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Your Real Estate Business Can’t Afford ‘Just-in-Time Compliance’

Written with Heidi Unrau

 

In the past two years, 13 real estate brokerages faced a total of $1,041,936 in administrative monetary penalties (AMP) from FINTRAC, the federal agency that regulates anti-financial crime compliance and analyzes financial intelligence in Canada. That works out to an average fine of $80,148 per brokerage, with the single largest AMP reaching approximately $150,000. 

Real estate brokers, sales representatives, and developers have legal responsibilities under Canada’s anti-money laundering rules prescribed by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). These rules are designed to prevent, detect and deter real estate transactions from being used to hide proceeds of crime, to fund terrorist activity, or evade sanctions. 

Yet too many brokerages still treat anti-money laundering (AML) compliance as a cost centre instead of a core risk management function. And what we’re seeing is a lot of “just-in-time compliance” behaviour, resulting in major deficiencies with up to six-figure penalties.

Compliance within the real estate industry has never been as important as it is right now. Not only is the regulator penalizing companies for compliance failures, but the monetary penalties are now 40 times higher than they were before. That emphasizes the level of effort that needs to be paid to your compliance program before FINTRAC calls.

Why is FINTRAC Cracking Down on Real Estate?

Real estate is an attractive target for money laundering because one deal can move a significant amount of illicit funds. Real estate transactions are especially vulnerable because they are used at the integration stage of money laundering, after the funds have already moved through accounts, businesses, third parties, family members, or international transfers to obscure the origin. 

By the time those funds reach real estate, the warning signs are much harder to identify, but the compliance expectations do not change. Given the size, complexity, and risk profile of real estate transactions, you need to apply greater scrutiny to the people, funds, and circumstances behind each deal. 

Weak controls around identification, record keeping, training, and suspicious transaction reporting expose your business to unnecessary financial and reputational risk.

The Problem With ‘Just-in-Time Compliance’

Just-in-time compliance happens when you ignore your AML compliance obligations throughout the year, or worse, a longer period of time, then scramble to fix everything after FINTRAC makes contact. By then, it’s too late. 

Once FINTRAC calls, the exam has already started. Everything done after that point becomes last-minute compliance. It’s better than doing nothing, but it doesn’t prove you had those controls in place during the period FINTRAC is reviewing. 

The regulator is looking at whether you had a functioning program in place during the period under review. If your procedures, training, records, and review processes were missing or outdated during that period, fixing them after FINTRAC contacts you will not undo the deficiency.

A FINTRAC examination can disrupt regular business operations if you’re scrambling to track down missing records, update stale policies, complete overdue training, or fix program gaps while still trying to serve clients and close deals. 

FINTRAC publishes all administrative monetary penalties on its website. A public enforcement action can damage trust with clients, lenders, referral partners and other stakeholders, causing serious reputational harm that can negatively affect your bottom line. 

That’s exactly why AML compliance has to be treated as an ongoing business function. You already understand this concept in other areas of your business. You do not wait until tax season to create a full year of bookkeeping from scratch. You do not wait until a lawsuit to decide if your contracts were properly drafted. AML compliance works the same way. The work needs to be done before the regulator asks for proof. 

Start With Your Baseline AML Obligations

Trying to build a perfect AML program right out of the gate can be overwhelming. In reality, you should start by meeting the baseline requirements. That means ensuring your real estate business has the fundamentals in place, such as written policies and procedures, a designated Compliance Officer, training, risk assessment, record keeping, suspicious transaction escalation and reporting processes, and the required two-year compliance effectiveness review. 

Beyond these baseline requirements, FINTRAC states you must implement a compliance program that can effectively verify the identity of the persons and entities involved in transactions, conduct ongoing monitoring when a business relationship is formed, obtain and take reasonable measures to confirm beneficial ownership information for entities, make third-party determinations when required, and take reasonable measures to determine whether clients are politically exposed persons or heads of international organizations.

Your policies and procedures should clearly explain what your business is supposed to do. Risk assessments identify where your business is most exposed. Your training ensures staff and agents understand their obligations. Your records prove what happened. And your suspicious transactions process shows how concerns are escalated, reviewed, documented, and reported. 

