FINTRAC Policy Interpretations

Politically Exposed Persons or Heads of an international organization

Is a niece of a PEFP considered to be a PEFP?

Question:

One of our clients is a judge who is considered to be a politically exposed foreign person (PEFP). One year later, the judge's sister opens an account with our office. Since she is considered to be a member of the judge's family, she is deemed to be a PEFP. One year later, the daughter of the judge's sister opens an account with our office. Does this mean that the daughter of the PEFP's sister, namely the judge's niece, is also considered to be a PEFP?

Answer:

Paragraph 9.3(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) states that a PEFP "means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:
(a) head of state or head of government;
(b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position."

For the purpose of this definition, under section 1.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), the prescribed family members of a PEFP are:
(a) the person's spouse or common-law partner;
(b) a child of the person;
(c) the person's mother or father;
(d) the mother or father of the person's spouse or common-law partner; and
(e) a child of the person's mother or father.

Under the scenario provided, the niece does not meet the definition under paragraph 9.3(3) of the PCMLTFA or with respect to prescribed family members of a PEFP under section 1.1 of the PCMLTFR. Thus, in light of these facts, we confirm that the judge's niece is not considered to be a PEFP.

That being said, the securities dealer has the obligation to make an assessment of the risk associated with the client, namely the niece. When the securities dealer makes his or her risk assessment and feels that the risks associated with the client are high, the dealer must take the special measures set out in section 71.1 of the PCMLTFR.

Date answered: 2016-06-23

PI Number: PI-6429

Activity Sector(s): Securities dealers

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6E

Regulations: 1.1, 71.1

Act: 9.3(3)

STR and ID obligations for Exempt Market Dealers

Question:

What are the requirements of a US firm to report suspicious transactions to FINTRAC? More specifically, an affiliate of our Bank, located in the United States, conducts business in Canada through exemptions afforded in NI 31-103. The affiliate would be dealing with a Canadian resident customer however the account would be boarded on the books and records of the US firm and have nothing to do directly with the Canadian Dealer. If a transaction is suspect, and upon further analysis requiring reporting, does the US affiliate have to appropriately file a suspicious transaction report with FINTRAC given that the account is opened with the US Dealer and not the Canadian Dealer? In this scenario, the Canadian client would only be dealing with the US Dealer and would have no contact with the Canadian Dealer in any way.

Also, if an IIROC Investment Dealer opens an account for another registered IIROC Investment Dealer in Canada, is there an obligation on the securities dealer to confirm (in writing or otherwise) that the Investment Dealer client screens its client's data against sanctions and terrorist lists, including PEFPs?

Answer:

Paragraph 5(g) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) states that “persons and entities 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, other than persons who act exclusively on behalf of such an authorized person or entity” are subject to Part 1 of the PCMLTFA. Pursuant to subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a securities dealer is defined as “a person 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”.

In the information provided, you state that “an affiliate of our Bank, located in the United States, conducts business in Canada through exemptions afforded in NI 31-103. The affiliate would be dealing with a Canadian resident customer however the account would be on boarded on the books and records of the US firm, and have nothing to do directly with the Canadian Dealer.” As such, the US firm appears to be authorized under provincial legislation to operate in Canada as an Exempt Market Dealer through the NI 31-103 exemption. The US firm is therefore subject to the PCMLTFA and its associated Regulations as a securities dealer, and has to develop a compliance regime, and meet the record keeping, client identification, and reporting obligations in respect of its Canadian activities only. Reporting obligations include the reporting of suspicious transactions.

Section 7 of the PCMLTFA stipulates that, “Subject to section 10.1, every person or entity referred to in section 5 shall report to the Centre, in the prescribed form and manner, every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that
(a) the transaction is related to the commission or the attempted commission of a money laundering offence; or
(b) the transaction is related to the commission or the attempted commission of a terrorist activity financing offence”.

As a result, if the US firm has reasonable grounds to suspect that a financial transaction that occurs, or that is attempted, in the course of its Canadian activities is related to the commission or the attempted commission of a money laundering offence or a terrorist activity financing offence, a suspicious transactions report (STR) must be submitted to FINTRAC.

Also, you have asked “if an IIROC Investment Dealer opens an account for another registered IIROC Investment Dealer in Canada, is there an obligation to confirm (in writing or otherwise) that the Investment Dealer client screens its client's data against sanctions and terrorist lists, including PEFPs?”

As previously indicated, every person or entity defined as a securities dealer under the PCMLTFA and its associated Regulations is required to meet the obligations outlined therein. Typically, when opening an account, every securities dealer is required to take reasonable measures to determine if the person for whom they open an account is a politically exposed foreign person (PEFP). However, in cases where the opening of an account is in the name of, or in respect of which instructions are authorized to be given by a securities dealer, paragraph 62(2)(l) of the PMCLTFR provides an exception to the client identification, and PEFP determination requirements outlined at sections 57 and 57.1 of the PCMLTFR. Based on the situation described, where a securities dealer opens an account for its client, another securities dealer, the exception listed at paragraph 62(2)(l) could be applied.

Specifically, there is no requirement outlined in the PCMLTFA or its associated Regulations, for the securities dealer to obtain this type of confirmation from its client, another securities dealer. That said, pursuant to subsection 9.6(3) of the PCMLTFA, if the securities dealer, in the course of its risk assessment, deems its client, the other securities dealer, to be high risk, then the securities dealer must take the prescribed special measures outlined at section 71.1 of the PCMLTFR, which may include obtaining from the other securities dealer confirmation that specific verifications were performed on their clients.

Date answered: 2016-04-28

PI Number: PI-6419

Activity Sector(s): Securities dealers

Obligation(s): Politically Exposed Persons or Heads of an international organization, Reporting

Guidance: 2, 3, 6E

Regulations: 1(2), 62(2)(l)

Act: 5(g), 7, 9.6(3)

Ex-spouse considered a PEFP

Question:

Is the ex-spouse/partner of a politically exposed foreign person (PEFP) also considered a PEFP? If a person was once a PEFP, will he or she always be considered to be one?

Answer:

Pursuant to subsection 57.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), and subject to section 62 and subsection 63(5), ever securities dealer must take reasonable measures to determine if:

  • a person for whom a new account is opened is a politically exposed foreign person (PEFP); and
  • an existing account holder is a PEFP, based on the level of risk of a money laundering or terrorist financing offence.

This determination must be made within 14 days.

Subsection 9.3(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) defines a PEFP as “a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:
(a) head of state or head of government;
(b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position.”

The prescribed family members of such a person are also considered to be PEFPs. Section 1.1 of the PCMLTFR specifies that prescribed family members include:
(a) the person's spouse or common-law partner;
(b) a child of the person;
(c) the person's mother or father;
(d) the mother or father of the person's spouse or common-law partner; and
(e) a child of the person's mother or father.

We have previously taken the position that once PEFP status is determined, it remains indefinitely. We have also previously determined that in situations where a PEFP has died, the PEFP status of prescribed family members remains, as it is possible the family members still have access to the PEFP's funds. As such, because the status remains indefinitely and because the ex-spouse may continue to have access to the PEFP's funds, if a divorce has occurred, the ex-spouse remains a PEFP for the purposes of the PCMLTFA and its associated Regulations.

Date answered: 2015-12-16

PI Number: PI-4442

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

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6I

Regulations: 1.1, 57.1

Act: 9.3(3)

Risk assessment on PEFPs

Question:

Are persons identified as politically exposed foreign persons (PEFPs) automatically considered to be high risk, and are they subject to measures other than enhanced ongoing monitoring for the purposes of detecting suspicious transactions?

Answer:

Subsection 67.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “A financial entity or securities dealer that has determined under paragraph 54.2(a) or (b) or section 57.1 that a person is a politically exposed foreign person shall
(a) take reasonable measures to establish the source of the funds that have been, will be or are expected to be deposited in the account in question;
(b) subject to subsections (2) and (3), obtain the approval of senior management to keep the account open; and
(c) conduct enhanced ongoing monitoring of the activities in respect of the account for the purpose of detecting transactions that are required to be reported to the Centre under section 7 of the Act.”

Regarding the requirements associated with high risk clients, subsection 71.1 of the PCMLTFR states that “The prescribed special measures that are required to be taken by a person or entity referred to in subsection 9.6(1) of the Act for the purpose of subsection 9.6(3) of the Act are the development and application of written policies and procedures for
(a) taking enhanced measures based on the risk assessment undertaken in accordance with subsection 9.6(2) of the Act to ascertain the identity of any person or confirm the existence of any entity in addition to the measures required in sections 54, 54.1, 55, 56, 57, 59 and 59.1, subsection 59.2(1), section 59.3, subsection 59.4(1) and sections 59.5, 60 and 61; and

(b) taking any other enhanced measure to mitigate the risks identified in accordance with subsection 9.6(3) of the Act, including,
(i) keeping client identification information and the information referred to in section 11.1 up to date, and
(ii) in addition to the measures required in sections 54.3, 56.3, 57.2, 59.01, 59.11, 59.21, 59.31, 59.41, 59.51, 60.1 and 61.1, conducting ongoing monitoring of business relationships for the purpose of detecting transactions that are required to be reported to the Centre under section 7 of the Act.

Therefore, while it is not explicitly stated in the Proceeds of Crime (Money Laundering) or Terrorist Financing Act (PCMLTFA) or its associated Regulations, our Guidelines are correct in indicating that PEFPs are high risk clients. The requirements associated with PEFPs exceed those of regular clients and are the same as those of other high risk clients. A financial entity's written policies and procedures should include measures for identifying and managing PEFP clients.

Date answered: 2015-08-28

PI Number: PI-6350

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 67.1(1), 71.1

Act: 9.3

Verification of terrorist lists and PEFPs

Question:

What are FINTRAC's expectations with respect to the verification of terrorist lists and the determination of politically exposed foreign persons (PEFPs) for settlors, trustees and beneficiaries of trusts?

Answer:

On the one hand, it is essential that the financial entity meet the requirements of subsection 7.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act), which states that “Every person or entity referred to in section 5 that is required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism shall also make a report on it to the Centre, in the prescribed form and manner." For this purpose, to meet the obligations of subsection 7.1(1) of the Act and transmit to FINTRAC the terrorist property reports, declarations of assets belonging to a terrorist group, the verification of terrorist lists must be included in the financial entity's policies and procedures. That said, the Act does not prescribe the measures that a financial entity must take in order to verify the information contained on terrorist lists.

On the other hand, with regards to the determination of PEFPs, under section 54.2 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, "subject to section 62 and subsection 63(5), every financial entity shall

(a) in accordance with subsection 67.1(2), take reasonable measures to determine whether a person for whom the financial entity opens an account is a politically exposed foreign person;
(b) take reasonable measures, based on the level of the risk referred to in subsection 9.6(2) of the Act, to determine whether a person who is an existing account holder is a politically exposed foreign person;
(c) in accordance with subsection 67.2(3), take reasonable measures to determine whether the person who initiates an electronic funds transfer of $100,000 or more is a politically exposed foreign person; and
(d) in accordance with subsection 67.2(3), take reasonable measures to determine whether the person who is the beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign person."

Consequently, if the settlors, trustees and known beneficiaries of a trust are those whom the financial entity is opening the account for, hold a current account, are persons who receive an electronic funds transfer of $100,000 or more, or are persons benefiting from an electronic funds transfer of $100,000 or more, the financial entity must take reasonable measures to determine whether these people are PEFPs.

That said, FINTRAC cannot comment on the financial entity's specific daily business decisions. It is up to the financial entity to determine the measures it considers reasonable based on a given situation.

Date answered: 2015-08-20

PI Number: PI-6346

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54.2

Act: 7.1(1), 9.3

Board members of foreign companies or banks

Question:

Are board members of foreign companies or banks considered to be PEFPs within the meaning of paragraph 9.3(3)(f) of the PCMLTFA?

Answer:

Subsection 9.3(3) of the PCMLTFA states that "politically exposed foreign person” means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:
(a) head of state or head of government;
(b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position.

An officer of a state-owned company or a state-owned bank means a natural person in charge of assuming the responsibilities of a president and chief executive officer or general manager of the state-owned company or bank. Please consult the english version of paragraph 9.3(3)(f) of the Act, which clearly states that a president of a state-owned company or a state-owned bank is considered a PEFP.

Date answered: 2015-08-11

PI Number: PI-6343

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 1.1

Act: 9.3(3)

Honorary consul

Question:

Senior teacher positions in a foreign department and honorary consul positions are not positions whose duties within a foreign government are similar to executive, legislative, legal, diplomatic or military authorities. Moreover, these jobs and their equivalents are not mentioned in FINTRAC Guideline 6G.

Consequently, is an honorary consul of a foreign department in Canada considered a PEFP?

Answer:

Subsection 9.3(3) of the Proceeds of Crime and Terrorist Financing Act states: “For the purposes of this section, politically exposed foreign person means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:
(a) head of state or head of government; (b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position.

You have asked whether someone who was a senior teacher at the Department of National Defence and honorary consul for a foreign department in Canada is considered a PEFP. An honorary consul mainly refers to someone who is responsible abroad, who after holding certain duties keeps the titles and honorific prerogatives and without any real duties. In light of these facts, we confirm that this person is not a PEFP.

