Archived FINTRAC Policy Interpretations

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Beneficial Ownership

Beneficial ownership for a trust – vested vs. contingent interest

Question:

When we have to obtain beneficial ownership information for trusts does it make a difference if the beneficiaries of the trust have a vested vs. contingent interest in the trust?

Answer:

The beneficial ownership obligations are outlined at subsection 11.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). The obligation to obtain beneficial ownership information is tied to the type of entity for which the existence is being confirmed and when the beneficial ownership obligation is triggered in respect of a trust, every prescribed entity must obtain "the names and addresses of all trustees and all known beneficiaries and settlors of the trust". In addition, the reporting entity must take reasonable measures to confirm the accuracy of the information obtained, and a record must be kept that includes the information obtained and the measures taken to confirm its accuracy.

In a situation where a trust has beneficiaries with vested and/or contingent interest, both must be considered, and if those beneficiaries are known, their names and addresses must be obtained, reasonable measures must be taken to confirm the accuracy of the information, and a record must be kept. If the reporting entity is unable to obtain the names and addresses, then, pursuant to subsection 11.1(4) of the PCMLTFR, the reporting entity must take reasonable measures to ascertain the identity of the most senior managing officer of the entity, and treat the activities in respect of that entity as high risk.

Please also note that, in a situation where a trust is set up with no individually named beneficiaries, but rather categories or types of beneficiaries, and the reporting entity is unable to obtain the names and addresses of the individual beneficiaries, then, pursuant to subsection 11.1(4) of the PCMLTFR, the reporting entity must take reasonable measures to ascertain the identity of the most senior managing officer of the entity, and treat the activities in respect of that entity as high risk.

Date answered: 2019-05-06

PI Number: PI-9982

Activity Sector(s): Financial entities, Life insurance, Money services businesses, Securities dealers

Obligation(s): Beneficial Ownership

Regulations: 11.1(1)

Beneficial ownership - branches and subsidiaries

Question:

I understand from the guidelines at https://www.fintrac-canafe.gc.ca/guidance-directives/client-clientele/bor-eng that a financial entity has obligations to obtain beneficial ownership information when it has to confirm the existence of an entity.

I also understand that section 11.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (SOR/2002-184) provide that a financial entity shall obtain beneficial ownership information when it is required to confirm the existence of an entity when it opens an account in respect of that entity.

I note, however, that there are other instances when the Regulations require a financial entity to confirm the existence of an entity. For example, I understand that a financial entity would need to confirm the existence of an entity when the financial entity provides electronic funds transfers of $1,000 or more, or when it provides a foreign currency exchange of $3,000 or more, even if the financial entity is not opening an account for its client.

Could you please confirm whether a financial entity is required to obtain beneficial ownership information in these circumstances when its client is not opening an account ?
Does this confirming of existence obligation (and the accompanying obligation to obtain beneficial ownership information) only apply if the financial entity opens the account in Canada? For example, would it apply when the financial entity opens an account for a Canadian corporation in another jurisdiction in which the financial entity carries on banking business, such as the United States or the United Kingdom?

Answer:

As you point out, pursuant to subsection 11.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a financial entity is required to obtain the information outlined at paragraphs 11.1(1) (a) to (d) of the PCMLTFR, also referred to as beneficial ownership information, when it is required to confirm the existence of an entity in accordance with the PCMLTFR when it opens an account in respect of that entity. As such, it is the confirming of existence obligation tied to the account opening that triggers the obligation to obtain the beneficial ownership information.   Pursuant to subsection 9.7(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) every entity referred to in paragraphs 5 (a) to (g) of the PCMLTFA, which includes Schedule I and II banks in Canada, must, for its foreign branches and subsidiaries that carry out activities similar to those of entities in 5 (a) to (g), develop policies that establish requirements similar to the obligations to keep records, ascertain identification and  establish and implement a compliance program. The financial entities must also ensure that those branches and subsidiaries apply those policies to the extent it is permitted by, and does not conflict with, the laws of the foreign state in which the branch or subsidiary is located.

