FINTRAC Policy Interpretations

Record Keeping

Electronic signature and signature card

Question:

I am seeking clarification regarding the definitions of signature and signature card under the amended Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). More specifically, I am wondering what forms of e-signatures FINTRAC will accept. For example, will typing initials, typing in a name, etc. be accepted as a valid electronic signature?

Answer:

The recently amended PCMLTFR expands upon the previous definition of a signature to more broadly include electronic signatures.

Subsection 1(2) of the PCMLTFR now defines a signature as “an electronic signature or other information in electronic form that is created or adopted by a client of a person or entity referred to in section 5 of the Act and that is accepted by the person or entity as being unique to that client”. Additionally, pursuant to subsection 1(2) of the PCMLTFR, a “signature card, in respect of an account, means a document that is signed by a person who is authorized to give instructions in respect of the account, or electronic data that constitutes the signature of such a person”.

Therefore, reporting entities may define what is considered to be a signature. It can be numeric or character based or even voice, so long as it is unique to the client and a record can be kept.

Date answered: 2016-08-15

PI Number: PI-6895

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): Record Keeping

Regulations: 1(2)

Foreign currency exchange transaction ticket requirements for a Canadian branch

Question:

Could you confirm the following: a Canadian branch of an authorized foreign bank does not have foreign currency exchange transaction record keeping obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations?

Answer:

Regarding foreign exchange transactions, paragraph 14(j) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that, subject to subsection 62(2), every financial entity shall keep “a transaction ticket in respect of every foreign currency exchange transaction”.

The information provided specifies that the Canadian branch does not have an FX business and conducts no FX transactions with its customers and that the Bank located outside of Canada also has relationships with certain of these customers for FX transactions. It on-boards these customers using its own processes and has its own agreements with these customers, in compliance with applicable law in the foreign country, and there is no involvement by the Canadian branch in this connection.

As a result, based on our understanding, it appears that the Canadian branch of the Bank is not conducting foreign currency exchange transactions, and therefore, is not required to keep foreign currency exchange transaction tickets as outlined under the PCMLTFA and its associated Regulations.

Date answered: 2016-08-08

PI Number: PI-6891

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6

Regulations: 14(j)

Opening an account in its name - exception 62(2)(l)

Question:

We are seeking guidance regarding the application of the exceptions provided under paragraphs 62(2)(j) and 62(2)(l) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) with respect to record-keeping and ascertaining the identity of clients.

By way of background, a law firm acting on behalf of its client has contacted our financial institution to have funds held in escrow until a judgment is handed down, and our financial institution must open a trust account into which a deposit can be made.

The account holder is our financial institution, and the persons authorized to act on the account are employees acting as trustees who are duly authorized by means of corporate resolutions. Deposits in this account will only be released upon an order in a court judgment.

Answer:

Pursuant to subsection 62(2) of the PCMLTFR, there are certain exceptions to the requirements relating to record-keeping and ascertaining identity, namely in the case of 

"(j) the opening of an account established pursuant to the escrow requirements of a Canadian securities regulator or a Canadian stock exchange or any provincial legislation; and
(l) the opening of an account in the name of, or in respect of which instructions are authorized to be given by, a financial entity, a securities dealer or a life insurance company or by an investment fund that is regulated under provincial securities legislation."

It is important to note that, since the entities mentioned in paragraph 62(2)(l) of the PCMLTFR are defined in subsection 1(2) of the PCMLTFR, the application of this exception is very specific.

Based on the information provided, it is our understanding that your financial entity is opening a trust account in its name, and that it is the financial entity's employees, acting as trustees as part of their duties for the financial entity, who are authorized to give instructions in respect of the account. Hence, the exception in paragraph 62(2)(l) of the PCMLTFR appears to apply as long as the financial entity meets all the specified requirements.

Date answered: 2016-07-21

PI Number: PI-6919

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6

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

Additional party added to a real estate offer

Question:

We are wondering whether we need to obtain client identity information for an additional party that has been added to an accepted real estate offer?

Answer:

According to section 37 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “Every real estate broker or sales representative is subject to Part 1 of the Act when they act as an agent in respect of the purchase or sale of real estate.”

According to paragraph 59.2(1)(a) of the PCMLTFR, “Subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction”.

Subsection 39(1) of the PCMLTFR states that certain records must be kept by a real estate broker or sales representative when engaging in the activity described in section 37 of the PCMLTFR, and as per paragraph 39(1)(b) of the PCMLTFR, “a client information record must be kept in respect of every purchase or sale of real estate”.

Therefore, to answer your question, you must ascertain the identity, and keep the required records, of every person who conducts the transaction. This includes the party added to the offer, as per the PCMLTFR.

Date answered: 2016-07-20

PI Number: PI-6879

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Regulations: 37, 39(1), 59.2(1)a)

Receipt of funds record - Exception for financial entities and public bodies

Question:

  1. What triggers the obligation to verify the identity of an individual for the ROFR? Is it “the person delivering the funds or the person who has legal ownership over them” who needs to be identified? More specifically, whose identity should be verified for the receipt of funds record in the following circumstances:
     
    1. Funds in the form of a personal cheque with the name of one person detailed on the cheque, but physically delivered by another person
    2. Funds in the form of a bank draft with no name detailed on it and physically delivered by someone who is not the client
    3. Funds in the form of a personal cheque with two names detailed on it and physically delivered by a third person or by only one of the people named on the cheque
       
  2. Is there an exception for when funds are received from a financial entity or a public body? For example, if I am a Developer and a purchaser gives me a deposit through a wire transfer that is technically a payment through a financial entity (assuming the entity qualifies) so would that qualify for the exemption? Or would I have to keep a ROFR?

Answer:

Real estate agents and brokers, while engaged in the purchase or sale of real estate, are required to keep certain records under subsection 39(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). One of the records that real estate agents and brokers are required to keep is the ROFR. The ROFR is required in respect of every amount that a real estate agent or broker receives, in the course of a single transaction, unless the amount is received from a financial entity or a public body.

According to subsection 1(2) of the PCMLTFR, the ROFR is kept in respect of a transaction in which an amount of funds is received and contains the following information:

(a) if the information is not readily obtainable from other records that the recipient keeps and retains under these Regulations, the name of the person or entity from whom the amount is in fact received and (i) where the amount is received from a person, their address and date of birth and the nature of their principal business or their occupation, and (ii) where the amount is received from an entity, their address and the nature of their principal business;

(b) the date of the transaction;

(c) the number of any account that is affected by the transaction, and the type of that account, the full name of the person or entity that is the account holder and the currency in which the transaction is conducted;

(d) the purpose and details of the transaction, including other persons or entities involved and the type and form of the transaction;

(e) if the funds are received in cash, whether the cash is received by armoured car, in person, by mail or in any other way; and (f) the amount and currency of the funds received.

  1. Paragraph 59.2(1)(a) of the PCMLTFR states, “every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction.”

    Therefore, when an ROFR is required to be kept, the real estate agent or broker must verify the identity of the individual who delivers the funds, or conducts the transaction, as opposed to the person who has legal ownership over the funds. I trust this information also answers your question as to what “conducting the transaction” means for the purpose of determining who the ROFR is to be completed on.

    As explained above, according to paragraph 59.2(1)(a) of the PCMLTFR, in all three circumstances, so long as the funds are received by (i.e. the personal cheque or bank draft is made out to) the real estate agent or broker, the ROFR is to be completed on the person who is physically delivering the funds.
     

  2. Paragraphs 39(1)(a) and 39.7(1)(a) of the PCMLTFR apply to real estate brokers/sales representatives and real estate developers respectively. These provisions state that, a receipt of funds record (ROFR) must be kept for every amount received in the course of a single transaction, unless the amount is received from a financial entity or a public body.

The reference to financial entity and public body in this context is meant to refer to situations where the financial entity or public body is the client in the real estate transaction. This exception may only apply in situations where the funds being "received from a financial entity or a public body" come from a financial entity or public body. That is, the funds must be those of the financial entity or public body to give to the real estate broker, sales representative, or developer, with the receipt of funds record obligations. If the funds are received from an individual or entity that is not a financial entity or public body, then they are not received from a financial entity or public body. For example, if an individual provides a real estate broker with a bank draft, then the funds are received from that individual, not the financial entity.

To address the example you provided, if you are a real estate developer and a purchaser gives you a deposit through a wire transfer from a financial entity, the funds belong to the purchaser and therefore, are considered to be received from the purchaser, not the financial entity. Therefore, the ROFR obligations would apply to the real estate developer in this scenario.

Date answered: 2016-06-29

PI Number: PI-6432

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 1(2), 39(1), 39.7(1)(a), 59.2(1)(a)

Obligations regarding the use of a power of attorney

Question:

What are the requirements for financial entities to keep a signature card in respect of an account opening? And what are the requirements to ascertain the identity of a person not physically present, specifically when using a power of attorney (POA)?

  1. Who must sign the signature card? Only the person with the POA or only the account holder or both individuals?
  2. What is an independent and reliable identification product based on personal information as well as Canadian credit history? Could you give me an example?
  3. Can a POA signed by a Quebec Notary be used as attestation despite the fact that it does not include a copy of any identification document?

Answer:

  1. Paragraph 14(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to subsection 62(2), every financial entity shall keep, where it opens an account, a signature card in respect of each account holder for that account”. Pursuant to subsection 1(2) of the PCMLTFR, a “signature card, in respect of an account, means any record that is signed by a person who is authorized to give instructions in respect of the account”. Therefore, those who sign the signature card are those authorized to give instructions in respect of that specific account. If both individuals will operate on the account, then both should sign the signature card.

    That said, in the event that the individual wishing to open the account does not sign the signature card, they should be identified as a third party and a record must be kept. In accordance with subsection 9(1) of the PCMLTFR, a financial entity that is required to keep a signature card in respect of an account must, at the account opening, take reasonable measures to determine whether the account is to be used by or on behalf of a third party. If the third party is an individual, a record must be kept that sets out the third party's name, address and date of birth, and the nature of the principal business or occupation of the third party. A third party is a person or an entity who instructs another person to carry out a transaction in respect of an account. It is not about who owns the account, or benefits from the money, but rather who gives instructions in regards to dealing with the money.
     

  2. In order to ascertain a person's identity, when that person is not physically present, subparagraph 64(1)(b)(ii) of the PCMLTFR specifies that non-face-to-face identification can be done by using one of the combinations identified, and further detailed in Part A of Schedule 7.

    As per Part A of Schedule 7, one of the non-face-to-face methods is the Identification Product Method. This method consists of referring to an independent and reliable identification product that is based on personal information in respect of the person and a Canadian credit history of the person of at least six month's duration. While I cannot direct you to a specific product, an identification product is understood to be a product offered by independent businesses, in which they provide a series of specific questions to be asked to the client based on information drawn from that individual's Canadian credit history (they must have at least 6 months of credit history). The key here is that the questions asked are so precise that only the person concerned can answer them. This method must always be uses in combination with another method listed in Schedule 7 of the PCMLTFR.

    Furthermore, paragraph 67(e) of the PCMLTFR requires the following information to be recorded when an identification product is used to ascertain the person's identity: the name of the person, the name of the identification product, the name of the entity offering the product, the search reference number, and the date the product was used to ascertain the person's identity. Therefore, the identification product used for this method must also supply all of this information.
     

  3. Similar to the identification product method, the attestation method can be used to ascertain a person's identity when they are not physically present. As per Part A of Schedule 7, the attestation method consists of obtaining an attestation from a commissioner of oaths in Canada, or a guarantor in Canada that they have seen one of the documents referred to in paragraph 64(1)(a) of the PCMLTFR. These documents include the person's birth certificate, driver's licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document. The attestation must be produced on a legible photocopy of the document (if such use of the document is not prohibited by the applicable provincial law) and must include the name, profession and address of the person providing the attestation; the signature of the person providing the attestation; and the type and number of the identifying document provided by the person.

For this purpose, subsection 3(2) of Schedule 7 indicates that “a guarantor is a person engaged in one of the following professions in Canada:

  1. dentist;
  2. medical doctor;
  3. chiropractor;
  4. judge;
  5. magistrate;
  6. lawyer;
  7. notary (in Quebec);
  8. notary public;
  9. optometrist;
  10. pharmacist;
  11. professional accountant (APA [Accredited Public Accountant], CA [Chartered Accountant], CGA [Certified General Accountant], CMA [Certified Management Accountant], PA [Public Accountant] or RPA [Registered Public Accountant]);
  12. professional engineer (P.Eng. [Professional Engineer, in a province other than Quebec] or Eng. [Engineer, in Quebec]); or
  13. veterinarian.”

While a notary in Quebec is considered a guarantor in Canada, the signed power of attorney is not the same as an attestation, and is therefore not acceptable for this method. 

Date answered: 2016-06-23

PI Number: PI-6428

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6G

Regulations: 1(2), 9(1), 14(a), 64(1)(b)(ii), 67e), Schedule 7

Opening an account in the case of syndicated lending

Question:

What is considered to be opening an account in the case of syndicated lending? More specifically, we would like to know whether in the case of syndicated lending, a client is considered to be opening an account with all participating banks or simply with the bank that has the central relationship.

Answer:

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 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. Generally, financial institutions have their policies and procedures and, as such, know when an “account opening” has taken place. It is important to note that a financial deposit component does not have to be present. In cases other than deposit taking accounts, FINTRAC will generally respect the entity's determination of whether or not it has opened an account.  

As reporting entities, subject to the PCMLTFA and its associated Regulations, financial entities are obligated to fulfill certain record keeping and client identification obligations when they open accounts for clients. In the case of syndicated loans, the client identification and record keeping obligations apply to all of the financial entities involved in the syndicated loan that are opening accounts.

In such cases, and as necessary to fulfil the client identification obligations of subsection 64(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), each of the participating banks and the bank that has the central relationship may put in place a written agreement or arrangement so that all the participating banks may rely on the information gathered from the bank that holds the central relationship. The participating banks would then have the responsibility to obtain from the bank that holds the central relationship the client information obtained under that agreement or arrangement.

Date answered: 2016-05-06

PI Number: PI-6421

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 64(1)

When to deny a transaction?

Question:

If a person wishing to offer on a property has not complied with the request for identification of the real estate agent, either due to not understanding or otherwise, should the real estate agent refuse to put the offer in?

Answer:

Every real estate broker or sales person is subject to Part 1 of the Proceeds of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTA) when they act as an agent in respect of the purchase or sale of real estate. When subject to the PCMLTFA, the real estate broker or sales representative must keep the following records:
(a) a receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body; (b) a client information record in respect of every purchase or sale of real estate; and
(c) where the receipt of funds record or the client information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the real estate broker or sales representative.

If the real estate broker or sales representative receives an amount of $10,000 or more in cash in the course of a single transaction, then they must keep a large cash transaction record instead of the receipt of funds record.

Pursuant to subsection 59.2(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, for any of the records listed above, the real estate broker or sales representative must ascertain the identity of every person who conducts the transaction, and, in accordance with sections 65 and 66, respectively, confirm the existence of every corporation or entity other than a corporation on whose behalf the transaction is conducted.

In the case of a corporation, the real estate broker or sales representative must also ascertain the name and address of the corporation, as well as the names of its directors.

While none of the PCMLTFA or its associated Regulations specify when a real estate transaction may or may not proceed, every real estate broker or sale representative who acts in respect of the purchase or sale of property without keeping the necessary records, or ascertaining identity, as outlined above, is in non-compliance with the obligations of the PCMLTFA and its associated Regulations, and to be in non-compliance with Part 1 of the PCMLTFA may result in criminal or administrative penalties.

Date answered: 2016-03-30

PI Number: PI-6410

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 1(2), 39(1), 59.2(1), 64(1)(a)

Act: Part 1

Existence of a corporation and ascertaining identity of clients

Question:

What type of document is sufficient to prove the existence of the corporation? Also, please confirm that there is no requirement to re-identify our clients at closing?

Answer:

Every real estate broker or sales person is subject to Part 1 of the Proceeds of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTA) when they act as an agent in respect of the purchase or sale of real estate. When subject to the PCMLTFA, the real estate broker or sales representative must keep the following records:
(a) a receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body;
(b) a client information record in respect of every purchase or sale of real estate; and
(c) where the receipt of funds record or the client information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the real estate broker or sales representative.

If the real estate broker or sales representative receives an amount of $10,000 or more in cash in the course of a single transaction, then they must keep a large cash transaction record instead of the receipt of funds record.

Pursuant to subsection 59.2(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, for any of the records listed above, the real estate broker or sales representative must ascertain the identity of every person who conducts the transaction, and, in accordance with sections 65 and 66, respectively, confirm the existence of every corporation or entity other than a corporation on whose behalf the transaction is conducted. In the case of a corporation, the real estate broker or sales representative must also ascertain the name and address of the corporation, as well as the names of its directors.

As outlined in FINTRAC's Guideline 6B - Record Keeping and Client Identification for Real Estate, to confirm the existence of a corporation as well as the corporation's name and address, a reporting entity may refer to the following documents:

  • the corporation's certificate of corporate status;
  • a record that has to be filed annually under provincial securities legislation; or
  • any other record that confirms the corporation's existence (e.g., the corporation's published annual report signed by an independent audit firm, or a letter or a notice of assessment for the corporation from a municipal, provincial, territorial or federal government).

When a real estate broker or sales representative is also required to keep a record a copy of the part of the official corporate records showing the provisions relating to the power to bind the corporation regarding the transaction, FINTRAC has suggested referring to a certificate of incumbency, the articles of incorporation or the bylaws of the corporation that set out the officers duly authorized to sign on behalf of the corporation, such as the president, treasurer, vice-president, comptroller, etc.

If there were changes subsequent to the articles or bylaws that relate to the power to bind the corporation regarding the purchase and these changes were applicable at the time that the record had to be kept, then the board resolution stating the change would be included in this type of record.

You will note that the examples provided in the FINTRAC Guidelines are different for each requirement (confirmation of existence vs. power to bind the corporation), however should there be one document that does meet both requirements, then a real estate broker or sales person would be able to use this.

Regarding your question on ascertaining identification, as outlined above, a real estate broker or sales person is required to ascertain identity in relation to the keeping of certain records. In addition, identity must be ascertained, with some exceptions, if the real estate broker or sales person is filing a large cash or suspicious transaction report. If the real estate broker or sales person refers to the client's birth certificate, driver's licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document, then at the time this document is referred to, it must be valid and not have expired. There is not a specific requirement to ascertain the identity of your client again at closing, unless another obligation triggers such a requirement (i.e., receipt of funds, large cash transaction, client information record, etc.) If one of these other obligations triggers the need to ascertain identity again at closing, and should the real estate broker or sales person refer to the client's birth certificate, driver's licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or other similar document, then that document must be valid and not have expired.

Date answered: 2016-03-30

PI Number: PI-6409

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 1(2), 39(1), 59.2(1)

Act: Part 1

Obligations for real estate under the PCMLTFA

Question:

  1. In case of Audit, how far back do we need to have files accessible and available?
  2. What happens if the sale collapses and information was not obtained for the buyer before the sale collapsed?
  3. A transaction is considered a "Business Transaction" only if two transactions have occurred?

Answer:

Every real estate broker or sales representative is subject to Part 1 of the Proceeds of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTA) when they act as an agent in respect of the purchase or sale of real estate. When subject to the PCMLTFA, the real estate broker or sales representative must keep the following records:
(a) a receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body;
(b) a client information record in respect of every purchase or sale of real estate; and
(c) where the receipt of funds record or the client information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the real estate broker or sales representative.

If the real estate broker or sales representative receives an amount of $10,000 or more in cash in the course of a single transaction, then they must keep a large cash transaction record instead of the receipt of funds record.  They will also be required to submit a large cash transaction report for the amount of cash received.

Finally, a real estate broker or sales person must send a suspicious transaction report in respect of a financial transaction that occurs or is attempted, and for which there are reasonable grounds to suspect that the transaction is related to the commission or attempted commission of a money laundering or terrorist activity financing offence. Unlike all other reporting obligations, there is no monetary threshold associated with the reporting of a suspicious transaction. A record of this report must be kept.

Pursuant to subsection 59.2(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), for any of the records in the bulleted list, the real estate broker or sales representative must ascertain the identity of every person who conducts the transaction, and, in accordance with sections 65 and 66, respectively, confirm the existence of every corporation or entity other than a corporation on whose behalf the transaction is conducted. In the case of a corporation, the real estate broker or sales representative must also ascertain the name and address of the corporation, as well as the names of its directors.

If a large cash transaction report were required, then the real estate broker or sales representative must ascertain the identity of every person who conducts the transaction. Whereas, if a suspicious transaction report is required, then the real estate broker or sales representative must ascertain the identity of every person who conducts or attempts to conduct a transaction, unless the real estate broker or sales representative believes that to ascertain the person's identity would inform the person that the transaction was being reported.

1. Pursuant to section 68 of the PCMLTFR, real estate brokers and sales representatives must keep records for five years, as follows:

  • In the case of client information records and records to confirm the existence of an entity (including a corporation), these records have to be kept for five years from the day the last business transaction was conducted.
  • In the case of a copy of a suspicious transaction report, the record has to be kept for a period of at least five years following the date the report was made.
  • All other records must be kept for a period of at least five years following the date they were created.

2. Every real estate broker or sale representative who acts in respect of the purchase or sale of property without keeping the necessary records, or ascertaining identity, as outlined above, is in non-compliance with the obligations of the PCMLTFA and its associated Regulations. For example, should a real estate broker or sales representative have received $10,000 in cash then they must have kept a large cash transaction record, and reported a large cash transaction, regardless of whether or not the purchase or sale of the property proceeds.

3. A business relationship is triggered after a real estate broker or sales representative has twice had to ascertain the identity of a person, or confirm the existence of corporation or entity other than a corporation within 5 years.  Once in a business relationship with a person or entity, you must:

  • conduct ongoing monitoring of your business relationship with your client; and
  • keep a record of the measures you take to monitor your business relationship and the information you obtain as a result.

Date answered: 2016-03-30

PI Number: PI-6408

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 1(2), 39(1), 59.2(1), 68

Act: Part 1

Real estate investment trusts and exception under 62(2)

Question:

Can a real estate investment trust, although it is not a corporation, qualify for the exception described in paragraph 62(2)(m) of the PCMLTFR if it meets the other criteria mentioned in that paragraph (e.g. It has minimum net assets of $75,000,000, its shares are traded on a Canadian stock exchange and it operates in a country that is a member of the Financial Action Task Force (FATF))?

If it does not meet the above criteria, can the real estate investment trust qualify as an investment fund which is regulated under provincial securities legislation, as described in paragraph 62(2)(l) of the PCMLTFR?

Answer:

It has been determined that Real Estate Investment Trusts are neither public bodies nor corporations. As such, although they may meet the other requirements of paragraph 62(2)(m), that is they have the minimum net assets, are traded on an applicable stock exchange and operate in an FATF country, a reporting entity cannot apply paragraph 62(2)(m) of the PCMLTFR because the Real Estate Investment Trust does not satisfy all of the requirements.

That said, it is my understanding that Real Estate Investment Trusts are regulated under provincial securities legislation. As such, a reporting entity could apply the exception outlined in paragraph 62(2)(l) of the PCMLTFR, whereby certain sections and subsections of the PCMLTFR do not apply in respect of the opening of an account in the name of, or in respect of which instructions are authorized to be given by, a financial entity, a securities dealer or a life insurance company or by an investment fund that is regulated under provincial securities legislation.

Date answered: 2016-03-17

PI Number: PI-6404

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

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

Who has to report to FINTRAC - automobile loan company

Question:

Do the FINTRAC record keeping and reporting requirements apply to an independent finance company that does not qualify as a "financial entity" (such as banks (that is, those listed in Schedule I or II of the Bank Act) or authorized foreign banks with respect to their operations in Canada, credit unions, caisses populaires, financial services cooperatives, credit union centrals (when they offer financial services to anyone other than a member entity of the credit union central), trust companies, loan companies and agents of the Crown that accept deposit liabilities)). For example, an automobile loans finance company?

Answer:

FINTRAC administers the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations, and ensures that entities subject to these are in compliance with the obligations outlined therein.

Pursuant to section 5 of the PCMLTFA, the sectors subject to the PCMLTFA and its associated Regulations include accountants, British Columbia notaries, casinos, dealers in precious metals and stones, life insurance companies, life insurance brokers and agents, real estate agents or brokers, securities dealers, and financial entities. 

Pursuant to subsection 1(2) of the PCMLTFR, financial entities means an authorized foreign bank, as defined in section 2 of the Bank Act, in respect of its business in Canada or a bank to which that Act applies, a cooperative credit society, savings and credit union or caisse populaire that is regulated by a provincial Act, an association that is regulated by the Cooperative Credit Associations Act, a financial services cooperative, a credit union central, a company to which the Trust and Loan Companies Act applies and a trust company or loan company regulated by a provincial Act.

An entity that is not within a sector subject to the PCMLTFA is not required to keep records or report to FINTRAC in accordance with the PCMLTFA and its associated Regulations. 

Date answered: 2016-02-18

PI Number: PI-6395

Activity Sector(s): Financial entities

Obligation(s): Other, Record Keeping

Guidance: 1(5.2), 6G

Regulations: 1(2)

Act: Part 1

Address records requirements

Question:

Is it a requirement for reporting entities to obtain a physical address for ongoing monitoring purposes?

Answer:

As outlined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), the obligations when the credit union opens an account for a person include:

  1. keeping a signature card in respect of each account holder for that account [subsection 14(a) of the PCMLTFR];
  2. ascertaining the identity of every person who signs a signature card in respect of an account [subsection 54(1) of the PCMLTFR]; and,
  3. keeping a record of the client's name, address, date of birth, and the nature of their principal business or their occupation, as applicable (client identification information)[subsection 14(c) of the PCMLTFR].

We have said previously that a postal box is not a valid or legitimate address, it is only a box allocated by the post office to clients to receive their mail. The address referred to in the PCMLTFR is the physical address where the client lives.

Stemming from the opening of an account, where the identity of a signatory to the account is ascertained, is the establishment of a business relationship for which the financial entity is required to conduct ongoing monitoring [paragraph 54.3(1)(a) of the PCMLTFR]. This means that, on a periodic basis, the credit union must monitor their business relationships for the purpose of, among other things, keeping client identification information up to date. Given that client identification information includes the client's address, the credit union is required to keep this information up to date through ongoing monitoring.

Date answered: 2016-01-22

PI Number: PI-6386

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(a), 14c), 54(1), 54.3(1)(a)

Provincial public records

Question:

Under section 20 and paragraph 23(1)(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, what are the requirements related to keeping a copy of the part of the official records for insurance companies and securities dealers? More specifically, can the copy of the public records be considered as a copy of the part of the official corporate records in order to open an account with a securities dealer and/or purchase an insurance product from an insurer?

Answer:

Subject to subsection 20.2, “every life insurance company or life insurance broker or agent who keeps a client information record in respect of a corporation under subsection 19(1) shall also keep a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the life insurance company or life insurance broker or agent, if the copy of that part is obtained in the normal course of business."

Paragraph 23(1)(b) of the Regulations stipulates that “Subject to subsection 62(2), every securities dealer shall keep the following records ... where the securities dealer opens an account in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of that account."

On this topic, concerning the types of documents that are considered official records, FINTRAC has previously indicated that they could consist of a certificate of incumbency, articles of incorporation or by-laws of the corporation that specify the officers duly authorized to sign for the account on behalf of the corporation, for example, the president, treasurer, vice-president and controller. If changes are made later to the articles of incorporation or by-laws in respect of the power to bind the corporation for the account opened and these changes were in effect when the account was opened, the resolution adopted by the board in this respect must be indicated in this type of document. It is also essential that the document include a provision on the power to bind the corporation regarding transactions with a life insurance company or a securities dealer.

Therefore, regarding the copy of the part of official records from the public records, as long as it contains provisions to bind the corporation to the account, requirements presented in section 20 and paragraph 23(1)(b) of the Regulations will be met.

Date answered: 2015-08-21

PI Number: PI-6347

Activity Sector(s): Life insurance, Securities dealers

Obligation(s): Record Keeping

Guidance: 6A, 6E

Regulations: 20, 23(1)b)

The normal course of business

Question:

Section 20 of the Regulations states: every life insurance company or life insurance broker or agent who keeps a client information record in respect of a corporation ... shall also keep a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the life insurance company or life insurance broker or agent, if the copy of that part is obtained in the normal course of business.“

I am not sure that I understand the end of the section, “ if the copy of that part is obtained in the normal course of business.“ What is meant exactly?

Answer:

Section 20 of the Regulations stipulates that “Subject to section 20.2, every life insurance company or life insurance broker or agent who keeps a client information record in respect of a corporation under subsection 19(1) shall also keep a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the life insurance company or life insurance broker or agent, if the copy of that part is obtained in the normal course of business.“

Knowing whether the copy of the part is obtained in the normal course of business is always a question of fact. However, we understand this expression to mean that the copy of the part is obtained as part of the entity's business model. Basically, if the copy of the part is obtained in order to accomplish other obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its related regulations or if it is obtained during the course of the business's daily activities outside the Act's requirements, the life insurance company or its representative needs to keep a copy. So a copy must be kept if the life insurance company or its representative receives this document at any time and for any reason as part of its services offered to clients. However, it should be noted that the life insurance company or its representative may not receive an extract copy. Nevertheless, if this copy of the part exists and it is obtained in the normal course of business, the copy of the part must be kept.

