered in branch?
  4. One RE argued that the driver of the armoured car may not know the amount in the secured bag hence it may not be a large cash deposit? In that case, why would the RE need to get the name of the driver? The RE would only know that it is a large cash transaction once they post the transaction which may not be in the presence of the driver.

Answer:

  1. What amounts to a quick drop is typically determined by the reporting entity, who may decide to have a drop box physically located outside the branch or may designate a specific area within the branch for deposits.

All reporting entities must keep a record of the receipt of an amount in cash of $10,000 or more in a single transaction, unless the cash is received from a financial entity or a public body.

Pursuant to section 53 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “Subject to subsection 63(1), every person or entity that is required to keep and retain a large cash transaction record under these Regulations shall ascertain, in accordance with subsection 64(1), the identity of every person with whom the person or entity conducts a transaction in respect of which that record must be kept, other than a deposit made to a business account or a deposit made by means of an automated banking machine.” As such, a reporting entity is not required to ascertain the identity of the person conducting the transaction if the deposit is into a business account or if the deposit is made via an automated banking machine, regardless if the deposit is made into a personal account.

If an individual or entity conducts a large cash transaction, then the reporting entity is required to keep a large cash transaction record and send a large cash transaction report to FINTRAC.

Subsection 1(2) of the PCMLTFR defines a large cash transaction record as “a record that indicates the receipt of an amount of $10,000 or more in cash in the course of a single transaction and that contains the following information:

(a) as the case may be
(i) if the amount is received for deposit by a financial entity, the name of each person or entity in whose account the amount is deposited, or
(ii) in any other case, the name of the person from whom the amount is in fact received, their address and date of birth and the nature of their principal business or their occupation, if the information is not readily obtainable from other records that the recipient keeps and retains under these Regulations;
(b) the date of the transaction;
(c) where the transaction is a deposit that is made during normal business hours of the recipient, the time of the deposit or, where the transaction is a deposit that is made by means of a night deposit before or after those hours, an indication that the deposit was a night deposit;
(d) the number of any account that is affected by the transaction, and the type of that account, the full name of any person or entity that holds the account and the currency in which account transactions are conducted;
(e) the purpose and details of the transaction, including other persons or entities involved and the type of transaction (such as cash, electronic funds transfer, deposit, currency exchange , the purchase or cashing of a cheque, money order, traveller’s cheque or banker’s draft or the purchase of precious metals, precious stones or jewellery);
(f) whether the cash is received by armoured car, in person, by mail or in any other way;
(g) the amount and currency of the cash received; and
(h) where the amount is received by a dealer in precious metals and stones for the sale of precious metals, precious stones or jewellery,
(i) the type of precious metals, precious stones or jewellery involved in the transaction,
(ii) the value of the transaction, if different from the amount of the cash received, and
(iii) the wholesale value of the transaction.”

Paragraph 12(1)(a) states that, “Subject to section 50 and subsection 52(1), every financial entity shall report the following transactions and information to the Centre: […] the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from another financial entity or a public body”.

  1. In this scenario, the secured bag is merely being dropped off and is not immediately being verified and/ or deposited into the account. Therefore, it seems as though this would be considered a quick drop and the conductor’s name would not need to be provided.
     
  2. A physical check of the bag is done to ensure it is sealed but the amount in the bag is not verified nor is the amount being deposited into the account at that time. As such, this is considered a quick drop and therefore the conductor’s name does not need to be provided.
     
  3. If the secured bag is not being verified/ deposited at the time it is brought into the branch, it seems as though it would be considered a quick drop. As such, the conductor’s name would not need to be recorded.

Date answered: 2013-10-02

PI Number: PI-5628

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Reporting

Guidance: 7

Regulations: 1(2), 12(1), 53

PEFP: Judge - Confirmation of Interpretation

Question:

Our position is that “judge” in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) is a reference to senior judicial positions. Does FINTRAC agree?

Answer:

Paragraph 9.3(3)(h) of the PCMLTFA states that “For the purposes of this section, “politically exposed foreign person” means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state: […] judge […]”

The meaning of a “judge” in the PCMLTFA is comparable to the definition of a judge in Canada found in other federal or provincial Canadian legislation, for example, the Judges Act and other provincial legislation. In understanding that there is a process an individual undergoes to be elected or appointed as a judge, seniority would not be a factor in determining whether a judge is a judge.

FINTRAC does not agree with your view that the position of “judge” only includes senior judicial positions.

Date answered: 2013-05-14

PI Number: PI-5552

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Act: 9.3(3)(h)

Ascertaining Identity of an Non-Account Holder

Question:

When a business makes a purchase, who is not an account holder, is the ascertaining identification requirement apply to the individual procuring the transaction or the entity who is making the purchase of the negotiable instruments?

Specifically, [ the reporting entity] sells negotiable instruments for corporate sales programs in bulk. I need to understand how to interpret this section of the act when no individual is present for the sale. An entity will complete an order form for the purchase in a non-face to face transaction.

The guidance indicates to ascertain the identity of the 'individual'. Should that be interpreted to include an entity if the entity is making the purchase?

Answer:

According to Section 54(1) of the PCMLTFR “Subject to sections 62 and 63, every financial entity shall […]

(b) in accordance with subsection 64(1), ascertain the identity of every person who has not signed a signature card in respect of an account held with the financial entity and has not been authorized to act with respect to such an account but who conducts

(i) a transaction whereby the financial entity issues or redeems money orders, traveller’s cheques or other similar negotiable instruments in an amount of $3,000 or more,
(ii) an electronic funds transfer, as prescribed by subsection 66.1(2), in an amount of $1,000 or more sent at the request of a client, or
(iii) a foreign currency exchange transaction of $3,000 or more;

Therefore, according to subsection 54(1)(b) of the PCMLTFR, the reporting entity must ascertain the identity of the individual who is purchasing the negotiable instruments. In the example provided by the reporting entity, the individual procuring the transaction must be identified. You may want to remind the reporting entity that they must also take reasonable measures to conduct a third party determination, if the reporting entity has to keep a large cash transaction record.

