PROCESSING...
We’re proud to participate in a five-part webinar series on Financial Crime Investigations and Enforcement in Canada and Australia. The series brings together leading voices from Canada and Australia to explore today’s most pressing financial crime challenges.
Join Outlier’s Amber Scott in moderating the 4th session of the Canada & Australia Financial Crime Webinar Series on Due Diligence (Canada) on November 24.
4PM-5PM ET Online
Learn more and register here.
Join Outlier’s David Vijan at the DIACC Executive Planery on November 6th, 2025.
The following topics will be explored during the panel discussion on “The Digital Trust Landscape: Open Banking & Client Identity Verification”:
Panel Details:
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.
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.
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.
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:
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.
Reports are submitted through Corporations Canada’s online portal (accessed through the registry). The process is as follows:
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.
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.
BackgroundWe 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.
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:
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.
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.
BackgroundOn January 1, 2025 final amendments to regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act were published in the Canada Gazette (SOR 2024-266 and SOR 2024-267). The most noteworthy changes fall under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations. The final amendments include changes or new requirements related to:
The regulatory impact statement states that these amendments implement measures announced in previous budgets, the 2023 Fall Economic Statement, our Parliamentary Review and Cullen Commission report ahead of Canada’s upcoming mutual evaluation by the Financial Action Task Force (FATF).
To make reading these changes a little easier, as we always do, (thanks Rodney) a redlined version of the regulations, with new content showing as tracked changes, is attached here.
From the draft regulations published back in July 2024, there have not been significant changes to the final publication. Some changes were made to address potential gaps, inconsistencies, and business realities in the context of application, and to provide greater flexibility in the coming-into-force dates. The most notable change from the draft relates to obligations for title insurers.
Below is a summary of what we feel are the most noteworthy changes and incoming requirements:
Money Services Businesses (MSBs) must register with FINTRAC. As part of registration, it will now be required to submit the following documentation as part of the application.
If the applicant is a corporation:
If the applicant is an entity other than a corporation:
Additionally, domestic MSBs will have to submit criminal record checks covering the CEO, President and directors, as well as every person who owns or controls 20% or more of the MSB. These criminal record checks must also be updated every two years as part of the renewal process. Where an MSB uses an agent or mandatary, criminal record checks are also required on those individuals. It should be noted that the 20% threshold does not align with reporting entity requirements for beneficial owners, which is at 25%. While industry asked for these numbers to align, Finance did not accept the change.
The final amendments expand the definition of a listed person or entity to capture individuals and entities listed under all Canadian sanctions legislation including Special Economic Measures Act, the United Nations Act and the Justice for Victims of Corrupt Foreign Officials Act.
These changes also result in a new sanctioned property report. The report includes information fields such as:
Final amendments will require those that provide acquiring services to white-label ATMs (WLATMs) to register with FINTRAC as MSBs and implement a full AML compliance regime. Similar to that of other regulated entities, a compliance regime will have to be in place which includes the following:
In addition to the records that must be retained as an MSB, WLATM operators will need to keep the following records:
Final amendments will make title insurers reporting entities under Canada’s AML/ATF Regime. Title insurers are defined as a person or entity that is engaged in the business of providing title insurance, as defined in the schedule to the Insurance Companies Act when they provide a title insurance policy to the purchaser of real property or an immovable.
Specifically, title insurers will be required to develop a compliance program, meet certain identity verification requirements, submit required reporting to FINTRAC, keep certain records, and follow application Ministerial Directives.
It should be noted that changes were made to remove certain record-keeping obligations noted in the draft regulations. Title insurers will only be required to keep records of information that is obtained for the sale of title insurance. The following are the specific records that must be kept for every title insurance policy provided to a purchaser of real property or an immovable:
Given title insurers’ business model, wherein they do not have direct contact with the purchasers of title insurance, final amendments have been updated to remove beneficial ownership requirements as well as exempt third-party determination and PEP requirements for title insurers.