Date answered: 2015-07-23

PI Number: PI-6331

Activity Sector(s): Life insurance

Obligation(s): Record Keeping

Guidance: 6A

Regulations: 20

Receipt of funds record (ROFR) requirements

Question:

A question has been posed as to FINTRAC's expectation when a cheque is provided by a client to a brokerage representing a buyer when the cheque is made out to someone other than the buyer's brokerage (for example, the listing/seller brokerage).

  1. Where funds are provided in the form of a cheque payable to the seller's agent and both the buyer and seller are represented by agents, is neither agent required to complete a receipt of funds record?
  2. Alternatively, where funds are provided in the form of a cheque payable to the seller's agent and both the buyer and seller are represented by agents, the agent representing the seller needs to complete the receipt of funds record (which is contrary to the situation that would arise if the cheque is made out to the buyer's agent, in which case we understand the buyer brokerage would complete the receipt of funds record pursuant to section 39(4) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations?)
  3. Where funds are provided in the form of a cheque payable to the seller and only the buyer is represented by an agent, is no receipt of funds record kept?
  4. With respect to all of the above questions does your view change if the cheque is ultimately not cashed (for example, the deal falls through)?
  5. Can you provide further examples on what FINTRAC means for an agent to “act just as a courier”?

Answer:

Pursuant to section 37 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every real estate broker or sales representative is subject to Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) when they act as an agent in respect of the purchase or sale of real estate. Paragraph 39(1)(a) of the PCMLTFR goes on to require that, when subject to the PCMLTFR, a real estate broker or sales representative has to keep an ROFR in respect of every amount that they receive in the course of a single transaction, unless that amount is received from a financial entity or a public body.

If a real estate broker or sales representative does not receive any funds in the course of a single transaction (e.g., the cheque is made-out to another person or entity party to the transaction or there are no funds exchanged) then the ROFR is not required. However, this would not apply in situations where a cheque is addressed to a seller's agent or the brokerage of the seller's agent, as subsection 39(4) states that “Where two or more of the parties to a real estate transaction are represented by a real estate broker or sales representative and one of those brokers or sales representatives receives funds in respect of the transaction from a party to the transaction whom they do not represent but who is represented by another of those real estate brokers or sales representatives, the broker or sales representative that represents the party from whom the funds are received is the one that is responsible for keeping the receipt of funds record referred to in paragraph (1)(a) and, if applicable, for keeping the copy referred to in paragraph (1)(c).” This alleviates the need for an agent to identify and keep a record about someone they receive funds from but have no relationship with.

Here are the answers to your questions:

  1. Pursuant to subsection 39(4) of the PCMLTFR, when both parties are represented by an agent and funds are in the form of a cheque addressed to the seller's agent, it is the buyer's agent who is responsible for completing the ROFR.
  2. See the response to Q1.
  3. If funds are provided directly to the seller and the seller is not a reporting entity subject to the PCMLTFA, then no ROFR is required.
  4. Pursuant to paragraph 39(1)(a), an ROFR must be kept by a real estate broker or sales representative “in respect of every amount that they receive”. Therefore, in situations where an ROFR is required, it must be completed when the cheque is received, not at the time it is cashed.
  5. This terminology is simply used to convey that the agent is physically delivering the payment for its client (e.g. when delivering a cheque to the recipient, such as another agent, brokerage, lawyer, etc.).

Date answered: 2015-06-25

PI Number: PI-6324

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 37, 39(1)(a), 39(4)

Act: Part 1

Receipt of funds record - ROFR obligations

Question:

I was hoping to clarify the receipt of funds obligation in regards to the real estate sector.

In the majority of real estate transactions cheques will be addressed to the listing agent's brokerage to be held in trust.

So which agent has to keep the ROFR?

Answer:

Paragraph 39(1)(a) of the PCMLTFR requires that, when subject to the PCMLTFR, a real estate broker or sales representative has to keep a ROFR in respect of every amount that they receive in the course of a single transaction, unless that amount is received from a financial entity or a public body.

If the real estate broker or sales representative does not receive any funds in the course of a single transaction (e.g., the cheque is made-out to another person or entity party to the transaction or there are no funds exchanged) then the ROFR is not required. However, this would not apply in situations where a cheque is addressed to a listing agent's brokerage. Subsection 39(4) states that “Where two or more of the parties to a real estate transaction are represented by a real estate broker or sales representative and one of those brokers or sales representatives receives funds in respect of the transaction from a party to the transaction whom they do not represent but who is represented by another of those real estate brokers or sales representatives, the broker or sales representative that represents the party from whom the funds are received is the one that is responsible for keeping the receipt of funds record referred to in paragraph (1)(a) and, if applicable, for keeping the copy referred to in paragraph (1)(c).” Therefore, in these situations, it is the buyer's agent or broker who is responsible for keeping the ROFR.

Date answered: 2015-04-15

PI Number: PI-6300

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39(1)(a), 39(4)

Obligations and Exception for a type of Trust account

Question:

What record keeping and client identification obligations do we have for a specific type of trust account we open? Also, do the exceptions listed under section 62 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) apply?

Answer:

Based on the information you provided, it is our understanding that you open this specific type of trust account for companies who receive provincial approval to operate a community economic development investment fund (CEDIF) and “raise capital through an exempt public offering in Nova Scotia.” These trust accounts are opened in the name of your entity, and its employees are identified as signers for the account, however, it appears that instructions for the account are given by the CEDIF approved company.

Reporting entities subject to the PCMLTFA have record keeping and reporting obligations, including client identification obligations. They must take certain measures to ascertain the identity of individuals or to confirm the existence of entities.

Having said that, paragraph 62(2)(l) of the PCMLTFR provides an exception to record-keeping and ascertaining identity for reporting entities when “the opening of an account in the name of, or in respect of which instructions are authorized to be given by, a financial entity, a securities dealer or a life insurance company or by an investment fund that is regulated under provincial securities legislation” occurs. Of course, the exceptions are not mandatory, so it is for the reporting entity to decide whether it will apply them or not.

Date answered: 2015-01-16

PI Number: PI-6279

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6G

Regulations: 62(2)(l)

Real estate brokers or sales representatives selling private property

Question:

Would the brokerage be legally liable for the completion of any forms required in a scenario where the agent, licensed under a brokerage, is privately selling property?

Answer:

Subsection 1(2) of the PCMLTFA states, “a real estate broker or sales representative means a person or entity that is registered or licensed under the provincial legislation in respect of the sale or purchase of real estate.” According to section 37 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “Every real estate broker or sales representative is subject to Part I of the Act when they act as an agent in respect of the purchase or sale of real estate”.

In this scenario, the real estate agent is privately selling personal property without involving the brokerage. If this real estate agent is acting as an agent in respect of the sale of real estate (representing another person/entity in this transaction), in the course of a private sale of a property, the brokerage wouldn't be required to fulfil any obligations. However, the real estate agent would have to fulfill certain obligations, unless the real estate agent is selling this property for him/herself.

Date answered: 2014-11-18

PI Number: PI-6257

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 37

Act: 1(2)

Acquisition of a credit card portfolio

Question:

  1. What are the rules for identification or record keeping when an organization acquires credit card accounts that have already been used and validated?
  2. Is there any guidance which discusses the record keeping or identification requirements for financial entities when acquiring a portfolio of credit card accounts?
  3. In the verifying identity section of the guidelines, it lists a number of possible documents to use to verify identity. Some have photos included and others do not. Is it required anywhere in the PCMLTFA or its associated Regulations that a photo id must be presented?

Answer:

When a reporting entity acquires client accounts, it must consider whether the accounts are already opened in order to determine its identification and record keeping obligations. FINTRAC has determined that there is no account opening in a situation where an entity acquires client accounts from another entity when:

  • the clients were previously identified and records were kept in accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations or, the accounts were opened prior to the legislative requirements to ascertain identity coming into force on June 12, 2002;
  • only immaterial changes were made to the account such as, the accounts were given new numbers, logos and branding, new cards were issued and ancillary services were added or removed; and
  • the transactional history of the accounts follows.

Client Accounts Acquired from a Reporting Entity
When the acquiring reporting entity determines that there are no accounts being opened from the acquisition of accounts from another reporting entity, there is no legislative requirement to repeat the process of ascertaining the identity of each newly acquired account holder.
The acquiring reporting entity is responsible for assessing the acquired client accounts against the criteria outlined above in the section “No Account Opening”.
Should the acquiring reporting entity open any additional account(s) for an acquired client, the acquiring reporting entity must ascertain the identity of the client at the time the new account is opened. The exceptions outlined in paragraph 62(1)(c) and section 63 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), pertaining to ascertaining identity, would not apply.

Client Accounts Acquired from a Non-Reporting Entity
When client accounts are acquired from a non-reporting entity, there is an account opening situation and the acquiring reporting entity must ascertain the identity and keep records pertaining to each newly acquired account holder. This is because the non-reporting entity was not subject to the PCMLTFA, therefore its clients were not previously identified and records were not kept in accordance with the PCMLTFA and its associated Regulations.

Risk Assessment for All Acquired Client Accounts
Every reporting entity is required to carry out a risk assessment of their new and existing clients and business relationships. As such, an acquiring reporting entity is required to conduct a risk assessment of each newly acquired account holder and to keep a record of the purpose and intended nature of the business relationship. This information has to be reviewed on a periodic basis and kept up to date. If the acquiring entity identifies a client as high-risk, the business relationship with that client must be monitored more frequently, the client identification information must be updated more frequently and other enhanced measures must be taken to mitigate the risk.

Subsection 54.1(a) of the PCMLTFR states that “Subject to subsections 62(1) and (2) and section 63, every financial entity shall […] where the financial entity opens a credit card account in the name of a person, ascertain their identity in accordance with subsection 64(1.1)”.

There are three conditions that will make a document acceptable for identification purposes:

  • The document must have a unique identifier number
  • The document must have been issued by a provincial, territorial or federal government
  • The document also has to be a valid one and cannot have expired

These conditions are applicable at the time the identity is ascertained. The PCMLTFA and its associated Regulations do not prescribe that a reporting entity use documents with a photo to ascertain identity. However, pursuant to subsection 9.6(3) of the PCMLTFA, if a reporting entity considers that the risk of a money laundering offence or a terrorist financing offence in the course of their activities is high, the reporting entity shall take prescribed special measures for identifying clients, keeping records and monitoring financial transactions in respect of the activities that pose the high risk. The prescribed special measures are those outlined in section 71.1 of the PCMLTFR. In addition to enhanced identification measures as per 71.1(a), reporting entities are required to take any other enhanced measures to mitigate the risks identified including those outlined in 71.1(b)(i) and 71.1(b)(ii). One of these can be to use a document with a photo to ascertain identity.

Date answered: 2014-09-29

PI Number: PI-6242

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6G

Regulations: 54.1(a) , 62(1), 71.1

Act: 9.6(3)

Receipt of funds and associated obligations for accountants, and their use of their clients' accounts.

Question:

  1. Receipt of Funds: Are these requirements only triggered by "receipt" in connection with one of the activities noted in s. 34(1) (i.e. the accounting firm directly receiving or giving instructions to receive $3,000 in cash, securities, real property, or business assets, or $10k+ in cash)? Or are they also triggered when the accounting firm pays or transfers out that amount in accordance with the client's instructions?
     
  2. Use of Client Accounts: Suppose an accounting performs financial services for its client through client authorizations to use the client's own accounts for specific purposes (e.g. payroll), rather than receiving money into and disbursing from the accounting firm's own accounts. As such, the accounting firm does not "receive" funds. Does the accounting firm incur reporting, record-keeping, and/or identification requirements when sums are received into/paid out of client accounts?

Answer:

  1. Paragraph 5(j) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) limits the application of Part 1 for accountants to activities described in regulations. The obligations for accountants apply only while they are carrying out the triggering activities described in subsection 34(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). This means accountants are subject to Part 1, but only when they conduct the following activities on behalf of any individual or entity, or give instructions relating to the following activities on behalf of any individual or entity:
  • receiving or paying funds;
  • purchasing or selling securities, real property or business assets or entities; or
  • transferring funds or securities by any means.

In addition, subsections 36(1) and 36(2) of the PCMLTFR state :
“(1) Subject to subsection 62(2), every accountant and every accounting firm shall, when engaging in an activity described in section 34, keep the following records:
(a) a receipt of funds record in respect of every amount of $3,000 or more that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body; and
(b) where the receipt of funds record is in respect of a client that is a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the accountant or accounting firm.

(2) Subject to subsection 52(2), every accountant and every accounting firm shall, when engaging in an activity described in section 34, keep a large cash transaction record in respect of every amount in cash of $10,000 or more that they receive in the course of a single transaction, unless the cash is received from a financial entity or a public body.”

You asked if the record keeping requirement “is also triggered when the accounting firm pays or transfers out that amount in accordance with the client's instructions.” When the accountant pays or transfers an amount in accordance with its client's instructions, he or she is undertaking an activity for which he is covered under part 1 of the PCMLTFA. However, the requirement for record keeping is specific to the two triggering activities under subsections 36(1) and (2), and only exist when the accountant receives funds. Therefore, the accountant would not have any record keeping obligation in cases where he pays out or transfers funds.

It should be noted that while the record keeping requirement is limited to the triggering activities under subsections 36(1) and (2), accountants are required to meet other obligations under the PCMLTFR.

  1. As previously noted, accountants are subject to Part 1, but only when they conduct the following activities on behalf of any individual or entity, or give instructions relating to the following activities on behalf of any individual or entity:
  • receiving or paying funds;
  • purchasing or selling securities, real property or business assets or entities; or
  • transferring funds or securities by any means.

The obligations do not refer to the account being used by the accountant, rather the obligations are tied to whether or not the accountant is conducting an activity on behalf of any individual or entity or giving instructions on behalf of any individual or entity. As such, should the accountant be using the client's account to conduct the triggering transactions, the accountant would still be subject to the obligations of the PCMLTFA and its associated Regulations.

That said, while the accountant may not “receive” funds in a scenario such as the one you have suggested, the following obligations would still exist and the accountant would be required, where applicable, to:

  • report suspicious transactions, suspicious attempted transactions, and large cash transactions, and send terrorist property reports to FINTRAC;
  • in addition to ascertaining the identity of any individual who conducts a large cash transaction or for whom they have to keep a receipt of funds records, they also have to take reasonable measures to ascertain the identity of any individual for whom they have to send a suspicious transaction report (some exceptions may apply);
  • meet the requirements of the PCMLTFR in relation to business relationships that they enter into; and
  • have a compliance regime.

Date answered: 2014-09-12

PI Number: PI-6235

Activity Sector(s): Accountants

Obligation(s): Record Keeping

Guidance: 6D

Regulations: 34(1), 36

Act: 5(j)

Receipt of funds record obligations

Question:

Could you please confirm that this means if funds greater than $3000 are received by a law firm, not for fees for professional services or disbursements but for any other purpose, in the form of a personal cheque or cash, then the law firm must record the transaction and ascertain the identity of every person and confirm the existence of every corporation who conducts the transaction?

Answer:

Pursuant to subsection 1(2) of the PCMLTFR, financial entity means an authorized foreign bank, as defined in section 2 of the Bank Act, in respect of its business in Canada or a bank to which that Act applies, a cooperative credit society, savings and credit union or caisse populaire that is regulated by a provincial Act, an association that is regulated by the Cooperative Credit Associations Act, a financial services cooperative, a credit union central, a company to which the Trust and Loan Companies Act applies and a trust company or loan company regulated by a provincial Act. It includes a department or agent of Her Majesty in right of Canada or of a province when the department or agent is carrying out an activity referred to in section 45.

Where, throughout the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations, there is reference to funds being “received from a financial entity” these funds must come from a financial entity as defined above. An individual does not meet this definition, even where an individual is sending funds by means of a personal cheque bearing the bank's business logo, because the funds are still received from the individual.

That said, legal counsel are not, at this time, subject to Part 1 of the PCMLTFA and its associated Regulations. Therefore, the receipt of funds record obligations outlined in subsection 33.4(a) are not currently in force. The [reporting entity] of Law Societies may, however, impose certain requirements similar to those outlined in the PCMLTFA and its associated Regulations.

Date answered: 2014-09-10

PI Number: PI-6232

Obligation(s): Record Keeping

Guidance: 6

Regulations: 1(2), 33.4(a)

Exempt life insurance company products

Question:

Am I right in believing that, since all our life insurance policies are exempt (under subsection 306(1) of the Income Tax Regulations), we are not required to keep the information in a record or ascertain identity, as mentioned in FINTRAC Guideline 6A (exceptions listed in subsections 3.1 and 4.2)?

Answer:

"As an insurance company regulated by provincial legislation, the Insurance Company ABC is subject to Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) and the related regulations.

I would like to start by specifying that some of the obligations described in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFR) apply only to some life insurance company products. More specifically, a client information record is required only for the purchase, from a company, broker or agent, of an immediate or deferred annuity or a life insurance policy which is not an exempt product under subsection 62(2) of the PCMLTFR and for which the client may pay $10,000 or more over the duration of the annuity or policy, regardless of the means of payment (subsection 19(1) of the PCMLTFR).

With regard to the Insurance Company ABC, if the product in question is exempt under subsection 62(2) of the PCMLTFR, a client information record is not required. This has a ripple effect on ascertaining identity, since the requirement to ascertain client identity is, in most cases, linked to the requirement to retain a client information record. It also has repercussions on third party determination, since the Insurance Company ABC is required to make a third party determination only when it must retain a client information record. If the reporting entity has documents proving the legitimacy of the application for product exemption, FINTRAC may ask for these documents. However, as the department responsible for the Income Tax Act, the Canada Revenue Agency is responsible for deciding whether a product may be exempted. FINTRAC is not in a position to determine whether a product may be exempted under subsection 62(2)a),and must therefore depend on the information provided by the reporting entity and cannot cite it for failing to comply with its obligations if the entity declares that the product is exempt.

That being said, if an Insurance Company ABC product is not exempt, the Insurance Company ABC is subject to the obligations to retain a client information record, ascertain client identity and make a third party determination. A third party is a person or entity who gives instructions with regard to money. To make a third party determination, it is important to establish whether the person conducting the transaction is acting on the instructions of another person. If so, this other person is the third party. When the Insurance Company ABC sells a product to a person or entity, the Insurance Company ABC must determine whether this product is being purchased according to the instructions of another person. If so, the Insurance Company ABC must retain a third party determination record on this other person, specifying:

  1.  the third party's name, address, date of birth and principal business or occupation if the third party is a person;
  2.  if the third party is an entity, its name, address and principal business; if the third party is a corporation, its incorporation number and place of incorporation;
  3.  the relationship between the third party and the client.
    If the Insurance Company ABC is unable to determine whether the client for which the client information record is retained is acting for a third party, but has reasonable grounds to suspect that this is the case, the person or entity must retain a document:
  4. indicating whether , according to the client, the transaction is made on behalf of a third party;
  5.  describing the reasonable grounds for suspecting that the client is acting on behalf of a third party.

Whether or not section K of the “Proposal” form deals with third party determination correctly depends on the facts. For example, if the purchaser of a product conducts the transaction on behalf of a third party—who is the person paying for the product—the form can be used for this determination, even if the Insurance Company ABC must review the information entered and make sure that it meets the requirements related to information included in section 10(2) of the PCMLTFR. However, if the purchaser of a product conducts the transaction on behalf of a third party who is not paying for the product, the form does not seem to work well.

That being said, under subsection 52(2) of the PCMLTFR, the requirement that a person or entity retains a record or adds information to it does not apply if this information is readily available in other records that the person or entity is required to retain under the Regulations. If the subscription form includes appropriate information on the third party, the insurance company is then required only to retain it and provide it upon request. To enter third party information correctly, the insurance company must make sure to gather the information on the third party giving instructions for the transaction indicated in subsection 10(2) of the PCMLTFR.

Date answered: 2014-09-04

PI Number: PI-6226

Activity Sector(s): Life insurance

Obligation(s): Record Keeping

Guidance: 6A

Regulations: 10(2), 19(1), 52(2), 62(2)

Clarification about the time of transaction for a real estate transaction

Question:

  1. Does FINTRAC define the "time of the transaction" for real estate transactions as the time when the deed is signed? If not, how do you define it?
     
  2. In the case of an LCTR, when should the LCTR be sent to FINTRAC:

a) within 15 calendar days after an amount of $10,000 or more in cash is received in the course of a single transaction (regardless of when the deed is signed)?
b) within 15 calendar days after the transaction, meaning within 15 calendar days of when the deed is signed (if this is how a real estate transaction is defined by FINTRAC for both client ID/record-keeping purposes and LCTR reporting purposes).
c) some other interpretation?

Answer:

According to section 37 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), “Every real estate broker or sales representative is subject to Part 1 of the Act when they act as an agent in respect of the purchase or sale of real estate.” Section 38 indicates, “Subject to subsection 52(1), every real estate broker or sales representative who, while engaging in an activity described in section 37, receives an amount in cash of $10,000 or more in the course of a single transaction shall report the transaction to the Centre, together with the information set out in Schedule 1, unless the amount is received from a financial entity or public body.”

Record-keeping
Pursuant to subsection 39(1) of the PCMLTFR subject to subsections (3), (4), (5), (6), 52(2) and 62(2), every real estate broker or sales representative shall, when engaging in an activity described in section 37, keep the following records:
(a) a receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body;
(b) a client information record in respect of every purchase or sale of real estate; and
(c) where the receipt of funds record or the client information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the real estate broker or sales representative.

Additionally, pursuant to subsection 39(2) of the PCMLTFR, subject to subsection 52(2), every real estate broker or sales representative shall, when engaging in an activity described in section 37, keep a large cash transaction record in respect of every amount in cash of $10,000 or more that they receive in the course of a single transaction, unless the cash is received from a financial entity or a public body. If the real estate broker or sales representative is required to keep a large cash transaction record in respect of a transaction, they do not also have to keep a receipt of funds record and the associated official corporate records in respect of a corporation, for that same transaction.

Ascertaining identity
Subsection 64(1) of the PCMLTFR states that the identification shall be ascertained at the time set out in subsection 64(2). Paragraph 64(2)(e) of the PCMLTFR states that “the identity shall be ascertained … in the cases referred to in paragraphs … 59.2(a), at the time of the transaction”.

Subsection paragraph 59.2(1) of the PCMLTFR states, “Subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1),
(a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction;
(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors; and
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted.

Furthermore, pursuant to section 53 of the PCMLTFR, subject to subsection 63(1), every person or entity that is required to keep and retain a large cash transaction record under these Regulations shall ascertain, in accordance with subsection 64(1), the identity of every person with whom the person or entity conducts a transaction in respect of which that record must be kept, other than a deposit made to a business account or a deposit made by means of an automated banking machine.

Time of the transaction
The “time of the transaction” can vary depending on the requirement. Where a receipt of cash or funds triggers the requirements, as is the case for the Large Cash Transaction Record or the Receipt of Funds Record, respectively, the obligations are triggered from the moment the cash or funds are received by the real estate broker or sales representative acting as an agent in respect of the purchase or sale of real estate. There is no requirement for the purchase or sale of a property to be completed. Subsequently, the ascertaining of identity associated with these record-keeping obligations is triggered with the record-keeping obligations. The reporting of a large cash transaction is required within 15 days after the large cash transaction.

If the triggering activity is a client information record, the timing for creating this record and any associated obligations, such as ascertaining identity, are tied to the purchase or sale of real estate. As such, the reporting entity has to create the client information record in respect of every purchase or sale of real estate. The client information record “in respect of a purchase or sale” would have to be created at the time of the transaction (i.e. that purchase or sale).

Given that a real estate broker or sales representative may not be present at the time of the transaction, consideration may be given to carrying out the obligations when the opportunity arises. For example, we understand that certain Real Estate agents' associations recommend that, to ensure that the identification has occurred as required, even if their members are not present at the time of the transaction, they may want to proceed with the identification beforehand (i.e. at the time they first meet their client or sign an agreement to represent them).

Date answered: 2014-08-22

PI Number: PI-6222

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 37, 38, 39, 53, 59.2(1), 64(1), 64(2)

Life Insurance Company obligations

Question:

Does the Life Insurance Company have legal obligations under the Act and Regulations for the mortgage product? Are those obligations related to client identification/record keeping/beneficial ownership, RBA/high risk rating of client, and/or STR?

Answer:

It is important to note, however, that certain of the obligations outlined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) only apply to specific types of products that a life insurance company may offer. Specifically, a client information record is only required for every purchase from the company, broker or agent of an immediate or deferred annuity or a life insurance policy for which the client may pay $10,000 or more over the duration of the annuity or policy, regardless of the means of payment (ss. 19(1) PCMLTFR). Unless the product in question is “an immediate or deferred annuity or a life insurance policy for which the client may pay $10,000 or more over the duration of the annuity or policy” the PCMLTFR does not require a client information record. This has a trickle-down effect on ascertaining of identity, because the requirement to ascertain identity is tied in most cases, to the requirement to keep a client information record. This also impacts the beneficial ownership requirements, because the life insurance company is only required to determine beneficial ownership where they have to confirm the existence of an entity, and this confirmation is required only in cases where the life insurance company must keep a client information record.

Furthermore, the determination as to whether or not the life insurance company is dealing with a politically exposed foreign person (PEFP) is only required where a person makes a lump-sum payment of $100,000 or more in respect of an immediate or deferred annuity or life insurance policy on their own behalf or on behalf of a third party.

That said, the life insurance company is required to keep a large cash transaction record regardless of the product, unless they are dealing in reinsurance, ascertain identity, and submit a large cash transaction report (s. 18 PCMLTFR, s. 53 PCMLTFR, s. 17 PCMLTFR, respectively.) Furthermore, subject to section 10.1 of the PCMLTFA, the life insurance company must report, 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 (s. 7 PCMLTFA.) Where the life insurance company is required to submit an STR, they must take reasonable measures to ascertain the identity of every person who conducts or attempts to conduct a transaction that is required to be reported to the Centre under section 7 of the Act, unless identity was previously ascertained or the life insurance company believes that complying would inform the person of the report being submitted. The life insurance company would also be required to submit a terrorist property report to FINTRAC, if 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.

Finally, pursuant to subsection 9.6(2) of the PCMLTFA, the program established and implemented by the life insurance company under 9.6(1) if the PCMLTFA, shall include the development and application of policies and procedures for the person or entity to assess, in the course of their activities, the risk of a money laundering offence or a terrorist activity financing offence, taking into consideration :
(i) the clients and business relationships of the person or entity,
(ii) the products and delivery channels of the person or entity,
(iii) the geographic location of the activities of the person or entity, and
(iv) any other relevant factor;

If the life insurance company considers that the risk referred to in subsection (2) is high, the person or entity shall take prescribed special measures for identifying clients, keeping records and monitoring financial transactions in respect of the activities that pose the high risk. The prescribed special measures are those outlined in 71.1 of the PCMLTFR.

All of this to say that the life insurance company's mortgage products would only be subject to the large cash transaction, suspicious transaction and terrorist property obligations. However, all of the life insurance company's clients and products, among other things, would be subject to the life insurance company's risk assessment obligations, and those clients for which identity had to be ascertained at least twice would be subject to the business relationship obligations (including ongoing monitoring and keeping a record that sets out the purpose and intended nature of each business relationship).

Date answered: 2014-08-13

PI Number: PI-6215

Activity Sector(s): Life insurance

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 17, 18, 19(1), 53, 71.1

Act: 7, 9.6(2)

Relationships of the parties - Applicability of client identification requirements to portfolio managers

Question:

Questions refer to Model 1: The client enters into an agreement with a PM

  1. Under whose name the account is opened – the client's or the PM's?
  2. From the SD's perspective, would the client be considered a third party to the transaction? If so, would the SD clarify the third party aspect?

Questions refer to Model 2:The client enters into an agreement with a PM authorizing the PM to manage assets held in one or more accounts that the client has or will establish with a securities dealer(s)

  1. Please clarify the relationship between the client, the PMs and the SDs.

Answer:

First, we agree that Section 57 applies only where a securities dealer is required to keep records as required under subsection 23(1).

For Model 1, we understand that the securities dealer (SD) is opening an account in the name of a client, with the portfolio manager (PM) acting as an agent for the SD. Pursuant to subsection 6(2) of the PCMLTFR, which states that “Where a person or entity who is subject to the requirements of these Regulations, […], is an agent of or is authorized to act on behalf of another person or entity referred to in any of paragraphs 5(a) to (l) of the Act, it is that other person or entity rather than the agent or the authorized person or entity, as the case may be, that is responsible for meeting those requirements”, the SD is the reporting entity, and has the obligations to ascertain identity and keep records.

As per subsections 64.1(1) and (2) of the PCMLTFR, if the SD is relying on an agent or mandatary to take the identification measures described under subsection 64(1) of the PCMLTFR, it must enter into an agreement or an arrangement with the PM in writing and the SD would be obligated to obtain the customer information from the PM.