Date answered: 2015-06-26

PI Number: PI-6326

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 1.1

Act: 9.3(3)

PEFP - prescribed office or position

Question:

Please clarify what is meant by paragraph 9.3(3)(j) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), specifically, what “prescribed office or position” refers to.

Answer:

Subsection 9.3(3) of the PCMLTFA states that ““politically exposed foreign person” means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:
(a) head of state or head of government;
(b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position.”

And it includes any prescribed family member of such a person, defined in section 1.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) as:
“(a) the person's spouse or common-law partner;
(b) a child of the person;
(c) the person's mother or father;
(d) the mother or father of the person's spouse or common-law partner; and
(e) a child of the person's mother or father.”

In response to your question, at this time, no other office or position has been prescribed in accordance with paragraph 9.3(3)(j) of the PCMLTFA.

Date answered: 2015-06-24

PI Number: PI-6323

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6

Regulations: 1.1

Act: 9.3(3)

Clarification of PEFP definitions

Question:

Can you please opine and provide explanation with respect to:

  1. The definition of a “counsellor of an ambassador”.
  2. The difference between a “counsellor of an ambassador” and “consul”, and “councellor”.
  3. Whether or not a ”deputy ambassador” of a foreign state would qualify as a PEFP. If not, please articulate the material difference between a “deputy ambassador” and an “ambassador's attache” or a “counsellor of an ambassador”.
  4. Whether or not a ”counsellor from the embassy” of a foreign state would qualify as a PEFP.
  5. Whether or not a ”counsellor from the high commission” of a foreign state would qualify as a PEFP.
  6. Whether or not a ”high commissioner” or “acting high commissioner” of a foreign state would qualify as a PEFP.
  7. Whether or not a ”charge d'affaires” of a foreign state would qualify as a PEFP.

Answer:

Pursuant to subsection 9.3(3) of the PCMLTFA, a PEFP means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:
(a) head of state or head of government;
(b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position.

And it includes any prescribed family member of such a person, defined in section 1.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) as:
(a) the person's spouse or common-law partner;
(b) a child of the person;
(c) the person's mother or father;
(d) the mother or father of the person's spouse or common-law partner; and
(e) a child of the person's mother or father.

With this in mind, our answers to your specific questions are outlined below.

  1. As per the Department of Foreign Affairs, Trade and Development Canada (DFATD), a Counsellor is a designation given to staff working in embassies, high commissions and permanent missions and is defined as “the fourth rank in Canadian embassies, high commissions or permanent missions; but number two or three in missions without a minster or minster-counsellor.”
     
  2. A Consul General or Consul is defined as “…functional - denoting staff who provide consular services….” A Counsellor of an Ambassador therefore denotes a higher ranking position than a Consul General and as such, it falls within the purview of paragraph 9.3(3)(d) of the PCMLTFA as “attaché or counsellor of an ambassador”.
     
  3. Deputy Ambassadors would be considered PEFPs, as this is also considered to be a senior-ranking position and would typically sit just below an Ambassador. As such, it falls within the purview of paragraph 9.3(3)(d) of the PCMLTFA as “attaché or counsellor of an ambassador”.
     
  4. A Counsellor from an embassy of a foreign state, if equivalent to the definition provided above from DFATD, would also qualify as a PEFP.
     
  5. Given that a high commission is essentially equivalent to an embassy, a Counsellor from a high commission would also qualify as a PEFP.
     
  6. A High Commissioner is equivalent to an Ambassador in commonwealth countries, therefore, it too would qualify as a PEFP.
     
  7. It will always be a question of fact to be able to determine whether a person fits into this category. Based on our understanding, a Chargé d'affaires is typically appointed on a temporary or permanent basis, and those appointed on a temporary basis generally also occupy a counsellor or similarly ranked position and would therefore already be considered PEFPs. In situations where a person is appointed as a Chargé d'affaires on a temporary basis and does not also occupy another position covered under the definition of PEFP, they would not be considered a PEFP. However, Chargé d'affaires appointed on a permanent basis would be.

Date answered: 2015-03-05

PI Number: PI-6293

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 1.1

Act: 9.3

PEFP Determination

Question:

It is our view that, where a financial entity opens an account for a new client, who is determined to be a politically exposed person, regardless of the account open and activation date, the determination must be made, and the approval obtained, within 14 days from the day the account is activated.

Further, where the financial entity has determined that an existing account holder is a politically exposed foreign person, regardless of when that account was opened and activated, and the determination could not be made at account open, it is our view that the approval must be obtained within 14 days after the day on which the financial entity determines the individual to be a politically exposed foreign person.

The determination may not have been made at account open / activation for a variety of reasons, e.g. the position changed from that at account open such that the client's position became a senior foreign political position at some point subsequent to account open or client was not identified as a senior foreign politically exposed person using the financial entity's various screening mechanisms but was subsequently identified.

We would welcome feedback or comments.

Answer:

Financial entities have to take reasonable measures to determine whether they are dealing with a politically exposed foreign person for new or existing accounts. Section 54.2 of the PCMLTFR states that “Subject to section 62 and subsection 63(5), every financial entity shall

(a) in accordance with subsection 67.1(2), take reasonable measures to determine whether a person for whom the financial entity opens an account is a politically exposed foreign person;
(b) take reasonable measures, based on the level of the risk referred to in subsection 9.6(2) of the Act, to determine whether a person who is an existing account holder is a politically exposed foreign person”

Subsection 67.1(1) of the PCMLTFR states that “A financial entity or securities dealer that has determined under paragraph 54.2(a) or (b) or section 57.1 that a person is a politically exposed foreign person shall

(a) take reasonable measures to establish the source of the funds that have been, will be or are expected to be deposited in the account in question;
(b) subject to subsections (2) and (3), obtain the approval of senior management to keep the account open; and
(c) conduct enhanced ongoing monitoring of the activities in respect of the account for the purpose of detecting transactions that are required to be reported to the Centre under section 7 of the Act.

Subsection 67.1(2) of the PCMLTFR states that “The determination referred to in paragraph 54.2(a) and section 57.1(1) as to whether a person is a politically exposed foreign person shall be made, and the approval referred to in paragraph (1)(b) shall be obtained, within 14 days from the day on which the account is activated.”

Subsection 67.1(3) of the PCMLTFR states that “The approval referred to in paragraph (1)(b) shall be obtained within 14 days after the day on which a financial entity or securities dealer has determined under paragraph 54.2(b) or subsection 57.1(2) that a person is a politically exposed foreign person.”

For new accounts:

When a financial entity opens an account for an individual, including a credit card account, they have to take reasonable measures to determine whether they are dealing with a politically exposed foreign person. This has to be done within 14 days after the new account is activated.

If they determine that an individual is a politically exposed foreign person for a new account, they also have to do the following:

  • get senior management's approval to keep the account open within 14 days after the new account is activated;
  • take reasonable measures to establish the source of funds that have been, will be or are expected to be deposited in that account. Once they have determined the source of funds for the account, they are not required to do so again for future deposits, unless ongoing monitoring triggers the need to do so; and
  • perform enhanced ongoing monitoring of activities for that account to detect suspicious transactions.

Financial entities have to make the determination and get senior management approval within a single period of 14 days. For example, if it takes them 5 days after the new account is activated to make the determination that they are in fact dealing with a politically exposed foreign person, they have 9 days left to get senior management approval to keep the account open.

For existing accounts:

For existing account holders, including credit card accounts, financial entities also have to take reasonable measures to determine whether they are dealing with a politically exposed foreign person. This is to be done based on their compliance regime's risk assessment regarding situations considered to be higher-risk for money laundering or terrorist financing.

If they determine that an individual is a politically exposed foreign person for an existing account, they also have to do the following:

  • get senior management's approval to keep the account open within 14 days after they determined that the existing account holder is a politically exposed foreign person;
  • take reasonable measures to establish the source of funds that have been, will be or are expected to be deposited in that account. Once they have determined the source of funds for the account, they are not required to do so again for future deposits, unless ongoing monitoring triggers the need to do so; and
  • perform enhanced ongoing monitoring of activities for that account to detect suspicious transactions.

Date answered: 2015-03-04

PI Number: PI-6292

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54.2, 67.1

Act: 9.3

PEFP determination for sub-accounts

Question:

Can you confirm that a PEFP determination would be required for subsequent account openings, under the same master account number?

Answer:

Section 54.2 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that:
“Subject to section 62 and subsection 63(5), every financial entity shall
(a) in accordance with subsection 67.1(2), take reasonable measures to determine whether a person for whom the financial entity opens an account is a politically exposed foreign person;
(b) take reasonable measures, based on the level of the risk referred to in subsection 9.6(2) of the Act, to determine whether a person who is an existing account holder is a politically exposed foreign person;
(c) in accordance with subsection 67.2(3), take reasonable measures to determine whether the person who initiates an electronic funds transfer of $100,000 or more is a politically exposed foreign person; and
(d) in accordance with subsection 67.2(3), take reasonable measures to determine whether the person who is the beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign person.”

Having said that, FINTRAC has previously stated that the terms “account” and “sub-account” are not defined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) or its associated Regulations. It is suggested that the term "sub-account", used by the reporting entity, be assimilated into the term "account" and treated in the same way. While the opening of an account for the purpose of holding a client's assets is clearly understood to be an account opening, FINTRAC has taken the position that, in other cases, it is generally for the reporting entity to determine whether or not an account has been opened. Generally, financial institutions, including trust companies, have their policies and procedures, and know when an “account opening” has taken place.

Accordingly, FINTRAC's position on this matter has not changed and it is therefore at the financial entity's discretion to determine whether the opening of a sub-account constitutes an account opening for their purposes.

In addition, paragraph 62(1)(c) of the PCMLTFR provides an exception to PEFP determination when opening accounts for existing clients. Of course, the exceptions are not mandatory, so it is for the reporting entity to decide whether they will apply them or not.

Date answered: 2015-01-19

PI Number: PI-6281

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54.2, 62(1)(c)

Act: 9.3

EFT process and PEFP determination

Question:

Person A and Person B are employees conducting a wire transfer. Person A creates the wire transfer and Person B reviews the created wire transfer and approves the wire, which actually sends it to the intended recipient. When proceeding to a PEFP determination, who would be considered the initiator of the transaction?

Example of scenario:

  • Employee A logs into online banking, accesses the wire transfer service and creates the wire
  • Employee B then logs into online banking, accesses the wire transfer service, reviews the wire that Person A has created (accuracy) and approves the wire, which sends the wire to the vendor.

Answer:

Pursuant to subsections 9.3 (1) to (3) of the PCMLTFA, financial entities must determine if they are dealing with politically exposed foreign persons in prescribed circumstances. Those circumstances are prescribed in section 54.2 of the PCMLTF Regulations to include, under 54.2(c) : “in accordance with subsection 67.2(3), take reasonable measures to determine whether the person who initiates an electronic funds transfer of $100,000 or more is a politically exposed foreign person”.

In the provided scenario, two employees would be using an online banking system to request the transfers of funds (in some cases, those transfers would meet the definition of EFTs under the PCMLTFA).

In regards to your question concerning the reporting entity's obligation, Guideline 6G states that “You have to take reasonable measures to determine if the initiator of an outgoing EFT of $100,000 or more is a politically exposed foreign person. The initiator means the individual who requested the EFT whether the individual is acting on behalf of an entity (including a corporation) or on their own behalf. This determination has to be done within 14 days after the transaction occurred.”

Based on this, it seems like the first individual (Person A) is the one requesting the transmission of funds and would be the initiator. This is based on the fact that he/she is the one who accesses the transfer system to request the transfer, and prepares the actual instructions including determining the amount to be transferred, and the beneficiary of said transfer.

Therefore, person A (the first employee) would be the initiator and the reporting entity would have to determine if that person is a PEFP in situations where he/she initiates EFTs for more than $100,000.

Date answered: 2014-11-19

PI Number: PI-6260

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54.2

Act: 9.3

PEFP clarification - Prescribed family members of a PEFP

Question:

Would a person that has a step-mother that is a PEFP be considered a  PEFP because of that relationship?

Answer:

We have determined that solely having a step-family connection is not sufficient for meeting the definition of a prescribed family member of a politically exposed foreign person (PEFP) as indicated at section 1.1. of the PCMLTFR.

Having said that, if a step-child is legally considered to be the child of the step-parent, then they are included in the definition and would be considered a PEFP. Therefore, a person that has a step-mother who is a PEFP would only be considered a PEFP because of that relationship if they were also legally considered to be the child of the PEFP.

Date answered: 2014-10-02

PI Number: PI-6247

Activity Sector(s): Money services businesses

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6C

Regulations: 1.1, 59(5)

Act: 9.3(3)

Definition of a politically exposed foreign person

Question:

What is the definition of a politically exposed foreign person?

Answer:

Pursuant to subsection 9.3(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), every person or entity that is referred to in section 5 of the PCMLTFA and that is prescribed, shall determine, in the prescribed circumstances and in accordance with the regulations, whether it is dealing with a politically exposed foreign person. As per subsection 9.3(3) of the PCMLTFA, a politically exposed foreign person means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:

(a) head of state or head of government;
(b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position.

And it includes any prescribed family member of such a person, defined in section 1.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations as :
(a) the person's spouse or common-law partner;
(b) a child of the person;
(c) the person's mother or father;
(d) the mother or father of the person's spouse or common-law partner; and
(e) a child of the person's mother or father.

Date answered: 2014-08-13

PI Number: PI-6214

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6

Act: 9.3(1), 9.3(3)

Politically Exposed Foreign Person (PEP) Determination for International EFTs of $100,000 or more

Question:

Would it be acceptable to ask the PEP determination question on a predetermined schedule under a risk based approach (e.g., annually; semi-annually)? It would be unlikely that a person would become politically exposed after a lifetime of no such exposure. Would this also be applicable in an account-based scenario?

Answer:

Credit unions have to take reasonable measures to determine whether they are dealing with a politically exposed foreign person for new or existing accounts (including credit card accounts).

Subsection 67.1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that the determination as to whether a person is a politically exposed foreign person shall be made and the approval of senior management shall be obtained within 14 days from the day on which the account is activated.

In addition, credit unions must take reasonable measures to determine whether they are dealing with a politically exposed foreign person for certain electronic funds transfers. Pursuant to subsection 67.2(3) of the PCMLTFR, the determination as to whether or not the initiator or beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign person has be done within 14 days after the transaction occurred.

If an individual who is the initiator of an EFT of $100,000 or more is a politically exposed foreign person, the credit union will also have to do the following:

  • take reasonable measures to establish the source of funds used by the initiator for the transaction; and
  • within 14 days after the transaction occurred, get a member of senior management to review the transaction.

If an individual who is the beneficiary of an EFT of $100,000 or more is a politically exposed foreign person, the credit union also has to get a member of senior management to review the transaction, within 14 days after the transaction occurred.

Once the credit union has determined that an individual is a politically exposed foreign person, they will not have to do it again. However, if they initially determined that an individual was not a politically exposed foreign person, the credit union must still take reasonable measures to determine whether they are dealing with a politically exposed foreign person for every subsequent account opening or for prescribed electronic funds transfers, based on the level of the risk referred to in subsection 9.6(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). In addition, should the credit union have opened an account for a client before to June 23, 2008, prior to the existence of the requirement to determine if the person was a politically exposed foreign person, the credit union would be required to subsequently make the determination based on the level of the risk referred to in subsection 9.6(2) of the PCMLTFA.

Date answered: 2014-07-18

PI Number: PI-6200

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 67.1(2), 67.2(3)

Act: 9.6(2)

PEFP - Consul General

Question:

Can the daughter of the Israeli consul general in Montreal be considered a Politically Exposed Foreign Person (PEFP) and is this position equivalent to the ambassador's attaché or counsellor?

Answer:

Subsection 9.3(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) states that, “Every person or entity that is referred to in section 5 and that is prescribed shall determine, in the prescribed circumstances and in accordance with the regulations, whether it is dealing with a politically exposed foreign person.” Additionally, paragraph 9.3(3)(d) of the PCMLTFA specifies that a politically exposed foreign person can include an, “ambassador or attaché or counsellor of an ambassador” and any prescribed family member of such a person. According to subparagraph 1.1(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a prescribed member includes a child of the PEFP.

An ambassador is the foreign diplomatic representative of a nation who is authorized to handle political negotiations between his or her country and the country where the ambassador has been assigned. A consul is the commercial agent of a nation, who is empowered only to engage in business transactions, and not political matters in the country where he or she is stationed. Consuls are not diplomatic agents (such as an ambassador) and, therefore, they are usually amenable to civil lawsuits and criminal prosecution in the country

A consul general is a consular officer who heads a consulate general and is a consul of the highest rank serving at a particular location. A consul general may also be responsible for consular districts which contain other, subordinate consular offices within a country. The consul general serves as a representative who speaks on behalf of his or her state in the country to which he or she is located, although ultimate jurisdiction over the right to speak on behalf of a home country within another country ultimately belongs to the single ambassador. In most embassies, the consular section is headed by a consul general who is also a member of the ambassador's country team. In short, it does not appear that a consul general equates to an ambassador's attaché or counselor, nor that it falls under either of the definitions of a PEFP found under subsection 9.3(3) of the PCMLTFA. As such, the daughter of the Israeli consul general in Montreal is not considered a PEFP pursuant to the PCMLTFA and its associated regulations.

Date answered: 2013-08-27

PI Number: PI-5604

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6

Act: 9.3(1), 9.3(3)

PEFP on Business Account

Question:

Should we check for PEFPs on business accounts? If so, who should we check: signatories, beneficial owners, directors and also the board of directors?

Answer:

Paragraph 54.2(a) of the PCMLTFR states that “Subject to section 62 and subsection 63(5), every financial entity shall […] in accordance with subsection 67.1(2), take reasonable measures to determine whether a person for whom the financial entity opens an account is a politically exposed foreign person”.

When the financial entity opens an account for a person, including a credit card account, it must take reasonable measures to determine if the person with whom it does business is a politically exposed foreign person. Thus, it is correct to assume that the obligation to determine whether a person is a politically exposed foreign person applies only to a person (individual) who opens an account, not the account opened in the name of an entity (business account).

Date answered: 2013-06-18

PI Number: PI-5569

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54.2(a)

PEFP: Receipt of $100,000 as an intermediary

Question:

Must the Bank take reasonable measures to determine whether the beneficiary of an EFT is a politically exposed foreign person where the bank acts as an intermediary with instructions to forward the amount to a Canadian bank to credit the account of a customer of the bank?

Answer:

The Bank does not have to take reasonable measures to determine whether the beneficiary of an electronic receipt of $100,000 or more is a politically exposed foreign person when the Bank (Canada) acts as an intermediary with instructions to follow the EFT to a Canadian bank to credit the account of a customer of the bank.

Date answered: 2013-06-03

PI Number: PI-5559

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G, 8

Regulations: 54.2(d)

PEFP Determination

Question:

Are there PEP requirements for these transactions?

Real Estate transactions involving foreign buyers. What are the risks? Are there any risks of money laundering or foreign criminal proceeds entering Canada in this way? Are there PEP requirements for these transactions the transactions?

Answer:

The keeping of politically exposed foreign person records is triggered by the requirement to make a politically exposed foreign person determination. That determination is associated to either the opening of an account or the conducting of certain transactions, depending on the reporting entity sector. The following reporting entity sectors are prescribed in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations for politically exposed foreign person determinations:

  • financial entities
  • life insurance
  • securities dealers
  • money services businesses

Therefore, there are no politically exposed foreign person requirements for real estate transactions involving foreign buyers.

Date answered: 2013-05-15

PI Number: PI-5553

Activity Sector(s): Real estate

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6B

UN director a PEFPS?

Question:

Would a Regional Director for the UN (United Nations) be considered a PEFP?

Answer:

The regional director UN does not fall within the definition of a PEFP found in subsection 9.3(3) of our Act.

The rationale behind this policy was that international organizations of the magnitude of the UN are not considered at risk of corruption, and we can have confidence in their integrity (for example the UN would not be subject to the diamond industry and its related lure of corruption).

Date answered: 2010-02-12

PI Number: PI-5317

Activity Sector(s): Securities dealers

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6E

Regulations: 57.1

Act: 9.3(3)

Identification Requirements for a Canadian Investment Dealer opening an institutional account for US securities dealer

Question:

In addition, please confirm whether or not it will be necessary to enquire if either the authorized individuals at the US securities dealer need to be asked if they are PEFP or if we need to ask them whether the clients they are dealing with are PEFPs?

Answer:

PEFP determination is required only if your client opens an account for an individual. As your client only opens an account for the ABC firm (not any of ABC's firm clients), the PEFP determination is not required.

Date answered: 2009-11-24

PI Number: PI-4736

Activity Sector(s): Securities dealers

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6E

Regulations: 23(1)

PEFP determination for incoming EFTs

Question:

We fully understand that we have the obligation to check Politically Exposed Foreign Person status for the individual who initiated an outgoing international EFT of $100k on behalf of an Entity.

Do we have the obligation to check PEFP status for incoming international EFTs of $100k where an Entity is the beneficiary?

Answer:

If the beneficiary of an incoming EFT of $100,000 or more is an individual then the RE must take reasonable measures to determine whether the person is a politically exposed foreign person or not.

However, there is no legislative requirement to make that determination in the case of an incoming EFT of $100,000 if the beneficiary is an entity (including a corporation).

Date answered: 2009-11-20

PI Number: PI-4733

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 67.2(1)

(Earlier PI) PEFPS: 54.2(a) and 62(1)(a)- clarification

Question:

In the past, we determined that subsection 54.2(a) of the Regulations did not apply when the account was opened for an entity.

That being said, I have found a contradiction in subsection 62(1)(a), which says that subsection 54.2(a) does not apply in "the opening of a business account" when the identity of at least three persons authorized to give instructions has been ascertained.

Should subsection 54.2(a) apply to entities, or (2) should the reference to subsection 54.2(a) in subsection 62(1)(a) be crossed out?

Answer:

I wish to point out that the opening of "a business account" is not the same thing as "the opening of an account by an entity".

An individual can open a business account. For example, supposing I open a business account under the name "Les fleurs de la Marquise" for my florist shop - which is not incorporated; it would still be an account opened by an individual (myself) and not by an entity (that is, a company or corporation).

As an alternative argument (if we suppose that 54.2(2)(a) applies only to accounts opened in the name of an individual, rather than in the name of a business), we must take into account that the introduction to 62(1) (that is, the part preceding paragraph (a)), applies to subsection 62(1) as a whole, not necessarily to each paragraph. It is rather as if the introduction to the paragraph ended with the words "as the case may be". Otherwise, each paragraph in 52.2(1) would have to include the specific articles which apply to the paragraph in question.

Date answered: 2009-11-20

PI Number: PI-4732

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54.2(a), 62(1)(a)

Length of being a PEFP and maintaining records

Question:

We have said that once a PEFP always a PEFP (s 63(5)). This said, however, for how long would a RE have to keep the prescribed information regarding a PEFP? According to 69(1)(c), the answer is 5 years, however, does that conflict with 63(5) "once a PEFP always a PEFP"? Would the RE have to keep the information on a PEFP indefinitely?

Answer:

The records must be retained five years regardless of which record we are talking about.

The adage "once a PEFP always a PEFP" should be read as saying you are a PEFP even if you are deceased.. therefore your children and other members of your family designated as PEFPs are still PEFP even though the original PEFP is deceased.

However, part of the RE's risk based approach would be that the RE may want to keep that information longer/or in storage as one never knows when the daughter of a deceased PEFP may open an account with the CU at some time and that information sure would be useful.

Date answered: 2009-06-24

PI Number: PI-4606

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 69(1)(c), 63(5)

PEFPs and transactions over than 100,000

Question:

I know that you have said that FINTRAC does not expect PEFP determinations on businesses. I am assuming this laps over into businesses the send or receive EFT's <$100,000.

Answer:

First PEFP the person that initiates the EFT - that includes the person that acts for the corporation.

Secondly PEFP the beneficiary of the EFT - if the EFT is sent to a corporation/business (to its account) no PEFP determination. 54.2 (d) indicates that you PEFP the person that is the beneficiary of the EFT, i.e the person that ultimately benefits/receives the money. However, again should the money go to the corporation itself, there is no PEFP determination to be made.

Date answered: 2009-04-29

PI Number: PI-4572

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54.2(c), 54.2(d), 14(m)

Corporate documentation for an Embassy FX account

Question:

I said, that they needed to establish whether the embassy existed (not unlike the effort undertaken to get corporate documentation for a public entity) and whether the person opening the account was granted authority to do so by the Ambassador or his direct report -this usually granted in the form of a letter. I further responded that the officer or other signing officers needed to be ID especially those that would be signing officers and that they may as a result of their role with the embassy be a PEFP. Where the FI deemed the officer to be a PEFP that the PEFP designation would require the applicable of enhanced due diligence for such person(s) in addition to ongoing transaction scrutiny and reporting where necessary.

Is there anything I missed here from your perspective?

Answer:

In reply to your question, we agree with you, and would haven't missed anything. The reporting entity would have to to establish the existence of the embassy (same as a corporation) - I know that there is an accreditation by DFAIT for ambassadors, however, I am not sure what applies to embassies. I suspect they may have document either establishing their existence, or a document from DFAIT recognizing their existence here in Canada.

Date answered: 2009-03-06

PI Number: PI-4538

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54(1)(a), 54(1)(d), 54.2(a)

PEFP (retention of records)

Question:

We have said that once a PEFP always a PEFP (s 63(5)). This said, however, for how long would a RE have to keep the prescribed information regarding a PEFP?

According to 69(1)(c), the answer is 5 years, however, does that conflict with 63(5) "once a PEFP always a PEFP"? Would the RE have to keep the information on a PEFP indefinitely?

Answer:

They would have to keep the information for 5 years after the account is closed. see 69(1) (a.1) it mentions 14(n) which is for PEFPs

Date answered: 2009-02-27

PI Number: PI-4534

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 69(1)(c), 63(5)

PEFP status

Question:

Regarding the status of PEFP, in OSFI's Guideline No B-8 Deterring and Detecting Money Laundering and Terrorist Financing page 30 stating "Once a PEFP determination is made, it may not be reversed or otherwise changed, other than to correct." It means that the counsellor officer's personal account should be permanently treated as PEFP account despite job change or retirement.

When we talk to some foreign counsellor officers, they state that their job positions may be changed from time to time. If their counsellor status has been changed because of retirement or job transfer, the PEFP account records will not reflect their real status and situation. Kindly advise us your recommendation and explanation.

Answer:

Once a PEFP always a PEFP. This bank may have set the bar too low by including Counsellors as PEFPs but that is up to them from a RBA perspective.

If they are looking for relief they will have to recast their risk rating for PEFPs and of course document why.

Date answered: 2009-02-13

PI Number: PI-4520

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54.2, 67.1

Act: 9.3

PEFPs

Question:

I would like to know if the legislation of your country has some special procedure regarding PEPs (Politically Exposed Persons). In affirmative case, the legislation of your country considers as PEPs (Politically Exposed Persons) native people or only foreign people?

Answer:

Under the Canadian legislation, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), financial entities, securities dealers, money services businesses and life insurance companies, brokers and agents have to determine if their clients are politically exposed foreign persons.

This obligation is now required following changes to our legislation that came into force last year (more specifically as of June 23, 2008) for enhanced measures to detect and deter money laundering and terrorist financing, including laundering of the proceeds of international corruption.

The politically exposed foreign person determination has to be made in the following circumstances: when a new account is opened with a financial entity or a securities dealer, or in certain circumstances, if the account is already opened. The determination will also have to be made when the client of a financial entity or a money services business, initiates or benefits of an electronic funds transfer of $100,000 or more, or if a client makes a lump-sum payment of $100,000 or more for an annuity or a life insurance policy to a life insurance company, broker or agent.

In our Act, subsection 9.3(3) defines a "politically exposed foreign person" as a person who holds or has ever held one of the following offices or positions in or on behalf of a foreign country: a head of state or government; a member of the executive council of government or member of a legislature; a deputy minister (or equivalent); an ambassador or an ambassador's attaché or counsellor; a military general (or higher rank); a president of a state-owned company or bank; a head of a government agency; a judge; or a leader or president of a political party in a legislature. Please note that this provision does not apply to Canadians that hold or have held offices or positions in Canada or abroad on behalf of Canada.

Furthermore, our PCMLTFA associated regulations indicate as well that a family member of an individual described above is also considered a politically exposed foreign person. In this context, a family member means one of the following: mother or father; child; spouse or common-law partner; spouse's or common-law partner's mother or father and brother, sister, half-brother or half-sister (that is, any other child of the individual's mother or father).

Date answered: 2009-01-30

PI Number: PI-4513

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6

Regulations: 1.1

Act: 9.3(3)

Section 54.2(c) - PEFPs

Question:

Section 54.2(c): An individual client (person) goes to a Credit Union and requests an international wire transfer. The Credit Union uses a Bank in Canada to send the wire internationally

Which RE has the PEFPs obligation?

Answer:

The Credit Union has the PEFP obligation, as the person is the CU's client. And the CU is the client of the Bank of Canada

Date answered: 2009-01-09

PI Number: PI-4490

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54.2(c), 67.2(3)

Section 54.2(d) - PEFPs

Question:

Section 54.2(d): An International Bank sends an international wire to a Bank in Canada. The bank in Canada (which is a correspondent bank) sends the same wire to a Credit Union. The beneficiary of this international wire is a client (person) of the Credit Union. To be clear, the international bank did include the name of the beneficiary (person) in the original wire.

Question: Which RE(s) has (have) the PEFPs obligation? Does it apply only to the Credit Union, because the beneficiary (person) is the Credit Union's client, or does it apply to both the bank in Canada and the Credit Union?

Answer:

The intent of these new measures (PEFPs, beneficiary, etc) was to boost due diligence measures and enhance the requirements around knowing your customer. So, requirements are in my view meant for the reporting entities in relation to their own clients.

The other reason is a practical one. It will be difficult for a reporting entity to make a determination on someone that is not a client. How will the Bank determine that the person is a PEFP if that person is not a client of them? They can scrub if they have a database solution but they could not call the person if they did not have a relationship with them.

So for those two reasons, I believe the requirement to determine whether the beneficiary is a PEFP should fall on the last RE (the one that has the relationship with the client) and not on intermediaries through which the wire transfer goes through.

Date answered: 2009-01-09

PI Number: PI-4489

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54.2(d), 67.2(3)

PEFPs- EFTs- s 54.2(c)(d)

Question:

  1. Does 54.2(c) also apply to a RE when it "receives" an EFT? That is, must the RE in Canada make a PEFPs determination regarding the "initiator" that initiating the EFT from another FE?
     
  2. Conversely, does 54.2(d) also apply to a RE when it "sends" an EFT? That is, must the RE in Canada make a PEFPs determination regarding the "beneficiary" that is receiving the EFT at another FE?

Answer:

My position is "no" in both cases.

Date answered: 2009-01-06

PI Number: PI-4484

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G, 8B

Regulations: 54.2(c), 54.2(d)

PEFPs- EFTs- s 54.2(d)

Question:

Does 54.2(d) also apply to a RE when it "sends" an EFT? That is, must the RE in Canada make a PEFPs determination regarding the "beneficiary" that is receiving the EFT at another FE?

Answer:

No you do not need to make a PEFP determination in regards to the beneficiary that is receiving the EFT.

Date answered: 2008-10-03

PI Number: PI-4369

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization, Reporting

Guidance: 6G

Regulations: 54.2(c), 54.2(d)

PEFPs- EFTs- s 45.2(c)

Question:

Does 54.2(c) also apply to a RE when it "receives" an EFT? That is, must the RE in Canada make a PEFPs determination regarding the "initiator" that initiating the EFT from another FE?

Answer:

No in this scenario, you do not need to make a PEFP determination in regards to the originator when you receive an EFT in Canada.

Date answered: 2008-10-03

PI Number: PI-4368

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization, Reporting

Guidance: 6G

Regulations: 54.2(c), 54.2(d)

PEFP status after death

Question:

With respect to PEFP identification, if a client is a PEFP, because they are a prescribed relation of someone who was in a prescribed role (e.g., daughter of former ambassador) does the death of the person who was in the prescribed role impact the identification. For instance, if the father, who was the ambassador, dies, is the daughter still a PEFP.

Our industry seems to say, "once a PEFP, always a PEFP". Does this hold true where the reason for the positive identification is now dead?

Answer:

Yes, once a PEFP, forever a PEFP.

There is no time limit for PEFPs. It seems that the drafters of the new legislation did discuss whether or not there should be a statute of limitations for how long PEFP's should be considered a PEFPs, and decided that it should go on indefinitely. So the daughter is still a PEFP.