Date answered: 2013-04-26

PI Number: PI-5536

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Regulations: 54(1)

Requirements applicable for reporting entities on First Nations Reserves

Question:

Are PCMLTFA requirements fully applicable for reporting entities situated on First Nations reserves?

Answer:

Every person or entity referred to in section 5 is subject to Part 1 of the PCMLTFA. There is no exemption pertaining to reporting entities located on a First Nation reserve.

Date answered: 2013-03-06

PI Number: PI-5509

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Act: 5

Address to be reported

Question:

Is the address that is reported in the BIC search sufficient, even if there is no street number and the reporting entity cannot determine if it is a complete address? If it is not sufficient, what should they report as an address?

Answer:

We have previously said that in terms of international or foreign addresses, there is no specific formula. It should be information relevant to help locate the person physically, or as many details as possible to where their personal housing unit is situated. It is difficult to give you a complete answer since every country has its own conventions. If no numerical address exists, the reporting entity should take reasonable measures to include relevant information to help locate the institution. A best practice would be to document the reasonable measures taken.

Date answered: 2013-02-28

PI Number: PI-5503

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Acquisition of a portfolio

Question:

The bank XYZ signed an agreement to purchase the Canadian [Company ABC]. The Canadian operations of [Company ABC] include the operating companies, [123 Limited (123)] and [456 Company (456)]. [456] is a Reporting Entity under the PCMLTFR and [123] is not. The acquisition is expected to close in February subject to receipt of all required governmental and regulatory approvals.

As part of the pre-acquisition due diligence, the bank XYZ reviewed the AML program of [456], including OSFI's 2012 Supervisory letter with respect to [456] which contained information on its AML program emanating from its 2011 and 2012 AML examinations. Overall, the review was satisfactory with two outstanding issues related to the independent audit and inherent risk ratings.

Subsequent to the closure of the acquisition in February, new business will be booked with bank XYZ and will follow existing bank XYZ processes in compliance with applicable AML laws and regulations.

Existing [123] and [456] business will be transferred to bank XYZ during 2013. The bank XYZ will migrate only that information to bank XYZ which is held with [123] and [456] for existing clients. As [123] is not a reporting entity, we expect that information to be limited and will not comply with the PCMLTFR. While [123] started to gather client identification and record keeping information that complies with the PCMLTFR over the last year or so in the event those loans were booked on [456], that has not always been the case.

The bank XYZ intends to take an approach whereby existing [123] and [456] accounts will be converted to XYZ's systems with existing information and then, should the personal clients obtain another account or product with bank XYZ, reasonable measures will be taken to update the client information. For any non-personal clients where we do not have documentation that confirms existence of the entity, if that client applies for a new account or product with the bank XYZ, we will take additional steps to obtain beneficial ownership and director information as required currently.

We believe that this approach conforms to expectations expressed by FINTRAC for acquisitions.

Answer:

Section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that every financial entity shall ascertain the identity of a person, corporation, or entity other than a corporation, at the time an account is opened (section 54.1 of the PCMLTFR applies to cases where a credit card account is opened). In the case of the acquisition of a portfolio, the acquiring entity must consider whether or not the accounts are opened, so as to determine the associated identification obligations.

FINTRAC has determined that there is no account opening in a situation where an entity transfers over client accounts where:

  • the clients were previously identified and records kept in accordance with the PCMLTFA and its related Regulations or at the time the account was opened there may not have existed the legislative requirements to ascertain the identity (prior to June 12, 2002);
  • only immaterial changes were made to the account, namely, change of account number, logo, branding, new card and ancillary services; and
  • transactional history follows.

For accounts acquired from a reporting entity, where the acquiring entity determined no accounts are opened, there is no legislative requirement for the acquiring entity to repeat the process to ascertain the identity of each newly acquired account holder. The acquiring entity is responsible for ensuring that the acquired client accounts were previously identified in accordance with section 64 of the PCMLTFR and records kept in accordance with section 14 of the PCMLTFR (section 14.1 of the PCMLTFR applies to cases where a credit card account is opened).

Should the acquiring entity add any account(s) to the profile of an acquired client, the acquiring entity shall ascertain the ID of the client at the time the new account is added. The exceptions outlined in the regulations (paragraph 62(1)(c) and section 63 of the PCMLTFR) pertaining to ascertaining the identity would not apply.

For accounts acquired from a non-reporting entity, there is an account opening situation and the acquiring entity must ascertain the identity and keep records of each newly acquired account holder. The clients were not previously identified and records were not kept in accordance with the PCMLTFA and its related Regulations, since the non-reporting entity is not subject to Part 1 of the PCMLTFA.

Furthermore, in accordance with subparagraph 71(1)(c)(i) of the PCMLTFR, every reporting entity is required to carry out a risk assessment of their clients and business relationships. As such, an acquiring entity is required to conduct a risk assessment of the newly acquired account holders. Should the risk assessment lead to a high risk designation, then the acquiring entity would be required to carry out special measures for identifying clients, keeping records, and monitoring financial transactions in respect of the activities that pose a high risk, in accordance with subsection 9.6(3) of the PCMLTFA, and further detailed in section 71.1 of the PCMLTFR.

Date answered: 2013-02-08

PI Number: PI-5494

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 14.1, 54.1, 62(1)(c), 63, 64, 71(1)(c)(i), 71.1

Act: 9.6(3)

Exception of client examination

Question:

The head office of the firm XYZ Inc. is located in Montréal and all its employees work at that particular location. XYZ does not have any affiliates in the US, but the firm is registered to work in US soil in the securities sector. XYZ mainly deals with institutional clients, such as pension funds.

For the opening of an American pension fund account, the advisors do not verify the identity of the signing authorities, because the chief compliance officer of XYZ believes that similarly to Canadian pension funds and as per paragraph 62(2)(k), American pension funds are exempted from the ascertaining identity obligations. Also, according to the compliance officer, the American legislation contains exemptions regarding the identification of signing authorities for pension funds and as such, for American institutional clients, XYZ applies the American legislation.

