When to identify individuals and confirm the existence of entities - Real estate brokers or sales representatives, and real estate developers. You are required to identify the individual at the time the transaction takes place, and confirm the existence of the entity on whose behalf the transaction is conducted within 30 days. Click here.
When to identify individuals and confirm the existence of entities - Real estate brokers or sales representatives, and real estate developers
June 2017
This guidance on client identification is applicable to real estate brokers or sales representatives, and real estate developers that are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations.
Details on how to identify individuals and confirm the existence of entities are available in FINTRAC’s guidance Methods to identify individuals and confirm the existence of entities.
Throughout this guidance, references to dollar amounts (such as $10,000) are in Canadian dollars. Furthermore, all references to cash mean money in circulation in any country (bank notes or coins) and does not include cheques, money orders or other similar negotiable instruments.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) specify when you must identify an individual or confirm the existence of an entity, and how you must do this. The point at which you identify a client will vary depending on the activity or transaction that is carried out. Knowing your clients includes identifying them in accordance with the Regulations, but you also have further obligations in this regard, such as requirements related to the ongoing monitoring of business relationships, and third party determination.
Identifying clients
As a real estate broker, sales representative, or a real estate developer, you must identify individuals and confirm the existence of entities for certain activities and transactions, as listed below. Entities can be corporations, trusts, partnerships, funds, and unincorporated associations or organizations.
When you have to confirm the existence of an entity that is a corporation, you also have to verify its name and address, and the names of the corporation’s directors.
When there are unrepresented parties, each real estate broker or sales representative representing a party to the transaction must take reasonable measures to identify the individual or confirm the existence of the entity that is unrepresented.
A real estate developer is considered to be a client if they hire a broker or sales representative to act as their agent for the purchase or sale of real estate. In this situation, the broker or sales representative must meet the obligations under the PCMLTFA and associated Regulations, which include identifying the real estate developer that retained their services.
A real estate developer does not need to be identified if the broker or sales representative representing them is also their employee. In this case, the real estate developer has the obligation to identify their client even if the employee performs this on their behalf.
The formation of business relationships and the ensuing obligations are tied to your requirements to identify clients. For non-account-based relationships, you are considered to be in a business relationship with every individual you have had to identify at least twice, and with every entity whose existence you have had to confirm at least twice. If you have not identified an individual or confirmed the existence of an entity because an exception applied, you are still considered to be in a business relationship and must conduct ongoing monitoring and keep certain records.
You are also required to take reasonable measures to determine if a client is acting on the instruction of a third party when creating a client information record or conducting a large cash transaction. In this case, reasonable measures may include asking the individual, or relying on information you may already have about the individual. If you determine that the individual in front of you is acting on someone else's instructions, that “someone else” is the third party.
As a real estate developer, that is an individual or entity, you must identify clients for the activities listed below when you sell to the public a new house, new condominium unit, new commercial or industrial building, or new multi-unit residential building. If you are a real estate developer that is a corporation, you must identify clients for the activities below when you sell to the public a new house, condominium unit, commercial or industrial building, or multi-unit residential building if you are acting on your own behalf, or on behalf of a subsidiary or affiliate.
As a real estate broker, sales representative, or a real estate developer, you are responsible for identifying clients for:
- Receipt of funds
- Client information records
- Large cash transactions
- Suspicious transactions
**Note: Exceptions to your client identification requirements are listed in the last section of this guidance.
1. Receipt of funds
You must identify an individual providing you funds, whether it is in cash or in another form, at the time the transaction takes place. You must also confirm the existence of any entity on whose behalf the funds are received within 30 days.
If you are a real estate broker or sales representative and you receive funds from a client who is represented by another real estate broker or sales representative, it is the other broker or sales representative who has to identify the client for the receipt of funds.
2. Client information records
You are required to identify the individual or confirm the existence of the entity on whose behalf the transaction is conducted when you create a client information record. You are required to identify the individual at the time the transaction takes place, and confirm the existence of the entity on whose behalf the transaction is conducted within 30 days.
As a real estate broker or sales representative, you must keep a client information record for every purchase or sale of real estate. As a real estate developer, you must keep a client information record of every sale of a house, condominium unit, commercial or industrial building and multi-unit residential building.
3. Large cash transactions
You must identify every individual who conducts a large cash transaction at the time the transaction takes place. A large cash transaction occurs when you receive $10,000 or more in cash in a single transaction. A large cash transaction also occurs when there are multiple cash transactions of less than $10,000 each that total $10,000 or more within a 24-hour period, when you know they are conducted by, or on behalf of the same individual or entity.
4. Suspicious transactions
You must take reasonable measures to identify every individual who conducts or attempts to conduct suspicious transactions before sending a Suspicious Transaction Report. Reasonable measures in this case may include asking the individual to provide photo identification.
All suspicious transactions and attempted suspicious transactions, including transactions that are normally exempt from client identification requirements, require you to take reasonable measures to identify your clients.
Keeping client identification information up to date
You must update client information at a frequency that will vary based on your risk assessment. As a part of ongoing monitoring requirements, you must keep all client identification information up to date. High-risk clients’ identification information must be updated more frequently, and you must take any other appropriate enhanced measures.
To keep client identification information up to date, you must take measures such as asking the client to provide information to confirm or update their identification information. In the case of an individual, this may also include confirming or updating the information by using the options that are available to identify individuals who are not physically present.
In the case of clients that are entities, measures to keep client identification information up to date may include consulting a paper or electronic record or obtaining information verbally.
Exceptions
As a real estate broker or sales representative, you are not required to verify the names of the directors when you confirm the existence of a corporation that is a securities dealer.
As a real estate broker, sales representative or real estate developer, you do not have to:
- re-identify an individual or re-confirm the existence of an entity if you previously did so using the methods specified in the Regulations in place at the time and kept the associated records, so long as you have no doubts about the information used;
- identify an individual and/or confirm the existence of an entity for the receipt of funds, or when a client information record is kept, if you conduct the transaction for a public body or very large corporation. The same is true regarding a subsidiary of either of those types of entities, if the financial statements of the subsidiary are consolidated with those of the public body or very large corporation;
- identify an individual or confirm the existence of an entity for the receipt of funds of any amount, if the amount is received from a financial entity or public body;
- identify an individual who conducts a large cash transaction if the cash is received from a financial entity or public body; or
- take reasonable measures to identify the individual who conducts or attempts to conduct a suspicious transaction only if:
- you have already identified the individual as required and have no doubts about the identification information; or
- you believe that identifying the individual would inform them that you are submitting a Suspicious Transaction Report.
- Date Modified:
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