Today’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
The 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
The 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.
On 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.
Proposed AML Amendments & Credit Unions
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
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
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.