Does the exemption prescribed under paragraph 62(2)(k) of the Regulations also apply to pension funds based outside of Canada?

Answer:

Subsection 5(g) de la Proceeds of Crime (Money Laundering) and Terrorist Financing Act states that "persons and entities authorized under provincial legislation to engage in the business of dealing in securities or any other financial instruments, or to provide portfolio management or investment advising services" are subject to Part 1 of the Act.

Provincial authorization means that the activities must be carried out in Canada.

The following are a few comments regarding the case described below:

  1. If the account is opened in Canada:
    The exception to record-keeping and ascertaining identity set out in paragraph 62(2)(k) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations applies to "the opening of an account where the account holder or settlor is a pension fund that is regulated by or under an Act of Parliament or of the legislature of a province." Because this is a U.S. pension fund account, the exception set out in paragraph 62(2)(k) of the Regulations cannot apply. Under subsection 57(1) of the Regulations, XYZ Inc., in accordance with subsection 64(1), must ascertain "the identity of every person who is authorized to give instructions in respect of an account for which a record must be kept by the securities dealer under subsection 23(1).
     
  2. If the account is opened in another country:
    XYZ Inc. has no obligation under our Act and associated regulations.

Date answered: 2013-01-18

PI Number: PI-5485

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Regulations: 62(2)(k), 57(1), 64(1), 23(1)

Act: 5(g)

Opening of account concept

Question:

The firm XYZ Inc. is a portfolio and discretionary investment fund management firm. Company 123 does not hold the assets of these clients. The clients are giving a discretionary management mandate to Company 123.

XYZ Inc. says that its clients either already have an account or are opening an account with a securities broker or securities custodian that will carry out the transactions.
Company 123 is sending the documentation to the discount broker or the securities custodian (if an account has to be opened).

XYZ Inc. says that it will not assign an account number, but instead will assign a client reference number to ensure that the discount broker has carried out the transactions. The instructions for transactions always include the client account number.

Is XYZ Inc. opening an account within the meaning of section 57(1)?

Answer:

Because it is authorized under provincial legislation to trade in securities or other financial instruments, or provide portfolio management and investment counselling services (under subsection 5(g) of the Act), XYZ Inc.is a reporting entity subject to our Act and the obligations therefrom.

According to the information provided in Section 1.3.7 of the Agreement concluded between Mr. Smith ("the Client") and XYZ Inc. ("the Manager"), in which it is clearly stated that the Client has assigned the Manager the mandate to "open and maintain, in the Client's interest, one or several accounts with firms that are members of a securities regulatory agency, such as the Autorité des marchés financiers (AMF), the Investment Industry Regulatory Organization of Canada (IIROC) or a recognized brokerage firm that it chooses at its own discretion," it appears that XYZ Inc. itself is not opening accounts to carry out its clients' transactions. Instead, XYZ Inc. is authorized by its clients to provide portfolio management and investment counselling services on accounts opened with other securities brokers or custodians.

However, the term "account" is not defined in law. So, because there is a business relationship established between XYZ Inc. and its clients, and because XYZ Inc. assigns a reference number, there is an account opened and this gives rise to the obligations to ascertain identity and keep records.

Other securities brokers or securities custodians also have responsibilities relative to the opening of an account and other interaction between them and their clients.

To reduce their workload, XYZ Inc. and other securities brokers or securities custodians could draw up a written agreement to allow XYZ Inc.to fulfil obligations related to the opening of an account with other securities brokers or securities custodians.

Date answered: 2012-12-11

PI Number: PI-5475

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Regulations: 57(1)

Act: 5(g)

Acquisition of credit card portfolio

Question:

Information with respect to the credit card portfolio acquisition:

  1. All product features and benefits of the credit cards will remain the same other than the fact that the insurance on the product will be different. While the existing card has Travel Accident Group Insurance (TAI) and Purchase Security, the new XYZ bank product will have Purchase Security and Extended Warranty. XYZ bank will not provide the TAI insurance type on the card. In addition, a few minor non-material changes will be made e.g. interest rate changes, but the card holders will be provided with 60 days notice of the changes.
  2. XYZ bank has recently learned that it cannot obtain the Bank Identification Number of the current issuer and, as such, the clients will be sent a new card with the XYZ bank and retailer branding.
  3. More importantly, while the card "number" on the face of the plastic will change, and the card will be branded with the XYZ bank as the new issuer, the actual account of the card holder will remain the same. XYZ bank will be conducting a systematic conversion to transfer all outstanding credit / debit balances and applicable transactional data (eg. all loyalty points transfer) to the new account to enable a seamless transition for the client. In addition, the credit bureaus are notified the account has transferred to XYZ bank.

Ultimately, no are changes being made to the conditions for the acquired accounts as the points above do not impact the conditions for the acquired accounts and are not material, particularly from an AML perspective. Consequently, these are not "new accounts" and XYZ bank will be able to rely on the record keeping and ID verification undertaken by the current issuer.

Answer:

In accordance with section 54.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) every financial entity shall ascertain the identity of a person, corporation, or entity other than a corporation, at the time a credit card account is opened.

In the case of the acquisition of a credit card portfolio, the acquiring entity must consider whether or not credit card accounts are opened, so as to determine the associated identification obligations. It is the position of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) that where no new accounts are opened, no changes are made to the acquired accounts, and/or no changes are made to the conditions with respect to the acquired accounts, then there is no legislative requirement for the acquiring entity to repeat the process to ascertain the identity of each newly acquired credit card account holder.

That said, in accordance with subparagraph 71(1)(c)(i), every reporting entity is required to carry out a risk assessment of their clients and business relationships. As such, XYZ bank is required to conduct a risk assessment of the newly acquired credit card account holders. Should the risk assessment lead to a high risk designation, then XYZ bank would be required to carry out special measures for identifying clients, keeping records, and monitoring financial transactions in respect of the activities that pose a high risk, in accordance with subsection 9.6(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), and further detailed in section 71.1 of the PCMLTFR.

