IC will comply with record-keeping, client identification, reporting and compliance requirements of the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA); Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations; the Canadian Criminal Code; and the United Nations Suppression of Terrorism Regulations.
PCMLTFA creates a mandatory reporting system for suspicious and prescribed transactions and the cross-border movement of large amounts of currency and monetary instruments.
Canada is also a member of Financial Action Task Force (FATF), the agency that establishes international anti-money laundering standards. Canada has also signed and ratified the United Nations International Convention for the Suppression of the Financing of Terrorism and the Anti-Terrorism Act (ATA). The ATA creates measures to deter, disable, identify, prosecute, convict and punish terrorist organizations. In addition, the ATA provides new investigative tools for law enforcement and national security agencies. Specifically, the ATA make it a crime to: knowingly collecting or providing funds, either directly or indirectly, used to carry out terrorist activities; knowingly participating in, contributing to or facilitating the activities of a terrorist organization; instructing anyone to carry out a terrorist activity on behalf of a terrorist organization; or knowingly harbouring or concealing a terrorist.
The Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism and the United Nations Al-Qaida and Taliban Regulations (UN Regulations) provide a list of individuals or entities believed to be involved in, or associated with, terrorist activity (UN List). The UN Regulations, through resulting amendments to the Criminal Code, make it an offence for anyone in Canada, or any Canadian outside of Canada, to collect funds from, or provide funds to, any individual or entity appearing on the UN List.
FINTRAC is an anti-money laundering agency established by PCMLTFA.
FINTRAC’s mandate is to collect, analyze, assess and, where appropriate, disclose information relevant to the investigation and prosecution of money laundering and terrorist financing offences. FINTRAC is also responsible for conducting research and for undertaking educational measures to inform the public, those who are required to report suspicious transactions and the law enforcement community about the nature and extent of money laundering and terrorist financing activities, and effective detection, prevention and deterrence measures.
The United Nations (UN) defines money laundering as “any act or attempted act to disguise the source of money or assets derived from criminal activity.” It is the process whereby “dirty money” (money generated through criminal activity) is transformed into “clean money,” the criminal origin of which is difficult to trace. Money laundering has three recognized stages:
Any of the three stages may occur consecutively or concurrently.
In Canada, a money laundering offence involves concealing or converting property or the proceeds of property, knowing or believing that the property or proceeds were derived from the commission of another offence (predicate offence). Predicate offenses include, but are not limited to: drug dealing, bribery, gaming, robbery, fraud, theft, extortion and counterfeiting.
Methods of money laundering include:
FINTRAC describes terrorist financing as the provision of monies for terrorist activity including funds raised from legitimate sources, such as personal donations and profits from businesses and charitable organizations, as well as from criminal sources, such as from predicate offences.
Similar to money laundering, terrorist financing activity is intended evade authorities’ attention and to protect the identity of their sponsors and of the ultimate beneficiaries of the funds. Unlike laundering however, terrorist financing transactions tend to be in smaller amounts and thus, when they are derived from legitimate sources, the detection and tracking of these funds is more difficult.
Terrorist financing comes from two primary sources:
c. Risk Mitigation: IC will take necessary risk mitigation measures including: confirming that necessary client identification is provided prior to the acceptance of investors; and ensuring that the AML policy and outlined compliance regime are strictly adhered to. IC will have:
Effective internal controls such as:
Customer identification, due diligence and KYC procedures;
Operational assessment (products, services, clients and geographic locations) that are more vulnerable to abuse;
Informing staff of compliance initiatives and identified compliance deficiencies;
Developing operational continuity despite changes in management, employees or structure; and
Striving to meet all regulatory record keeping and reporting requirements.
General measures such as:
Development, implementation and review of policies and procedures of IC’s AML Compliance Regime;
iii. Risk-focused measures such as:
The last review was conducted in December 2013 upon which a risk report, recommendation report and final report to management was produced and presented to the UDP.
PCMLTFA defines a suspicious transaction as a “financial transaction that occurs in the course of (business) activities and in respect of which there are reasonable grounds to suspect the transaction is related to the commission of a Money Laundering offence and/or a terrorist activity financing offence”.
Determining suspicious transactions should be on evaluation of a number of factors and consideration of all surrounding circumstances. Industry specific indicators should be assessed. A single indication ma not necessarily provide reasonable grounds to suspect money laundering or terrorist financing. However, more than one may. Some common indicators are:
A consolidated list of the names of suspected terrorist organizations and individuals published under the Regulations Establishing a List of Entities made under the Criminal Code or the United Nations Suppression of Terrorism Regulations is found at the OFSI website: http://www.osfi- bsif.gc.ca/osfi/index_e.aspx?DetailID=627
In accordance with IC’s policy on Books and Records, IC will maintain all client account records created in the normal course of business in a safe and secure location. In addition, all AML related reports including suspicious transaction reports would be maintained.