Date answered: 2008-09-26

PI Number: PI-4363

Activity Sector(s): Securities dealers

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6E

Regulations: 1.1

Act: 9.3

Classification of local politians: PEFP

Question:

Would the following levels of government be included in the definition of a PEFP:

  1. the mayor of a city
  2. the governor of a state (i.e. Kansas)
  3. the head of a barangay in the Philippines (which is a very small unit).

Answer:

In regards to the PEFP determination, here are a few comments:

  1. Mayor of city - Not a PEFP (as he is not in a position or office in or on behalf of a foreign state).
  2. Governor of a state - yes... as he/she is holding an office in or on behalf of a foreign state.
  3. The Head of a baranguay in the Philippines - seems to be similar to a village, and therefore not a PEFP.

Date answered: 2008-09-26

PI Number: PI-4362

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 1.1

Act: 9.3(3)

PEFP Determination (When there is a match on the database list)

Question:

A reporting entity uses a PEFPS database to scan the list of its clients against this database list. The database list only displays a name (no SIN or DOB, address).

What does the reporting entity do when there is a match?

Answer:

It is up to the reporting entity to take reasonable measures to make a PEFP determination (either by asking the client directly, or by letter would be fine as well)."reasonable measures" in these circumstances (RE has a hit against PEFP database) could also include not asking the client but act as if client is a PEFP and conduct the additional due diligence measures (obtain senior management approval, ongoing monitoring, obtain source of funds).

Date answered: 2008-09-08

PI Number: PI-4338

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54.2

Act: 9.6(2)

Customer's refusal to provide information: PEFP

Question:

If a customer refuses to answer as to whether he / she is a PEFP, and the credit union is not using a list to determine PEFP status, can the credit union still open the account? Is merely asking the question and not getting an answer considered a reasonable measure?

Answer:

If a customer refuses to answer to a PEFP determination question - under the regs the obligation of the CU is to take reasonable measures to determine whether a person is a PEFP (reasonable measure includes asking the question). If the person refuses to answer, the CU has taken the reasonable measure to determine, so the CU would be in compliance (of course the CU must document this). However, in its risk assessment, it would be strongly suggested that the CU monitor this client and its account (as a precaution since the client did not want to answer this particular question!)

Date answered: 2008-08-08

PI Number: PI-4301

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 54.2(a), 54.2(b)

Act: 9.6(2)

PEFP determination: Time limit

Question:

An individual wants to open an account in a CU. He is the son of a deceased person that was a judge in South Africa. Do we PEFP the son in light of the fact that he is part of the family of a deceased PEFP?

This is a different take on the PEFP determination. Any comments?

Answer:

There is no time limit for PEFPs. He said that the drafters of the new legislation did discuss whether or not there should be a statute of limitations for how long PEFP's should be considered a PEFP. They decide to it should go indefinitely. From a practical stand-point, despite the fact that PEFP might have died, it is possible, in certain circumstances, that accounts have been opened overseas and those family members still have access to those funds and therefore money laundering could still take place despite the death of the original

Date answered: 2008-07-23

PI Number: PI-4295

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6

Regulations: 1.1

Act: 9.3

PEFP determination for Life Insurance - every $100K deposit

Question:

Do you have to keep doing a PEFP determination on a client who keeps giving you $100K+ deposits if they answer 'No' to the PEFP question. I know that once you determine a person is a PEFP, you do not have to subsequently make the determination again and that 'once a PEFP, always a PEFP'. However, if you do a PEFP determination on a person when they do their first 100K deposit and they are not a PEFP, do you have to ask the question every time that same client deposits 100K+?

Answer:

Under 63(5) if you have already identified a person as a PEFP you do not have to ask again. However, should the person have answered no to being a PEFP, then each time (that it is a no), you would have to determine if he is a PEFP (as his status may of changed).

So under 56(1) for every 100K$ deposit you would have to make a PEFP determination every time, unless you have already identified this person as a PEFP.

Date answered: 2008-07-18

PI Number: PI-4284

Activity Sector(s): Life insurance

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6A

Regulations: 63(5), 56(1)

Identifying existing clients as PEPFS

Question:

A reporting entity is willing to do a mailing to all existing clients, asking them to identify themselves as PEFPs. Does FINTRAC have any guidelines or directions around this methodology?

Secondly, is a negative response option sufficient for compliance with PEFPs identification? In other words, can the reporting entity client position the self-identification questionnaire such that a nil response can be construed to indicate that the client is NOT a PEPF?

Answer:

There is no requirement to conduct a PEFP determination for all existing clients; reporting entities are only required to do so for existing customers that have been deemed higher risk for money laundering or terrorist financing.

In terms of what constitutes "reasonable measures" in making the PEFP determination, our guidance has been that asking the client is sufficient so long as both the dealer and client understand the question and the definition of a PEFP.

Section 7 of Guideline 6E provides further information on the PEFP determination requirement.

Yes a nil answer, or a blank (as long as on the questionnaire it is clear that no response or a nil will be taken/or will be deemed as the client not being a PEFP) can be used as a PEFP determination. However, a word of caution, the reporting entity would have to be certain that the client has received the letter and/or questionnaire.

Date answered: 2008-07-17

PI Number: PI-4268

Activity Sector(s): Securities dealers

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6E

Regulations: 57.1(2)

Act: 9.3

PEFP: Child of deceased

Question:

An individual wants to open an account in a CU. He is the son of a deceased person that was a judge in South Africa. Do we PEFP the son in light of the fact that he is part of the family of a deceased PEFP?

Answer:

Yes you would PEFP the son of a PEFP (deceased or not), as he is part of the prescribed immediate family of a PEFP.

It is irrelevant if the PEFP is deceased or not. So once a PEFP is forever a PEFP.

Date answered: 2008-06-30

PI Number: PI-4247

Activity Sector(s): Financial entities

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6G

Regulations: 1.1

Act: 9.3

PEFP Determination for existing accounts

Question:

The requirement to determine PEFP status going forward is clear, but how does this apply to existing clients? To what extent or level are the requirements retroactive?

Answer:

Section 57.1(2) of the Regs a PEFPs determination must only be made for those accounts considered as high risk as defined under ss9.6(2) of the Act.

Date answered: 2008-06-25

PI Number: PI-4241

Activity Sector(s): Securities dealers

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6E

Regulations: 57.1(2)

Act: 9.6(2)

PEFP definition

Question:

It is my understanding that the PEFP requirement is "in or on behalf of a foreign….." Could you verify?

Answer:

PEFP is defined as a person having held/holding a position or office in/on behalf of a foreign state; the in being defined as someone who is part of a foreign state

Date answered: 2008-06-25

PI Number: PI-4240

Activity Sector(s): Securities dealers

Obligation(s): Politically Exposed Persons or Heads of an international organization

Guidance: 6E

Act: 9.3(3)

Date Modified: