Vol. 142, No. 16 — August 6, 2008

Registration

SOR/2008-233 July 28, 2008

PROCEEDS OF CRIME (MONEY LAUNDERING) AND TERRORIST FINANCING ACT

Regulations Amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

P.C. 2008-1345 July 28, 2008

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 73(1) (see footnote a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (see footnote b), hereby makes the annexed Regulations Amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations.

REGULATIONS AMENDING THE PROCEEDS OF CRIME (MONEY LAUNDERING) AND TERRORIST FINANCING REGULATIONS

AMENDMENTS

1. (1) The portion of subsection 39(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (see footnote 1) before paragraph (a) is replaced by the following:

39. (1) Subject to subsections (3), (4), (5), (6), 52(2) and 62(2), every real estate broker or sales representative shall, when engaging in an activity described in section 37, keep the following records:

(2) Section 39 of the Regulations is amended by adding the following after subsection (3):

(4) Where two or more of the parties to a real estate transaction are represented by a real estate broker or sales representative and one of those brokers or sales representatives receives funds in respect of the transaction from a party to the transaction whom they do not represent but who is represented by another of those real estate brokers or sales representatives, the broker or sales representative that represents the party from whom the funds are received is the one that is responsible for keeping the receipt of funds record referred to in paragraph (1)(a) and, if applicable, for keeping the copy referred to in paragraph (1)(c).

(5) A real estate broker or sales representative that is responsible for keeping a receipt of funds record under subsection (4) is not required to include in that record any of the following information if, after taking reasonable measures to do so, they are unable to obtain that information:

(a) the number and type of any account that is affected by the transaction; and

(b) the full name of the person or entity that is the holder of that account.

(6) A real estate broker or sales representative that is responsible for keeping a receipt of funds record under subsection (4) and that determines that one or more of the accounts affected by the transaction is a trust account held by another real estate broker or sales representative must include that information in that record but is not required to include

(a) the number of that trust account or those trust accounts; or

(b) the full name of the person or entity that is the holder of that trust account or those trust accounts.

2. Subsection 59.2(3) of the Regulations is replaced by the following:

(3) Where one or more but not all of the parties to a real estate transaction are represented by a real estate broker or sales representative, each real estate broker or sales representative that represents a party to the transaction shall take reasonable measures to ascertain the identity or confirm the existence of the parties that are not so represented.

(4) Where a real estate broker or sales representative is not able to ascertain the identity or confirm the existence of an unrepresented party as required by subsection (3), they shall keep a record that indicates

(a) the measures they have taken to ascertain the identity or confirm the existence of that party; and

(b) the reasons why the identity of that party could not be ascertained or the existence of that party could not be confirmed.

COMING INTO FORCE

3. These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issue and objectives

In June 2007, the Government published new amendments to certain regulations made under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) that introduced various measures to enhance Canada’s anti-money laundering and anti-terrorist financing regime. Those amendments included additional client identification, record-keeping, transaction reporting and compliance program requirements for the financial institutions and financial intermediaries subject to the Act, including real estate brokers and sales representatives. Those amendments came into force on June 23, 2008.

Following the publication of those regulatory amendments, the real estate industry identified two issues in respect of their new obligations: first, that the amendments are unclear as to who, between the listing and the selling broker or representative, has to identify prospective buyers making deposits and keep receipt of funds records in respect of such deposits; and second, a new requirement for real estate brokers and sales representatives to identify unrepresented parties to a real estate transaction could potentially disrupt legitimate transactions, should an unrepresented party refuse to be identified. Such a situation would prevent real estate brokers and sales representatives from meeting their fiduciary duties to their clients.

The objectives of the regulatory amendments are twofold:

• to clarify which real estate brokers or sales representatives have to identify clients making deposits and keep related records, when two or more brokers or agents are involved in a real estate transaction;
• to prevent real estate brokers and agents from having to refuse real estate transactions when an unrepresented party refuses to be identified, while ensuring that adequate measures are in place to prevent the real estate sector from being used by money launderers and terrorist financiers.

Description and rationale

The amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations specify that, in the context of a real estate transaction where both the prospective buyer and the seller are represented, it is the buying broker or representative that is required to keep a receipt of funds record in respect of the deposits made by his or her client. A new provision further specifies that the real estate broker or sales representative that keeps a receipt of funds record does not have to include information on the trust account of other brokers or representatives involved in the transaction. Information on the other accounts involved in the deposit will not have to be kept if, after having taken reasonable measures (e.g., asking the client to provide the information), the real estate broker or sales representative is not able to obtain the information.

The amendments also replace the current requirement for real estate brokers and sales representatives to identify all unrepresented parties to a transaction by a requirement to take reasonable measures (e.g., asking the person to show a government-issued identification document) to identify these unrepresented parties. If an unrepresented party refuses to be identified, the broker or representative will be required to document the reasonable measures that have been taken to identify that party and the reason why they could not be identified.

These amendments are beneficial to real estate brokers and sales representatives, as they provide additional clarity on the requirements applicable to the industry, while ensuring greater competitiveness.

Consultation

The amendments respond to requests made by the real estate industry. The Department of Finance has informed the Canadian Real Estate Association (the Association) of its intention to amend the Regulations and shared a draft of the regulatory amendments for comments. The changes proposed by the Association have been integrated in the regulatory amendments to the fullest extent possible. Overall, the industry is supportive of the measures being introduced.

Implementation, enforcement and service standards

The Financial Transaction and Reports Analysis Centre of Canada (the Centre) is responsible for ensuring compliance with Part 1 of the Act and its related regulations. The Centre sends compliance questionnaires to persons or entities that are subject to the Act to better assess the compliance risks and conducts on-site examinations. It also has the capacity to enter into information-sharing agreements with industry regulators to reduce the number of compliance examinations to which entities are subjected.

The amendments do not impose any new compliance obligations on the Center.

Persons and entities that do not comply with the Act and its regulations are currently subject to criminal penalties and, depending on the offence, to convictions that could result in up to five years imprisonment, a fine of up to $500,000, or both. However, starting in December 2008, a new administrative monetary penalties scheme will allow for penalties that are in proportion to the violation. Violations under that scheme are classified into one of three categories: minor, serious and very serious. The maximum penalty amount that can be imposed under the administrative monetary penalty scheme for violations classified as very serious is, in the case of an entity, $500,000 and in the case of a person, $100,000.

Contact

Diane Lafleur
Director
Financial Sector Division
Department of Finance
140 O’Connor Street
Ottawa, Ontario
K1A 0G5
Telephone: 613-992-5885
Fax: 613-943-8436
Email: fcs-scf@fin.gc.ca

Footnote a
 S.C. 2006, c. 12, s. 39

Footnote b
 S.C. 2000, c. 17; S.C. 2001, c. 41, s. 48

Footnote 1
 SOR/2002-184

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