FINTRAC Compliance Policy & Procedures Manuel

TABLE OF CONTENTS

 

        Introduction                                                                                                    3

 

1.     Compliance Officer                                                                                  5

2.     Compliance Training                                                                                6

               Who is to be Trained                                                                                6

               What is the Required Training                                                                6

               Providing Proof of Training                                                                     6

3.     Client Identification Procedures                                                             9

               Individuals                                                                                                  9

               Corporation/Entity                                                                                  16

4.     Third Party Determination                                                                     25

5.     Out-of-Province and Off-Shore Clients                                                 25

6.     Receipt of Funds Record                                                                         33

7.     Reporting Procedures – Suspicious Transactions                               37

8.     Reporting Procedures – Terrorist Property Transactions                  40

9.     Reporting Procedures – Large Cash Transactions                              42

10.   Record Keeping Policies and Procedures                                             45

11.   Review of Our Compliance Program                                                     48

12.   Legal Issues Around Reporting                                                               48

 

INTRODUCTION

 

As a real estate brokerage firm, we are required to implement a compliance regime or program because we engage in the following activities on behalf of any person or entity in the course of a real estate transaction:

  • receiving or paying funds
  • depositing or withdrawing funds; or
  • transferring funds by any means.

The implementation of a compliance regime is good business practice for anyone subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its Regulations, such as real estate brokers and salespeople. A well-designed, applied, and monitored regime will provide a solid foundation for compliance with the legislation. This compliance program must include the following:

  • the appointment of a compliance officer;
  • the development and application of written compliance policies and procedures;
  • an assessment and documentation of risks related to money laundering and terrorist financing; implementation of controls to limit risk;
  • initial training and an ongoing compliance training program for any employees or individuals authorized to act on your behalf; and
  • a review of compliance policies and procedures every two years to test their effectiveness.

For further information refer to Guideline 4, available on FINTRAC’s website at www.fintrac.gc.ca.

 

NOTE: Any reference to dollar amounts in this manual (such as $10,000) refers to Canadian dollars or its equivalent in foreign currency.

 

 

A Compliance Regime for Real Estate Brokers or Sales Representatives

The following is a summary of the requirements for real estate brokers or sales representatives. In general, the compliance policies and procedures should cover the following elements:

·       Appointment of Compliance Officer

·       Training Your Employees

·       Client Identification and Verification Procedures: Individuals and Corporations/Entities

·       Third-Party Determination

·       Out-of-Province or Off-Shore Clients

·       Reporting Procedures

·       Record Keeping Procedures

·       Review Process

·       Risk Assessment and Documentation

 

Each of the above elements was described in the Money Laundering and Terrorist Financing Reference Manual.

 

Penalties for Non-Compliance

The penalties for non-compliance can include significant fines and jail terms. Failure to comply can lead to criminal charges against the persons and entities subject to the Act, such as real estate brokers and salespeople. The following are some of the elements of the penalties:

·       failure to report a suspicious transaction: conviction can lead to 5 years imprisonment and/or a fine of up to $2,000,000

·       failure to report a large cash transaction: conviction can lead to a fine of up to $500,000 for first offence and $1,000,000 for subsequent offences

·       failure to retain records: conviction can lead to 5 years imprisonment and/or a fine of up to $500,000.

            As of December 2008, FINTRAC can impose administrative fines for failing to comply with the record keeping requirements of these guidelines. These fines will be passed on to the salesperson who failed to comply.

 

Our Compliance Program

The remainder of this document outlines our policies and procedures to ensure that we are in full compliance with FINTRAC’s requirements. This matter must be taken seriously. Failure to notify our Compliance Officer when a report needs to be filed can lead to immediate termination of employment from the firm as well as significant penalties imposed by FINTRAC as outlined above.

 

1.             COMPLIANCE OFFICER

 

Our Compliance Officer is Simon Yeung. The duties of the Compliance Officer are as follows:

 

(a)   to register with FINTRAC and obtain an ID number, logon id, and password for reporting purposes (It is not necessary to do this until you are faced with a situation that needs to be reported to FINTRAC.)

(b)   to be thoroughly knowledgeable about the FINTRAC Guidelines and our compliance program in order to act as the source of information for the firm’s employees and to ensure that our firm is in full compliance with FINTRAC’s requirements

(c)   to develop and implement a filing system for the keeping of forms or Records required for compliance

(d)   to file any necessary reports with FINTRAC relating to suspicious transactions, large cash transactions, or terrorist property

(e)   to file Individual and Corporate Identification Information Forms

(f)    to file Receipt of Funds forms

(g)   to maintain associated forms and records as required by FINTRAC

(h)   to implement and administer a compliance program for money laundering and terrorist property financing reporting; this includes the completion of the Compliance Questionnaire – Real Estate Sector form when requested to do so by FINTRAC. This form can be downloaded from the web site: www.fintrac.gc.ca; click on ‘Real Estate’ and select Compliance Questionnaire. This form is not completed until requested to do so by FINTRAC.

(i)    to ensure that all employees of the firm receive initial training and to keep a record indicating when those requiring such training received it; to ensure that all employees receive ongoing training as required to remain current with legislative changes or changes to our firm’s policies and procedures

(j)    to prepare any necessary forms to facilitate reporting by employees within our organization to the Compliance Officer

(k)   to maintain lists of terrorist individuals and organizations available on the identified web sites for review by the firm’s staff

(l)    to assess the need to review compliance policies and procedures

 

The name of our Compliance Officer shall be made available, when required, to FINTRAC. FINTRAC has a responsibility to ensure compliance with legislative requirements related to money laundering and terrorist financing activities. To do this, FINTRAC can examine our compliance policies, procedures, and records. FINTRAC has the authority to refer non-compliance cases to the appropriate law enforcement agencies.

 

 

2.             COMPLIANCE TRAINING

 

Who is to be Trained

All sales representatives and authorized officials, management, administrative staff, etc. employed by our firm who are authorized to act on behalf of the firm and who have contact with clients/customers, see client/customer transaction activity, or who handle cash in any way, must receive compliance training. Others with responsibilities under the compliance program, such as information technology, the appointed compliance officer, internal auditors or accountants, and staff responsible for designing and implementing electronic or manual internal controls, must also receive compliance training.

            All new employees, administrative staff, or other individuals authorized to act on the firm’s behalf must receive compliance training before they begin to deal with clients/customers.

            All employees will be kept informed of any changes in anti-money-laundering or anti-terrorist legislation and policies; and current developments and changes in money laundering or terrorist activity financing schemes particular to their jobs. This will usually be done via our regular sales meetings. Money laundering and terrorist financing will also be included in MCE Seminars as changes to legislation or reporting requirements dictate.

            Any employee who changes jobs within the brokerage firm must complete compliance training to ensure that he/she is up-to-date with compliance policies associated with his/her new responsibilities.