Finally, as a best practice, reporting entities are encouraged to review and update credit card account information, as appropriate, when acquiring these accounts in the process of a merger or acquisition. Ultimately, the newly acquired credit card account holders become the responsibility of the acquiring entity, and it is for that entity to not only ensure compliance with the PCMLTFA and its related Regulations, but to review the risk that these newly acquired clients may pose to the entity, and/or the Canadian financial system.

Since XYZ bank is opening new credit card accounts, I recommend that they look at the guidances in regard of Financial Entities obligations.

Date answered: 2012-09-24

PI Number: PI-5452

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 54.1, 71(1)(c)(i), 71.1

Act: 9.6(3)

Ascertaining ID of an exempt entity

Question:

A lawyer is seeking an exemption under the legislation by which he would not be required to be identified by a real estate agent in a transaction. Is this possible?

Answer:

It is important to note that in this instance, the real estate agent is the reporting entity to which the PCMLTFA and its associated Regulations apply. As such, the exemptions apply to the real estate agent’s record keeping and identification requirements, rather than what the lawyer is allowed to potentially refuse to give.

That said, when an external individual is engaged to represent a corporation that qualifies for the exception under subsection 62(2)(m) of the Regulations, there is no legislative requirement to identify either the person conducting the transaction, or the large corporation. In this particular case, should the lawyer admit to representing ABC, then the real estate agent would not be required to carry out the record keeping and the associated ascertaining identity requirements.

Date answered: 2012-08-16

PI Number: PI-5440

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 62(2)(m)

ID requirements

Question:

Scenarios:

  1. (a) The buyer gets in touch with the Bank re: need for funds for home purchase, so the Bank (Lender) transfers the amount to the Notary

(b) The buyer brought to their real estate agent a cheque as a deposit on the purchase. The agent sent the funds to the sellers real estate agent. Once the sale is approved, the sellers real estate agent transfers these funds to the Notary to become part of the total purchase price.

(c) The buyer transfers to the notary an amount that they have on hand to be part of the purchase of the home.

As it currently stands, in all of the above, the notary is only ascertaining the identity of the buyer. While they are maintaining, in their records, information on the Bank and Real estate agent they are not carrying out the ascertaining of identity as outlined in 64-66 of the PCMLTFR. Is this understanding of how it currently works correct?

  1. (a) The buyer transfers to the notary an amount that they have on hand to be part of the purchase of the home.

(b) The buyer gets in touch with the Corp/institutional lender re: need for funds for home purchase, so the lender transfers the amount to the Notary.

As it currently stands, in the above, the notary is only ascertaining the identity of the buyer. While they are maintaining, in their records, information on the corp/institutional lender they are not carrying out the ascertaining of identity as outlined in 64-66 of the PCMLTFR. Is this understanding of how it currently works correct?

  1.  (a) the buyer’s lawyer transfers funds to the Notary for the purchase of property by their client.

(b) the Notary then transfers the funds to the seller

As it currently stands, in the above, the notary is only ascertaining the identity of the buyer. While they are maintaining, in their records, information on the lawyer they are not carrying out the ascertaining of identity as outlined in the PCMLTFR. Is this understanding of how it currently works correct?

Answer:

We’ve reviewed the various scenarios provided and have the following comments:

In accordance with section 33.2(1), BC Notaries subject to the PCMLTFR, are required to keep a receipt of funds record (unless the amount is from a financial entity or public body) for every transaction of $3000 or more and that record must contain all the information required under the definition of “receipt of funds record” found under subsection 1(2). Furthermore, where the receipt of funds record pertains to a corporation, the BC Notary must obtain a part of the official records that contains any provision relating to the power to bind the corporation.

BC Notaries are also required to keep, in accordance with 33.2(2), a large cash transaction record, unless the amount was received from a financial entity or public body. If a large cash transaction record is required, then the receipt of funds record is not.

When a receipt of funds record is required, BC Notaries, must:

in accordance with 64(1), ascertain the identity of every person who conducts the transaction
in accordance with 65, confirm the existence and ascertain the name and address of every corporation on whose behalf the transaction is conducted
in accordance with 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.

In the scenarios presented, it is important to remember that the BC Notary must ascertain the identity of every person who conducts the transaction. This would be the person in front of the BC Notary or the person actually carrying out the transaction.

When a large cash transaction record is required, BC Notaries must ascertain identification in accordance with section 53 of the Regulations and carry out a third party determination.

Date answered: 2012-08-08

PI Number: PI-5437

Activity Sector(s): British Columbia notaries

Obligation(s): Ascertaining Identification

Regulations: 1(2), 33.2(1), 33.2(2), 53, 64(1), 65, 66

MSB enters into an ongoing service agreement for EFT's and FX

Question:

Compliance Officer requests confirmation that pursuant to Subsection 11.1 of the Regulations, an MSB is only required to obtain and take reasonable measures to confirm the information in relation to the existence of an entity when it enters into an "ongoing" service agreement for EFT's and FX.

If they do not enter into an agreement, they do not have to obtain and confirm the information in relation the existence. Correct?

Answer:

The MSB is only required to obtain and take reasonable measures to confirm the information in relation to the existence of an entity when it enters into:

  • an ongoing electronic funds transfer, funds remittance or foreign exchange service agreement with an entity, or
  • a service agreement for the issuance or redemption of money orders, traveller’s cheques or other negotiable instruments.

If the MSB does not enter into such agreements it does not have to obtain and take reasonable measures to confirm the information in relation to the existence of a corporation (sec. 32 and sub. 59(2) and (3)).

Date answered: 2010-01-22

PI Number: PI-5299

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 11.1, 32, 59(2), 59(3)

Existence- entity other than corporation- resolution

Question:

A former PI stated that, in the absence of any other document, a letter from the entity other than a corporation was sufficient to satisfy the "existence" obligation.

Would a resolution document from the entity other than a corporation meet the definition of a document that establishes the "existence"?

Answer:

A resolution from an entity other than a corporation (a non incorporated body) would be acceptable. However, the document would have to be dated, signed (indicate who the signatory in relation to the entity is) and the resolution should be current.

Date answered: 2010-01-21

PI Number: PI-5296

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Regulations: 54(1)(e), 66

Are Tax free savings accounts exempt under the Act?

