Financial entities

Financial entities must fulfill specific obligations as required by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations to help combat money laundering and terrorist activity financing in Canada. For the purposes of the PCMLTFA, financial entities include:

  1. All Canadian banks, foreign banks in Canada, and full service and lending foreign bank branches in Canada. These entities are established under Canada's Bank Act and are regulated by the Office of the Superintendent of Financial Institutions (OSFI);
  2. Financial services cooperatives, savings and credit unions and caisses populaires that are regulated by a provincial Act; as well as credit union centrals when they provide services to any person or entity that is not a member;
  3. Trust companies and loan companies that are regulated under the federal Trust and Loan Companies Act, or that are regulated by a provincial Act that is equivalent to the Trust and Loan Companies Act;
  4. Unregulated trust companies;
  5. Departments, agents and mandataries of the Crown that accept deposit liabilities when providing financial services to the public. Deposit liabilities are amounts that are left with the agent or mandatary of the Crown, but that the agent or mandatary of the Crown owes to the person or entity that left the funds;
  6. Life insurance companies, or entities that are life insurance brokers or agents, in respect of loans or prepaid payment products that they offer to the public and accounts that they maintain with respect to those loans or prepaid payment products, other than:
    • loans that are made by the insurer to a policy holder if the insured person has a terminal illness that significantly reduces their life expectancy and the loan is secured by the value of an insurance policy;
    • loans that are made by the insurer to the policy holder for the sole purpose of funding the life insurance policy; and
    • advance payments to which the policy holder is entitled that are made to them by the insurer.

Financial entities are responsible for the following requirements under the PCMLTFA and associated Regulations.

*Note: On June 1, 2021, regulatory amendments, which will create or change obligations for all reporting entities (REs) subject to the PCMLTFA and associated Regulations, will come into force. FINTRAC expects that REs will comply with the amended Regulations, but will exercise flexibility in assessing and enforcing compliance with certain record keeping and reporting requirements. See the Notice on forthcoming regulatory amendments and flexibility for more information.

Table 1—Summary requirements for financial entities
Category of requirement under the PCMLTFA and associated Regulations Requirements
Compliance program

Financial entities must implement a compliance program. A strong compliance program will form the basis of meeting all of your regulatory requirements. For more information, see Compliance program requirements and the Risk assessment guidance.

Know your client

Financial entities must verify the identity of persons and entities for certain activities and transactions, and carry out other customer due diligence activities, as described below:

When to verify the identity of persons and entities
Financial entities must verify the identity of persons and entities for certain transactions and activities. For more information, see When to verify the identity of persons and entities – Financial entities.

Methods to verify the identity of persons and entities
Financial entities must verify the identity of persons or entities using the methods prescribed by the PCMLTFA and associated Regulations. For more information, see Methods to verify the identity of persons and entities.

Business relationship requirements
Financial entities enter into a business relationship with a client when they open an account for the client or the second time they are required to verify the identity of a client. For more information, see Business relationship requirements.

Ongoing monitoring requirements
Financial entities have ongoing monitoring requirements when they enter into a business relationship with a client. For more information, see Ongoing monitoring requirements.

Beneficial ownership requirements
Financial entities must obtain and take reasonable measures to confirm the accuracy of beneficial ownership information for entities. For more information, see Beneficial ownership requirements.

Third party determination requirements
Financial entities have third party determination requirements when they are required to submit certain reports and keep certain records. For more information, see Third party determination requirements.

Politically exposed persons (PEP) and heads of international organizations (HIO) requirements
Financial entities are required to take reasonable measures to make PEP and HIO determinations for certain activities or transactions. If a financial entity determines that a person is a PEP or a HIO then they have additional related requirements. For more information, see Politically exposed persons and heads of international organizations guidance and Politically exposed persons and heads of international organizations guidance for account-based reporting entity sectors.

Reporting

Financial entities must submit the following reports to FINTRAC:

Suspicious transaction reports
For more information, see:

Terrorist property reports  
For more information, see:

Large cash transaction reports 
For more information, see:

Alternative to large cash transaction reports (optional, if conditions are met)
For more information, see:

Large virtual currency transaction reports 
For more information, see:

Electronic funds transfer reports 
For more information, see:

24-hour rule

Financial entities have 24-hour rule requirements for large cash transaction reports, large virtual currency transaction reports, and incoming and outgoing electronic funds transfer reports. For more information, see Transaction reporting guidance: the 24-hour rule.

Record Keeping

Financial entities must keep certain records, including records related to accounts, transactions and client identification. For more information, see Record keeping requirements for financial entities.

Travel rule

Financial entities have travel rule requirements related to electronic funds transfers and virtual currency transfers. For more information, see Travel rule for electronic funds and virtual currency transfers.

Correspondent banking relationships

Financial entities have correspondent banking relationship requirements for any correspondent banking relationship they enter into. For more information, see Correspondent banking relationship requirements.

Foreign branches, foreign subsidiaries and affiliates

Financial entities have foreign branches, foreign subsidiary and affiliate requirements. For more information, see Foreign branches, foreign subsidiaries and affiliates requirements.

Prepaid payment products and prepaid payment product accounts

Financial entities have requirements related to prepaid payment products and prepaid payment product accounts. For more information, see Prepaid payment products and prepaid payment product accounts.

Ministerial directives

Ministerial directive requirements apply to all reporting entity sectors. For more information, see Ministerial directives and transaction restrictions.

Penalties for non-compliance

FINTRAC has the legislative authority to issue administrative monetary penalties (AMPs) to reporting entities that are found to be non-compliant with the PCMLTFA and associated Regulations. For more information, see Penalties for non-compliance.

Glossary

The FINTRAC Guidance glossary includes terminology defined in the PCMLTFA and associated Regulations, as well as terms used throughout the guidance. For more information, see FINTRAC's Guidance Glossary.

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