Final amendments will require real estate brokers and sales representatives to identify the party or parties (including third parties) not represented in real estate transactions. This is a change from the current requirement where real estate brokers and sales representatives are only required to take “reasonable measures” to identify unrepresented parties.
The requirements summarized above come into force October 1, 2025. In the meantime, FINTRAC will have to issue guidance which has been promised before the noted in-force date.
While we await guidance, newly regulated entities should start working on developing their compliance program in anticipation of the respective in-force dates noted above. Other Reporting Entity types should take note of MSB framework changes and changes related to sanction property as it relates to their business model.
If you would like assistance in understanding what these changes mean to your business, or if you need help in creating or updating your compliance program and processes, please get in touch.
BackgroundOn November 30, 2025 draft amendments to the regulations under the Proceeds of Crime Money Laundering and Terrorist Financing Act (PCMLTFA) were published in the Canada Gazette.
In the interest of time, we have published this blog summarizing what we feel to be the most noteworthy amendments but will follow up with a redlined version of the regulations, with new content showing as tracked changes, at a later date.
The noted changes are meant to improve Canada’s anti-money laundering (AML) and anti-Terrorist Financing (ATF) regime and implement measures announced in Budget 2022, Budget 2023, Budget 2024, the 2023 Fall Economic Statement and Canada’s last Parliamentary Review. This is addressed through six separate measures including the introduction of new regulated entities.
The draft amendments include a new Proceeds of Crime (Money Laundering) and Terrorist Financing Reporting of Goods Regulation.
Currently, the Canada Border Services Agency (CBSA) can require receipts and invoices for the purposes of determining compliance with import laws, but they cannot request these documents for the purposes of detecting money laundering or terrorist financing.
Under the proposed regulations, anyone who is importing or exporting goods into or out of Canada needs to file a declaration with the CBSA as follows:
The latter is meant to address “phantom shipments” that are used in trade-based money laundering (TBML) which was identified as a primary money laundering concern in Canada’s last Financial Action Task Force (FATF) evaluation.
The new regulations also bring about substantial record keeping requirements which include information such as the origin, marking, purchase, importation, costs and value of the goods, and records relating to payment for the goods. It’s noteworthy that FINTRAC’s 2023-24 Annual Report lists customs and excise related offences as being in the top five predicate offences related to case disclosures during the period.
Information sharing between private entities has been recognized by the FATF as an important tool for disrupting money laundering and terrorist financing. Budget 2024 introduced legislative amendments to the Criminal Code and the PCMLTFA to enhance the ability of reporting entities to share information with each other as it relates to the detection of money laundering and terrorist financing.
The draft amendments introduce measures to allow for reporting entities to share information with each other to detect and deter money laundering, terrorist financing, and sanctions evasion, while maintaining privacy protections for personal information.
Reporting entities that wish to share information (it’s voluntary) would be required to establish and implement a code of practice for disclosing, collecting and using personal information without consent. The code must:
The Code must be provided to the Office of the Privacy Commissioner of Canada (OPC) for approval and to FINTRAC for comment in advance of use. The OPC would have a prescribed period of 90 days to approve a Code. The proposed amendments also include procedures for reporting entities to modify the Code, which would need the OPC’s approval if the changes are material. Reporting entities would be required to resubmit their Codes every five years regardless of changes or not.
The draft amendments will require reporting entities who are dealing with a Canada Business Corporations Act (CBCA) corporation to report any material discrepancy it finds as part of obtaining and verify the accuracy of beneficial ownership information under current AML requirements. The reporting requirement will not apply if the material discrepancy is resolved within 15 days after the day on which it is identified. Currently, what is deemed to be material is not well defined (outside of missing beneficial owners).
The Information with respect to the discrepancy includes:
In case you missed it, the federal government launched a public, searchable beneficial ownership registry of federal corporations in early 2024.
The draft amendments outline the inclusion of three new regulated entities which were announced in Budget 2024 and where noted as concerns during Canada’s last FATF mutual evaluation: factoring companies (referred to as “factors”), cheque cashing companies, and financing and leasing companies.
Similar to that of other regulated entities, a compliance regime will have to be in place which includes the following:
4. Factoring Companies
Factoring companies 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.
The draft amendments require factoring companies to keep certain records which include:
5. Cheque Cashing
Cheque cashing is a financial service that offers clients the ability to cash a cheque immediately and hold free, for a fee.
Cheque cashing where cheques are not payable to a named person or entity is not currently captured under the PCMLTFA, but draft amendments would introduce such as regulated activity.
In addition to current money services business (MSB) requirements, the draft amendments require keeping certain records in respect to where an MSB cashes a cheque for more than CAD 3,000, including:
6. Finance and Leasing Entities
The draft amendments define a financing or leasing entity as a person or entity that is engaged in the business of financing or leasing of:
The draft amendments require financing or leasing entities to keep certain records in respect of every financing or leasing arrangement which include:
The proposed changes related to measures 1, 3, 4, 5 and 6 would come into force on October 1, 2025, and the proposed amendments related to information sharing would come into force immediately on final publication in the Canada Gazette.
There is a 30 day comment period ending December 30, 2024 for the proposed regulations. It is strongly recommended that industry, and potentially impacted companies, review carefully and provide feedback. Comments can be submitted online via the commenting feature after each section of the proposed changes, or via email directly to Erin Hunt, Director General, Financial Crimes and Security Division, Financial Sector Policy Branch, Department of Finance, 90 Elgin Street, Ottawa, Ontario, K1A 0G5.
If you have questions related to the proposed changes, or need help starting to plan, you can get in touch using the online form on our website, by emailing us directly at info@outliercanada.com, or by calling us toll-free at 1-844-919-1623.
BackgroundFebruary seems to be the month for proposed legislative changes.
On February 18, 2023, draft amendments to the regulations under the Proceeds of Crime Money Laundering and Terrorist Financing Act (PCMLTFA), and a net-new draft regulation, were published in the Canada Gazette. If you’re the type that likes to read original legislative text, you can find it here. We (thanks Rodney) also created a redlined version of the regulations, with new content showing as tracked changes, which can be found here.
These changes are meant to renew and improve Canada’s anti-money laundering (AML) and anti-Terrorist Financing (ATF) regime, adapting to new money laundering (ML) and terrorist financing (TF) risk. One of the most significant changes, in our opinion, is the introduction of two new regulated entity types, mortgage lenders and armoured car companies.
Currently, mortgages issued by financial entities are captured under the PCMLTFA but these amendments would make all entities involved in the mortgage lending process (brokers responsible for mortgage origination, lenders responsible for underwriting the loan, and administrators responsible for servicing the loan) reporting entities. The intent here is to level the playing field between regulated and unregulated mortgage lenders, and to deter misuse of the sector for illicit activities.
While the activity of transportation is not currently supervised for AML purposes per se, armoured car carriers provide services largely to regulated entities. Given the flow of funds that is typically seen in this sector, reconciliation and identification of the origin of funds can sometimes be challenging, and allows funds to move with some degree of anonymity, which is an ML/TF vulnerability.
The draft regulations also introduce new requirements for correspondent banking relationships, and additional requirements related to the Money Services Business (MSB) registration. There are also some technical amendments related to existing reporting requirements and changes related to Administrative Monetary Penalties (AMPs).
Lastly, a new regulation would introduce a prescribed formula for the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to assess the expenses it incurs in the administration of the PCMLTFA against reporting entities. Such models are seen from other regulators, such as the Office of the Superintendent of Financial Institutions (OSFI) and the Financial Consumer Agency of Canada (FCAC). Currently, FINTRAC is funded through appropriations.
In the following sections, we have summarized what we feel are the most important requirements to note.
The proposed changes would require a company that engages in “transporting currency or money orders, traveller’s cheques or other similar negotiable instruments” (except for cheques payable to a named person or entity) to be considered an MSB. As such, the following obligations will have to be met:
One record keeping obligation to note, which is new for armoured car companies, is the requirement to record the following information when transporting CAD 1,000 or more of cash or virtual currency, or CAD 3,000 or more in money orders or similar negotiable instruments:
An additional requirement that will apply to armoured car companies is in relation to PEP determinations (existing PEP requirements for MSBs still apply). Specifically, a PEP determination is required whenever a person requests that the MSB transport more than CAD 100,000 in cash or virtual currency, or in an amount that is not declared.
Under the proposed regulations, there are some exemptions for reporting that are noteworthy. Large Cash and Large Virtual Currency reporting requirements will not apply where there is an agreement of transportation between:
It is noteworthy, based on the definition, that there may be more than just armoured car companies that are captured under these new requirements. This will be clarified in guidance from FINTRAC that will follow publication of the legislation.
The requirements applicable to armoured car companies will come into force eight months after final publication in the Canada Gazette.
The proposed regulations would require mortgage lenders, brokers, and administrators (mortgage participants) to put in place compliance regimes, similar to that of other regulated entities, which include the following:
It is noteworthy, that many mortgage brokers already have existing voluntary AML compliance programs and already apply AML measures. This is in part due to various securities regulations and lending partners.
The requirements applicable to mortgage lending will come into force six months after final publication in the Canada Gazette.
As part of this round of regulatory changes, there is a net-new regulation, the Financial Transactions and Reports Analysis Centre of Canada Assessment of Expenses Regulations. This regulation will allow FINTRAC to pass on expenses, to reporting entities, that it incurs in the administration of the PCMLTFA. Only the following prescribed entity types are affected by this:
The regulations provide a formula that FINTRAC would use to calculate the assessment amounts payable by reporting entities on the basis of their annual asset value, and the volume of all threshold transaction reports submitted. For clarity, threshold transaction reports include Large Cash Transaction Reports (LCTRs), Large Virtual Currency Transaction Reports (LVCTRs), Electronic Funds Transfer Reports (EFTRs), and Casino Disbursement Reports (CDRs).
The requirement would come into force on April 1, 2024. This means FINTRAC would commence recovering costs from the 2024-2025 fiscal year and forward.
Under the proposed amendments, as part of MSB registration, MSBs would now need to include the telephone numbers and email addresses of its president, directors and every person who owns or controls 20% or more of the MSB. This is in addition to current required information. Additionally, the number of the MSB’s agents, mandataries and branches in each country will be added (currently, only those within Canada are required).
This requirement will come into force twelve months after final publication in the Canada Gazette.
Under the proposed amendments, FINTRAC would be allowed to serve a reporting entity solely by electronic means when issuing an AMP. Currently, FINTRAC would also have to send an additional copy by registered mail.
This requirement would come into force on registration.
There is a 30 day comment period (ending March 20, 2023) for the proposed regulations. It is strongly recommended that industry, and potentially impacted companies, review carefully and provide feedback. Comments can be submitted online via the commenting feature after each section of the proposed changes, or via email directly to Julien Brazeau, Associate Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance, 90 Elgin Street, Ottawa, Ontario K1A 0G5.
If you have questions related to the proposed changes, or need help starting to plan, you can get in touch using the online form on our website, by emailing us directly at info@outliercanada.com, or by calling us toll-free at 1-844-919-1623.
BackgroundOn April 27, 2022 amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations were published in the Canada Gazette. To make reading these changes a little easier, we (thanks Rodney) have created a redlined version of the regulations, with new content showing as tracked changes, which can be found here.
The Regulatory Impact Statement for these changes state the following:
Crowdfunding platforms and some payment service providers are not currently covered by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) and therefore have no money laundering and terrorist financing obligations under federal statute. This lack of oversight presents a serious and immediate risk to the security of Canadians and to the Canadian economy. This risk was highlighted in early 2022, when illegal blockades took place across Canada that were financed, in part, through crowdfunding platforms and payment service providers. Allowing these gaps to continue represents a risk to the integrity and stability of the financial sector and the broader economy, as well as a reputational risk for Canada.
Amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, and consequential amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations, will help prevent the financing of illegal activities through these types of financial services.
The changes are substantial and sudden. They will affect many companies that have not been previously under the purview of AML regulation in Canada. These changes are effective immediately and there is no comment period, which is not the norm for such changes.
To help digest these changes, we have summarized what we feel are the most important changes below:
The definition for an electronic funds transfer has been removed and the corresponding section within the body of the regulations was amended. Previous exemptions related to remitting or transmitting from one person or entity to another by Credit or Debit Card, or Prepaid Payment Product if the beneficiary has an agreement with the payment service provider that permits payment for the provision of goods and services, has been revoked for money services businesses, which as we mentioned now includes Payment Service Providers.
The definitions section was amended by adding the following:
With these changes, crowdfunding platforms and payment service providers will now be subject to existing money services businesses requirements. These obligations include:
Specific to record keeping, crowdfunding platforms that provide services to persons or entities in Canada where a person donates an amount of CAD 1,000 or more in funds or virtual currency will need to:
(a) keep an information record in respect of the person or entity to which they provide those services;
(b) keep a record of the purpose for which the funds or virtual currency are being raised; and
(c) if the person or entity for which the funds or virtual currency are being raised is different from the person or entity referred to in paragraph (a),
Due to these changes, FINTRAC will need to revise its interpretation of existing requirements to include crowdfunding platforms and payment service providers. There is no set date for when we can expect guidance from FINTRAC. Additionally, various FINTRAC policy interpretations will no longer be able to be relied upon (i.e. policy interpretations related to merchant services as well as payment processing for utility bills, mortgage and rent, payroll, and tuition being exempt from AML obligations). The hope is FINTRAC will issue new policy interpretations, but for now the industry is left with many questions.
If you would like assistance in understanding what these changes mean to your business, or if you need help in creating or updating your compliance program and processes, please get in touch.
This article is focused on business relationships that are not account-based (which means that if you are a financial institution or a securities dealer that only conducts transactions with your customers in the context of the accounts that they hold with you, you can skip this one).
Over the past few months, I have assisted some of my clients with their Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) examinations. While I cannot generally answer questions on my clients’ behalf during these meetings, I can help them prepare for the examination, understand what the examiner is asking for, and redirect them if they stray off track (provided that they have signed an Authorizing_or_Cancelling_a_Representative form). While the businesses examined were quite different in size and complexity, their examinations have been similar, particularly when it came to questions about business relationships.
For certain types of reporting entities, including money services businesses (MSBs), real estate businesses, and dealers in precious metals and stones (DPMSs) (which are the focus of this article), during each on-site review, the FINTRAC examiner requested a list of all the “Business Relationships” for the review period. Certain information was requested, which was the same in each instance, and included the following:
In most cases, this information was not requested in advance. This meant that it needed to be provided to the examiner while the examiner was on-site (typically a single business day). For some reporting entities, obtaining this information was not something that their recordkeeping systems were set up to do easily.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines a Business Relationship as:
Any relationship with a client, established by a person or entity, to conduct financial transactions or provide services related to those transactions and, as the case may be,
(a) If the client holds one or more accounts with that person or entity, all transactions and activities relating to those accounts; or
(b) If the client does not hold an account, only those transactions and activities in respect of which that person or entity is required to ascertain the identity of a person or confirm the existence of an entity under these Regulations.
If you’re not entirely certain what that means, FINTRAC’s guidance on Business Relationship Requirements provides additional clarification:
You enter into a Business Relationship when you conduct two or more transactions where you have to:
Specifically, conducting the following transactions or activities that require you to identify an individual or confirm the existence of an entity:
In its simplest form, a business relationship means that a client or customer has done two things that cause identification requirements to be triggered.
When you establish a Business Relationship with a customer, you have three things to do.
First, determine and record the “purpose and intended nature” of the Business Relationship. Some examples provided in the FINTRAC guidance are:
For MSBs:
For Real Estate businesses:
For DPMSs:
Next, you need to conduct ongoing monitoring of all Business Relationships, based on the level of risk. This seems to be where the biggest stumbling blocks are for reporting entities. The purpose of ongoing monitoring is to ensure the following:
It is not enough just to conduct the monitoring, you must be able to produce some type of record that proves that you’ve done the monitoring. The record should be specific about what was done, and what conclusions were drawn.
If there is something out of the ordinary, expect that the FINTRAC examiner will ask questions. For example, if a customer has indicated that the purpose and intended nature of the business relationship is “fund transfer for family support” but it is clear that payments are being made that are related to the purchase of goods, questions will be raised. It is expected that information about the purpose and intended nature of the business relationship is updated if it has changed – and that you will ask questions when the actual transaction patterns are different than what you expected.
It is this final step, keeping a record of the measures taken to monitor your business relationships and the information you obtain as a result, that is most crucial to successful examination results.
The additional information collected about the customer is used to compare your expectations for that relationship, with the transactions that customer is conducting.
Here are a few examples, broken down by industry:
MSBs
If the nature and purpose provided was foreign exchange for travel, does it make sense that the customer returns every other day with $2,700 in cash?
DPMSs
If the nature and purpose provided was purchasing jewellery as a wedding gift, does it make sense that the customer returns every month on the same day to make a new purchase?
Real Estate
If the nature and purpose provided was the purchase of a first-time owner-occupied home, does it make sense that the customer purchases another owner-occupied home shortly after?
In each of the scenarios above, it is quite clear that the activities don’t align with the nature and purpose of the business relationship collected. This doesn’t automatically make it suspicious, but certainly leaves some questions that need answering. When you question the customer about the discrepancy, be sure you’re taking notes. This does not have to be a complete reiteration (though it can be), but simply a brief synopsis of the conversation, any additional information collected and/or adjustments made to the customer’s risk rating. It should be written in a way that would be clear to someone from outside of your business that is reading the notes two years later.
Recording these types of discussions is paramount to evidence that you’re meeting your ongoing monitoring obligations because, in the compliance world, if you can’t prove it… it never happened.
We’ve made a quick checklist to help you prepare for your FINTRAC examinations.
| Question | Response & Action Plan |
| Can I generate a list of my business relationships for the examination period? | |
| Is there a risk rating recorded for each business relationship? | |
| Do I have evidence of ongoing monitoring being conducted? | |
| Do I have evidence of enhanced due diligence and enhanced transaction monitoring for high risk business relationships? | |
| Do I have the date of when I entered in the business relationship with each customer? | |
| Is there a record of the last time the customer information was reviewed and/or updated? |
Outlier has created a FINTRAC Examination Preparation Package, and it can be downloaded for free here. FINTRAC has also provided information on their assessment manual, which details the approach and methods it uses to conduct compliance examinations.
For additional information, assistance, or a review of your FINTRAC Examination submission package (the information requested by FINTRAC for an examination), you can get in touch using our online form, by emailing info@outliercanada.com, or by calling us toll-free at 1-844-919-1623. At Outlier, we firmly believe that good compliance is good business.
On July 10th, 2019, the final amendments to Canada’s anti-money laundering (AML) regulations were published in the Canada Gazette. One of the welcomed changes that came into force immediately upon publication was related to identification. On November 14th, 2019, FINTRAC published guidance related to “Methods to verify the identity of an individual and confirm the existence of a corporation or an entity other than a corporation.” This is good news considering the range of identification methods has been broadened, and a step forward in digital identification methods. The updated methods are designed to make it easier to identify customers that are not physically present.
As defined under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), reporting entities have to identify their customers in certain situations (specific information on when customers need to be identified is outlined in FINTRAC’s guidance on “When to identify individuals and confirm the existence of entities”). The identification guidance outlines ways to verify the identity of an individual, and how to identify corporations or entities other than corporations (such as a partnership).
There are three ways in which an individual can be identified:
Under this method, an organization can use an authentic, valid and current government-issued photo identification document, issued by either a federal, provincial or territorial government in order to be used to verify the identity of an individual. Foreign government-issued photo identification can be accepted if it’s equivalent to a Canadian document such as those listed in the guidance.
The photo identification document used to verify identity must:
If a customer is physically present, an organization can authenticate an identification document by looking at the characteristics on the physical document such as security features.
If the customer is not physically present, the authentication of the identification document must be determined by using technology capable of assessing the document’s authenticity. The guidance makes it clear that it is not sufficient to view a person and an identification document through video conference or similar. Meaning, a selfie while holding your driver’s license is not sufficient for identification purposes.
Whatever method is selected by an organization, the process to authenticate a photo identification document, and how the organization will confirm that it is authentic, valid and current, must be documented.
Under this method, an organization can use valid and current information from a Canadian credit file to identify an individual.
The Credit File must:
To rely on a credit file, the search must be completed at the time an organization is verifying the individual’s identity, and can be completed via an automated system or the use of a third party vendor.
When using the Credit File method, organizations must keep a record of the following information:
The guidance clarifies that sometimes information found within the credit file may contain variations of the name or address provided by a customer. In these cases, it’s up to the organization to determine whether the information in the credit file is a match to the information collected from the individual.
Under this method, an organization can use valid and current information from two reliable sources. Under the dual-process method, an organization can verify an individual’s identity by referring to any two of the following options:
In order to qualify as reliable, the sources should be well-known and considered reputable. There must be two sources providing the information, and the information cannot come from the individual whose identity is being verified, nor can it come from the organization doing the verification. For example, reliable and independent sources can be the federal, provincial, territorial and municipal levels of government, crown corporations, financial entities or utility providers.
A Canadian credit file can be used as one of the two sources required to verify the identity of an individual. so long as the credit file has been in existence for at least six months.
The organization must keep a record of the following:
The guidance details how to confirm the existence of a corporation, or an organization that is not a corporation. This can be done by referring to a paper or electronic record that was obtained from a source that is accessible to the public such as:
If an organization refers to a publicly accessible electronic record to confirm the existence of a corporation or of an entity other than a corporation, a record must be retained including the corporation/entity’s registration number and the source of the electronic version of the record. If a paper record is used, a copy should be retained. At a minimum, for all organization types, an organization must collect and keep a record of the following:
The guidance details how a domestic or foreign affiliate, an agent or a mandatary can be used to verify the identify of a customer. If this method is used, it is important for organizations to remember that, legally, they are responsible for verifying a customer’s identity, even though they are relying on someone else to do it. Organizations should obtain the identification information from the other entity and have a written agreement in place requiring the entity doing the identification to provide the identification verification as soon as feasible.
The guidance details how to identify children under 12 years of age (organizations must verify the identity of a parent, guardian, or tutor) and how to identify children between the ages of 12 and 15. For this age range, organizations can verify identity by using one of the prescribed methods to verify an individual’s identity and where not possible, relying on certain information from the child’s parent, guardian, or tutor, and information that includes the child’s name and date of birth.
The guidance also reminds organizations that while the personal information that they are collecting is protected by the Personal Information Protection and Electronic Documents Act (PIPEDA), personal information that is required to be included in reporting to FINTRAC does not have to be disclosed to the Office of the Privacy Commissioner of Canada. It is important that organizations remember that safeguarding is a key consideration for all personal information collected in the normal course of business.
The most significant change for identification standards is related to the Government-Issued Photo Identification Method. A wording change from “original” to “authentic”, that was found in the prior version of the regulations, now allows for scanned copies of documentation, so long as it can be authenticated. It is noteworthy that the guidance gives clarity to all methods that can be used. Where further clarity is warranted, organizations can contact FINTRAC for a policy position related to the identification guidance. This can be done free of charge by emailing guidelines-lignesdirectrices@fintrac-canafe.gc.ca. This can also be done on a no-names basis by a lawyer or consultant on your behalf.
If you have questions related to the identification changes, or need help updating your identification processes, you can get in touch using the online form on our website, by emailing us at info@outliercanada.com, or by calling us toll-free at 1-844-919-1623.