Question:

Can you please confirm that a tax free savings account (TFSA) qualifies as a "registered plan account" in subsection 62(2)(i) of the Regulations such that the sections and subsections of the Regulations outlined in subsection 62(2) do not apply to TFSAs?

Answer:

Yes the TFSA is considered as a registered plan account

Date answered: 2009-12-04

PI Number: PI-4747

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 62, 62(2)(i)

Purchasing real estate from a builder

Question:

We purchased a ready to move home from a builder. We took possession over a month ago, and he is now asking us for copies of our driver's licences and information about our occupations.

I understand that the federal guidelines apply to real estate. We purchased the land separately, as well as contracted the construction of the foundation, utilities and mechanical ourselves. Essentially, we general contracted the build of the home.

You may also wish to note that we secured funds for this build via a mortgage with our bank that is now registered on the land title and these transactions were also handled by our lawyer.

As we did not purchase "real estate" from the builder, are we required to provide him with the information he has requested?

Answer:

Homebuilders have legal requirements if they fall into the legal definition as a real estate developer. Your builder should know if they meet the definition. All these legal obligations apply to the developer, not you as the client.

To clarify how that legal definition of real estate developer is applied, I am including the following summary:

Effective February 20, 2009, if you are a real estate developer, these requirements apply to you when you sell to the public a new house, a new condominium unit, a new commercial or industrial building, or a new multi-unit residential building. A real estate developer means an individual or an entity other than a real estate broker or sales representative who in any calendar year after 2007 has sold the following to the public:

  • at least five new houses or condominium units;
  • at least one new commercial or industrial building;
  • at least one new multi-unit residential building each of which contains five or more residential units; or
  • at least two new multi-unit residential buildings that together contain five or more residential units.

Just to close the loop on this question, we just wanted to add that the builder (if he falls within the definition of a real estate developer within our legislation) is required to identify the client before selling the house.

Should the real estate developer have the sale or all sales handled by a real estate broker then we have indicated in the past that the real estate broker/agent would then have that obligations (there is no need for dual identification real estate developer and agent in that case).

It would be a question of fact in determining whether the real estate developer or the real estate agent have the obligations.

Date answered: 2009-09-12

PI Number: PI-4678

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 1(2), 59.5(a)

Valid Identification

Question:

Is the Quebec Bar Association's member card a valid piece of identification under the Act? It has an expiry date and a unique identifier number.

Answer:

The Bar Associations member cards are not a government issued identification card, therefore, are not acceptable as a valid identification document under our legislation.

Date answered: 2009-08-31

PI Number: PI-4664

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 64(1)

Act: 6

Client ID exception

Question:

Company ABC is wholly owned by the Ontario government, but I do not know if their financial statements are consolidated with those of the province. Do they qualify as an exception for ID requirements?

Answer:

After verification, ABC company is defined as a crown corporation, however in vertu of the Electricity Act, 1998, it is not considered as an agent of the Crown (i.e. as an agency of the province) -below is the subsection that deals with the ABC company in the Electricity Act and it reads as:

Status: (2) ABC company and its subsidiaries are not agents of Her Majesty for any purpose, despite the Crown Agency Act. 2002, c. 1, Sched. A, s. 11.

Therefore, if is not an agent of Her Majesty (the province) then it does not fit in our definition of a "public body" found is subsection 1(2). And by ricochet then the ABC company does not benefit of the exemption of identification requirement found under subsection 62(2)(m).

Date answered: 2009-08-10

PI Number: PI-4647

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 62(2)(m), 1(2)

Military ID

Question:

There seems to be confusion among reporting entities about the acceptance of Canadian Military identification as being a valid form of ID.

It was previously advised that Military ID was the equivalent to employer ID therefore unacceptable as identification. Acceptance of this would open up accepting RCMP ID, other police force ID, etc.

Could you please provide clarification on this.

Answer:

In regards to this issue - the military ID was deemed acceptable because this card is more than just an employment card as it has an international purpose of identifying the military when abroad, something that other employment cards such as the police force card or firefighter card lacks.

I think what we are getting at is we want to avoid opening the debate on the acceptability of "employment" card that is a means usually for an individual to be identified as an employee of an organization or an agency, however, not as a means of identification of the said individual.

Date answered: 2009-06-26

PI Number: PI-4611

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): Ascertaining Identification

Guidance:

Regulations: 64(1)(a)

Exemptions for Client ID: Section 32 and Financial Entities as clients

Question:

If the company is a public body or large corporation, would the exemption in 59(6) apply only to confirming the existence of the entity, or also to the other record keeping obligation in section 32?

Specifically, would a public body or large corporation still need to provide the MSB with the "name, address, date of birth and occupation of every person who has signed the agreement on behalf of the entity...and a list containing the name, address and date of birth of every employee authorized to order transactions under the agreement" ?

Answer:

No the exemption found in 59(6) applies only to confirming the existence of the entity and not to the record keeping obligation under section 32. Therefore, the MSB will have to keep a record of the name, address, DOB and occupation of every person who signed the agreement, a client information record with respect to the entity and a list containing name, address, DOB of every employee authorized to order transactions under the agreement.

In other words for a public body or large corporation you keep a CIR, list of employees (section 32) but you do not need to ascertain the existence of the entity (59(6)).

Date answered: 2009-05-11

PI Number: PI-4428

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 62(2)(m), 32

Accounts Opened by POA

Question:

Determining the identification requirements for the following scenario:

Securities Dealer opened a non-registered account in the name of Person A (Beneficial Owner). However, the authorization to open the account and all instructions executed on the account were given by Person B (who holds a POA granted by Person A).

Under Fintrac Guidelines, it is clear that Person B must be identified by the Securities Dealer.

Can you clarify if the Securities Dealer is required to identify Person A if Person A never places instructions on the account themselves?

Answer:

The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations require the dealer to ascertain the identity of any person(s) authorized to give instructions in respect of the account. It comes down to a question of fact concerning the account holder. For example, if the account holder is infirm or has been declared mentally incompetent, they would be unable to give instructions and therefore the identity obligations would only apply to the person holding POA. However, if the account holder simply wishes to have someone else not named on the account give instructions, then both parties would have to be identified.

Date answered: 2009-05-08

PI Number: PI-4424

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 57(1)

Selling to band councils and exemptions to receipt of funds obligations

Question:

If the individual from the Band Council is not seen face-to-face, then the entity must appoint someone (we call this person an agent or mandatary) to do the identification on its behalf. This agent/mandatary will be in the same location as the client so that they will see original identification, document and send it to the entity for its record. Also note, there must be a written agreement between the entity and the agent.

As for the corporation, being the Band Council, they must also be identified / confirmed.

Also note, that once the entity has done the ID and confirmed the corporation once, and the entity deals with them again, the entity does not have to go through the ID process again.

Answer:

In the scenario, the RED will identify the individual that is conducting the transaction on behalf of the band council (face to face or if non face to face either with two of the prescribed methods, or by appointing an agent to identify on your behalf), and you then ascertain the existence of the band council.

As for the receipt of funds record - we would just like to indicate that the RED keeps a receipt of funds record, with the information prescribed and would identify the individual providing the funds and ascertain the existence of the band council (because it is not a public body, nor an agent of the Crown and does not benefit from any exemption).

Date answered: 2009-05-04

PI Number: PI-4577

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 39.7

Obligation to verify signers information before conducting a transaction

Question:

If we are opening an account for corporation or other entity, if there are several signors, can we conduct transactions before verifying all signors?

For example, if there are multiple signors and it will take time to meet all of them based on geographic location etc., would we be able to conduct transactions based on instructions from those individuals who have been verified or do we need to wait until all (maximum of 3) have been verified in order to proceed with conducting transactions?

Answer:

The regulations are quite clear in obtaining three signatures for signing officers to open an account.

If only one or two signature(s) are obtained, you can accept the initial deposit however you cannot do any other transactions.

You must have complete information to transact in the account.

Date answered: 2009-04-16

PI Number: PI-4569

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 54(a)

Exemptions to client ID

Question:

This question is about the exemption from the client ID requirements in the regulations for the large corporation (minimum net assets of $75 million on its last audited balance sheet).

The regulations exempt such corporations where their shares are traded on a Canadian stock exchange or on a stock exchange outside Canada that is designated by the Minister of Finance and where they operate in a country that is a member of the Financial Action Task Force (FATF). It is the word "operate" that I would like to have clarified. Does this mean that the corporation has to operate solely in an FATF country, or can it operate in both FATF and non-FATF countries? For example, if a corporation is headquartered in a non-FATF country, but carries on business globally and has offices in a number of countries, including FATF countries (and satisfies the stock exchange requirement), does this meet the requirements of the exemption?

Also could you please advise on the interpretation of paragraph 62(2)(m) according to the question below?

Answer:

The exemption provided for in paragraph 62(2)(m) would apply to corporations that operate in an FATF country, whether or not they also operate in non-FATF countries. I base this opinion on the following reasoning:

  • paragraph 62(2)(m) does not refer to corporations that "only" operate in FATF countries (if the exemption was meant to be restricted to corps. that operate only in FATF countries, the text would have to be written in an explicit fashion);
     
  • if the corp. operates in at least one FATF country, it means that a RE in that FAFT country that deals with the corp. would have done an ML and TF risk assessment with respect to that corp., taking into account its world-wide operations, thereby offering some comfort in respect of the corp's non-FATF operations;
     
  • if the corp. operates in at least one FATF country, it means that the corp (even if it is not a RE) has that aspect of its operations that are subject to an AML-ATF regime that is comparable to Canada's regime.
     
  • I would add that: I think that the country where the corp. has its headquarters is not a useful criteria, since a corp. can have its HQ in a country and have little or no business activity in that country.

Date answered: 2009-03-27

PI Number: PI-4559

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): Ascertaining Identification

Guidance:

Regulations: 62(2)(m)

Real Estate Policy Interpretation

Question:

If a client gives a deposit cheque, but the RED does not deposit the cheque during the rescission period, is it still considered a transaction and hence a receipt of funds record? The RED is arguing that taking a cheque and not depositing it is not a transaction, hence do not need to Identify a client.

Client information record is the only time when the purchase and sale is complete. So in this case, only need to identify when all the conditions on the offer to purchase is met.

Answer:

When you receive funds, then a receipt of funds record needs to be kept. In other words, when the developer receives the cheque, then he needs to keep a receipt of funds record including ascertaining ID. Whether it is deposited or not is irrelevant to this obligation

Date answered: 2009-03-06

PI Number: PI-4536

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 39.7(1), 59.5

Registered Disability Savings Plans: Exemption to client ID

Question:

We believe the Registered Disability Savings Program (RDSP) falls under the exceptions set out in section 62(2)(i), which states that sections 14, 14.1, 19, 20.1 and 23, subsection 33.2(1), section 33.4, subsections 36(1), 39(1) and 39.7(1), sections 43, 49, 54, 54.1, 54.2, 55, 56, 56.1, 57, 57.1 and 59.1, subsection 59.2(1) and sections 59.3, 59.4, 59.5, 60 and 61 do not apply in respect of 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.

RDSPs are grouped by the Canada Revenue Agency under the same plans as RRSPs and RESPs.

Given the above, and what appears to be the intention of the legislators to provide an exception for registered plans/accounts, in our view the phrase "registered plan account" set out in section 62(2)(i) is sufficiently broad to capture RDSPs.

Could FINTRAC please confirm our understanding?

Answer:

You are right. So it is part of the exemption under 62(2).

Date answered: 2009-02-16

PI Number: PI-4526

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 62(2)

14(l) vs 54(1)(b)(i) - Regulatory Change Suggested

Question:

There seems to be a lack of symmetry in the Regulations, for which we need a position.

14(l) applies to the "redemption" of Money Orders for $3000 or more. So, the reporting entity need not record keep for the redemption of any other type of product

Yet, 54(1)(b)(i) states that the reporting entity must ID a client for the issuance and "redemption" of MO, TCs, and similar negotiable instruments of $3000 or more. ID applies to the redemption of all these products yet Record keeping only applies to MO for the redemption

Do we enforce ID for the redemption of all the product types mentioned?