           

What is the Required Training

Compliance training includes legislative requirements for reporting, client identification, and record keeping; a general understanding of the money laundering process and its occurrence within the real estate industry; and all agency compliance policies and procedures. Specifically, all employees, without exception, must complete the following:

 

  1. Complete Anti-Money Laundering and Terrorist Financing Training Course: all five modules; provided on the CREA website
  2. Read and understand the Money Laundering and Terrorist Financing Reference Manual
  3. Read and understand the firm’s Compliance Policies and Procedures

           

Providing Proof of Training

Upon completion of the above training, an employee must complete the form provided on the following page and forward it to the Compliance Officer. The Compliance Officer will file these forms as proof of employee training should FINTRAC conduct an audit and request such information.

 

 

CERTIFICATION OF COMPLETION OF COMPLIANCE TRAINING

 

By signing this form, I certify that I have completed the following training:

 

1.     Money Laundering Training Course: all five modules; provided on the CREA website

2.     Money Laundering and Terrorist Financing Reference Manual

3.     Firm’s Compliance Policies and Procedures

 

Date: ___________________  Signature: _____________________

 

Please forward this form to the Compliance Officer __________________

 

 

 

RECORD OF ADDITIONAL TRAINING

(Meetings, MCE, etc.)

 

Date: ________________________________________________

 

Type of Training: _____________________________________

(Indicate whether training was provided in a Sales meeting, MCE, etc.)

 

Names of those attending:

 

Complete as required and forward to the firm’s Compliance Officer for filing.

 

 

3.     CLIENT IDENTIFICATION PROCEDURES

 

 

1.1          INDIVIDUALS

 

Obligations

As a real estate broker or sales representative, you have the following client identification obligations when you act as an agent regarding the purchase or sale of real estate. This includes the buying or selling of land, buildings, houses, etc. Such activities trigger these identification obligations whether or not you receive a commission for the transaction and whether or not you have agency duties and obligations regarding it. However, the obligations do not apply to you for activities related to property management – that is, if you only deal in rental property transactions and not purchases or sales, you do not have any requirement to identify your clients.

            Note that if your clients are husband and wife or common-law partners, BOTH parties must be identified and an Identification Information Record must be completed for each person. If The Homesteads Act applies, both the owning spouse/common-law partner and the non-owning spouse/common-law partner must be identified.

 

When do You have to Identify Clients?

§  As a real estate broker or sales representative, you have to identify a client when you act as an agent regarding the purchase or sale of real estate.  If you represent a buyer, when the offer is submitted and/or a deposit is made; if you represent a seller, when the seller accepts the offer. This identification may be done earlier for safety reasons such as first contact with the prospective seller or buyer or if you know that the seller is moving and will not be in Manitoba when the offer is presented, etc. However, remember to ask the seller at the time the offer is accepted and/or the buyer at the time the offer is written whether or not any of the information has changed. If for some reason the home is not sold, then any identification records completed earlier must be destroyed.

§  If your clients are husband and wife or common-law partners, then each client must be individually identified and an Identification Information Record must be completed for each.

§  If The Homesteads Act applies, that is, one of the spouses or common-law partners are not on title, you identify both the owning spouse/common-law partner and the non-owning spouse/common-law partner and complete an Individual Identification Form for each.

§  You have to identify individuals for whom you keep a Receipt of Funds record or a client information record and you have to do this at the time of the transaction.

§  If the parties to a real estate transaction are each represented by a different real estate broker or sales representative, you have to identify the individual or confirm the existence of the entity that you represent in the transaction. If some parties in a transaction are not represented by a real estate broker or sales representative while other parties are, each real estate broker or sales representative that represents a party to the transaction must make a reasonable attempt to identify the parties that are not represented.

§  You have to identify any individual with whom you conduct a large cash transaction at the time of the transaction.

§  When you are going to send a suspicious transaction report to FINTRAC, you have to take reasonable measures before the transaction is reported to identify the individual who conducted it.  You do not have to identify the individual in the following circumstances:  if you have already identified the individual as required; if you believe that doing so would inform or tip-off the individual that you are submitting a suspicious transaction report; or the transaction being reported was an attempted transaction.

§  NOTE: If the buyer is using a nominee in the offer to purchase, someone else who may take title to the property at closing, and the buyer knows who that nominee is, then that nominee is a client and must be identified as outlined above. The nominee is not considered to be a third party – he or she is not giving instructions to the buyer about the transaction.

 

CAUTION

 

It is our firm’s policy that all real estate practitioners advise clients of the FINTRAC requirements BEFORE real estate documents are signed. This is to avoid the situation where you have a buyer agency or listing contract with a client, only to discover the client later refuses to provide the identification information now required by law. A real estate practitioner who continues to represent a client who refuses to provide identification information is in non-compliance with the federal law. The firm keeps copies of two brochures that can be used to discuss the FINTRAC requirements with your clients: Your REALTOR® is asking questions because … It’s the law and The Proceeds of Crime (Money Laundering) and Terrorist Financing Act: What you need to know

 

WARNING RE: “Walking Away” from the Transaction

If client refuses to supply the information required in order to identify him/her, then the real estate practitioner must not represent him/her. Proceeding with a transaction without identifying your client means that you are in violation of the federal PC(ML)TF Act. Report ALL such refusals to supply information to the Compliance Officer. If you do not represent the individual – that is, he/she is not your client (e.g., FSBO) – you can proceed with the transaction; however, record your attempt to identify him/her.

 

Exceptions

These measures are subject to the general exceptions outlined below.

 

Existing Clients

Once you have confirmed the identity of an individual, you do not have to confirm his/her identity again if you recognize the individual at the time of a future event that would otherwise trigger the identification requirement. However, if you have any doubts about the identification information previously collected or believe that any of the information has changed, you will have to identify that individual again.

            Exceptions related to Corporations are covered in Identifying Clients: Corporations.           

 

How to Identify an Individual

The form to be used is the Individual Identification Information Record, a copy of which is provided on the following page. A copy is also available on REALTORLink. Complete all sections of the form – making a copy of the driver’s licence and placing it in the file etc, is NOT acceptable.

 

  1. To identify an individual, refer to the individual’s birth certificate, driver’s licence, passport, record of landing, permanent resident card, Certificate of Canadian Citizenship, old age security card, certificate of Indian status, or other similar document and record the information on the Individual Identification Information Record. Ideally, the identification document should bear a picture of the individual, although such is not stated in the FINTRAC Regulations.
  2. For a document to be acceptable for identification purposes, it must have a unique identifier number. Also, the document must have been issued by a provincial, territorial, or federal government.
  3. The document also has to be a valid one and cannot have expired. For example, an expired driver’s licence or passport is not acceptable.
  4. When you refer to a document to identify an individual, it has to be an ORIGINAL, not a copy of the document.
  5. A Social Insurance Number (SIN) can be used to verify the identity of a client, but the SIN number itself is not to be provided to FINTRAC on any type of report. Therefore, it is recommended that you do not use a SIN for identification purposes.
  6. A provincial or territorial identification card issued by any of the following is also acceptable:

§  the Insurance Corporation of British Columbia

§  Alberta Registries

§  Saskatchewan Government Insurance

§  Department of Service Nova Scotia and Municipal Relations

§  Department of Transportation and Public Works of Prince Edward Island

§  Service New Brunswick

§  Department of Government Services and Lands of Newfoundland and Labrador

§  Department of Transportation of the Northwest Territories

§  Department of Community Government and Transportation of the Territory of Nunavut

  1. The following documents are NOT acceptable:

§  a birth or baptismal certificate issued by a church

§  an identification card issued by an employer for an employee even if government issued

§  a Manitoba health card or any provincial health card from Ontario or Prince Edward Island

  1. Valid foreign identification if equivalent to an acceptable type of Canadian identification document would also be acceptable for the purposes of individual identification. For example, a valid foreign passport or an international driver’s licence would be acceptable.

