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Redlined PCMLTFR Updates (June 2016)

Amber with laptop logo on screen 2On June 29, 2016 updates to the Proceeds of Crime (Money Laundering) & Terrorist Financing Regulations (PCMLTFR) were published in the Canada Gazette. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has also published updated guidance related to identification, and we expect more updated guidance in the coming weeks.

In order to make it easier for our friends, colleagues and customers to understand the changes, we have created a “redlined” version of the document that can be downloaded and used free of charge.

Our only stipulation for those that choose to use this document in any way is that we do not permit a fee to be charged for access to it, in whole or in part, via any medium… That’s a fancy way of saying that you can share it as much as you like, but you can’t charge money for it.

That said, we hope that this document saves you time and money – it’s the least we can do:

June 29 2016 PCMLTFR Updates Redlined

Need A Hand?

Changes will not come into effect until next year (2017). If you need assistance updating your anti-money laundering (AML) compliance program, please contact us.

 

Proposed AML Amendments & Credit Unions

Jon 1Today’s guest blogger is Jonathan Krumins, Vice-President, AML Risk & Compliance, at vCAMLO Solutions Inc. vCAMLO provides anti-money laundering (AML) and counter terrorist financing (CTF) support to Canadian credit unions. You can learn more about vCAMLO at www.vcamlo.ca.

Background

On July 4, 2015, draft amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) were published in the Canada Gazette. These changes are not yet in force, and are open to public comment until September 4, 2015. The proposed changes are based on requirements set out by the Financial Action Task Force (FATF), an inter-governmental body that sets out international standards for combating money laundering and terrorist financing. For this reason, we expect the final version of these amendments to be similar to the draft text.

2015 Proposed PCMLTFR Amendments and Credit Union Specific Analysis (Line By Line)

Why Do These Changes Matter to Credit Unions?

The proposed changes will have a direct impact on a Credit Union’s AML obligations, including record keeping, member identification and ongoing monitoring requirements. Some of the more significant changes include new member identification methods, expanded definitions (and requirements) for Politically Exposed Persons, and new record keeping requirements for “reasonable measures” taken.

New Member Identification Methods          

IdentificationThe draft regulations will require identification documents to contain a member’s name and photograph. This will exclude SIN cards and birth certificates as acceptable identification documents, and may pose an issue when identifying seniors whose passport or driver’s license has long since expired.

The amendments also provide a number of new identification methods that can be used to identify members both face-to-face and non-face to face. These new methods are an improvement on existing rules, which are currently more restrictive.

For example, a Canadian credit file meeting certain criteria could now be used to identify a member. Many credit unions perform credit checks as part of their account opening process, so this could be used in place of government-issued identification in certain circumstances, or would allow simple non-face to face identification.

Also added is the ability to rely on information from “a reliable source” (yet to be determined, but likely online databases and other web-based resources), and information confirming that an individual has a deposit account, credit card or other loan account with another credit union, bank or caisse populaire. A credit union will also be able to accept identification performed by another credit union.

Politically Exposed Persons

PEFP silhouette 1The proposed regulations have added new categories of Politically Exposed Persons (PEPs), as follows:

  • Close associates of Politically Exposed Foreign Persons (PEFPs)
  • Politically Exposed Domestic Persons (PEDPs), their family members and close associates
  • Heads of International Organizations (HIOs), their family members and close associates

Given that the list (contained in bill C-31) of qualifying positions for PEDPs includes mayors, it is likely that many if not most credit unions will have members classified as PEDPs. The draft regulations mitigate this somewhat by adding a prescribed period of 20 years to the definition of a PEDP.

Additionally, required measures for PEPs such as determining the source of funds, obtaining senior management authorization to keep an account open, and performing enhanced monitoring will only apply to PEDPs and HIOs (and their family members and close associates) who have been determined to be high risk. Despite these exceptions, identifying and documenting these new categories of PEP will add to credit unions’ compliance obligations.

Reasonable Measures

Many AML record keeping, reporting and determination requirements rely on “reasonable measures” to be taken by financial institutions. For example, in a Large Cash Transaction Report, certain information about the conductor of the transaction, such as their country of residence, their home and business telephone numbers are not mandatory, but reasonable efforts must be made to obtain the information, and if you have it on file, it must be included in the report. The proposed changes will mean that whenever you take “reasonable measures”, and the measures taken are unsuccessful, you will then need to keep a record describing what the measures were and the reason they were unsuccessful. This will require additional work and record keeping for categories such as FINTRAC reporting, PEP determinations and correspondent banking relationships, among others.

Public Comments

Public comments about the proposed changes will be accepted by the Ministry of Finance until September 4, 2015. They must be submitted in writing, as follows:

Mail       Attention: Lisa Pezzack

Director, Financial Systems Division

Department of Finance

90 Elgin Street

Ottawa, Ontario, K1A 0G5

Email: fcs-scf@fin.gc.ca

Need a Hand?

If you would like someone to look over your submission before you make comments to the Department of Finance, you can get in touch with us free of charge. We will look over your submission and make suggestions, without any cost to you. If you need a hand, please feel free to contact vCAMLO or Outlier.

Draft AML Regulations Will Be Released July 4th

Canadian Flag

Where Can You See The Draft Regulations?

Amendments to Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) will be published this Saturday, July 4th, 2015 in the Canada Gazette.  There will be a 60 day comment period, open to all stakeholders.

Who Should Comment & Why Does It Matter?

We expect that the draft amendments will include, among other things, the inclusion of ‘dealers in digital currency’ as money services businesses (MSBs), and updates to the methods that can be used to identify customers in a non-face-to-face environment.

If you are a regulated entity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), including:

  • Financial entities;
  • Life insurance;
  • Securities dealers;
  • Money services businesses;
  • Accountants;
  • Real estate;
  • Casinos;
  • Dealers in precious metals and stones; and
  • British Columbia notaries,

or if you are a digital currency business, the proposed amendments are likely to have an impact on the way that you do business.

The 60 day comment period is intended for stakeholders to submit meaningful feedback that can shape the law, and provide insight for lawmakers on how the regulations will impact Canadian businesses.

How Do You Comment?

Comments must be submitted in writing (either on paper or electronically).

Snail Mail:

Attention:  Lisa Pezzack

Director, Financial Systems Division

Department of Finance

90 Elgin Street

Ottawa, Ontario, K1A 0G5

Email:

fcs-scf@fin.gc.ca

Make Your Voice Heard

These are the only official means to submit comments.  We highly encourage all stakeholders to participate in this process.

Need A Hand?

At Outlier, we believe that it is important to participate in decisions that affect you and your business.  If you would like someone to look over your submission before you make comments to the Department of Finance, you can get in touch with us free of charge.  We will look over your submission and make suggestions, without any cost to you.  If you need a hand, please feel free to contact us.

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