| Please review this email text carefully before moving on to the more detailed guide you will find here. |
| Re: Your new anti-money laundering and anti-terrorist financing requirements |
| 1. Background |
| On February 1, 2014, new regulations to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act took effect. FINTRAC (the Financial Transactions and Reports Analysis Centre of Canada) has published revised guidelines to clarify the responsibilities of life insurance agents and companies, and for securities advisors and dealers. |
| 2. What’s New |
| As an advisor you must: |
- report suspicious transactions: as always, if you suspect that a client’s transaction is related to AML or ATF, you must file a suspicious transaction report with FINTRAC. This now applies to attempted suspicious transactions: If a client attempts a suspicious transaction, you must ensure you have properly identified them, even if they are a client for an otherwise exempt account, such as a registered savings plan.
- document your business relationships: you need to document the purpose and intended nature of the relationship you have with each client, including in cases of retirement savings, estate planning, and other forms of financial advice and planning.
- keep your client information current: you are expected to verify that the client identification information on file is correct. At the absolute minimum, this information should be reviewed every five years. But for “high risk” clients, their identifying information should be reviewed more regularly – and before each of their transactions.
- record beneficial ownership information: for business entities (mainly corporations), you now must record the names of all individuals who have an ownership interest in the entity applicant, and not just those with 25% ownership. For individuals who own or control 25% or more, record detailed information on occupations and residential addresses. If an entity owns 25% or more, its address, the nature of its principal business, and its corporate registration number must be recorded. For estates and trusts, you must now document the names, detailed occupations, and residential addresses of the estate executor and beneficiaries, or the trustees, settlors and beneficiaries, as the case may be.
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| IMPORTANT! – Be Sure to Know Your FINTRAC Exemptions |
| 3. Exemptions |
| Please note these key exemptions to your client identification requirements. Much of what you do will be covered by these exemptions. First, as a general matter, once you’ve ascertained the identity of an individual, you don’t have to do so again, if you recognize the individual visually or by voice at the time of a future event that would otherwise trigger the identification requirement. |
| Life insurance agents should note that the following purchases are exempted from the client identification rules: |
- a policy that is an exempt policy (that is, a policy issued for insurance protection and not for significant investment purposes as defined in subsection 306(1) of the Income Tax Regulations);
- a group life insurance policy that does not provide a cash surrender value or a savings component;
- a registered annuity policy or a registered retirement income fund; and
- a registered plan, including a locked-in retirement plan, a registered retirement savings plan, a group registered retirement savings plan, a registered education savings plan, and any other registered plan.
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| Advisors who sell mutual funds are considered by FINTRAC to be securities dealers and have their own set of requirements. If you sell mutual funds, please note that certain routine transactions are exempted from the client identification rules, including the opening the following: |
- accounts for a registered plan, including a locked-in retirement plan, a registered retirement savings plan, a group registered retirement savings plan, a registered annuity policy, a registered retirement income fund, a registered education savings plan, and any other registered plan.
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| Also exempted from the client identification rules: opening an account for – or pursuant to authorized instructions from – a securities dealer, a life insurance company, an investment fund, or other financial entity regulated by provincial securities legislation. |
| Please be sure to consult the FINTRAC Guidelines for the full set of exemptions: |
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| 4. Your Firm’s Compliance Regime |
| You should be clear on who runs your compliance regime. Organizations are required to implement a compliance regime to ensure fulfillment of FINTRAC’s reporting, recordkeeping and client identification requirements. |
- Life insurance: When life insurance agents are employees of a life insurance company, the compliance regime is the responsibility of the life insurance company. But if you are a life insurance broker or independent agent (that is, you are not an employee), you are responsible for your own compliance regime. Independent life agents and brokers have been responsible for maintaining their own FINTRAC compliance regime since 2008.
- Mutual funds and other securities: If you are an employee of a firm that deals in securities, the compliance regime requirement is the responsibility of the firm. As well, if you are an agent or authorized to act on behalf of a person or firm subject to FINTRAC, that other individual or entity is responsible for the compliance regime.
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| For more, see Guideline 4: Implementation of a Compliance Regime. |
| Note: This email and the linked guide entitled “Now in effect: FINTRAC’s new anti-money laundering and anti-terrorist financing requirements” are intended for informational purposes only. Members should review the FINTRAC Guidelines. |
