Foreign branches, subsidiaries and affiliates requirements

Foreign branches, subsidiaries and affiliates requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations are applicable to reporting entities in the financial entity, life insurance and securities dealer sectors.

June 2017

Foreign branches and foreign subsidiaries

Which reporting entities have obligations in relation to their foreign branches and foreign subsidiaries?

If you are a financial entity, life insurance company, or securities dealer, you have requirements related to your foreign branches and subsidiaries, if they carry out activities similar to a financial entity, life insurance company, or securities dealer, and are wholly owned by you, or have consolidated financial statements with you.

As the Canadian reporting entity, you must develop policies that establish requirements for your foreign branches and subsidiaries. These policies must be similar to your own obligations in Canada for the following:

If you have a board of directors, it must approve the policies before they are applied.

You must ensure that your foreign branches and subsidiaries apply the policies to the extent permitted by, and not conflicting with, the laws of the country where that branch or subsidiary is located.

Retention: You must keep foreign branch and subsidiary records for at least five years following the date they were created.

Exceptions

The requirements concerning foreign branches and subsidiaries do not apply to:

Affiliates

Which reporting entities have requirements in relation to their affiliates?

If you are a financial entity, life insurance company, or securities dealer, you have requirements related to any other financial entity, life insurance company, or securities dealer that you are affiliated with, or any foreign entity that you are affiliated with, which carries out activities similar to a financial entity, life insurance company, or securities dealer.

You are affiliated with another entity when one of you is wholly owned by the other, if both of you are wholly owned by the same entity, or if your financial statements are consolidated.

It is possible for you to be affiliated with another reporting entity that is covered under the PCMLTFA and associated Regulations.

What are the requirements?

You must develop and apply policies and procedures related to the exchange of information between yourself and your affiliates. The purpose of this exchange of information is to help you detect and deter money laundering and terrorist activity financing offences, and to help you assess the risk of any such offence.

If your affiliates cannot implement policies for the exchange of information, you may want to keep a record which would include the rationale as to why these policies cannot be implemented.

Risk-based assessments relating to your affiliates

As part of the compliance program, financial entities, life insurance companies and securities dealers must consider any risk resulting from the activities of:

The activities of affiliates should be included as part of the overall risk-based approach.

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