Given that the obligation to confirm the existence of an entity when opening an account for said entity is an obligation that falls within the requirements to ascertain identification [para. 54(d) and (e) of the PCMLTFR], then the entity in Canada must develop policies that establish requirements for its foreign branches and subsidiaries to confirm the existence of an entity at account opening, which would trigger the subsequent obligation to obtain beneficial ownership information as outlined at subsection 11.1(1) of the PCMLTFR.   

If the application by a foreign branch or a foreign subsidiary of these policies is not permitted by or would conflict with the laws of the foreign state in which the branch or subsidiary is located, the entity must keep a record of that fact and of the reasons why it is not permitted or it would conflict. In addition the reporting entity must, within a reasonable time, notify FINTRAC, and the entity’s principal agency or body that supervises or regulates it under federal or provincial law, of that fact and those reasons.

Date answered: 2018-09-20

PI Number: PI-9132

Activity Sector(s): Financial entities

Obligation(s): Beneficial Ownership

Regulations: 11.1(1), 54(d)

Act: 9.7(1)

Beneficial ownership for accounts - when owner is a trust

Question:

In determining the beneficial owners of a trust, I seem to recall the previous guidelines indicate it would be the trustees of the trust who control the trust.  

Realizing if you open an account for a trust the requirements state, you need to determine the names and addresses of all the trustees and all known beneficiaries and settlors of the trust and you do not need to go down to the individual level of ownership. 

But, If you are trying to determine the beneficial ownership of an entity for whom you have opened an account, and the entity for whom you have opened the account is 100% owned by a trust…would you need to determine who the beneficial owners of the trust are (determine who controls the trust) or do you still need to just record the names and addresses of all the trustees and all known beneficiaries and settlors of the trust and you do not need to go down to the individual level of ownership.  Are all these people (the settlor, trustees and beneficiaries) then considered the beneficial owners of the trust? How would you determine their percentage of ownership if that was the case?  Or is it just the trustees (or others stipulated in the trust agreement) who have control over the administration and decisions of the trust that are the true beneficial owners? 

Answer:

Pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), subsection 11.1(1) every financial entity […] that is required to confirm the existence of an entity in accordance with these Regulations when it opens an account in respect of that entity […], shall, at the time the existence of the entity is confirmed, 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 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.

The ultimate beneficial owners cannot be another corporation or entity, they must be the actual individuals who are the owners or controllers of the entity. In order to determine who the beneficial owners are, the reporting entity must search through as many levels of information as necessary in order to determine the actual individuals. 

When the RE is confirming the existence of an entity, the RE must apply the beneficial ownership requirements in respect of that entity. In this instance, the RE would be required to obtain the information set out in 11.1(1)(a) and (d) of the PCMLTFR in the case of a corporation or in 11.1(1)(c) and (d) of the PCMLTFR in the case of an entity other than a corporation or trust. Given that the beneficial owners cannot be another entity, such as a trust, the RE would, therefore, be required to obtain the names and addresses of all persons who own or control, directly or indirectly, 25 per cent or more of the corporation, or other entity, through the trust (i.e. the trustees). 

For example, if the financial entity is opening an account for ABC Corporation they would obtain:

• the names of all directors of the corporation;
• information establishing the ownership, control and structure of the corporation, which would reflect the 100% ownership by XYZ trust; and
• the names and addresses of all trustees who own or control, directly or indirectly, 25 per cent or more of XYZ trust. 

Date answered: 2018-07-17

PI Number: PI-9126

Activity Sector(s): Financial entities, Life insurance, Money services businesses, Securities dealers

Obligation(s): Beneficial Ownership

Regulations: 11.1(1)

Act: 6

Beneficial ownership for Trusts - beneficiaries not "known"

Question:

According to 11.1(b) PCMLTFR:   “in the case of a trust, the names and addresses of all trustees and all known beneficiaries and settlors of the trust;”

If a beneficiary is not named or individually listed in a trust agreement, but rather the trust agreement refers to “the employees of…” or “the issue of…”/”the members of …”  , are they considered “known”?