It should be noted that if the account were indeed to be opened in the name of the PM, then the SD would retain the obligations, and pursuant to Section 9 of the PCMLTFR, would have to conduct a third party determination and keep the associated records.

As for Model 2, the SD is doing the account opening. The SD is the reporting entity and has the obligations under the PCMLTFR. This is consistent with what we have indicated in the past: “Even if a management mandate is given to a portfolio manager, the client is the person who has the account and who assigns the mandate, so the client must be identified. Ultimately, in this case, the client holding the account is still the person "responsible" for the account and can, at any time, decide to give instructions regarding the account directly (without going through the portfolio manager).”

It should however be noted that in some cases, PMs could open accounts for their client, even if those accounts are not for deposit taking purpose. Changes to the PCMLTFA under paragraph 5(g) are now in force and, while associated regulations have not been developed, the Act has introduced a specific amendment to what constitute a securities dealers subject to Part 1 pf the PCMLTFA, which now reads: “5(g) 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.”

In this case, if they are acting “exclusively on behalf of” a securities dealer, they would not be considered a reporting entity for the purpose of our Act; however, in those cases, it would be a question of facts whether they are subject to the PCMLTFA or not.

Date answered: 2014-08-07

PI Number: PI-6210

Activity Sector(s): Securities dealers

Obligation(s): Record Keeping

Guidance: 6E

Regulations: 6(2), 9, 23(1), 57, 64.1

Act: 5(g)

Banking relationships

Question:

  1. In case of entering into a relationship with a foreign bank to extend trade services, would the Letter of Credit related to a specific trade finance deal be accepted as a Correspondent Banking agreement/arrangement?
     
  2. Similarly in the case of exchanging SWIFT Relationship Management Application (RMA) with a foreign bank but no transactions or trade communication has been exchanged yet.
    a. Would FINTRAC deem the Bank has established a Correspondent Banking relationship and therefore the agreement/arrangement document is required?
    b. Would FINTRAC accept the SWIFT RMA itself as a form of Correspondent Banking agreement/arrangement?”

Answer:

A “prescribed financial entity” under subsection 15.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) requires it to be a foreign financial institution. Before entering into any correspondent banking agreement, you would also be required to take the measures described under section 9.4 of the Proceeds of Crime(Money Laundering) and Terrorist Financing Act (PCMLTFA) related to due diligence regarding shell banks.

  1. A “Correspondent banking relationship” is defined in subsection 9.4 (3) of the PCMLTFA as “a relationship created by an agreement or arrangement under which an entity referred to in any of paragraphs 5(a), (b), (d) and (e) or an entity that is referred to in section 5 and that is prescribed undertakes to provide to a prescribed foreign entity services such as international electronic funds transfers, cash management, cheque clearing and any prescribed services.”

Under 15.1(2)(f) of the PCMLTFR, the required record of the arrangement is “a copy of the correspondent banking agreement or arrangement, or product agreements, defining the respective responsibilities of each entity.” The acceptability of a Letter of Credit would depend on the extent of the information it includes about the responsibilities of each entity regarding the service being agreed to; typical letters of credit would define only financial responsibilities, and this would likely not satisfy the requirements under 15.1(2)(f).

  1. The SWIFT Web site defines the Relationship Management Application (RMA) as:

“a powerful and easy way to manage your business relationships. As a SWIFT user, you can easily control the traffic that you want to accept from other correspondents.
The solution consists of two parts:

  1. You establish authorisations ('who can send traffic to whom and when'). This can be done in two ways, either by exchanging authorisations using the RMA protocol or by creating authorisations locally.
  2. Your messaging interfaces apply these rules to control which traffic you can exchange with which correspondent.

The policy is that the use of RMA is decided by the service administrator on a service by service basis. RMA adds value in many-to-many environments where there is a requirement to be able to restrict the exchange of traffic to correspondents with whom there is a business relationship. It adds no value to many-to-one Closed User Group based services such as Market Infrastructures which are managed centrally by the Service Administrator.”

It seems that the existence of a “Correspondent banking relationship” in this case would depend on the services being agreed to between the entities under the SWIFT RMA, and if those services include the Canadian entity providing “services such as international electronic funds transfers, cash management, cheque clearing and any prescribed services” to the foreign entity, or not.

If a “Correspondent banking relationship” does exist, then the acceptability of the RMA document as “a copy of the correspondent banking agreement or arrangement, or product agreements” would again depend on it appropriately ”defining the respective responsibilities of each entity” .

Date answered: 2014-07-30

PI Number: PI-6207

Obligation(s): Record Keeping

Guidance: 6

Regulations: 15.1(1), 15.1(2)

Act: 9.4

Expiry date of identification

Question:

Is recording expiry date of identification, such as the expiry date of a driver's license, a requirement for compliance?

Answer:

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations do not require the expiry date of the identification card to be recorded. However, as per subsection 64(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), unless otherwise specified in the Regulations, only original documents that are valid and have not expired can be used to ascertain identity in accordance with paragraph 64(1)(a) or 64(1.1)(a) of the PCMLTFR.

Date answered: 2014-07-18

PI Number: PI-6201

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 64(1), 64(1.1), 64(3)

Requirement for real estate brokers or sales representatives to keep receipt of funds records, and when this requirement is triggered.

Question:

Our brokerage firm is representing the Vendor in this transaction, however all funds in relation to the deal are going through the Vendors lawyer. Meaning until we receive commissions we will not be handling any money. In this case would it be the responsibility of the lawyer to perform Fintrac or would it be our responsibility as all paper work has been submitted under our brokerage?

Answer:

In accordance with section 37 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every real estate broker or sales representative is subject to Part 1 of the Act when they act as an agent in respect of the purchase or sale of real estate. Paragraph 39(1)(a) of the PCMLTFR goes on to require that, when subject to the PCMLTFR, a real estate broker or sales representative has to keep a receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless that amount is received from a financial entity or a public body.

If the real estate broker or sales representative does not receive any funds in the course of a single transaction (e.g., another person or entity party to the transaction receives the funds or there are no funds exchanged) then the receipt of funds record is not required.

Date answered: 2014-07-17

PI Number: PI-6177

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 37, 39(1)(a)

Clarification on record keeping retention

Question:

How long is an investment institution required to keep records of financial transactions that have been undertaken on behalf of their clients? What happens when the institution changes ownership or name ABC is now DEF?

Can a client recover the information through an InforSource Privacy Act request? How far back? What about if a person is attempting to acquire the information on behalf of an elderly parent who has signed a consent for the institution to release the information?

If a representative of an elderly person believes that a financial institution might be short selling investments just to acquire a commission what recourse is available to protect the elderly?

Answer:

FINTRAC administers the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations, so we can only address record retention requirements that are outlined in the legislation. That said, Canadian financial institutions have an obligation to collect and retain certain specific records relating to financial transactions and activities. The timeframes for keeping records depends on the nature of those records, and are as follows:

  • In the case of signature cards, account operating agreements, client credit files, credit card applications, records setting out the intended use of the account, politically exposed foreign person records regarding an account, or a credit card account, these records have to be kept for five years from the day of closing of the account to which they relate.
  • In the case of records to confirm the existence of an entity (including a corporation), beneficial ownership records, politically exposed foreign person records regarding transactions and records about a corresponding banking relationship, they have to be kept for five years from the day the last business transaction was conducted.
  • In the case of a copy of a suspicious transaction report, the record has to be kept for a period of at least five years following the date the report was made.
  • In the case of all other records, the records must be kept for a period of at least five years following the date they were created.

In some cases, reporting entities that acquire another entity will rely on the information collected by the acquired entity, and will consequently retain those records as if they had created them.

Date answered: 2014-07-02

PI Number: PI-6171

Obligation(s): Record Keeping

Guidance: 6

Definition of Negotiable instruments

Question:

What is the definition of other negotiable instrument ?

Answer:

Paragraph 14(k) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that a financial entity must keep a record where it “receives an amount of $3,000 or more from a person or from an entity other than a financial entity in consideration of the issuance of traveller's cheques, money orders or similar negotiable instruments,” and include in that record, “the amount received, the date it was received, the name and address of the person who in fact gave the amount and whether the amount received was in cash, cheques, traveller's cheques, money orders or other similar negotiable instruments.”

I note the term "negotiable instruments" is not defined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) nor the PCMLTFR and should therefore be given its common/ordinary meaning. Black's Law Dictionary defines negotiable instruments as, "a written or signed unconditional promise or order to pay a specified sum of money on demand or at a definite time payable to order or bearer." This would include a bank draft and/ or a cheque (certified or not).

The Cross-border Currency and Monetary Instruments Reporting Regulations (CCMIRR) provides further guidance through its definition of monetary instruments. According to subsection 1(1) of these regulations, monetary instruments mean the following instruments in bearer form or in such other form as title to them passes on delivery, namely,

(a) securities, including stocks, bonds, debentures and treasury bills; and
(b) negotiable instruments, including bank drafts, cheques, promissory notes, travellers' cheques and money orders, other than warehouse receipts or bills of lading.

Moreover, section 2 of the Financial Administration Act (FAA), defines a negotiable instrument as including, “any cheque, draft, travellers cheque, bill of exchange, postal note, money order, postal remittance and any other similar instrument."

Date answered: 2014-06-27

PI Number: PI-6169

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(k)

Recording of Identification and foreign currency exchange

Question:

Can an MSB request and record personal information when it exchanges under $3000.00?

Answer:

Pursuant to paragraph 59(1)(c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) an MSB must ascertain the identity of every person who conducts a foreign currency exchange transaction of $3000 or more. Furthermore, in accordance with subsection 30(f) of the PCMLTFR, the MSB must keep a record of this foreign currency exchange transaction.

When a reporting entity has to ascertain the identity of a person in connection with a transaction that they have carried out and in respect of which they are required to keep a record under these Regulations or under section 12.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations, the then reporting entity has to include on, in, or with that record the name of that person and certain information related to the method in which the identity was ascertained. For example, if a driver's license was used to ascertain the person's identity, then the RE must record that it was the license that was used, as well as the reference number of the license and the place it was issued.

Response
It should be noted that the legal requirement to ascertain identity is triggered where the foreign exchange transaction is of $3000 or more. As such, if the foreign exchange transaction is under $3000 the PCMLTFA and its associated Regulations do not require the MSB to ascertain identity, or keep certain records related to the ascertaining of identity. A record of the foreign exchange transaction must still be kept.

That said, while the PCMLTFA and its associated Regulations may not require that the MSB ascertain identity for foreign exchange transactions of under $3000, the MSB may have its own policies and procedures in place to require that certain personal information be obtained and recorded. FINTRAC cannot comment on the day-to-day business decisions of the reporting entities that may go above and beyond the requirements of the PCMLTFA and its associated Regulations.

Date answered: 2014-06-05

PI Number: PI-6157

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 6C

Regulations: 12.1, 30(f), 59(1)(c)

Definition of ''Account''

Question:

Can you clarify the definition of “account” and how it pertains to a financial institution in The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR)?

Answer:

Pursuant to section 5 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) companies to which the Trust and Loan Companies Act applies and trust companies regulated by a provincial Act are subject to Part 1 of the PCMLTFA, which would include the obligations associated with account opening.

The term “account” is not defined in the PCMLTFA or its associated Regulations. 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 a 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.

In the given situation, you have taken the position that certain trust businesses may not have accounts that hold their clients' assets, as such they do not open accounts, or have the associated obligations. Rather, in the examples provided, the trust company may act as trustee for corporations and governments in a number of different capacities including acting as issuer trustee, indenture trustee, and custodian for securitizations, acting as trustee, paying agent and registrar for debt securities, acting as escrow agent, acting as bare trustee, acting as security and collateral agent, acting as insurance trustee, and acting as trustee for pooled and mutual funds. It is important to note that to be considered an account, there does not need to be a deposit component. As indicated above, in cases other than deposit taking accounts, FINTRAC will generally respect the entity's determination of whether or not it has opened an account in any given case.

Date answered: 2014-06-05

PI Number: PI-6156

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Act: 5

Obligations of real estate developers

Question:

I have read your online information but find that I still have questions and/or would like to have confirmation of my understanding.

  1. New homes sales people are obliged to gather a range of information on purchasers of a home and keep it on file for 5 years. This applies to all transactions, suspicious or not, correct?
     
  2. Does the Agreement of Purchase and Sale (sales contract) have to reflect the information intended to comply with FINTRAC? More specifically, must the Agreement describe the type and number of the identification document presented by the purchaser to verify identity? It is my understanding that this particular information does not need to appear in the contract document itself--could you please confirm or correct this?
     
  3. What constitutes a "record of purchaser information" for the purposes of FINTRAC? E.g. Is there a specific form for the new homes sales people to fill out, do they need to create their own form or can they simply compile and keep the information as "notes", photocopies, etc. in their own system (paper or electronic file folders).
     
  4. What are the obligations of a salesperson related to a purchaser's business or occupation? Do they simply ask and jot down the answer for their file? Or is there an onus on them to somehow verify this occupation? If yes, how so?
     
  5. If a purchaser provides $10,000 or more in cash within a 24-hour period, the new homes sales person is obliged to report this to FINTRAC, but can continue with the transaction, and without notifying the purchaser of the report. Correct? Does it follow then, that several, or a series of, cash payments of less than $10,000 each over a longer period do not trigger the need to report to FINTRAC?

Answer:

Pursuant to section 39.5 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) every real estate developer is subject to Part 1 of the Act when:
a) in the case of a person or of an entity other than a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building; and
b) in the case of an entity that is a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building on their own behalf or on behalf of a subsidiary or affiliate.

Individuals and entities subject to the PCMLTFA and its associated Regulations have obligations pertaining to the ascertaining of identity, record-keeping, compliance and reporting, some of which you have questions about.

  1. Yes, this is correct. Regardless of whether the home is new or previously owned, or the transaction is suspicious or not, a real estate developer must keep various records, as outlined in section 39.7 of the PCMLTFR. This includes:
  • Large cash transaction records;
  • Receipt of funds records;
  • Client information records;
  • Suspicious transaction report records.
  1. Your understanding is correct. FINTRAC does not prescribe which document(s) reporting entities are to use for record-keeping purposes. Where a real estate developer is required to keep a record, it is for them to determine how to keep the record or records. For purposes of the PCMLTFR, every record that is required to be kept under these Regulations shall be retained in such a way that it can be provided to FINTRAC within 30 days after a request is made to examine it under section 62 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (s. 70 PCMLTFR).
     
  2. As indicated in response to Question 2, FINTRAC does not prescribe the document(s) reporting entities must use for record-keeping purposes.

There is not a “record of purchaser information” per se, but real estate developers are required to keep client information records. This is a record that contains the client's name and address and:

  • if the client is a person, their date of birth and the nature of their principal business or their occupation, as applicable;
  • if the client is an entity, the nature of their principal business.

Where and how this client information record is kept is left to the real estate developer to determine.

  1. As indicated in response to Question 3, the real estate developer must keep a client information record that contains information on the principal business or occupation of their client. There is no associated obligation to verify this information.

That said, if the client information record is in respect of a corporation, the real estate developer must keep a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the real estate developer.

Furthermore, when a real estate developer has to keep a record under section 39.7 of the PCMLTFR, they must ascertain the identity of every person who conducts the transaction; and,

(b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors; and
(c) in accordance with section 66, confirm the existence of every entity, other than a corporation, on whose behalf the transaction is conducted .

Section 65 of the PCMLTFR specifies that the existence of a corporation shall be confirmed and its name and address and the names of its directors shall be ascertained within 30 days after the transaction, by referring to its certificate of corporate status, a record that it is required to file annually under the applicable provincial securities legislation or any other record that ascertains its existence as a corporation. The record may be in paper form or in an electronic version that is obtained from a source that is accessible to the public. Subsection 65(3) goes on to clarify that where the information has been ascertained by referring to an electronic version of a record, the person or entity required to ascertain the information shall keep a record that sets out the corporation's registration number, the type of record referred to and the source of the electronic version of the record. While subsection 65(4) explains that where the information has been ascertained by referring to a paper copy of a record, the person or entity required to ascertain the information shall retain the record or a copy of it.

Section 66 of the PCMLTFR requires that the existence of an entity, other than a corporation, shall be confirmed as of within 30 days after the transaction, by referring to a partnership agreement, articles of association or other similar record that ascertains its existence. The record may be in paper form or in an electronic version that is obtained from a source that is accessible to the public. Subsection 66(3) goes on to clarify that where the existence of the entity has been confirmed by referring to an electronic version of a record, the person or entity required to confirm that information shall keep a record that sets out the registration number of the entity whose existence is being confirmed, the type of record referred to and the source of the electronic version of the record. While subsection 66(4) explains that where the existence of the entity has been confirmed by referring to a paper copy of a record, the person or entity required to confirm that information shall retain the record or a copy of it.

  1. Subject to subsection 52(1) of the PCMLTFR, every real estate developer subject to Part 1 of the Act, receives an amount in cash of $10,000 or more in the course of a single transaction shall report the transaction to the Centre. A single transaction is defined as two or more cash transactions of less than $10,000 each that are made within 24 consecutive hours and that total $10,000 or more.

If a real estate developer receives $10,000 or more in cash at one time, or by means of two or more cash transactions of less than $10,000, within 24 consecutive hours, they must report this to FINTRAC.

Date answered: 2014-04-11

PI Number: PI-6136

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39.5, 39.7, 52(1), 65, 66, 70

Guidelines for Real Estate Developers using Agents/Brokers

Question:

I would like to request clarification of an apparent conflict between the information contained in your Guideline 6B and the provisions of Section 6(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations. Guideline 6B states:

If you engage a real estate broker or sales representative to act as your agent for your sales to the public, the obligations explained in this guideline do not apply to you. In this case, the real estate broker or sales representative would be responsible for meeting these obligations. However, if the real estate broker or sales representative is your employee, do you remain responsible for meeting these obligations.?

However, this seems to conflict with the Regulation, which states in Section 6(2):

Where a person or entity who is subject to the requirements of these Regulations, other than a life insurance broker or agent, is an agent of or is authorized to act on behalf of another person or entity referred to in any of paragraphs 5(a) to (l) of the Act, it is that other person or entity rather than the agent or the authorized person or entity, as the case may be, that is responsible for meeting those requirements.

The specific situation I am dealing with is one where a real estate developer (my client) is employing a licensed real estate broker to staff its sales centre and negotiate purchase contracts with potential buyers. In this case, Guideline 6B seems to indicate that it is the broker who is responsible for satisfying FINTRAC's client identification and record keeping requirements, where Section 6(2) of the Regulation indicates it may be the developer's responsibility as the broker is acting as the developer's agent. Any clarification you could provide on this point would be much appreciated.

On a related point, and assuming that the record-keeping and client identification requirements are the responsibility of the broker (at least in part), my client (the developer) is also concerned that their broker may not be complying with these requirements in relation to sales of the developer's units. The broker is refusing to turn over the relevant records to the developer, so there is no way we can verify whether they are complying. My question here is whether (a) the record keeping and client identification requirements are also requirements for the developer, which would therefore give the developer a good reason to demand the records being kept by the broker (i.e. it needs to satisfy its own obligations for record keeping etc.) or (b) if the requirements are only applicable to the broker, is there any way that the developer can ensure compliance or request an audit of the broker's activities to ensure that the sales being conducted by the broker are in compliance with FINTRAC?s requirements?

Answer:

Subsection 39.5(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) indicates that the PCMLTFR applies to real estate developers as follows:

“Every real estate developer is subject to Part I of the PCMLTFA when
a) in the case of a person or of an entity other than a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building; and
b) in the case of an entity that is a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building on their own behalf or on behalf of a subsidiary or affiliate.”

It would be a question of fact to be able to determine who must fulfill the requirements under the PCMLTFA and PCMLTFR in a case where the real estate developer has retained the services of an independent real estate broker to market and sell real estate to third party purchasers. In fact, it would depend on the nature of the contractual relationship between the developer and broker.

That being said, to follow are certain scenarios that may assist in determining which party has responsibilities under the PCMLTFA and associated Regulations when a developer engages the services of a real estate broker:

  1. The developer employs the real estate broker to provide services which may include advertising, the provision of information to prospective buyers, and assisting buyers with purchasing. In this scenario, the developer would remain responsible for any reporting or identification obligations under the PCMLTFA and associated Regulations. The real estate broker would also have an obligation to report suspicious transactions should he or she have reasonable grounds to suspect the transaction is related to the commission or attempted commission of a money laundering offence or the transaction is related to the commission or attempted commission of a terrorist activity financing offence (s. 7 PCMLTFA).
     
  2. The developer contracts the real estate broker to act as an agent for identification purposes. Pursuant to section 64.1 of the PCMLTFR, an entity that is required to take measures to ascertain identity may rely on an agent or mandatary to take the identification measures only if that entity has entered into an agreement or arrangement, in writing, with that agent or mandatary for the purposes of ascertaining identity. I note the entity must obtain from the agent or mandatary the customer information obtained under that agreement or arrangement.
     
  3. The developer hires a real estate broker for the purchase and/or sale of real estate. In this scenario, the developer would be the real estate broker's client. The real estate broker would not be an employee of the developer, and would be solely responsible for all functions related to the purchase and sale of the real estate, not simply for providing certain services, such as advertising or negotiating purchase contracts. In this scenario, the real estate broker is the reporting entity responsible for fulfilling requirements under the PCMLTFA and associated Regulations.

Date answered: 2014-03-25

PI Number: PI-6125

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39.5(1)

LCTR Reporting and Receipt of funds record (ROFR)

Question:

  1. What should the brokerage indicate on the ROFR? (eg. Funds received in brokerage's account, via cash deposit by the client OR should this be considered as funds received in cash?)
     
  2. Is an LCTR required for the following scenario?
  • the brokerage represents a buyer who purchased a property
  • the buyer deposited $20,000 cash into the brokerage's bank account at a bank, as deposit for the purchase; the bank will be sending a copy of the deposit slip to the brokerage
  • the buyer went directly to the bank to make the deposit, no cash was physically given to the brokerage
  • it is the brokerage's regular practice to give clients their (brokerage's) deposit account information so that the funds can be deposited directly into their account

Answer:

Pursuant to subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, the receipt of funds record “means, in respect of a transaction in which an amount of funds is received, a record that contains the following information:

(a) if the information is not readily obtainable from other records that the recipient keeps and retains under these Regulations, the name of the person or entity from whom the amount is in fact received and
(i) where the amount is received from a person, their address and date of birth and the nature of their principal business or their occupation, and
(ii) where the amount is received from an entity, their address and the nature of their principal business;
(b) the date of the transaction;
(c) the number of any account that is affected by the transaction, and the type of that account, the full name of the person or entity that is the account holder and the currency in which the transaction is conducted;
(d) the purpose and details of the transaction, including other persons or entities involved and the type and form of the transaction;
(e) if the funds are received in cash, whether the cash is received by armoured car, in person, by mail or in any other way; and
(f) the amount and currency of the funds received."

The receipt of funds record should accurately reflect the transaction whereby the funds were received. As such, the reporting entity should, in this scenario, indicate that the funds were received by means of a deposit, by the client, directly into the brokerage's account at the bank.

The LCTR is intended to indicate the receipt, in cash, of $10,000 or more in a single transaction. A deposit made by the client into the brokerages account, where the brokerage did not handle the cash at any point, is not deemed as the receipt of funds in cash. In this instance, the transaction is not a cash transaction, therefore a large cash transaction report is not required.

Date answered: 2014-02-26

PI Number: PI-6104

Activity Sector(s): Real estate

Obligation(s): Record Keeping, Reporting

Guidance: 6B, 7

Regulations: 1(2)

FX transactions with EFT component

Question:

We had some Iranian Rials in Iran and we have sold it to company A in UAE and they have sent US dollar to our Bank In Europe. Normally A is INSTRUCTOR, his bank is SENDER our European Bank is Receiver and we are Beneficiary. In EFTI template from F2R, receiver is Money XYZ and won't allow us to change to our European bank.

For transferring Rials to Iran no physical transfer will be done. It is a settlement account. As explained for Rials we have only debit /credit our account and when Iran agent owes us, he sell Rials to Company A in Dubai and asks them to send us equivalent US dollar.

So it seems such transaction is not reportable. Am I right? Would like to have your comment. In General we want to know if any wire from Canadian client from their outside Canada account comes to our European account and payment will be done from outside Canada is reportable or not.

Answer:

Paragraph 28(1)(c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) indicates, every money services business shall report the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be. Furthermore, subsection 1(2) of the PCMLTFR defines an electronic funds transfer as “the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, other than the transfer of funds within Canada”

Therefore, to be reportable, an electronic funds transfer must be:

  • client initiated, and
  • the transmission of instructions to transfer funds across the Canadian border.

Based on all of the above, Money XYZ does not appear to be conducting an electronic funds transfer transaction. Money XYZ is not transmitting instructions to transfer funds across the Canadian border. Money XYZ is, in fact, conducting a foreign exchange transaction for which they are being paid via EFT. They are not the entity asked by a client to send or receive the EFT, but merely a beneficiary thereof.

That said, as a foreign exchange transaction, Money XYZ would be required to keep a transaction ticket, as outlined in subsection 30(f) of the PCMLTFR and identify subject to subsection 63(1) and in accordance with subsection 64(1).

 

Date answered: 2014-01-14

PI Number: PI-5681

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 8

Regulations: 1(2), 28(1)(c), 30(f)

Negotiable instruments - cheque and bank draft

Question:

A member issues a cheque to a business who is a non-member. The business owner comes to certify the cheque, but instead of certifying the cheque, we replace the cheque issued by the member with an official cheque/bank draft for the same amount and payable to the same payee as the original cheque.

The interpretation I'm seeking is whether this transaction requires record keeping and ascertaining identification of the individual conducting the transaction?

Answer:

Paragraph 14(k) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that a financial entity must keep a record where it “receives an amount of $3,000 or more from a person or from an entity other than a financial entity in consideration of the issuance of traveller's cheques, money orders or similar negotiable instruments,” and include in that record, “the amount received, the date it was received, the name and address of the person who in fact gave the amount and whether the amount received was in cash, cheques, traveller's cheques, money orders or other similar negotiable instruments.”

I note the term "negotiable instruments" is not defined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) nor the PCMLTFR and should therefore be given its common/ordinary meaning. Black's Law Dictionary defines negotiable instruments as, "a written or signed unconditional promise or order to pay a specified sum of money on demand or at a definite time payable to order or bearer." This would include a bank draft and/ or a cheque (certified or not).

The Cross-border Currency and Monetary Instruments Reporting Regulations (CCMIRR) provides further guidance through its definition of monetary instruments. According to subsection 1(1) of these regulations, monetary instruments mean the following instruments in bearer form or in such other form as title to them passes on delivery, namely,

(a) securities, including stocks, bonds, debentures and treasury bills; and
(b) negotiable instruments, including bank drafts, cheques, promissory notes, travellers' cheques and money orders, other than warehouse receipts or bills of lading.

Moreover, section 2 of the Financial Administration Act (FAA), defines a negotiable instrument as including, “any cheque, draft, travellers cheque, bill of exchange, postal note, money order, postal remittance and any other similar instrument.”

Based on the foregoing, it is clear that a cheque and/ or bank draft is a negotiable instrument and as a result, the obligations outlined in paragraph 14(k) of the PCMLTFR would apply in the above-mentioned scenario, provided the $3,000 threshold is reached.

Date answered: 2013-11-20

PI Number: PI-5648

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(k), 1(1) CCMIRR

Language of documents

Question:

I am wondering if the PCMLTFR contains a provision on record keeping in French or in English. Are we required to translate documents into one language or the other? For example, if we have a document in Spanish and we do not translate it because the document recipient understands Spanish, can we be penalized?

Answer:

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) and its associated Regulations do not contain a provision requiring entities to provide documents in French or in English. However, according to section 16 of the Canadian Charter of Rights and Freedoms, French and English are the official languages of Canada and have equality of status and equal rights and privileges as to their use in Government of Canada institutions. Moreover, the Official Languages Act specifies that Acts of Parliament must be enacted, printed and published in both of Canada's official languages (section 6). Section 22 also indicates that every federal institution has the duty to ensure that any member of the public can communicate with and obtain available services from its head or central office in either official language.

Because reporting entities are subject to requirements under the Act and its associated Regulations, enacted by the Parliament of Canada, and they provide the Financial Transactions and Reports Analysis Centre of Canada, a government institution, with documents, it is logical that these entities would provide them in one of the two Canada's official languages. Given that Government of Canada institutions have a duty to ensure that they can serve members of the public in either official language, it is expected that public servants can understand at least one of the official languages. Therefore, the documents will have to be provided in one of the official languages so that the public servants who receive them can read and understand them.

Date answered: 2013-10-18

PI Number: PI-5635

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Record keeping obligations for incomplete transactions

Question:

Here are two questions with respect to a real estate broker's record keeping obligations when a transaction is not fully completed:

  1. Are real estate brokers obligated to keep receipt of funds records as soon as funds are received, even in the event the purchase and/ or sale is not concluded? 
  2. Are real estate brokers obligated to keep a client information record for an incomplete transaction when there is a receipt of funds or when there is no receipt of funds?

Answer:

  1. Paragraph 39(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “Subject to subsections (3), (4), (5), (6), 52(2) and 62(2), every real estate broker or sales representative shall, when engaging in an activity described in section 37, keep the following records […] a receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body”.

This record keeping requirement applies if the real estate broker or sales representative receives any amount in the course of a single transaction while acting as an agent in respect of the purchase or sale of real estate. This requirement applies as soon as the funds are received by the real estate broker or sales representative, whether or not the purchase or sale of real estate is concluded.

Unlike the large cash transaction record, the amount received for a receipt of funds record can be in any form; it does not have to be in cash. The real estate broker or sales representative does not have to keep a receipt of funds record for a transaction for which they have to keep a large cash transaction record (as per subsection 39(3) of the PCMLTFR). In other words, if the receipt of funds amounted to $10,000 of cash or more, the large cash transaction record would replace the receipt of funds record.

  1. Paragraph 39(1)(b) of the PCMLTFR states that “Subject to subsections (3), (4), (5), (6), 52(2) and 62(2), every real estate broker or sales representative shall, when engaging in an activity described in section 37, keep the following records […] a client information record in respect of every purchase or sale of real estate”.

The real estate broker or sales representative has to keep a client information record for every purchase or sale of real estate. There is no requirement to keep a client information record if there is no purchase or sale of real estate.

For your information, I am providing you with the link to the Guideline 6B: Record Keeping and Client Identification for Real Estate, which provides guidance regarding the record keeping obligations for the Real Estate sector.

Date answered: 2013-10-07

PI Number: PI-5632

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39(1)(a), 39(1)(b)

Record Keeping Obligations - Purchase of Real Estate by a Corporation

Question:

What client identification obligations apply to a real estate broker in the scope of the purchase of real estate by a corporation? I would like to know if the individual who represented the corporation during the purchase must be identified.

Answer:

Pursuant to section 39 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), when a real estate broker or sales representative acts as an agent in respect of the purchase or sale of real estate, they must keep a client information record in respect of every purchase or sale of real estate. Where the client information record is in respect of a corporation, they must also include a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the real estate broker or sales representative.

Moreover, section 59.2 of the PCMLTFR states that every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1):

  • In accordance with subsection 64(1) of the PCMLTFR, ascertain the identity of every person who conducts the transaction
  • In accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors.

Date answered: 2013-10-04

PI Number: PI-5630

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39, 59.2

Client Information Record in respect of every Purchase or Sale of Real Estate

Question:

An agent of your CFO would like to issue a monthly cheque to the daughter of his fiancé. We would obtain an updated signed "know your client" from the agent with a descriptive note to describe that a monthly cheque would be issued to the daughter (name included in full) of his fiancé (name included in full). In addition an acceptable original photo ID will be reviewed or 2 acceptable alternative methods would be reviewed for the third party. Is it acceptable to approve this based on this described method of documenting?

Answer:

Pursuant to section 39 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), when a real estate broker or sales representative acts as an agent in respect of the purchase or sale of real estate, they must keep a receipt of funds record in respect of every amount that they receive in the course of a single transaction and a client information record in respect of every purchase or sale of real estate. Where the receipt of funds record or the client information record is in respect of a corporation, they must also include a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the real estate broker or sales representative.

Subsection 1(2) of the PCMLTFR defines a “client information record” as a record that sets out a client's name and address. If the client is a person, it should set out their date of birth and the nature of their principal business or their occupation. If the client is an entity, it must set out the nature of their principal business.

Additionally, a “receipt of funds record” must contain the following information:

  • the name of the person or entity from whom the amount is in fact received and
    • where the amount is received from a person, their address and date of birth and the nature of their principal business or their occupation, and
    • where the amount is received from an entity, their address and the nature of their principal business;
  • the date of the transaction;
  • the number of any account that is affected by the transaction, and the type of that account, the full name of the person or entity that is the account holder and the currency in which the transaction is conducted;
  • the purpose and details of the transaction, including other persons or entities involved and the type and form of the transaction;
  • if the funds are received in cash, whether the cash is received by armoured car, in person, by mail or in any other way; and
  • the amount and currency of the funds received.

In the situation you have described above, the real estate broker has the obligation to gather the information required to complete a receipt of funds record and a client information record.

Date answered: 2013-10-01

PI Number: PI-5626

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6B

Regulations: 1(2), 39

Keeping records of the client's occupation

Question:

I would like to have more information on this subject:

The legislative requirement to keep a record of the client's occupation.

Answer:

A real estate broker or sales representative is required to keep record, among others, of the occupation of their client, if the client is an individual.

Reference to the client's occupation should mirror standardized labour market language used to describe work performed by Canadians. This way, the occupation, as part of the familiar Canadian labour market, should convey a precise and detailed idea of the work performed.

While “retired” is not an occupation per se, this status is acceptable to refer to a client's work situation if, indeed, the client has retired.

In the case where the client's occupation is a doctor or a teacher, either of these occupations would be acceptable to reference because they generate a precise and detailed idea about the type of work being performed by the client.

Date answered: 2013-09-13

PI Number: PI-5616

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39(1), 64(1)

Keeping records of Powers of Attorney and the Will

Question:

I would like to have more information on this subject:

Certain documents being kept, such as the Powers of Attorney and the Will.

Answer:

Regarding the Powers of Attorney and Will, it is our understanding that a real estate broker or sales representative will ask for such document if the seller and/or the buyer has granted someone the powers of attorney over the transaction or is the executor of the Will that is the person that has the authority to sign on behalf of the estate. Our Compliance Officers examine that these people were properly identified as per subsection 64(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) and records properly kept as per subsection 39(1) of the PCMLTFR, as they are the people conducting the transaction. In addition, our Compliance Officers will request copies of the Powers of Attorney and/or the Will to establish who is giving instruction.

Date answered: 2013-09-13

PI Number: PI-5615

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39(1), 64(1)

Client Identification Record

Question:

Does a real estate broker, representing themselves, on the sale or purchase of a property need to complete a client identification record or perform self-identification? FINTRAC's Compliance Q&A( July 3, 2008) states that there is no obligation for a real estate, who is representing themselves, to complete a client identification record or perform self-identification.

Answer:

Section 37 of the PCMLTFR states that “Every real estate broker or sales representative is subject to Part 1 of the Act when they act as an agent in respect of the purchase or sale of real estate.”

Therefore, a real estate broker or sales representative cannot be their own agent with respect to the purchase or sale of real estate.

Date answered: 2013-09-13

PI Number: PI-5614

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 37

Client Identification Record (CIR) and the Receipt of Funds Record (ROFR)

Question:

Who is responsible for submitting the Client Identification Record (CIR) and the Receipt of Funds Record (ROFR) when a client is referred to one real estate brokerage by another? The “referring” brokerage never represented the client and had no further dealings with the client once he or she was referred to the other brokerage.

Answer:

Section 37 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) stipulates that every real estate broker or sales representative who acts as an agent in respect of the purchase or sale of real estate is subject to Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Section 39 of the PCMLTFA further specifies that, every real estate broker or sales representative shall, when engaging in an activity described in section 37, keep a receipt of funds record in respect of every amount that they receive in the course of a single transaction (unless the amount is received from a financial entity or a public body) and a client information record in respect of every purchase or sale of real estate.

Under section 2 of the PCMLTFA, a “client” is defined as a person or entity that engages in a financial transaction or activity with a person or an entity referred to in section 5.

The above provisions make it clear that the record keeping obligations found in section 39 of the PCMLTFA must be fulfilled by the entity that is genuinely engaging in a financial transaction with the client. In the scenario you have provided, these obligations must be performed by the real estate broker who acts as an agent for the client in respect of the purchase or sale of real estate, not the broker who simply made the referral.

Date answered: 2013-08-29

PI Number: PI-5608

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 37

Act: 2, 39

Acceptable ID and record keeping - T4As, SIN

Question:

Based on the information you have provided we understand, and will be advising Company ABC accordingly, that they may satisfy their obligations under subsection 59.2(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations with respect to a party represented by a mere poster by:

a) asking the party represented by a mere poster for an identification document when the party is present; or
b) using an agent or mandatory and/or to use an appropriate combination of the identification methods used to identify individuals who are not physically present to identify the party represented by a mere poster (“alternate ID method”).

If, after applying (a) or (b), the Company ABC has not been able to confirm the identify or existence of the party represented by the mere poster, they will be required to document the steps they took under (a) or (b), as the case may be, to confirm the identity or existence of the party. Please advise us if our understanding is incorrect.

Non-exhaustive list of acceptable pieces of identification to ascertain the identity of people

We understand that T4As are issued by Service Canada and not an employer. In addition, T4As contain two unique identifier numbers: Social Insurance Number and OAS number. The document needs to be government issued, have a unique identifier, and must be valid. Since T4As meet all the criteria, does this alter FINTRAC's opinion on whether T4As may be used for identification purposes?

Recording of SIN Cards

Whether the Company ABC are required to document the SIN number of the client on client information records given the statement in FINTRAC's Guideline 6B.

If not required to document SIN, how would FINTRAC prefer Company ABC account for this in their files? Would merely noting on their client ID form that they saw the SIN number suffice?

Answer:

With respect to your question as to whether the T4As may be used for identification purposes, FINTRAC's position remains the same that this document is not an acceptable piece of identification because it is not issued for identification purposes.

With respect to your question on how the real estate broker or sales representative must keep a record of the SIN, as per subsection 67(a) of the PCMLTFR, the real estate broker or sales representative must keep a record of the piece of identification used to verify the identity of the person. If the piece of identification used is the SIN, the record must include:

  • the name of that person;
  • the type of the piece of identification used;
  • the reference number of the piece of identification used; and
  • the place where it was issued.

Date answered: 2013-08-16

PI Number: PI-5596

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6B

Regulations: 67(a)

Record Keeping - Powers of Attorney and the Will

Question:

Can I have more information about : The legislative requirement to keep a record of certain documents such as the Powers of Attorney and the Will?

Answer:

Regarding the legislative requirement to keep a record of the Powers of Attorney and Will, it is our understanding that a real estate broker or sales representative will ask for such documents if the seller and/or the buyer has granted someone the power of attorney over the transaction or if the seller and/or buyer is the executor of a Will and has the authority to sign on behalf of the estate.

There is no legislative requirement under the PCMLTFA and its associated Regulations to keep such a record. We understand that this is a best practice that establishes who has the authority to give instructions and who is conducting the transaction.

Please note, when a real estate broker or sales representative is required to provide documents to one of FINTRAC's Compliance Officers it is for the purpose of examining whether the real estate broker or sales representative's clients were properly identified as per subsection 64(1) of the PCMLTFR as well as whether records were properly kept as per subsection 39(1) of the PCMLTFR. If available, the Powers of Attorney and Will may be requested in order to facilitate FINTRAC's examination.

Date answered: 2013-07-26

PI Number: PI-5585

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39(1), 64(1)

Cardholder record keeping requirements

Question:

Assume a financial entity is opening a credit card account for a corporation that is not a securities dealer. Prior to issuing any card on the account, the financial entity: (i) performs proper client identification of the corporation (e.g. confirming existence, name, address as well as its directors' names); and (ii) obtains proper records with respect to the corporation (e.g. official corporate records that contain provisions relating to the power to bind the corporation in respect of the account, beneficial ownership, etc.). Going forward, the financial entity also keeps a record of every credit card application received from the corporation and every credit card statement issued in respect of the corporation.

Assume also that the corporation is issued a number of credit cards on the account which may only be used in accordance with the corporation's approved usage policy. Some of the cards are embossed with the name of a specific employee while others are simply for use by a particular department (e.g. for use by the marketing department for catering and dining). Further, all credit card statements are issued to the corporation and the corporation remains solely responsible for payment of all charges in respect of each credit card issued under the account (even those cards which are embossed with the name of a specific employee).

My question is in respect of the cardholder record keeping requirements. Specifically, is it acceptable that the financial entity has access to cardholder records (e.g. name, address, telephone number and date of birth, as available) and can draw upon this information on demand? Or is the financial entity required to “scrub” the cardholder names against applicable Canadian “blocked persons list” (keeping in mind always that it is not the individual cardholder who has applied for the account, rather such cardholder is simply using the card in their capacity as an employee of the corporation).

My understanding is that the corporation is “the client” of the financial entity and thus only the corporate information (e.g. name of corporation, directors, and beneficial owners) is scrubbed against the blocked persons list. In other words, it is not necessary to maintain the cardholder information in the same processing platform as the corporate information (keeping in mind always that the specified information for each cardholder can nevertheless be obtained on demand). Can you please confirm whether my understanding is correct?

Answer:

Section 54.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states, “Subject to subsections 62(1) and (2) and section 63, every financial entity shall:

(b) where the financial entity opens a credit card account in the name of a corporation, confirm the existence of and ascertain the name and address of the corporation and the names of its directors in accordance with section 65”.

Therefore, your understanding that the corporation is the client of the financial entity is accurate. According to section 54.1(b), the financial entity is required to identify the corporation, but not the corporation's employees who are designated cardholders.

Furthermore, section 14.1 of the PCMLTFR states, “Subject to subsection 62(2) every financial entity shall, in respect of every credit card account that is opens, keep a credit card account record that includes

(b) where the account is opened in the name of a client that is a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of the account;
(c) the name, address and telephone number of every holder of a credit card for the account;
(d) the date of birth of every holder of a credit card for the account, if that information is known after reasonable measures have been taken by the financial entity to obtain it…”

The financial entity is required to keep certain records pertaining to cardholder information, listed above, and can draw upon this information on demand. However, unlike the corporation itself, the cardholders, or employees, do not have to be identified under 54.1(b) of the PCMLTFR. Since the cardholders do not need to be identified, only corporate information (e.g. name of corporation, directors, beneficial owners) will be able to be scrubbed against the OSFI Terrorist Listings.

However, as indicated in FINTRAC's Guideline 4: Implementation of a Compliance Regime (under Section 5: Compliance Policies and Procedures), a reporting entity's compliance policies and procedures should incorporate, at a minimum, applicable reporting, record keeping, client identification, risk assessment and risk mitigation requirements. For example, in the case of reporting obligations relating to terrorist property or suspicious terrorist financing, a reporting entity's policies and procedures should include the verification of related lists in Canada.

Date answered: 2013-07-25

PI Number: PI-5580

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 4

Regulations: 14.1, 54.1

Situation where a deposit account goes into overdraft

Question:

In the situation where a deposit account goes into overdraft such that the customer now owes the credit union money (so it has become a credit file.), do they now need to get the employer address and employer name?

Answer:

According to subsection 1(2) of the PCMLTFR, a “client credit file means a record that relates to a credit arrangement with a client and includes the name, address and financial capacity of the client, the terms of the credit arrangement, the nature of the principal business or occupation of the client, the name of the business, if any, and the address of the client's business or place of work”.

It is possible that a financial entity will implement some type of document(s) detailing a credit agreement for its clients. However, if this document does not contain all of the information found in the definition of client credit file under subsection 1(2) of the PCMLTFR, it is not considered a client credit file under the PCMLTFR.

Therefore, according to the PCMLTFR, the financial entity is not required to keep a record of the information as it is not a client credit file.

According to paragraph 14(i) of the PCMLTFR, every client credit file that a financial entity creates in the normal course of business needs to be recorded. Therefore, if the financial entity has created a client credit file by obtaining all of the information under subsection 1(2) of the PCMLTFR, then the financial entity has created a client credit file and they must keep this record.

Date answered: 2013-06-14

PI Number: PI-5567

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 1(2), 14(i)

Record keeping requirements and negotiable instruments

Question:

If a client brought in $3500 cash and wanted the financial entity to issue a Manager's Trust cheque for it, this would be considered a reportable transaction. But if a client came into the financial entity and wanted us to debit their account for $3500 and we issued a Manager's Trust Cheque, this would not be a reportable transaction. Also if someone was to bring in a cheque drawn on one of our client's for $3500 and simply wanted to cash the cheque, this would not be a reportable transaction

Answer:

Subsection 14(k) of the PCMLTFR states that a financial entity must keep a record where it “receives an amount of $3,000 or more from a person or from an entity other than a financial entity in consideration of the issuance of traveller's cheques, money orders or similar negotiable instruments” and include in that record “the amount received, the date it was received, the name and address of the person who in fact gave the amount and whether the amount received was in cash, cheques, traveller's cheques, money orders or other similar negotiable instruments.”

There is no record keeping obligation when an individual uses funds from his or her account at the financial entity in consideration of the issuance of the traveller's cheques, money orders or similar negotiable instruments.

Anytime an individual walks in with the 3000$ (regardless of how much time has elapsed or if the financial entity deposits it before then issues a product) - and requests a money order or other - there is a record keeping obligation for the reporting entity. However, if the client withdraws from his account, and immediately requests a money order or other - no record keeping obligations.

Furthermore, should funds that have passed through a client's account be mixed with the financial entity's funds for the issuance of a manager's trust cheque, the record-keeping obligations would not be triggered because these are funds drawn from a client's account and funds received from a financial entity.

However, should the client enter the financial entity with the funds and have these mixed with the financial entity's funds for the issuance of a manager's trust cheque, then the record-keeping obligations would be triggered as the funds brought in were not drawn from the client's account but brought to the institution by the client.

Date answered: 2013-05-02

PI Number: PI-5540

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(k)

Mere posting

Question:

The Real Estate entity is seeking a specific application of the PCMLFTA. They believe that the determination of subjecting real estate brokers or salespeople to the PCMLTFA should NOT depend on the following:

  • what listing form they use
  • how the form is amended
  • whether they are providing mere postings

The PCMLTFR states that every real estate broker or salesperson is subject to the PCMLTFA when they act as an agent in respect of the purchase or sale of real estate. Therefore, the inquiring Real Estate entity believes, according to the regulations, real estate brokers or agents must comply with the regime for every real estate transaction they are involved in; including all MLS® listings regardless of whether those MLS® listings are mere postings.

Answer:

Paragraph 1(2) of the PCMLTFR defines a real estate broker or sales representative as “a person or entity that is registered or licensed under provincial legislation in respect of the sale or purchase of real estate.” Section 37 of the PCMLTFR further states that “every real estate broker or sales representative is subject to Part 1 of the Act when they act as an agent in respect of the purchase or sale of real estate.” This means that when a person or entity, who is registered or licensed under provincial legislation in respect of the sale or purchase of real estate, acts as an agent in respect of the purchase or sale of real estate they are subject to Part 1 of the PCMLTFA.

The PI Function position relies on the agreement laid out in writing between the mere poster and the seller of the property, as this agreement is a good indicator of the relationship between the seller or the buyer and the real estate broker or sales representative.

However, real estate brokers or salespeople are best placed to determine if they are acting as agents for the purchase or sale of property. Should the agent provide services not listed in the agreement, services that render them subject to the PCMLTFA and its associated regulations, they must comply with the requirements of the PCMLTFA and its associated regulations. An agreement is a private contract between the seller or the buyer and the real estate broker or sales representative that, as with any provision in any private agreement, cannot interfere with or overrule a public law.

Paragraph 59.2(3) of the PCMLTFR:

Where the parties in a real estate transaction are each represented by a different real estate broker or sales representative, each broker or sales representative has to identify the individual or confirm the existence of the party that they represent.

If some parties in a real estate transaction are represented by a real estate broker or sales representative while other parties are not, each real estate broker or sales representative who represents a party to the transaction has to take reasonable measures to identify or confirm the existence of the parties that are not represented.

In this situation, if the real estate broker or sales representative is unable to identify or confirm the existence of the parties that are not represented, they will have to keep a record of the measures they took and the reason they were unable to identify or confirm the existence of the other parties.

There are no clarifications of the concept of “reasonable measures” in these provisions and the term is not defined in the Act or Regulations. However, our guideline 6B: Record Keeping and Client Identification for Real Estate, available on our Web site, provides some guidance as to FINTRAC's policy regarding this term.

Date answered: 2013-05-02

PI Number: PI-5539

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 1(2), 37, 59.2(3)

Condominium Developer's Obligations

Question:

Please be advised that our law firm acts on behalf of a condominium developer, engaged in the development and sale of new condominium units, and our client (the “Developer”) has also retained the services of an independent real estate agency/brokerage firm (the “Agency”) to market and sell the new condominium units to third party purchasers. It's my understanding that although real estate developers and builders are reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (hereinafter referred to as “FINTRAC”), the Developer does not have to comply with the reporting and record-keeping requirements of FINTRAC in those circumstances where the sale of all the condominium units being developed are handled by the Agency, because real estate brokers and sales representatives are also reporting entities under FINTRAC, and accordingly the Agency (being an external real estate broker or agent with whom the Developer has a contractual relationship) will correspondingly be compelled to keep the requisite records and make any required reports relating to the sale of the units available to the government.

Can you kindly confirm:

  1. Whether my understanding (regarding the Developer not having to comply with the reporting and record keeping requirements of FINTRAC in the above-noted circumstances) is correct;
  2. Whether the Developer would be exposed to any negative ramifications (such as a fine or any criminal or quasi-criminal sanction, or any civil action) in the event that the Agency inadvertently failed to comply with its FINTRAC obligations in connection with any sale of a unit by the Developer in the condominium project under development; and
  3. Whether the monies received by the Developer on the closing of any unit sale transaction (in respect of which the FINTRAC requirements were not followed by the Agency) are susceptible to being seized by (and forfeited to) the government any time after the closing date.

Answer:

To answer your questions regarding your client, the Developer, and their contractual relationship with an external real estate broker or agent, the Proceeds of Crime (Money Laundering) Terrorist Financing Act (PCMLTFA) outlines the reporting obligations for real estate developers.

Subsection 1(2) of the PCMLTFR states, “a real estate developer means, on any given day in a calendar year, a person or entity who, in that calendar year and before that day or in any previous calendar year after 2007, has sold to the public, other than the capacity of a real estate broker or sales representative,

(a) five or more new houses or condominium units;
(b) one or more new commercial or industrial buildings; or
(c) one or more new multi-unit residential buildings each of which contains five or more residential units, or two or more new multi-unit residential buildings that together contain five or more residential units.”

According to subsection 39.5(1) of the PCMLTFR, “Every real estate developer is subject to reporting obligations under Part I of the PCMLTFA when

(a) in the case of a person or of an entity other than a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building; and

(b) in the case of an entity that is a corporation, they sell to the public a new house, a new condominium unit, a new commercial or industrial building or a new multi-unit residential building on their own behalf or on behalf of a subsidiary or affiliate.”

It would be a question of fact to be able to determine who has to fulfill the requirements under the PCMLTFA and PCMLTFR in a case where the real estate developer has retained the services of an independent real estate agency/brokerage firm to market and sell the new condominium units to third party purchasers. In fact, it would depend on the nature of the contractual relationship between the builder and the sales agency.

  • If the contract makes the sale agency the builder's agent (and makes the individual sales representatives the employees of the builder), then the builder would remain responsible for the obligations (i.e. the usual rules for agents and employees, with the usual exception that the agent or employee might have a personal obligation to report STRs for which they have reasonable grounds themselves).
  • If the contract is simply a contract for services (i.e. the sales agency has contracted to do advertising, give info to prospective clients, but they do not act as agents for the sale, they simply help a buyer fill out the offer and act as a mail box to hand the offer to the builder who may or may not accept it), then the builder is still responsible for all obligations, and the sales representative has absolutely no obligations (not even STR obligations).

Date answered: 2013-04-12

PI Number: PI-5534

Activity Sector(s): Real estate

Obligation(s): Record Keeping, Reporting

Guidance: 6B, 7

Regulations: 39.5(1)

Act: 1(2)

Record keeping: traveller's cheques, money orders or similar negotiable instruments

Question:

If a member brought in $3500 cash and wanted the Credit Union to issue a Manager's Trust cheque for it, would this be considered a reportable transaction? If a member came into the Credit Union and wanted us to debit their account for $3500 and we issued a Manager's Trust Cheque, would this be a reportable transaction? Also if someone was to bring in a cheque drawn on one of our member's for $3500 and simply wanted to cash the cheque, would this be a reportable transaction?

Answer:

Subsection 14(k) of the PCMLTFR states that a financial entity must keep a record where it “receives an amount of $3,000 or more from a person or from an entity other than a financial entity in consideration of the issuance of traveller's cheques, money orders or similar negotiable instruments” and include in that record “the amount received, the date it was received, the name and address of the person who in fact gave the amount and whether the amount received was in cash, cheques, traveller's cheques, money orders or other similar negotiable instruments.”

As indicated in the policy interpretation below there is no record keeping obligation when an individual uses funds from his or her account at the financial entity in consideration of the issuance of the traveller's cheques, money orders or similar negotiable instruments.

Furthermore, should funds that have passed through a member's account be mixed with credit union funds for the issuance of a manager's trust cheque, the record-keeping obligations would not be triggered because these are funds drawn from a client's account and funds received from a financial entity.

However, should the client enter the credit union with the funds and have these mixed with the credit union's funds for the issuance of a manager's trust cheque, then the record-keeping obligations would be triggered as the funds brought in were not drawn from the client's account but brought to the institution by the client.

With respect to your question, namely, “when a credit union cashes a personal cheque of $3,000 or more, is this captured under 14(l) with respect to record keeping requirements?”

The answer is no, if it is a cleared cheque, it is captured under 14(h) of the PCMLTFR. A financial entity has to keep every cleared cheque drawn on or deposited to an account. This does not apply to cheques if they are drawn on and deposited to accounts at the same branch. It does not apply either if the financial entity has electronic or microfilm records that are retained for at least five years and that can readily reproduce images of the cheques.

Date answered: 2013-03-19

PI Number: PI-5522

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(k), 14(h)

Occupation

Question:

Please confirm if the following occupations are considered valid and sufficiently descriptive in prescribed circumstances (e.g. at account opening):

  • Retired
  • Student
  • Unemployed
  • Self-employed
  • Contractor

Answer:

  • Retired - acceptable
  • Student - acceptable
  • Unemployed - acceptable
  • Self-employed – not acceptable
  • Contractor - not acceptable

Reference to the client's occupation should mirror standardized labour market language used to describe work performed by Canadians. This way, the occupation, as part of the familiar Canadian labour market, should convey a precise and detailed idea of the work performed.

Date answered: 2013-03-06

PI Number: PI-5510

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

"Cash-on-delivery account for bonds" – Intended use of the account

Question:

Is "cash-on-delivery account for bonds" in line with the intended use of the account?

Answer:

The goal of the requirement to keep records on the intended use of each account is to provide reporting entities with an overview of the client's intentions at the time the account is opened, and to allow for the identification of any discrepancies or inconsistencies in account use vis-a-vis the declared intentions, with a view to identifying areas deemed at high risk for money laundering or the financing of terrorist activities, and to take necessary mitigating action.

Neither the Act nor the Regulations specify what is considered as acceptable or inacceptable in terms of intended account use. Although our own guidelines do include some examples of intended use, they do not provide instructions regarding the required level of detail for intended account use record-keeping. More importantly, they do not specify what would be considered as "insufficient" record-keeping with respect to intended account use. In comparison, as concerns record-keeping relating to the business or occupation, our guidelines clearly indicate that reporting entities must "be as descriptive as possible regarding the business or occupation." The guidelines also provide concrete examples of what is considered insufficient.

We are currently putting together a list that compliance officers can refer to when identifying deficiencies and/or updating our guidelines on this issue. However, there is still a lot of work left to be done and, for the time being, determining what constitutes an acceptable description of intended account use remains a matter of policy interpretation.

The answer to your question, "Is 'cash-on-delivery account for bonds' in line with the intended use of the account?", is yes. This is a legitimate intended use of an account with a securities dealer, and meets the requirements of subparagraph 23(1)(a.1) of the Regulations.

Date answered: 2013-02-19

PI Number: PI-5500

Activity Sector(s): Securities dealers

Obligation(s): Record Keeping

Guidance: 6E

Regulations: 23(1)(a.1)

Social Insurance Number - Record keeping

Question:

If a client presents his/her Social Insurance Number card for identification purposes, is the entity required to record the number on this piece of identification and the place of issue, or does this contravene a regulation (or a best practice) of the Privacy Commissioner?

Answer:

Subsection 67(a) of the Regulations states that "Every person or entity that is required by these Regulations to ascertain the identity of a person in connection with a record that the person or entity has created and is required to keep under these Regulations, or a transaction that they have carried out and in respect of which they are required to keep a record under these Regulations or under section 12.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations, shall set out on or in or include with that record the name of that person" and the following information: "if a birth certificate, driver's licence, provincial health insurance card (if such use of the card is not prohibited by the applicable provincial law), passport or any other similar record is relied on to ascertain the person's identity, the type and reference number of the record and the place where it was issued.".

As with all pieces of identification used to verify a person's identity, if a client presents his/her social insurance card for identification purposes, the reporting entity must record the following:

  1. Person's name;
  2. Type of document serving as the person's identification;
  3. Reference number of the document used
  4. Place of issuance of the document used as the person's identification (province or state, country).

Section 67 of the Regulations may be cited for the "failure of a person or entity that is required to ascertain the identity of a person to keep prescribed records in respect of the person."

As indicated in the Policy interpretation with respect to SIN and health card numbers: “The use of the SIN as an identification card/number is not prohibited under any Canadian legislation, including FINTRAC's. However, it should be noted that guidance from TBS and the OPC recommends, as best practice, using another method to identify clients. FINTRAC guidance signals that reporting entities can use the SIN for identification purposes but indicate that it should not be sent in transaction reports.”

Date answered: 2013-02-11

PI Number: PI-5495

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 67(a), 67

Reasonable measures for beneficial ownership and record keeping requirements

Question:

Beneficial Ownership:

One case I noted during an AML review is that no beneficial ownership record is retained for one customer (a church) of the financial entity ("FE"). The FE explained that it's because there are no beneficial owners (i.e. individuals control directly or indirectly 25% or more of the church's interests). However, the current customer file does not contain any documentation evidencing that the FE (or its employee) has taken "reasonable measures" to obtain beneficial ownership information. That is to say, we didn't notice any document showing that the FE has asked its customer the question or has done its own research to determine if there are beneficial owners.

Your advice is that this is considered as an area of deficiency as there is no written record to indicate the FE has taken reasonable measures. This is in line with what we've observed on some FINTRAC examination letters which identified similar occurrences as deficiencies.

The FE presented a document indicating the composition of the board that controls the church to prove to us that there are no beneficial owners, as the board consists of 9 members and each member has an equal controlling interest. This document is obtained from the CRA website. Do you think if this is considered as a "reasonable measure"?

Record-keeping requirements for a signature card holder:

I also asked about what records should be retained for authorized signatories (i.e. individuals signing the signature card of an entity). Your advice is that the following information should be retained on file: name, address, date of birth and occupation; and the references of regulations are section 54(1) and section 14. My understanding is that although the authorized signatories are not the FE's customers (the entity is the customer), a client record should be retained as the FE is required to identify the authorized signatories (up to 3).

Answer:

Beneficial Ownership

Subsection 11.1(1) of the PCMLTFR indicates that if the financial entity has to confirm the existence of a corporation or other entity at the opening of an account, at that same time, the financial entity also has to take reasonable measures to obtain information about the entity's beneficial ownership.

If obtained, the financial entity has to keep a record of the following:

  • If the entity is a corporation:
    • the name and occupation of all directors of the corporation; and
    • the name, address and occupation of all individuals who directly or indirectly own or control 25% or more of the shares of the corporation.
  • If the entity is other than a corporation:
    • the name, address and occupation of all individuals who directly or indirectly own or control 25% or more of the entity.

In the case of a not-for-profit organization:

If the financial entity has to confirm the existence of an entity that is a not-for-profit organization (confirming the existence as per subsection 11.1(1) of the PCMLTFR), the financial entity also has to do the following:

  • Determine whether or not that entity is a registered charity for income tax purposes and keep a record to that effect;
  • If that entity is not a registered charity, determine whether or not it solicits charitable financial donations from the public and keep a record to that effect.

This requirement is not based on reasonable measures. If the entity is a not-for-profit organization, the financial entity must make the determination described above and keep the related record.

That means, in the case of a not-for-profit organization, the financial entity has 1) to take reasonable measures to obtain information about the entity's beneficial ownership and 2) to determine if the not-for-profit organization is a registered charity or solicits charitable financial donations from the public.

In a scenario where each owner owns or controls less than 25%, the financial entity would record that they verified the result of the beneficial ownership.

Record-keeping requirements for a signature card holder

The financial entity has to identify any individual who signs a signature card for an account that they open (other than a credit card account) before any transaction (other than the initial deposit) is carried out. In cases where a business account has more than three individuals authorized for it, the financial entity has to identify at least three of those individuals.

If the financial entity opens an account for an entity, there are identification requirements in addition to the one regarding signature cards.

I refer you to section 14 of the PCMLTFR for more information with respect to which record must be kept, since it is a question of fact, I am not able to provide you more information on this matter.

 

Date answered: 2013-02-04

PI Number: PI-5493

Activity Sector(s): Financial entities

Obligation(s): Beneficial Ownership, Record Keeping

Guidance: 6G

Regulations: 11.1(1), 14

Life insurance acquiring client accounts from another entity

Question:

With respect to the question of acquiring client accounts from another entity, we discussed this on the telephone and would like written confirmation. You had indicated that when an Advisor acquires client accounts from another entity that the new Advisor has a responsibility to ensure all client files are compliant with respect to Fintrac regulations, i.e. Identification, etc. I believe this also included if an Advisor takes over a case from another Advisor by way of Agent of Record change. The MGA of the new Advisor was not part of the original sale as it was completed through another Distribution however you indicated on the phone last week that the new MGA does have obligation for the case once it becomes part of the our Advisor's business. Please elaborate on this area and include what is involved in ensuring the files are compliant to Fintrac guidelines.

Answer:

In accordance with section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every financial entity shall ascertain the identity of a person, corporation, or entity other than a corporation, at the time an account is opened. In the case of the acquisition of a portfolio, the acquiring entity must consider whether or not the accounts are opened, so as to determine the associated identification obligations.

FINTRAC has determined that there is no account opening in a situation where an entity transfers over client accounts where:

  • the clients were previously identified and records kept in accordance with the PCMLTFA and its related Regulations or at the time the account was opened there may not have existed the legislative requirements to ascertain the identity (prior to June 12, 2002);
  • only immaterial changes were made to the account, namely, change of account number, logo, branding, new card and ancillary services; and
  • transactional history follows.

The acquiring entity is responsible for ensuring that the acquired client accounts were previously identified in accordance with section 64 of the PCMLTFR and records kept in accordance with section 14 of the PCMLTFR.

However, should the acquiring entity add any account(s) to the profile of an acquired client, the acquiring entity shall ascertain the ID of the client at the time the new account is added. The exceptions outlined in the regulations (paragraph 62(1)(c) and section 63 of the PCMLTFR) pertaining to ascertaining the identity would not apply.

That said, in accordance with subparagraph 71(1)(c)(i), every reporting entity is required to carry out a risk assessment of their clients and business relationships. As such, the acquiring entity is required to conduct a risk assessment of the newly acquired account holders. Should the risk assessment lead to a high risk designation, then the acquiring entity would be required to carry out special measures for identifying clients, keeping records, and monitoring financial transactions in respect of the activities that pose a high risk, in accordance with subsection 9.6(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), and further detailed in section 71.1 of the PCMLTFR.

Finally, as a best practice, reporting entities are encouraged to review and update the account information, as appropriate, when acquiring these accounts in the process of a merger or acquisition. Ultimately, the newly acquired account holders become the responsibility of the acquiring entity, and it is for that entity to not only ensure compliance with the PCMLTFA and its related Regulations, but to review the risk that these newly acquired clients may pose to the entity, and/or the Canadian financial system.

Date answered: 2012-12-19

PI Number: PI-5479

Activity Sector(s): Life insurance

Obligation(s): Record Keeping

Guidance: 6A

Regulations: 14, 54, 62(1)(c), 63, 64,71,1, 71(1)(c)(i)

Act: 9.6(3)

Acquisition of a portfolio

Question:

ABC Corporation wanted to obtain clarification in writing concerning their record keeping requirements in regards to the purchase of a pool from a Life Insurance Company since the majority of mortgage that are being purchased originated prior to 2002 and at present do not meet the current record keeping requirements.

Answer:

In accordance with section 54 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), every financial entity shall ascertain the identity of a person, corporation, or entity other than a corporation, at the time an account is opened. In the case of the acquisition of a portfolio, the acquiring entity must consider whether or not the accounts are opened, so as to determine the associated identification obligations.

FINTRAC has determined that there is no account opening in a situation where an entity transfers over client accounts where:

  • the clients were previously identified and records kept in accordance with the PCMLTFA and its associated Regulations or at the time the account was opened there may not have existed the legislative requirements to ascertain the identity (prior to June 12, 2002);
  • only immaterial changes were made to the account, namely, change of account number, logo, branding, new card and ancillary services; and
  • transactional history follows.

The acquiring entity is responsible for ensuring that the acquired client accounts were previously identified in accordance with section 64 of the PCMLTFR and records kept in accordance with section 14 of the PCMLTFR.

However, should the acquiring entity add any account(s) to the profile of an acquired client, the acquiring entity shall ascertain the ID of the client at the time the new account is added. The exceptions outlined in the regulations (paragraph 62(1)(c) and section 63 of the PCMLTFR) pertaining to ascertaining the identity would not apply.

That said, in accordance with subparagraph 71(1)(c)(i), every reporting entity is required to carry out a risk assessment of their clients and business relationships. As such, the acquiring entity is required to conduct a risk assessment of the newly acquired account holders. Should the risk assessment lead to a high risk designation, then the acquiring entity would be required to carry out special measures for identifying clients, keeping records, and monitoring financial transactions in respect of the activities that pose a high risk, in accordance with subsection 9.6(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), and further detailed in section 71.1 of the PCMLTFR.

Finally, as a best practice, reporting entities are encouraged to review and update the account information, as appropriate, when acquiring these accounts in the process of a merger or acquisition. Ultimately, the newly acquired account holders become the responsibility of the acquiring entity, and it is for that entity to not only ensure compliance with the PCMLTFA and its associated Regulations, but to review the risk that these newly acquired clients may pose to the entity, and/or the Canadian financial system.

Date answered: 2012-12-19

PI Number: PI-5478

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14, 54, 62(1)(c), 63, 64, 71(1)(c)(i), 71.1

Act: 9.6(3)

Similar negotiable instruments - AML ID. Requirements

Question:

We have been given a further definition of “similar negotiable instruments” to include Manager's Trust Cheques or other types of official credit union cheques.

Can you please confirm the following:

  1. If a member wants the credit union to issue a manager's trust cheque in the amount of $3,000 or greater from funds the member will pay (including debits regarding the member's deposit), has the record keeping requirement for “similar negotiable instruments” been triggered? (this would include a record of the date, amount received, and name and address of the person who gave the amount and also whether the amount received was in cash, cheques, traveller's cheques or “similar neg. instruments” and the person's identity or confirmation on record if this has already been done).
  2. If a manager's trust cheque is issued from credit union funds only, there is no need to create a record, since the funds are not those of a member. However, if a manager's trust cheque is issued on funds that have passed through a member's account, then a record for a negotiable instrument of $3,000 is required. Can one assume this would include if a member deposited sale proceeds from a house sale and those funds were commingled with mortgage proceeds from the credit union to fund a manager's trust cheque on the purchase of a home? (a credit union may already have all of the information required for this record in its systems and should be okay as long as it can link all of the information so that an actual record does not have to be created). The record info would include date, amount received (from the member's account), name and address of the member and record that ID has been ascertained or verified.

Answer:

As per section 14(k) of the PCMLTFR, a financial entity must keep a record where it “receives an amount of $3,000 or more from a person or from an entity other than a financial entity in consideration of the issuance of traveller's cheques, money orders or similar negotiable instruments” and include in that record “the amount received, the date it was received, the name and address of the person who in fact gave the amount and whether the amount received was in cash, cheques, traveller's cheques, money orders or other similar negotiable instruments.”

Based on the information provided in bullet 1 above, there is no record keeping obligation when an individual uses funds from his or her account at the financial entity in consideration of the issuance of the traveller's cheques, money orders or similar negotiable instruments.

Furthermore, should funds that have passed through a member's account be mixed with credit union funds for the issuance of a manager's trust cheque (as in bullet #2), the record-keeping obligations would not be triggered because these are funds drawn from a client's account and funds received from a financial entity. However, should the client enter the credit union with the funds and have these mixed with the credit union's funds for the issuance of a manager's trust cheque for the purchase of a home, then the record-keeping obligations would be triggered as the funds brought in were not drawn from the client's account but brought to the institution by the client.

Date answered: 2012-12-06

PI Number: PI-5473

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(k)

Receipt of Funds- s.39(1)(b)

Question:

The funds do not go directly to the seller; they go directly to the seller's listing agent's brokerage. So, the buyer's agent and brokerage has not received the funds but seller's agent and brokerage has.

But what about the seller's brokerage?

The brokerage or agent has received funds directly from a buyer but is not in a client relationship with the buyer; the other agent and brokerage is in the client relationship with the buyer.

Question that remains is whether agent of seller would need to complete a ROF record or not. If yes, then it follows they would also need an ID record to go with the ROF record.

This is then problematic as this brokerage would be trying to ID another brokerage's client.

Answer:

In accordance with subsection 39(1) and subject to subsections (3), (4), (5), (6), 52(2) and 62(2), every real estate broker or sales representative shall, when engaging in an activity described in section 39, keep the following records:

(a) A receipt of funds record in respect of every amount that they receive in the course of a single transaction, unless the amount is received from a financial entity or a public body;
(b) a client information record in respect of every purchase or sale of real estate; and
(c) where the receipt of funds record or the client information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the real estate broker or sales representative

In response to the scenario outlined, namely that “the funds do not go directly to the seller; they go directly to the seller's listing agent's brokerage. So, the buyer's agent and brokerage do not receive the funds at all but the seller's agent and brokerage has,” I refer you to subsection 39(4) which indicates that “where two or more of the parties to a real estate transaction are represented by a real estate broker or sales representative and one of those brokers or sales representatives receives funds in respect of the transaction from a party to the transaction whom they do not represent but who is represented by another of those real estate brokers or sales representatives, the broker or sales representative that represents the party from whom the funds are received is the one that is responsible for keeping the receipt of funds record referred to in paragraph (1)(a) and, if applicable, for keeping the copy referred to in paragraph (1)(c).”

As such, the real estate agent or broker with the relationship with the client sending the funds is responsible for the receipt of funds record and associated obligations. This alleviates the need for a real estate agent or brokerage to keep the record or carry out the related obligations for a sender of funds with whom they have no relationship.

Date answered: 2012-11-13

PI Number: PI-5466

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39(1), 39(4)

Online account opening and Record-Keeping

Question:

Occasionally people apply for accounts (online or in branch) and they provide information but cancel before any account (deposit or loan) is actually opened by us.

Would you confirm that the FINTRAC rules around record-keeping do not apply until/unless an account is actually opened?

The new account application in question was conducted online. The individual had not signed anything before cancelling the application.

For my future reference, would you clarify the record keeping requirements that would apply in this case as well as in the case of someone signing an agreement but cancelling before making any kind of deposit.

Just to clarify, the account is considered opened regardless of whether or not the client has signed an account opening agreement?

Answer:

In response to the question, if an account is opened, the record-keeping requirements for financial entities under subsection 14(a) of the PCMLTFR will apply. If an account is deemed to be opened for a client, then regardless of a transaction taking place on that account, the record-keeping requirements apply.

Where an account opening did not take place, the record-keeping obligations do not apply.

In discussion with Legal, it was determined that it is not for FINTRAC to declare when an account is deemed to be opened. The financial institutions have their processes in place and should know what an “account opening” is. If they have not completed their documented process to open an account, then it is our understanding that the account would not be considered to be opened.

Date answered: 2012-09-25

PI Number: PI-5454

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(a)

Name change - Professionals' Financial

Question:

I would like to validate FINTRAC's position regarding our current name change procedure. When someone requests that the name in their account be changed (e.g., a married woman who now wants the account to be in her maiden name), we require supporting documentation (e.g., a divorce ruling or a birth certificate), as well as a piece of valid ID bearing the new name.

Taking into account article 393 of the Civil Code of Quebec, which states that both spouses must retain their respective names and exercise their respective civil rights under those names, do you consider that our procedure goes too far by requiring supporting documentation in the case of married women who want to go back to using their maiden name?

Answer:

Paragraph 71.1(a) of the Regulations stipulates that the person or entity referred to in subsection 9.6(1) of the Act must take “reasonable measures to keep client identification information and the information referred to in section 11.1 up to date.”

The updating of client identification is not required under the Act, except in the case of high-risk clients. Furthermore, in the case of clients who present a high risk, although the Act requires that the entity keep identification information up to date, it does not require the entity to re-authenticate these clients.

This having been said, the nature of the client identification information depends on the nature of the documents that are normally kept. These generally include the client's name, address, phone number, date of birth and occupation or principal company.

FINTRAC is not in a position to comment on ABC's internal guidelines as concerns the case of an individual who wants to change the name in his/her account.

Date answered: 2012-09-12

PI Number: PI-5449

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 71.1(a)

Act: 9.6(1)

Canada Post - Public Body?

Question:

We have a request for an account opening for ABC Canada and understand the recordkeeping requirements under sections 3.3-3.9 do not apply to this as it is a Federal Government Body. However, I want to clarify the statement that says this type of account is exempt from record keeping requirement including official corporate records (provisions that bind) and other information. (Statement in section 3.3.)

Normally for the opening of an account for a corporation, you would be required to keep the following records at account openings:

  • signature card,
  • intended use,
  • member identification information,
  • identification of at least three of the signing officers on the account
  • principal business information,
  • director information,
  • copy of the record that binds,
  • confirm the existence,
  • are they a charitable organization (do they accept/solicit donations),
  • beneficial owner information,
  • PEFP determination
  • Third Party determination.

Can you please confirm if ALL of the above record keeping requirements are NOT REQUIRED at an account opening for a Federal Government Account and/or advise which are not exempt from record keeping requirements.

Are the very large corporation, provincial, federal and municipal government accounts exempt to the same record keeping requirements at account opening that the registered accounts are exempt from?

Answer:

Paragraph 1(2) of the PCMLTFR defines public body as:

(a) any department or agent of Her Majesty in right of Canada or of a province;

(b) an incorporated city, town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body or an agent of any of them; and

(c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or any agent of such an organization.

ABC Canada is a federal crown corporation in Canada, and therefore falls within the definition of “public body” as it fits under “Her Majesty in right of Canada” (Queen in Right of Canada).

Date answered: 2012-09-04

PI Number: PI-5446

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 1(2)

Estate accounts

Question:

I have a question regarding how FINTRAC expects a firm to keep records when a client passes away. For most securities dealers, the account will change from an individual account to an “estate account” whereby the executors of the estate will provide instructions as to how the account should be dealt with (including if the assets should be withdrawn from the account immediately). What information does a security dealer have to collect upon the client's death? Do they need to collect signature, IDs, etc. from the executors or will they be considered “third parties” and therefore the dealers would just need their name, address, occupation, etc. or do they have to collect anything at all?

Answer:

It is a question of facts to be able to determine what requirements will need to be fulfilled in such a case. But here are some comments:

We need to know if the estate account is opened on behalf of an individual or on behalf of an entity. In both case, it is a new account.

If the account holder is the "Estate of", then it should be treated as an entity. When determining the beneficial ownership, the executor or the executors that control (or take care of) 25% or more of the estate (i.e. assets and liquidating, etc.) would be listed as per section 11.1 of the PCMLTFR.

However, should the account holder be the executor, then it would not be considered as opened on behalf of an entity, rather as an individual opening an account. The executor is the person opening the account, and the one authorized to give instructions in respect to that account.

The regulations do say that each time you create a client info record you have to do a third party determination.

Having said this, however, the result of the third party determination in the case of an executor, will be that the transaction is not made by or on behalf of a third party, as there is no other person than the executor that can give out instructions in regards to an estate (a deceased person cannot be a 3rd party).

Date answered: 2012-07-19

PI Number: PI-5431

Activity Sector(s): Securities dealers

Obligation(s): Record Keeping

Guidance: 6E

Regulations: 11.1

Resolution - power to bind -sec. 23(1)(b) Regulations

Question:

Subsection 23(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations reads as follows: “Subject to subsection 62(2), every securities dealer shall keep the following records:

b) where the securities dealer opens an account in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of that account;”

Can you confirm this?

Answer:

Guideline 6E: Record Keeping and Client Identification Obligations for Securities Brokers and specifically 3.3 - Account opening records, reads as follows:

“If you open an account for a corporation, in addition to the signature card, account operating agreement or account application as explained above, you have to keep a copy of the part of the official corporate records showing the provisions that relate to the power to bind the corporation regarding the account. This could be a certificate of incumbency, the articles of incorporation or the bylaws of the corporation that set out the officers duly authorized to sign on behalf of the corporation, such as the president, treasurer, vice-president, comptroller, etc. If there were changes subsequent to the articles or bylaws that relate to the power to bind the corporation regarding the account and these changes were in effect at the time the account was opened, then the board resolution stating the change would be included in this type of record.”

Hence, as a general rule, the articles of incorporation are acceptable. However, the document must also demonstrate the power to bind the corporation regarding the account. Upon review, it appears that the Board of Directors has certain powers; however, the composition of the Board is not explained. As to who has the power to bind the corporation regarding the account, I have no answer.

I also note that on the same day that the company was incorporated, a director was fired.

Finally, I would like to add that we have already indicated in the past that the fact that someone signs a cheque does not necessarily mean that this person has the power to bind the corporation. The document outlining the power to bind usually takes the form of a resolution or makes up part of the enabling legislation, and indicates which administrators or individuals are authorized to bind the corporation (to sell, purchase, open a bank account, take out a loan, etc.).

Date answered: 2012-07-17

PI Number: PI-5429

Activity Sector(s): Securities dealers

Obligation(s): Record Keeping

Guidance: 6E

Signature Card

Question:

I understand that pursuant to paragraph 54(1)(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), that every financial entity must ascertain the identity of every person who signs a signature card (referred to in this note as “Identifying”), except in the case of a business account the signature card of which is signed by more than three persons authorized to act with respect to the account, if the financial entity has ascertained the identify of at least three of those persons. It is my further understanding that the PCMLTFR defines a signature card as any record that is signed by a person who is authorized to give instructions in respect of an account.

I would like to distinguish between two classes of individuals: those within a corporation that are given corporate authority through resolutions to deal with the corporation's banking (“Corporately Designated Bankers”), and the subset of Corporately Designated Bankers that sign a signature card to open an account for the corporation (“Signers”).

Based on that background and distinction, could you please confirm the following:

(a) Only Signers are authorized to act in respect of an account;
(b) Only Signers, up to a maximum of 3, must be identified;
(c) A financial entity need not identify all Corporately Designated Bankers of a corporation to open an account, unless there are 3 or less Corporately Designated Bankers, and all 3 sign the signature card;
(d) For clarity, if there are 3 Corporately Designated Bankers, and only one of them signs a signature card, only one Designated banker must be identified.

Answer:

Paragraph 54(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that “subject to sections 62 and 63, every financial entity shall”, “in accordance with subsection 64(1), ascertain the identity of every person who signs a signature card in respect of an account, other than a credit card account, that the financial entity opens, except in the case of a business account the signature card of which is signed by more than three persons authorized to act with respect to the account, if the financial entity has ascertained the identity of at least three of those persons”.

That means in the case where a business account has more than three individuals authorized for it, the financial entity has to identify at least three of those individuals. So, the requirement is at a minimum 3 individuals. That said, under 62(1)(a) of the PCMLTFR, the financial entity does not have to identify an individual at the opening of a business account for which the financial entity has already identified three persons who are authorized to give instructions in respect of the account.

In fact, paragraph 62(1)(a) of the PCMLTFR states that:

“Paragraphs 54(1)(a) and (b), 54.1(a), 54.2(a) and 55(a) and (e), subsections 57(1) and 57.1(1) and paragraphs 60(a) and (b) do not apply in respect of

(a) the opening of a business account in respect of which the financial entity, the securities dealer or the casino, as the case may be, has already ascertained the identity of at least three persons who are authorized to give instructions in respect of the account”.

Also, subsection 1(2) of the PCMLTFR defines signature card, in respect of an account, as “any record that is signed by a person who is authorized to give instructions in respect of the account”. Therefore, those who signs signature cards are those authorized to give instructions in respect of that specific account.

The financial entity doesn't need to ascertain the identity of Corporate Designated Bankers unless if they make up any of the three persons authorized to give instructions in respect of an account, i.e. sign a signature card or if they are a person who conducts a triggering activity as per paragraph 54(1)(b) of the PCMLTFR, which states:

(b) “in accordance with subsection 64(1), ascertain the identity of every person who has not signed a signature card in respect of an account held with the financial entity and has not been authorized to act with respect to such an account but who conducts

(i) a transaction whereby the financial entity issues or redeems money orders, traveller's cheques or other similar negotiable instruments in an amount of $3,000 or more,
(ii) an electronic funds transfer, as prescribed by subsection 66.1(2), in an amount of $1,000 or more sent at the request of a client, or
(iii) a foreign currency exchange transaction of $3,000 or more”.

Date answered: 2012-07-16

PI Number: PI-5428

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 1(2), 54(1)(a), 54(1)(b), 62(1)(a), 64(1)

Life insurance company determination

Question:

We are currently set up as a reporting entity under 123 Ltd. a managing general agency for which I'm the reporting officer. As an MGA we process applications of financial advisors to the life insurance companies. We are a conduit between the life companies and the advisors for the flow of information. All cheques that come through our office are payable to the life companies.

For ABC Financial (Ottawa) Inc. I'm also the compliance officer and by function would also be the reporting officer if required to be set up as a separate entity.

The only reason that I'm looking at this is the fact that ABC Financial is life licensed in order for us to write annuity business with life companies. This business is processed through 123 Ltd. as this our Managing General Agency and ABC is contracted with 123 Ltd. in order to do business with the life companies. ABC only accepts cheques from clients payable to the life companies as this is the only way the life companies accept the business. It is only because of this life license that we are required to be set up with FINTRAC.

ABC does not operate a trust account as its business dealings with the banks and trust companies for the GIC business is again by way of a client cheque payable to the bank or trust company.

We do have AML policies and procedures in place as well as a risk assessment and are required to be a member of the RDBA which is our self regulatory organization which requires us to pass an annual test for all agents as it relates to AML.

DEF Financial Ltd. is the franchise arm of the operation and again all business is processed through 123 Ltd. as the MGA. All AML requirements are in place except the registration as here again I would like the ability to have one registration since all business flows through 123 Ltd.

Answer:

The life insurance company except with respect to reporting suspicious transactions and terrorist property, which is applicable to both.

Life insurance broker or agent is defined under our legislation as a person or entity that is registered or licensed under provincial legislation to carry on the business of arranging contracts of life insurance. A life insurance company means a life company or foreign life company to which the Insurance Companies Act applies or a life insurance company regulated by a provincial Act.

Based on the information you have provided, it appears that ABC Financial and DEF Financial Ltd. are life licensed authorised to sell life insurance.

Since it appears that ABC Financial and DEF Financial Ltd. fall within one of these definitions, they are covered under the PCMLTFA and both have the following obligations, regardless of the type of product they offer. When applicable (since you indicated that ABC accepts cheques from clients payable to the life companies), you must report any large cash transaction of $10,000 or more you receive, and have record keeping obligations in regards to that transaction. You must also report any suspicious transactions, as well as terrorist property reports. You also have a number of other record keeping obligations, ascertaining identity in certain situations, PEFP determination, third party determination, and finally you must also implement a compliance regime.

I would like to let you know that there are general exceptions that apply to client identification requirements only in the following situations: the purchase of a policy that is an exempt policy (i.e., a policy issued for insurance protection and not for significant investment purposes as defined in subsection 306(1) of the Income Tax Regulations); the purchase of a group life insurance policy that does not provide a cash surrender value or a savings component; the purchase of an immediate or deferred annuity paid for entirely with funds directly transferred from a registered pension plan or the proceeds of a group life insurance policy; the purchase of a registered annuity policy or a registered retirement income fund; a registered plan, including a locked-in retirement plan, a registered retirement savings plan, a group registered retirement savings plan, a registered education savings plan and any other registered plan; where the account holder or settlor is a federally or provincially regulated pension fund; or a transaction that is part of a reverse mortgage or structured settlement;

I would refer you to our website to consult the legislation, as well as the guidelines that use plain language to explain the most common situations under the PCMLTFA and Associated Regulations, and more specifically Guideline 6A: Record Keeping and Client Identification for Life Insurance Companies, Brokers and Agents.

Date answered: 2012-06-20

PI Number: PI-5417

Activity Sector(s): Life insurance

Obligation(s): Record Keeping

Guidance: 6A

Regulations: 1(2), 16, 17, 18, 19, 20, 20.1, 20.2, 56, 56.1, 56.2, 62(2)(a)

Act: 5(c)

Intended use of account

Question:

I am assisting my clients in their efforts to comply with Guideline 6. E. 3.3 Account Opening Records and have a couple of questions regarding the guidelines regarding intended use and record?. The Guidelines state in part:

3.3 Account opening records
For every account that you open, you have to keep records. This includes signature cards, account operating agreements, account applications, copies of official corporate records (binding provisions) and other information, as described below.

Intended use
For every account you open, you will have to keep a record about the account's intended use.
Examples of intended use for accounts include the following:

  • investments for eventual payment of children's education;
  • investments for retirement;
  • investments of the retained earnings of a corporation;
  • investments for a group plan.

Question: Are you looking for a declaration from the client as to what plans they have for the money e.g. buy a house, buy a car, education? Or would you accept something more generic like capital appreciation?

3.4 Certain records created in the normal course of business
You have to keep every one of the following records that you create in the normal course of business:

  • new account applications;
  • confirmations of purchase or sale;
  • guarantees;
  • trade authorizations;
  • powers of attorney and joint account agreements; and
  • all correspondence, including electronic mail, about the operation of accounts.

Question: If records includes all correspondence, including electronic mail, about the operation of accounts would this include a sales representative's entire client file? If yes, then would it follow that so long as the intended use is contained in the file, the dealer's processes are compliant?

Answer:

With respect to your first question, namely “are you looking for a declaration from the client as to what plans they have for the money e.g. buy a house, buy a car, education? Or would you accept something more generic like capital appreciation?”

Paragraph 23(1)(a.1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states that every securities dealer shall keep a record “in respect of every account that the securities dealer opens, a record that sets out the intended use of the account”. The Guideline 6E: Record Keeping and Client Identification for Securities Dealers gives examples of intended use for accounts. What is expected is that the intended use of the account indicates the specific purpose of investments.

With respect to your second question, namely “if records includes all correspondence, including electronic mail, about the operation of accounts would this include a sales representative's entire client file?” The answer will be yes, as long as it is related to the operation of the client's account.

Date answered: 2012-05-04

PI Number: PI-5407

Activity Sector(s): Securities dealers

Obligation(s): Record Keeping

Guidance: 6E

Regulations: 23(1)(a.1)

Section 14(c.1) of the Regulations

Question:

The ABC Financial is developing an application to enable its members to open what they are calling a "sub-account" online. After receiving an access code and PIN at the ABC Financial, the member uses these codes to access a Website and selects Open a sub-account, providing the following information:

  • Type of account requested: Savings account, chequing account, TFSA, etc;
  • Selection of desired terms: eg, SavingsPlus or Variable TFSA.

The member can also name the account, so it can be identified on his or her monthly bank statement. The member confirms everything on line and agrees to the creation of a sub-account in his or her portfolio.

If, for example, the member's portfolio is 123456-C-0 (checking account) and he or she now wants a savings account, the savings account would be designated as 123456-K-0.

Must the ABC Financial document the intended use of the account when the sub-account is opened, even through it considers it to be "attached" to the main portfolio?

Answer:

Paragraph 14(c.1) of the Regulations indicates that, subject to subsection 62(2), every financial entity shall keep a record that sets out the intended use of the account in respect of every account that it opens, other than a credit card account.

No definition of "account" or "sub-account" exists in the Act or the Regulations. It is suggested that the term "sub-account", used by the ABC Financial, should be assimilated into the term "account" and treated in the same way.

Since the type of account must be selected every time a sub-account is opened, it is logical to think that the intended use of the account may be different from that of the "main" account or other sub-accounts, even if they are all part of a single folio (for example 123456).

Consequently, since the ABC Financial is opening an account (the sub-account), it must keep a record indicating the intended use of the account. It must, pursuant to paragraph 14(c.1), set out the intended use of the account for every "sub-account" that it opens at the request of a member.

The ABC Financial should be advised that it can make use of the exemption provided in paragraph 62(1)(c) respecting ascertaining the identity of the member.

Date answered: 2012-04-26

PI Number: PI-5403

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14 (c,1), 62(1)(c)

Civic Address (vs. postal address)

Question:

Is the address a postal installation or a physical address?

Answer:

Rural Route addresses denoting group postal boxes with individual compartments as well as PO Box addresses are postal installations- e.g. RR 1, SITE 4, COMP 10. This would NOT qualify as a physical address as this indicates a postal installation box/compartment, not an actual physical house or land address.

However, rural routing addresses that contain the street number of the residence qualify as physical addresses where the person lives- e.g. 123 Main Street, RR 6 (this includes a house number on a particular rural route- route 6. This would be a rural route with mail delivery to a little mailbox at the end of a driveway- where somebody lives.)

Therefore, the address must serve to represent the physical address where the person lives.

Date answered: 2012-04-26

PI Number: PI-5402

Obligation(s): Record Keeping

Guidance: 6

Credit card acquiring business

Question:

I wanted to get a better understanding of our reporting requirements as per applicable FINTRAC Guidelines.

I do understand that as a regulated financial entity under the Trust and Loan Companies Act, we would be obligated to abide by FINTRAC Guidelines. However, given the nature of our operations (Credit Card Acquiring Business), as a financial entity, it appears that we may be exempt from certain reporting requirements.

Our review of the 10 FINTRAC Guidelines has revealed a key piece of information about how Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) would be applicable to a Credit Card Acquiring Business.

According to Guideline 6G (Record Keeping and Client Identification for Financial Entities), If you are carrying on activities as a Credit Card Acquiring Business, the record-keeping requirements explained in this guideline do not apply to those activities. Credit Card Acquiring Business is a financial entity that has an agreement with a merchant to provide the following services:

  • enabling a merchant to accept credit card payments by cardholders for goods and services and to receive payment for credit card purchases;
  • processing services, payment settlements and providing point-of-sale equipment (such as computer terminals); and
  • providing other ancillary services to the merchant.

Given that we are a Credit Card Acquiring Business, this would mean that we are exempt from record keeping and client identification requirements.

It is important to inform you that we are neither a deposit taking nor a lending institution. Given that our business activities are limited to the bulleted points mentioned above, merchants are our primary and only clients. We never have access to customer information when our products and services enable merchants to accept credit or debit card payments from a customer in exchange for goods and services.

With regards to our clients (merchants), it goes without saying that they all have banking relationship with federally regulated deposit taking institutions (DTIs). It is our understanding that those DTIs would be primarily responsible for record keeping and client identification of these merchants. Is this correct?

Answer:

Despite the fact that your company will be involved in the credit card acquiring business, if you fall within the definition of financial entity, under Subsection 1(2) Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, you have obligations, regardless of the type of products or services you offer, including implementing a compliance regime.

There are no exceptions under our Act or Regulations that would permit you not to have a compliance regime.

However, if you register as a trust and loans company under the Trust and Loan Companies Act, and if you are carrying on activities as a credit card acquiring business, the record-keeping and client identification requirements explained in our guideline 6G (Record Keeping and Client Identification for Financial Entities) do not apply to those activities.

Date answered: 2012-02-03

PI Number: PI-5382

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6

Regulations: 1(2)

Act: 9.6

Intended use of account

Question:

FINTRAC's Guideline 6E for securities dealers as found in section 3.3. (Account Opening Records) states:

For every account you open, you will have to keep a record about the account's intended use. Examples of intended use for accounts include the following:

  • Investments for eventual payment of children's education;
  • Investments for retirement
  • Investments of retained earnings of a corporation
  • Investments for a group plan

In reviewing IIROC guidance provided to their members I found that as part of their FAQs issued in November 2008 (attached, found on the last page) IIROC specifically states that although there is a requirement under the Regulations to determine the intended use of the account, IIROC does not expect members to ask the question specifically as it may be apparent from other information gathered during the account opening process, such as investment objectives, risk tolerance and time horizon. There is acknowledgement from IIROC thought that there may be times when additional services are offered by the dealer e.g. cash management account which necessitate the question being asked directly.

We would appreciate it if FINTRAC could confirm if it's acceptable to rely on information obtained through the account opening process, without the need to ask a specific 'intended use of account' question with a check-box like answer for each account.

Answer:

We agreed that the question of what is the intended use of an account does not have to be specifically asked, however, a record that clearly sets out the intended use - such as a trading agreement for example, or as long as the information has been gathered in an accessible document – must be present upon an examination of the entity.

On the other hand, we are a bit concerned that “other information gathered during the new account process such as the investment objectives, risk tolerance and time horizon” may not necessarily address or be clear enough to indicate what is the intended use of the account but may rather address the profile of the customer in terms of acceptable risk and the type of products that may be of interest to the client.

Consequently, we have also determined that although securities dealers are not required by our Regulations to ask the specific question to their member, other information that are gathered during the new account process may not be sufficient to be considered as record of intended use.

Date answered: 2012-02-02

PI Number: PI-5381

Activity Sector(s): Securities dealers

Obligation(s): Record Keeping

Guidance: 6E

Regulations: 23(a.1)

Credit cards to a corporation

Question:

A bank issues credit cards to a corporation. These cards will be used as corporate cards and are held by the corporation. The corporation maintains that it will meet the client identification requirements as they apply to the corporation, including names of directors, ownership and corporate registry documents. They do not wish to go further to the names of the employees on the cards. This is more than the law requires, they argue.

What does the law require of the credit card issuer when the cards are issued to a corporation?

Answer:

This is what is required by the bank when it issues credit cards to a corporation:

Section 14.1 of the PCMLTFR states that "subject to subsection 62(2), every financial entity shall, in respect of every credit card account that it opens, keep a credit card account record that includes

(b) where the account is opened in the name of a client that is a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of the account;
(c) the name, address and telephone number of every holder of a credit card for the account;
(d) the date of birth of every holder of a credit card for the account, if that information is known after reasonable measures have been taken by the financial entity to obtain it;
(e) every credit card application that the financial entity receives from the client in the normal course of business;
(f) a copy of every credit card statement that the financial entity sends to the client, if the information in the statement is not readily obtainable from other records that are kept and retained by it under these Regulations; and
(g) where the financial entity has obtained approval under paragraph 67.1(b) to keep the account of a person that has been determined to be a politically exposed foreign person open

(i) the office or position in respect of which the person was determined to be a politically exposed foreign person, (ii) the source, if known, of the funds that are or are expected to be deposited in the account,
(iii) the date of the determination that the person was a politically exposed foreign person,
(iv) the name of the member of senior management who gave the approval to keep the account open, and
(v) the date of that approval".

Furthermore, paragraph 54.1(b) of the PCMLTFR indicates that "subject to subsections 62(1) and (2) and section 63, every financial entity shall, where the financial entity opens a credit card account in the name of a corporation, confirm the existence of and ascertain the name and address of the corporation and the names of its directors in accordance with section 65".

Date answered: 2012-01-20

PI Number: PI-5378

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14.1(b), 14.1(c), 14.1(d), 14.1(e), 14.1(f), 14.1(g), 54.1(b)

PEFP- senior approval

Question:

Is the RE required to obtain senior management's approval IN WRITING to keep the account open? Is a verbal consent adequate?

Answer:

With respect to subsection 67.1(1)(b), the intent of this portion of the Regs was to boost due diligence measures and enhance the requirements around knowing the RE's customer. I believe that if the legislator wanted the approval to keep the account open in writing, it would be expressly stated under this subsection. However, having said that, it is clear to me that it must be documented, since the RE is asked to keep the record of the date it determined the individual to be a politically exposed foreign person; AND the name of the member of senior management who approved the account to be kept open (Guideline 6E and 6G 7.2 Politically exposed foreign person records).

Date answered: 2012-01-19

PI Number: PI-5377

Activity Sector(s): Financial entities, Securities dealers

Obligation(s): Record Keeping

Guidance: 6E, 6G

Regulations: 67.1(1)(b)

Obligation in stages

Question:

Is CU required to have a Stage 1 documented and Stage 2 Member Accounts completed and documented by July 31/2010 or is there a phase in period to allow for same?

Answer:

RBA applies to them as of the coming into force of the regulations in July 2010.

The phased approach referred to by the CU is the following approach in examinations:

  1. At the beginning when the RBA came into force in June 2008 we just wanted to see if REs were starting to work on a RBA model.
  2. At this time, we have moved to the "presence" mode, i.e. a RBA must be done (i.e. form of a checklist)

Date answered: 2010-04-28

PI Number: PI-5357

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 4

Regulations: 71(1)

What constitutes opening an account?

Question:

It seems to me that opening an account would necessarily imply that: 1) we receive money or other assets from the investor; 2) that we possess and are able to control those assets in some way and 3) that we receive client instructions to transfer, exchange or disburse the assets from the account. But none of these are true. Could you provide any clarification on what constitutes ‘opening an account'?

Answer:

An "account" is not defined in the PCMLTFA and can potentially mean different things in the context of a PM. As per your clarification you do not open new accounts (only enter into agreements in which you have discretionary authority over trading in the accounts that are traded in the USA). Provided that your Canadian clients open new accounts directly with XYZ USA LLC than the PCMLTFA provisions record keeping obligations do not apply. The funds and portfolio are in the USA, and based on your information Mondiale only provides instructions to XYZ on behalf of the client.

Date answered: 2010-04-22

PI Number: PI-5349

Activity Sector(s): Securities dealers

Obligation(s): Record Keeping

Guidance: 6

Regulations: 23(1)

Is withdrawing money from an account received or not?

Question:

If a client requests a draft for example, but asks the FE to take the money from his/her account (money is already in the account) do we consider that the RE has "received" the amount or not. If we consider that it has "not received" because the funds were already in the account then the obligation does not apply.

Answer:

If the money is already in the account - it is not considered as received, therefore, there is no record keeping obligation. If however, the client walks in with the cash (and even if the FE as per their internal procedure deposits it) - this is considered as the FE receives the cash, and there are record keeping obligations.

Date answered: 2010-04-01

PI Number: PI-5344

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6

Regulations: 14(k)

Covered or not covered?

Question:

When a client obtains a mortgage, the FE often places the amount for the notary in the client's account, and then the FE (given its own internal process and "not" at the request of the client) issues a draft to the client to pay the notary. Is this covered or not?

Answer:

This is not covered.

Date answered: 2010-04-01

PI Number: PI-5343

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14

Occupation question for bank account holder

Question:

I'm a little confused in the requirement for the occupation of a bank account holder, as for a personal account I understand, the occupation that is required is that of the individual's personal occupation, but when it comes to business accounts, or organization accounts...are you looking for the role of the corporation or group (such as president, director...etc) to be entered as the occupation or that person's personal occupation?

Someone can be the secretary/treasurer of a corporation or organization, but works as a loans officer for a financial institution... or she could even be retired from the work force, so which one are we required to enter under the occupation for that individual. And if she is retired, I can't find a code that is provided from the government for this, nor does it have any codes for president, director, etc. so do we need to create one?

Answer:

The legislative requirement to record keep the occupation for a bank account holder as per subsection 14 represents the individual's personal occupation (as in lawyer, accountant, engineer, bus driver, financial advisor, loans officer, etc.). It does not represent the individual's role as a member of the board within an organization (i.e. president, secretary etc..).

We have indicated in the past that retired can be indicated as the individual's occupation. After all, that is the present occupation of that person and secondly, it does give a good indication for financial institutions in regards to what their income should look like.

Date answered: 2010-03-11

PI Number: PI-5335

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14

MSB Identification Obligations

Question:

Receipt of an e-mail from the reporting entity concerning those sections of the Act that deal with the obligation to keep identification card numbers for Money Service Businesses.

Request confirmation with regard to the following sections of the Regulations: 30(c); 59(1); 64(1)(a) and 64(2)(b); 69(1) and 69(1)(c)

Answer:

The legislative obligation to keep the number of the identification document used to identify a client resides in subsection 67(a) that states that every entity that is required to ascertain the identity of a person in connection with a record that the entity has created and is required to keep must include with that record or in relation to a transaction that they have carried out (in this case either a money order, traveller's cheque etc, or a FX) and in respect of which they are required to keep a record must include with the record: the name of the person, and (a) the type and reference number of the record and the place it was issued.

The identification obligation is found in subsection 59(1) stating that an MSB must ascertain the identity of every person who conducts a transaction for the issuance or redemption of money orders, traveller's cheques or other similar negotiable instruments of $3000 or more, (b) for the remittance or transmission of $1000 or more, and (c) a fx transaction of $3000 or more.

In the email sent by the Reporting Entity, the scenario provided refers only to the payment in cash of $3000 or more... when replying back to the entity, I would suggest to include subsection 59(1) to ensure that all possibilities are covered, as well as to put emphasis to the fact that the record keeping obligations and the identification obligations apply whether the amount of $3000 or more is received in cash, cheques, traveller's cheques, money order or other monetary instruments.

Record keeping obligations for these transactions are found in subsection 30 and as per the entity's scenario, more specifically 30(c), where it receives an amount of $3000 or more from a person (whether the amount is received in cash, cheques, traveller's cheques, money order or other).

Date answered: 2010-03-02

PI Number: PI-5328

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 6

Regulations: 30(c); 59(1); 64(1), 64(2), 69(1)

Forward contracts and obligations

Question:

Am I correct to understand the forward contract is only considered a FINTRAC covered transaction once it is actualized (currency exchange actually takes place) and prior to actualizing the transaction it is not a covered activity for an MSB?

Answer:

Two things - first, we would need to determine which business the entity is in - Securities or Money Services Business? Are we talking about speculation on shares or actual FX?

Secondly, if an actual currency exchange takes place (i.e. at the time the transaction takes place), then it is a covered activity for an MSB as it is a concrete Foreign Currency Exchange.

Date answered: 2010-02-17

PI Number: PI-5321

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 6 C, 6 E

Regulations: 2

Deed of Sales and binding requirement

Question:

A copy of a Deed of Sale which includes a paragraph relating to a Resolution of the Board of Directors of a Corporation. The Notary acknowledges that is it true and was signed in his/her presence. The seller of the property was identified. Could this document be used as a Binding Resolution?

Answer:

No the document/deed of sale attached does not meet the legislative record keeping requirements that fall on the real estate agent in regards to: Confirming the existence of the corporation and Binding resolution.

The deed of sale refers to a resolution - this resolution is the binding document that should be part of the record kept by the real estate agent. Furthermore the real estate agent should also have either a CIDREQ copy or any other acceptable documents attesting to the existence of the company that is purchased.

Date answered: 2010-02-10

PI Number: PI-5314

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39(1)(c)

Services to the public or Members vs non-members

Question:

What is considered a Central within the definition of the PC(ML)TFA ? Clarification of the definition is required.

Answer:

The Credit Union Centrals are subject to Part I of our Act when they offer financial services to:

  1. A person or
  2. An entity that is not a financial entity member

The Centrals are covered (i.e. have legislative requirements under our act) when they offer services to individuals and entities other than a financial entity and a member (both conditions must be met).

Unless the Credit Union Centrals deal with individuals or corporations then most of their financial services offered will not be covered. Centrals usually deal almost exclusively with CU or banks that are members.

In Quebec however, the requirements are completely different in that all financial services offered by financial services cooperatives are covered (whether given to CP members or general public).

Date answered: 2010-02-09

PI Number: PI-5310

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6

Regulations: 11.2

Requirement for keeping records of less than $1000

Question:

Is there a requirement to keep records of remittance or transmission of funds records that are less than $1,000?

Answer:

There is no requirements for record keeping for amounts remitted or transmitted under $1000 - 30(e) specifies $1000 or more, however if the RE wants to keep additional records nothing prevents them from doing so.

Date answered: 2009-11-26

PI Number: PI-4743

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 6C

Regulations: 30(e)

Remittance transmission of funds of less than $1,000 - record retention

Question:

Examination of an MSB. In their Policy & Procedures they state they will maintain remittance records of under $1000 for six months.

Is there a requirement to keep records of remittance or transmission of funds records that are less than $1,000?

Answer:

There are no requirements for record keeping for amounts remitted or transmitted under $1000 - 30(e) specifies $1000 or more - however if the RE wants to keep additional records, nothing prevents it from doing so.

Date answered: 2009-11-26

PI Number: PI-4742

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 6C

Regulations: 30e)

Remittance transmission of funds of less than $1,000 - record keeping

Question:

Is there a requirement to keep records of remittance or transmission of funds records that are less than $1,000?

Answer:

There are no requirements for record keeping for amounts remitted or transmitted under $1000 – Subsection 30(e) of the Regulations specifies $1000 or more.

Date answered: 2009-11-26

PI Number: PI-4741

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 6C

Regulations: 30(e)

Remitting and transmitting $1,000 or more

Question:

Are MSBs and casinos subject to record keeping requirements found in Subsections 30(e) and 43(f) respectively of the Regulations for EFTs or any sum of money that flows into Canada?

Answer:

Remitting and transmitting 1000$ or more

The regulations provide that MSBs and Casinos must keep records where an amount of $1000 or more is remitted or transmitted. They must also identify the person who conducts the transaction.

The information to be recorded includes information about the client, the transaction and the person to whom the amount is remitted or transmitted.

This requirement applies to electronic funds transfers and any sum of money that is remitted or transmitted following instructions from a client. The word remitted refers to a physical transfer of funds (such as individual X transports funds to a destination to give to person Y), and transmitted implies an electronic transfer of funds.

Based on this clarification, we reiterate that the requirement applies to the sending of domestic or international wire transfers. Wire transfers received by the MSB or casino are not subject to these record keeping/client identification requirements.

Date answered: 2009-11-19

PI Number: PI-4730

Activity Sector(s): Casinos, Money services businesses

Obligation(s): Record Keeping

Guidance: 6C, 6F

Regulations: 30(e), 43(f)

Citing Deficiencies for Client Credit File

Question:

A policy interpretation was recently provided on the requirement to keep a client credit file as prescribed in the Proceeds of Crime Money Laundering Terrorist Financing Regulations (Regulations). Given this interpretation, the following is to provide clarification in order to be consistent when citing this record keeping deficiency.

Under the Regulations, Financial Entities and MSBs are required to keep "every client credit file it creates in the normal course of business". This has been further clarified to mean that the requirement to keep the client credit file, is triggered only if the RE creates it in the normal course of business. Furthermore, in order for a client credit file to be considered created, it must include all of the elements as defined under subsection 1(2) of the Regulations.

What does this mean when citing deficiencies?

Answer:

If in their normal course of business, an RE does not create a client credit file, the RE is not required to keep this record under the Regulations. Additionally, even if the RE has some type of document detailing a credit arrangement, but if that document does not contain all of the elements as defined in subsection 1(2) of the Regulations, then it is also considered that a client credit file was not created as prescribed; and once again, the RE is not required to keep this record under the Regulations.

For example: an MSB declares during an examination that they offer loans/credit to some customers by transferring funds internationally, but that they do not create any documents to show the terms of this credit arrangement loan in the normal course of their business. The MSB only records the customer's name and amount of transfer.

In this scenario, since the RE does not create a client credit file as defined in Regulations 1(2) in the normal course of their business, there is no requirement to keep a this record and therefore, we would not cite for failure to keep a client credit file as prescribed.

Date answered: 2009-11-13

PI Number: PI-4726

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 6C

Regulations: 1(2)

Guideline 6B - Credit Unions

Question:

We have determined that credit unions are not exempt from client identification requirements. Real Estate agents would still have to create Client Identification Records when conducting a real estate transaction - with a binding corporate record and ID of the individualS. Since they are not publicly traded.

It seems odd but Credit Unions do not fit the description within the exemptions in G6B.

Was there an opinion on this as they are exempt from LCTRs and Records of Funds requirements?
Have there been any changes with regards to these entities being exempt from Client Identification Requirements?

Answer:

There have been no changes since. We will include this in the list of questions to post on our website.

Note: Credit Unions are not considered as “large corporations” with assets of $75 million dollars or more and are not “publicly traded”.

Date answered: 2009-11-12

PI Number: PI-4722

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6B

Regulations: 62(2)(m)

Question regarding section 32 of the Regulations and reporting and sole proprietor

Question:

If they should include the individual's name as the client, what happens when the sole proprietor owned business has employee's ordering the transaction?

Answer:

The sole proprietorship is not an entity, and does not benefit from the exemption that accompanies the signing of the agreement in relation to employees authorized to order transactions.

Date answered: 2009-11-06

PI Number: PI-4718

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 6C

Regulations: 32

Act: 2

Question regarding section 32 of the Regulations and reporting and sole proprietor

Question:

If they are not considered entities, when reports need to be made should XYZ include the business name as the client or the individual's name?

Answer:

A sole proprietor may do business with a trade name other than his or her legal name. However, in terms of reporting, the sole proprietorship must use his or her legal name. In this case, XYZ is his trade name, but should be reporting under the individual's name (which is his legal name).

Date answered: 2009-11-06

PI Number: PI-4717

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 6C

Regulations: 32

Act: 2

Question regarding section 32 of the Regulations and reporting and sole proprietor

Question:

XYZ has a client that is a sole proprietor and they want to know how to go about identification and reporting for this client.

In the Act, an entity is defined, but sole proprietors do not meet this definition, so I think the answer is no. However, the business has registered the legal name.

Are sole proprietor's considered entity's under section 32, (can an MSB enter an ongoing service agreement with them)?

Answer:

No, a sole proprietorship is not considered as an entity under Subsection 32 of the PCMLTFR. The definition of an entity is found in Section 2 of the Act and means a body corporate, a trust, a partnership, a fund or an unincorporated association or organization. The definition does not include sole proprietorship, and a sole proprietorship is not a corporate body (i.e. is not incorporated).

Date answered: 2009-11-06

PI Number: PI-4716

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 6C

Regulations: 32

Act: 2

Account opening documentation

Question:

XYZ firm is the private client division of an investment funds dealer (mutual funds).

XYZ manages their own private clients by opening accounts, providing statements, etc.
They also sell their XYZ mutual funds to various brokers under a nominee name through ABC Inc.

ABC Inc. is the clearing house between securities brokers and mutual fund providers, in this case XYZ.

For the sales/purchases of mutual funds to broker dealers, XYZ assigns a number (XYZ calls them account numbers) for each transaction (buy/sell) for reconciliation/balancing purposes.

For example:

The securities brokers enters purchase tickets via ABC Inc. to buy $2000 of XYZ Money Mkt funds for their securities brokers client and another $5000 of XYZ Cdn Bond funds for their client's margin account. XYZ receives the orders and fills them (confirms the purchase and the NAV prices) back to the securities brokers via ABC Inc. Keep in mind that the account holders are at the securities brokers not at XYZ. XYZ buys/sells mutual funds following the orders (buy/sell) received via ABC Inc. from various securities brokerage firms.

Does XYZ require account opening documentation as per R. 23(a) for the sales/purchases of mutual funds handled via ABC Inc. to broker dealers?

The entity is covered under section 5G of the Act.

Answer:

The Entity is simply a clearing network for the mutual fund industry and is not subject to the PCMLTFA. In this instance, the exemption under 62(1)(b) clearly applies.

That is, there is no requirement for an investment fund management firm to ID clients and keep records in circumstances where the funds are being distributed through another securities dealer.

Date answered: 2009-11-05

PI Number: PI-4713

Activity Sector(s): Securities dealers

Obligation(s): Record Keeping

Guidance: 6E

Regulations: 62(1)(b), 23(1)(a)

Act: 5(g)

Client credit file

Question:

When exactly does the trigger for client credit file kick in?

Answer:

The RE must keep the client credit file if it creates it. The creation of a client credit file entails that all the prescribed items as per the client credit file definition found in subsection 1(2). Only if all the items are there then we can safely say that a client credit file has been created and that it must be kept under subsection 14(1).

Date answered: 2009-10-14

PI Number: PI-4702

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 1(2), 14(i)

Customer Identification - Real Estate Agent

Question:

Facts:

  • A real estate broker has mandate to sell a property which belongs to the Caisse populaire
  • the property belongs to the Caisse populaire due to non-payment of the mortgage by its previous (reprise de financement)
  • the real estate agents has a copy of the judgment transferring title of the property from the previous owner to the Caisse populaire
  • as per the telephone conversation which I had with the broker last week, the standard operation procedure to follow in cases involving the sale of foreclosed properties, is for Caisse populaire to mandate a representative of the [reporting entity] to represent the Caisse populaire for the sale of the foreclosed properties; however the listing contract is with the Caisse populaire and not the [reporting entity]
  • the real estate broker has the mandate to sell a foreclosed property belonging to the Caisse populaire; but the person representing the Caisse populaire in the transaction is an employee of the [reporting entity].

Question: Does the real estate broker in the scenario described above have any record keeping and client ID obligations?

Answer:

The CP is a body corporate, and a body corporate falls within Fintrac's definition of "entity" under the Act. And so the following should be noted:

  1. A client information record (CIR) on the entity should be created, i.e. the CP;
     
  2. ID the representative;
     
  3. third party determination - Subsection 10 (1) indicates that every person or entity that is required to keep a CIR in respect of a client shall take reasonable measures to determine whether the client is acting on behalf of a third party - so the RE would have to make 3rd party determination, however, the response may be NIL.
     
  4. confirm the existence of the Caisse populaire, and an entity other than a corporation
     
  5. binding resolution is not needed as the Caisse populaire is an entity other than a corporation and the binding resolution is only required if the CIR is in respect of a corporation.

Date answered: 2009-09-11

PI Number: PI-4675

Activity Sector(s): Financial entities, Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6G

Regulations: 39(1)(b), 59.2(1)

Postal codeless for record keeping / reporting obligations

Question:

At this point it is well established that the postal code is part of the address and that a P.O. box is not the address. However, we have a large RE who performs EFTs for people residing in rural Alberta and Saskatchewan who do not have a postal code for their residential address. They have a roll number for their plot of land, as opposed to a rural route. There is no assigned postal code to these parcels of land, (no reverse look up on Canada Post) because there is no mail delivery to them. A power bill for one of their clients was sent as an example and there is just a long alpha-numeric code to identify the land parcel. The only postal code they have is in relation to their post office box, which of course is not where they live. Beyond the legislative requirement is the fact that by identifying Canada as the country of residence makes the postal code a "go or no go" field on our form. Advice?

Answer:

We have indicated in past interpretations that a P.O. box was not what we considered a "physical" address in the sense that it does not indicate where an individual "resides". However, the long alpha numeric code, the roll number of their plot of land, or the "cadastre" description/number would certainly be considered as an acceptable address and would in our view replace the absence of a postal code.

In regards to the reporting however, this would probably cause a problem especially in light of the fact that once they identify Canada as the country of residence - then the postal field becomes mandatory.

Date answered: 2009-08-10

PI Number: PI-4649

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): Record Keeping

Guidance: 6

Agent Agreement

Question:

Does the portion (clause) at the bottom of the document constitute enough to be considered an agent agreement? Is it explicit enough?

Answer:

It is not an agent agreement for ID purposes because it does not require the person to check ID (or even say what the person has to do), it simply states that the CU has a client record that includes the driver's licence number (not that the person has seen the driver's licence). You can't rely on an ID done before the obligation arose and before the agreement was signed

Date answered: 2009-07-24

PI Number: PI-4636

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 6C

Regulations: 64.1

Record Keeping obligations: account holding CU or Receiving CU

Question:

Who has the obligation to keep the money order record keeping information when another credit union accepts the deposit of a money order into the account of another credit union's member through the counter ICU deposit?

Answer:

It is the CU who receives the deposit/funds that has the record keeping obligation, not the credit union where the account is held. The only exception to this is when there is a LCT, where the CU that holds the account has the obligations to record keep.

Date answered: 2009-07-10

PI Number: PI-4624

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Negotiable items of $3,000 or more (from a bank account)

Question:

Regarding negotiable items.Guideline 6G discusses keeping records on purchases of negotiable item greater than or equal to $3,000 using cash or other negotiable items. Is there the same requirement to keep records if funds are taken from a customer's account to purchase the negotiable item of $3,000 or more. This is not really addressed in the guideline, but individuals could deposit negotiable items and later request to purchase a negotiable item. Please advise what the intent of the guideline is.

Answer:

Anytime an individual walks in with the 3000$ (regardless of how much time has elapsed or if the financial entity deposits it before then issues a product) - and requests a MO or other - there is a record keeping obligation for the CU.

However, if the client withdraws from his account, and immediately requests a MO or other - no record keeping obligations.

Date answered: 2009-07-03

PI Number: PI-4622

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(k)

Clarification for ID obligation in service agreements

Question:

In the context of an ongoing service agreement, when we say address, does this mean a residential address or can the individual provide the business address from which they will be booking transactions for example? Regardless, either way, is it required that this address actually be provided by the employee or can it be obtained from a third party or public source? If it is unimportant whether its business or personal would this mean for section 32 and for when a MSB has an ongoing service agreement sections 30(c), 30(d), 30(e)(ii), 30(f), it is CORRECT for the MSB to record the person's business address or P.O. Box address, in lieu of a residential address? In addition, what about sections 59(2) and section 11.1 - does the directors and beneficiaries addresses' need to be their personal address?

Answer:

When ascertaining the identity of an individual under subsection 59(1) - absolutely that it must be the residential address of the person that must be collected.

However, if it is only for record keeping purposes (such as in the case of the ongoing service agreement) where you are not ascertaining the identity, merely record keeping information on who signed the agreement or which employees are authorized to conduct transactions, then you may use either the personal address of the signatories and employees or their business address.

This interpretation would be in line with a similar one that was given a number of years ago in regards to corporate credit cards - whereas it was indicated that for all individuals who benefit from this corporate credit card (i.e. that are listed as users), the address for record keeping purposes, could be either their personal address or their "business" address.

However, a P.O. Box is not an address - in other words, the MSB can record the business or residential address, but not a P.O. Box which is not a "physical" address, and is not an acceptable information.

59(2): does not require the address of the directors;
11.1: business or personal address, as it is not part of ascertaining the identity of an individual.

Date answered: 2009-07-02

PI Number: PI-4619

Activity Sector(s): Money services businesses

Obligation(s): Record Keeping

Guidance: 6C

Regulations: 30(c), 30(d), 30(e)(ii), 30(f), 59(1), 59(2)

Act: 11.1

Clarification of MO TC and Other Negotiable instruments

Question:

If you receive $3,000 or more for the issuance of (one totaling $3,000 or two or more of any of these totaling $3,000 or only $3,000 in Travellers Cheques; $3,000 in Money Orders, $3,000 in Other Negotiable items or any combination ($1,000 in MO, $1,000 in TC and then $1,000 in bank draft) traveller's cheques, money orders or other similar negotiable instruments, keep a record of the date, the amount received and the name and address of the individual who gave you the amount. These records also must indicate whether the amount was received in cash, cheques, traveller's cheques, money orders or other similar negotiable instruments.

Receipt of $3000 for travellers' cheques, money orders or other negotiable instruments: Is this relating to one or more items or 1 items for $3,000 or more?

  • Amount
  • Date received
  • Name and address of individual who gave amount
  • Whether amount received was in cash, cheques, traveller's cheques, money orders or other
  • Redemption of one money order of $3000 or more, or two or more money orders that add up to $3000 or more:
  • Total amount
  • Date of redemption
  • Name and address of individual requesting redemption
  • Name of issuer(s)

In 14(k), to me, it means $3000 for one of those instruments and not for example $1,000 in MO - $1,000 in TC and then $1,000 in bank
draft .. do you agree?

Answer:

It is the dollar value that should be considered i.e. $3000 or more, regardless of how many products are issued or received.

Consequently, it means $3000 or more of any of those instruments (MO, TC and bank draft).

Date answered: 2009-06-15

PI Number: PI-4602

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(k)

Confirmation on guideline 6A

Question:

We would like to get a confirmation concerning some information in guideline 6A, Record Keeping and Client Identification for Life Insurance Companies, Brokers and Agents, under item 4.2, General exceptions to client identification (direct connection), in the first bullet in the section entitled Certain types of transactions, to wit:

“the purchase of a policy that is an exempt policy (ie a policy issued for insurance protection and not for significant investment purposes as defined in subsection 306(1) of the Income Tax Regulations).”

The guideline indicates what is meant by an exempt policy, “policy issued for insurance protection and not for significant investment purposes,” while the Regulations do not provide any details (Regulations paragraph 62(2)(a) – direct connection). We would like to confirm if this detail in the guideline is intended for temporary insurance policies with no investment component and critical illness insurance policies also with no investment component.

Answer:

The exemption found in subsection 62(2)(a) refers to an exempt policy as defined in subsection 306(1) of the Income Tax Regulations. This exempt policy is not covered under our legislation (and is a policy that has no savings component i.e. does not have an investment component). However, the definition of what and when a policy is exempted is found in subsection 306(1) of the tax regulations and not within our regulations (not Fintrac guidelines).

Date answered: 2009-06-08

PI Number: PI-4594

Activity Sector(s): Life insurance

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6A

Regulations: 62(2)(a)

Client ID and record keeping obligations when a client is a bank

Question:

A real estate broker is asking about their client ID and record-keeping obligations in cases where his client is a bank.

If I interpret 62(m) correctly, in cases where the broker's client is corporation which meets the definition of 62(m), and I presume all of Canada's major banks meet said definition, then the broker need not keep a client info record for the bank. Now, since section 59.2 speaks of identifying in respect of records which must be kept, and section 62(2)(m) obviates the obligation to keep said records, than ipso facto, no record equals no client ID, for both the bank and the person representing the bank in said transaction.

Am I correct in my interpretation?

Answer:

The only exemption applicable in that case (i.e. real estate sector and client is a financial entity) is the one found at 62(m) - the banks are mostly publicly traded and have a minimum net assets of $75M therefore they can benefit from this client identification exemption.

However, this exemption does not apply to Credit Unions as they are to my knowledge not publicly traded. The person conducting the transaction must also be identified.

It should be noted that this is an incongruity, because most other sectors when the client is a financial entity benefit from the client identification and record keeping obligation exemptions. The real estate sector does not benefit from this exemption when their client is a financial entity; the only exemption that applies in their case is 62(m) via the publicly traded big corporation.

Date answered: 2009-05-26

PI Number: PI-4589

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6B

Regulations: 39(1), 59.2, 62(2), 62(2)(m)

Using information in Customer files

Question:

In the past, when we are conducting record review if the RE does not have certain information on a record (ie. Occupation on a LCT record), but have that information somewhere else that is reliable and was collected before the time of the transaction (ie. Customer file, other record), we will not cite a deficiency to the RE.

Can an RE only rely on that information if it is collected in another record that is required under our legislation. How do we reconcile this when we state to REs that records can be kept in any form or manner?

Answer:

Subsection 52(2) is pretty clear in that it indicates the information you can use from other records are from records that the reporting entity is required to keep under our legislation, and it does not leave much space for interpretation.

The use of any other information (i.e. from records that are not required to be kept under our legislation) should not be relied on, and if the reporting entity wants to use that information, the reporting entity would have to verify its accuracy by asking the client if the information is still the same.

Records can still be kept in any form or manner, it is just that the records the RE can rely on must be records that the reporting entity is required to keep in the first place.

Date answered: 2009-05-11

PI Number: PI-4436

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): Record Keeping

Guidance: 6

Regulations: 52(2)

Record of funds obligation

Question:

It was decided that if the cheques are made out to the RED's lawyer, then the RED does not have any obligations under our act.

However, with respect to RE agents, the same approach is not taken in my opinion and I just want to make sure that I have understood this correctly.

My understanding is that when a cheque is given to a Real Estate agent/broker, they must keep the receipt of funds record - regardless of who the cheque is made out to. Maybe you can provide some background rationale on this.

Answer:

If the real estate agent receives a cheque made out to the real estate agent, either directly, to his/her brokerage, or in trust, then the real estate agent must keep a receipt of funds record.

If the real estate agent receives a cheque made out to anyone else, lawyers, other agents/brokerages, financial institutions, and acts just as courier, then no receipt of funds record is required.

Date answered: 2009-05-11

PI Number: PI-4435

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 1(2), 39

Upgrades and records of funds in real estate sector

Question:

Is a real estate developer required to keep a receipt of funds record (ROFR) for upgrade costs?

Answer:

If the upgrades are part of the initial contract of purchase then they are included in the transaction and are subject to a receipt of funds record obligation if payment is made to the real estate developer.

If the upgrades are not part of the purchase agreement, or part of the initial contract (such as an addendum to the contract), then they are not covered in regards to the receipt of funds obligation. For example the upgrades were paid separately from the price of the new residence and were not included in the original purchase contract; the real estate developer would not have to keep a receipt of funds record when he receives the payment for the upgrades.

Date answered: 2009-05-06

PI Number: PI-4581

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 1(2), 39.7

S. 52(2)- Info at the time of transaction

Question:

Jan 1 a client opens a general chequing account and the information in 14(c) is collected, amongst other things, by the CU. In this, the occupation is collected.

Also, although not part of 14(c) they collect, on Jan 1, the work address.

Sometime later (eg. July 1), the client asks for a loan. Therefore, info in 14(i) is required.

For the client credit file, can the RE use 52(2) for the occupation and place of work address by using the info collected on Jan 1 for the chequing account?

Answer:

Yes the RE can use the occupation and address, provided the information are still the same. However, keep in mind that under subsection 52(2), we are talking about information from other records that the CU is required to keep or retain under our regulations. If the record kept was not a legislative requirement, then the CU may not rely on that information.

Just a quick note on the client credit file - under subsection 14(i) the financial entity has the obligation to keep every client credit file that it creates in the normal course of business - if it doesn't create a credit file, then there is no obligation to keep the information required in the client credit file definition.

Date answered: 2009-05-04

PI Number: PI-4579

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 52(2), 14(c), 14(i)

Info at the time of transaction

Question:

For a client credit file, can the RE use 52(2) for the occupation and place of work address by using the info collected previously for the chequing account?

Answer:

Yes the RE can use the occupation and address, provided the information is still the same. However, keep in mind that under subsection 52(2), we are talking about information from other records that the CU is required to keep or retain under our regulations. If the record kept was not a legislative requirement, then the CU may not rely on that information.

Just a quick note on the client credit file - under subsection 14(i) the financial entity has the obligation to keep every client credit file that it creates in the normal course of business - if it doesn't create a credit file, then there is no obligation to keep the information required in the client credit file definition.

Date answered: 2009-05-04

PI Number: PI-4578

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 52(2), 14(c), 14(i)

Obligations on sale of bonds

Question:

  1. An accountant has been retained by a real estate developer (the “Developer”) in Victoria BC to act as a fund administrator.
     
  2. An accountant is an accounting firm and must comply with the PCMLTFA.
     
  3. The Developer is planning to construct a strata-titled hotel and residential building. The Developer is aware that it will fall under the PCMLTFA for real estate developers and has put an AML policy in place.
     
  4. In addition to pre-selling condo units, the Developer is raising capital for the project by selling bonds to sophisticated investors. The Developer is not a registered securities dealer.
     
  5. The proceeds from the bonds will be paid in trust to the Developer's lawyer (the “Lawyer”), until a minimum amount has been raised, at which time the funds will be paid to the accountant to “administer” the funds. The accountant will register a mortgage on title as security for the bond investors, and when certain conditions have been met, the accountant will release funds to the Developer to use for specified purposes (replacing existing debt and funding development costs).
     
  6. The funds raised through the bond offering are for a loan and not for the purchase of real estate, although certain bond investors may also enter into a separate purchase and sale agreement for a condominium unit pre-sale. The Developer has agreed to follow the same record keeping procedures (client identification, payment of funds records, reporting etc.) for the funds received under the bond offerings as for the condominium unit presales.
     
  7. As the administrator, the accountant will be receiving funds only from the Lawyer, who will be receiving the funds directly from the bond investors. The Lawyer will not carry out its own client identification procedures, but is planning to rely on the client identification done by the developer. Both the lawyer and accountant will be provided with copies of the client identification and receipt of funds records from the Developer, and are prepared to carry out any necessary reporting to FINTRAC based on reviews of those copies.
     
  8. The accountant would like clarification as to its PCLMTFA obligations under this scenario.

Our specific questions are:

  1. Does the accountant have any obligations to identify the source of funds (client identification) other than the Lawyer for the payments made from the Lawyer's trust account to the accountant's trust account?
     
  2. If the accountant has a client identification obligation beyond the transfer of funds from the Lawyer (that is, if the accoutant has an obligation to properly identify the individual bond investors), can the accountant enter into an agreement with the Developer to act as a mandatary for this role, since the Developer will already be taking these records?

Answer:

First, the sale of bonds in relation to the pre-sale of a multi-unit condo project is not a sale of property (or a new condo unit). Therefore, for the sales of bonds (in this scenario) there are no receipt of funds obligations for the Developer.

As for questions about the accountant:

  1. Does the accountant have any obligations to identify the source of funds (client identification) other than the Lawyer for the payments made from the Lawyer's trust account to account's trust account? No
     
  2. If the accountant has a client identification obligation beyond the transfer of funds from the Lawyer (that is, if the accountant has an obligation to properly identify the individual bond investors), can the accountant enter into an agreement with the Developer to act as a mandatary for this role, since the Developer will already be taking these records? No

I just wanted to point out however that as an accounting firm may engage in triggering activities such as receiving or paying funds on behalf of any person or entity (i.e. in this case the Developer as his client) and therefore may have obligations attached to these activities. In this case however, we understand that the funds are paid directly to the lawyer in trust.

Date answered: 2009-04-29

PI Number: PI-4573

Activity Sector(s): Accountants, Real estate

Obligation(s): Record Keeping

Guidance: 6D

Regulations: 34, 59.1

Clarification on bankruptcy and triggering activities

Question:

I understand that if they only do bankruptcy then it's not accounting services to the public and have no requirements. Now if they do other activities and therefore are covered under FINTRAC's PCMLTFA and then they also do bankruptcy they would not have the ID, record keeping & reporting requirements related to bankruptcy but would have requirements related to the other activities - correct? This is assuming that it is one legal entity.

If they have separate legal entities for bankruptcy and then another one for their accounting services then their accounting services entity would be subject to FINTRAC's PCMLTFA.

Just want to be clear that if they are court appointed receiverships they do not have to keep receipt of funds, ID clients etc. as it would not be applicable? In those situations they have no real "clients"...could you please clarify?

Answer:

We agree with your comments - you are right. We just want to add a precision, after further discussions on that issue - In the case of services rendered by the accountant/accountant firm as trustee in bankruptcy, the services rendered would in most cases not fall into the triggering activities as worded in our legislation, that is, receiving or paying funds "on behalf of any person or entity".

Let me explain - if you are appointed by the court, or if you act as a trustee in bankruptcy, you do not act on behalf of any person or entity, because you do not represent the bankrupt, nor the creditors. The trustee in bankruptcy handles the bankruptcy on his own, and does not receive any instructions from either the bankrupt, the court nor the creditors.

Therefore, the chances that any services rendered by the accountant/accountant firm/trustee in bankruptcy would fall in the prescribed triggering activities would be very slim.

Date answered: 2009-03-23

PI Number: PI-4550

Activity Sector(s): Accountants

Obligation(s): Record Keeping

Guidance: 6D

Regulations: 1(2)

Section 14(i) Client Credit file

Question:

If someone has a co-maker on a loan do we need to get the address of the employer for the co-maker too? In this case, it is not a joint application. It is simply a guarantor.

Answer:

No, the co-maker or guarantor does not need to be identified. The record keeping requirements apply to the client.. the guarantor is not the client.

Date answered: 2009-03-20

PI Number: PI-4547

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(i), 1(2)

Act: 2

Identity in records: individual or entity

Question:

We are in the process of updating our KYC. They have a question regarding employees authorized to book foreign exchange deals. In terms of guideline 6G – “Record Keeping and Client Identification for Financial Entities” and subsection 3.7 …booking of foreign currency exchange tickets: “also must set out the name and address and DOB of the individual who carried out the transaction”.

My understanding and according to our current KYC it is the home address of the booker. Could this be the address of the Entity?

Answer:

Our guidance for record keeping (and for reporting as well) in this case is to provide the address of the individual conducting the transaction, and not the entity. My understanding is that they would only have to keep the entity information in third-party records.

Date answered: 2009-03-09

PI Number: PI-4540

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G (3.7)

Real Estate Developer

Question:

Scenario

  • Developer has a licenced real estate sales rep on site doing agreements
  • Buyer comes in and does the deal giving all ID etc to realtor
  • THEN buyer wants to get some upgrades to the home and deals DIRECTLY with the developer to pay for these upgrades

Question: Is the developer required to ID and do receipt of funds records on the upgrades?

Answer:

Yes any funds that are received by the real estate developer in relation to the purchase of a new home are subject to the obligation of keeping a receipt of funds record.

Date answered: 2009-02-16

PI Number: PI-4527

Activity Sector(s): Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6B

Regulations: 39.7(1)(a)

Real Estate developers obligation inquiry

Question:

Regarding the new FINTRAC requirements for Real Estate Developers. If an agreement of purchase and sale is entered into in December 2008, and calls for a series of deposits, some of which are due after February 19, 2009, and a closing after February 19, 2009, is the real estate developer required to create a client information record, etc., or is this transaction exempt because the agreement of purchase and sale was entered into before February 20, 2009?

Answer:

If the purchase agreement is signed prior to February 20, 2009, but the closing takes place after Feb. 20 - there is no requirement to client ID. However, if the home builders receives payments directly (not via his lawyer) on or after February 20th, 2009, then they will have to client ID the person providing the funds, and keep a receipt of funds record.

Date answered: 2009-02-10

PI Number: PI-4515

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39.7(1)(a), 59.5(a)

Receipt of Funds obligations

Question:

Guideline 6B, talking about the receipt of funds record when it is about a corporation states: If the receipt of funds record is about a corporation, you also need to keep a copy of the part of the official corporate records showing the provisions relating to the power to bind the corporation regarding the transaction.

Is this an oversight? Presumably the person signing the cheque has the authority to do so or the cheque would not clear. If a money order or draft, does it matter who brings the deposit? I understand the power to bind is required for a Client Identification Record, but do not understand the requirement in a Receipt of Funds Record.

Answer:

The fact that the person is signing a cheque, does not necessarily mean that the same person has the authority to bind the corporation. The power to bind document is usually a resolution or is part of the incorporation statutes indicating which officer/person are authorized to bind the corporation (either to sell, buy, open a bank account, take up a loan etc).

So for the receipt of funds record, you would have technically an officer authorized to bind the corporation that would also sign the cheque, or an officer that was authorized to transact on behalf of the corporation that would be involved.

Date answered: 2009-01-29

PI Number: PI-4510

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39(1)(c), 39(1)(a), 39(4), 39(5), 39(6), 39.7(1)(c)

Client information records and client identification

Question:

A condominium developer client retains the services of a related party real estate brokerage. My understanding is that the real estate brokerage, and not the developer, will be responsible for compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and Regulations thereto (Section 1 to Guideline 6B). Depending on circumstances, it generally takes about 3 years from the beginning of project marketing (and sales of units) for the condominium to be constructed and registered, at which time, the sales transactions are closed by the law firm on the developer's behalf.

As is very often the case, a purchaser will, through his or her lawyer, provide the developer's law firm with a Direction just prior to closing, under which the purchaser directs that title be placed in the names of one or more people in addition to or in substitution to the purchaser.

In other cases, the purchaser will, prior to closing, request to assign the Purchase Agreement to one or more people in addition to or in substitution to the purchaser.

The Purchase Agreement does not provide such rights to a purchaser.

In the case of a Direction regarding title, the developer client has provided us with ‘standing instructions' to allow for title to be placed in the name of the spouse of the purchaser and no one else. In such a case, we, as the developer's law firm, prepare title in accordance with such Direction and do not seek permission to do so from the developer (as we are acting under ‘standing instructions' as noted above).

In the case of a requested assignment of the Purchase Agreement, or in the case of a request to direct title to anyone other than the spouse of the purchaser, we will seek the developer's instructions on a case-by-case basis. In each of such cases, an addendum to the Purchase Agreement is signed.

In each of the foregoing cases, the real estate brokerage will have complied with the client information records and client identification requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and Regulations thereto with respect to the original purchaser, at the time of entering into the Purchase Agreement.

The real estate brokerage is not involved at all in either of these situations (i.e., a Direction by the purchaser made on the eve of closing or a request to assign the Purchase Agreement prior to closing). Their services to the developer will have ended well before the closing of the purchase transactions.

As such, and based on the foregoing scenarios, I ask for a definitive answer/ruling from FINTRAC as to:

Is there any obligation on the part of the developer in the case of the foregoing circumstances (i.e., either or both of a Direction by a purchaser to place title in the name of one or more parties in addition to or in substitution of the purchaser or an assignment of the Purchase Agreement on the eve of closing) to complete a client information record and obtain identification of the proposed title-holders/assignees?

Are there any other obligations in these cases under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and Regulations thereto?

If there are any obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and Regulations thereto (to complete a client information record and obtain identification on the proposed title-holders/assignees or any other obligations), we assume that this would be an obligation on the developer and not on the real estate brokerage (despite Section 1 to Guideline 6B). Is this assumption correct?

If there is an obligation on the developer to complete a client information record and obtain identification on the proposed title-holders/assignees in the above scenarios, then, given the fact that neither the developer nor its law firm will ever meet the proposed title-holders/assignees, the developer will satisfy such obligation by instructing the law firm to enter into an agreement with the lawyer for the purchaser to require that such lawyer complete a client information record and obtain identification on the proposed title-holders/assignees on behalf of the developer and then submit a written report to the developer (as agent of the developer). Is this the correct procedure to be followed?

Answer:

You are absolutely right - the real estate agent will have the obligations to report, record-keep and client ID. As for the nominees/assignees that sign at the closing (and the realtor does not know about it), there is no obligations for the real estate agent! ( in regards to the presence of nominees/assignees at the closing without the knowledge of the real estate agent would also apply if the real estate developer had the obligations)

Date answered: 2009-01-27

PI Number: PI-4506

Obligation(s): Record Keeping

Guidance: 6B

Obligations regarding the receipt of funds

Question:

I have mentioned to you on various occasions in the past that our client condominium developers require (in order to fulfil statutory requirements) that all deposit, occupancy and closing funds, be made payable to the law firm. This is the case whenever the sale transaction occurs prior to the registration of the particular condominium.

You have always maintained that a Receipt of Funds Record would not therefore be required, as the funds are payable to the law firm and not to the developer or broker/sales representative.

At this time, I ask for a definitive answer/ruling from FINTRAC confirming that no Receipt of Funds Record would be required whenever funds are payable to the law firm and not to the developer or broker/sales representative.

Answer:

If the funds go the lawyer, there are no receipt of funds obligation for the real estate agent (or if not represented, for the real estate developer).

Date answered: 2009-01-27

PI Number: PI-4505

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39(1)(a)

School accounts

Question:

As an education-affiliated credit union, we open operating accounts for individual schools within the various boards in our region. These accounts are used to collect and disburse funds related to clubs, graduations, school trips and other fees. I expect that from time to time fundraising dollars (eg chocolate bar sales etc) are also deposited.

We have confirmed that for the major boards of education in our area, the Board itself is registered as a charity on the CRA website but the individual schools are not. Given this, is it still necessary for staff to ask the charitable status question on each school account and to search the CRA list of charities and print off the result?

Answer:

Yes they will have to ask re: charitable status question each time, and search the CRA list every time as well (if they are registered with CRA of course).

There is an obligation when opening a new account with a not-for-profit organization to determine and keep record of whether the entity (in this case the specific school) is a charity registered with CRA or an organization that solicits charitable donations from the public (subsection 11.1(3)). The school, although part of the Board, is a separate entity and it is the school that is opening the account, not the Board.

Date answered: 2009-01-23

PI Number: PI-4503

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 11.1(3)

Legal Addresses - First Nations

Question:

A Credit Union has asked what type of address they need to obtain for First Nations clients when they are living on the Reserve. There are only PO Box addresses. I advised that they need to obtain the Legal Land Description. The issue is that the Land is registered under the Bands name and not the clients. Hence, would the clients need to obtain that from the Band Council?

Answer:

In regards to the First Nations clients, we would suggest that if they do not have a civic address, then they should provide as many details as possible in regards to where their personal housing unit is situated (i.e. the name of the street, and the name of the reserve they are on or any other similar type of information).

Unfortunately, our policy interpretation in regards to the civic/personal address would not allow any relief in this case, and P.O. Boxes would still not be acceptable.

Date answered: 2009-01-23

PI Number: PI-4502

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 64(1)

PO box as valid address

Question:

An RE is inquiring about the ability to use PO boxes as a valid address in regards to a revised action plan.

Answer:

We maintain our previous policy interpretation. A postal box is not a valid or legitimate address, it is only a box allocated by Post Canada to clients to receive their mail. The address referred to in our regulations is the physical address where the client lives or where the physical location of the place of business is found.

Date answered: 2009-01-09

PI Number: PI-4491

Activity Sector(s): Life insurance

Obligation(s): Record Keeping

Guidance: 6A

Regulations: 64(1)

OSFI Question re assuming mortgages

Question:

When a RE purchases a book of mortgage business from a non-RE, would our interpretation be that the acquiring RE is "opening a new account" and as such would be responsible for meeting the ascertaining ID and recordkeeping obligations.

For example,a Corporation (an RE under the PCMLTFA) purchased a book of mortgages from a non-RE for which they did not met the PCMLTFA obligations with respect to ascertaining ID and recordkeeping, does the acquiring RE have to now ascertain the appropriate ID and keep a record?

Answer:

It would be a question of fact in determining if we are talking about new accounts or not.

First, if the corporation renegotiates, modifies or registers a new mortgage, then yes definitely we are talking about the opening of new accounts (with all the required obligations under our Act and regulations).

However, if there are no changes in the mortgage per se and we are talking of a "behind the scene" change of creditor, and the debtor may not even be aware of that change, then it would most probably not be considered as the opening of new accounts (again the facts are crucial in determining that).

Date answered: 2009-01-08

PI Number: PI-4485

Activity Sector(s): Financial entities, Real estate

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6B, 6G

Regulations: 64

Old RRIF Payments without application forms

Question:

A securities dealer has a bunch of old RRSP accounts (10 to 20 years older or more) on its books.

As required under Canadian tax law, when the client turns 69 years of age the RRSP must be rolled over to a RRIF account, and the client must make minimum yearly withdrawals.

However, because of the age of the accounts in some cases they have completely lost contact with the client and the accounts are put into "frozen" status until such time as they are able to find the client or the client claims their funds.

The problem is with the RRIF withdrawals, which are required under law. In order to comply with CRA requirements, the dealer opens an investment account in the client's name and deposits the annual RRIF withdrawal into this account. However, under PCMLTFA regulations the investment account requires a signed and completed application from the client. Technically, this puts the dealer out of compliance with our regs.

What are your thoughts on the matter?

Answer:

If the securities dealer opens a new account under the client's name to deposit the annual RRIF and there is no signature card - that would make him in non-compliance with our Act and regulations.

Therefore, to avoid this, the securities dealer should either use some sort of internal escrow or suspense account or even to his own trust account (if he has one).

Date answered: 2008-12-17

PI Number: PI-4470

Activity Sector(s): Securities dealers

Obligation(s): Record Keeping

Guidance: 6E

Regulations: 62(2)(j)

FINTRAC new regs for real estate developers

Question:

This question concerns ‘Who is a real estate developer' and in particular to which outlines as follows:

‘On any given day in a calendar year, a person or entity who, in that calendar year and before that day or in any previous calendar year after 2007, has sold to the public, other than in the capacity of a real estate broker or sales representative

(a) five or more new houses or condominium units;
(b) one or more new commercial or industrial buildings; or
(c) one or more new multi-unit residential buildings, each of which contains five or more residential units, or two or more new multi-unit residential buildings that together contain five or more residential units'.

I have underlined the word ‘new' in each of the 3 cases because this requires further clarification. How does FINTRAC define or classify ‘new'? For example, if CLC builds & develops an office tower building in 2008 and fills the tenants' occupancy only by 2011, and then sells the building in 2011 is it no longer new? This prefix new requires clarification. Please let me know what is intended here by FINTRAC.

Answer:

Very quickly -- new means:

  • over 90% renovated
  • brand new build
  • built but had never used for its intended purposes (ie a home built, used for a model home and then sold to the Jones, when sold to Jones, it is NEW)

I believe that the building ceases to be new once part of it is used for its intended purpose - so in this case the office tower building was built but not sold, instead, it is leased and administered by the owner (or an administrator), and then sold only in 2011. Therefore, the building itself, because it was used for its intended purpose from 2008 to 2011 (which is to be leased to tenants and businesses), then it is no longer considered new under our regulations. Presumably when the no-longer-new building is sold, wouldn't a real estate broker likely be used? Therefore the sale would be covered, just not under the RED provisions. If it is a sale by owner, it's true that there would be no obligations in respect of the sale.

Date answered: 2008-12-04

PI Number: PI-4467

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39.5, 39.6, 39.7

Individual Pension Plan - justifying document

Question:

Regarding registered individual pension plans, is a fax of a document from the Canada Revenue Agency (the document refers to the registration number for the plan in question), which was sent by the client, an adequate justifying document for granting the exemption?

Answer:

The Regional Officer can request for any justifying document (within reason of course) from the reporting entity during an examination when scoping why the exemption found in 62(2) applies - however, subsection 62(2) is silent on the record keeping specifications that would be considered sufficient to support the exemption. In addition, it may be prudent for the financial entities or securities dealer to keep some type of justifying document (albeit could be a fax) to support that the exemption applies because it is the opening of a RRSP account.

Date answered: 2008-11-28

PI Number: PI-4460

Activity Sector(s): Financial entities, Securities dealers

Obligation(s): Record Keeping

Guidance: 6G, 6E

Regulations: 62(2)(i)

Act: 6.1

Identification Requirements

Question:

I am still unclear on the duties of my client with respect to identification, third party determination and PEFPs screening.

My client is a 60 year old investment firm that offers discretionary investment management to private clients, usually of high net worth. In terms of process, this is how their business works:

Clients decide they want this firm to make their investment decisions for them and sign an investment management agreement with the firm, allowing this to happen. However, they physically open their account and go through all the identification, third party determination and PEFPs screening with an investment dealer. They give the investment dealers the power to accept trading instructions from the firm, but the account is housed with the dealer. So, for that client and that account, all of the FINTRAC requirements mentioned above are met.

I have been left with conflicting views on whether the firm must subject these clients to the identification process, again. Because the dealers through which the accounts are opened are not affiliated with the firm, one interpretation says they must. However, it seems to me that this would be an unnecessary duplication of efforts and would be unduly onerous on clients.

Answer:

There is no exemption applicable. The client has opened an account with the portfolio management firm, therefore all the obligations/requirements attached to this will apply. So you are right, that both the portfolio management firm and the investment dealer would have obligations under our legislation.

Date answered: 2008-11-19

PI Number: PI-4406

Activity Sector(s): Securities dealers

Obligation(s): Record Keeping

Guidance: 6E

Regulations: 62(2)(o)

Notary Procedure

Question:

Must a notary keep a receipt of funds record when he or she receives a payment from a client through a bank?

Answer:

Yes. This applies if the payment is made by cheque, bank draft, wire transfer or any other method, and deposited into a Canadian Chartered Bank.

Date answered: 2008-11-17

PI Number: PI-4401

Activity Sector(s): British Columbia notaries

Obligation(s): Record Keeping

Guidance: 6J

Regulations: 33.2

Act: 6

Verifying the identity of a third-party

Question:

A father takes out a life insurance policy on the life of his son, with surrender value, but it is the grandfather who makes the payments. Should the insurance company verify the identity of the father, the grandfather, or both?

In this scenario, the grandfather is not giving instructions; he is simply helping out his son financially.

Answer:

In the scenario provided, the requirements to identify would apply only in regards to the father who purchased the life insurance policy. The fact that it is the grand-father that makes the payment of the annuities doesn't change the fact that it is the father who purchased the policy under section 19 (1), and who gives the instructions in regard to the policy.

However, should the grand-father decide to put down $10,000.00 or more cash on that policy (in person) to the life insurance company/broker, then under section 17, the LI company or broker would have to report the LCT to us.

Date answered: 2008-10-31

PI Number: PI-4394

Activity Sector(s): Life insurance

Obligation(s): Record Keeping

Guidance: 6

Regulations: 17, 19 (1)

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): Ascertaining Identification, Beneficial Ownership, Record Keeping

Guidance: 6C

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

Definition of occupation

Question:

If an RE records the client's occupation as "self-employed" or "consultant", etc. should it be cited as a deficiency or noted as a best practice to obtain more detailed info?

Answer:

Occupation should be based and/or similar as what we find in the NOC list (as the occupations listed are detailed and precise). The terms utilized for the occupation should reflect the standardized language for describing the work performed by Canadians in the labour market. In the case of self-employment, the occupation should include self-employed in what (e.g. self-employed window cleaner as we had already mentioned), and in the case of a consultant, same thing, consultant in what.

As for the "retired" and "unemployed" terms, it would depend, as those terms may very well represent the client's situation - so although both terms are not occupations per se, it would be acceptable terms to use if it does reflect the fact that the client has retired, or is unemployed.

Date answered: 2008-10-29

PI Number: PI-4388

Obligation(s): Record Keeping

Guidance: 6

Date of Birth Requirement

Question:

Is the DOB a new requirement under section 14(c)(i)?

Answer:

In regards to the requirement to record keep the DOB under 14(c)(i).

Pre-June 23rd, the DOB requirement was found in section 67(a) under the section of Ascertaining Identity. Under that old section, you would ID the client and include the DOB in a record (as the case may be, a CIR, LCT etc) following the identification.

Post-June 23rd, is it the same obligation however, the DOB requirement is no longer found in the Ascertaining Identity section, but in the record keeping requirements under section 14(c)(i), when you open the account.

Date answered: 2008-10-28

PI Number: PI-4384

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(c)(i)

Record keeping obligations: account holding CU or Receiving CU.

Question:

With the new changes in money laundering, does it require financial institutions to keep a record for the following scenario:
redemption of one money order of $3000 or more or two or more money orders that add up to $3000 or more. The record should include total amount, date of redemption, name and address of individual requesting redemption and name of issuer.

With this change, if members' of the other credit union uses our ATM to deposit money order which total to $3000, we can instruct our branch to keep a record but would there be an obligation to inform the other credit union?

Answer:

The obligation to record keep in this case falls to the credit union who holds the client/member's account.. Not the credit union that received the money order via ATM.

In other words, where the account is held, that financial entity will be responsible for the record keeping obligations.

Date answered: 2008-10-20

PI Number: PI-4380

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 11.2(2), 14(l)

Retroactivity of exemptions according to the new regulations

Question:

Can an entity retroactively benefit from the new exceptions in effect since June 23, 2008?

Answer:

Yes. It is possible to invoke the exceptions in 62(2) after June 23, even if the account was opened before June 23, if the identification has not been completed yet and there is a legal principle that stipulates that, in theory, when an act that has fewer obligations enters into effect, it is the latter that applies.

Date answered: 2008-10-09

PI Number: PI-4377

Activity Sector(s): Securities dealers

Obligation(s): Record Keeping

Guidance: 6E

Regulations: 23, 62(2)

Act: 6.1

Cancelled and declined credit applications

Question:

The June 23rd changes added a requirement for us to now retain credit applications that represent either a cancelled or a declined loan application. I would appreciate if you can clarify the rationale behind the need to retain such information. I know we need to retain it, but it would help to understand the rationale of why.

In addition for a cancelled or declined loan application, we might have requested a credit bureau report. Since for a cancelled or declined loan no funds were ever advanced, does a credit bureau report (if one had been requested) need to be retained and if it does need to be retained and how long must it be retained for.

Answer:

In light of section 14(i) yes you need to retain every client credit file that the CU creates in the normal course of business, and that includes the cancelled or declined loan applications (and the credit reports related to those cancelled and denied applications).

The rationale behind keeping the cancelled and declined applications as part of the credit file, is that Law enforcement had indicated that this type of information was valuable and therefore should be retained.

Date answered: 2008-10-06

PI Number: PI-4372

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(i)

Regarding 14(k) and record keeping obligation

Question:

If a member comes into the credit union and gives a teller $5000 cash or gets the teller to take it out of their account and write an official cheque to someone else from our internal official cheque account, do we need do record keep it?

Answer:

Yes, as indicated in the scenario if the client brings cash, then the RE would have to keep a receipt of funds.

Date answered: 2008-09-15

PI Number: PI-4345

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(k)

Regarding 14(k) and record keeping obligation

Question:

If a member comes into my office and applies for a car loan of $10,000. We do the loan under the member's account number but the disbursement is done through our internal official cheque account. This means that the credit union takes the money from the member's loan number and deposits it into the credit union internal account for official cheques. We then give the cheque to the member to bring to the car dealer to pay for the car. I want to know if we need to do some record keeping for these items as other negotiable items.

Answer:

No, it would not qualify within 14(k) as receiving an amount of $3000.00 or more, as the cheque is from the bank, and does not represent funds received from the client.

Date answered: 2008-09-15

PI Number: PI-4344

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(k)

Record keeping for subaccounts (52(2))

Question:

Credit Unions open Master accounts, and then under that same Master account, they open sub-accounts. I believe a PI was issued stating that if a signature card (14(a))was kept for the master account, which authorized the client to also give instructions on all subsequent sub-accounts, then that one signature was sufficient

During an examination, we wanted to confirm if the previous policy regarding the signature card (14(a)) was also applicable to 14(c) (DOB, address, occupation), that is, if the RE had the name, DOB, address, and occupation in the first account, for example, was sufficient under 52(2), notwithstanding subsequent accounts. If so, that would mean (as was the case during an exam) that if the name, DOB, address or occupation were missing in an account that we were examining under our scope, we could ask the RE to show us the first account, for example. If the information was in that first account, section 52(2) would apply, and therefore we could not cite them for the missing information in the subsequent accounts.

Answer:

52(2) applies for both sub -accounts (which are part of master accounts), as well as new distinct accounts (which are not part of sub-account- just a straight new account) for name , address , occupation , and DOB for accounts subsequent to the first account (second, third, fourth, etc) "unless" the client is high risk , at which point the information must be updated.

Date answered: 2008-09-15

PI Number: PI-4343

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 52(2)

Act: 9.6(3)

Information needed about the signatory of a cheque rather than a depositor of cheque

Question:

What if the person (people) signing the offer is not the same person (people) who are signing the deposit check? What information do we need about the check signer? What if the deposit check is sent from another city in Canada … or somewhere outside of Canada?

Answer:

On the cheque signer, you need to identify them and, for the receipt of funds record, obtain:

  • name, address and date of birth of individual and/or entity from whom the funds were received
  • nature of principal business/occupation
  • date of transaction
  • amount of transaction
  • purpose and details of the transactions, i.e. how the funds were received, addresses of properties being bought/sold, currency type, other parties involved, etc.

The record has to include the type of document you used to confirm the individual's identity, its reference number and its place of issue.

If the cheque is from another city in Canada or abroad and the entity has no agents or employees there, need to use “non-face-to-face” methods to identify individual who is providing the funds. Record-keeping requirements vary slightly depending on which non-face-to-face method is used; these can be found in FINTRAC's Guideline 6B. If a mandatary is used, you must record the type of document the mandatary used to confirm the individual's identity, its reference number and its place of issue.

The person signing the offer must also be identified, and you must record:

  • Name and address;
  • Date of birth;
  • Nature of their occupation or principle business, as applicable.

As with the cheque signer, you must record information on the method used to identify the individual.

For both the deposit and the purchase/sale itself, if the transaction is conducted on behalf of a corporation, you must also confirm existence of the corporation within 30 days and record the required information in respect of the corporation as well.

Date answered: 2008-09-08

PI Number: PI-4340

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39(1), 1(2), 64(1)(b), 64(1)(a), 59.2(1), 65(2)(e)

Form of the binding resolution

Question:

Our GL state that if the record is about a corporation, you also need to keep a copy of the part of the official corporate records showing the provisions relating to the power to bind the corporation regarding the transaction. This could be a certificate of incumbency, the articles of incorporation or the bylaws of the corporation that set out the officers duly authorized to sign on behalf of the corporation, such as the president, treasurer, vice-president, comptroller, etc.

When conducting examinations we find that REs provide to corporations/entities a binding resolution form of their own-making and have a director of the corporation sign off on said form. In other words, they ascertain the existence of the corporation/entity and obtain the name of the corporation entity's director via a publicly available corporate registry; however, the binding resolution is a form that the RE prepares itself and then has one of the directors of the corporation/entity sign off on. This is quite common practice in FE sector and I was wondering if this were acceptable or not.

Answer:

It really doesn't matter if the resolution is drafted by the financial entity or by the corporation itself. What really matters is who has the power to bind the company. So as long as the person signing has the power to bind the corporation, than he can sign the resolution.

Date answered: 2008-09-08

PI Number: PI-4339

Obligation(s): Record Keeping

Guidance: 6

Regulations: 14(b), 14.1(b), 15(c), 20, 23(b), 30(b), 33.2(b), 33.4(b), 36(b), 39(c), 39.7(c), 43(b), 49(b)

Binding Resolutions

Question:

In cases where the corporation/entity has one shareholder/director as confirmed via CIDREQ/On-Corp or any other valid corporate record.

In such cases, is it still necessary to obtain a copy of the binding resolution or can the record confirming that the corporation/entity has only one shareholder/director act as a proxy (replacement) for the binding resolution?

Answer:

The question to ask is does the director have the power to bind or not? You have to know/verify if the person in front of you has the power to bind. And I don't believe that this information shows on CIDREQ/or On-Corp. So yes, it is still necessary to obtain a copy of the binding resolution.

Date answered: 2008-09-08

PI Number: PI-4332

Obligation(s): Record Keeping

Guidance: 6

Regulations: 14(b), 14.1(b), 15(c), 20, 23(b), 30(b), 33.2(b), 33.4(b), 36(b), 39(c), 39.7(c), 43(b), 49(b)

How to ID an embassy in a real estate transaction

Question:

Question from a real estate broker regarding identifying an embassy. The broker is representing an embassy in a real estate transaction, she has identified the individual conducting the transaction (acting on behalf of the embassy) however her question is how does she identify the embassy? How is an embassy set up? Is it part of the government?

Answer:

For embassies, the document that comes closest to the definition of "a partnership agreement, articles of association or any other similar record that confirms the entity's existence" is this document produced by Foreign Affairs. It is frequently updated and available to the public, indicates that each diplomatic mission contained therein is recognized by the Canadian government, and lists the address and officers of the mission.

I would suggest that the realtor conserve a copy of this document (or at least the section that refers to the relevant diplomatic mission). Another option would be for the realtor to ask the embassy/high commission for a document that confirms its legal status, and revert to the DFAIT document if the realtor is unable to provide one.

Date answered: 2008-08-21

PI Number: PI-4317

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 59.2(1)(a), 59.2(1)(b)

Obligations or exceptions for real estate brokers in the case of repossession on behalf of CU

Question:

The situation is a power of sale situation - i.e. the property being listed has been seized and the credit union is representing the power of sale. Therefore the credit union itself is not purchasing or selling any property but the broker's "client" is the credit union? The broker would like to know how the client identification and the record keeping requirements apply in this situation. If a broker is representing a credit union they would be exempt from all record keeping, ID, reporting etc. requirements? I know if it's a public body or a large corporation with assets of $75M etc. that is exempt but in the case of financial institutions I believe that would also be exempt correct?

Answer:

Actually, in the case of the CU the large corporation exemption at 62 (2) (m) can't apply because the exemption cover either a public body, or a corporation with a minimum net asset of $75 M and whose shares are traded on a Cdn stock exchange... and unfortunately the CUs are not traded on the Cdn stock exchange!!!

So the real estate broker would have to identify the person that conducts the transaction on behalf of the credit union, as well, the real estate has to ascertain the existence of the CU (and all the other related requirements).

In the power of sale.. the credit union is repossessing the property and becomes the actual "owner" of the property (unless there is another mortgage company involved.. and that may lead to a 3rd party determination

As for the receipt of funds... remember that the receipt must be kept unless the amount is received from a financial entity or public body - for the funds to be received from a financial entity, that would mean that the financial entity is the buyer!

In other words, you have to keep a client information record even though the client is a financial entity, unless the financial entity has net assets of minimum $75 M and has shares that are traded on a Cdn stock exchange, and you will not have to keep a receipt of funds if the funds are received from a financial entity (i.e. buying the property).

Date answered: 2008-08-20

PI Number: PI-4316

Activity Sector(s): Financial entities, Real estate

Obligation(s): Ascertaining Identification, Record Keeping, Reporting

Guidance: 6B

Regulations: 62(2)(m), 39(1)(a), 39(1)(b)

Receipt of Funds

Question:

When the deposit from the buyers are received in Certified Cheque and/or bank Draft, do we still need to ask for their banking information i.e. bank name, transit number and bank account number?

The guideline mentions if the deposit is in the form of a cheque you can obtain the account information directly from the cheque itself. There is no mention of certified cheque, money order, bank draft etc. and the obligation for the broker to obtain information on the account the draft, m/o, certified cheque etc. were drawn on?

Answer:

The receipt of funds record is in respect of a transaction in which an amount of funds is received, regardless in which form the funds are given (cash, cheques etc).

The record must contain the following information: name, address, DOB and occupation of the person(s) giving the funds / the date of the transaction / the number and type of any account affected by the transaction, as well as the name of the person or entity that is the account holder and currency / purpose and details of transaction / if funds received in cash, how it was received (armoured car, in person etc) / amount and currency of funds.

So the banking information will have to be recorded, amongst all the other information that the receipt of funds record must contain.

There isn't technically a requirement to ask for the transit or the bank name, the regs only say account number, so we wouldn't be able to cite a deficiency for not having transit/bank name. Also, the regulations changes that recently came through changed the requirement to taking reasonable measures to obtain account number/type of account/account holder, so if the client refuses to provide the info of the account on which the bank draft was drawn, the Reporting Entity could record this fact and remain in compliance.

Date answered: 2008-08-11

PI Number: PI-4303

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 39(1)(a), 1(2)

Customer's refusal to provide information: occupation

Question:

If a customer refuses to provide their occupation, can the credit union still open the account? While the credit union requires the customer's occupation for record keeping purposes, only name, address and date of birth is required for the account opening.

Answer:

If a customer refused to provide their occupation - they should not open the account - it is a legislative requirement when opening an account to keep the record of the occupation - section 14 (c)(i) and the CU would be in non-compliance.

Consequently because occupation is not part of the "identity" of a person, 9.2 is not the section that would impact the absence of that caption. However, it would still be up to the reporting entity to determine if they want to open an account in light of the fact that a mandatory record keeping obligation (e.g. occupation) would be missing, and that would put the reporting entity in non-compliance.

This is a record keeping obligation - and we also indicated that the reporting entity should not open the account - but it would be up to the RE to make that determination!

Date answered: 2008-08-08

PI Number: PI-4302

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(c)(i), 53.2

Act: 9.2

Client Statements and section 14 obligations

Question:

It is increasingly likely that we may lose access to our current client tracking system in the next 12 to 16 months. While it will be replaced with another system, there is no guarantee that we can re-produce the exact same statement the client initially received after the system is removed.

Is the intent of the legislation to have us reproduce the exact same statement either through re-print or by filing original? We are looking into document scanning to store electronically the exact statement if required to ensure we are compliant.

Answer:

Is the intent of the legislation to have us reproduce the exact same statement either through re-print or by filing original? No that is not the intent of the legislation under 14 (g), however, as long as the information can be found, or reproduced that would be acceptable (in some other form).

Date answered: 2008-07-18

PI Number: PI-4285

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(g)

Reasonable measures for record keeping

Question:

If the Canadian correspondent responds or does NOT respond to the request, does the fact that the receiving FI made the request to obtain the missing information still satisfy the requirement for “reasonable measure”?

Answer:

Yes, just ask, and document although that the regs do not require to document, the RE's P's and P's should

Date answered: 2008-07-17

PI Number: PI-4272

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Act: 9.5, 9.6(2)

Process to be followed when information is missing by receiving FI

Question:

Please confirm that there is no requirement in the regulations and legislation for the receiving FI to reject or return a wire transfer payment to the originator if the “reasonable measure” was unsuccessful at obtaining the missing information. Is it correct to say that, provided that the receiving FI exercised a reasonable measure to obtain the missing information that they will have complied with the intent and spirit of the regulations?

Answer:

Depends if it is a mandatory field of not... if mandatory, then return the wire, if reasonable measures, then they can proceed.

Date answered: 2008-07-17

PI Number: PI-4271

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Act: 9.5

Number of requested need to be considered reasonable measures

Question:

If the receiving FI sends a single request to the Canadian correspondent of the originating FI to request the missing information, does that constitute a reasonable measure?

Answer:

Yes.

Date answered: 2008-07-17

PI Number: PI-4270

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 12(1)(b), Schedule 2, Schedule 5, 12(1)(c), Schedule 3, Schedule 6, 66.1(2)

Act: 9.5

How to document reasonable measures

Question:

Assuming that a reasonable measure has been taken, how must this be documented or evidenced to satisfy any FINTRAC field audits?

Answer:

From a compliance perspective the documentation again are not required by our regs, however, should be part of the RE's P's and P's).

Date answered: 2008-07-17

PI Number: PI-4269

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Act: 9.5, 9.6(2)

Exemptions to Client ID for direct deposits for dividend distribution

Question:

Would direct deposits for purpose of dividend distribution be able to take advantage of the exclusion for direct deposits or pre-authorized debits?

While such transactions are mostly undertaken by trust companies on behalf of large corporations a trust company could use this method to distribute dividends for small entities and privately held companies and I have been asked if the exclusion would hold up in such circumstances.

Answer:

The exemption found in section 66.1(3)(c) of the regs applies to the travel rule and the originator information. This exemption however, does not exempt the reporting entities of their obligation under section 14(m) to keep a record in the case of an EFT (international, SWIFT MT 103, and within Canada that are SWIFT MT 103), of $1000.00 or more.

In other words subsection 66.1(3) provides an exemption (travel rule), however, it does not exempt the trust company of their obligations of record keeping under 14 (m).

Date answered: 2008-07-14

PI Number: PI-4260

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(m), 66.1(3)(c)

Written agreements in appointing mandataries and agents

Question:

I recall that it was decided that written agreements could be done between brokerage office (and not just at a sales person level). The corporate office is looking at developing a template that basically says:

The company X hereby appoints 'another company' Y as their agent / mandatary for the purposes of ascertaining identification as required under the PCMLTFA. The idea is that this will be signed by both brokers of record and dated (and maybe done every year).

I am thinking that this is acceptable, but wanted to check to make sure I was not speaking out of turn. Am I correct in my assumption?

Answer:

We feel that a written agreement between brokerage offices would be acceptable as long as the written agreement indicates that:

" All brokers/agents employees of or acting on behalf of an entity are appointed as their agents/mandatary for the purposes of ascertaining identification as required under the PCMLTFA" as opposed to just appointing the entity (as it will be the employees/as individuals that will ascertain the id).

Plus as best practice, you may want to point out that the agents/mandatary must have clear indications of what they are expected to do.

Date answered: 2008-07-14

PI Number: PI-4259

Activity Sector(s): Real estate

Obligation(s): Record Keeping

Guidance: 6B

Regulations: 64.1

Term deposits being increased- intended use

Question:

When you increase an amount of an existing Term Deposits (GIC), do you have to record the intended use of the account again? (i.e. a member has a term deposit for $10,000 and wants to increase it to $12,000. What actually happens is the first term deposit is closed and a second one is opened for $12,000. )

Answer:

If there is a new account being opened, then the CU would have to ask (and record) what is the intended use for this new account.

However, if the first account is not closed (remains open - and it's a mere roll-over), then there is no new account being opened, and no new intended use. It would be a question of fact.

Date answered: 2008-07-14

PI Number: PI-4258

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(c.1)

Regarding recording the Issuer of Money Orders- section 14(l)

Question:

Section 14(l): where, in a single transaction, it redeems one money order of $3,000 or more, or two or more money orders of that, taken together, add up to a total of $3,000 or more, a record of the total amount of the money order or orders, the date on which the money order or orders were redeemed, the name and address of the person who made the request for the money order or orders to be redeemed and the name of the issuer of each money order. Who is the issuer?

Answer:

“The name of the issuer” refers to the name of the entity that issued the Money Order that the RE is now redeeming. It is important to note, however, that if the entity is redeeming the money order, then it has to have been issued by that entity. To take in a money order issued by another entity and return the cash equivalent to the client is cashing the money order. For financial entities, there are no associated record-keeping obligations when cashing money orders. When the money order is redeemed, the Credit Union that is redeeming the Money Order must keep a record the total amount of the money order or orders, the date on which the money order or orders were redeemed, the name and address of the individual (person at the teller) who is redeeming the Money Order, as well as the name of the issuer that issued the Money Order, which would be the Credit Union itself when redeeming.

Date answered: 2008-07-14

PI Number: PI-4257

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(l)

CU / traveller's cheque question

Question:

Do you need to go the extra step when cashing traveller's cheque and ask how the traveller's cheque were paid for initially (cash/by cheque etc.)?

Answer:

No, the CU doesn't need to gather that information.

Date answered: 2008-07-14

PI Number: PI-4256

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(k), 54.1(b)(i)

Bank Drafts considered Money orders

Question:

This applies to section 14(l) cashing a money order of $3000 or more

(l) where, in a single transaction, it redeems one money order of $3,000 or more, or two or more money orders of that, taken together, add up to a total of $3,000 or more, a record of the total amount of the money order or orders, the date on which the money order or orders were redeemed, the name and address of the person who made the request for the money order or orders to be redeemed and the name of the issuer of each money order;

Comment: In order for an FE to cash a Money Order (MO) of $3000 or more, another FE must issue a MO of $3000 or more. For the exception of Canada Post, all CUs have told me during the workshops (and from my days at RBA), FEs will not issue MOs for $3000 or more. As soon as the amount if over $1000, the FE will issue a draft. Therefore, it is extremely unlikely that a CU will cash (redeem) a MO of that amount unless they for example three MOs of $1000 in a single transaction, which will also be very rare. They will redeem drafts for that amount ($3000 or more)

Section 14(k) which speaks to the issuance of MOs or other negotiable instruments. The other negotiables instruments cover Drafts. No such "negotiable instruments" is inserted in 14(l)

Does 14(l) apply to drafts?

Answer:

No Money Orders do not include Bank Drafts. And therefore 14 (l) does not apply to Bank Drafts.

Date answered: 2008-07-09

PI Number: PI-4254

Activity Sector(s): Financial entities

Obligation(s): Record Keeping

Guidance: 6G

Regulations: 14(l), 14(k)

Exemption to Client ID

Question:

Where an account is opened in the name of a non-exempt non-personal entity, and a financial entity / securities dealer / life insurance company / investment fund (all as referenced in 62(2)(l)) / publicly traded corporation (the latter as defined in 62(2)(m)) / wholly owned subsidiary of a 62(2)(m) corporation / has been appointed to give instructions in respect of that account (i.e. is a signing authority), there is no requirement to comply with client ID and record keeping requirements (e.g., sections 14, 23, 54, 57) in respect of the otherwise non-exempt non-personal account holder. This is the case regardless of whether there is an additional signing officer that has been appointed.

Actual Case: The business is opening an account in the name a non-exempt entity and a bank (who would meet the exemptions as they are a wholly owned sub of another bank) will be appointed as authority to act on the account. Initially, the business discussed with the bank and advised them that we would need to ID them and their employees that would be acting on behalf of the bank. The bank refused to provide the information. They are aware that they would be exempt if they opened the account in their name and don't see this as any different.

Answer:

The exemption at 62(2)(l) applies to the opening of an account either in the name of, or in respect of which instructions are authorized to be given, by a financial entity.

In this case the exemption applies to the opening of the account in respect of which instructions are authorized to be given by a financial entity, and no client identification or record keeping are required. There are no limits to this exemption.

Date answered: 2008-06-25

PI Number: PI-4239

Activity Sector(s): Financial entities

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6G

Regulations: 62(2)(l)

Date of birth obligation for existing accounts

Question:

A reporting entity was wondering as to the retroactivity of obtaining date of birth on accounts which were opened previously to the provisions of the PCMLTFA coming into force; must they go back and obtain the date of birth for those clients whose accounts were opened 20 years ago?

Answer:

The PCMLTFA cannot be applied retroactively, however, in light of section 71.1 of the PCMLTFR and following the securities' dealer risk assessment - if the clients are deemed to have high risk accounts - then the securities' dealer would need to take reasonable measures to update the client information and ultimately the date of birth would need to be obtained.

Date answered: 2008-06-25

PI Number: PI-4238

Activity Sector(s): Securities dealers

Obligation(s): Ascertaining Identification, Record Keeping

Guidance: 6E

Regulations: 71.1

Date Modified: