FINTRAC Policy Interpretations

Other

Employees of accountants and accounting firms

Question:

I'm looking for clarification on an amendment coming into force with respect to the requirements for accountants and accounting firms.

Currently, paragraph 34(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations says:

  • "Subsection (1) does not apply in respect of an accountant when they engage in any of the activities referred to in paragraph (1)(a) or (b) on behalf of their employer.”

The amended regulations at paragraph 47(3) says:

  • "Subsection (1) does not apply to an accountant who is acting in the capacity of an employee or of a person who either is authorized by law to carry on the business of - or to monitor the business or financial affairs of - an insolvent or bankrupt person or entity or is authorized to act under a security agreement.”

Are these paragraphs intended to mean the same thing with respect to the obligations when acting as an employee, or is there an intended policy change? In other words, once the amendments come into force, will accountants acting as employees still be scoped out of the reporting requirements under the Act and the Regs?

Answer:

While the PCMLTFR has been amended such that effective June 1, 2021, the PCMLTFA will instead “not apply to an accountant who is acting in the capacity of an employee or of a person who either is authorized…” the amended language is not meant to reflect a change in policy intent. An accountant carrying out the prescribed activities on behalf of their employer will not be subject to the PCMLTFA and its associated Regulations.

Date answered: 2021-08-19

PI Number: PI-11493

Activity Sector(s): Accountants

Obligation(s): Other

Regulations: 47(3)

Real estate – life lease

Question:

Is a real estate sales representative acting as an agent for the purchase of a life lease subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations?

Answer:

A real estate broker or sales representative is a person or entity that is registered or licensed under provincial legislation in respect of the sale or purchase of real estate, and 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. FINTRAC has further clarified that real estate brokers or sales representatives acting as agents for rental and lease transactions are not subject to the PCMLTFA and its associated Regulations. As such, whether or not a real estate broker or sales representative is acting as an agent for the purchase or sale of real estate in this case, is dependent on whether a life lease transaction is the purchase or sale of real estate.

Based on the information available, namely that in a life lease transaction, the person does not own the property, but rather is leasing from the sponsor for a period of time, it would appear that any real estate broker or sales representative involved with the transaction would be acting with respect to a lease transaction, so would not be acting as an agent in respect of the purchase or sale of real estate.

Date answered: 2020-12-09

Answer updated on: 2021-08-20

PI Number: PI-11071

Activity Sector(s): Real estate

Obligation(s): Other

Regulations: ss. 1(2), 53

Act: 5(j)

Extracting precious metals or stones

Question:

What if a company selling gold or silver byproduct did not mine the material itself but obtained the source concentrate from a related party that mined it?

What if the company selling the gold or silver byproduct is a mining entity, but it so happens that the particular gold and silver byproduct in the transaction in question was derived from raw concentrate that was purchased from another, unrelated mining entity and the vendor merely refined/extracted the gold and silver byproduct from the concentrate?

What about purchases of raw concentrate, would this qualify as a "precious metal"? (Mineral concentrate has a mix of many different minerals, including very small trace amounts of precious metals. The various minerals are separated through the refining process which would result in gold and silver alloys as a byproduct among other products.) Or is it just the subsequent sales of the refined gold/silver byproduct that would fall within the "precious metal" definition.

Answer:

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

  • Subsection 1(2):
    • A DPMS means a person or entity that, in the course of their business activities, buys or sells precious metals, precious stones or jewellery. It includes a department or an agent of Her Majesty in right of Canada or an agent or mandatary of Her Majesty in right of a province when the department or the agent or mandatary carries out the activity, referred to in subsection 65(1), of selling precious metals to the public
    • Jewellery means objects that are made of gold, silver, palladium, platinum, pearls or precious stones and that are intended to be worn as a personal adornment.
    • Precious metal means gold, silver, palladium or platinum in the form of coins, bars, ingots or granules or in any other similar form.
    • Precious stones means diamonds, sapphires, emeralds, tanzanite, rubies or alexandrite.
  • Subsection 65(1), a DPMS, other than a department or an agent of Her Majesty in right of Canada or an agent or mandatary of Her Majesty in right of a province, that buys or sells precious metals, precious stones or jewellery, for an amount of $10,000 or more is engaged in an activity for the purposes of paragraph 5(i) of the Act. […]
  • Subsection 65(2), the activities referred to in subsection (1) do not include a purchase or sale that is carried out in the course of or in connection with manufacturing a product that contains precious metals or precious stones, extracting precious metals or precious stones from a mine or polishing or cutting precious stones.
  • Subsection 65(3), for greater certainty, the activities referred to in subsection (1) include the sale of precious metals, precious stones or jewellery that are left on consignment with a dealer in precious metals and precious stones. Goods left with an auctioneer for sale at auction are not considered to be left on consignment.

Please note that the exemption relates to when a DPMS will have legal obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations. Namely, a DPMS that has engaged in the purchase or sale of precious metals, precious stones, or jewellery in the amount of $10,000 or more, has legal obligations under the PCMLTFA and its associated Regulations.

Precious metal has not been defined further than the definition provided  within the PCMLTFR. DPMS are covered under the regime when they buy or sell precious metals and it does not matter whether the quantity of precious metal is negligible or not (as long as it qualifies as a precious metal in Canada). That said, the precious metal that is bought or sold has to be in the form of coins, bars, ingots or granules or in any other similar form. For instance, the sale of gold plated coins. However, the purchases or sales referred to above exclude those carried out for, connected with, or for the purpose of extracting precious metals or precious stones from a mine.

As such, where a mining company recovers gold or silver by-product in the course of their mining operations and, as a result, needs to sells this by-product, then this subsequent sale would fall within the exemption. However, where a company (mining or otherwise) buys gold or silver by-product in order to sell this by-product (precious metal), then this company would be engaged in the sale of precious metals, as long as it meets the definition noted above.

Finally, where a company purchases “raw concentrate” that contains precious metals, as defined in the PCMLTFR, except for a purchase in connection with manufacturing a product that contains precious metals, then this company is engaged in the purchase of precious metals, and should this company subsequently sell the purchased precious metals, then they would also be engaged in the sale of precious metals.

Date answered: 2020-10-30

Answer updated on: 2021-08-20

PI Number: PI-11061

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

Obligation(s): Other

Regulations: 1(2), 65(1), 65(2), 65(3)

Act: 5(i)

Prepaid Payment Products and Accounts

Question:

Some reporting entities have expressed concern with the definition and application of the prepaid payment product amendments, specifically, the definition of “prepaid payment product account” and “prepaid payment product” are broadly drafted.

In particular, the definition of a prepaid payment product account appears to capture pooled accounts, which is the customary structure of a prepaid program (i.e. one account that holds the prepaid funds for the prepaid payment products subject to the program). This appears to indicate that, even if the prepaid payment product does not allow for a balance of $1,000 or more to be maintained, if the prepaid payment product is tied to an account that holds a significant sum of funds some of which are tied to other prepaid payment products that do allow for a balance of $1,000 or more to be maintained, the prepaid payment product that does not allow for a balance of $1,000 or more is caught by the requirements under the definitions. Given the impact of this on the prepaid business model, the concern raised is whether this is in fact the intent of the amendments or if the definition of prepaid payment product account is specific/limited to the particular card (rather than all cards tied to the account i.e., pooled accounts).

Answer:

As you know, as of June 1st, 2021, subsection 1(2) of the PCMLTFR will be amended and the following definitions will be added:

  • prepaid payment product means a product that is issued by a financial entity and that enables a person or entity to engage in a transaction by giving them electronic access to funds or virtual currency paid to a prepaid payment product account held with the financial entity in advance of the transaction. It excludes a product that:
    • (a) enables a person or entity to access a credit or debit account or one that is issued for use only with particular merchants; or
    • (b) is issued for single use for the purposes of a retail rebate program.
  • prepaid payment product account means an account — […] — that is connected to a prepaid payment product and that permits:
    • (a) funds or virtual currency that total $1,000 or more to be added to the account within a 24-hour period; or
    • (b) a balance of funds or virtual currency of $1,000 or more to be maintained.

As such, where a PPP account allows either for funds that total $1,000 or more to be added within a 24 hour period or allows for a balance of $1,000 or more to be maintained, even if the associated prepaid payment products do not themselves hold funds of $1,000 or more, the financial entity would have the obligations associated with PPP accounts.

For instance, where a business opens a PPP account with a financial entity, deposits $5,000 to said account, and instructs the financial entity to issue 50 prepaid payment products all in the amount of $100 and all connected to the PPP account, then the financial entity has all of the obligations associated with that PPP account.

Date answered: 2020-08-28

PI Number: PI-11497

Activity Sector(s): Financial entities

Obligation(s): Other

Guidance: Prepaid payment product requirements

Regulations: 1(2)

Changes for the real estate sector

Question:

With the amendments to the Regulations in June 2020 and June 2021, what has changed for the real estate sector in Ontario?

Answer:

 

Effective June 1, 2020

The timing for submitting a suspicious transaction report (STR) has changed. Reporting entities are now required to submit an STR to FINTRAC as soon as practicable after they have taken measures that enable them to establish that there are reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering offence or a terrorist activity financing offence.

Effective June 1, 2021

1. The amended definition of real estate broker of sales representative is “a person or entity that is authorized under provincial legislation to act as an agent or mandatary for purchasers or vendors in respect of the purchase or sale of real property or immovables.”

2. When a real estate broker or sales representative or a real estate developer is required to verify the identity of an entity, they will have an obligation to obtain beneficial ownership information for that entity. That is, pursuant to section 138 of the PCMLTFR, obtaining:

  • 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% or more of the shares of the corporation;
  • in the case of a widely held or publicly traded trust, the names of all trustees of the trust and the names and addresses of all persons who own or control, directly or indirectly, 25% or more of the units of the trust;
  • in the case of a trust, the names and addresses of all trustees and all known beneficiaries and settlors of the trust
  • 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% or more of the entity; and
  • in all cases, information establishing the ownership, control and structure of the entity.

In addition, the real estate broker or sales representative or real estate developer will be required to take reasonable measures to confirm the accuracy of the information when it is first obtained under that subsection and in the course of ongoing monitoring, and keep a record that sets out the information and the measures taken to confirm the accuracy of the information.

3. The concept of entering into a business relationship has been amended. Pursuant to paragraph 4.1(c) of the PCMLTFR, for a person or entity that is a real estate broker or sales representative or a real estate developer, the business relationship will be triggered the first time that the person or entity is required to verify the identity of the client under these Regulations.

4. In addition to the ongoing monitoring that is already required once a business relationship is entered into, if that business relationship is with a person, then the real estate broker or sales representative or real estate developer will be required to determine whether the person is a politically exposed person (PEP), foreign or domestic, a head of an international organization, or a family member or close associate of one of those. Specifically, pursuant to section 120.1 of the PCMLTFR, the real estate broker or sales representative or real estate developer will have the following obligations:

  • take reasonable measures to determine if a person with whom they enter into a business relationship is a foreign PEP, a domestic PEP, a head of an international organization, a family member of any of those persons or a close associate to a foreign PEP;
  • periodically take reasonable measures to determine whether a person with whom they have a business relationship is a foreign PEP, a domestic PEP, a head of an international organization, a family member of any of those persons or a close associate to a foreign PEP;
  • take reasonable measures to determine if a person from whom they receive an amount of $100,000 or more, in cash or virtual currency, is a foreign PEP, a domestic PEP, a head of an international organization, or a family member or close associate of any of those persons; or
  • if they detect a fact that constitutes reasonable grounds to suspect that a person with whom they have a business relationship is a foreign PEP, a domestic PEP, a head of an international organization, or a family member or close associate of any of those persons, then take reasonable measures to determine whether they are such a person.

5. Real estate brokers and sales representatives will also have a new reporting obligation. Specifically, pursuant to section 55 of the PCMLTFR, a real estate broker or sales representative will have to report the receipt of an amount equivalent to $10,000 or more in virtual currency (VC) in a single transaction in connection with the purchase or sale of real property or immovables for which they act as an agent or mandatary for a purchaser or vendor. A large virtual currency transaction report (LVCTR) must be sent to FINTRAC within five working days after the day on which the amount is received. The real estate broker or sales representative will also have to keep a large virtual currency transaction record in respect of the same.

6. The PCMLTFR has also been amended to require that all reporting entities, including real estate brokers or sales representatives and real estate developers, keep a copy of all reports submitted to FINTRAC (section 144 of the PCMLTFR) For the real estate sector, this includes large cash transaction reports (LCTR), STRs, terrorist property reports (TPR), and LVCTRs.

In addition to these specific obligations, it is worth noting that amendments have been made to the 24-hour rule, which has an impact on determining whether or not an LCTR or an LVCTR is required to be submitted to FINTRAC. As outlined at section 126 and subsection 129(1) of the PCMLTFR, in addition to considering whether the receipt of two or more amounts in cash or VC that i) total $10,000 or more, and ii) are received within 24 consecutive hours, were conducted by or on behalf of the same person or entity, reporting entities will now have to consider whether the amounts are for the same beneficiary. While this may not have as great an impact on real estate brokers and sales representatives as it does on other sectors, it is important to be aware of the change.

Finally, significant changes have been made to the LCTR and the STR Schedules in the Regulations, so the forms for reporting will also be changing quite a bit, but these are not yet available for circulation. Once the form for the LVCTR is published, however, this can be used as an indication of what to expect for the LCTR and STR forms, as these will follow the same template.

Date answered: 2020-08-20

PI Number: PI-11503

Activity Sector(s): Real estate

Obligation(s): Other

Regulations: 4.1(c), 55, 120.1, 126, 129(1), 138, 144,

Sharing of information between reporting entities

Question:

The regulations prescribe how reporting entities can rely on each other to verify identity. Can we use these provisions to allow us to share other information on clients with other reporting entities?

Answer:

It is important to note that FINTRAC administers the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations. Therefore, we are only able to comment on the obligations contained within these.

Persons and entities subject to the PCMLTFA are required to verify the identity of clients for activities and transactions prescribed within the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). The methods available to reporting entities (REs) to verify the identity of their clients are also prescribed within the PCMLTFR. The provisions within the PCMLTFR are specific to the obligation to verify identity under the regulations and provide for the sharing of information between REs for this purpose. That is, these provisions do not speak to, or allow for, the sharing of information between REs for other purposes, such as confirming negative media. These provisions would allow you to verify the identity of your customer for prescribed activities and transactions, by relying on measures taken by the person’s financial institution (for example), so long as the requirements are met, and would require the person’s financial institution to provide you with the required information.

The collection, use, or disclosure of personal information in the context of Canadian commercial activities is protected by the Personal Information Protection and Electronic Documents Act (PIPEDA), or by substantially similar provincial legislation. FINTRAC cannot, however, comment on the requirements under Canada’s privacy legislation, either federal or provincial, that may apply to your business. Therefore, you may wish to contact the Office of the Privacy Commissioner of Canada, as they would be best placed to answer any questions you may have.

Date answered: 2020-08-07

Answer updated on: 2021-08-20

PI Number: PI-10881

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): Other

Guidance: Methods to verify the identity of persons and entities

Pre-paid payment products

Question:

When does a financial entity have obligations associated with pre-paid cards?

Answer:

Subsection 1(2) of the PCMLTFR has been amended to include:

  • Prepaid payment product, which means a product that is issued by a financial entity and that enables a person or entity to engage in a transaction by giving them electronic access to funds or virtual currency paid to a prepaid payment product account held with the financial entity in advance of the transaction. It excludes a product that:

                     (a) enables a person or entity to access a credit or debit account or one that is issued for use only with particular merchants; or

                     (b) is issued for single use for the purposes of a retail rebate program.

  • Prepaid payment product account, which means an account […] that is connected to a prepaid payment product and that permits:

                     (a) funds or virtual currency that total $1,000 or more to be added to the account within a 24-hour period; or

                     (b) a balance of funds or virtual currency of $1,000 or more to be maintained.

Therefore, where a financial entity opens a prepaid payment product account connected to a prepaid payment product and permits funds totalling $1,000 or more to be added to the account within a 24-hour period or a balance of $1,000 or more to be maintained, then the financial entity would have the associated obligations.

Date answered: 2020-03-12

Answer updated on: 2021-08-20

PI Number: PI-10536

Activity Sector(s): Financial entities

Obligation(s): Other

Guidance: Prepaid payment product requirements

Regulations: 1(2)

Prepaid payment product – corporate reward program

Question:

Does a financial entity have obligations if a company sets up a prepaid card program for its customers, deposits $50,000, and instructs that 500 cards all in the amount of $100 be issued?

Answer:

As per subsection 1(2) of the PCMLTFR:

  • Prepaid payment product, means a product that is issued by a financial entity and that enables a person or entity to engage in a transaction by giving them electronic access to funds or virtual currency paid to a prepaid payment product account held with the financial entity in advance of the transaction. It excludes a product that:
    • enables a person or entity to access a credit or debit account or one that is issued for use only with particular merchants; or
    • is issued for single use for the purposes of a retail rebate program.
  • Prepaid payment product account, means an account that is connected to a prepaid payment product and that permits:
    • funds or virtual currency that total $1,000 or more to be added to the account within a 24-hour period; or
    • a balance of funds or virtual currency of $1,000 or more to be maintained.
  • Authorized user, means a person who is authorized by a holder of a prepaid payment product account to have electronic access to funds or virtual currency available in the account by means of a prepaid payment product that is connected to it.

In addition, subsection 14(1) of the PCMLTFR states, a financial entity shall keep the following records in respect of every prepaid payment product account that it opens and of every transaction that is made by means of a prepaid payment product that is connected to that account:

  • (a) a record of the name and address of each holder of a prepaid payment product account and each authorized user, the nature of their principal business or their occupation and, in the case of a person, their date of birth;
  • (b) if an account holder is a corporation, a copy of the part of its official corporate records that contains any provision relating to the power to bind the corporation in respect of the prepaid payment product account or the transaction.

Finally, subsection 88(a)(ii) of the PCMLTFR states, a financial entity shall verify the identity of an authorized user.

Turning to your question, where a business opens a prepaid payment product account with a financial institution, deposits $50,000 to said account, and instructs the financial institution to issue 500 prepaid payment products all in the amount of $100, and all connected to the prepaid payment product account, then the financial institution has all of the obligations associated with that prepaid payment product account, which includes the obligation to verify the identity of all authorized users.

Date answered: 2020-01-10

Answer updated on: 2021-08-20

PI Number: PI-10540

Activity Sector(s): Financial entities

Obligation(s): Other

Guidance: Prepaid payment product requirements

Regulations: 1(2), 14(1), 88(1)(ii)

Prepaid payment product account definition

Question:

Can you clarify what is covered by the definition of prepaid payment product account? Who has obligations and is the $1,000 the limit? Would stores that sell prepaid cards be required to submit reports to FINTRAC?

Answer:

Subsection 1(2) of the PCMLTFR has been amended and will include:

Prepaid payment product, which means a product that is issued by a financial entity and that enables a person or entity to engage in a transaction by giving them electronic access to funds or virtual currency paid to a prepaid payment product account held with the financial entity in advance of the transaction. It excludes a product that:

  • (a) enables a person or entity to access a credit or debit account or one that is issued for use only with particular merchants; or
  • (b) is issued for single use for the purposes of a retail rebate program.

Prepaid payment product account, which means an account […] that is connected to a prepaid payment product and that permits:

  • (a) funds or virtual currency that total $1,000 or more to be added to the account within a 24-hour period; or
  • (b) a balance of funds or virtual currency of $1,000 or more to be maintained.

As such, it is only financial entities that have obligations associated with their prepaid payment products. Therefore, stores that sell prepaid payment products are not financial entities and would not have obligations with respect to the prepaid payment products sold.

Further, financial entities will have obligations when they open a prepaid payment product account, where a prepaid payment product account is an account connected to a prepaid payment product that permits funds of $1,000 or more to be added within a 24-hour period or permits the holder to maintain a balance of $1,000 or more.

Therefore, there is no $1,000 limit on prepaid payment products. Rather, for example, should Financial Entity 123 issue a prepaid payment product with an initial value of $25 and where that product allows the holder to load additional funds to the prepaid payment product account in the amount of $1,000 or more within 24-hours or allows the holder to maintain a balance of $1,000 or more in the account, then Financial Entity 123 would have obligations associated with this account.

Date answered: 2019-12-05

PI Number: PI-11499

Activity Sector(s): Financial entities

Obligation(s): Other

Guidance: Prepaid payment product requirements

Regulations: 1(2)

Sale of dental practices

Question:

As a Real Estate agent, would my obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) extend to my activities when I am acting as a sales representative for the sale of dental practices?

Answer:

We will respond to your question by assuming that when you sell a dental practice, you are selling three categories of assets: the tangible assets of the practice (the furniture, fixtures and equipment owned by the practice) ; the practice’s accounts receivable, including the revenue due to the practice prior to the sale; and the “goodwill”, including the practice’s reputation, trained support staff, established client base and accompanying medical records, practice history and practice location.

A real estate broker or real estate sales representative means, as per 1(2), "a person or entity that is authorized under provincial legislation to act as an agent or mandatary for purchasers or vendors in respect of the purchase or sale of real property or immovables". If you are a real estate broker or real estate sales representative, you are subject to the obligations when you act as an agent regarding the purchase or sale of real property or immovables. This includes the buying or selling of land, houses, commercial buildings, etc. Such activities trigger these obligations whether or not you get a commission for the real estate transaction and whether or not you have fiduciary duties regarding it. These obligations do not apply to you for activities related to property management. This means that if you only deal in property management transactions, such as leases or rental management, not purchases or sales, the obligations explained in this guideline do not apply to you.

Because the obligations that apply to Real Estate sales professionals are limited to their activities when they act as an agent for the purchase or sale of real property or immovables, it appears that, unless you are also selling real estate in combination with your other activities (more specifically the sale of dental practices) then those activities would not be covered under the PCMLTFA and do not carry obligations under the PCMLTFA.

Date answered: 2014-12-01

Answer updated on: 2021-08-20

PI Number: PI-6261

Activity Sector(s): Real estate

Obligation(s): Other

Regulations: 1(2), 53

Watches - Considered jewelry or not

Question:

Could watches be considered jewellery within the definition of a “dealer in precious metals and precious stones” found in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR)?

Answer:

Subsection 1(2) of the PCMLTFR defines a dealer in precious metals and stones as, “a person or entity that, in the course of their business activities, buys or sells precious metals, precious stones or jewellery. It includes a department or an agent of Her Majesty in right of Canada or an agent or mandatary of Her Majesty in right of a province when the department or the agent or mandatary carries out the activity, referred to in subsection 65(1), of selling precious metals to the public.”

The PCMLTFR also defines jewellery as “objects that are made of gold, silver, palladium, platinum, pearls or precious stones and that are intended to be worn as a personal adornment”.

It additionally explains that precious metals include "gold, silver, palladium or platinum in the form of coins, bars, ingots or granules or in any other similar form".

As such, a watch would be considered jewellery if it is made of the aforementioned precious metals.

Date answered: 2013-07-22

Answer updated on: 2021-08-20

PI Number: PI-5578

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

Obligation(s): Other

Regulations: 1(2)

Act: 5(i)

DPMS Covered?

Question:

Our business activity is outlined as such:

  1. Client contacts us to buy natural coloured diamonds.
  2. Once the quantity and price is agreed upon, the client is informed that payment is required and is put in touch with our Associate company in Florida.
  3. The client then sends the payment to our Associate company in Florida.
  4. Our Associate company then sends the diamonds to the client in Canada.
  5. Our Associate company sends a commission payment to us in Canada.

Are these activities covered by the PCMLTFA?

Answer:

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines a dealer in precious metals and precious stones (DPMS) as "a person or entity that, in the course of their business activities, buys or sells precious metals, precious stones or jewellery.” However, as indicated in Section 65 of the PCMLTFR, it is only once a dealer in precious metals or stones engages in the purchase or sale of precious metals, precious stones or jewellery in an amount of $10,000 or more in one transaction, regardless of how it is paid, that they become subject to the PCMLTFA and the obligations outlined therein.

If your business has engaged solely in the activity outlined in steps 1-5 above, namely acting as a broker, then it is not subject to the Act.

Date answered: 2012-09-11

Answer updated on: 2021-08-20

PI Number: PI-5448

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

Obligation(s): Other

Regulations: 1(2), 65

Act: 5(i)

Costume jewellery

Question:

I understand that costume jewellery is not always covered but depending on the amount of precious metal or stones in the piece, it could be considered jewellery.

I thought that the amount of precious metal or stones had to be 10%, but I am not sure where that is listed. Also, is it 10% of the weight or 10% of the value?

Answer:

A dealer in precious metals and precious stones means an individual or an entity that buys or sells precious metals, precious stones or jewellery, in the course of its business activities. A DPMS is subject to the PCMLTFA if they have ever engaged in the purchase or sale of precious metals, precious stones or jewellery in an amount of $10,000 or more.

Entities dealing purely with costume jewellery that do not contain any precious stones or precious metals are not typically covered. For example, stones or metals such as cubic zirconia and rhodium are not captured by the regime. That said, as long as the costume jewellery contains precious metals (gold, silver, palladium or platinum), stones (diamonds, sapphires, emeralds, tanzanite, rubies or alexandrite) or pearls, in any quantity, and equals a value of $10,000; the costume jewellery would be covered.

This is similar to what we’ve said about coin dealers in past. It does not matter whether the quantity of precious metals is negligible or not. If the coin does contain precious metals - even in the smallest quantity - it constitutes precious metals in the form of a coin.

In regards to your question, the second a precious metal or stone constitutes any part of the item, the full value of the item has to be included in the calculation of the $10,000 or more. We cannot expect our compliance officers to be able to calculate the % of precious metals or stones in any particular item, so even the smallest amount of precious metals or stones means that the item is covered.

If a retail store combines the purchase of items containing even negligible amounts of precious metals or stones with the purchase of items containing absolutely no precious metals or stones, then they do not have to consider the latter items in the calculation of $10,000 or more. Only items containing precious metals or stones need to be considered in the calculation of $10,000 or more.

Date answered: 2012-08-23

Answer updated on: 2021-08-20

PI Number: PI-5443

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

Obligation(s): Other

Regulations: 1(2), 65

Act: 5(i)

Once a DPMS always a DPMS?

Question:

Once a DPMS always a DPMS? Will a DPMS subject to the PCMLTFA  remain subject to the regime until it can be demonstrated that the DPMS will no longer purchase or sell precious metals, stones or jewellery in a transaction above $10,000 or more? If yes, my question is what constitutes demonstrated?

Answer:

First of all, once a DPMS always a DPMS. After the initial one-time purchase or sale of $10,000 or more a DPMS becomes subject to the PCMLTFA. From that point on, even if they continue to solely carry out $500 transactions, they are a DPMS. Because they are set up as a DPMS, they could, presumably, carry out a $10,000 purchase or sale at any moment.

As such, it would not necessarily be for the DMPS to demonstrate that they will no longer purchase or sell precious metals, stones or jewellery in a transaction of $10,000 or more, but that they are no longer in a position to act as a DPMS. This could be demonstrated through the dissolution of the company or a change in the business licensing/structure.

This is similar to the approach we’ve taken with MSBs. While they may not have carried out an MSB-related activity in months, they are set up to do so, and, as such, are still considered an MSB to be registered with FINTRAC.

Date answered: 2012-07-27

Answer updated on: 2021-08-20

PI Number: PI-5434

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

Obligation(s): Other

Regulations: 65

Act: 5(i)

Are sole proprietors persons?

Question:

Sole proprietors, in the eyes of our law, considered persons and "not" entities, correct?

Answer:

Sole proprietor is a type of business that is owned and run by one individual and in which there is no legal distinction between the owner and the business. Therefore it is considered a person as defined by Section 2 of the Act, and not an entity.

Date answered: 2010-03-31

PI Number: PI-5342

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): Other

Act: 2

Date Modified: