As many REALTORS® are aware, significant modifications to Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (also known as the FINTRAC Regime) came into force on June 1, 2021. Key changes include:
- A new obligation to determine whether a client is a politically exposed person (commonly referred to as a “PEP”) or head of an international organization;
- A new obligation to obtain beneficial ownership information from corporate and other entity clients;
- A new obligation to report large virtual currency transactions; and
- A change as to what constitutes a “business relationship” under the law.
In addition to many smaller changes.
At first glance, these updates can seem intimidating. But before you go running for the hills, its important to take stock of what tools exist to help you get a handle on them.
What resources are available?
First, as a REALTOR® you have access to REALTOR Link®. On this site, members will find a template office policy manual, FAQs and two new forms that can be used as a step-by-step guide to walk members through their PEP and beneficial ownership obligations. Other resources include a brochure REALTORS® can use to explain to their clients why they require sensitive client information in order to comply with the law, a video, which summarizes the basics of the FINTRAC Regime, and a document produced by FINTRAC explaining the key changes.
Second, REALTORS® and brokerage staff who require more in-depth knowledge of the law should review the detailed guidance FINTRAC has produced on its website. This includes:
- Beneficial ownership requirements;
- Politically exposed persons and heads of international organizations guidance for non-account-based reporting entity sectors; and
- Frequently asked questions about domestic politically exposed persons and heads of international organizations.
Third, FINTRAC offers a helpful policy interpretation service that provides more detailed and technical interpretations about specific aspects of the law. They won’t provide legal advice, but they can go a long way in pointing you in the right direction. To request a policy interpretation you can contact FINTRAC at policy-interpretation@fintrac-canafe.gc.ca.
Returning to the recent changes in the law, it’s important to note FINTRAC has announced that until March 31, 2022, FINTRAC will be focusing its examination activities (i.e. audits) on assessing compliance with regulatory requirements that were in effect prior to June 1, 2021. This means although REALTORS® are still required to comply with the new obligations, and should make good faith efforts to do so, the likelihood of an administrative monetary penalty being levied if a deficiency is found with respect to the new obligations appears to be significantly lower.
Does this mean that the new changes are a walk-in-the park? No. REALTORS®, whether they are brokers or sales representatives, will have to work hard to make sure they understand what is now expected of them going forward. But hopefully these tools, and FINTRAC’s recent announcements, will give REALTORS® some comfort as they familiarize themselves with their new obligations.
The article above is for information purposes and is not legal advice or a substitute for legal counsel.
They should go where the money is being handled. The banks and closing lawyers move most of the finances. Realtors only see the deposit which is a small part of the money trail. When will they see the big picture. Realtors are easier to intimidate and blame when a deal gets dirty
As a result of a Supreme Court of Canada ruling, which ruled that Canada’s federal anti-money laundering laws violated solicited-client privilege, lawyers are currently not subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. However, lawyers remain subject to local law society anti-money laundering requirements. Conversely, financial institutions are subject to Canada’s federal anti-money laws.
We also have client confidentiality agency requirements. So why the difference? Also, the people hiding something know the loop holes, so won’t they all use lawyers going forward?
Client confidentiality for real estate brokers and sales representatives, while important, is quite different from solicitor-client privilege, which is a unique to lawyers. CREA continues to advocate for lawyers to be subject to Canada’s subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act as we believe the current state of the law is a gap that could be exploited by money launderers.
Let’s face it, money is moved by a lender or the holder of funds, those funds at source is where money is moving. As previously stated Realtors are the low hanging fruit, we do NOT originate funds other than a deposit which originates from a bank, most of the time, we do not handle large sums of cash, in fact never. So FINTRAC is chasing and intimidating Realtors seems more of a make work project for FINTRAC. How about examples of Realtors who have helped catch a money launderers? How many should have been caught at the bank and or the bank caught the money launderer? Easy questions but any answers?
Hi Marty,
CREA understand REALTORS® may be frustrated with having to comply with onerous ever changing complex obligations, especially in the middle of a pandemic. CREA has repeatedly raised its concerns on behalf of our sector with the federal Government and FINTRAC officials and will continue to do so. But given the size, importance and stability of the real estate market in Canada, money launderers and terrorists may attempt to funnel their ill-gotten gains here. Realistically, in light of international pressure on Canada to implement stricter anti-money laundering controls, including in the real estate sector, it is not realistic to expect these new requirements will disappear. These are international obligations that Canada is trying to meet to maintain its financial creditability on the world stage, set out by the Financial Action Task Force (FATF), which is the global anti-money laundering and terrorist financing watchdog that requires all reporting entities to be subject to the similar regulations. CREA will continue to raise its concerns with the government in order to mitigate the burden and obligations on REALTORS®.
If my daughter is buying a house but I am writing the cheque for the deposit, what steps are needed? Would the info be collected on me and she would be considered the third party. I am confused.
Hi Linda,
Under Canada’s anti-money laundering legislation (a.k.a. FINTRAC Regime) there are several requirements. Generally speaking:
1. The client must be ID’ed.
2. If the client is acting on behalf of a third party, a third party record must be recorded.
3. If funds are received, a receipt of funds record must be recorded and, possibly a large transaction report submitted (if funds are received in cash). The person providing the funds must also be ID’ed.
And possibly additional steps depending on the circumstances.
If you are uncertain what to do you should speak to your brokerage’s compliance officer. You may also wish to consult FINTRAC’s guidance at: https://www.fintrac- canafe.gc.ca/guidance-directives/1-eng or CREA’s materials at https://www.realtorlink.ca/content/realtorlink/crea/en_CA/resources—compliance/legal- compliance—national-standards/compliance-resources/money-laundering.html