Answer:

There is a lack of symmetry between the record keeping obligation found in subsection 14(l) that only covers the redemption of money orders and the obligation to identify of subsection 54(1)(b)(i) that on the other hand applies to the redemption of money orders, but also of traveller's cheque, and similar negotiable instruments.

Having said this, in response to your question - yes identification applies to all the product types mentioned in subsection 54(1)(b)(i) i.e money orders, traveller's cheques and other similar negotiable instruments.

The problem lies that in the absence of a corresponding record keeping obligation in regards to the redemption of traveller's cheques and other similar instruments (such as the one found in subsection 14(l) applicable to the redemption of MO) it will be more difficult for regional officers to ensure the compliance with 54(1)(b)(i) in that case.

Date answered: 2009-01-22

PI Number: PI-4497

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 14(l), 54(1)(b)(i)

Existence of a Corporation under ongoing service agreement

Question:

It seems that the compliance officer is under the impression that you ascertain the existence of a corporation only when there is an ongoing service agreement in place? For all other client information record, the MSB only IDs the individual, and does a third party determination (corporation) - however does not ascertain the existence of the corporation nor the beneficial ownership ?

Answer:

Yes, under 59(2) you confirm the existence of the corporation when you are required to keep a client information record and under section 32, you are required to keep a client information record when you enter into an ongoing service agreement.

Therefore, if the MSB does not enter into an ongoing service agreement with the entity, you are right, the MSB only has to identify the individual, with a third party determination.

Date answered: 2008-10-30

PI Number: PI-4392

Activity Sector(s): Money services businesses

Obligation(s): Ascertaining Identification, Beneficial Ownership, Record Keeping

Regulations: 11.1, 32, 59(2), 65

Identification obligation

Question:

A senior has an account with the CU, has an agreement with the CU, that his monthly payment for his senior's residence accommodation will be automatically taken from his account, that a "certified cheque/more like a bank draft" will be issued from the CU Manager's trust account to the senior's residence.

Assuming that the payments are $ 3000/month - in light of 54(1)(b) - would you need to ID the manager? Because he issues a similar negotiable instrument in an amount of $ 3000 and has not been authorized to act with respect of the account, and then you can recognize - however why it is bugging me is that the money is really coming from the senior's account? or would 14(k) apply? you record keep the client/senior information, because the CU received the amount, then the CU then issues a similar negotiable instrument to pay the bill, and that is it.

The twist is also that when the senior opened his account, it was opened before the ID requirement, so he was not ID when he opened the account.

Answer:

You wouldn't have to ID either the person holding the account at the CU nor the manager of the trust account. You also do not have to keep a record of that transaction.

Firstly 14(k) does not apply, because the CU is not receiving money in consideration of the issuance of traveller's cheques, money orders, or similar negotiable instrument. The transfer of money from the senior's account to the CU's trust account resembles a pre-authorized payment to cover his monthly residence rent. And there are no legislative requirements in that case to identify the senior.

As for the "certified cheque" emitted by the CU's trust account to the senior's residence, there are no legislative requirements to identify the manager of the trust account - and 54(1)(b) does not apply, because the manager is emitting a CU cheque from the CU's own "account", not the senior's account.

In regards to the fact that the senior has never been identified (since his account was opened at the CU prior to our identification requirements coming into force) - we have already indicated in prior policy interpretations that there are no legislative requirements to identify a person that has opened an account (prior to our legislation and/or legislative requirements. The reason being that legislative requirements do not apply retroactively).

However, should a client/account be deemed high risk, then under section 71.1(a) reasonable measures would have to be taken to keep the client identification information up to date.

Date answered: 2008-09-29

PI Number: PI-4364

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 71.1(a), 54(1)(b), 14(k)

Retirement compensation arrangement

Question:

A retirement compensation arrangement is a plan under the Income Tax Act, but it's not a registered retirement plan. Paragraph 62(2)(k) of the PCMLTFR is not applicable. Would another provision apply to these arrangements, such as 62(2)(i)?

Answer:

No, paragraph 62(2)(i) does not apply to retirement arrangements. Also, no other exemption provision apply to this. Although the retirement arrangements certainly have a fiscal impact, it's not a registered retirement plan.

Date answered: 2008-09-25

PI Number: PI-4360

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 62(2)(i)

Act: 6.1

ID Obligations for real estate agent when lawyer is handling the sale

Question:

I am representing 2 parties (corporations) that are purchasing a piece of development land that was not listed for sale. The Vendors have no real estate sales representative representation and are handling the sale through their lawyer. The Vendor is an Estate, not an individual.

Since I am not representing the Sellers and their lawyer is, do I need to get any ID and if so, since it is an estate, who do I get I.D. from?

Answer:

ID the two buyers (individuals and confirm existence of the corporations), and take reasonable measures to identify the lawyer (not necessarily the same person as executor) and indicate that the transaction is being conducted on behalf of the estate.

Date answered: 2008-08-18

PI Number: PI-4310

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 59.2(1)(a), 59.2(1)(b)

Blanket exemptions for foreign banks with privacy policies

Question:

One of our credit unions sent a trace to a Swiss Bank requesting the ordering customers complete address. The Swiss Bank advised that Swiss Law protects the personal privacy of customers and it states that only to the extent a customer waives protection of secrecy rules is a bank free to reveal the name and/or customer information.

It is unlikely with the Swiss Banking laws in place that many wires receive from Switzerland will be complete with the originators full address, postal code and country. Can the credit union consider this country has blanket approval and not need to send out further trace requests or does the response from the Swiss bank only cover any further incoming wire transfers for the same receiving beneficiary?

Answer:

For this question, we must distinguish here between two separate and distinct obligations in our Act and Regulations regarding wires, namely:

  1. the travel rule (9.5(b) Act) and 66.1(1)(2)
  2. EFT Incoming (12(1)(c) Regs and Schedule 6)

1. For the travel rule, the Act says that a RE must take "reasonable measures" to obtain the name, address, and if any, account number (reference number) of the originator. I believe that Policy Interpretation ruled, in a previous email, that should a RE send one traces back to "that" Swiss bank that would be sufficient as reasonable measures and that the RE would not have to do so again for any of the incoming wires from that bank, irrespective of the beneficiary. I believe this, as stated, has already been decided.

What I may see as an additional question from CU central, is that can this "notion or blanket exclusion" apply to all Swiss Banks because we know that is how the country operates. In other words, the RE would not have to send a trace or two to other Swiss banks because we know there privacy (secrecy) laws. I believe that we should not allow this blanket exception because AML regimes, in my opinion, do not want to favour or endorse secrecy laws (in certain countries it is more a secrecy law than privacy law). The RE should still have to send a trace or two to ask for the originator information for each bank from which it receives an EFTI as a reasonable measure.

2. EFT Incoming- What strikes me more is the fact that in a paragraph above it says "waives protection of secrecy rules is a bank free to reveal the name and/or customer information."

Well, once more, assuming that, as in most cases, the CU is non-SWIFT (if so, it must report in Non-SWIFT, irrespective of whether its service provider received it in SWIFT) , then according to schedule 6, Part B, originator full name and account number, if applicable, are mandatory. So if the statement in quotations holds true, then the RE is non-compliant for the EFTR incoming if the name of the originator is not provided. How are they addressing that issue? The Regs do not provide an exception here (unless it is a 24 rule - 52(3) Regs)

Date answered: 2008-08-13

PI Number: PI-4305

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 12(1)(c), 66.1(1)(2), Schedule 6-Part B, 52(3)

Act: 9.5(b)

Power to Bind question

Question:

Is the "power to bind" document required when the person signing is listed as one of the principles on the Joint Registry of Stocks website document? If they are the owner why would we need to verify that they have signing authority?

Answer:

Although the person is listed as one of the principles (or owners) on the Joint Registry of Stocks website, it does not necessarily implied that this *specific person* is the one who is duly authorized to sign on behalf of the corporation. In order to fulfill the legal requirements (both for the Receipt of funds record and the Client information record), a copy of the part of the official corporate records showing the provisions relating to the power to bind the corporation regarding the transaction must be kept. This document should set out the officer(s) duly authorized to sign on behalf of the corporation.

Date answered: 2008-07-31

PI Number: PI-4298

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 39(1)(c)

Power to Bind question

Question:

For corporate identification verification, the following is mandatory:

The type and source of verification record to confirm existence of the corporation (e.g. certificate of corporate status, published annual report, government notice of assessment).

And,

A copy of corporate record showing authority to bind corporation regarding transaction (e.g. certificate of incumbency, articles of incorporation, by-laws setting out duly authorized to sign on behalf of corporation).

Would printing of the Registry of Joint Stocks info satisfy both of those requirements? Is the second point specific to non-profits? Could you clarify these points?

Answer:

Corporate identification verification is possible with the Registry of Joint Stocks in Nova Scotia. However, the authority to bind the corporation to the transaction could/should be verified with, among possible options, the articles of incorporation setting out who is duly authorized to sign on behalf of the corporation or any resolution of the corporation that binds it to the transaction. Note that both of these methods to document/verify the authority to bind the corporation to the transaction cannot be accomplished through the Registry of Joint Stocks as "power to bind" are not listed. Said otherwise, "corporate identification verification" and "power to bind" are two different requirements to fulfill when the client is a corporation.

In the case of an entity other than a corporation (often call "non-profits"), the existence shall be confirmed by referring to a partnership agreement, articles of association or other similar record that ascertains its existence. Again, the record used may be in paper form or in an electronic version that is obtained from a source that is accessible to the public. Note that in this instance (entity other than a corporation) the regulations do not specifically ask to document/verify the "power to bind". It would however constitute a best practice to do so.

Date answered: 2008-07-31

PI Number: PI-4297

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance:

Regulations: 59.2(1)(b), 59.2(1)(c), 39(1)(c)

Privacy act and requesting ID

Question:

It has been brought to my attention that asking for ID prior to it being needed (i.e. at closing) is going against the Privacy Act.

Has this been brought up to anyone else? Is this correct?

Answer:

The Privacy Act only applies to the handling of personal information by federal government departments and agencies (including FINTRAC - we are subject to it), but the private sector is not covered by it in any way. Real estate sales representatives are subject to the federal Personal Information Protection and Electronic Documents Act (PIPEDA) in most provinces, and to similar provincial legislation in several provinces. PIPEDA places restrictions on businesses in the collection of data, including how it must be kept and protected, a requirement to inform customers of why information is being collected, and to not collect unnecessary information. There are stipulations for the collection of data that is required by law, but no reference to at what point this information can or cannot be collected. There is no prohibition on collecting data that you know you will need to fulfil an obligation at a later time.

While we are not in the position to be giving advice on privacy legislation to real estate sales representatives, it is reasonable to say that there is nothing that prevents real estate sales representatives from asking a client for ID prior to closing if they so choose, without the need for a consent form. (and keeping in mind that in most cases, they will have asked the same person for ID at the time of the deposit anyway)

Date answered: 2008-07-23

PI Number: PI-4294

Obligation(s): Ascertaining Identification

Guidance:

Corporation document for builders

Question:

I have received another question from a real estate sales person who represents multiple builders / developers - this person wants to know if having the Tarion registration would be acceptable for corporation identification as all builders have a lengthy process to go through to get registered with Tarion and get a number

Answer:

Tarion registration would count as an acceptable publicly-available record that confirms the corporation's existence, its name and its address. The real estate sales representative would also have to obtain the names of the corporations directors separately. The real estate sales representative could either print out the builder's info from the registry and keep a copy, or keep a record of the builder's registration number, address and the fact that the info was obtained from the Tarion registry on the Tarion website.

Date answered: 2008-07-17

PI Number: PI-4265

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification

Guidance: 6B

Regulations: 59.2(b), 39(1)(b)

Date Modified: