The proposed changes broaden the scope of reporting entities in certain situations
On Feb. 15, the Government of Canada released a draft proposal for additional changes to the earlier amendments to the regulations made under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
The Act, which aims to combat money laundering and terrorist financing, obligates financial institutions and other covered entities to identify and keep records of their clients who are involved in certain financial transactions such as buying a money order or a life insurance policy or depositing funds. Among other requirements imposed under the law, these clients must show valid identification such as a birth certificate or driver’s license.
Since 2016, the Government has been conducting reviews with the intention of reforming the legal regime governing anti-money laundering and anti-terrorist financing in Canada. In July 2019, it issued regulations amending certain others made under the Act, which are now subject to additional proposed changes, according to the latest update on Feb. 15.
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The proposed amendments aim to ensure that the current regime keeps certain regulatory aspects, such as customer due diligence measures for certain industries and virtual currency record-keeping obligations, on par with international standards.
The proposed changes seek to “level the playing field” among reporting entities, particularly regarding their obligations in relation to politically exposed persons (PEPs) and the heads of international organizations (HIOs). Under the current regime, financial entities, securities dealers, money service businesses and life insurance companies must go out of their way – under certain circumstances – to decide whether a particular client can be considered a foreign PEP or a domestic PEP or an HIO, or an associate or family member of either. The proposed changes will significantly widen the scope of covered entities.
A similar change will be made in relation to the obligation to collect information on beneficial ownership. Currently, the regulations also require this of financial entities, securities dealers, money services businesses and life insurance companies. The proposed changes will likewise adopt a broader scope of application for this requirement.
Specific rules were set for casinos and the real estate industry, sectors found to be particularly vulnerable to money laundering. One proposed change imposes new customer due diligence measures on casinos. The receipt of $3,000 or more in a single transaction triggers an obligation on the part of the casino to seek identifying information from the customer involved.
As for real estate developers, brokers and sales representatives, they will be required to enter a business relationship with the client if the transaction involved triggers the obligation to seek identification. The presence of a business relationship will in turn impose additional requirements on the parties involved, such as recording the purpose and intended nature of the relationship.