For example:

An auto sector trust that was set up due to the bailout of the auto sector by the federal government in 2008-2009. As part of the bailout package, an independent trust fund was set up, endowed with payments from the companies, for the purpose of paying supplementary health benefits (e.g.,dental costs, vision, and prescription drug coverage). There are over 40,000 members of the auto sector who are participating in this “trust”.  The number will fluctuate as employees retire and others pass away. The reporting entity holds the assets of the trust, and deposits additional funds to the policy as it receives and pays out benefits to the trust company to pay out to the retiree as required.  We do not hold any member records, and the trust document does not individually list the members. 
 

Answer:

Pursuant to paragraph 11.1(1)(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every prescribed entity that is required to confirm the existence of an entity as prescribed in the PCMLTF iR, must obtain, in the case of a trust, the names and addresses of all trustees and all known beneficiaries and settlors of the trust. In addition, the reporting entity must take reasonable measures to confirm the accuracy of the information obtained, and a record must be kept that includes the information obtained and the measures taken to confirm its accuracy.

Where a trust is set up with no individually named beneficiaries, but rather categories or types of beneficiary, and the reporting entity is unable to obtain the names and addresses of the beneficiaries, then, pursuant to subsection 11.1(4) of the PCMLTFR, the reporting entity must take reasonable measures to ascertain the identity of the most senior managing officer of the entity, and treat the activities in respect of that entity as high risk. 

That said, should the reporting entity be able to obtain the names and addresses of the beneficiaries, based on the information available to them, then the reporting entity would be expected to record these, and take reasonable measures to confirm the information. 

Date answered: 2018-04-11

PI Number: PI-9112

Activity Sector(s): Financial entities, Life insurance, Securities dealers

Obligation(s): Beneficial Ownership

Regulations: 11.1(1)

Act: 6

Settlor of a trust

Question:

A request has been made for FINTRAC's position regarding information on directors or partners or on persons who own or control 25 per cent or more of a corporation or other entity. More specifically, under subsection 11.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), it was asked who is the true settlor and who is a settlor within the meaning of the PCMLTFA.

Answer:

In accordance with subsection 11.1(1) of the PCMLTFR, "every securities dealer that is required to confirm the existence of an entity in accordance with these Regulations when it opens an account in respect of that entity . . . shall, at the time the existence of the entity is confirmed, obtain the following information:
(b) in the case of a trust, the names and addresses of all trustees and all known beneficiaries and settlors of the trust;
(d) in all cases, information establishing the ownership, control and structure of the entity".

Although neither the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) nor its associated Regulations define "settlor" ("constituant" in French), this term must be understood as meaning a person or entity that lends or transfers, either directly or indirectly, property in the trust.

In this regard, you have asked whether a person who gives a $20 bill is considered as a settlor within the meaning of the PCMLTFA. The answer to your question is yes, a person or entity that contributes, upon opening a trust account, to a loan or that transfers property, either directly or indirectly, is considered as being a settlor of the trust, and the information of that person or entity, such as names and addresses, must be obtained. 

You have also provided the following definition, namely, that a contributor "means an economic contributor that has transferred funds in the trust", and you have asked whether this act constitutes the act of a settlor. According to our understanding of what a settlor is, it would appear that a contributor making the initial transfer of funds, directly or indirectly, upon opening a trust account corresponds to what FINTRAC considers as a settlor. Therefore, the contributor's information (name and address) must be obtained in accordance with paragraph 11.1(1)(b) of the PCMLTFR. 

Date answered: 2017-02-10

PI Number: PI-7664

Activity Sector(s): Securities dealers

Obligation(s): Beneficial Ownership

Guidance: Beneficial ownership requirements

Regulations: 11.1(1)

Beneficial ownership requirements for accounts opened before 2008

Question:

Could you please confirm what the expectation is for confirming beneficial ownership with respect to an account that was opened before 2008, when the requirement first came into force?

Answer:

Under subsection 11.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every reporting entities required to confirm the existence of an entity in accordance with these Regulations must, at the time the existence of the entity is confirmed, 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 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.

Reporting entities must also take reasonable measures to confirm the accuracy of the information obtained under subsection 11.1(1) of the PCMLTFR (subsection 11.1(2) of the PCMLTFR), and keep a record that sets out the information obtained and the measures taken to confirm the accuracy of that information (subsection 11.1(3) of the PCMLTFR).

The Regulations which came into effect on February 1, 2014 are not retroactive. However, under subsection 1(2) of the PCMLTFR, a reporting entity has a business relationship with a client who holds one or more accounts with that entity. Therefore, all accounts held prior to that date are subject to the obligation related to business relationships, including ongoing monitoring. Under subsection 1(2), ongoing monitoring is undertaken to keep client identification and the information referred to in sections 11.1 and 52.1 up to date. If, under the requirements included in section 11.1, a reporting entity has gathered information which existed before February 1, 2014, that is the information that must be kept up to date. However, since the requirement that existed prior to February 1, 2014 referred to reasonable measures to obtain and record information on beneficial ownership, if no such information was obtained, it cannot be kept up to date. The reporting entity would not be required to make the necessary efforts to obtain information on beneficial ownership now for accounts that existed prior to February 1, 2014.

Date answered: 2015-08-24

PI Number: PI-6349

Activity Sector(s): Financial entities, Life insurance, Money services businesses, Securities dealers

Obligation(s): Beneficial Ownership

Regulations: 1(2), 11.1

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 the corporation. Moreover, is the requirement to also record "total" ownership of corporations & 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 11.1(1) of the PCMLTFR, every financial entity or securities dealer that is required to confirm the existence of an entity in accordance with these Regulations when it opens an account in respect of that entity, “every life insurance company, life insurance broker or agent or legal counsel or legal firm that is required to confirm the existence of an entity in accordance with these Regulations and every money services business that is required to confirm the existence of an entity in accordance with these Regulations when it enters into an ongoing electronic funds transfer, fund remittance or foreign exchange service agreement with that entity, or a service agreement for the issuance or redemption of money orders, traveller’s cheques or other similar negotiable instruments, shall, at the time the existence of the entity is confirmed, 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 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.”

Subsection 11.1(2) of the PCMLTFR further states that reasonable measures must be taken to confirm the accuracy of the information obtained in subsection 11.1(1) and if the information cannot be obtained or confirmed subsection 11.1(4) of the PCMLTFR states the RE must take reasonable measure to ascertain the identity of the most senior managing officer of the entity 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 11.1(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 11.1(2). As per subsection 11.1(4) of the PCMLTFR, in the event this information cannot be obtained or confirmed, the reporting entity must take reasonable measures to ascertain the identity of the most senior managing officer and treat the organization or entity as high risk.

Date answered: 2015-08-18

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

Regulations: 1(2), 11.1

11.1(6) and Group Plan Accounts

Question:

An investment dealer provides trading services for employees that have participated in employer-sponsored “employee share purchase plans”. The investment dealer holds accounts for issuer corporations who sponsor these employee share purchase plans. All issuers are traded on Canadian stock exchanges and all issuers operate in Canada. All transactions through these accounts are for the purposes of managing and operating employee share purchase plans and other similar types of plans.

Can you confirm our understanding of whether subsection 11.1(6) of the Regulations applies to these types of “group plans”?

It is our understanding that section 11.1 of the Regulations contains additional requirements which are imposed on certain registrants at the time confirmation of the existence of a particular entity (e.g. a corporation or a trust) occurs (e.g. at account opening). These additional requirements, generally speaking, relate to information on directors, partners or on other persons who own or control 25 percent of such an entity.

Answer:

Subsection 11.1(6) of the PCMLTFR indicates that certain group plan accounts are not subject to section 11.1 if the group plan account is “held within a dividend reinvestment plan or a distribution investment plan, including a plan that permits purchases of additional shares or units by the member with contributions other than the dividends or distributions paid by the sponsor of the plan, if the sponsor of the plan is an entity whose shares or units are traded on a Canadian stock exchange, and that operates in a country that is a member of the Financial Action Task Force”.

You have indicated that the securities dealer provides trading services for employees that have participated in employer-sponsored ‘employee share purchase plans. You have also indicated that accounts are held for issuer corporations who sponsor these employee share purchase plans, and that “all issuers are traded on Canadian and U.S. stock exchanges”.

The term “account” is not defined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) or its associated Regulations. While the opening of an account for the purpose of holding client assets is clearly understood to be an account opening, FINTRAC has taken the position that, in other cases, it is generally for a reporting entity to determine whether or not an account has been opened. This same logic can thus be applied to “group plan accounts”, as this term is also not defined by the PCMLTFA or its associated Regulations.

Therefore, it would appear that securities dealers that open group plan accounts are not required to gather beneficial ownership information for those accounts, as required by section 11.1, so long as the group plan accounts meets the exact specifications identified in subsection 11.1(6) of the PCMLTFR.

Date answered: 2015-07-23

PI Number: PI-6332

Activity Sector(s): Securities dealers

Obligation(s): Beneficial Ownership

Guidance:

Regulations: 11.1, 11.1(6)

Clarification of PCMLTFR 11.1 - Beneficial ownership

Question:

Does a financial institution holding funds in an estate account formed upon the death of a client have any obligation under AML rules, policies or procedures to collect the personal ID’s of the beneficiaries before transferring these funds following instructions received from the executor to an estate account at a bank?

Answer:

Subsection 11.1 (1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) requires that “every financial entity or securities dealer that is required to confirm the existence of an entity in accordance with these Regulations when it opens an account in respect of that entity, every life insurance company, life insurance broker or agent or legal counsel or legal firm that is required to confirm the existence of an entity in accordance with these Regulations and every money services business that is required to confirm the existence of an entity in accordance with these Regulations when it enters into an ongoing electronic funds transfer, fund remittance or foreign exchange service agreement with that entity, or a service agreement for the issuance or redemption of money orders, traveller’s cheques or other similar negotiable instruments, shall, at the time the existence of the entity is confirmed, obtain the following information:

(b) in the case of a trust, the names and addresses of all trustees and all known beneficiaries and settlors of the trust;

(2) Every person or entity that is subject to subsection (1) shall take reasonable measures to confirm the accuracy of the information obtained under that subsection.

As such, where the entity in respect of which an account is opened is a trust, the reporting entity must obtain the names and addresses of all trustees and all known beneficiaries and settlors of the trust, as well as the ownership, control and structure of the trust, and must also take reasonable measures to confirm the accuracy of the information obtained (paragraph 11.1(1)(d) of the PCMLTFR).

However, confirming the accuracy of the information obtained does not require that the reporting entity ascertain the identity of the beneficiaries, trustees and settlors of the trust. The reporting entity only has to take reasonable measures to confirm that the names and addresses obtained for the trustees, beneficiaries and settlors of the trust are accurate.

Date answered: 2014-10-17

PI Number: PI-6250

Activity Sector(s): Securities dealers

Obligation(s): Beneficial Ownership

Regulations: 11.1

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 11.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR).

Answer:

Pursuant to subsection 11.1(1) of the PCMLTFR, every reporting entity that is required to confirm the existence of an entity in accordance with these Regulations when it opens an account in respect of that entity, shall, at the time the existence of the entity is confirmed, 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 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.

In a situation where there are both 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. That said it is only for persons who own or control 25% or more of the entity that names and addresses have to be obtained.

In response to the specific examples provided, namely 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 just non-voting shares are deemed 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 11.1(1) of the PCMLTFR.

With respect to the situation where there is 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 (ss. 11.1(2) PCMLTFR).

Date answered: 2014-05-30

PI Number: PI-6154

Activity Sector(s): Financial entities

Obligation(s): Beneficial Ownership

Regulations: 11.1(1)

Beneficial Ownership - trust

Question:

  1. If the settlor of the trust is an entity, must the bank look behind the entity to determine the person pulling its strings? Is it the same in respect of trustees?
  2. What if the beneficiaries are not natural persons? Do corporate beneficiaries have to be looked-through?

Answer:

In the case of trusts, pursuant to subsection 11.1(1) of PCMLTFR, every financial entity that is required to confirm the existence of an entity in accordance with these Regulations when it opens an account in respect of that entity, shall, at the time the existence of the entity is confirmed, obtain the names and addresses of all trustees and all known beneficiaries and settlors of the trust, and information establishing the ownership, control and structure of the entity.

Unlike the owning or controlling information required to be gathered in the case of corporations and in the case of entities other than corporations or trusts, that specifies that the reporting entity must determine the names and addresses of all persons who own or control, directly or indirectly, 25 per cent or more of the shares or of the entity, the trust requirement does not specify the requirement down to the person.

As such, the financial entity must obtain the names and addresses of all trustees and all known beneficiaries and settlors of the trust, which could be entity names and addresses.

However, as per subsection 11.1(4) of the PCMLTFR, if the person or entity is not able to obtain the information referred to in subsection (1) or to confirm that information in accordance with subsection (2), the person or entity shall

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 these Regulations.

Although they specify banks, it might be worth noting that if the financial entity is a trust company, then, in accordance with section 55 of the PCMLTFR, the trust company must:

  • 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;
  • 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; and
  • 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.

Then the trust company must ascertain the identity of each person who is authorized to act as co-trustee of any trust.

Date answered: 2014-05-21

PI Number: PI-6148

Activity Sector(s): Financial entities

Obligation(s): Beneficial Ownership

Regulations: 11.1(1), 55

Beneficial Owner - non profit organizations

Question:

We review accounts of entities that solicit funds. Subsection 11.1(5) is the section that refers to non profit organizations. It is our understanding that some accounts are opened for associations that are not legal NPOs per say but that raise funds.

By "not-for-profit organization (NPO)", do we mean "strictly or only" NPOs that are "legally" structured as actual NPOs or do we "also" mean any entity that raises funds whether or not they are actual NPOs?

Answer:

In regards to NPOs, subsection 11.1(5) outlines two possibilities:

(a) a registered charity with CRA under the Income Tax Act; or
(b) an organization other than a registered charity under (a) that solicits charitable financial donations from the public.

A non-profit organization is an association, club, or society that is operated exclusively for social welfare, civic improvement, pleasure, recreation, or any other purpose except profit.

We do not refer in our regulations to a "legally structured" non profit organization, but rather we refer to either 1) a registered one with CRA (however, CRA does require that the NPO be a legal entity or 2) a non registered charity that solicits donations.

Registered Charity: A registered charity (under the Canadian Income Tax Act) is exempt from paying income tax and can issue official donation receipts for gifts it receives.

Not-for-Profit Organizations: All Canadian provinces and territories have regulatory bodies which govern the legal establishment of non profit community groups - however, I looked at the Quebec site for NPOs and a NPO is not necessarily a corporation. There is no obligation for a non profit entity (other than a corporation) to register with them...

Our regulations: Our legislation does not indicate that an NPS must be a legal body; it only refers to as "an organization that solicits charitable donations".

However, in order to operate as a non profit organization, there are certain legal requirements for each province; therefore, the reporting entity should ensure that the organization that claims the status of an NPO is in fact an NPO. This check can be done simply by asking the question directly.

Date answered: 2010-01-21

PI Number: PI-5297

Obligation(s): Beneficial Ownership

Regulations: 11.1(5)

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): Verifying identity, Beneficial Ownership, Record Keeping

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

Date Modified: