When to identify individuals and confirm the existence of entities – Accountants

June 2017

This guidance on client identification is applicable to accountants and accounting firms that are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated regulations.

Details on how to identify individuals and confirm the existence of entities is available in FINTRAC’s guidance Methods to identify individuals and confirm the existence of entities.

Throughout this guidance, references to dollar amounts (such as $10,000) are in Canadian dollars. Furthermore, all references to cash mean money in circulation in any country (bank notes or coins) and does not include cheques, money orders or other similar negotiable instruments.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) specify when you must identify an individual or confirm the existence of an entity, and how you must do this. The point at which you identify a client will vary depending on the activity or transaction that is carried out. Knowing your client includes identifying them in accordance with the Regulations, but you also have further obligations in this regard, such as requirements related to the ongoing monitoring of business relationships, and third party determination. Please refer to FINTRAC’s guidance on these subjects for more information.

**Note: Exceptions to your client identification requirements are listed in the last section of this guidance.

Identifying clients

As an accountant or accounting firm, you must identify individuals and confirm the existence of entities for certain activities and transactions, as listed below. Entities can be corporations, trusts, partnerships, funds, and unincorporated associations or organizations.

When you have to confirm the existence of an entity that is a corporation, you also have to verify its name and address, and the names of the corporation’s directors.

The formation of business relationships and the ensuing obligations are tied to your requirements to identify clients. For non-account-based relationships, you are considered to be in a business relationship with every individual you have had to identify at least twice, and with every entity whose existence you have had to confirm at least twice. If you have not identified an individual or confirmed the existence of an entity because an exception applied, you are still considered to be in a business relationship. If you are in a business relationship you must conduct ongoing monitoring and keep certain records.

You are also required to take reasonable measures to determine if a client is acting on the instruction of a third party when conducting a large cash transaction. In this case, reasonable measures may include asking the individual, or relying on information you may already have about the individual. If you determine that the individual in front of you is acting on someone else's instructions, that “someone else” is the third party.

As an accountant or accounting firm, you are subject to the PCMLTFA and associated Regulations when you engage in any of the following activities on behalf of any individual or entity (other than your employer), or give instructions for the following activities on behalf of any individual or entity (other than your employer):

If you engage in any of the activities listed above as an accountant or accounting firm you are responsible for identifying clients for:

  1. Receipt of funds of $3,000 or more
  2. Large cash transactions
  3. Suspicious transactions

1. Receipt of funds of $3,000 or more

You must identify an individual providing you funds in the amount of $3000 or more in a single transaction, at the time the transaction takes place, whether or not it is in cash or in another form. You must also confirm the existence of any entity on whose behalf the funds are received within 30 days.

2. Large cash transactions

You must identify every individual who conducts a large cash transaction at the time the transaction takes place. A large cash transaction occurs when you receive $10,000 or more in cash in a single transaction. A large cash transaction also occurs when there are multiple cash transactions of less than $10,000 each that total $10,000 or more within a 24 hour period, when you know they are conducted by, or on behalf of, the same individual or entity.

3. Suspicious transactions

You must take reasonable measures to identify individuals who conduct or attempt to conduct suspicious transactions before sending a Suspicious Transaction Report. Reasonable measures in this case may include asking the individual to provide photo identification.

All suspicious transactions and attempted suspicious transactions, including transactions that are normally exempt from client identification requirements, require you to take reasonable measures to identify your clients.

Keeping client identification information up to date

You must update client information at a frequency that will vary based on your risk assessment. As a part of your ongoing monitoring requirements, you must keep all client identification information up to date. High-risk clients’ identification information must be updated more frequently, and you must take any other appropriate enhanced measures.

To keep client identification information up to date, you must take measures such as asking the client to provide information to confirm or update their identification information. In the case of an individual, this may include confirming or updating the information by using the options that are available to identify individuals who are not physically present.

In the case of clients that are entities, measures to keep client identification information up to date may include consulting a paper or electronic record or obtaining information verbally.

Exceptions

You do not have to re-identify an individual or re-confirm the existence of an entity if you previously did so using the methods specified in the Regulations in place at the time and kept the associated records, so long as you have no doubts about the information used.

You do not have to verify the names of a corporation’s directors when you confirm the existence of a corporation that is a securities dealer.

You do not have to identify an individual and/or confirm the existence of an entity if you conduct a transaction for a public body or very large corporation. The same is true regarding a subsidiary of either of those types of entities, if the financial statements of the subsidiary are consolidated with those of the public body or a very large corporation.

You are not subject to the PCMLTFA and associated Regulations as an accountant or accounting firm if the activities you undertake are in respect of an audit, review or compilation engagements, or carried out in accordance with the recommendations set out in the CICA Handbook. Please note that the CICA Handbook was replaced by the CPA handbook in 2013.

You do not have to identify an individual or confirm the existence of an entity for the receipt of funds in an amount of $3,000 or more, if the amount is received from a financial entity or public body.

You do not have to identify the individual who conducts a large cash transaction if the cash is received from a financial entity or public body.

You do not have to take reasonable measures to identify the individual who conducts or attempts to conduct a suspicious transaction only if:

Definitions

Administrative monetary penalties (AMPs)

Civil penalties that may be issued to reporting entities by FINTRAC for non-compliance with the PCMLTFA and related regulations. (pénalité administrative pécuniaire [PAP])

Affiliate

An entity is affiliated with another entity if one of them is wholly owned by the other, if both are wholly owned by the same entity or if their financial statements are consolidated. (entité du même groupe)

Branch

A branch is a part of your own business at a distinct location other than your main office. (succursale)

Clarification Request

A clarification request is a method used to communicate with you when we need more information about your registration form. This request is usually sent to you by email. If you do not reply to a clarification request, your registration can be denied or revoked. (demande de precisions)

Compliance officer

The individual you appoint to be responsible for the implementation of your compliance regime. Your compliance officer should have the authority and the resources necessary to discharge his or her responsibilities effectively. Depending on your type of business, your compliance officer should report, on a regular basis, to the board of directors or senior management, or to the owner or chief operator. (agent de conformité)

Credit card acquiring business

A credit card acquiring business is a financial entity that has an agreement with a merchant to provide the following services:

  • enabling a merchant to accept credit card payments by cardholders for goods and services and to receive payment for credit card purchases;
  • processing services, payment settlements and providing point-of-sale equipment (such as computer terminals); and
  • providing other ancillary services to the merchant. (entreprise d’acquisition de cartes de crédit)
Current

A document or information that is up to date (the most recent) and is not expired. (document ou renseignement à jour)

Electronic Funds Transfer (EFT)

An electronic funds transfer (money transfer) means the transmission of instructions for the money transfer of funds to or from Canada. An electronic funds transfer does not include the instructions for the money transfer of funds from one place in Canada to another in Canada. (télévirement)

Entity

Can be a corporation, trust, partnership, fund, or an unincorporated association or organization. (entité)

Financial account

Refers to deposit, credit card or other loan accounts held by a financial entity. This does not include investment accounts such as Registered Retirement Savings Plans (RRSPs). (compte financier)

Financial entity

Means a bank that is regulated by the Bank Act, an authorized foreign bank, as defined in section 2 of that Act, in respect of its business in Canada, a cooperative credit society, savings and credit union or caisse populaire that is regulated by a provincial Act, an association that is regulated by the Cooperative Credit Associations Act, a financial services cooperative, a credit union central, a company that is regulated by the Trust and Loan Companies Act and a trust company or loan company that is regulated by a provincial Act. It includes a department or an entity that is an agent or mandatary of Her Majesty in right of Canada or of a province when it is carrying out an activity referred to in section 45 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations. (entité financière)

Guarantor

A guarantor can be:

  • a medical doctor, chiropractor, or dentist;
  • a judge, a magistrate or lawyer;
  • a notary (in Quebec) or a notary public;
  • an optometrist or a pharmacist;
  • an accredited public accountant or Chartered Professional Accountant;
  • a professional engineer (P. Eng., in a province other than Quebec) or engineer (Eng. in Quebec); or,
  • a veterinarian. (répondant)
Independent

For the purposes of ascertaining client identity, the term “independent” means that the sources must be different; the information cannot be from the same issuer. (source indépendante)

Individual or person

A human being. (individu ou personne)

Institutional trust

An institutional trust is a trust that is established by a corporation, partnership or other entity for a particular business purpose and includes pension plan trusts, pension master trusts, supplemental pension plan trusts, mutual fund trusts, pooled fund trusts, registered retirement savings plan trusts, registered retirement income fund trusts, registered education savings plan trusts, group registered retirement savings plan trusts, deferred profit sharing plan trusts, employee profit sharing plan trusts, retirement compensation arrangement trusts, employee savings plan trusts, health and welfare trusts, unemployment benefit plan trusts, foreign insurance company trusts, foreign reinsurance trusts, reinsurance trusts, real estate investment trusts, environmental trusts and trusts established in respect of endowments, foundations and registered charities. (fiducie institutionnelle)

Inter vivos trust

A trust that is not created by will. This type of trust is established by a living individual for the benefit of another individual, such as a trust created by a parent for a child (also known as a living trust). Its assets can be distributed to the beneficiary during or after a settlor’s lifetime. (fiducie entre vifs)

Listed person

A listed person includes an individual, a corporation, a trust, a partnership or fund or an unincorporated association or organization that is believed to:

  • have carried out, attempted to carry out, participated in or facilitated a terrorist activity; or
  • be controlled directly or indirectly by, be acting on behalf of, at the direction of, or in association with any individual or entity conducting any of the above activities.

A listed person means anyone on a list published in the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism issued under the United Nations Act. You can consult that list of names on the Office of the Superintendent of Financial Institutions' Web site: http://www.osfi-bsif.gc.ca/Eng/fi-if/amlc-clrpc/atf-fat/Pages/default.aspx. (personne inscrite)

Money Laundering Offence

A money laundering offence involves various acts committed with the intention to hide or convert dirty money produced through criminal activity into clean money whose criminal origin is hard to trace. Criminals are always looking for ways to exchange, disguise or move money around to hide its origin. The dirty money can come from offences such as drug trafficking, bribery, fraud, forgery, murder, robbery, counterfeit money, stock manipulation, tax evasion, and copyright infringement. Dirty money can also come from illegal activities that took place outside of Canada. (infraction de recyclage des produits de la criminalité)

Money service business agent

An MSB services agent is an individual or organization authorized to act on an MSB's behalf. Do not mistake an MSB agent with a branch. If you are an MSB, an agent is a separate individual or organization that you authorize to deliver your services. If you use one or more agents to deliver your MSB services on your behalf, you need to give information about all of them in your registration form. It is your responsibility to keep your agent information up to date in your registration information. If you are an agent of an MSB, you do not have to register with us for the services you deliver for that MSB. (mandataire d’une entreprise de services monétaires)

Organization

An organization is an entity such as a corporation, a trust, a partnership, or an association. It does not include an individual. (organisation)

Original

Original refers to any paper or electronic document as it is sent from the issuer directly to the client. (version originale d’un document)

Public body
  1. any department or agent or mandatary of Her Majesty in right of Canada or of a province;
  2. an incorporated city or town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body in Canada or an agent or mandatary in Canada of any of them; and
  3. an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or an agent or mandatary of such an organization (organisme public).
Reliable

In reference to a source, reliable means that the source is well known, reputable, and is considered one that you trust to verify the identity of the client. (source fiable)

Senior officer

A senior officer of an organization can be:

  • a director who is also a full time employee;
  • a chief executive officer, chief operating officer, president, secretary treasurer, controller, chief financial officer, chief accountant, chief auditor or chief actuary, or any individual who performs these similar duties; or,
  • any other officer who reports directly to the board of directors, chief executive officer or chief operating officer. (cadre dirigeant)
Service agreement

A service agreement is an agreement between you and another organization for you to provide any of the following MSB services:

  • money transfers;
  • foreign currency exchange; or
  • money orders, traveller's cheques or anything similar. (accord de relation commerciale)
Settlor

A settlor is an individual or entity that creates a trust with a written trust declaration. The settlor ensures that legal responsibility for the trust is then given to a trustee and that the trustee is provided with a trust instrument document that explains how the trust is to be used for the beneficiaries. A settlor includes any individual or entity that contributes financially to that trust, either directly or indirectly. (constituent)

Source

The issuer or provider of information or documents for verifying identification. (source)

SWIFT

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) network is a global member-owned cooperative and an international provider of secure financial messaging services. (SWIFT)

Terrorist activity financing offence

A terrorist financing offence is knowingly collecting or giving property (such as money) to carry out terrorist activities. This includes the use and possession of any property to help carry out the terrorist activities. The money earned for terrorist financing can be from legal sources, such as personal donations and profits from a business or charitable organization. The money can also come from criminal sources, such as the drug trade, the smuggling of weapons and other goods, fraud, kidnapping and extortion. (infraction de financement des activités terroristes)

Trust

A right of property held by one individual or entity (a trustee) for the benefit of another individual or entity (a beneficiary). (fiducie)

Trustee

A trustee is the individual or entity authorized to hold or administer the assets of a trust in the best interests of the beneficiary. (fiduciaire)

Valid

Refers to a document or information that appears legitimate or authentic and does not appear to have been altered or had any information redacted. The information must also be valid according to the issuer, for example if a passport is invalid because of a name change, it is not valid for FINTRAC purposes. (document ou renseignement valide)

Verify client identity

To refer to certain information or documentation to identify a client and ensure that their information matches what you know about them. (vérifier l’identité d’un client)

Very Large Corporation

A large corporation is one that has minimum net assets of $75 million CAD on its last audited balance sheet. The corporation's shares have to be traded on a Canadian stock exchange or on a stock exchange outside Canada that is designated by the Minister of Finance. The corporation also has to operate in a country that is a member of the Financial Action Task Force (FATF). (personne morale dont l’actif est très important)

Working Days

A working day is a day between and including Monday to Friday. It excludes Saturday, Sunday, or a public holiday. (jour ouvrable)

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