Withdrawal of temporary COVID-related support to reporting entities
When the COVID-19 pandemic was declared, FINTRAC announced a series of temporary supports to assist reporting entities experiencing challenges in meeting their obligations due to the impact of public health measures.
While FINTRAC continues to monitor current COVID-19 conditions, we are preparing for the resumption of a number of regular business activities. The world is now well over a year in what has become our new normal, so it is important that reporting entities' compliance policies and procedures align with this new normal in order to meet the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.
FINTRAC has not been alerted to any pervasive reporting challenges due to factors associated with the COVID-19 pandemic. In fact, during this period, reporting entities were able to continue reporting using the normal reporting channels. If you are a reporting entity that is experiencing pervasive reporting challenges due to the pandemic that are not addressed in this communication, please contact your FINTRAC regional compliance officer or send an email to firstname.lastname@example.org.
As such, if you are a reporting entity with an internet connection, you must electronically submit all reports on suspicious transactions, large cash transactions, electronic funds transfers and casino disbursements to FINTRAC by means of FINTRAC's secure web reporting system, within the prescribed timeframes. The special email inbox (email@example.com) created at the beginning of the pandemic has now been decommissioned as it is no longer required.
That said, in instances where a reporting entity is prevented from reporting or will be reporting late for reasons beyond its control, the reporting entity can submit a voluntary self-declaration of non-compliance to VSDONC.ADVNC@fintrac-canafe.gc.ca, as soon as it has the opportunity to do so. This information will be taken into account in future compliance activities.
Verifying the identity of an individual, or confirming the existence of a corporation or entity other than a corporation
Robust measures to verify the identity of clients are the foundation of a strong anti-money laundering and anti-terrorist financing (AML/ATF) regime to prevent, detect and deter money laundering and terrorist activity financing, which threaten national security and compromise the integrity of the financial system. FINTRAC would like to emphasize to reporting entities the critical role they play in the fight against financial crimes, even during these challenging times.
Knowing your clients puts a reporting entity in a position to assess a proposed transaction and determine whether it aligns with what you know about that person or entity, and to assess whether there are reasonable grounds to suspect money laundering or terrorist activity financing where the transaction is outside of what is expected for that client.
The first step in knowing your clients is to verify their identity. To this end, there are prescribed methods in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) to verify the identity of a person or an entity. Each of the prescribed methods has a set of criteria associated with it in order to ensure that the method is applied consistently and effectively.
Valid and current in relation to provincial documents
Provincial governments continue to have in place measures to ensure the health and safety of their employees and all citizens. These include extending the validity of various government-issued documents that would have expired on or after March 1, 2020, so that in-person visits to renewal facilities can be avoided.
If a person presents a document or information affected by such a decision, a reporting entity must continue to determine the authenticity of a government-issued photo ID document. A reporting entity can consider the document or information that would have expired on or after March 1, 2020 as valid and current pursuant to its issuing authority, until issuing authorities announce otherwise.
Alternatively, reporting entities may wish to consider using another method to verify the identity of the person.
Verifying the identity of an individual not physically present.
Effective March 31, 2022, the temporary flexibility extended to reporting entities with respect to authenticating a government-issued photo ID document at a distance will end. This means that reporting entities will be required to use more than human judgement to authenticate government-issued photo ID document when a person is not physically present.
Pursuant to the PCMLTFR, a document used to verify the identity of a person must be authentic, valid and current. Given the shift to online interactions with clients, and prevalence of at-a-distance transactions, it is important that the right tools be used by a reporting entity to authenticate a document.
- In person, a reporting entity can view, even handle, the document to assess its qualities and characteristics, and determine whether or not it is authentic.
- At a distance, a reporting entity cannot physically inspect a document and so must find another way to authenticate it. In its guidance, FINTRAC has indicated that reporting entities need to have a process in place to authenticate documents, such as through the use of technology.
That is, reporting entities must have in place a process that involves more than just human judgement to authenticate a government-issued photo ID document when the document is not physically present.
Given the increase of online interactions, it is important that reporting entities put in place the policies and procedures necessary to meet the PCMLTFR requirement of determining the authenticity of a government-issued photo ID document at a distance in the absence of any flexibility.
For many reporting entities, the necessary tools are already in place, as the obligation to authenticate government-issued photo ID document has been in force since June 2019. However, for other reporting entities, the advanced notice is meant to provide the time needed to adapt their policies and procedures, should they choose to proceed with the government-issued photo ID method. Alternatively, reporting entities can use the dual process or credit file method to verify the identity of a person.
Confirming the existence of a corporation or entity other than a corporation
Effective June 1, 2021, reporting entities that are required to verify the identity of a corporation or an entity other than a corporation are required to refer to a record that is authentic, valid and current. FINTRAC expects reporting entities that choose to receive a paper record via fax, scan or email, to have a process in place to determine that it is authentic, valid and current.
Expectations for record keeping and re-verifying client identification
As stated on April 23, 2020, for any person or entity whose identity was verified using the temporary flexibility provided, reporting entities were expected to:
- keep a record of all clients identified using this temporary method; and
- re-verify the identity of their clients in accordance with the PCMLTFR when the physical distancing measures have been lifted by public health authorities.
Considering the temporary flexibility outlined above, and the expectation to re-verify identity, FINTRAC may ask a reporting entity to explain, in a compliance examination, the reasons why the identity of a person was not verified using a method other than the government-issued photo ID method, or the existence of the entity was not confirmed by means of an electronic version of a record obtained from a source accessible to the public. However, FINTRAC will continue to consider the impact of the COVID-19 pandemic, as well as, the realities of each reporting entity sector, and the temporary flexibility provided, when assessing a reporting entity's compliance with the obligations identified in the PCMLTFA and its associated Regulations, and will take a reasonable approach in its enforcement activities.
Note that depending on the volume of requests, it may take more time than usual for FINTRAC to respond.
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