Why The Two-Year Effectiveness Review Is Critical

The two-year effectiveness review is especially important because it reveals where your program is working and where it’s weak. We recommend starting here because it provides a look at your AML compliance program as a whole, identifies the biggest problem areas, and prioritizes the highest risk gaps. It is very important that the person completing your review has adequate experience and understands the industry, as well as your business. This should not be a “check the box” compliance exercise. 

If you have not yet completed an effectiveness review, that should be the top priority. 

Where Real Estate Entities Commonly Fail 

Many real estate compliance failures are basic program deficiencies that are entirely preventable. The most serious gaps usually fall into three main areas: not having an AML program at all, failing to complete the required two-year effectiveness review, and unreported suspicious transactions. The regulator can, and does, penalize failures in the compliance process itself, including missed reporting, poor documentation, and weak program controls.

It is complex, but it is not impossible. If your written program does not reflect how your brokerage actually operates, fix it. If your training is outdated, that needs attention. If your team is unsure what to collect, when to escalate concerns, or when a report may be required, those deficiencies should be fixed before FINTRAC identifies them for you.

No AML Program At All

The most common failure is having nothing in place. That means no written policies and procedures, no designated compliance officer, no training, and no clear internal process for meeting AML obligations. 

These are the foundation of a compliance program. Without them, your business has no consistent way to identify risk, collect required information, train agents, escalate concerns, keep records, or prove to the regulator that the business is taking its obligations seriously. 

The Two-Year Effectiveness Review Not Done

Another major gap is the two-year effectiveness review. It’s often skipped entirely, even though it is one of the most important tools you have to determine if your compliance program is actually working. Without it, you may not know where your business is exposed until FINTRAC identifies the problem first. 

Missed Suspicious Transaction Reporting

A single unreported suspicious transaction can result in a financial penalty well over $100,000. Yet, this remains one of the most common compliance failures. 

FINTRAC has given reporting entities a laundry list of suspicious indicators. And that laundry list is what they’re using to assess your transactions. If a transaction presents red flags, it needs to move through a clear internal process so you can show the regulator what the final decision was. Specifically, that there were reasonable grounds to suspect (RGS) the transaction was related to financial crime and reported as a suspicious transaction to FINTRAC, or there was not RGS and the rationale is clearly documented.  

‘Suspicious’ Does Not Automatically Mean a Dead Deal

A common point of confusion is the distinction between a high-risk transaction, a suspicious transaction, and a transaction you cannot legally participate in. 

A transaction can be high risk without being illegal. A client might have foreign funds, a complex ownership structure, have a holding company involved, or have a third party helping with the purchase. Those details can have legitimate explanations. They also require more questions, documentation, and scrutiny. 

A transaction is suspicious when you have reasonable grounds to suspect, which is a lower threshold than to believe, that it is linked to criminal activity. You do not need proof, but you do need to explain why you feel it is suspicious based on facts, context, indicators, what you know about the client, and the nature of the transaction. 

You can still proceed with high risk and suspicious transactions. Your obligation is to assess the concern, document what happened, escalate internally, and report to FINTRAC when required. 

However, if a client is asking you to help them break the law or evade sanctions, then you absolutely cannot proceed with the transaction. 

Next Steps

For real estate brokerages, compliance is no longer something to address only when an exam is looming, the biggest risk is waiting too long.

If your real estate business does not have an AML compliance program, you need to implement one as soon as possible. Get support from a qualified compliance provider that can help create policies and procedures customized to the specific type of real estate business you conduct. Generic compliance templates are no longer effective because they are not tailored to align with your specific day-to-day operations. 

If you have an AML compliance program, but have not yet completed your two-year effectiveness review, start there. It will tell you where your program is working and where it’s not. Then use that information to prioritize what needs to be fixed first. 

Need an effectiveness review or support building, reviewing, or updating your AML compliance program? Contact Outlier to get clear, practical guidance on your obligations and next steps.

Infonex – Financial Services Regulation 2026 (Virtual)

Canada’s anti-money laundering landscape is undergoing its most significant transformation in years, and compliance professionals need to be ready.

Outlier’s Co-Founder & CEO, David Vijan, will join industry leaders at Infonex’s Financial Services Regulation 2026 conference to unpack the sweeping changes brought by Bill C-12 — the Strengthening Canada’s Immigration System and Borders Act — which received Royal Assent on March 26, 2026. The legislation dramatically raises the stakes for AML compliance, increasing administrative monetary penalties by up to 40 times current levels, expanding mandatory compliance agreements with FINTRAC, and broadening registration requirements to all reporting entities under the PCMLTFA.

David will also address the Government of Canada’s plans to establish a new Financial Crimes Agency — designed to serve as Canada’s lead enforcement authority on money laundering, organized crime, and online financial fraud — and what it means for financial institutions preparing for a new era of oversight.

Attendees will leave with a clearer picture of what these legislative and structural changes mean in practice, and how organizations can strengthen their AML programs to meet rising regulatory expectations.

For more information and to register, click here.

 

RPAA Annual Reporting – Reminder and Key Requirements

Background

Under the RPAA and the Retail Payment Activities Regulations (RPAR), Payment service providers (PSPs) must submit an annual report through the Bank of Canada’s (BoC) online portal using the prescribed reporting form. Reports must be filed annually by March 31 and must cover retail payment activities conducted during the prior calendar year.

Who Must Comply

All PSPs that are on the registration list with BoC must complete the annual report. For clarity, BoC has established the following deadlines:

  • PSPs registered before March 9, 2026, must submit their report by March 31, 2026.
  • PSPs registered between March 9 and March 30, 2026, have until April 28, 2026.

PSPs on the application list as of March 31, 2026, are not required to file a report for the 2025 year and will report in 2026.

The annual report is now available through PSP Connect. It includes mandatory sections and does not permit structural or formatting changes. It is set up similarly to what PSPs saw as part of registration. All required fields must be completed, and any omissions must be explained in accordance with BoC guidance.

What to Report

The following are the reporting elements of the annual report.

1. Operational Risk and Incident Management

In this section, PSPs must provide information on the governance, design, and effectiveness of their operational risk management and incident response frameworks. This includes confirming whether the framework, and any material updates to it, were approved during the reporting year by the senior officer.

In this section, PSPs must identify the operational risk categories monitored during the year and must outline what protective and detective measures were in place. Importantly, this action requires PSPs to provide quantitative staffing and resourcing information.

PSPs must also explain how operational risks arising from third-party service providers and agents or mandataries are managed. PSPs must also indicate whether agreements with third-party service providers were entered into, amended, extended, or renewed. Where agents or mandataries are used, PSPs are expected to confirm that responsibilities are clearly defined, operational risk criteria are established, and assessments are performed to evaluate whether those criteria are met.

Some key requirements for this section are:

  • Did the PSP classify assets and business processes by sensitivity and criticality?
  • Were sufficient human and financial resources available to implement and maintain the framework?
  • Did the framework set out operational reliability objectives, targets, and indicators?
  • Which measures were in place to mitigate technology risks and protect assets and processes?
  • Did the framework include incident response and recovery plans, including third-party incidents?
  • Which elements were included in the incident response plan?

2. Safeguarding of End-User Funds

In this section, PSPs that perform the payment function of holding funds on behalf of end-users must identify whether they safeguard funds through a trust account or through an account supported by insurance or a guarantee, and whether the safeguarding method changed during the reporting year.

PSPs must report whether end-user funds are placed into a safeguarding account upon receipt and, where processing constraints exist, whether funds are placed into the safeguarding account by the next business day. PSPs must identify whether safeguarding accounts are held with Canadian or foreign financial institutions and, where applicable, identify those institutions and their regulators.

PSPs must describe the liquidity approach used to ensure end-users have reliable access to their funds and outline the procedures in place for returning those funds in the event of the PSP’s insolvency.

Some key requirements for this section relate to shortfall reporting. PSPs must report instances during the reporting year where safeguarded funds were insufficient, including:

  • the date the shortfall occurred and the date it was resolved,
  • the maximum daily shortfall amount (in CAD),
  • the root cause (selected from prescribed categories), and
  • the measures taken to prevent recurrence.

3. Significant Changes and Incidents

In this section, PSPs must identify all significant changes that occurred during the reporting year. A change is considered significant where it could reasonably be expected to materially affect operational risk or the safeguarding of end-user funds. The annual report requires each change to be reported separately, including the month and year in which the change took effect.

Examples of reportable significant changes include new or amended outsourcing arrangements, changes to third-party service provider relationships, material technology changes, geographic expansions, new products or market segments, changes in participation in payment systems, and material changes to organizational structure or staffing levels.

It is important to note that the report must also include a complete inventory of incidents experienced during the year, including incidents that were not required to be reported to the Bank under the RPAA at the time they occurred.

PSPs must also identify any retail payment activities that the PSP began or ceased to perform during the reporting year.

4. Ubiquity and Interconnectedness Metrics

In this section, PSPs must provide quantitative metrics as it relates to end-user funds used by the Bank to assess a PSP’s footprint and interconnectedness within the Canadian payments ecosystem.

These metrics must capture transactions where the PSP performed a payment function directly or indirectly, and must be reported separately for all end-users and end-users in Canada, where applicable.

PSPs must also report the total number of distinct end-users served during the reporting year, including users receiving services directly and indirectly, and provide information on services performed for other registered PSPs.

Some key metrics that must be reported include:

Value of End-User Funds Held

  • The maximum Canadian Dollar (CAD) equivalent value of end-user funds held at any time during the year.
  • For each month, report the average daily value (in CAD) at month-end.
  • Both the total of all funds held, and a breakdown by currency held.

End-Users

  • Total number of distinct end-users, and
  • Number of users receiving direct vs. indirect services (via third-party PSPs).

Number and Value of Electronic Funds Transfers (EFTs)

  • Monthly Count and Total Value
    • Report the monthly count and total value of EFTs.
    • Values in CAD (as both a total of all currencies combined, and a breakdown by currency of the EFT).
  • Value by Payment Type
    • Report an estimate of the total value of EFTs by payment type as a share of total value.

PSP with a place of business in Canada must report values for end-users in Canada and end-users outside of Canada as separate amounts.

5. Financial Information

In this section, PSPs must report key financial information, including total revenue, operating expenses, and total equity. Financial information may be reported using the PSP’s fiscal year-end, whereas most other reporting elements must align with the calendar year.

6. Record-Keeping

In this section, PSPs must confirm whether they maintain records sufficient to demonstrate compliance with the RPAA and the Retail Payment Activities Regulations. PSPs must indicate whether record-keeping is complete, partially complete, or not in place, and should be prepared to support these responses if requested by the Bank.

Preparing for Report

The annual reporting form is available through PSP Connect as of February 2, 2026. We suggest that PSPs may begin gathering the needed information for submission at any time prior to the applicable deadline. To help make this a bit easier, Outlier has put together a spreadsheet that will help in compiling the needed information. Please note that this spreadsheet does not replace formal BoC guidance. The system does allow organizations to save and continue where you left off.

We’re Here To Help

If you would like assistance in understanding what has to be reported or if you need help with RPAA requirements in general, please get in touch.

VACI’s 2026 “Life Cycle of Dirty Money” Webinar Series

From January 8 to February 12, 2026, the Vancouver Anti-Corruption Institute (VACI) will host a six-part webinar series connecting leading voices on anti-money laundering investigations and enforcement.

Join Outlier‘s Amber Scott in Session 2’s discussion: Preventing Money Laundering.

Date and Time: January 15, 2026 | 9:00-10:00 AM

New Beneficial Ownership Discrepancy Reporting

Effective October 1, 2025, Canadian anti-money laundering (AML) reporting entities regulated by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) are required to report to Corporations Canada any material discrepancies identified between the beneficial ownership information that they have obtained and that is listed in Corporations Canada’s database.

Background

This requirement was introduced to enhance the reliability of beneficial ownership information available to authorities and the public, and to reduce the opportunities for misuse of Canadian corporate structures in money laundering, tax evasion, and sanctions avoidance schemes. Since the usefulness of the beneficial ownership information depends on the accuracy of the information, amendments under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) now will require reporting entities to flag material discrepancies between the information provided by a corporation incorporated under the Canada Business Corporations Act (CBCA) and what is recorded in the registry, thereby supporting Corporations Canada in maintaining an accurate database.

A “material discrepancy” exists where beneficial ownership information collected by a reporting entity substantively contradicts what is publicly disclosed. While the regulations give limited guidance, missing beneficial owners are considered material, while minor typographical errors are not. Currently, the definition of “material” remains imprecise, which may create some uncertainty for compliance teams.

Who Must Comply

The requirement applies to reporting entities who have the existing obligation to take reasonable measures to confirm the accuracy of beneficial ownership information when they first obtain it and in the course of conducting ongoing monitoring of their business relationships.

Discrepancy reporting applies only to CBCA corporations that are active on the Corporations Canada registry.

When to Report

Reporting entities are required to report a material discrepancy to Corporations Canada within 30 days after the day on which it is identified when the following criteria are met:

  • A client is an active CBCA corporation; and
  • The reporting entity determines that the corporation is high-risk for money laundering, terrorist financing, or sanctions evasion; and 
  • When there is a material discrepancy in beneficial ownership information that is not resolved within 30 days. Note there is no requirement to address the material discrepancy directly  with the customer. 

In these cases, reporting entities must check the Corporations Canada registry when a high-risk relationship is first identified and continue to check during ongoing monitoring of that high-risk business relationship.

If a previously reported discrepancy is identified again (i.e., during the course of ongoing monitoring) and it has not been resolved, it must be reported again. If there are other issues related to corporate status or registry info (not beneficial ownership information), this information can still be reported to Corporations Canada, but it must be done so separately. Voluntary reporting is permitted if the client is considered low-risk, but discrepancies are still found.

Reporting Steps

Reports are submitted through Corporations Canada’s online portal (accessed through the registry). The process is as follows:

  1. Ensure your reporting entity is registered for FINTRAC Web Reporting (FWR), and that the individual completing the reporting has an active My ISED account with Corporations Canada.
  2. Search the corporation on the Corporations Canada website to confirm it is an active CBCA corporation.
  3. While in Corporations Canada’s online portal, from the page connected to the corporation about which the discrepancy is being reported, select “Report an Issue” (currently a link at the bottom right of the page). This will prompt a My ISED login.
  4. Complete the discrepancy form with:
    • Reporting entity details (legal name, RE number, location, compliance contact/email). This information will auto-populate after the first report. 
    • Corporation details (name and incorporation number for the company you are reporting on).
    • Selecting the reason for reporting a discrepancy (reporting as required under PCMLTFA or voluntary).
    • Discrepancy details (nature of inconsistency, date identified).
  5. Review the information for accuracy and submit the report.
  6. A confirmation screen will appear, including a reference number 
  7. Corporations Canada will validate the report and issue an acknowledgment within 10 business days.
  8. Keep a copy of the acknowledgement as evidence of the completed discrepancy reporting.
  9. If the discrepancy has not been resolved by the next time you complete periodic monitoring for the entity, the process is repeated.

For more detailed steps on reporting, you may refer to the guidance on submitting a beneficial ownership discrepancy report or the following Corporations Canada demo video, which together provide a comprehensive overview.

 

Note that inaccurate or incomplete reporting entity information will result in an invalid Beneficial Ownership discrepancy report. Amendments to submitted reports are currently not possible, and a new report will have to be submitted. 

Reporting entities must retain the report acknowledgment and other supporting documentation as evidence of meeting obligations. 

We’re Here To Help

If you would like assistance in understanding what these changes mean to your business, or if you need help updating your compliance program and processes, please get in touch.

ACAMS Toronto Chapter Virtual Event — “The Regulatory Landscape of Money Service Businesses (MSBs) and Financial Crime in Canada”

Join Divya Bhaktha of Outlier Compliance Group as she speaks on the regulatory challenges and evolving compliance landscape facing MSBs in Canada. This virtual session will dive into best practices, emerging trends, and enforcement priorities when it comes to financial crime in the MSB sector.

Key topics include:

  • Current regulatory expectations for MSBs in Canada
  • Recent enforcement trends and case studies
  • Strategies for strengthening compliance programs
  • Emerging risks and future developments

Whether you’re in the MSB space or advising clients in high-risk sectors, this session will provide valuable insights and practical guidance.

Hosted by: ACAMS Toronto Chapter
Register or get more info here.

Outlier Compliance Group welcomes Maria Shamou!

The Outlier Compliance Group team is excited to welcome our newest member, Maria Shamou, as our administrative ninja.
Maria brings broad compliance knowledge complemented by over eight years of comprehensive customer service experience, paired with a strong foundation in administrative support and a strong interest in compliance along with a background in administrative support. She earned a Bachelor’s degree in Business Administration, and later completed a post-graduate program in Financial Services Compliance Administration at Seneca College. Through this program, she expanded her knowledge in anti-money laundering (AML) administration, risk management, privacy management, and financial services product knowledge. Her interest in financial services products led her to complete the Canadian Securities Course (CSC).

Maria is proud to support Outlier’s mission statement: “Good compliance is good business.”

 

Check Your FINTRAC MSB Registration

Divya BhakthaAre you a money services business (MSB) that serves clients in Canada? Have you checked your MSB registration lately? If not, there’s no time like the present, and you can do so here.

What’s Required?

There have been some changes to the process for updating registration information with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) that may not be immediately apparent, and further changes are forthcoming. As a reminder, when an MSBs’ information changes, including products, locations, key personnel such as the Compliance Officer, ownership, or agents, that information must be updated with FINTRAC within 30 days. MSB registration must also be renewed prior to the registration’s expiry date. 

MSB Registration Changes 

When your MSB registration information changes, the first step is to complete the change form on FINTRAC’s website and remember to submit it within 30 days of the change. This form has a number of checkboxes that must be selected, depending on the specific updates that are being requested, as well as a freeform field that can be used to provide additional information (but be brief, there is a 100-character limit). There is also an option to download and save a copy of the completed form, which should be kept as part of your AML records. 

Once FINTRAC has received the form, they will reach out, usually to the email address provided in the form, with next steps. The most common next step is currently for FINTRAC to send a PDF form using Canada Post Connect (a secure portal for messages and document sharing), which must be completed and returned within a specific timeframe. As with the online registration form, you should save a copy of your completed change form.

MSB Registration Renewals

Before your MSB registration expires, complete the renewal form on FINTRAC’s website. Remember, your MSB registration is valid for two years, and you need to renew it before it expires. This form is different from the change form, but does have a checkbox that must be selected if there are also changes to MSB registration information, as well as a freeform field that can be used to provide additional information (remember to be brief, as there is a 100-character limit). There is also an option to download and save a copy of the completed form, which should be kept as part of your AML records. You can also use the save a copy function to download a form in progress, which can be re-uploaded and completed later.

Once FINTRAC has received the form, they will reach out, usually to the email address provided in the form, with next steps. If there are changes to MSB registration information, the most common next step is currently for FINTRAC to send a PDF form using Canada Post Connect (a secure portal for messages and document sharing), which must be completed and returned within a specific timeframe. We recommend whitelisting @fintrac-canafe.gc.ca and @canadapost-postescanada.ca addresses, so that they don’t get caught in your spam filters.

In either of the above scenarios, we recommend that you always download and keep a copy of the registration details, which include the time and date when you submitted the document, so you have proof if required at a later date.

Does FINTRAC Send Notices to Expiring MSBs?

Prior to last year, MSBs received email reminders from FINTRAC when their registration was expiring, but it doesn’t seem that this is the case. You should not expect a notification from FINTRAC when your MSB registration is set to expire. We recommend setting a reminder in your calendar for 30 days before the registration expires, to make sure the form is submitted on time.

Need a hand?

Whether you need assistance with your FINTRAC registration or AML compliance in general, you can contact us here or by email at info@outliercanada.com.

We Turn 12!

Green foil balloons forming the number 12 with gold confetti on a light background, celebrating a 12-year anniversary.Today marks another milestone for us – 12 years since Outlier Compliance Group was founded.

What began as a bold and novel idea, building a consulting firm made up exclusively of seasoned compliance professionals with deep in-house experience, has grown into a thriving, trusted partner for clients navigating Canada’s ever-changing regulatory landscape.

Our name, inspired by Malcolm Gladwell’s “Outliers, the Story of Success” which espoused the notion that to be truly proficient in a skill, 10,000 hours of practice is required. That was the bar that was set, met, and most often exceeded by every compliance professional that joined our team over the years.

Over the years, we’ve grown, evolved, but have stayed true to our roots. We’ve learned that success comes from surrounding ourselves with exceptional people, from listening closely to our clients, and from being willing to adapt in the face of change. We’ve discovered the value of curiosity when navigating complexity, and the power of collaboration when tackling the most challenging problems.

Through it all, our mission has remained the same “good compliance is good business”. It’s the principle that guides our work, shapes our advice, and underpins every solution we deliver.

As the Canadian regulatory environment becomes increasingly complex, our mission and our learnings will play to our continued success and growth as we continue to provide top tier compliance and risk management services. 

To our amazing team, past, present and future, thank you for your passion, expertise and resilience. To our clients, partners and industry peers, thank you for your trust and collaboration. Lastly, but by no means least, a special thank you to our CEO, David Vijan, and our Chairperson, Amber D. Scott, for keeping us on our toes and steering the ship with vision and purpose. 

Here’s to 12 years of achievement and to the future.

Identification Triggers for Factoring Companies

Background

We recently sought clarification from FINTRAC as it relates to identification requirements that Factoring Companies (Factors) must comply with.

Factors supply liquidity to a customer in exchange for the cash value of a certain amount of the customer’s accounts receivable (i.e. invoices) to be collected later by the factoring company. A factor is defined as a person or entity that is engaged in the business of factoring, with or without recourse against the assignor.

If you missed it, Factors became reporting entities under the PCMLTFA effective April 1, 2025. As a reporting entity, Factors must have in place a compliance program and comply with various requirements, including identification requirements.  Please refer to our previous blog post on Factors that outlines full requirements that factors must comply with.

Identification Requirements

Factors must confirm identification using prescribed methods for individuals and entities where they are required to keep a record as defined under section 24.14 of the

Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations.

Section 24.14 states a factor shall keep the following records in respect of every factoring agreement that it enters into:

(a) an information record in respect of the person or entity with whom it enters into the agreement;

 (b) if the information record is in respect of an entity, a record of the name, address and date of birth of every person who enters into the agreement on behalf of the entity and the nature of the person’s principal business or their occupation;

 (c) if the 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 factor;

 (d) a record of the financial capacity of the person or entity with which it enters into the agreement and the terms of the agreement;

 (e) for any payment it makes; and

 (f) a receipt of funds record in respect of every amount of $3,000 or more that it receives, unless the amount is received from a financial entity or public body or from a person who is acting on behalf of a client that is a financial entity or public body.

As it relates to the last record, funds may come from a party other than the factoring client (a third party) and in such instances it is not sufficient to rely on identification that would have been completed for the factoring client, but rather the third party would have to be identified.

Below is a response from FINTRAC:

Under the PCMLTFA, specifically section 24.14(f), a receipt of funds record must be kept for every amount of $3,000 or more, unless the funds are received from a financial entity, public body, or a person acting on behalf of such an entity.

In response to your question:
If funds are received from a party other than the identified factoring client, identification requirements may still apply depending on who that third party is.

If the third party is not:

    • a financial entity,
    • a public body, or
    • acting on behalf of one,

then yes, identification and a receipt of funds record would be required, even if the factoring client has already been identified. This is because the receipt of funds record pertains to who the funds are actually received from, not just who the factoring agreement is with.

Identification of the factoring client alone is not sufficient if funds are received from another party who does not fall under the exemptions in s. 24.14(f). The source of funds must be identified and recorded accordingly.

The factoring company must take reasonable measures to identify the sender, document those efforts, and keep a receipt of funds record.

While this may prove to be challenging in some instances, demonstrating that reasonable measures were taken becomes critical.

We’re Here To Help

If you would like assistance in understanding what this mean to your business, or if you need help in creating or updating your compliance program and processes, please get in touch.

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