 

Examples:

 

Scenario One: Buyer and Seller

Two individuals are involved – a buyer and a seller. The agent for each completes the Individual Identification Information Record(s) for his/her own client(s). Remember that if the client is a husband and wife, two Identification Information Forms must be completed – one for each. The two agents do not share or exchange reports.

 

Scenario Two: FSBO

Two individuals are involved – a buyer and a seller, but one of the individuals is unrepresented (e.g., FSBO). The agent representing a client must complete the Individual Identification Information Record for his/her own client, and take all reasonable measures to also acquire identification information of the unrepresented party and complete an  Individual Identification Information Record for that person. If the unrepresented individual refuses to provide the required information, write REFUSED on the form and proceed with the transaction. DO NOT SIGN A LISTING AGREEMENT WITH THE UNREPRESENTED PARTY – DOING SO MAKES THE PARTY YOUR CLIENT AND YOU NOW HAVE TO IDENTIFY HIM/HER. It is permissible to sign a fee agreement with the private seller – just don’t do anything that will make the private seller your client.

 

Scenario Three: Limited Joint Representation

Two individuals are involved – a buyer and a seller, but the same agent is representing both the buyer and the seller; i.e., a case of limited joint representation. In this case, who does what is very clear. In this case, it is that agent who completes Individual Identification Information Records for both the buyer and the seller and their spouses.

 

Scenario Four: Non Face-to-Face Situation

There are two individuals involved – one agent represents the buyer and another represents the seller. However, the buyer is in another country and will never meet his/her agent face-to-face. It is the responsibility of the broker representing the buyer to have a contract in place with an agent or mandatary who can then meet the buyer and verify the identification information. Once that information has been verified, the rest of Scenario One would apply.

 

NOTE:  If the buyer resides in Canada but the agent will not meet him/her personally, then a mandatary can be used to verify the identification information OR the agent can use one of the other methods described herein: the identification product or credit file method, the attestation method, or the cleared cheque or deposit account method.

 

Scenario Five: Seller is Builder who is not represented

Two individuals are involved. The real estate agent is representing the buyer, and the seller is a new home builder not licensed in the trading of real estate. The deposit goes directly from the buyer to the new home builder’s trust account. In this case, the buyer agent completes the Individual Identification Information Record for his/her own client and no Receipt of Funds Record is required. Note however that if the builder is licensed, then a Receipt of Funds Record is required.

 

 

 

 

SScenario Six: Seller is Builder who is represented

The seller is a new home builder represented by a real estate agent. Under The Real Estate Brokers Act, any deposit cheque submitted with an offer must be deposited into the listing firm’s trust account by the next banking day following acceptance of the offer. In this case, the agent representing the home builder completes the Corporate Identification Information Record for the home builder since most home builders are corporations. The agent who represents the buyer completes the Individual Identification Information Form. Remember that once the home builder has been identified, you do not need to identify the home builder again in subsequent transactions with that same builder. Just remember to ask if any of the information has changed.

 

Scenario Seven: Buyer is using a Nominee

If the buyer is using a nominee – e.g., clause 14 of the residential offer to purchase states that “the buyer reserves the right to have title taken in the name of a nominee at closing” – and the buyer knows who that nominee is, then the agent who is representing the buyer identifies both the buyer(s) and the nominee and completes an Individual Identification Information Record for all parties, including the nominee – the nominee is not a third party as that term is defined by FINTRAC unless it is the nominee who is giving directions to the buyer about the transaction.

            If the buyer does not know who that nominee is at the time the offer is prepared, then no Identification Record is prepared.

            When using a nominee, it is important that the buyer not be named at the top of the offer as [buyer’s name or “nominee”] as such is considered to be violation of Section 22(1) of The Real Estate Brokers Act (the names of the buyer and the seller must be specified) and a violation of contract law since the terms of the contract are not definite and clear.

 

 

3.2   CORPORATION/ENTITY

 

The form used to identify a corporation or other entity is the Corporation/Entity Identification Information Record, a copy of which is provided on the following pages. A copy is also available on REALTORLink. Complete all sections of the form as applicable.

            You have to confirm the existence of any corporation or other entity for which you have to keep a Corporation Identification Information Record or a Receipt of Funds Record within 30 days of the transaction associated with the records.

            In addition to confirming its existence, you also have to determine the corporation’s name, address, and the names of its directors, within 30 days of the transaction. (NOTE: For Manitoba corporations, this information is available from the Companies Office (in person or by mail) or can be accessed via Manitoba OnlineTM – see Manitoba Provincial Reference Manual. For federal corporations, access the Industry Canada’s Strategis database on the Corporations Canada page of http://strategis.ic.gc.ca ) The Manitoba Real Estate Association recommends that this information be requested at the time of writing the offer.

            For the purposes of requesting the necessary information from a corporation/entity, CREA has developed a covering letter, a two-page information form, and a consent form regarding the release of the information in order to comply with the FINTRAC requirements. The information form requests that the corporation/entity forward certain records that can be used to confirm the existence of the corporation/entity. Copies of these CREA forms are also provided herein.

 

 

Exceptions

Client identification for corporations is subject to the general exceptions outlined below.

 

Existing Clients:

Once you have confirmed the existence of a corporation and confirmed its name, address, and the names of its directors, you are not required to confirm that same information in the future, unless the information has changed.

           

Certain Types of Transactions:

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

            A public body means any of the following or their agent:

-  a provincial or federal department or Crown agency;

-  an incorporated municipal body (e.g., an incorporated city, town, village, metropolitan  authority, district, county, etc.)

-  a hospital authority (i.e., an organization that operates a public hospital and that is  designated to be a hospital authority for GST purposes).

            A very large corporation is one that has minimum net assets of $75 million on its last audited balance sheet. The corporation’s shares have to be traded on a Canadian stock exchange or certain stock exchanges outside Canada, and the corporation must operate in a country that is a member of FATF.

 

 

Corporations

1.     Send the covering letter, Information Form, and consent form to the corporation involved in the transaction at the time of writing the offer. In order to meet the 30-day deadline, it is important to have the information as soon as possible.

2.     Upon receipt of the information back from the corporation, confirm the existence of a corporation as well as the corporation’s name and address by referring to the following documents:

§  the corporation’s certificate of corporate status

  • a record that has to be filed annually under provincial legislation. In Manitoba, this is the Annual Return of Information report that must be filed with the Manitoba Companies Office.
  • any other record that confirms the corporation’s existence. Examples include such other records as the corporation’s annual report signed by an independent audit firm, or a letter or a notice of assessment for the corporation from a municipal, provincial, territorial, or federal government.

3.     Complete the Corporation/Entity Identification Information Record, unless exempt, for the corporation that is your client. Sentence 7 of this form requires you to obtain a copy of the corporate record showing authority to bind the corporation regarding the transaction. This record should be obtained early in the process to ensure that the individual who is signing the listing agreement and/or offer to purchase has the authority to do so.

4.     If the offer to purchase contains a clause that title may be taken in the name of a nominee, the nominee does not have to be identified provided that the name of the nominee is not known at the time the offer to purchase is prepared.

5.     Complete a Receipt of Funds Record if applicable and forward to your firm’s FINTRAC Compliance Officer. This record is completed by the real estate firm that is representing the buyer at the time funds are received.

6.     To confirm the names of the corporation’s directors in order to record the names on the Identification Information Record, refer to the list of the corporation’s directors supplied by the corporation in the CREA Information Form or in the Annual Return of Information filed with the Manitoba Companies Office. If the client is a corporation that is a securities dealer, you do not need to ascertain the names of the corporation’s directors.

7.     The record that you use to confirm a corporation’s existence can be a paper version such as the completed Information Form Respecting Corporations/Entities or it can be the Annual Return of Information filed with the Companies Office. Although such information may be available verbally, it is not acceptable for these purposes as you have to be able to refer to a record. If the record is in paper format, you have to keep the record or a copy of it.

8.     If the record is an electronic version, you have to keep a record of the corporation’s registration number, the type, and source of the record. An electronic version of a record has to be from a public source such as those listed above for Manitoba corporations or for federal corporations. You may also get this type of information if you subscribe to an online service such as Manitoba Online TM.

9.     Forward all completed forms, including the forms supplied by the corporation, to your firm’s FINTRAC Compliance Officer. Remember that you only have 30 days from the date of the transaction to complete all forms required to confirm the existence of the corporation.

 

Entities other than Corporations

In the case of an entity other than a corporation, refer to a partnership agreement, articles of association, or any other similar record that confirms the entity’s existence. The record you use to confirm the existence of an entity can be paper or an electronic version. Although such information may be available verbally, it is not acceptable for these purposes as you have to be able to refer to a record. If the record is in paper format, you have to keep a record or a copy of it. If the record is an electronic version, you have to keep a record of the entity’s registration number, the type, and source of the record. An electronic version of a record has to be from a public source.

 

Keeping Client Identification Information Up-to-date

In this context, reasonable measures include asking the client to confirm or update identification information. In the case of an individual client, reasonable measures also include confirming or updating the information through the options available to identify individuals who are not physically present. This can include obtaining information verbally to keep client information up-to-date.

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

            The frequency with which client identification information is to be kept up-to-date will vary in accordance with the context in which transactions occur, and therefore could differ from one situation to the next. However, for high risk situation, frequency for updating client identification information should be at least every two years.

 

Penalties for Non-Compliance

Failure to comply with your client identification requirements can lead to criminal charges against you. As of December 2008, failure to identify clients can lead to an administrative monetary penalty. You are responsible for the payment of such fines.

 

[insert date]

VIA [insert means of communication]

 

[insert address]

 

Attention:        [insert name of lawyer or representative]

Dear Sir or Madam:

Re:       Identification Information Record - [insert details of transaction (e.g., address)]

Real estate agents/brokers are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations. As such, we are required to confirm the existence of, and ascertain the name and address of, every corporation or other entity (e.g., partnership) on whose behalf we conduct a transaction, as well as the names of its directors.   We are also required to confirm that the person entering into the transaction on behalf of the corporation has the power to bind the corporation regarding the transaction.  We therefore request your assistance in completing our Identification Information Record with respect to the above-noted transaction for [insert name of corporation].

We enclose a form which lists the information we are required to include in our records. Please complete the form, attach the requested documents and return the materials to [insert name] at [refer to mailing address or e-mail address]. We also enclose a consent from [name of corporation] to the release of this information.

We are required to confirm the existence of [name of corporation] and complete the information record within 30 days of the closing of this transaction or, where the corporation is the buyer, within 30 days of the deposit being made. We would therefore appreciate receiving the documents listed above no later than [note – insert date].

If you have any questions please do not hesitate to contact us.

Yours very truly,

 

 

Information Form Respecting Corporations/Other Entities

If you act for a corporation

1.   Please provide the following information:

(a)    Name of corporation:

(b)   Corporate address:

(c)    Nature of Principal Business:   

(d)   Names of Directors:

 

2.   Please provide the following records:

(a)    Copy of a corporate record showing authority to bind corporation regarding transaction[1]

(b)   Copy of record confirming existence of corporation[2]:.

If the records are in paper format, please enclose a copy with this form. In the event that you provide an electronic version of a record which is publically accessible, please provide the following information:

(i) Registration number of corporation:

(ii) Type of verification record[3]:            

(iii) Source of verification record[4]:        

If you act for an entity other than a corporation (e.g., partnership)

1.   Please provide the following information:

(a)    Name of entity:

(b)   Entity address:

(c) Nature of Principal Business:    

[…2]

2.   Please provide the following records:

(a) Copy of record confirming existence of entity[5]:

If the record is in paper format, please enclose a copy with this form. In the event that you provide an electronic version of a record which is publically accessible, please provide the following information:

(i) Registration number of entity:

(ii) Type of verification record:             

(iii) Source of verification record:         

Whether you act for a corporation or an entity other than a corporation

Please indicate whether or not the corporation or entity is acting on behalf of a third party with respect to this real estate transaction.

(a)  Is corporation or entity acting on behalf of a third party?

  Yes ___          No ___            Reasonable suspicion[6] ___

(b) Name of third party:

(c) Address:

(d) Date of Birth:

(e) Nature of Principal Business or Occupation:

(f) Incorporation number and place of issue (if applicable):

(g) Relationship between third party and corporation or entity:

 


[1] For example, certificate of incumbency, articles of incorporation or by-laws setting out the officers duly authorized to sign on behalf of corporation.

[2] For example, certificate of corporate status or other record confirming corporation’s existence.

[3] For example, certificate of corporate status, published annual report, government notice of assessment.

[4] For example, Corporations Canada website.

[5] For example, partnership agreement, articles of association.

[6] Reasonable suspicion would arise when circumstances indicate the possibility of a third party but the entity’s representative will not confirm.

 

Consent

 

I, [name of individual], as a duly authorized representative of [name of corporation], hereby authorize [lawyer] to release and communicate to [insert name] the corporation information set out in the attached Information Form Respecting Corporations/Other Entities for the sole purpose of enabling [insert name] to comply with his/her obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations.

 

                                                             [Name in print]

 

                                                             [Signature]                             Date:                           

 

4.   THIRD PARTY DETERMINATION

 

You have to make a third party determination when you keep any of the following records:

  • Large Cash Transaction Record: Whenever you have to keep a large cash transaction record, you have to take reasonable measures to determine whether the individual who gives you the cash is acting on the instructions of a third party.
  • Client Identification Information Record: Whenever you are required to keep a client identification information record, you have to take reasonable measures to determine if the client is acting on the instructions of a third party.

Both the Individual Identification Information Record and the Corporation/Entity Identification Information Record have space on the reverse side for use when verifying third parties.

            Who is a third party? Under FINTRAC Guideline 6B, a third party is an individual or entity other than the individual who conducts the transaction. When you are determining whether or not a third party is involved, it is not about who “owns” the money, but rather about who gives instructions about how to handle the money. To determine who the third party is, the point to remember is whether the individual in front of you is acting on someone else’s instructions. If so, that someone else is the third party. In making a third party determination when employees are acting on behalf of their employers, they are considered to be acting on behalf of a third party.

 

What are reasonable measures?

What constitutes reasonable measures will vary in accordance with the context in which they occur, and therefore could differ from one situation to the next. However, reasonable measures would include retrieving the information already contained in your files or elsewhere within your business environment, or obtaining the information directly from the client.

 

 

5.  OUT-OF-PROVINCE AND OFF-SHORE CLIENTS

 

To identify an individual who is not physically present but who resides in Canada, you can use a mandatary OR you can use a combination of two of the alternative methods described below. Whichever method you use, the individual’s information has to be consistent with what you have in your records. The information also has to be consistent from one method to the other. For example, if each of the methods you use has the name, address, and date of birth information about the individual, all of it has to agree with what you have in your records. NOTE:  If the client does not reside in Canada, you must use an approved agent or representative (legally known as a mandatary) to identify clients the alternative methods may not be used in this case.

 

 

Use of Mandatary

 

Who can be a Mandatary?

A mandatary is a legal term for a representative. Therefore, a mandatary can be anyone that a real estate practitioner wants to appoint – the only requirement is that there be a written contractual agreement with that individual beforehand as described below. It is recommended that real estate firms with franchise offices in other cities in Canada set up these contractual agreements with one another ahead of the time that identification is required. It is very important that you choose the mandatary to use – don’t let your client choose that individual as you cannot be sure that proper identification is being made or whether or not that individual is involved in money laundering or is a terrorist. If a mandatary is required in a foreign country, consider using a Canadian Embassy employee as embassy employees will be aware of the federal law.

 

Contractual Agreement

There must be a contractual agreement with the agent or representative whose services will be used. CREA has prepared a template agreement which you can use for this purpose. When you are completing this form, “broker” refers to our brokerage firm and “identification agent” is your chosen mandatary. A copy is provided on the following pages; a copy is also available on REALTORLink. When completing this form, “real estate broker” is your firm and “identification agent” is the mandatary that you are using.

            When it is necessary to identify an individual, the appointed mandatary will then complete Schedule A – Services with respect to Individuals for identification of individuals. The mandatary must record the following information on Schedule A to meet the compliance requirements for client identification:

-        Full legal name of individual

-        Address

-        Date of Birth

-        Nature of Business or Occupation

-        Type of identification (driver’s licence, passport, etc.)

-        Identification number of that document

-        The issuing jurisdiction (country, province, etc.)

-        Document expiry date

He/she must also provide a photocopy of the identification document. This document and the copy of the identification document is then forwarded to you. Schedule B is used for identification of corporations/entities.

 

Alternative Methods of Identification

 

1.  Identification Product or Credit File Method

You can use either of the following methods but you cannot combine them:

  • ID Product: Refer to an independent and reliable identification product. It must be based on personal information in respect of the person and a Canadian credit history of the individual of at least six months’ duration. This type of product can use a series of specific questions, based on an individual’s credit file, to enable verification of client identity.
  • Credit File: Confirming the name, address, and date of birth for client by referring to a credit file in respect of that person in Canada that has been in existence for at least six months.

Products for either of these methods are available commercially, such as those used for credit ratings.

 

2.  Attestation Method

Obtain an attestation that an original identification document for the individual has been seen by a commissioner of oaths or a guarantor. (Many real estate practitioners are Commissioners of Oaths.) The attestation must be on a legible photocopy of the document and include the following information:

-        the name, profession, and address of the commissioner of oaths or the guarantor;

-        the signature of the commissioner of oaths or the guarantor; and

-        the type and number of the identifying document provided by the individual being identified.

In this context, a guarantor has to be an individual engaged in one of the following professions in Canada:

-        a dentist, a medical doctor, or a chiropractor

-        a judge, a magistrate, or a lawyer

-        a notary public

-        an optometrist or a pharmacist

-        an accredited public accountant, a chartered accountant, a certified general accountant, a certified management accountant, a public accountant, or a registered public accountant

-        a professional engineer or

-        a veterinarian

 

3.  Cleared Cheque or Deposit Account Method

You can use either of the following methods, but you cannot combine them.

  • Confirm that a cheque drawn on a deposit account that the individual has with a financial entity has cleared. This means a cheque that was written by the individual, cashed by the payee, and cleared through the individual’s account. It does not include pre-authorized payments as these are not cheques written by the individual.
  • Confirm that the individual has a deposit account with a financial entity.

 

            For either method, the account has to be with a financial entity: i.e., with a bank listed in the Bank Act (Canada), an authorized foreign bank with respect to its operations in Canada, a credit union, a caisse populaire, a trust and loan company, or an agent of the Crown that accepts deposit liabilities. In the case of a foreign bank, the deposit account has to be in Canada.

            The account cannot be one that is exempt from identification requirements for the financial entity, such as a registered retirement savings plan or a reverse mortgage.

 

NOTE:

In non face-to-face situations, therefore use one of the following combinations of ID methods described above.

 

 

 

ID Product  OR

Credit file

 

 

AND

 

Cleared Cheque OR

Confirmation of Deposit Account

 

 

Attestation

 

 

AND

 

Cleared Cheque OR

Confirmation of Deposit Account

 

 

Attestation

 

 

AND

 

ID Product  OR

Credit file

 

 

6. THE RECEIPT OF FUNDS RECORD

 

General

Effective June 23, 2008, a Receipt of Funds Record is required when you receive any funds, whether or not it is in cash, in the course of a single real estate transaction. The purpose of this record is to track information on amount of funds received, including currency, and details about how the funds were received. The record must also include the date of the transaction, details about the individuals involved, and the reason for the financial transaction (e.g., deposit).

            Amendments made by the Federal Government in July 2008 stipulate that it is the buyer’s agent who is responsible for completing and retaining the Receipt of Funds Record in a transaction when all parties are represented. If one party is unrepresented, the Receipt of Funds Record must be completed by the real estate agent representing the other party. If the funds are received by the listing agent directly from the buyer, that is, the buyer agent does not touch the cheque nor does it accompany the offer to purchase, then it is the listing agent who must complete a Receipt of Funds Record. If there is a staged deposit – an initial deposit with the offer, a subsequent deposit when the offer is accepted, another deposit when all conditions are satisfied – then a Receipt of Funds Record must be completed each time by the real estate agent who receives the funds.

 

GUIDELINE: When to complete a Receipt of Funds Record – each and every time you receive funds for a single real estate transaction, whether the funds are cash or cheque, which are being deposited into a registrant’s trust account. Who completes the Receipt of Funds Record – the first person to receive the funds.

 

Exceptions:

A Receipt of Funds Record is not completed if

  • the funds are received from a financial entity or a public body that is buying or selling the property;
  • a Large Cash Transaction Record must be completed for the same transaction; or
  • if the deposit goes directly to an individual who is not licensed to trade in real estate. For example, if the deposit goes directly to: a builder or developer not represented by an agent, a lawyer or notary, or any professional not licensed to trade in real estate.

 

Basically, you only have to complete a Receipt of Funds record if the funds are being deposited into an account of a licensed practitioner – e.g., a brokerage trust account.

            It is the responsibility of the broker to ensure that such a record is kept for five years from the date it was created.

 

Contents of a Receipt of Funds Record

A copy of this record is provided on the following page; a copy is also available on REALTORLink.

            For any receipt of funds that are to be deposited into the trust account of a licensed practitioner, the information which you have to keep in a Receipt of Funds record includes the following:

 

       Transaction Property Address: indicate full property address

       Sales Representative/Broker Name: indicate your name and the name of your             brokerage firm

       Date:  This is the date the form is created – it will usually be the date the funds are             received.

  1. Amount and currency of the funds received – check as appropriate and complete either (a) if cash, or (b) if cheque
  2. Date funds are received
  3. Account where funds were deposited – This will usually be the listing broker’s trust account; therefore complete this section as follows:

§  Type of account:  check as appropriate – this will usually be “Trust”

§  Number of account:  “Not Available” (NOTE: DO NOT RECORD a broker’s trust account number on any form.)

§  Name of account holder:  [name of listing brokerage firm]

  1. Purpose of funds: (e.g. for a deposit on the purchase of a house, etc.)
  2. Other details concerning receipt of funds:

 

Guidelines for Completing

(i)         A Receipt of Funds Record is completed each and every time you receive funds for a single real estate transaction, whether the funds are cash or cheque, which are being deposited into a registrant’s trust account. Who completes the Receipt of Funds Record? the first person to receive the funds. Typically, in Manitoba, this is the buyer’s agent who receives a deposit with an offer to purchase; however, there are exceptions.

(ii)       When a Receipt of Funds Record is completed, an Identification Information Record, either Individual or Corporate, is completed at the same time, unless the Identification Record was completed prior to the receipt of funds.

(iii)     As per the July 2008 amendments, when both the buyer and seller are represented, it is the agent of the buyer who is required to complete and retain a Receipt of Funds Record in respect of the deposit, regardless of who retains the deposit.

(iv)     If one of the parties in the transaction is unrepresented, the real estate agent representing the other party is responsible for the Receipt of Funds Record, and must make a reasonable attempt to gather the information about the deposit. If the information is unavailable, you should indicate why. You are not required to include the number and type of any account affected by the transaction or the name of the person or entity that is the holder of the account, if after taking reasonable measure you are unable to do so.

(v)       Where both parties are represented and the funds are deposited into the listing broker’s trust account, the buying agent must indicate that fact but is NOT required to include the number of the trust account, or the name or entity that holds the trust account.

 

 

 

NOTE RE:  Broker’s Trust Account in Manitoba

 

Both The Manitoba Securities Commission and The Manitoba Real Estate Association have stated that brokers MUST NOT give out or record on any form the account numbers of their trust accounts. In Manitoba, cash deposits are first deposited into the trust account of the broker who receives the cash and are then transferred by cheque to the listing broker, if other than the broker who received the cash, upon acceptance of the offer. Cheque deposits are deposited into the listing broker’s trust account upon acceptance of the offer. Because of the trust synoptic and trust ledger that must be kept by each Manitoba broker under The Real Estate Brokers Act, there is adequate information to track the cash should that be required by FINTRAC.

 

 

6.        REPORTING PROCEDURES – SUSPICIOUS TRANSACTIONS

 

(a)   General Requirements

A suspicious transaction is a financial transaction for which there are reasonable grounds to suspect that the transaction is related to the commission of a money-laundering offence or a terrorist activity financing offence. This also includes transactions that you have reasonable grounds to suspect are related to the attempted commission of a money laundering offence or to the attempted commission of a terrorist activity financing offence.

            Any sales representative or broker who suspects that a transaction may be suspicious is responsible for notifying the firm’s Compliance Officer so that a Suspicious Transaction Report can be completed and forwarded to FINTRAC within 30 days of the suspicion using the procedure in section (e) below. Some examples of suspicious transactions as they could apply to a real estate transaction are shown in the table provided on the following page. Additional examples are provided in The Manitoba Real Estate Association’s FINTRAC Reference Manual.

 

 

(b)  Tipping off Requirement

Any person reporting a suspicious transaction MUST NOT inform anyone, including the client, about the contents of a Suspicious Transaction Report or even that such a report has been made or is to be made. The penalty for such an offence if found guilty can be up to two years in prison.

 

 

(c)   Completed or Attempted Transactions

A completed transaction is one that has occurred. For example, if you process a deposit from a client towards the purchase of an asset such as a life insurance policy or a house, a financial transaction has occurred. This is true even if the final sale associated with the deposit does not go through.

            An attempted transaction is one that a client intended to conduct and took some form of action to do so. An attempted transaction is different from a simple request for information, such as an enquiry as to the fee application to a certain transaction. An attempted transaction includes entering into negotiations or discussions to conduct the transaction and involves concrete measures to be taken by either you or the client. For example, if a client starts to make an offer to purchase a house with a deposit but will not finalize the offer once asked to provide identification, then this is an attempted suspicious transaction which must be reported to FINTRAC.

            For you to have to report an attempted transaction, it must be one that you have reasonable grounds to suspect that it is/was related to money laundering or terrorist activity financing. An attempt to conduct a transaction does not necessarily mean the transaction is suspicious. However, the circumstances surrounding it might contribute to your having reasonable grounds for suspicious.

 

 

(d)  Basic Information for the Report

Information that would normally be necessary to complete a transaction is to be recorded when making a Suspicious Transaction Report. Mandatory information includes:

-        the date of the financial transaction

-        the amount and type of funds used in the transaction

-        how and where the funds were deposited

-        the branch and transit numbers of the financial institution for where the funds were deposited  (include copy of cheque if possible)

-        the account number and type of account into which the funds were deposited

-        the full name(s) of the account holder(s); and

-        an explanation of what led to the belief something was suspicious about the transaction, including as complete and clear a description as possible of all factors or unusual circumstances that led to the suspicions of money laundering or terrorist financing

Information that is not mandatory in a suspicious transaction report is to be provided if it is available prior to or results from a financial transaction. Any salesperson or other employee who suspects that a suspicious transaction should be reported to FINTRAC must supply the above information to the firm’s Compliance Officer immediately so that the electronic report can be prepared and submitted to FINTRAC within the time constraints imposed by FINTRAC.

 

 

(e)   How to Report a Suspicious Transaction

If your suspicions about a money laundering offence arise as a result of more than one transaction, all of the transactions that contributed to your suspicions are to be included in the same report and forwarded to our Compliance Officer.

            All Suspicious Transaction Reports reported by our Compliance Officer are submitted electronically.

            If a Suspicious Transaction Report contains incomplete information, FINTRAC may notify our Compliance Officer. The notification will indicate the date and time the report was received, an identification number generated by FINTRAC, and information on the fields that must be completed or corrected. After receiving FINTRAC’s notification, our Compliance Officer will contact the employee who initiated the report to obtain the necessary information which must be forwarded to FINTRAC within 30 calendar days of the time the suspicious transaction was first detected. The legal obligation to report will not be fulfilled until the complete report is sent to FINTRAC by our Compliance Officer.

            For all reports submitted electronically, FINTRAC issues an acknowledgement message, which can be printed from the browser window. This acknowledgement message will include the date and time that the report was received, together with a FINTRAC-generated identification number. This information will be filed together with the salesperson’s report and a copy of the of the electronic report by our Compliance Officer.

            Once the Suspicious Transaction Report has been submitted to FINTRAC, a copy of it is printed together with the Acknowledgement Message and file.

 

 

 

 

 

Real Estate Specific Examples of Suspicious Transactions

 

·        Client arrives at a real estate closing with a significant amount of cash. (Remember that any cash amount over $10,000 MUST be reported – see Large Cash Transaction Reporting below.)

·        Client purchases property in the name of a nominee such as an associate or a relative other than a spouse.

·        Client does not want to put his or her name on any document that would connect him or her with the property or uses different names on Offers to Purchase, closing documents, and deposit receipts.

·        Client inadequately explains the last minute substitution of the purchasing party's name.

·        Client negotiates a purchase for market value or above asking price, but records a low value on documents, paying the difference "under the table".

·        Client sells property below market value with an additional "under the table" payment

·        Client pays initial deposit with a cheque from a third party, other than a spouse or parent

·        Client pays substantial down payment in cash and balance is financed by an unusual source or offshore bank

·        Client purchases personal use property under corporate veil when this type of transaction is inconsistent with the ordinary business practice of the client

·        Client purchases property without inspecting it

·        Client purchases multiple properties in a short time period, and seems to have few concerns about the location, condition, and anticipated repair costs of each property

·        Client pays rent or the amount of a lease in advance using a large amount of cash

·        Client is known to have paid large remodeling or home improvement invoices with cash on a property for which property management services are provided.

 

  

8.      REPORTING PROCEDURES – TERRORIST                            PROPERTY TRANSACTIONS

 

(a)  General Requirements

Anyone who knows that a client is a terrorist must:

-        not complete the transaction

-        complete a terrorist property report in accordance with the procedure outlined below

-        notify our Compliance Officer immediately so that a report can be made to FINTRAC without delay

-        our Compliance Officer will also disclose to the RCMP and CSIS the existence of property that you know is owned or controlled by or on behalf of a terrorist or a terrorist group in accordance with the procedure outlined below

 

*****INFORMATION IS TO BE PROVIDED WITHOUT DELAY*****

 

(b)  What is Terrorist Property

Real estate brokers and sales representatives are responsible for notifying our Compliance Officer once they know that property in their possession or control is owned or controlled by or on behalf of a terrorist or a terrorist group. This includes information about any transaction or proposed transaction for such a property. Terrorist property reports must be sent by our Compliance Officer without delay. Property includes:

-        any deed or instrument giving title or right to property, or giving right to money or goods

-        cash

-        bank accounts

-        insurance policies

-        money orders

-        securities

-        real estate

-        traveller’s cheques, and

-        other assets

A list of known terrorist groups and individuals are available on the web sites: www.psepc.gc.ca, www.osfi-bsif.gc.ca/osfi/index_e.aspx?DetailID=525, or www.fintrac.gc.ca. A full list and description of these terrorist groups and individuals is kept by our Compliance Officer.

 

(c)      Required Record

Any person reporting terrorist property must prepare a record of the following information and forward to our Compliance Officer immediately:

-        the reason for making the report including how possession or control of the terrorist property was obtained

-        how it became known that the property was terrorist property

-        the type of property and its actual or approximate value

-        the branch and transit numbers of the financial institution where the funds for the completed or proposed transaction were deposited, if applicable

-        the account number and type of account to where terrorist funds were deposited, if applicable

-        the amount and type of funds deposited, if applicable

-        the full name(s) of the account holder(s) to where the funds were deposited, if applicable

-        the time and date of the transaction, if applicable

-        the type of funds or other property involved in initiating the transaction, if applicable

-        how the transaction was (or was proposed to be ) completed, if applicable

 

(d)      If you only Suspect Terrorist Financing

If you only suspect that a transaction is related to property owned or controlled by or on behalf of a terrorist or terrorist group, a Suspicious Transaction Report must be filed by our Compliance Officer if the transaction is completed. Furthermore, if it is unknown whether or not a client is a terrorist, but you suspect that he/she is, then a Suspicious Transaction Report must be filed by our Compliance Officer if the transaction is completed or attempted.

 

(e)      How to File a Terrorist Property Report

Terrorist Property Reports must be submitted on paper to FINTRAC. Our Compliance Officer has copies of these forms. To ensure that the information provided is legible, it is preferable that the report is typed. However, if the report must be completed by hand, use black ink and print using CAPITAL LETTERS. For detailed instructions on how to complete the report, consult FINTRAC’s website.

            Once the Report is completed, provide the Report to our Compliance Officer so that it may be sent by FAX to 1-866-226-2346 or mailed by registered mail to the following address:

            FINTRAC

            Section A

            234 Laurier Avenue West, 24th Floor           

            Ottawa, ON  Canada  K1P 1H7

 

(f)       Disclosing Terrorist Property to the RCMP and CSIS

In addition to making a Terrorist Property Report to FINTRAC, anyone in Canada and any Canadian outside Canada having property in their possession or control that they know is owned or controlled by or on behalf of a terrorist or a terrorist group must, by law, disclose its existence to the RCMP and to the Canadian Security Intelligence Service (CSIS) without delay. Our Compliance Officer will contact the RCMP and CSIS as required.

 

RCMP:  Financial Intelligence Branch; unclassified fax: (613-993-9474)

 

CSIS: Financing Unit; unclassified fax: (613-231-0266)

 

 

 

9.     REPORTING PROCEDURES – LARGE CASH          TRANSACTIONS

 

(a)      General Reporting Requirements

Brokers and sales representatives must report large cash transactions when receiving $10,000 CDN or more in cash in the course of a real estate transaction. If two or more cash transactions of less than $10,000 each are made within a 24-hour period by or on behalf of the same client, these are considered to be a single large cash transaction if they add up to $10,000 or more. These must also be reported. Such large cash transactions are to be reported to our Compliance Officer who will send the report to FINTRAC. Remember that the dollar amount is $10,000 in Canadian funds or its equivalent in foreign currency.

 

NOTE: According to FINTRAC Interpretation Notice No. 4 dated April 7, 2006, the 24-hour period is a rolling 24-hour concept – in other words, the 24-hour period begins with each new transaction if you know the transactions were made by or on behalf of the same person or entity. For example, John Doe makes the following four cash transactions with a reporting entity ABC Realty Inc., two on one day and two the following day as follows:

            Day 1: 9:00 a.m.         $10,000 CDN              Day 2:  9:00 a.m.        $4,000 CDN

            Day 1: 2:00 p.m.         $  4,000 CDN              Day 2:  11:00 a.m.      $4,000 CDN

One of ABC’s sales employees knows that these four cash transactions are all by the same person. ABC would submit a large cash transaction report for the first cash deposit of $10,000 as it is a single transaction. The other three smaller cash deposits of $4,000 would also have to be reported as they combine to an amount over $10,000 and they were conducted by, or on behalf of, the same person within 24 hours. (The 24-hour period begins again as of Day 1 at 2:00 p.m.)

           

NOTE:  You do not need to complete a Receipt of Funds Record when you complete a large cash transaction record.

 

 

Cross Border Currency Reporting

Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, anyone who is bringing into or taking out of Canada amounts equal to or greater than $10,000 CDN must be reported to a customs officer. There are no restrictions on the amount of money that can be brought into or taken out of Canada, nor is it illegal to do so. It just has to be reported to a customs officer if more than $10,000 in cash.

 

 

 

(b) Exceptions

You do not have to keep a large cash transaction record or make a large cash transaction report to FINTRAC if the cash is received from a financial entity or a public body. What is meant by a financial entity or a public body? A financial entity is a bank as listed in the 

            Records can be kept in a machine readable or electronic form as long as a paper copy can be readily produced from it.

            The record keeping requirements are about each record that must be kept in order to comply with FINTRAC’s requirements. A firm’s record keeping system can store the information required for any one record separately as long as it is possible to readily retrieve and put the information together for the record whenever necessary.

 

NOTE:  Principle 7 of the PIPEDA and the Privacy Code requires real estate practitioners to protect information with safeguards appropriate to the sensitivity of the information. Tools used to confirm identification such as drivers’ licences, health cards, or other government issued identification – are all sensitive and require the highest form of protection. It is the real estate practitioner’s responsibility to protect that personal information as part of the FINTRAC compliance process against loss, theft, unauthorized access, disclosure, or copying.

 

 

 

Timeframe for Keeping Records

In the case of client information records and records to confirm the existence of an entity, including a corporation, these records have to be kept for five years from the day the last business transaction was conducted.

            In the case of a copy of a suspicious transaction report, the report has to be kept for a period of at least five years following the date the report was made.

            All other records must be kept for a period of at least five years following the date they were created.

 

 

Employees or Contractors who Keep Records for You

Any employees who keep records on behalf of our firm are not required to keep those records after the end of their employment with us. The same is true for individuals in a contractual relationship with us, e.g., independent contractors, etc.

 

 

Failure to Comply

Failure to comply with the record keeping requirements can lead to criminal charges against you. Conviction for failure to retain records could lead to up to five years imprisonment, to a fine of $500,000, or both. Alternatively, effective December 30, 2008, failure to keep records or identify clients can lead to an administrative monetary penalty.

 

 

 

NOTE: Keeping Identification Information Up-to-date

Effective June 2008, your compliance program will have to include an assessment of the risk of money laundering or terrorist financing in the course of your real estate activities. According to this assessment, in higher risk situations, you will have to take reasonable measures to keep client identification information up-to-date.

            In this context, reasonable measures include asking the client to confirm or update identification information. In the case of an individual client, reasonable measures also include confirming or updating the information through the options available to identify individuals who are not physically present. This can include obtaining information verbally to keep client information up-to-date.

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

            The frequency with which client identification information is to be kept up-to-date will vary in accordance with the context in which transactions occur, and therefore could differ from one situation to the next. However, for high risk situations, client identification information should be updated at least every two years.

 

 

 

 

 

 11.  REVIEW OF OUR COMPLIANCE PROGRAM

 

Our Compliance Program is subject to review as often as necessary to test its effectiveness and to help evaluate the need to modify existing policies and procedures or to implement new ones.

            As far as practicable, this review may be conducted by an internal or external auditor, including an auditor from FINTRAC, and could include interviews, tests, and samplings, such as:

-        Interviews with those employees handling transactions and with their supervisors to determine their knowledge of the legislative requirements and our firm’s policies and procedures;

-        A review of the criteria and process for identifying and reporting suspicious transactions;

-        A sampling of large cash transactions followed by a review of the reporting of such transactions;

-        A test of the record keeping system for compliance with legislation; and

-        A test of the client identification procedures for compliance with the legislation.

 

          In order to fully comply with FINTRAC’s requirements, our firm must have the following in place:

-        a Compliance Officer

-        a Compliance Policies and Procedures Manual

-        a training program for all employees, including a record to prove the completion of such training

 

 

 

 

12.   SOME LEGAL ISSUES AROUND REPORTING

 

Confidentiality of Your Reporting

As a reporting person or entity, which real estate practitioners are, you are not allowed to inform anyone, including the client, about the contents of a suspicious transaction report or even that you have made such a report. Because it is important not to tip your client off that you are making a suspicious transaction report, you should not be requesting information that you would not normally request during a transaction. You are able, however, to disclose the reporting of large cash transactions.

 

Protection of Privacy by FINTRAC

There are numerous safeguards to protect the privacy of individuals about whom information is sent to FINTRAC, including the following:

·       the independence of FINTRAC from law enforcement and other agencies to which FINTRAC is authorized to disclose information;

·       criminal penalties for any unauthorized use or disclosure of the personal information under FINTRAC's control;

 

·       the requirement for police to get a court order to obtain further information from FINTRAC; and

·       the application of the Privacy Act to FINTRAC.

 

Disclosure by FINTRAC

FINTRAC is required to ensure that personal information under its control is protected from unauthorized disclosure. Information may only be disclosed to the appropriate law enforcement authorities when it has been determined that there are reasonable grounds to suspect that the information would be relevant to investigating or prosecuting a money laundering offence or a terrorist activity financing offence.

            When FINTRAC has made this determination, it discloses only designated information to law enforcement agencies. Designated information is limited to key identifying information, such as name and address, date of birth and citizenship. It also includes certain information about the transaction itself, such as the name and address of the place of business where it occurred, the date of the transaction, amount and type of currency or value of the funds, account number, etc. To obtain further information from FINTRAC, police must first get a court order.

            FINTRAC may also, under specified circumstances, disclose designated information to CRA, Citizenship and Immigration, or foreign agencies with mandates similar to FINTRAC's. If FINTRAC determines that there are reasonable grounds to suspect that the information under its control would be relevant to threats to the security of Canada, designated information is disclosed to the Canadian Security Intelligence Service or CSIS.

 

Immunity

No criminal or civil proceedings may be brought against you for making a report in good faith concerning a suspicious transaction. This also applies if you are not required to submit a report to FINTRAC, but decide to provide information voluntarily to FINTRAC because of your suspicions of money laundering or financing of terrorist activity.

 

Penalties

There are penalties if you fail to meet the suspicious transaction reporting obligations. Failure to report a suspicious transaction could lead to up to five years imprisonment, a fine of $2,000,000, or both. However, penalties for failure to report do not apply to employees who report suspicious transactions to their employer – i.e., to our Compliance Officer.

 

NOTE:  However, the firm itself may take disciplinary action against the employee which can include immediate dismissal for failure to comply with the firm’s policies and procedures regarding reporting of suspicious transaction, large cash transactions, or terrorist property offences.

 

Powered by Lone Wolf Real Estate Technologies (CMS6)