Records will be maintained in a format and location that will permit them to be provided to FINTRAC within 30 days of request. Records will be maintained for a minimum of seven years.
Under the Act, IC must take steps to identify every person who is authorized to give instructions for an account, as well as ascertain the identity of the beneficial owner of the investment. The identity of said beneficiary must be verified within six months of the time the subscription is received. IC will collect the following identification for clients in order to comply with the AML Policy:
To identify an individual, IC will refer to the individual’s birth certificate, driver’s license, passport, record of landing, permanent resident card or other similar document.
Complete and detailed information regarding the client’s occupation is mandatory. If an individual is self-employed, the nature of the business must be provided. If the client is retired, the client’s previous employment should be noted.
To open corporate accounts, IC will require identify of all individuals who beneficially own more than 10% of that corporation, whether directly or indirectly. This involves obtaining the name, address, citizenship, occupation and employer of each beneficial owner and whether he or she is an insider or controlling shareholder of a publicly traded corporation or similar entity.
IC will also need to verify the identity of owners via collection of the names and occupations of all directors and a certificate of corporate status. Corporate resolutions are also required as evidence of who is authorized to trade in the account – the identity of which also must be verified.
Employees must be alert as to whether or not a third party is the beneficial owner of a new account or fund investment. IC and its personnel are required to take reasonable measures to determine whether or not the new client or fund investor is acting on behalf of a third party. If IC personnel have any grounds to suspect that the client or fund investor is acting on behalf of a third party, he or she must report this situation immediately to the CLO. The CLO will be responsible for maintaining a record to indicate whether, according to the client, the transaction is being conducted on behalf of a third party, and to indicate details of why it is suspected that the client is acting on behalf of a third party.
IC will need the identity of the settlor and all individual beneficiaries of more than 10% of the trust or account, whether directly or indirectly. IC will need the name, address, citizenship, occupation and employer of each and whether any is an insider or controlling shareholder of a publicly traded corporation or similar entity. Exceptions can be made for some beneficiaries such as minor children.
As support of the trust, a written trust agreement, other trust documents or a trust information form are will be requested. IC will also identify and verify the identification of all trustees of the trust.
Informal trusts, including personal trusts, will mandate a record about each of the beneficiaries. The information required in this record is the name, address and principal business and occupation of each beneficiary known at that time. If the beneficiary is an individual, the record also has to include the beneficiary’s date of birth and social insurance number.
For non-individual entities other than corporations and trusts, IC will request their constating documents including details of all beneficial owners holding a 10% interest. For example, IC may refer to a partnership agreement, articles of association or any other similar record that confirms the entity’s existence.
Valid foreign documents are required for the identification of non- Canadian investors equivalent to an acceptable type of Canadian identification document such as a valid foreign passport. Advisors should be mindful that non- Canadian clients would only be permitted from jurisdictions where IC and its advisors are registered or permitted to sell under an eligible exemptions.
Individual clients will be required to certify, through the new account application forms or initial client account documentation, that they are not Politically Exposed Foreign Persons.
A politically exposed foreign person is an individual who holds or has ever held one of the following offices or positions in or on behalf of a foreign country: a head of state or government; a member of the executive council of government or member of a legislature; a deputy minister (or equivalent); an ambassador or an ambassador’s attaché or counsellor; a military general (or higher rank); a president of a state-owned company or bank; a head of a government agency; a judge; or a leader or president of a political party in a legislature.
This certification extends to the client’s immediate family as well (such as: mother or father; child; spouse or common-law partner; spouse’s or common-law partner’s mother or father and brother, sister, half-brother or half-sister (that is, any other child of the individual’s mother or father). An individual or family member is a politically exposed foreign person regardless of their citizenship, residence status or birthplace.
If it is determined that an individual is a politically exposed foreign person for a new account, IC will
IC will do check existing client accounts to determine whether existing clients are politically exposed foreign persons.
OPTION 2: Combination of methods. To identify an individual using this second option, IC will have to use a combination of two of the methods noted below. In each of the two methods used, the individual’s information has to be consistent with what is in IC’s records. The information also has to be consistent from one method to the other.
The methods below may not apply for all clients. For example, the methods would not be available to identify a client outside Canada who is opening an account but has no Canadian credit history, no access to a Canadian guarantor and no deposit account with a financial entity. In this case, identification of the client using an identification document may necessitate the use of an agent or mandatory, as explained above.
a. Identification product or credit file method
c. Cleared cheque or deposit account method
IC does not accept cash transactions and will reject any prospective client that wishes to transact in cash. Business will only be conducted through recognized financial entities.
For any of the foregoing offences, any officer, director, or agent who directed, authorized, acquiesced or participated in the commission of the offence may also be deemed guilty of the offence.
Administrative monetary penalties (AMP) for non-compliance carry maximum penalties for individuals and entities (e.g. corporations), as reflected in the list below:
Last Update: December 2013
$1 to $1,000 $1 to $100,000
$1 to $100,000
$1 to $500,000
Employees do not need to be actively involved in a money-laundering scheme to face liability. A person who has knowledge of the tainted source of funds but still effects a transaction involving such funds may be charged with money laundering. As such, facilitating a financial transaction while wilfully or recklessly disregarding the source of the customer’s assets or the nature of the customer’s transactions can also result in criminal and/or civil liability for both employees and IC.
It is unlikely that a person or entity will be charged or convicted for an offence under the Act and the Regulations if they exercised proper due diligence to prevent its commission. Moreover, no criminal or civil proceedings will be brought against a person or entity for making a report under the Act in good faith to the appropriate regulatory body. For these reasons, compliance with the AML Policy is essential for the protection of both IC and all of its directors, officers and employees.
The limits above apply to each violation, and multiple violations can result in total fines that exceed these limits.
For more information on the AML Policy, please contact Amana Manor, the CAMLO.
FINTRAC Guidelines can be found at: http://www.fintrac-canafe.gc.ca/publications/guide/guide-eng.asp
Introduction Capital Inc. (IC) Anti-Money Laundering and Anti-Terrorist Financing Policy (AML Policy) is created to demonstrate IC’s commitment to prevent, detect and address non-compliance in regards to money laundering and terrorist financing activities. IC will not knowingly participate in any capacity in the advancement of a transaction that is suspected to be related to the commission of a money laundering or terrorist financing activity.
IC’s AML compliance regime operates on a risk-based approach (RBA). In the context of money laundering and terrorist financing, a RBA is a process that encompasses the following: IC’s risk assessment using certain factors; the risk-mitigation to implement controls to handle identified risks; keeping client identification and beneficial ownership information up to date; and the ongoing monitoring of financial transactions.
IC’s AML Compliance Regime is comprised of five key areas:
IC’s Anti-Money Laundering and Anti- Terrorist Financing Training Policy (AML Training Policy) is designed to focus on the fourth key area of IC’s AML Compliance Regime. All employees should understand and adhere to the AML Policy, particularly those who work in the areas relating to client identification, record keeping, and any of the types of transactions that have to be reported to FINTRAC.
The CAMLO will be responsible for designing and/or adopting an AML training module that will be rolled out to all employees including officers, directors, administrators and sales people. Currently, as there are only two full- time partners at IC, the CCO will be responsible for training the CEO on IC’s AML Compliance Regime.
IC’s AML training will review Canada’s AML regime in general including definitions of AML and ATF.
Employees will be made aware of circumstances where an enhanced level of caution is required in dealing with transactions, such as those involving countries or territories that have not yet established adequate anti-money laundering or anti-terrorist financing regimes consistent with international standards.
AML training will address specific instances of money laundering and terrorist financing that employees may face in their roles at the firm.
The CCO will conduct individual non-written training but may adopt a written AML training format or implement an on-line training module at a later date.
If written training is implemented to review and discuss AML in Canada and potential incidents that may employees may face, there will be an examination or quiz. Employees will be required to have a pass mark of at least 80% to successfully complete the training. Employees who fail to achieve a mark of 80% or higher will be asked to redo the AML testing. The quiz will be modified on an annual basis to ensure new questions will be included each year.
All Employees will receive training upon hire and refresher training on an annual basis. In addition, the CAMLO may administer additional training as she sees fit (i.e. if there is an instance that warrants special attention or if there has been a change in the legislation).
IC’s AML training and corresponding AML Training Policy will be reviewed on an annual basis for relevance.
AML training is mandatory. There will be serious repercussions for employees who fail to participate in the training and testing. Employees who are unable to complete the training during the timelines set by the CAMLO should make alternate arrangements. Employees should know that there are criminal and administrative monetary penalties for non-compliance with AML and ATF rules and regulations.
For more information on the AML Policy, please contact the CAMLO: Ms. Amana Manori.
FINTRAC Guidelines can be found at: