FINTRAC Policy Interpretations

Beneficial Ownership

BC Land Owner Transparency Registry used for beneficial ownership

Question:

The BC Government has created a Land Owner Transparency Registry (“Registry”) that can be searched by the public. Can FINTRAC provide clarification on the following:

  1. To fulfil the beneficial ownership obligations, is it sufficient for reporting entities to identify and record the names and addresses of all persons who directly or indirectly own or control 10% or more of the shares of the corporation without the reporting entity knowing or recording whether any of the persons have 25% or more of the shares of the corporation? This question is relevant because individuals with 10 percent of the shares in a relevant corporation are included in BC’s Registry and that Registry does not disclose, in a public search, the percentage of shares that the individual owns.
  1. Are reporting entities obligated to obtain from corporate clients the exact percentage of shares owned or controlled by persons with 25% or more of the shares of a corporation? Or is it sufficient for a reporting entity to obtain information from the entity that a person controls or owns 25% or more of the shares (but it could be anywhere between 25-35%, for example)?
  1. Does FINTRAC consider the following to be deficiencies under the Act and regulations?
  • A reporting entity that fails to record the names of all persons who directly or indirectly own or control 25% or more of the shares of a corporation on the basis that this information is excluded from being made public under a provincial beneficial ownership registry?
  • A reporting entity that fails to record the names of all persons who directly or indirectly own or control 25% or more of the shares of a corporation on the basis that this information is not yet recorded in a provincial beneficial ownership registry?
  1. When information is obtained verbally, can a reporting entity confirm the accuracy of the address information of all persons who directly or indirectly own or control 25% or more of the shares of a corporate client by referring to a document that is consistent but not identical to the information obtained?

For example, the representative of Corporation A, states verbally that 100% of the shares of Corporation A are owned by Person A, who lives at 123 Fake Street, Vancouver, BC, K1A 03B

An RE consults the BC registry, which states that an interest holder or settlor of Corporation A is Person A of Vancouver, BC.

The BC Registry discloses the names of individuals and the city and province of their principal address, but it does not disclose their full address. It is unclear whether consulting the Registry on its own is sufficient to confirm the accuracy of address information obtained.

Answer:

Subsection 138(1) of the amended Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Every person or entity that is required to verify an entity’s identity in accordance with these Regulations shall, at the time the entity’s identity is verified, obtain 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% or more of the shares of the corporation;
  • (a.1) 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;
  • (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% or more of the entity; and
  • (d) in all cases, information establishing the ownership, control and structure of the entity.”

Additionally, reporting entities (REs) shall:

  • 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 of business relationships.
  • keep a record that sets out the information and the measures taken to confirm the accuracy of the information.

If the RE is not able to obtain the information, to keep it up to date in the course of ongoing monitoring of business relationships, or to confirm its accuracy, they shall take:

  1. reasonable measures to verify the identity of the entity’s chief executive officer or the person who performs that function; and
  2. the special measures referred to in section 157 of the amended PCMLTFR.

Turning to your questions:

1. In the case of a corporation, the requirement is to obtain the names and addresses of all persons who own or control 25% or more of the shares in the corporation. While the PCMLTFR prescribes the minimum requirements, REs are able to put in place measures that go beyond these requirements. That said, should an RE wish to obtain the names and address of all persons who own or control 10% or more of the shares of a corporation, they must still be able to demonstrate whether there are in fact persons who own or control 25% or more of the shares, as this is the obligation.

If no person owns or controls 25% or more, then an RE must keep a record of the measures they took and the information obtained in order to reach that conclusion. In addition, they are still required to obtain and take reasonable measures to confirm the ownership, control and structure of that entity.

The collection and verification of beneficial ownership information by REs is an important step in mitigating the risk of money laundering (ML) and terrorist activity financing (TF). Anonymity of ownership and control can facilitate ML and TF and the concealment of this information is a technique used in ML and TF schemes. Therefore, identifying beneficial ownership is important in order to remove anonymity and identify the actual individuals behind the transactions and account activities. The collection and confirmation of this information aids in ML/TF investigations, and ultimately in protecting the integrity of Canada’s financial system.

2. The requirement is to obtain the prescribed information under subsection 138(1) of the PCMLTFR, take reasonable measures to confirm the accuracy of this information as outlined above, and keep a record of this information and the measures taken to confirm its accuracy. With respect to paragraph 138(1)(d), the information establishing the ownership, control and structure of the entity, an RE may fulfil this requirement by obtaining general information regarding the ownership, control and structure of an entity, which may or may not include the names of the owners and their exact percentage owned. However, in practice, the RE will likely become aware of the exact percentage of each shareholder in the course of completing its beneficial ownership obligations.

3. With respect to deficiencies, the requirement is to obtain the prescribed information under subsection 138(1) of the PCMLTFR, take reasonable measures to confirm the accuracy of this information as outlined, and keep a record of this information and the measures taken to confirm its accuracy. Should an RE not complete one or more of these requirements, then they would be in non-compliance with their obligations. There is no exception to these obligations on the basis that a provincial registry does not contain this information.

4. With respect to confirming a person’s address, an address for the purposes of the PCMLTFR refers to the physical address where the individual lives. As such, if there is a slight typo in the address an RE may determine that the information still matches what was obtained or provided. However, you cannot confirm the address of 123 Fake Street, Vancouver, BC, K1A 03B with information from a registry that simply has Vancouver, BC, as information is missing and all that is confirmed is city and province.

Date answered: 2021-05-10

PI Number: PI-11461

Activity Sector(s): Real estate

Obligation(s): Beneficial Ownership

Guidance: Beneficial ownership requirements

Regulations: 138(1)

Beneficial ownership obligations for the Real Estate sector

Question:

Does the Real Estate sector have any obligations in respect of beneficial ownership under the revised PCMLTFR taking effect June 1, 2021?

I don't see Real Estate having been included under Section 138(1) of the revised regulations.

Answer:

First, you will note that no specific sector is specified within subsection 138(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). Rather that subsection now states that “Every person or entity that is required to verify an entity’s identity in accordance with these Regulations shall, at the time the entity’s identity is verified, obtain the following information…”, and then goes on to list the beneficial ownership details.

As such, given that the real estate sector has transactions and activities for which it is required to verify an entity’s identity, it will have beneficial ownership obligations pursuant to subsection 138(1) of the amended PCMLTFR as of June 1st, 2021.

Date answered: 2021-03-05

PI Number: PI-11459

Activity Sector(s): Real estate

Obligation(s): Beneficial Ownership

Guidance: Beneficial ownership requirements

Regulations: 138(1)

Total ownership of businesses up to 100%

Question:

Reporting entities are required to record the names and addresses of all individuals who directly or indirectly own or control 25% or more of the entity/shares of a corporation. Is the requirement to also record "total" ownership of corporations and entities up to 100% - record ownership of all percentages of ownership until 100% is accounted for (i.e. individuals/entities/organizations with ownership of less than 25%)?

Answer:

Pursuant to subsection 138(1) of the PCMLTFR, every reporting entity that is required to verify the identity of an entity in accordance with these Regulations  shall, at the time the entity's identity is verified, obtain 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% or more of the shares of the corporation;
  • (a.1) 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;
  • (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% or more of the entity; and
  • (d) in all cases, information establishing the ownership, control and structure of the entity.

Subsection 138(2) of the PCMLTFR further states that reasonable measures must be taken to confirm the accuracy of the information obtained in subsection 138(1) and if the information cannot be obtained or confirmed subsection 138(4) of the PCMLTFR states the RE must take reasonable measure to verify the identity of the entity's chief executive office and treat the entity as high risk.

As a result, while information regarding the ownership, control, and structure of an entity is required, we cannot ask a reporting entity to provide ownership information totaling 100% because this may not always be possible (e.g. in cases where a corporation has several hundred or thousand shareholders). Additionally, it is not specifically indicated in this paragraph that actual names of the owners are required. Therefore, a reporting entity may fulfil the requirement at paragraph 138(1)(d) by obtaining general information regarding the ownership of an entity, which may or may not include the names of the owners with a breakdown of percentages owned, and confirming the information obtained as per subsection 138(2).

Date answered: 2015-08-18

Answer updated on: 2021-08-20

PI Number: PI-6345

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): Beneficial Ownership

Guidance: Beneficial Ownership Requirements

Regulations: 138(1), 138(2), 138(4)

Beneficial Owners

Question:

In a situation where there are those who own and others who control an entity, who are the beneficial owners for the purpose of subsection 138(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR).

Answer:

Pursuant to subsection 138(1) of the PCMLTFR, every reporting entity that is required to verify the identity of an entity in accordance with these Regulations shall, at the time the entity's identity is verified, obtain 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% or more of the shares of the corporation;
  • (a.1) 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;
  • (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% or more of the entity; and
  • (d) in all cases, information establishing the ownership, control and structure of the entity

In a situation where there are those who own and those who control an entity, the reporting entity must consider both. To have determined that there are owners of an entity does not negate the need to also determine that there are others who may control the entity, and vice versa.

In a situation where there are shareholders with voting and non-voting shares, both must be considered. To be a shareholder makes one an owner of the company, at which point the percentage of ownership must be determined. If a person is determined not to own 25% or more of the entity, the reporting entity must still determine whether or not the person controls 25% or more of that entity. Those persons holding non-voting shares only are typically understood only to own the entity, but they do not have control of the entity. The reporting entity must then determine the percentage of ownership for the purpose of subsection 138(1) of the PCMLTFR.

With respect to a partnership, and a board of directors, the reporting entity must again consider both ownership and control. If it is determined that the partners both own 25% or more of the entity, then they must be recorded as beneficial owners. However, the reporting entity must also note that the board of directors has control of the entity and take reasonable measures to confirm the accuracy of the information pertaining to both ownership and control of the entity (subsection 138(2) of the PCMLTFR).

Date answered: 2014-05-30

Answer updated on: 2021-08-20

PI Number: PI-6154

Activity Sector(s): Financial entities

Obligation(s): Beneficial Ownership

Guidance: Beneficial Ownership Requirements

Regulations: 138(1)

Date Modified: