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SOR/2016-153 June 17, 2016

PROCEEDS OF CRIME (MONEY LAUNDERING) AND TERRORIST FINANCING ACT

Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2016

P.C. 2016-569 June 17, 2016

His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 73(1) (see footnote a) and paragraphs 73.1(1)(a) and (b) (see footnote b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (see footnote c), makes the annexed Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2016.

Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 2016

Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations

1 (1) Subsection 1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations (see footnote 1) is repealed.

(2) The portion of subsection 1(2) of the English version of the Regulations before the first definition is replaced by the following:

(2) The following definitions apply in these Regulations.

(3) The definition money services business in subsection 1(2) of the Regulations is repealed.

(4) The definitions financial entity and funds in subsection 1(2) of the Regulations are replaced by the following:

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 paragraph 8(a). (entité financière)

funds means either

  • (a) cash; or
  • (b) currency, securities, negotiable instruments or other financial instruments, in any form, that indicate a person’s or entity’s title or right to, or interest in, them. (fonds)

(5) The definitions dealer in precious metals and stones and financial services cooperative in subsection 1(2) of the English version of the Regulations are replaced by the following:

dealer in precious metals and stones means a person or entity that, in the course of their business activities, buys or sells precious metals, precious stones or jewellery. It includes a department or agent or mandatary of Her Majesty in right of Canada or of a province when the department or agent or mandatary is carrying out the activity, referred to in section 5, of selling precious metals to the public. (négociant en métaux précieux et pierres précieuses)

financial services cooperative means a financial services cooperative that is regulated by An Act respecting financial services cooperatives, CQLR, c. C-67.3, or An Act respecting the Mouvement Desjardins, S.Q. 2000, c. 77, other than a caisse populaire. (coopérative de services financiers)

(6) Subsection 1(2) of the Regulations is amended by adding the following in alphabetical order:

casino means a government, organization, board or operator that is referred to in any of paragraphs 5(k) to (k.3) of the Act. (casino)

2 Section 1.1 of the Regulations is replaced by the following:

1.1 If a registered charity, as defined in subsection 248(1) of the Income Tax Act, conducts and manages, in a permanent establishment of a casino, a lottery scheme that includes games of roulette or card games for a period of not more than two consecutive days at a time and, in doing so, acts under the supervision of the government of a province that is referred to in paragraph 5(k) of the Act, or of an organization that is referred to in paragraph 5(k.2) of the Act, that conducts and manages such a lottery scheme in the same establishment, the lottery scheme that is conducted and managed by the registered charity is considered to be conducted and managed by the supervising government or organization.

3 Subsection 7.1(2) of the Regulations is replaced by the following:

(2) For the purposes of subsection (1), 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.

4 The portion of section 8 of the English version of the Regulations before paragraph (a) is replaced by the following:

8 Every department and agent or mandatary of Her Majesty in right of Canada or of a province is subject to Part 1 of the Act when, in the course of providing financial services to the public, the department or agent or mandatary

5 Subsection 9(2) of the Regulations is replaced by the following:

(2) The report shall be sent to the Centre within 30 days after the day on which the person or entity or any of their employees or officers detects a fact respecting a financial transaction or an attempted financial transaction that constitutes reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering offence or a terrorist activity financing offence.

6 Subparagraph 13(a)(v) of the Regulations is replaced by the following:

  • (v) the number of an identification document issued to them by the federal government or a provincial government or by a foreign government that is not a municipal government, other than a document that contains their social insurance number, the issuing authority and, if available, the place of issue and expiry date of the identification document,

7 Item 7 of Part B of Schedule 1 to the Regulations is repealed.

8 Items 7 and 8 of Part D of Schedule 1 to the Regulations are replaced by the following:

  • 7 Type of document or other information used to identify person and number of document or number associated with information
  • 8 Jurisdiction and country of issue of document or other information used to identify person

9 Items 6 and 7 of Part F of Schedule 1 to the Regulations are replaced by the following:

  • 6 Type of document or other information used to identify person and number of document or number associated with information
  • 7 Jurisdiction and country of issue of document or other information used to identify person

10 Items 3 to 5 of Part B of Schedule 2 to the English version of the Regulations are replaced by the following:

  • 3 Full name of that terrorist group or listed person
  • 4 Full address of that terrorist group or listed person
  • 5 Phone number of that terrorist group or listed person

11 Items 7 and 8 of Part B of Schedule 2 to the English version of the Regulations are replaced by the following:

  • 7 Full address of that person or entity
  • 8 Phone number of that person or entity

12 Item 7 of Part E of Schedule 2 to the Regulations is repealed.

13 Items 8 and 9 of Part F of Schedule 2 to the Regulations are replaced by the following:

  • 8 Type of document or other information used to identify person and number of document or number associated with information
  • 9 Jurisdiction and country of issue of document or other information used to identify person

14 Items 6 and 7 of Part H of Schedule 2 to the Regulations are replaced by the following:

  • 6 Type of document or other information used to identify person and number of document or number associated with information
  • 7 Jurisdiction and country of issue of document or other information used to identify person

Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

15 (1) The definition casino in subsection 1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (see footnote 2) is replaced by the following:

casino means a government, organization, board or operator that is referred to in any of paragraphs 5(k) to (k.3) of the Act. (casino)

(2) The definition client credit file in subsection 1(2) of the Regulations is repealed.

(3) The definitions financial entity, funds, securities dealer, signature and signature card in subsection 1(2) of the Regulations are replaced by the following:

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. (entité financière)

funds means either

  • (a) cash; or
  • (b) currency, securities, negotiable instruments or other financial instruments, in any form, that indicate a person’s or entity’s title or right to, or interest in, them. (fonds)

securities dealer means a person or entity that is referred to in paragraph 5(g) of the Act. (courtier en valeurs mobilières)

signature includes an electronic signature or other information in electronic form that is created or adopted by a client of a person or entity referred to in section 5 of the Act and that is accepted by the person or entity as being unique to that client. (signature)

signature card, in respect of an account, means a document that is signed by a person who is authorized to give instructions in respect of the account, or electronic data that constitutes the signature of such a person. (fiche-signature)

(4) The definitions dealer in precious metals and stones and financial services cooperative in subsection 1(2) of the English version of the Regulations are replaced by the following:

dealer in precious metals and stones means a person or entity that, in the course of their business activities, buys or sells precious metals, precious stones or jewellery. It includes a department or agent or mandatary of Her Majesty in right of Canada or of a province when the department or agent or mandatary is carrying out the activity, referred to in section 39.1, of selling precious metals to the public. (négociant en métaux précieux et pierres précieuses)

financial services cooperative means a financial services cooperative that is regulated by An Act respecting financial services cooperatives, CQLR, c. C-67.3, or An Act respecting the Mouvement Desjardins, S.Q. 2000, c. 77, other than a caisse populaire. (coopérative de services financiers)

(5) The portion of the definition business relationship in subsection 1(2) of the Regulations after paragraph (b) is replaced by the following:

It does not include any transaction or activity referred to in paragraph 62(1)(a), (b) or (d) or subsection 62(2) or (3). (relation d’affaires)

(6) Paragraph (b) of the definition public body in subsection 1(2) of the Regulations is replaced by the following:

  • (b) 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

(7) Paragraph (a) of the definition public body in subsection 1(2) of the English version of the Regulations is replaced by the following:

  • (a) any department or agent or mandatary of Her Majesty in right of Canada or of a province;

(8) Paragraph (c) of the definition public body in subsection 1(2) of the English version of the Regulations is replaced by the following:

  • (c) 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)

16 Section 1.1 of the Regulations is replaced by the following:

1.1 (1) For the purposes of subsection 9.3(1) of the Act, a prescribed family member of a politically exposed foreign person, a politically exposed domestic person or a head of an international organization is

  • (a) their spouse or common-law partner;
  • (b) their child;
  • (c) their mother or father;
  • (d) the mother or father of their spouse or common-law partner; or
  • (e) a child of their mother or father.

(2) For the purposes of the definition politically exposed domestic person in subsection 9.3(3) of the Act, the prescribed period is five years.

17 The Regulations are amended by adding the following after section 1.11:

1.12 For the purposes of these Regulations, 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.

18 The portion of section 2 of the English version of the Regulations before paragraph (a) is replaced by the following:

2 If a transaction is carried out by a person or entity in a foreign currency, the amount of the transaction shall be converted into Canadian dollars using

19 The heading before section 6 of the English version of the Regulations is replaced by the following:

Transactions Conducted by Employees or Agents or Mandataries

20 Subsection 6(2) of the English version of the Regulations is replaced by the following:

(2) If a person or entity that is subject to the requirements of these Regulations, other than a life insurance broker or agent, is an agent or mandatary of, or is authorized to act on behalf of, another person or entity referred to in any of paragraphs 5(a) to (l) of the Act, it is that other person or entity rather than the agent or mandatary or the authorized person or entity, as the case may be, that is responsible for meeting those requirements.

21 Paragraph 11.1(4)(b) of the Regulations is replaced by the following:

  • (b) treat the activities in respect of that entity as high risk for the purposes of subsection 9.6(3) of the Act and take the prescribed special measures referred to in section 71.1 of these Regulations.

22 (1) Paragraph 14(i) of the Regulations is replaced by the following:

  • (i) in respect of every credit arrangement that it enters into with a client, a record of the client’s financial capacity, the terms of the credit arrangement and, if the client is a person, the address of their business or place of work;

(2) Subparagraph 14(m)(ii) of the Regulations is replaced by the following:

  • (ii) if the client is an entity, the name, address, date of birth and telephone number of the person who made the request on behalf of the entity and the nature of that person’s principal business or their occupation, as applicable,

(3) Subparagraph 14(m)(iv) of the Regulations is replaced by the following:

  • (iv) the name and, if applicable, the account number of the beneficiary of the transaction, and

(4) The portion of paragraph 14(n) of the Regulations before subparagraph (v) is replaced by the following:

  • (n) if it obtains the approval referred to in subsection 67.1(1) or (2) to keep the account open, a record of
    • (i) the office or position and the organization or institution in respect of which the person is determined to be a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons,
    • (ii) the date of the determination,
    • (iii) the source, if known, of the funds that are or are expected to be deposited in the account,
    • (iv) the name of the member of senior management who gave the approval, and

(5) The portion of paragraph 14(o) of the Regulations before subparagraph (iv) is replaced by the following:

  • (o) if a transaction is reviewed under any of subsections 67.2(1) to (4), a record of
    • (i) the office or position and the organization or institution in respect of which the person is determined to be a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons,
    • (ii) the date of the determination,
    • (iii) the source, if known, of the funds used for the transaction,

23 The portion of paragraph 14.1(g) of the Regulations before subparagraph (v) is replaced by the following:

  • (g) if it obtains the approval referred to in subsection 67.1(1) or (2) to keep the account open,
    • (i) the office or position and the organization or institution in respect of which the person is determined to be a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons,
    • (ii) the date of the determination,
    • (iii) the source, if known, of the funds that are or are expected to be deposited in the account,
    • (iv) the name of the member of senior management who gave the approval, and

24 Paragraph 17(b) of the Regulations is replaced by the following:

  • (b) in respect of transactions referred to in any of paragraphs 62(2)(c) to (f).

25 Paragraph 18(b) of the Regulations is replaced by the following:

  • (b) the transaction is a transaction referred to in any of paragraphs 62(2)(c) to (f).

26 (1) The portion of section 20.1 of the Regulations before paragraph (d) is replaced by the following:

20.1 Subject to section 20.2 and subsection 62(2), every life insurance company or life insurance broker or agent shall keep a record of the following information when a transaction is reviewed under subsection 67.2(1) or (2):

  • (a) the office or position and the organization or institution in respect of which the person is determined to be a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons;
  • (b) the date of the determination;
  • (c) the source, if known, of the funds used for the transaction;

(2) Paragraph 20.1(e) of the Regulations is replaced by the following:

  • (e) the date of that review.

27 (1) Subsection 23(1) of the Regulations is renumbered as section 23.

(2) Paragraph 23(a) of the Regulations is replaced by the following:

  • (a) in respect of every account that the securities dealer opens, a signature card of every person who is authorized to give instructions in respect of the account or an account operating agreement or account application that contains that person’s signature;

(3) The portion of paragraph 23(f) of the Regulations before subparagraph (v) is replaced by the following:

  • (f) if the securities dealer obtains the approval referred to in subsection 67.1(1) or (2) to keep the account open, a record of
    • (i) the office or position and the organization or institution in respect of which the person is determined to be a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons,
    • (ii) the date of the determination,
    • (iii) the source, if known, of the funds that are or are expected to be deposited in the account,
    • (iv) the name of the member of senior management who gave the approval, and

28 (1) Paragraph 30(a) of the Regulations is repealed.

(2) Subparagraph 30(e)(ii) of the Regulations is replaced by the following:

  • (ii) if the client is an entity, the name, address, date of birth and telephone number of the person who, on behalf of the entity, requested that the transaction be initiated and the nature of that person’s principal business or their occupation, as applicable,

(3) Subparagraph 30(e)(iv) of the Regulations is replaced by the following:

  • (iv) the name of the beneficiary of the transaction, and

29 (1) The portion of section 31 of the Regulations before paragraph (d) is replaced by the following:

31 Every money services business shall keep a record of the following information when a transaction is reviewed under any of subsections 67.2(1) to (4):

  • (a) the office or position and the organization or institution in respect of which the person is determined to be a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons;
  • (b) the date of the determination;
  • (c) the source, if known, of the funds used for the transaction;

(2) Paragraph 31(e) of the Regulations is replaced by the following:

  • (e) the date of that review.

30 Subsection 39.5(2) of the Regulations is repealed.

31 Section 42.1 of the Regulations is replaced by the following:

42.1 If a registered charity, as defined in subsection 248(1) of the Income Tax Act, conducts and manages, in a permanent establishment of a casino, a lottery scheme that includes games of roulette or card games for a period of not more than two consecutive days at a time and, in doing so, acts under the supervision of the government of a province that is referred to in paragraph 5(k) of the Act, or of an organization that is referred to in paragraph 5(k.2) of the Act, that conducts and manages such a lottery scheme in the same establishment, the lottery scheme that is conducted and managed by the registered charity is considered to be conducted and managed by the supervising government or organization.

32 (1) Subparagraph 43(f)(ii) of the Regulations is replaced by the following:

  • (ii) if the client is an entity, the name, address, date of birth and telephone number of the person who, on behalf of the entity, requested that the transaction be initiated and the nature of that person’s principal business or their occupation, as applicable,

(2) Subparagraph 43(f)(iv) of the Regulations is replaced by the following:

  • (iv) the name and, if applicable, the account number of the beneficiary of the transaction, and

33 The heading “Departments and Agents of Her Majesty in Right of Canada or of a Province” before section 45 of the English version of the Regulations is replaced by the following:

Departments and Agents or Mandataries of Her Majesty in Right of Canada or of a Province

34 Section 45 of the English version of the Regulations is replaced by the following:

45 Every department and agent or mandatary of Her Majesty in right of Canada or of a province is subject to Part 1 of the Act when they accept deposit liabilities in the course of providing financial services to the public.

35 Sections 46 to 48 of the English version of the Regulations are replaced by the following:

46 Every department and agent or mandatary of Her Majesty in right of Canada or of a province is subject to Part 1 of the Act when they sell or redeem money orders in the course of providing financial services to the public.

47 Subject to subsection 52(1), every department and agent or mandatary of Her Majesty in right of Canada or of a province that, while engaging in an activity referred to in section 46, receives from a client an amount in cash of $10,000 or more in the course of a single transaction shall report the transaction to the Centre, together with the information set out in Schedule 1, unless the amount is received from a financial entity or a public body.

48 Subject to subsection 52(2), every department and agent or mandatary of Her Majesty in right of Canada or of a province, while engaging in an activity referred to in section 46, shall keep a large cash transaction record in respect of every amount in cash of $10,000 or more that they receive from a client in the course of a single transaction, unless the amount is received from a financial entity or a public body.

36 The portion of section 49 of the English version of the Regulations before paragraph (d) is replaced by the following:

49 Subject to subsection 62(2), every department and agent or mandatary of Her Majesty in right of Canada or of a province that engages in an activity referred to in section 46 shall keep the following records in respect of that activity:

  • (a) every client information record that is created for the purpose of an ongoing business relationship between the department or agent or mandatary and a client;
  • (b) if the client information record is in respect of a corporation, a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation in respect of transactions with the department or agent or mandatary;
  • (c) if the department or agent or mandatary receives $3,000 or more in consideration of the issuance of money orders or other similar negotiable instruments, a record of the date, the amount received, the name, address and date of birth of the person who in fact gives the amount and whether the amount is in cash, cheques, traveller’s cheques, money orders or other similar negotiable instruments; and

37 (1) The portion of subsection 54(1) of the Regulations before subparagraph (b)(i) is replaced by the following:

54 Subject to sections 62 and 63, every financial entity shall

  • (a) in accordance with subsection 64(1), ascertain the identity of every person for whom a signature card is created in respect of an account, other than a credit card account, that the financial entity opens, except in the case of a business account for which signature cards are created for more than three persons, if the financial entity has ascertained the identity of at least three of those persons;
  • (b) in accordance with subsection 64(1), ascertain the identity of every person who conducts one of the following transactions, unless they hold an account, or are authorized to give instructions in respect of an account held, with the financial entity:

(2) Subparagraph 54(b)(ii) of the Regulations is replaced by the following:

  • (ii) an electronic funds transfer, as prescribed by subsection 66.1(2), in an amount of $1,000 or more that is sent at the person’s request or on their behalf, or

(3) Subsection 54(2) of the Regulations is repealed.

38 Paragraph 54.1(a) of the Regulations is replaced by the following:

  • (a) if the financial entity opens a credit card account in the name of a person, ascertain their identity in accordance with subsection 64(1);

39 Section 54.2 of the Regulations is replaced by the following:

54.2 (1) Subject to section 62 and subsection 63(5), a financial entity shall

  • (a) in accordance with subsection 67.1(3), take reasonable measures to determine whether a person for whom it opens an account is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization, a family member of one of those persons or a person who is closely associated with a politically exposed foreign person;
  • (b) in accordance with subsection 67.2(5), take reasonable measures to determine whether a person who requests that an electronic funds transfer of $100,000 or more be initiated or on whose behalf the request is made is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons; and
  • (c) in accordance with subsection 67.2(5), take reasonable measures to determine whether a person who is a beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons.

(2) Subject to section 62 and subsection 63(5), a financial entity shall take reasonable measures on a periodic basis to determine whether an account holder is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization, a family member of one of those persons or a person who is closely associated with a politically exposed foreign person.

(3) Subject to section 62 and subsection 63(5), if a financial entity or any of its employees or officers detects a fact that constitutes reasonable grounds to suspect that an account holder is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons, the financial entity shall, in accordance with subsection 67.1(3), take reasonable measures to determine whether the account holder is such a person.

40 The portion of subsection 54.3(1) of the Regulations before paragraph (a) is replaced by the following:

54.3 (1) A financial entity that is required to ascertain a person’s identity or confirm an entity’s existence shall

41 Section 54.4 of the Regulations is replaced by the following:

54.4 If, as a result of its ongoing monitoring of a business relationship with a person or entity under paragraph 54.3(1)(a), the financial entity considers that there is a high risk of a money laundering offence or terrorist activity financing offence, it shall treat the activities in respect of that person or entity as high risk for the purposes of subsection 9.6(3) of the Act and take the prescribed special measures referred to in section 71.1 of these Regulations.

42 Section 56.1 of the Regulations is replaced by the following:

56.1 Subject to section 56.2 and subsections 62(2) and 63(5), a life insurance company or life insurance broker or agent shall, in accordance with subsection 67.2(5), take reasonable measures to determine whether a person who makes a lump-sum payment of $100,000 or more in respect of an immediate or deferred annuity or life insurance policy on their own behalf or on behalf of a third party is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons.

43 (1) The portion of section 56.3 of the Regulations before paragraph (a) is replaced by the following:

56.3 A life insurance company or life insurance broker or agent that is required to ascertain a person’s identity or confirm an entity’s existence shall

(2) Paragraph 56.3(a) of the English version of the Regulations is replaced by the following:

  • (a) conduct ongoing monitoring of their business relationship with that person or entity; and

44 Section 56.4 of the Regulations is replaced by the following:

56.4 If, as a result of their ongoing monitoring of a business relationship with a person or entity under paragraph 56.3(a), the life insurance company or life insurance broker or agent considers that there is a high risk of a money laundering offence or terrorist activity financing offence, they shall treat the activities in respect of that person or entity as high risk for the purposes of subsection 9.6(3) of the Act and take the prescribed special measures referred to in section 71.1 of these Regulations.

45 (1) Subsection 57(1) of the Regulations is replaced by the following:

57 (1) Subject to section 62 and subsection 63(1), every securities dealer shall ascertain, in accordance with subsection 64(1), the identity of every person who is authorized to give instructions in respect of an account for which a record must be kept by the securities dealer under section 23.

(2) Subsections 57(3) and (4) of the English version of the Regulations are replaced by the following:

(3) Subject to section 62 and subsections 63(2) and (4), every securities dealer shall, in accordance with section 65, confirm the existence of every corporation for which they open an account and ascertain its name and address and the names of its directors.

(4) Subject to section 62 and subsection 63(3), every securities dealer shall, in accordance with section 66, confirm the existence of every entity, other than a corporation, for which they open an account.

46 Section 57.1 of the Regulations is replaced by the following:

57.1 (1) Subject to section 62 and subsection 63(5), a securities dealer shall, in accordance with subsection 67.1(3), take reasonable measures to determine whether a person for whom they open an account is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization, a family member of one of those persons or a person who is closely associated with a politically exposed foreign person.

(2) Subject to section 62 and subsection 63(5), a securities dealer shall take reasonable measures on a periodic basis to determine whether an account holder is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization, a family member of one of those persons or a person who is closely associated with a politically exposed foreign person.

(3) Subject to section 62 and subsection 63(5), if a securities dealer or any of their employees or officers detects a fact that constitutes reasonable grounds to suspect that an account holder is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons, the securities dealer shall, in accordance with subsection 67.1(3), take reasonable measures to determine whether the account holder is such a person.

47 (1) The portion of section 57.2 of the Regulations before paragraph (a) is replaced by the following:

57.2 A securities dealer that is required to ascertain a person’s identity or confirm an entity’s existence shall

(2) Paragraph 57.2(a) of the English version of the Regulations is replaced by the following:

  • (a) conduct ongoing monitoring of their business relationship with that person or entity; and

48 Section 57.3 of the Regulations is replaced by the following:

57.3 If, as a result of their ongoing monitoring of a business relationship with a person or entity under paragraph 57.2(a), the securities dealer considers that there is a high risk of a money laundering offence or terrorist activity financing offence, they shall treat the activities in respect of that person or entity as high risk for the purposes of subsection 9.6(3) of the Act and take the prescribed special measures referred to in section 71.1 of these Regulations.

49 Subsection 59(5) of the Regulations is replaced by the following:

(5) Subject to subsection 63(5), a money services business shall, in accordance with subsection 67.2(5), take reasonable measures to determine whether

  • (a) a person who requests that an electronic funds transfer of $100,000 or more be initiated or on whose behalf the request is made is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons; or
  • (b) a person who is a beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons.

50 (1) The portion of section 59.01 of the Regulations before paragraph (a) is replaced by the following:

59.01 A money services business that is required to ascertain a person’s identity or confirm an entity’s existence shall

(2) Paragraph 59.01(a) of the English version of the Regulations is replaced by the following:

  • (a) conduct ongoing monitoring of their business relationship with that person or entity; and

51 Section 59.02 of the Regulations is replaced by the following:

59.02 If, as a result of their ongoing monitoring of a business relationship with a person or entity under paragraph 59.01(a), the money services business considers that there is a high risk of a money laundering offence or terrorist activity financing offence, they shall treat the activities in respect of that person or entity as high risk for the purposes of subsection 9.6(3) of the Act and take the prescribed special measures referred to in section 71.1 of these Regulations.

52 (1) The portion of section 59.11 of the Regulations before paragraph (a) is replaced by the following:

59.11 An accountant or accounting firm that is required to ascertain a person’s identity or confirm an entity’s existence shall

(2) Paragraph 59.11(a) of the English version of the Regulations is replaced by the following:

  • (a) conduct ongoing monitoring of their business relationship with that person or entity; and

53 Section 59.12 of the Regulations is replaced by the following:

59.12 If, as a result of their ongoing monitoring of a business relationship with a person or entity under paragraph 59.11(a), the accountant or accounting firm considers that there is a high risk of a money laundering offence or terrorist activity financing offence, they shall treat the activities in respect of that person or entity as high risk for the purposes of subsection 9.6(3) of the Act and take the prescribed special measures referred to in section 71.1 of these Regulations.

54 Subsection 59.2(4) of the Regulations is repealed.

55 (1) The portion of section 59.21 of the Regulations before paragraph (a) is replaced by the following:

59.21 A real estate broker or sales representative that is required to ascertain a person’s identity or confirm an entity’s existence shall

(2) Paragraph 59.21(a) of the English version of the Regulations is replaced by the following:

  • (a) conduct ongoing monitoring of their business relationship with that person or entity; and

56 Section 59.22 of the Regulations is replaced by the following:

59.22 If, as a result of their ongoing monitoring of a business relationship with a person or entity under paragraph 59.21(a), the real estate broker or sales representative considers that there is a high risk of a money laundering offence or terrorist activity financing offence, they shall treat the activities in respect of that person or entity as high risk for the purposes of subsection 9.6(3) of the Act and take the prescribed special measures referred to in section 71.1 of these Regulations.

57 (1) The portion of section 59.31 of the Regulations before paragraph (a) is replaced by the following:

59.31 A British Columbia notary public or British Columbia notary corporation that is required to ascertain a person’s identity or confirm an entity’s existence shall

(2) Paragraph 59.31(a) of the English version of the Regulations is replaced by the following:

  • (a) conduct ongoing monitoring of their business relationship with that person or entity; and

58 Section 59.32 of the Regulations is replaced by the following:

59.32 If, as a result of their ongoing monitoring of a business relationship with a person or entity under paragraph 59.31(a), the British Columbia notary public or British Columbia notary corporation considers that there is a high risk of a money laundering offence or terrorist activity financing offence, they shall treat the activities in respect of that person or entity as high risk for the purposes of subsection 9.6(3) of the Act and take the prescribed special measures referred to in section 71.1 of these Regulations.

59 (1) The portion of section 59.51 of the Regulations before paragraph (a) is replaced by the following:

59.51 A real estate developer that is required to ascertain a person’s identity or confirm an entity’s existence shall

(2) Paragraph 59.51(a) of the English version of the Regulations is replaced by the following:

  • (a) conduct ongoing monitoring of their business relationship with that person or entity; and

60 Section 59.52 of the Regulations is replaced by the following:

59.52 If, as a result of their ongoing monitoring of a business relationship with a person or entity under paragraph 59.51(a), the real estate developer considers that there is a high risk of a money laundering offence or terrorist activity financing offence, they shall treat the activities in respect of that person or entity as high risk for the purposes of subsection 9.6(3) of the Act and take the prescribed special measures referred to in section 71.1 of these Regulations.

61 Paragraph 60(a) of the Regulations is replaced by the following:

  • (a) in accordance with subsection 64(1), ascertain the identity of every person for whom a signature card is created in respect of an account that the casino opens, except in the case of a business account for which signature cards are created for more than three persons, if the casino has ascertained the identity of at least three of those persons;

62 (1) The portion of section 60.1 of the Regulations before paragraph (a) is replaced by the following:

60.1 A casino that is required to ascertain a person’s identity or confirm an entity’s existence shall

(2) Paragraph 60.1(a) of the English version of the Regulations is replaced by the following:

  • (a) conduct ongoing monitoring of their business relationship with that person or entity; and

63 Section 60.2 of the Regulations is replaced by the following:

60.2 If, as a result of their ongoing monitoring of a business relationship with a person or entity under paragraph 60.1(a), the casino considers that there is a high risk of a money laundering offence or terrorist activity financing offence, they shall treat the activities in respect of that person or entity as high risk for the purposes of subsection 9.6(3) of the Act and take the prescribed special measures referred to in section 71.1 of these Regulations.

64 The heading before section 61 of the English version of the Regulations is replaced by the following:

Departments or Agents or Mandataries of Her Majesty in Right of Canada or of a Province that Sell or Redeem Money Orders

65 The portion of section 61 of the English version of the Regulations before paragraph (a) is replaced by the following:

61 Subject to subsection 62(2) and section 63, a department or agent or mandatary of Her Majesty in right of Canada or of a province that engages in an activity referred to in section 46 shall

66 (1) The portion of section 61.1 of the Regulations before paragraph (a) is replaced by the following:

61.1 A department or agent or mandatary of Her Majesty in right of Canada or of a province that engages in an activity referred to in section 46 and that is required to ascertain a person’s identity or confirm an entity’s existence shall

(2) Paragraph 61.1(a) of the English version of the Regulations is replaced by the following:

  • (a) conduct ongoing monitoring of their business relationship with that person or entity; and

67 Section 61.2 of the Regulations is replaced by the following:

61.2 If, as a result of their ongoing monitoring of a business relationship with a person or entity under paragraph 61.1(a), the department or agent or mandatary of Her Majesty in right of Canada or of a province that engages in an activity referred to in section 46 considers that there is a high risk of a money laundering offence or terrorist activity financing offence, they shall treat the activities in respect of that person or entity as high risk for the purposes of subsection 9.6(3) of the Act and take the prescribed special measures referred to in section 71.1 of these Regulations.

68 (1) The portion of subsection 62(1) of the Regulations before paragraph (a) is replaced by the following:

62 (1) Paragraphs 54(a) and (b), 54.1(a), 54.2(1)(a) and 55(a) and (e), subsections 57(1) and 57.1(1) and paragraphs 60(a) and (b) do not apply in respect of

(2) The portion of subsection 62(3) of the Regulations before paragraph (a) is replaced by the following:

(3) In respect of a group plan account, other than one referred to in subsection (2), a financial entity, securities dealer, life insurance company or life insurance broker or agent is not required to ascertain the identity of, or keep a signature card in respect of, any individual member of the group plan or to determine whether they are a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons if

(3) Subsection 62(4) of the Regulations is repealed.

69 (1) Subsections 63(1) to (4) of the Regulations are replaced by the following:

63 (1) If a person or entity ascertains a person’s identity in accordance with subsection 64(1) and complies with section 64.2 — or if, before the coming into force of this subsection, they ascertained a person’s identity in accordance with subsection 64(1) or (1.1) and complied with section 67, as they read at the time the identity was ascertained — they are not required to ascertain the person’s identity again unless they have doubts about the information that was used for that purpose.

(2) If a person or entity confirms a corporation’s existence and ascertains its name and address and the names of its directors in accordance with section 65, they are not required to confirm its existence or ascertain that information again unless they have doubts about the information that was used for that purpose.

(3) If a person or entity confirms the existence of an entity other than a corporation in accordance with section 66, they are not required to confirm its existence again unless they have doubts about the information that was used for that purpose.

(4) Despite paragraphs 54(d) and 54.1(b), subsections 56(3), 57(3) and 59(2) and paragraphs 59.1(b), 59.2(1)(b), 60(e) and 61(c), the names of a corporation’s directors do not need to be ascertained if the corporation is a securities dealer.

(2) Subsection 63(5) of the Regulations is replaced by the following:

(5) If a person or entity determines that a person is a politically exposed foreign person or a family member of such a person — or if, before the coming into force of this subsection, they determined that a person is a politically exposed foreign person, as defined in subsection 9.3(3) of the Act as it read at the time the determination was made — they are not required to make the determination again.

70 (1) Subsections 64(1) to (1.3) of the Regulations are replaced by the following:

64 (1) In the cases referred to in sections 53, 53.1 and 54, paragraph 54.1(a) and sections 55, 56, 57, 59, 59.1, 59.2, 59.3, 59.4, 59.5, 60 and 61, a person’s identity is to be ascertained

  • (a) by referring to an identification document that contains their name and photograph and that is issued by the federal government or a provincial government or by a foreign government that is not a municipal government, and by verifying that the name and photograph are those of the person;
  • (b) by referring to information concerning them that the person or entity that is ascertaining their identity receives, on request, from a federal or provincial government body — or an agent or mandatary of such a body — that is authorized in Canada to ascertain the identity of persons, and by verifying that either the name and address or the name and date of birth included in the information are those of the person;
  • (c) by referring to information that is in their credit file — if that file is located in Canada and has been in existence for at least three years — and by verifying that the name, address and date of birth in the credit file are those of the person;
  • (d) by doing any two of the following:
    • (i) referring to information from a reliable source that includes their name and address, and verifying that the name and address are those of the person,
    • (ii) referring to information from a reliable source that includes their name and date of birth, and verifying that the name and date of birth are those of the person, or
    • (iii) referring to information that includes their name and confirms that they have a deposit account or a credit card or other loan account with a financial entity, and verifying that information; or
  • (e) by confirming that one of the following entities previously ascertained their identity in accordance with any of paragraphs (a) to (d), and by verifying that the name, address and date of birth in the entity’s record are those of the person:
    • (i) an entity that is referred to in any of paragraphs 5(a) to (g) of the Act and that is affiliated with the entity that is ascertaining the person’s identity,
    • (ii) an entity that carries on activities outside Canada similar to the activities of a person or entity referred to in any of paragraphs 5(a) to (g) of the Act and that is affiliated with the entity that is ascertaining the person’s identity, or
    • (iii) a financial entity that is subject to the Act and that is a member of the same financial services cooperative or credit union central as the entity that is ascertaining the person’s identity.

(1.1) The identity of a person who is under 12 years of age shall be ascertained for the purposes of subsection (1) by ascertaining the identity of one of their parents or their guardian or tutor.

(1.2) The identity of a person who is at least 12 years of age but not more than 15 years of age may be ascertained by referring under subparagraph (1)(d)(i) to information that includes the name and address of one of the person’s parents or their guardian or tutor and by verifying that the address is that of the person.

(1.3) For the purposes of subparagraphs (1)(d)(i) to (iii), the information that is referred to must be from different sources, and neither the person whose identity is being ascertained nor the person or entity that is ascertaining their identity can be a source.

(1.4) If a document is used to ascertain identity under subsection (1), it must be original, valid and current. Other information that is used for that purpose must be valid and current and must not include an electronic image of a document.

(1.5) In the case of a retail deposit account referred to in subsection 448.1(1) of the Bank Act, if a person or entity cannot ascertain a person’s identity in the manner set out in one of paragraphs (1)(a) to (e), they are deemed to comply with subsection (1) if the person who requests that the account be opened meets the conditions set out in subsection 4(1) or (2) of the Access to Basic Banking Services Regulations.

(2) Paragraphs 64(2)(a) and (b) of the Regulations are replaced by the following:

  • (a) in the cases referred to in paragraph 54(a) and subsection 57(1), before the first transaction, other than an initial deposit, is carried out on an account;
  • (b) in the cases referred to in section 53, paragraph 54(b), subsection 59(1) and paragraphs 59.3(a), 59.4(1)(a), 59.5(a), 60(b) and 61(b), at the time of the transaction;

(3) Subsection 64(2) of the Regulations is amended by striking out “and” at the end of paragraph (e) and by adding the following after paragraph (e):

  • (e.1) in the case referred to in paragraph 60(a), before any funds are disbursed; and

(4) Subsection 64(3) of the Regulations is repealed.

71 Section 64.1 of the Regulations is replaced by the following:

64.1 (1) A person or entity that is required to take measures to ascertain a person’s identity under subsection 64(1) may rely on an agent or mandatary to take those measures.

(2) The person or entity may rely on measures that were previously taken by an agent or mandatary to ascertain the person’s identity if the agent or mandatary was, at the time they took the measures,

  • (a) acting in their own capacity, whether or not they were required to take the measures under these Regulations; or
  • (b) acting as an agent or mandatary under a written agreement or arrangement — entered into with another person or entity that is required to take measures to ascertain a person’s identity — for the purposes of ascertaining identity under subsection 64(1).

(3) In order to rely on measures taken by an agent or mandatary under subsection (1) or (2), the person or entity shall

  • (a) have entered into a written agreement or arrangement with the agent or mandatary for the purposes of ascertaining a person’s identity under subsection 64(1);
  • (b) obtain from the agent or mandatary all of the information that the agent or mandatary referred to in order to ascertain the person’s identity and the information that the agent or mandatary verified as being that of the person; and
  • (c) be satisfied that the information is valid and current and that the agent or mandatary ascertained the person’s identity in the manner described in one of paragraphs 64(1)(a) to (d).

64.2 Every person or entity that is required under these Regulations to ascertain a person’s identity in connection with a record that the person or entity has created and is required to keep under these Regulations — or in connection with a transaction that they have carried out and in respect of which they are required to keep a record under these Regulations or under section 12.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations — shall set out in, or include with, that record the person’s name and the following information:

  • (a) if the person or entity ascertained the person’s identity in accordance with paragraph 64(1)(a), the date on which they did so, the type of document referred to, its number, the jurisdiction and country of issue of the document and, if applicable, its expiry date;
  • (b) if the person or entity ascertained the person’s identity in accordance with paragraph 64(1)(b), the date on which they did so, the source of the information, the type of information referred to and a number associated with the information;
  • (c) if the person or entity ascertained the person’s identity in accordance with paragraph 64(1)(c), the date on which they did so, the source of the information and the number of the person’s credit file;
  • (d) if the person or entity ascertained the person’s identity in accordance with paragraph 64(1)(d), the date on which they did so, the source of the information, the type of information referred to and the account number included in it — or if there is no account number included in it, a number associated with the information;
  • (e) if the entity ascertained the person’s identity in accordance with paragraph 64(1)(e), the date on which it did so, the name of the entity that had previously ascertained that person’s identity, the manner in which it had previously ascertained the person’s identity under one of paragraphs 64(1)(a) to (d) and the applicable information referred to in one of paragraphs (a) to (d) of this section that is associated with that manner of ascertaining identity;
  • (f) if the entity ascertained the person’s identity in accordance with paragraph 64(1)(e) and the other entity had previously ascertained the person’s identity before the coming into force of this section, the date on which the entity ascertained the person’s identity in accordance with paragraph 64(1)(e), the name of the other entity, the manner in which the other entity had previously ascertained the person’s identity under subsection 64(1) or (1.1), as it read at the time the other entity ascertained the person’s identity, and the applicable information referred to in one of paragraphs 67(a) to (k), as it read at the time the other entity ascertained the person’s identity; or
  • (g) if, under subsection 64(1.5), the person or entity is deemed to have complied with subsection 64(1), the reasons why the person’s identity could not be ascertained in the manner set out in one of paragraphs 64(1)(a) to (e) and the date on which the conditions set out in subsection 4(1) or (2) of the Access to Basic Banking Services Regulations were met.

72 Paragraph 65(2)(a) of the Regulations is replaced by the following:

  • (a) in the cases referred to in paragraphs 54(d) and 60(e), before the first transaction, other than the initial deposit, is carried out on the account;

73 Paragraph 66(2)(a) of the Regulations is replaced by the following:

  • (a) in the cases referred to in paragraphs 54(e) and 60(f), before the first transaction, other than the initial deposit, is carried out on the account;

74 Section 67 of the Regulations is repealed.

75 The heading before section 67.1 of the Regulations is replaced by the following:

Due Diligence Measures with Respect to Persons Referred to in Subsection 9.3(1) of the Act

76 (1) The portion of subsection 67.1(1) of the Regulations before paragraph (a) is replaced by the following:

67.1 (1) A financial entity or securities dealer that determines under paragraph 54.2(1)(a), subsection 54.2(2) or (3) or section 57.1 that a person is a politically exposed foreign person or a family member of, or person who is closely associated with, such a person shall

(2) Paragraph 67.1(1)(b) of the Regulations is replaced by the following:

  • (b) obtain the approval of senior management to keep the account open; and

(3) Subsections 67.1(2) and (3) of the Regulations are replaced by the following:

(2) A financial entity or securities dealer shall also take the measures referred to in paragraphs (1)(a) to (c) if

  • (a) they determine under paragraph 54.2(1)(a), subsection 54.2(2) or (3) or section 57.1 that a person is a politically exposed domestic person, a head of an international organization or a family member of one of those persons or they determine under subsection 54.2(3) or 57.1(3) that a person is closely associated with a politically exposed domestic person or a head of an international organization; and
  • (b) they consider, based on an assessment of the risk referred to in subsection 9.6(2) of the Act, that there is a high risk of a money laundering offence or terrorist activity financing offence.

(3) A financial entity or securities dealer shall take the reasonable measures referred to in paragraph 54.2(1)(a) and subsections 54.2(3) and 57.1(1) and (3) — and, if applicable, shall take the measures referred to in paragraphs (1)(a) and (b) — within 30 days after the day on which the account is opened or the day on which the fact that constitutes the reasonable grounds to suspect is detected, as the case may be.

77 Section 67.2 of the Regulations is replaced by the following:

67.2 (1) A financial entity, life insurance company, life insurance broker or agent or money services business that determines under paragraph 54.2(1)(b), section 56.1 or paragraph 59(5)(a) that a person is a politically exposed foreign person or a family member of, or person who is closely associated with, such a person shall

  • (a) take reasonable measures to establish the source of the funds that have been used for the transaction; and
  • (b) ensure that a member of senior management reviews the transaction.

(2) A financial entity, life insurance company, life insurance broker or agent or money services business shall also take the measures referred to in paragraphs (1)(a) and (b) if they determine under paragraph 54.2(1)(b), section 56.1 or paragraph 59(5)(a) that a person is a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons and they consider, based on an assessment of the risk referred to in subsection 9.6(2) of the Act, that there is a high risk of a money laundering offence or terrorist activity financing offence.

(3) A financial entity or money services business that determines under paragraph 54.2(1)(c) or 59(5)(b) that a person is a politically exposed foreign person or a family member of, or person who is closely associated with, such a person shall ensure that a member of senior management reviews the transaction.

(4) A financial entity or money services business shall also take the measure referred to in subsection (3) if they determine under paragraph 54.2(1)(c) or 59(5)(b) that a person is a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons and they consider, based on an assessment of the risk referred to in subsection 9.6(2) of the Act, that there is a high risk of a money laundering offence or terrorist activity financing offence.

(5) A financial entity, life insurance company, life insurance broker or agent or money services business shall take the reasonable measures referred to in paragraphs 54.2(1)(b) and (c), section 56.1 and paragraphs 59(5)(a) and (b) — and, if applicable, shall take the measures referred to in paragraphs (1)(a) and (b) or that referred to in subsection (3), as the case may be — within 30 days after the day on which the transaction occurs.

Reasonable Measures

67.3 If the reasonable measures taken by a person or entity under paragraph 9.5(b) of the Act or under subsection 8(1), 9(1) or 10(1), paragraph 11.1(4)(a) or 14.1(d), subsection 15.1(3), 39(5), 42(3) or (4) or 44(1), paragraph 50(1)(e), subsection 52(1) or (3) or 53.1(1), any of paragraphs 54.2(1)(a) to (c), subsection 54.2(2) or (3), paragraph 55.1(b), section 55.2, 56.1 or 57.1, paragraph 59(5)(a) or (b), subsection 59.2(3), paragraph 67.1(1)(a), subsection 67.1(2), paragraph 67.2(1)(a) or subsection 67.2(2) are unsuccessful, the person or entity shall keep a record that sets out the measures taken, the date on which each measure was taken, and the reasons why the measures were unsuccessful.

78 Section 68 of the Regulations is replaced by the following:

68 If a record is required to be kept under these Regulations, the record or a copy of it may be kept in a machine-readable or electronic form if a paper copy can be readily produced from it.

79 (1) Paragraph 69(1)(a.1) of the Regulations is replaced by the following:

  • (a.1) in respect of records that are required to be kept under paragraph 14(i) or (n), 14.1(g) or 23(f), the day on which the account to which they relate is closed;

(2) Paragraph 69(1)(b.1) of the Regulations is replaced by the following:

  • (b.1) in respect of records that are required to be kept under section 11.1, paragraph 14(o), subsection 15.1(2) or section 20.1 or 31, lists that are required to be kept under section 32 and records, other than client information records, that are required to be kept under that section, the day on which the last business transaction is conducted; and

80 (1) Subparagraphs 71(1)(c)(i) to (iii) of the English version of the Regulations are replaced by the following:

  • (i) the person’s or entity’s clients and business relationships,
  • (ii) the person’s or entity’s products and delivery channels,
  • (iii) the geographic location of the person’s or entity’s activities,

(2) Paragraph 71(1)(c) of the Regulations is amended by adding the following after subparagraph (iii):

  • (iii.1) any new developments in respect of, or the impact of new technologies on, the person’s or entity’s clients, business relationships, products or delivery channels or the geographic location of their activities,
  • (iii.2) in the case of an entity that is referred to in any of paragraphs 5(a) to (g) of the Act, any risk resulting from the activities of an entity that is affiliated with it and that is referred to in any of those paragraphs or from the activities of a foreign entity that is affiliated with it and that carries out activities that are similar to those of entities referred to in any of those paragraphs, and

(3) Paragraph 71(1)(d) of the English version of the Regulations is replaced by the following:

  • (d) if the person or entity has employees, agents or mandataries or other persons authorized to act on their behalf, developing and maintaining a written, ongoing compliance training program for those employees, agents or mandataries or other persons; and

81 The French version of the Regulations is amended by replacing “entreprise de transfert de fonds ou de vente de titres négociables” and “entreprises de transfert de fonds ou de vente de titres négociables” with “entreprise de services monétaires”, with any necessary modifications, in the following provisions:

  • (a) the definition entreprise de transfert de fonds ou de vente de titres négociables in subsection 1(2);
  • (b) the portion of subsection 11.1(1) before paragraph (a);
  • (c) the heading before section 28;
  • (d) the portion of subsection 28(1) before paragraph (a) and subsections 28(2) to (5);
  • (e) section 29;
  • (f) the portion of section 30 before paragraph (a) and paragraph 30(b);
  • (g) section 32;
  • (h) the heading before section 59;
  • (i) the portion of subsection 59(1) before paragraph (a) and subsections 59(2), (3) and (6); and
  • (j) subsection 66.1(1).

82 The heading of Part D of Schedule 1 to the French version of the Regulations is replaced by the following:

PARTIE D

Renseignements sur la personne qui effectue l’opération, s’il ne s’agit pas d’un dépôt porté au crédit d’un compte d’affaires (le cas échéant)

83 Items 6 and 7 of Part D of Schedule 1 to the Regulations are replaced by the following:

  • 6* Type of document or other information used to identify person and number of document or number associated with information
  • 7* Jurisdiction and country of issue of document or other information used to identify person

84 The heading of Part E of Schedule 1 to the French version of the Regulations is replaced by the following:

PARTIE E

Renseignements sur la personne qui effectue l’opération, s’il s’agit d’un dépôt porté au crédit d’un compte d’affaires autre qu’un dépôt de nuit ou un dépôt express (le cas échéant)

85 The heading of Part F of Schedule 1 to the French version of the Regulations is replaced by the following:

PARTIE F

Renseignements sur le tiers quant à l’opération, s’il s’agit d’une entité (le cas échéant)

86 The heading of Part G of Schedule 1 to the French version of the Regulations is replaced by the following:

PARTIE G

Renseignements sur le tiers quant à l’opération, s’il s’agit d’une personne (le cas échéant)

87 Items 5 and 6 of Part G of Schedule 1 to the Regulations are replaced by the following:

  • 5 Type of document or other information used to identify person and number of document or number associated with information
  • 6 Jurisdiction and country of issue of document or other information used to identify person

88 Items 7 and 8 of Part B of Schedule 5 to the Regulations are replaced by the following:

  • 7 Type of document or other information used to identify client
  • 8 Number of document or number associated with other information used to identify client
  • 9 Jurisdiction and country of issue of document or other information used to identify client

89 Item 5 of Part D of Schedule 5 to the Regulations is replaced by the following:

  • 5 Type of document or other information used to identify third party
  • 6 Number of document or number associated with other information used to identify third party
  • 7 Jurisdiction and country of issue of document or other information used to identify third party

90 Item 7 of Part F of Schedule 5 to the Regulations is replaced by the following:

  • 7 Type of document or other information used to identify client
  • 8 Number of document or number associated with other information used to identify client
  • 9 Jurisdiction and country of issue of document or other information used to identify client

91 Item 5 of Part G of Schedule 5 to the Regulations is replaced by the following:

  • 5 Type of document or other information used to identify third party
  • 6 Number of document or number associated with other information used to identify third party
  • 7 Jurisdiction and country of issue of document or other information used to identify third party

92 Items 7 and 8 of Part B of Schedule 6 to the Regulations are replaced by the following:

  • 7 Type of document or other information used to identify client
  • 8 Number of document or number associated with other information used to identify client
  • 9 Jurisdiction and country of issue of document or other information used to identify client

93 Item 5 of Part D of Schedule 6 to the Regulations is replaced by the following:

  • 5 Type of document or other information used to identify third party
  • 6 Number of document or number associated with other information used to identify third party
  • 7 Jurisdiction and country of issue of document or other information used to identify third party

94 Item 7 of Part F of Schedule 6 to the Regulations is replaced by the following:

  • 7 Type of document or other information used to identify client
  • 8 Number of document or number associated with other information used to identify client
  • 9 Jurisdiction and country of issue of document or other information used to identify client

95 Item 5 of Part G of Schedule 6 to the Regulations is replaced by the following:

  • 5 Type of document or other information used to identify third party
  • 6 Number of document or number associated with other information used to identify third party
  • 7 Jurisdiction and country of issue of document or other information used to identify third party

96 Schedule 7 to the Regulations is repealed.

97 Items 6 and 7 of Part D of Schedule 8 to the Regulations are replaced by the following:

  • 6* Type of document or other information used to identify person and number of document or number associated with information
  • 7* Jurisdiction and country of issue of document or other information used to identify person

98 Items 5 and 6 of Part F of Schedule 8 to the Regulations are replaced by the following:

  • 5 Type of document or other information used to identify person and number of document or number associated with information
  • 6 Jurisdiction and country of issue of document or other information used to identify person

Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations

99 The French version of the Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations (see footnote 3) is amended by replacing “entreprise de transfert de fonds ou de vente de titres négociables” with “entreprise de services monétaires” in the following provisions:

  • (a) the definition entreprise de transfert de fonds ou de vente de titres négociables in section 1; and
  • (b) item 10 of Part B of Schedule 1.

Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations

100 Items 1 to 5 of Part 1 of the schedule to the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations (see footnote 4) are replaced by the following:

Item

Column 1

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Column 2





Short-form Description

Column 3





Classification of Violation

1

9.4(2)

Having a correspondent banking relationship with a shell bank

serious

2

9.7(1)

Failure to develop policies that establish requirements similar to those of sections 6, 6.1 and 9.6 of the Act and to ensure that foreign branches and foreign subsidiaries apply those policies

serious

3

9.7(2)

Applying policies that establish requirements similar to those of sections 6, 6.1 and 9.6 of the Act before they are approved by a board of directors

serious

4

9.7(4)

Failure to keep and retain a record of the fact that a foreign branch or foreign subsidiary cannot apply a policy and of the reasons why it cannot do so or to notify the Centre and the principal supervisory or regulating agency or body within a reasonable time

minor

4.1

9.8(1)

Failure of an entity to develop and apply policies and procedures related to the exchange of information between it and affiliated entities

serious

5

11.1

Failure to be registered with the Centre

serious

5.1

11.43

Failure to comply with a ministerial directive

very serious

5.2

11.44(1)

Failure to ensure that a foreign branch or foreign subsidiary complies with a ministerial directive

very serious

5.3

11.44(2)

Failure to keep and retain a record of the fact that a foreign branch or foreign subsidiary cannot comply with a ministerial directive and of the reasons why it cannot do so or to notify the Centre and the principal supervisory or regulating agency or body within a reasonable time

serious

101 The portion of item 1 of Part 2 of the schedule to the English version of the Regulations in column 3 is amended by replacing “based on” with “using”.

102 Items 15.1 to 15.3 of Part 2 of the schedule to the Regulations are replaced by the following:

Item

Column 1


Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3






Short-form Description

Column 4






Classification of Violation

15.1

6

11.1(1)

Failure to obtain the prescribed information

minor

15.2

6

11.1(2)

Failure to take reasonable measures to confirm the accuracy of the prescribed information

minor

15.3

6

11.1(3)

Failure to keep a record of the prescribed information and the measures taken to confirm its accuracy

minor

15.4

6

11.1(4)(a)

Failure to take reasonable measures to ascertain the identity of an entity’s most senior managing officer

serious

15.5

6

11.1(4)(b)

Failure to treat activities in respect of the entity as high risk and to take the prescribed special measures

serious

15.6

6

11.1(5)

Failure to determine whether a not-for-profit organization is a prescribed entity and to keep a record of the determination

minor

103 The portion of item 47 of Part 2 of the schedule to the English version of the Regulations in column 3 is replaced by the following:

Item

Column 3

Short-form Description

47

Failure of a department or agent or mandatary of Her Majesty in right of Canada or of a province to keep a large cash transaction record in respect of every amount in cash of $10,000 or more that they receive from a client in the course of a single transaction

104 Part 2 of the schedule to the Regulations is amended by adding the following after item 51:

Item

Column 1


Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3






Short-form Description

Column 4






Classification of Violation

51.1

6

52.1

Failure to keep a record of the purpose and intended nature of a business relationship

minor

105 The portion of item 52.1 of Part 2 of the schedule to the Regulations in column 3 is replaced by the following:

Item

Column 3

Short-form Description

52.1

Failure to take reasonable measures to ascertain in the prescribed manner and within the prescribed period the identity of every person with whom a transaction that is required to be reported to the Centre is conducted or is attempted to be conducted

106 The portion of item 53 of Part 2 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3




Short-form Description

53

54(a), 64(1) and 64(2)(a)

Failure of a financial entity to ascertain in the prescribed manner and within the prescribed period the identity of every person for whom a signature card is created

107 The portion of items 54 to 56.1 of Part 2 of the schedule to the Regulations in column 2 is replaced by the following:

Item

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

54

54(b), 64(1) and 64(2)(b)

55

54(d), 65(1) and 65(2)(a)

56

54(e), 66(1) and 66(2)(a)

56.1

54.1(a), 64(1) and 64(2)(b.2)

108 The portion of items 56.4 to 56.7 of Part 2 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3






Short-form Description

56.4

54.2(1)(a) and 67.1(3)

Failure of a financial entity to take reasonable measures within the prescribed period to determine whether a person for whom it opens an account is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization, a family member of one of those persons or a person who is closely associated with a politically exposed foreign person

56.5

54.2(1)(b) and 67.2(5)

Failure of a financial entity to take reasonable measures within the prescribed period to determine whether a person who requests that an electronic funds transfer of $100,000 or more be initiated or on whose behalf the request is made is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons

56.6

54.2(1)(c) and 67.2(5)

Failure of a financial entity to take reasonable measures within the prescribed period to determine whether the beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons

56.7

54.2(2)

Failure of a financial entity to take reasonable measures on a periodic basis to determine whether an account holder is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization, a family member of one of those persons or a person who is closely associated with a politically exposed foreign person

109 Part 2 of the schedule to the Regulations is amended by adding the following after item 56.7:

Item

Column 1



Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3







Short-form Description

Column 4







Classification of Violation

56.71

6

54.2(3) and 67.1(3)

Failure of a financial entity that detects a fact that constitutes reasonable grounds to suspect that an account holder is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons to take reasonable measures within the prescribed period to determine whether they are such a person

minor

110 Part 2 of the schedule to the Regulations is amended by adding the following before item 57:

Item

Column 1


Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3






Short-form Description

Column 4






Classification of Violation

56.8

6

54.3, 56.3, 57.2, 59.01, 59.11, 59.21, 59.31, 59.51, 60.1 and 61.1

Failure to conduct ongoing monitoring of a business relationship and to keep a record of the measures taken and information obtained

minor

56.9

6

54.4, 56.4, 57.3, 59.02, 59.12, 59.22, 59.32, 59.52, 60.2 and 61.2

Failure to treat activities in respect of a person as high risk and to take the prescribed special measures

serious

111 The portion of item 65.1 of Part 2 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3







Short-form Description

65.1

56.1 and 67.2(5)

Failure of a life insurance company or life insurance broker or agent to take reasonable measures within the prescribed period to determine whether a person who makes a lump-sum payment of $100,000 or more in respect of an immediate or deferred annuity or life insurance policy on their own behalf or on behalf of a third party is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons

112 The portion of items 67 and 68 of Part 2 of the schedule to the English version of the Regulations in column 3 is amended by replacing “it” with “they”.

113 The portion of items 68.1 and 68.2 of Part 2 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3






Short-form Description

68.1

57.1(1) and 67.1(3)

Failure of a securities dealer to take reasonable measures within the prescribed period to determine whether a person for whom they open an account is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization, a family member of one of those persons or a person who is closely associated with a politically exposed foreign person

68.2

57.1(2)

Failure of a securities dealer to take reasonable measures on a periodic basis to determine whether an account holder is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization, a family member of one of those persons or a person who is closely associated with a politically exposed foreign person

114 Part 2 of the schedule to the Regulations is amended by adding the following after item 68.2:

Item

Column 1



Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3







Short-form Description

Column 4







Classification of Violation

68.3

9.3(1)

57.1(3) and 67.1(3)

Failure of a securities dealer that detects a fact that constitutes reasonable grounds to suspect that an account holder is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons to take reasonable measures within the prescribed period to determine whether they are such a person

minor

115 The portion of items 73.1 and 73.11 of Part 2 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3






Short-form Description

73.1

59(5)(a) and 67.2(5)

Failure of a money services business to take reasonable measures within the prescribed period to determine whether a person who requests that an electronic funds transfer of $100,000 or more be initiated or on whose behalf the request is made is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons

73.11

59(5)(b) and 67.2(5)

Failure of a money services business to take reasonable measures within the prescribed period to determine whether the beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign person, a politically exposed domestic person, a head of an international organization or a family member of, or person who is closely associated with, one of those persons

116 The portion of item 74 of Part 2 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3





Short-form Description

74

60(a), 64(1) and 64(2)(e.1)

Failure of a casino to ascertain in the prescribed manner and within the prescribed period the identity of every person for whom a signature card is created in respect of an account that the casino opens

117 Items 84.1 and 84.2 of Part 2 of the schedule to the Regulations are replaced by the following:

Item

Column 1



Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3







Short-form Description

Column 4







Classification of Violation

84.1

6

64.1(3)

Failure to have entered into a written agreement or arrangement with an agent or mandatary, to obtain from them the information that the agent or mandatary referred to in order to ascertain a person’s identity and the information that the agent or mandatary verified as being that of the person and to be satisfied that the information is valid and current and that the person’s identity was ascertained in the prescribed manner

minor

84.2

6

64.2

Failure of a person or entity that is required to ascertain a person’s identity to keep prescribed information

minor

118 Item 89 of Part 2 of the schedule to the Regulations is repealed.

119 Items 89.1 to 89.5 of Part 2 of the schedule to the Regulations are replaced by the following:

Item

Column 1


Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3






Short-form Description

Column 4






Classification of Violation

89.1

9.3(2)

67.1(1)(a), (2) and (3)

Failure of a financial entity or securities dealer to take reasonable measures within the prescribed period to establish the source of funds that have been, will be or are expected to be deposited in an account

minor

89.2

9.3(2)

67.1(1)(b), (2) and (3)

Failure of a financial entity or securities dealer to obtain within the prescribed period the approval of senior management to keep an account open

minor

89.3

9.3(2)

67.1(1)(c) and (2)

Failure of a financial entity or securities dealer to conduct enhanced ongoing monitoring of the activities in respect of an account

minor

89.4

9.3(2)

67.2(1)(a), (2) and (5)

Failure of a financial entity, life insurance company, life insurance broker or agent or money services business to take reasonable measures within the prescribed period to establish the source of funds used for a prescribed transaction

minor

89.5

9.3(2)

67.2(1)(b), (2), (3), (4) and (5)

Failure of a financial entity, life insurance company, life insurance broker or agent or money services business to ensure that a member of senior management reviews a prescribed transaction within the prescribed period

minor

89.6

9.3(2)

67.3

Failure to keep a record of reasonable measures taken, the date of each measure and the reasons why the measures were unsuccessful

minor

120 The portion of item 95 of Part 2 of the schedule to the English version of the Regulations in column 3 is amended by replacing “employees, agents” with “employees, agents or mandataries”.

121 The portion of item 98 of Part 2 of the schedule to the English version of the Regulations in column 3 is replaced by the following:

Item

Column 3

Short-form Description

98

Failure of a person or entity to take the prescribed special measures

122 Part 2 of the schedule to the English version of the Regulations is amended by replacing “department or agent” with “department or agent or mandatary” in the following provisions:

  • (a) the portion of item 46 in column 3;
  • (b) the portion of item 48 in column 3; and
  • (c) the portion of items 81 to 84 in column 3.

123 Part 2 of the schedule to the French version of the Regulations is amended by replacing “entreprise de transfert de fonds ou de vente de titres négociables” with “entreprise de services monétaires” in the following provisions:

  • (a) the portion of items 29 to 33.2 in column 3; and
  • (b) the portion of items 69 to 73 in column 3.

Transitional Provision

124 A person or entity may, during the period that begins on the day on which section 70 of these Regulations comes into force and ends on the first anniversary of that day, comply with subsection 64(1) or (1.1) and sections 64.1 and 67 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, as they read immediately before the day on which that section 70 comes into force.

Coming into Force

125 (1) Subject to subsection (2), these Regulations come into force on the day on which subsection 256(3) of the Economic Action Plan 2014 Act, No. 1, chapter 20 of the Statutes of Canada, 2014, comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

(2) Subsections 1(1) and (6), sections 2 and 7 to 14, subsections 15(1) and (2), sections 16 and 22 to 26, subsection 27(3), sections 28, 29, 31, 39, 42, 46, 49 and 54, subsections 68(1) and (2) and 69(2), sections 75 to 77 and 79, subsections 80(1) and (2) and sections 83, 87 to 98, 108, 109, 111, 113 to 115 and 119 come into force on the first anniversary of either the day on which subsection 256(3) of the Economic Action Plan 2014 Act, No. 1, chapter 20 of the Statutes of Canada, 2014, comes into force or the day on which these Regulations are registered, whichever is later.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

Canada’s anti-money laundering and anti-terrorist financing regime has been subject to a range of domestic and international reviews and evaluations in recent years. The Department of Finance (the Department) also undertook consultations with private and public stakeholders. Through these activities, a number of statutory and regulatory amendments were identified to strengthen Canada’s anti-money laundering and anti-terrorist financing regime and to improve Canada’s compliance with international standards.

Consequently, the Government introduced legislative amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) through the Economic Action Plan 2014 Act, No. 1. The Regulations introduce a number of regulatory amendments that are needed to enact some of these legislative amendments as well as other standalone regulatory measures.

As a founding member of the Financial Action Task Force, Canada made a political commitment to implement its recommendations that set international standards to combat money laundering and terrorist financing. Canada’s anti-money laundering and anti-terrorist financing regime will be subject to a mutual evaluation by the Financial Action Task Force in 2015–2016. Some of the amendments would improve compliance with these international standards.

Background

Canada’s anti-money laundering and anti-terrorist financing regime is a horizontal initiative composed of 11 federal departments and agencies (both funded and non-funded). It was formally established in 2000 as part of the government’s ongoing effort to combat money laundering in Canada, and in 2001, was expanded to include measures to fight terrorist financing.

The core elements of the regime are set out in the Act. The Act applies to designated financial and non-financial entities (known as “reporting entities”), that provide access to the financial system and may therefore be susceptible to abuse by criminals seeking to integrate the proceeds of their crimes into the legitimate economy.

The Act sets out obligations that broadly fall into the following four categories: record-keeping; verification of identity of designated persons; reporting of suspicious and other prescribed financial transactions; and the establishment and implementation of an internal compliance regime.

The Act also establishes the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canada’s financial intelligence unit and the regulator responsible for administering and enforcing the Act. FINTRAC’s responsibilities include the overall supervision of reporting entities to determine compliance with the Act. Reporting entities are required under the Act to comply with FINTRAC information demands and to give all reasonable assistance when FINTRAC carries out its compliance responsibilities.

Alongside FINTRAC is the Office of the Superintendent of Financial Institutions (OSFI) which derives its powers from, and is responsible for, administering federal financial institution statutes. OSFI oversees federally regulated financial institutions to ensure that they are compliant with governing laws and supervisory requirements, and in sound financial condition. One of the key elements of a sound financial institution is an effective and comprehensive set of anti-money laundering and anti-terrorist financing controls. OSFI complements the work of FINTRAC by monitoring compliance with its prudential expectations, requiring information from financial institutions, conducting audits and annual exams. In addition, OSFI exercises remedial powers in regard to financial institutions’ safety and soundness.

Canada’s regime is consistent with international standards set by the Financial Action Task Force. The Financial Action Task Force is the key intergovernmental body whose purpose is the development and promotion of policies, both at the national and international levels, to combat money laundering and terrorist financing. The Financial Action Task Force updated its recommendations in February 2012, enhancing international standards in various areas such as with respect to dealing with politically exposed persons. (see footnote 5)

Although the recommendations of the Financial Action Task Force are not legally binding, as a member, Canada committed to implement them and to submit to a peer evaluation of their effective implementation. Not meeting the commitment could lead to number of sanctions including enhanced scrutiny measures to public listing and, in the extreme, suspension of membership from the Financial Action Task Force. Further, non-compliance could cause serious reputational harm to Canada’s financial sector and subject Canadian financial institutions to increased regulatory burden when dealing with foreign counterparties or when doing business overseas.

Canada’s last mutual evaluation by the Financial Action Task Force was in 2007–2008. The next mutual evaluation will take place over 2015–2016, this time in reference to the Financial Action Task Force’s revised recommendations.

Objectives

The regulatory amendments

  • update and strengthen the legislation to combat money laundering and terrorist financing activities;
  • strengthen customer due diligence requirements;
  • close gaps in Canada’s regime;
  • improve compliance, monitoring and enforcement efforts;
  • strengthen information sharing in the regime; and
  • address technical issues.

Description

The following suite of regulatory amendments is part of the Government of Canada’s efforts to strengthen Canada’s anti-money laundering and anti-terrorist financing regime.

The amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations update customer due diligence requirements for dealing with politically exposed persons.

  • One amendment prescribes the circumstances under which a reporting entity must make a determination that a client is a domestic politically exposed person or the head of an international organization, or a close associate or family member of such a person, and the measures to be taken as a result (such as obtaining information on source of funds and senior management approval to keep an account open). The prescribed circumstances include account openings and, where no account exists, very large specified transactions that are deemed to be of higher potential risk, such as lump-sum payments of $100,000 or more for the purchase of life insurance policies or annuities. The Regulations currently contain requirements with respect to politically exposed foreign persons.
  • One amendment requires reporting entities to periodically determine whether existing account holders are politically exposed foreign persons, where such a determination has not already been made. This amendment will align with the design of the new measures for politically exposed domestic persons and heads of international organizations.
  • An amendment would extend the time within which a reporting entity must make a determination that a client is a politically exposed foreign person from 14 days to 30 days. This amendment will align with the design of the new measures for politically exposed domestic persons and heads of international organizations.

The amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations clarify the type of customer information that reporting entities must obtain and keep as part of the customer due diligence process.

  • An amendment would clarify the records that must be kept with respect to a client’s credit file (i.e. a file related to a lending product). The existing wording in the Regulations could be interpreted narrowly. The Regulations currently define the term “client credit file” as containing specific types of information, some of which may not be applicable to certain types of credit arrangements. In the past, this has led to some reporting entities interpreting that in cases where only certain information listed in the definition of a “credit file” is available (i.e. the file is incomplete), there is no obligation to maintain any of the information nor provide it to FINTRAC in an examination. The amendment is needed to ensure there is a positive obligation for reporting entities to collect specific information that must be included in a credit file, which would have to be provided to FINTRAC if asked in a compliance examination. Specifically, the amendment would repeal the defined term “client credit file” and instead list the relevant types of information that must be maintained, when they are relevant to the client credit arrangement under consideration.
  • An amendment would update the existing list of methods that reporting entities must use to verify the identity of their clients. The new methods would be more flexible and allow for a broader range of reliable and independent sources to be used. In particular, the amendment would identify the specific types of sources that are deemed reliable enough to be used on a standalone basis (e.g. government-issued photo identification documents), and broadly allow other types of sources that are reliable and independent to be referred to on a dual-method basis (i.e. in combination). Since the latter category is not prescriptive, it will provide flexibility for reporting entities to consider various sources that are not currently accepted (e.g. a notice of assessment issued by the Canada Revenue Agency). FINTRAC would provide guidance on the methods that could be considered under these new provisions.
  • An amendment would expand the definition of a signature to more broadly include electronic signatures, which would facilitate account openings in a non-face-to-face environment.

The amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations would limit the duplication of identity verification efforts.

  • An amendment would extend the existing exemption from ascertaining the identity of a client where the client is recognized by voice (e.g. phone) or sight (e.g. in person or over video conferencing) to more broadly capture other forms of recognition (such as digitally, where a client logs in online).
  • An amendment would clarify that a reporting entity that relies on an agent (e.g. deposit broker) to verify client identity on its behalf could use identification measures that were previously undertaken by that agent on behalf of another reporting entity or itself with respect to the same client. This would only apply where the client’s identity was both ascertained in accordance with the requirements of the Act and the identification document remains unexpired and valid.

The amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations would close gaps in Canada’s anti-money laundering and anti-terrorist financing (AML/ATF) regime.

  • Paragraph 71(c) of the Regulations lists the elements that should be considered in a reporting entity’s risk assessment. An amendment would add an element to this list that requires reporting entities to assess and document risks posed by the impacts of new developments and technologies on the existing risk assessment criteria (business relationships, products, delivery channels or geographic locations). This would ensure Canada’s anti-money laundering and anti-terrorist financing regime is consistent with Financial Action Task Force’s recommendation 15 on the risks of new technologies. (see footnote 6)
  • An amendment would clarify reporting obligations to improve the financial intelligence that FINTRAC receives. In particular, it would repeal exemptions for reporting cash transactions of $10,000 or more in the life insurance sector for product purchases where the source of funds is not easily identifiable.

The amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations would improve compliance, monitoring and enforcement efforts.

  • An amendment would require reporting entities to keep a record of any “reasonable measures” they have taken (as required under the Act), in cases where they were unable to ascertain, establish or determine the information specified.
  • Since 2008, FINTRAC can impose administrative monetary penalties (AMPs) when reporting entities fail to comply with their obligations. An amendment would update the existing list of provisions for which FINTRAC can issue an AMP to ensure that new or modified requirements that were passed through Economic Action Plan 2014 Act, No. 1, and other requirements that came into force in February 2014, have a corresponding AMP related to them. For example, reporting entities have traditionally been prohibited from entering into a correspondent banking relationship with a shell bank, but this prohibition was expanded in the Economic Action Plan 2014 Act, No. 1 to more comprehensively prohibit them from “having” such a relationship. Since the existent AMP description reflects the former prohibition, it is being updated to more accurately reflect the revised prohibition.

The amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations would strengthen information sharing in the regime. They would

  • repeal any identifying information of reporting entity employees from the reporting form schedules;
  • require reporting entities in a financial conglomerate to, as part of their compliance programs, take into consideration the risks resulting from the activities of their affiliates; and
  • expand the designated information that FINTRAC can disclose to disclosure recipients, once relevant thresholds are met, to include information about references that were used to ascertain the identity of an individual (such as type of source, a reference number, place of issue and expiry date of relevant documents). FINTRAC’s disclosure recipients include law enforcement, intelligence, and foreign bodies.

An amendment to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations would clarify that where a securities dealer is a reporting entity under the Act, any brokers employed by that securities dealer would not be considered reporting entities in their own right. As a result, though the brokers would be required to abide by the compliance program of their securities dealer employer, they would not be required to maintain their own compliance program.

In addition, various amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations would address technical issues that have been identified through regime reviews and stakeholder comments. For example,

  • an amendment would ensure the existing definition of “casino” is updated to align with a legislative amendment in the Economic Action Plan 2014 Act, No. 1 that clarified the types of entities that are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act when they conduct and manage a lottery scheme or game;
  • an amendment would update the circumstances under which an entity is considered to be affiliated with another entity to align with a similar legislative amendment that was made in the Economic Action Plan Act 2014 Act, No. 1;
  • an amendment would replace the existing French term for money services business with an updated term (i.e. “entreprise de transfert de fonds ou de vente de titres négociables” with “entreprise de services monétaires”). The existing term creates confusion as it is not commonly used by stakeholders and it fails to encompass foreign currency exchange and virtual currency dealing;
  • an amendment would correct an inaccurate reference to the title of a Quebec law in the “Financial services cooperative” definition;
  • an amendment would update the definition of public body to correct a divergence between the English and French versions and provide greater certainty for the purposes of the Act that cities, towns and other municipal districts are only included in the definition of “public body” when they are located in Canada;
  • an amendment would update the provision dealing with foreign currency conversion to ensure it is done “using” an exchange rate rather than “based” on an exchange rate, to ensure other factors are being considered when converting currency; and
  • an amendment would update the definition of “funds” to better align the concept of entitlement as referenced under the Civil Code.

“One-for-One” Rule

The amendments to the Regulations are considered to be an “IN” under the “One-for-One” Rule. Cumulatively, the total “IN” is estimated to be $61,858, or $154 in administrative costs per business. The additional burden may stem from the cost of providing additional documentation to FINTRAC during an examination related to politically exposed domestic persons and heads of international organizations. However, since these requirements build on the existent obligations with regards to politically exposed foreign persons, reporting entities should already have administrative processes in place to include this type of information in client records and provide it to FINTRAC during an examination. Therefore, this has been projected to not exceed a half day (four hours) of preparation by reporting entities (e.g. pulling the additional records). All other additional burden has been assessed as compliance burden and discussed in the following section.

Only the costs of complying with the minimum requirements contained in the amendments have been assessed. However, reporting entities may choose to adopt more comprehensive procedures to fulfil their obligations, such as where required by a prudential regulator or where the entity chooses to implement more robust risk mitigation strategies (e.g. subscribing to external databases which provide lists and profiles of heightened risk individuals and entities as opposed to relying on clients to self-identify themselves when asked a question). This would be a choice made by individual businesses and not a requirement contained in the Regulations.

Small business lens

The costs associated with these amendments are less than $1 million annually; consequently, the small business lens would not apply. More specifically, the amendments are estimated, cumulatively, to impose a cost of $739,208 on all businesses (both compliance and administrative costs).

The measures which are expected to be burden-imposing introduce new requirements related to determining whether a client is a politically exposed domestic person, a head of an international organization, or a family member or close associate of such persons, or a close associate of a politically exposed foreign person. Most of the burden is related to compliance, stemming from the necessity of the reporting entities to adapt their procedures and policies. However, these requirements build on existent requirements with regards to politically exposed foreign persons, and will therefore necessitate only minor modifications to reporting entities’ current procedures and policies, resulting in relatively small incremental compliance costs.

The reporting entities are expected to comply with the new obligations by making minor adjustments to their existent procedures and policies. For example, this may entail modifying their existent account opening application forms to add a question with respect to a client’s status as a politically exposed domestic person or head of an international organization. Additionally, reporting entities would be expected to incorporate updates stemming from the implementation of these measures into their regularly scheduled cycles to update policies and procedures and information technology systems.

The scope of amendments that would impose requirements to determine the close associates of a politically exposed domestic person or the head of an international organization was reduced following consultations with reporting entities. It was identified that, as originally proposed, the amendments would impose significant burden, which in particular would have been difficult for small businesses as many of their operations are manual in nature. Therefore, the measure was redesigned with the aim to make it less burdensome, especially for small businesses.

Under the original proposal, reporting entities would have been required to make a determination as to whether or not a client is closely associated with a politically exposed domestic person or a head of an international organization at the outset of a business relationship as well as throughout the relationship with a client. However, reporting entities indicated that making such a determination at the outset of a business relationship would be difficult given the limited information available upfront regarding client associations. To assuage that concern, the measure has been redrafted to require that reporting entities make the determination only under certain trigger circumstances (e.g. very large specified transactions that are deemed to be of higher potential risk, such as lump-sum payments of $100,000 or more for the purchase of life insurance policies or annuities), or when they have suspicions that a client is a close associate.

Based on its initial design, and jointly with other requirements to determine politically exposed domestic persons or heads of international organizations, the measure would have had an annualized average cost of $587,720, as opposed to the estimated cost of the current design of $317,110.

Need for training and policy/procedure updates

It should be noted that, to ensure compliance with the Regulations, the Regulations contain a requirement for reporting entities to develop and maintain a written ongoing compliance and training program for persons authorized to act on their behalf. The Regulations also contain a requirement for compliance procedures and policies to be kept up to date. These requirements should allow the reporting entities to incorporate any necessary training or policy/procedure updates stemming from the implementation of the measures into the existent training and systems update cycles. Accordingly, no cost was attributed to the need for training resulting from the new requirements.

Measures relieving compliance burden

Many of the amendments would decrease the burden of compliance with the Regulations for all reporting entities.

For example, an amendment would extend the time period reporting entities have for making a politically exposed foreign persons determination from 14 days to 30 days. This would assist reporting entities by giving them more time to meet the obligation.

An amendment would update identification methods and provide increased flexibility for reporting entities to meet their identification verification requirements by allowing a broader range of reliable and independent sources to be used.

An amendment would expand the definition of a signature (which was limited to handwritten forms) to broadly include any type of signature in electronic form. This would provide increased flexibility for reporting entities to meet their identification verification requirements and would facilitate account openings through online channels.

An amendment would expand the circumstances where a reporting entity can rely on customer identification that has been performed by an agent on its behalf. This measure will assist both agents that work on behalf of multiple reporting entities (such as a deposit broker) as well as circumstances where a reporting entity is purchasing an asset portfolio of another reporting entity.

An amendment would expand the application of exemptions from ascertaining the identity of a client where that client is recognized by voice or sight (e.g. in person or over the phone) to capture recognition that may occur digitally (such as by logging in online to an existing profile). This measure assists entities that are transaction based by supporting online financial service delivery.

Consultation

The Department of Finance publicly released a formal consultation paper in December 2011, followed by more targeted discussion papers in spring 2013, and informal discussions with a number of stakeholders over fall 2014 and winter 2015. In general, reporting entities are supportive of the intent behind the amendments, even if they expressed some concern with respect to implementation costs (e.g. for updating their procedures, policies and systems and training their staff).

A number of the amendments are included as a response to the feedback received from the stakeholders during the consultation process. For example, the following measures are being introduced as a result of concerns raised by the stakeholders in the context of trying to expand their online financial services offerings:

  • updating identification methods and signature requirements in order to facilitate compliance with related anti-money laundering and anti-terrorist financing obligations in an online environment; and
  • expanding the exceptions to the identity verification requirements to include circumstances where an individual who has already been identified, can be recognized in a “non-face-to-face” manner. This would aid transaction-based reporting entities that are moving to an account based structure in an online setting.

Another amendment would address concerns raised with respect to duplication of identity verification efforts. This would involve updating the agency requirements to more easily allow a reporting entity to rely on customer due-diligence efforts previously performed by an agent (e.g. a deposit broker) with respect to the same client.

The measures which are expected to be burden-imposing have, for the most part, received a neutral reaction, since the Regulations also provides offsetting burden relief where possible. However, as discussed in the small business lens section above, the amendment that would impose requirements to determine the close associates of a politically exposed domestic person or the head of an international organization was reduced in scope in order to make it less burdensome, following feedback from the reporting entities.

Publication in the Canada Gazette, Part I — feedback and response

The Regulations were published on July 4, 2015, in the Canada Gazette, Part I, followed by a 60-day comment period. The Department received 20 submissions from stakeholders, including one letter writing campaign (consisting of approximately 175 form letters) regarding the new identification methods (see below for details).

The Department has also undertaken considerable discussions with the private sector through face-to-face meetings and outreach at numerous industry conferences.

Overall, stakeholders were supportive of the new measures being introduced. In particular, stakeholders expressed appreciation for the greater flexibility provided with respect to identification requirements and flexibility to include electronic signatures.

Stakeholder comments and concerns that were raised during the prepublication comment period focused on four key areas. These included

  • updating identification requirements;
  • requirements when dealing with foreign and domestic politically exposed persons, heads of international organizations and close associates of such persons;
  • recording reasonable measures; and
  • coming into force date.

Some of the comments received sought further clarification on the meaning of certain regulatory requirements, and how to interpret certain definitions. The Department provided additional clarity to individual stakeholders, and is summarized below.

The Department has also received comments regarding the “One-for-One” Rule and small business lens calculations; the comments were minor and are also addressed below.

  • Updating identification methods: This measure replaces the existing types of customer identification methods that may be used to verify customer identity with a new range of burden-relieving measures that could be used as either a single method or a dual method basis.

Stakeholders were very supportive of the new policy and flexible options when identifying clients. The primary issue identified by stakeholders is the need for clarity around interpretation of the new identification requirements, including terms such as “electronic image,” “reliable,” “verify” and the minimum length of time a credit file has existed so that it may be used as a single form of identification. Some of the stakeholder comments that focused on interpretation will be briefly addressed here, and greater clarity will be provided through upcoming FINTRAC guidance (which can be found on FINTRAC’s Web site). This section will also address other stakeholder comments regarding the new identification requirements.

  • a. Stakeholders asked for clarification on the term “verifying,” when ascertaining identity. While FINTRAC will address this in their guidance, it is worth noting that no additional information gathering or additional outreach is expected under the Regulations. The action of “verifying” can simply mean “comparing” different pieces of identification documents.
  • b. Some stakeholders were concerned that they would be required to re-identify clients who have been identified under the former identification methods. This was also the subject of the letter writing campaign. The new identification requirements are not retroactive.

Change: Furthermore, the Regulations will now allow the new identification requirements to be used immediately while still allowing the old identification requirements to be used for a period of 12 months.

  • c. The new identification requirements state that reporting entities choose to rely on the dual identification method, and that the information must come from “different sources.” Stakeholders expressed confusion regarding what is meant by “different sources.” Information from different sources could mean information from two different trade lines (e.g. a utility company bill and a credit card) or from two credit bureaus. In addition, two sources within the same credit bureau report could be acceptable as long as they are distinguishable and record-keeping obligations are met.
  • d. Stakeholders wrote in with concerns that a valid and current identification document might not be accessible to seniors or students. The new identification methods, however, offer a wider range of ID options to facilitate student, senior identification (e.g. a utility company bill or a credit file). There was also concern that requiring a photo identification document will contradict the Access to Basic Banking Regulations, as financial institutions are required to open a bank account under these Regulations for those persons with birth certificate and social insurance number cards.

Change: To address these concerns, the Regulations have been amended to allow banks to be compliant with the Act when they open accounts following identification methods under the Access to Basic Banking Regulations.

  • e. Stakeholders were concerned that there would be confusion between “issuing authority” and “place of issue,” two terms introduced in the new ascertaining identity section of the Regulations.

Change: An amendment is being introduced which will replace “issuing place and issuing authority” with “issuing jurisdiction” (e.g. country, state, province, municipality), as per stakeholder suggestions.

  • Politically exposed persons: This measure supports legislative provisions already in the Act to detail requirements when dealing with foreign and domestic politically exposed persons, heads of international organizations and close associates of such persons.
  • a. Stakeholders were generally understanding and supportive of this measure; however, this was a widely commented on area that had stakeholders concerned about the significance of the new burden being imposed and clarity on defining certain terms including the length of time that domestic politically exposed persons retain their status. In particular, most stakeholders found the 20-year timeframe for domestic politically exposed persons to retain their status as too long and burdensome.

Due to the nature of some comments, which focused broadly on definitional and interpretation questions, FINTRAC will address these through guidance.

Change: In response to the comments, the time period has been adjusted down to five years which will provide an appropriate balance between the length of time a domestic politically exposed person may continue to have some influence and reducing the potential regulatory burden. This will reduce the time period that reporting entities must monitor and keep records for domestic politically exposed persons.

  • b. Stakeholders expressed confusion with the meaning of the term “close associate.” Close associate has been defined in the legislation as a personal or business relationship. FINTRAC guidance will expand further on this definition.
  • c. Stakeholders asked for clarity in defining the terms “periodic basis” and “reasonable measures” in relation to screening for politically exposed persons. FINTRAC will provide additional guidance; however, politically exposed persons monitoring will not be retroactive, but must be included as part of ongoing monitoring performed by the reporting entities.
  • Recording reasonable measures: Certain obligations require reporting entities to undertake reasonable measures to ascertain, establish or determine information specified (e.g. when determining a third party to a transaction or when determining the status of a client as a politically exposed person) and to keep a record of that information. This amendment requires reporting entities to record instances where they have taken reasonable measures, but those measures were unsuccessful at ascertaining, establishing or determining the information specified.

This amendment generated a number of responses from stakeholders that were unsupportive. The source of concern from stakeholders was primarily around the definition of what are “reasonable measures” along with the potential burden of additional record-keeping requirements.

However, this amendment strengthens FINTRAC’s compliance function by ensuring that reporting entities are accountable for the measures they take to ascertain, establish or determine specific client information. While it is being characterized by reporting entities as creating an additional record-keeping requirement, it is an amendment to an existing requirement. While the Department acknowledges that there will be some incremental additional burden on reporting entities, the impact will be moderated and flexibility granted through a 12-month delay of the coming-into-force provisions will provide an opportunity for stakeholders to integrate the changes into regular system updates and training programs.

  • Coming into force: During initial consultations on the regulatory changes, some stakeholders asked if we would consider immediate coming into force for certain provisions, while others were to be delayed to allow industry to adapt to the changes. During the prepublication comment period, stakeholders noted that when it came to identification requirements and the casino amendments, at least a one-year delay in the coming into force of the specific related provisions of the Regulations would be required to implement information technology and other system upgrades.

Change: The Regulations are being amended to introduce a 12-month delay of coming into force.

  • Other changes introduced as a result of stakeholder feedback: An amendment to the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations raised some concerns amongst stakeholders. This amendment would have changed the threshold when a suspicious transaction must be submitted to FINTRAC, from “could reasonably be expected” to suspect that the transaction or attempted transaction is related to the commission of a money laundering offence or a terrorist activity financing offence, to “could reasonably be expected to raise reasonable grounds.” Stakeholders were concerned that the new wording would lower the reporting threshold and consequently lead to “over reporting.”

Change: In response to the feedback, the wording in the Regulations has reverted back to the original text, which is “constitutes reasonable grounds.”

Comments regarding the “One-for-One” Rule and small business lens calculations

The Department received three letters commenting on the Department’s “One- for-One” Rule and small business lens calculations; one from the Credit Union Central of Canada, one from the Investment Funds Institute of Canada, and one from the Canadian Real Estate Association.

All three organizations represent small businesses, which are more likely to be impacted by the potential burden imposed by the Regulations. These stakeholders were very supportive of the fact that the Government of Canada is cognizant of the level of regulatory burden associated with these Regulations; however, they expressed concern with the numbers reported in the Regulatory Impact Analysis Statement, in that the numbers understated the actual financial impact that will be borne by the reporting entities.

Some of the measures introduced in the Regulations will impose burden on the reporting entities; however, to clarify, only the costs of complying with the minimum requirements contained in the amendments have been assessed.

Reporting entities may choose to adopt more comprehensive procedures to fulfil their obligations, such as where required by a prudential regulator, or where the entity chooses to implement more robust risk mitigation strategies. This would be a choice made by individual businesses and not a requirement contained in the Regulations.

Initiatives like revisions to computer systems and staff training should be rolled into existent maintenance and training schedules already mandated by the Regulations.

Furthermore, the burden-imposing measures will not impact all reporting entities equally; therefore, only impacted sectors of reporting entities were assessed for the additional burden.

Rationale

The amendments to the Regulations are needed to update and strengthen the legislation to combat money laundering and terrorist financing activities.

Money laundering and terrorist financing are a threat to the integrity of the financial system and the security and safety of Canadians at home and abroad.

Money laundering supports and perpetuates criminal activity by legitimizing proceeds of crime. It can help criminals to harness more economic and social power, creating the right incentives for criminals to engage in more criminal activity. Terrorist financing can pose a serious national security threat to Canada and to Canadian interests domestically and internationally. Terrorist financing supports and sustains the activities of domestic and international terrorists that can result in terrorist attacks in Canada or abroad, causing destruction and loss of life. Furthermore, the economic consequences to Canada of terrorist financing can be significant if the funds raised are used to carry out a terrorist attack in Canada or against Canada’s interests abroad.

Strong measures help to deter money laundering and terrorist financing by ensuring that entities that provide access to the financial system know their customers and are vigilant. Additionally, records kept by reporting entities, as required by the Act and its Regulations, are available for law enforcement (upon procurement of a proper warrant) when investigating money laundering and terrorist financing offences. Such information could assist in the investigation, apprehension, and prosecution of money launderers and terrorist financiers.

The regulatory amendments would strengthen Canada’s anti-money laundering and anti-terrorist financing regime and improve its effectiveness by improving customer due diligence standards; closing gaps; improving compliance, monitoring and enforcement; and strengthening information sharing. These measures will contribute to protecting the security of Canada’s financial sector and the robustness of the anti-money laundering and anti-terrorist financing regime.

The Regulations would also improve compliance with the international recommendations of the Financial Action Task Force. Meeting these standards improves the integrity of the global anti-money laundering and anti-terrorist financing framework, positively impacts Canada’s international reputation, and can lead to regulatory efficiencies with other countries’ anti-money laundering and anti-terrorist financing regimes, making it easier for Canadian businesses to operate internationally.

Other jurisdictions’ perception of Canada has tangible impacts for Canadian businesses. If Canada is not aligned with the Financial Action Task Force recommendations or is perceived by its international peers as making insufficient progress on its anti-money laundering and anti-terrorist financing regime generally, there could be negative reputational consequences for Canada’s financial sector, as well as increased costs for Canadian financial institutions.

It is expected that businesses would face some administrative and compliance costs as a consequence of the amendments. The new requirements introduced by some of the amendments would necessitate modification to reporting entities’ policies and systems. However, these changes would only be incremental in nature as they expand on the existent obligations contained in the Act and Regulations as opposed to introducing a new category of requirements.

Some of the amendments are meant to address challenges that reporting entities are facing with respect to meeting the obligations in an online environment and are therefore meant to be burden relieving. Others are in line with procedures that many reporting entities are already undertaking and with regulators’ expectations when monitoring compliance. Other amendments are necessary to enact certain legislative amendments introduced through the Economic Action Plan 2014 Act, No. 1, and are therefore anticipated by the industry.

Implementation, enforcement and service standards

FINTRAC will be updating its guidance to set out its expectations for how obligations are to be met as well as undertake possible outreach activities to ensure reporting entities are aware of the new obligations. FINTRAC would be responsible for enforcing the obligations and would scope them into their compliance examinations and processes. Should non-compliance be identified, FINTRAC could impose AMPs or take other enforcement actions.

Measures that provide more flexibility for reporting entities to fulfill their existing obligations (e.g. updated identification methods and requirements for maintaining a record of a signature) or those that are internal to government would come into force on the day they are published in the Canada Gazette, Part II.

Measures that will require reporting entities to fulfill new requirements (e.g. with respect to politically exposed domestic persons and heads of international organizations) would come into force one year after registration.

Contact

Lisa Pezzack
Director
Financial Systems Division
Financial Sector Policy Branch
Department of Finance
90 Elgin Street
Ottawa, Ontario
K1A 0G5
Email: fin.fc-cf.fin@canada.ca

  • Footnote a
    S.C. 2014, c. 20, ss. 294(2), (4) and (6)
  • Footnote b
    2006, c. 12, s. 40
  • Footnote c
    S.C. 2000, c. 17
  • Footnote 1
    SOR/2001-317; SOR/2002-185, s. 1
  • Footnote 2
    SOR/2002-184
  • Footnote 3
    SOR/2007-121
  • Footnote 4
    SOR/2007-292
  • Footnote 5
    Politically exposed persons are persons who are, or have been, entrusted with prominent public functions, such as heads of state; senior politicians; senior government, judicial or militant officials; senior executives of state-owned corporations; and important political party officials. As a result of their prominent and influential positions, and their increased opportunities to influence activities involving large financial sums, politically exposed persons have a potential to be of higher risk of undertaking money laundering or terrorist financing activities.
  • Footnote 6
    Financial Action Task Force’s recommendation 15 with respect to new technologies reads as follows: “Countries and financial institutions should identify and assess the money laundering or terrorist financing risks that may arise in relation to (a) the development of new products and new business practices, including new delivery mechanisms, and (b) the use of new or developing technologies for both new and pre-existing products. In the case of financial institutions, such a risk assessment should take place prior to the launch of the new products, business practices or the use of new or developing technologies. They should take appropriate measures to manage and mitigate those risks.”