When to identify individuals and confirm the existence of entities – Dealers in precious metals and stones

June 2017

This guidance on client identification is applicable to dealers in precious metals and stones that are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations.

Details on how to identify individuals 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, and how you must do this. The point at which you identify a client will vary depending on the 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 enhanced measures for high-risk clients and third party determination.

Identifying clients

As a dealer in precious metals and stones, you must identify individuals for certain transactions, as listed below.

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. If you have not identified an individual because an exception applied, you are still considered to be in a business relationship and must 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 a dealer in precious metals and stones, you are responsible for identifying clients for:

  1. Large cash transactions
  2. Suspicious transactions

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

1. 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 that they are conducted by, or on behalf of, the same individual.

This includes large cash transactions from the sale of precious metals, precious stones or jewellery sold on consignment.

2. 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 them.

Keeping client identification information up to date

Based on your risk assessment, if a client is determined to pose a high risk, you must take measures to keep client identification information up to date, as part of your obligation to adopt enhanced measures for high-risk clients.

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. This may include confirming or updating the information by using the options that are available to identify individuals who are not physically present.

Exceptions

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

You also do not have to identify an individual who conducts a large cash transaction, if you are an auctioneer that has precious metals, precious stones or jewellery left with you for an auction sale.

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

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