Securities dealers must fulfill specific obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations to help combat money laundering and terrorist financing in Canada. For the purposes of the PCMLTFA, a securities dealer means an individual or entity authorized under provincial legislation to engage in the business of dealing in securities or any other financial instruments or to provide portfolio management or investment advising services.
Any person who acts exclusively on behalf of a securities dealer is not considered a reporting entity. If you are a broker-dealer employed by and authorized to sell securities on behalf of a securities dealer firm, it is your employer that is considered to be the securities dealer under the Regulations.
Securities dealers are responsible for providing FINTRAC with certain transaction reports, for implementing a compliance program and for keeping records that may be required for law enforcement investigations. Their obligations under the PCMLTFA and associated Regulations are described below.
A comprehensive and effective compliance program is the basis of meeting all of your obligations under the PCMLTFA and associated Regulations. During a FINTRAC examination, it is important to demonstrate that the required documentation is in place and that employees, agents, and all others authorized to act on your behalf are well trained and can effectively implement all the elements of your compliance program. A senior officer must approve the compliance program and the compliance officer must have the necessary authority to carry out the requirements of the program. You must:
- Appoint a compliance officer responsible for the implementation and oversight of the compliance program;
- Develop and apply written compliance policies and procedures that are kept up to date and approved by a senior officer;
- Apply and document a risk assessment, including mitigation measures and strategies;
- Develop and maintain a written training program for employees, agents, and others authorized to act on your behalf; and
- Review your compliance program (policies and procedures, risk assessment and training program) every two years for the purpose of testing its effectiveness.
See the Compliance program requirements guidance, the Risk assessment guidance and the Risk-based approach workbook for securities dealers for more information on these obligations.
Know your client
As a securities dealer, you must verify the identity of clients for certain activities and transactions according to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). Part of knowing your client includes following the methods to identify clients, as well as conducting certain additional activities as listed below.
- When to identify individuals and confirm the existence of entities – Securities dealers;
- Methods to verify the identity of persons and entities;
- Business relationship requirements;
- Ongoing monitoring requirements;
- Beneficial ownership requirements;
- Third party determination requirements; and
- Politically exposed persons and heads of international organizations requirements:
Securities dealers are required to complete reports about certain transactions and property and submit them to FINTRAC. Financial transaction reports are critical to FINTRAC’s ability to analyze transactions in order to develop financial intelligence that is disclosed to law enforcement and partner agencies. Therefore, the quality of your reporting will be reviewed by FINTRAC in examinations.
Suspicious transactions: You must submit a suspicious transaction report (STR) as soon as practicable after completing the measures required to establish reasonable grounds to suspect that a transaction is related to the commission or the attempted commission of a money laundering/terrorist activity financing offence. The following STR guidance pieces explain how to identify and report suspicious transactions and should be read together. See What is a suspicious transaction report?, Reporting suspicious transactions to FINTRAC and Money laundering and terrorist financing indicators - Securities dealers.
Terrorist property: When you know that property in your possession or under your control is owned, controlled by or on behalf of a terrorist or a terrorist group, you must submit a report without delay. You must also submit a report to the Royal Canadian Mounted Police (RCMP) and the Canadian Security Intelligence Service (CSIS). See Reporting terrorist property to FINTRAC.
Large cash transactions: When you receive $10,000 CAD or more in cash (including taxes or other fees) either in a single transaction or in multiple transactions within a 24-hour period, you must submit a report within 15 calendar days. See Guideline 7A: Submitting Large Cash Transaction Reports to FINTRAC electronically and Guideline 7B: Submitting Large Cash Transaction Reports to FINTRAC by paper.
If you have a computer and an internet connection, you must submit all reports to FINTRAC electronically, except Terrorist Property reports, which can only be submitted on paper.
You are responsible for keeping certain account, transaction and client identification records. These records are to be kept in such a way that they can be provided to FINTRAC within 30 days if required to do so. See Record keeping for securities dealers for details.
Foreign branches, subsidiaries and affiliates
If you have foreign branches, foreign subsidiaries or affiliates, you have to develop policies to establish requirements with respect to record keeping and retention, client identity verification, and compliance program requirements. Furthermore, your compliance program must include an assessment of money laundering and terrorist activity financing risk related to the foreign branch, subsidiary or affiliate’s operations, and implement risk mitigation controls when the risk is considered to be high. See Foreign branches, foreign subsidiaries and affiliates requirements.
Penalties for non-compliance
Non-compliance with Part 1 or 1.1 of the PCMLTFA may result in criminal or administrative monetary penalties.
FINTRAC has created a Guidance glossary that defines certain terms used throughout its guidance documents.
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