Guideline 6B: Record Keeping and Client Identification for Real Estate

July 2010

This replaces the previous version of Guideline 6B: Record Keeping and Client Identification for Real Estate Brokers or Sales Representatives issued in December 2008. The changes made to this version are indicated by a side bar to the right of the modified text in the PDF version.

Table of Contents

1. General
2. Record Keeping and Client Identification Obligations
   • 2.1 Real estate brokers or sales representatives
   • 2.2 Real estate developers
   • 2.3 Keeping personal information
3. Records To Be Kept
   • 3.1 General exceptions to record keeping
   • 3.2 Large cash transaction records
   • 3.3 Receipt of funds records
   • 3.4 Client information records
   • 3.5 Suspicious transaction report records
   • 3.6 Identification information on all records
   • 3.7 Records regarding unrepresented parties for real estate brokers and sales representatives
4. Client Identity
   • 4.1 When and how do you have to identify clients?
   • 4.2 General exceptions to client identification
   • 4.3 Client identity for large cash transactions
   • 4.4 Client identity for suspicious transactions
   • 4.5 Client identity for other records
   • 4.6 How to identify an individual
   • 4.7 Client identity for corporations and other entities
   • 4.8 Keeping client identification information up to date
5. Third Party Determination and Related Records
   • 5.1 Third party determination
   • 5.2 Third party records
6. How Should Records Be Kept?
7. Penalties for Non-Compliance
8. Comments?
9. How to Contact FINTRAC

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Guideline 6B: Record Keeping and Client Identification for Real Estate (PDF version, 101 KB)

1. General

The objective of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act is to help detect and deter money laundering and the financing of terrorist activities. It is also to facilitate investigations and prosecutions of money laundering and terrorist activity financing offences. This includes reporting, record keeping, client identification and compliance regime requirements for real estate brokers or real estate sales representatives and real estate developers.

A real estate broker or real estate sales representative means an individual or an entity that is registered or licensed in a province to sell or purchase real estate.

If you are a real estate broker or real estate sales representative, you are subject to the obligations explained in this guideline when you act as an agent regarding the purchase or sale of real estate. This includes the buying or selling of land, houses, commercial buildings, etc. Such activities trigger these obligations whether or not you get a commission for the real estate transaction and whether or not you have fiduciary duties regarding it. These obligations do not apply to you for activities related to property management. This means that if you only deal in property management transactions, such as leases or rental management, not purchases or sales, the obligations explained in this guideline do not apply to you.

A real estate developer means an individual or an entity other than a real estate broker or sales representative, who in any calendar year after 2007 has sold the following to the public:

• at least five new houses or condominium units;
• at least one new commercial or industrial building;
• at least one new multi-unit residential building each of which contains five or more residential units; or
• at least two new multi-unit residential buildings that together contain five or more residential units.

In the context of real estate developers, sales to the public include those to an individual, a corporation or any other type of entity. Sales to be public exclude those between affiliates and those between a subsidiary and its owner. Also in this context, a new house or other building is one that was constructed within the past two years and was not occupied for its intended purpose before being sold. For example, a home occupied by a developer as a sales office would still qualify as a new home, as long as it is sold within two years of being built.

From the day you first meet any of these conditions regarding your sales, you will be considered a real estate developer for the rest of that year. You will also be considered a real estate developer in following years, regardless of whether you meet any of the conditions in those following years. In other words, once you are considered a real estate developer, you will remain as such from that day forward, until there is a substantial and permanent change to your operations.

If you are a real estate developer as defined above, you are subject to the obligations explained in this guideline when you engage in activities relating to the sale of any of the following to the public:

• a new house;
• a new condominium unit;
• a new commercial or industrial building; or
• a new multi-unit residential building.

Also, if you are a real estate developer that is a corporation, you are subject to these obligations whether you sell those buildings on your own behalf or on behalf of a subsidiary or affiliate. In this context, an entity is affiliated with another entity if one of them is wholly owned by the other or both are wholly-owned by the same entity.

If you engage a real estate broker or sales representative to act as your agent for your sales to the public, the obligations explained in this guideline do not apply to you. In this case, the real estate broker or sales representative would be responsible for meeting these obligations. However, if the real estate broker or sales representative is your employee, you remain responsible for meeting these obligations.

If you are a real estate broker or sales representative or a real estate developer, this guideline has been prepared to help you meet your record keeping and client identification obligations.

This guideline uses plain language to explain the most common situations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act as well as the related Regulations. It is provided as general information only. It is not legal advice, and is not intended to replace the Act and Regulations.

Record keeping and client identification obligations for other types of reporting entities are explained by sector in other versions of this guideline (accountants; financial entities; securities dealers; life insurance companies, brokers and agents; money services businesses; agents of the Crown that sell or redeem money orders; casinos; dealers in precious metals and stones; and British Columbia notaries).

For more information about money laundering and terrorist financing, or other requirements under the Act and Regulations applicable to you, see the guidelines in this series:

• Guideline 1: Backgrounder explains money laundering, terrorist financing and their international nature. It also provides an outline of the legislative requirements as well as an overview of FINTRAC's mandate and responsibilities.
• Guideline 2: Suspicious Transactions explains how to report a suspicious transaction. It also provides guidance on how to identify a suspicious transaction, including general and industry-specific indicators that may help when conducting or evaluating transactions.
• Guideline 3: Submitting Suspicious Transaction Reports to FINTRAC explains when and how to submit suspicious transaction reports. There are two different versions of Guideline 3, by reporting method.
• Guideline 4: Implementation of a Compliance Regime explains the requirement for reporting entities to implement a regime to ensure compliance with their obligations under the Act and associated Regulations.
• Guideline 5: Submitting Terrorist Property Reports to FINTRAC explains to reporting entities when and how to submit a terrorist property report.
• Guideline 6: Record Keeping and Client Identification explains the requirement for reporting entities to identify their clients and keep records. There are several different versions of Guideline 6, with each one applicable to a particular sector.
• Guideline 7: Submitting Large Cash Transaction Reports to FINTRAC explains when and how to submit large cash transaction reports. There are two different versions of Guideline 7, by reporting method.
• Guideline 8: Submitting Electronic Funds Transfer Reports to FINTRAC explains when and how to submit electronic funds transfer reports. There are three different versions of Guideline 8, by type of electronic funds transfer and reporting method.
• Guideline 9: Submitting Alternative to Large Cash Transaction Reports to FINTRAC explains when and how financial entities can choose the alternative to large cash transaction reports. This is only applicable to financial entities.
• Guideline 10: Submitting Casino Disbursement Reports to FINTRAC explains when and how to submit casino disbursement reports. There are two different versions of Guideline 10, by reporting method.

If you need more help after you read this or other guidelines, call FINTRAC's national toll-free enquiries line at 1-866-346-8722.

Throughout this guideline, several references are provided to additional information that may be available on external Web sites. FINTRAC is not responsible for the accuracy, reliability or currency of the information contained on those external Web sites. The links provided are based on information available at the time of publishing of this guideline.

Throughout this guideline, any references to dollar amounts (such as $10,000) refer to the amount in Canadian dollars or its equivalent in foreign currency. Furthermore, all references to cash mean money in circulation in any country (bank notes or coins). In this context, cash does not include cheques, money orders or other similar negotiable instruments.

Your policies and procedures may cover situations other than the ones described in this guideline, for purposes other than your requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. For example, your provincial regulator may require you to apply additional policies and procedures or the retention period for your records may vary for purposes other than what is described in this guideline.

2. Record Keeping and Client Identification Obligations

A glossary is included in Appendix 1 to help you understand the most common terms used throughout this guideline.

2.1 Real estate brokers or sales representatives

If you are a real estate broker or sales representative, you have the following record keeping and client identification obligations when you engage in the activities described in section 1. The following summarizes your obligations and the rest of this guideline provides more detail.

2.2 Real estate developers

If you are a real estate developer, you have the following record keeping and client identification obligations when you engage in the activities described in section 1. The following summarizes your record keeping and client identification obligations and the rest of this guideline provides more detail.

2.3 Keeping personal information

The use of personal information in Canadian commercial activities is protected by the Personal Information Protection and Electronic Documents Act (PIPEDA), or by substantially similar provincial legislation. You have to inform individuals concerning the collection of personal information about them. However, you do not have to inform individuals when you include personal information about them in any reports that you are required to make to FINTRAC. You can get more information about your responsibilities in this area from the following:

• Industry Canada (http://privacyforbusiness.ic.gc.ca);
• The Office of the Privacy Commissioner of Canada (http://www.priv.gc.ca).
  • The Office of the Privacy Commissioner of Canada has developed, on its Web site, a Question and Answer document entitled PIPEDA and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (http://www.priv.gc.ca/resource/t_faqs_index_e.cfm) that will help you in understanding your responsibilities under both federal laws.

3. Records To Be Kept

As a real estate professional, you already keep information about your clients or potential clients. In many cases, you will find that what you are already doing is not all that different from what you have as obligations explained in this guideline.

As a real estate broker or sales representative, or as a real estate developer, you have to keep the following records in addition to the records described in section 5 when you engage in any of the activities described in section 1:

• Large cash transaction records;
• Receipt of funds records;
• Client information records;
• Suspicious transaction report records.

Details about each of these types of records are provided in subsections 3.2 through 3.5. Also, section 6 explains how your records should be kept.

See section 4 for information about identification requirements that may be associated to the events triggering record keeping requirements.

3.1 General exceptions to record keeping

If you keep information in a record that is already readily available in any other record that you have kept under these rules (as described throughout this guideline), you do not have to keep that information again.

You do not have to keep any of the records described in subsections 3.3 or 3.4 if you conduct a transaction for a public body or a very large corporation. The same is true regarding a subsidiary of either of those entities, if the financial statements of the subsidiary are consolidated with those of the public body or very large corporation.

In this context, a public body means any of the following or their agent:

• a Canadian provincial or federal department or Crown agency;
• an incorporated Canadian municipal body (including an incorporated city, town, village, metropolitan authority, district, county, etc.); or
• a hospital authority. A hospital authority means an organization that operates a public hospital and that is designated to be a hospital authority for GST/HST purposes. For more information on the designation of hospital authorities, refer to GST/HST Memoranda Series, Chapter 25.2, Designation of Hospital Authorities available from the Canada Revenue Agency Web site at http://www.cra-arc.gc.ca in the forms and publications listed by document type.

Also in this context, a very large corporation is one that has minimum net assets of $75 million on its last audited balance sheet. The corporation's shares have to be traded on a Canadian stock exchange or on a stock exchange outside Canada that is designated by the Minister of Finance. The corporation also has to operate in a country that is a member of the Financial Action Task Force (FATF). For more information about stock exchanges outside Canada that are designated by the Minister of Finance, refer to the July 2, 2008 news release available in the News area of the Department of Finance's Web site (http://www.fin.gc.ca).

To find out which countries are members of the FATF, refer to its Web site (http://www.fatf-gafi.org).

3.2 Large cash transaction records

This is a record for every amount of cash of $10,000 or more that you receive from a client in a single transaction. For example, if your client brings you $10,000 in cash for a deposit on the purchase of a house, you have to keep a large cash transaction record. In addition to this record, a large cash transaction will also require a report to FINTRAC as explained in Guideline 7: Submitting Large Cash Transaction Reports to FINTRAC.

If you know that two or more cash transactions of less than $10,000 each were made within a 24-hour period (i.e., 24 consecutive hours), by or on behalf of the same client, these are considered to be a single large cash transaction if they add up to $10,000 or more. In this case, you would have to keep a large cash transaction record, and report the transaction to FINTRAC as explained above.

Do not keep a large cash transaction record or make a large cash transaction report to FINTRAC if the cash is received from a financial entity or a public body. In this context, a financial entity means any of the following:

• a bank (i.e., one that is listed in Schedule I or II of the Bank Act) or an authorized foreign bank with respect to its operations in Canada;
• a credit union or a caisse populaire;
• effective July 31, 2010, a financial services cooperative (in the province of Quebec) or a credit union central (in all other provinces);
• a trust and loan company; or
• an agent of the Crown that accepts deposit liabilities.

For information about what is considered a public body in this context, see subsection 3.1.

Contents of a large cash transaction record
For any large cash transaction, the information you have to keep in a large cash transaction record includes the following:

• the amount and currency of the cash received;
• the name, date of birth and address of the individual from whom you received the cash and that individual's principal business or occupation;
• the date of the transaction;
• the purpose, details and type of transaction (for example, the cash was for a deposit on the purchase of a house, etc.), including whether any other individuals or entities were involved in the transaction;
• how the cash was received (for example, in person, by mail, by armoured car, or any other way); and
• if an account was affected by the transaction, include the following:
  • the number and type of any such account;
  • the full name of the client that holds the account; and
  • the currency in which the account's transactions are conducted.

Account information is required in this record if any account was affected. For example, this would include the account into which you deposited the cash, such as the broker, lawyer or notary's in-trust account.

Be as descriptive as possible regarding the business or occupation. Record information that clearly describes it, rather than use a general term. For example, in the case of a consultant, the occupation recorded should reflect the area of consulting, such as “information technology consultant” or “consulting forester”. As another example, in the case of a professional, the occupation should reflect the nature of the work, such as “petroleum engineer” or “family physician”.

If you have to identify the individual conducting the large cash transaction, see subsection 3.6 for additional information that is required on the large cash transaction record.

3.3 Receipt of funds records

A receipt of funds record is required when you receive any amount, whether or not it is in cash. If you have to keep a large cash transaction record, you do not have to keep a receipt of funds record for the same transaction.

You do not have to keep a receipt of funds record if the funds are received from a financial entity or a public body. For information about what is considered a financial entity in this context, see subsection 3.2. For information about what is considered a public body in this context, see subsection 3.1.

When a real estate broker or sales representative receives funds from a client represented by another real estate broker or representative, it is that other broker or sales representative who has to keep the receipt of funds record. If the client in this situation is a corporation, that other broker or sales representative also has to keep the information about the power to bind the corporation regarding the transaction.

Contents of a receipt of funds record
For any receipt of funds, the information you have to keep in a receipt of funds record includes the following:

• the amount and currency of the funds received;
• the name, date of birth and address of the individual from whom you received the funds and that individual's principal business or occupation (for more information about recording business or occupation, see subsection 3.2, under the heading “Contents of a large cash transaction record”);
• the date of the transaction;
• the purpose, details and type of transaction (for example, the funds were for a deposit on the purchase of a house, etc.), including whether any other individuals or entities were involved in the transaction;
• if the funds received were cash, how the cash was received (for example, in person, by mail, by armoured car, or any other way); and
• if an account was affected by the transaction, include the following:
  • the number and type of any such account;
  • the full name of the client that holds the account; and
  • the currency in which the transaction was conducted.

Account information is required in this record if any account was affected. For example, if the funds were received by cheque, this would include the account on which that cheque was drawn. However, if the receipt of funds record is about funds received from your client by another real estate broker or sales representative (you have to keep the record in this case, as explained above) you only have to include the number and type of any such account and the full name of the client that holds the account if reasonable efforts enable you to get that information

Account information for a receipt of funds record also includes information about the account into which the funds are deposited, such as the broker's in-trust account. However, if you are required to keep a receipt of funds record for funds received from your client by another real estate broker or sales representative, you are not required to provide the account number or the full name of the account holder for any in-trust account held by another real estate broker or sales representative. In this case, the receipt of funds record would have to indicate that an in-trust account for another broker or sales representative was involved, but the rest of the information about the in-trust account is not required.

If the receipt of funds record is about an entity, you will have to include the entity's name, address and nature of their principal business.

If the receipt of funds record is about a corporation, you also need to keep a copy of the part of the official corporate records showing the provisions relating to the power to bind the corporation regarding the transaction. This could be a certificate of incumbency, the articles of incorporation or the bylaws of the corporation that set out the officers duly authorized to sign on behalf of the corporation, such as the president, treasurer, vice-president, comptroller, etc. If there were changes subsequent to the articles or bylaws that relate to the power to bind the corporation regarding the purchase and these changes were applicable at the time that the record had to be kept, then the board resolution stating the change would be included in this type of record.

If you have to identify the individual conducting the transaction, see subsection 3.6 for additional information that is required on the receipt of funds record.

It is possible that you receive funds from someone who is not your client in a purchase or sale of a property. For example, a young couple make an offer on a house, but the funds for the associated deposit are given to you by one of their parents. In this case, you would have to keep the receipt of funds record about the parent, not the young couple. However, if the young couple give you the funds (whether the funds were given to them by a parent or anyone else), the receipt of funds record would be about the young couple.

You are not required to determine if a third party is involved in the receipt of funds. However, you do have to make this determination regarding the purchase or the sale, as explained in subsection 5.1.

3.4 Client information records

As a real estate broker or sales representative, you also have to keep a client information record for every purchase or sale of real estate. As a real estate developer, you also have to keep a client information record for every sale of a house, a condominium unit, a commercial or industrial building or a multi-unit residential building.

The client information record sets out the client's name and address, and the nature of the client's principal business or occupation. If the client is an individual, the client information record also has to include the individual's date of birth. If there is more than one individual purchasing or selling, you have to keep a client information record about each individual.

If the client information record is about an entity, in addition to the above-mentioned information about the individual conducting the transaction for the entity, the record also has to include the entity's name and address as well as the nature of the entity's principal business.

If the client information record is about a corporation, you also need to keep a copy of the part of the official corporate records showing the provisions relating to the power to bind the corporation regarding the transaction. This could be a certificate of incumbency, the articles of incorporation or the bylaws of the corporation that set out the officers duly authorized to sign on behalf of the corporation, such as the president, treasurer, vice-president, comptroller, etc. If there were changes subsequent to the articles or bylaws that relate to the power to bind the corporation regarding the transaction, and these changes were applicable at the time that the record had to be kept, then the board resolution stating the change would be included in this type of record.

However, the requirement to keep a record relating to the power to bind does not apply if you also have to keep a large cash transaction record about the purchase or sale of real estate.

3.5 Suspicious transaction report records

When you have to report a suspicious transaction to FINTRAC, you have to keep a copy of the report. See Guideline 3: Submitting Suspicious Transaction Reports to FINTRAC for more information about obligations related to this report.

3.6 Identification information on all records

If you have to identify an individual, as explained in section 4, in association with any of the records mentioned in section 3, you have to keep the individual's name with that record. You also have to keep the following with that record.

Identification documents
If you have to identify the individual using an identification document, the record has to include the type of document you used to confirm the individual's identity, its reference number and its place of issue.

Identification of clients not physically present
If you do not use an identification document but use methods for a client who is not physically present (as described in subsection 4.6), you have to include whichever of the following, according to the methods used:

• If you use a cleared cheque to confirm the individual's identity, the record has to include the name of the financial entity and the account number of the deposit account on which the cheque was drawn;
• If you confirm that the individual holds a deposit account with a financial entity, the record has to include the date on which you made the confirmation as well as the name of the financial entity where the account is held and the number of the account;
• If you use an identification product, the record has to include the name of the identification product, the name of the entity offering it, the search reference number and the date you used the product to identify the individual;
• If you consult a credit file, the record has to include the name of the entity keeping the credit file and the date you consulted it; and
• If you use an attestation signed by a commissioner of oaths in Canada or a guarantor in Canada, you have to keep the attestation.

3.7 Records regarding unrepresented parties for real estate brokers and sales representatives

As explained in subsection 4.1, if there are unrepresented parties in a real estate transaction in which you are involved as a broker or sales representative, you have to identify the unrepresented individuals or confirm the existence of the unrepresented entities. If you are not able to do so after taking reasonable measures, you will have to keep a record of the measures you took and why you were unable to identify them or confirm their existence.

4. Client Identity

4.1 When and how do you have to identify clients?

As a real estate broker or sales representative, or as a real estate developer, you have client identification obligations when you engage in any of the activities described in section 1.

You have to take the following measures to identify individuals or entities, subject to the general exceptions in subsection 4.2.

Subsections 4.3 to 4.5 explain the need to identify individuals when an event triggers the requirement. Any individuals that you have not already identified according to these rules must be identified if any of the situations described in those subsections occurs. However, some exceptions apply for existing clients and transactions with public bodies or large corporations, as explained in subsection 4.1.

See section 3 for information about record keeping requirements that may be associated to the events triggering identification requirements.

Identification requirements about each party in a real estate transaction for real estate brokers and sales representatives
If the parties in a real estate transaction are each represented by a different real estate broker or sales representative, you have to identify the individual or confirm the existence of the entity that you represent in the transaction. If some parties in a real estate transaction are not represented by a real estate broker or sales representative while other parties are, each real estate broker or sales representative that represents a party to the transaction has to take reasonable measures to identify or confirm the existence of the parties that are not represented. In this situation, if you are unable to identify or confirm the existence of the parties that are not represented, you will have to keep a record as explained in subsection 3.

4.2 General exceptions to client identification

In addition to the exceptions explained throughout the rest of section 4, the following general exceptions apply to client identification requirements.

Existing clients
Once you have confirmed the identity of an individual as explained in this guideline, you do not have to confirm their identity again if you recognize the individual (visually or by voice) at the time of a future event that would otherwise trigger the identification requirement. However, if you have any doubts about the identification information previously collected, you will have to identify that individual again.

Once you have confirmed the existence of a corporation and confirmed its name, address and the names of its directors (as explained in subsection 4.7), you are not required to confirm that same information in the future.

Once you have confirmed the existence of an entity other than a corporation (as explained in subsection 4.7), you are not required to confirm that same information in the future.

Certain types of transactions
You do not have to identify clients as described in subsection 4.5 if you conduct a transaction for a public body or a very large corporation. The same is true regarding a subsidiary of either of those entities, if the financial statements of the subsidiary are consolidated with those of the public body or very large corporation.

For information about what is considered a public body or a very large corporation in this context, see subsection 3.1.

4.3 Client identity for large cash transactions

You have to identify any individual with whom you conduct a large cash transaction, at the time of the transaction, if you have to keep a large cash transaction record for it, as described in subsection 3.2.

See subsection 4.6 to find out how to identify an individual for a large cash transaction.

4.4 Client identity for suspicious transactions

When you have to send a suspicious transaction report to FINTRAC, you have to take reasonable measures, before the transaction is reported, to identify the individual who conducted it. This will not apply in the following circumstances:

• if you had already identified the individual as required and you have no doubts about that previous identification information;
• if you believe that doing so would inform the individual that you are submitting a suspicious transaction report; or
• the transaction being reported was an attempted transaction. Guideline 2: Suspicious Transactions provides more information about reporting attempted transactions.

In this context, reasonable measures to identify an individual include asking the individual for an identification document. They also include using either of the options available to identify individuals who are not physically present. However, reasonable measures exclude any method that you believe would inform the individual that you are submitting a suspicious transaction report.

4.5 Client identity for other records

You have the following identification requirements when you have to keep a receipt of funds record, as explained in subsection 3.3, or a client information record, as explained in subsection 3.4.

As explained in subsection 3.3, 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 representative, it is that other broker or sales representative who has to keep the receipt of funds record. In this situation, the other broker or sales representative would also have to identify or confirm the existence of the client.

Individuals
You have to identify individuals for whom you keep a receipt of funds record or a client information record. You have to do this at the time of the transaction related to the record.

See subsection 4.6 to find out how to identify an individual for a receipt of funds record or a client information record.

Entities
You have to confirm the existence of any entity for which you have to keep a receipt of funds record or a client information record. You have to do this within 30 days of the transaction related to the record.

In the case of a corporation, in addition to confirming its existence, you also have to determine the corporation's name, address and the names of its directors within 30 days of the transaction related to the record.

To find out how to confirm the existence of a corporation, read the information in subsection 4.7, under the heading “Corporations”. To find out how to confirm the existence of an entity other than a corporation, read the information in subsection 4.7 under the heading “Entities other than corporations”.

4.6 How to identify an individual

See subsection 3.6 for additional information that is required on certain records when you have to identify individuals.

To identify an individual, refer to the individual's birth certificate, driver's licence, passport, record of landing, permanent resident card or other similar document.

You can refer to an individual's provincial health card, but only if it is not prohibited by provincial or territorial legislation. For example, you cannot refer to an individual's provincial health card from Ontario, Manitoba or Prince Edward Island since health cards cannot be used for this purpose in these provinces. As another example, in Quebec, you cannot request to see a client's health card, but you may accept it if the client wants to use it for identification purposes. If you have questions about the use of health cards for identification, please contact the appropriate provincial issuer for more information.

For a document to be acceptable for identification purposes, it must have a unique identifier number. Also, the document must have been issued by a provincial, territorial or federal government. For example, a birth or baptismal certificate issued by a church would not be acceptable for this purpose. Also, an identification card issued by an employer for an employee (i.e. an employee identification card) is not acceptable.

The document also has to be a valid one and cannot have expired. For example, an expired document, such as a driver's licence, would not be acceptable.

A social insurance number (SIN) card can be used to verify the identity of a client, but the SIN (i.e. the number itself) is not to be provided to FINTRAC on any type of report. The Office of the Privacy Commissioner (http://www.priv.gc.ca) has produced a fact sheet concerning best practices for the use of SINs. Please consult it for more information on this topic.

An example of other documents that can be used to verify the identity of a client includes a certificate of Indian status. Another example is a provincial or territorial identification card issued by any of the following (or their successors):

• the Insurance Corporation of British Columbia;
• Alberta Registries;
• Saskatchewan Government Insurance;
• the Department of Service Nova Scotia and Municipal Relations;
• the Department of Transportation and Public Works of the Province of Prince Edward Island;
• Service New Brunswick;
• the Department of Government Services and Lands of the Province of Newfoundland and Labrador;
• the Department of Transportation of the Northwest Territories; or
• the Department of Community Government and Transportation of the Territory of Nunavut.

Valid foreign identification, if equivalent to an acceptable type of Canadian identification document, would also be acceptable for the purposes explained in this guideline. For example, a valid foreign passport is acceptable.

When you refer to a document to identify an individual, it has to be an original, not a copy of the document. In cases where it is not possible for you to view the original yourself, you may choose to use an agent or mandatary to verify the original identification document on your behalf. Even if you use an agent or mandatary, you are responsible for making sure the identification requirements are met.

Use of an agent or mandatary
If you use an agent or mandatary for client identification, you have to enter into a written agreement or arrangement with the agent or mandatary outlining what you expect them to do for you. In addition, you have to obtain from the agent or mandatary the customer information that was obtained according to the agreement or arrangement.

Your agent or mandatary can identify your client for you using an identification document. In cases where your client is not physically present at the conducting of a transaction, your agent or mandatary can also use the options explained below.

Individual not physically present
To identify an individual who is not physically present, you have to use a combination of two of the following methods. In each of the two methods you use, the individual's information has to be consistent with what you have in your records. The information also has to be consistent from one method to the other. For example, if each of the methods you use has the name, address and date of birth information about the individual, all of it has to agree with what you have in your records.

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 conducting a real estate transaction with you, 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 mandatary, as explained above.

4.7 Client identity for corporations and other entities

You have to confirm the existence of any corporation or other entity for which you have to keep a client information record or a receipt of funds record, within 30 days of the transaction associated to the record. In the case of a corporation, in addition to confirming its existence, you also have to determine the corporation's name, address and the names of its directors, within 30 days of the transaction.

Corporations
To confirm the existence of a corporation as well as the corporation's name and address, refer to the following documents:

• the corporation's certificate of corporate status;
• a record that has to be filed annually under provincial securities legislation; or
• any other record that confirms the corporation's existence. Examples of these include such other records as the corporation's published annual report signed by an independent audit firm, or a letter or a notice of assessment for the corporation from a municipal, provincial, territorial or federal government.

You also have to confirm the names of the corporation's directors. This does not include verifying their identity. To confirm the names of the corporation's directors, you may need to see the list of the corporation's directors submitted with the application for incorporation. For real estate brokers or sales representatives, if the client is a corporation that is a securities dealer, you do not need to ascertain the name of the corporation's directors. In this context, a securities dealer means an individual or entity authorized under provincial legislation to engage in the business of dealing in securities or any other financial instruments or to provide portfolio management or investment advising services.

The record you use to confirm a corporation's existence can be a paper or an electronic version. Although such information may be available verbally (such as by phone), it is not acceptable for these purposes, as you have to refer to a record. If the record is in paper format, you have to keep the record or a copy of it.

If the record is an electronic version, you have to keep a record of the corporation's registration number, the type and source of the record. An electronic version of a record has to be from a public source. For example, you can get information about a corporation's name and address and the names of its directors from the Corporations Canada database which is accessible from Industry Canada's Web site (http://www.ic.gc.ca). As another example, you may also get this type of information if you subscribe to a corporation searching and registration service.

Entities other than corporations
In the case of an entity other than a corporation, refer to a partnership agreement, articles of association or any other similar record that confirms the entity's existence. The record you use to confirm the existence of an entity can be paper or an electronic version. Although such information may be available verbally (such as by phone), it is not acceptable for these purposes, as you have to refer to a record. If the record is in paper format, you have to keep the record or a copy of it.

If the record is an electronic version, you have to keep a record of the entity's registration number, the type and source of the record. An electronic version of a record has to be from a public source.

4.8 Keeping client identification information up to date

Your compliance program has to include an assessment, in the course of your activities, of the risk of money laundering or terrorist financing. According to this assessment, in higher risk situations, you will have to take reasonable measures to keep client identification information up to date.

In this context, reasonable measures include asking the client to confirm or update identification information. In the case of an individual client, reasonable measures also include confirming or updating the information through the options available to identify individuals who are not physically present. This can include obtaining information verbally to keep client identification information up to date.

In the case of clients that are entities, reasonable measures include consulting a paper or electronic record as explained in subsection 4.7, or obtaining information verbally to keep client identification information up to date.

The frequency with which client identification information is to be kept up to date will vary in accordance with the context in which transactions occur, and therefore could differ from one situation to the next. However, for high risk situations, frequency for keeping client identification information up to date should be at least every two years.

Guideline 4: Implementation of a Compliance Regime provides more information about risk assessment requirements.

5.Third Party Determination and Related Records

5.1 Third party determination

You have to determine whether there is a third party involved in a transaction when you have to keep any of the following records:

• Large cash transaction record
  Whenever you have to keep a large cash transaction record as explained in subsection 3.2, you have to take reasonable measures to determine whether the individual who gives you the cash is acting on the instructions of a third party.
  
  
• Client information record
  Whenever you are required to keep a client information record as explained in subsection 3.4, you have to take reasonable measures to determine whether the client is acting on the instructions of a third party.

In this context, a third party is an individual or entity other than the individual who conducts the transaction. When you are determining whether a “third party” is involved, it is not about who “owns” the money, but rather about who gives instructions to deal with the money. To determine who the third party is, the point to remember is whether the individual in front of you is acting on someone else's instructions. If so, that someone else is the third party.

In making a third party determination when employees are acting on behalf of their employers, they are considered to be acting on behalf of a third party.

If you determine that there is a third party involved in the transaction, you have to keep a record as explained below. However, you do not have to identify or confirm the existence of a third party.

Reasonable measures
What constitutes reasonable measures will vary in accordance with the context in which they occur, and therefore could differ from one situation to the next. However, reasonable measures would include retrieving the information already contained in your files or elsewhere within your business environment, or obtaining the information directly from the client.

5.2 Third party records

If you determine that there is in fact a third party who gave instructions to the individual conducting the transaction, you have to keep a record of the following information:

• the third party's name, address and principal business or occupation;
• if the third party is an individual, the third party's date of birth;
• the incorporation number and place of incorporation if the third party is a corporation; and
• in the case of a large cash transaction, the nature of the relationship between the third party and the individual who gives you the cash; or
• in the case of a client information record, the nature of the relationship between the third party and the client. For examples of third party relationships, see field 18 of Part G in the large cash transaction report.

For more information about recording business or occupation, see subsection 3.2, under the heading "Contents of a large cash transaction record".

If you are not able to determine that there is in fact a third party, but you have reasonable grounds to suspect that there are instructions of a third party involved, you have to keep a record to indicate the following:

• in the case of a large cash transaction, whether, according to the individual giving the cash, the transaction is being conducted on behalf of a third party; or
• in the case of a client information record, whether, according to the client, the transaction is being conducted on behalf of a third party.

This record must also indicate details of why you suspect the individual is acting on a third party's instructions.

6. How Should Records be Kept?

You should maintain an effective record keeping system to enable FINTRAC to have access to the records in a timely fashion. Your records have to be kept in such a way that they can be provided to FINTRAC within 30 days of a request to examine them.

For the requirements explained in this guideline, you can keep records in a machine-readable or electronic form, as long as a paper copy can be readily produced from it.
For example, if you have a document imaging system, you do not have to produce the original document for these purposes, as long as you can print the imaged one.

The record keeping requirements explained in this guideline are about each record to be kept. Your record keeping system can store the information required for any one record separately, as long as you are able to readily retrieve and put the information together for the record whenever necessary.

You are not required to keep a copy of the reports you make to FINTRAC (other than the suspicious transaction report as explained in subsection 3.5), but you may choose to do so. It is recommended that you keep the information that FINTRAC sends you in the acknowledgement message about each report processed. This provides the date and time the report was received along with its identification number.

Timeframe for keeping records
You have to keep records for five years, as follows:

• In the case of client information records and records to confirm the existence of an entity (including a corporation), these records have to be kept for five years from the day the last business transaction was conducted.
• In the case of a copy of a suspicious transaction report, the record has to be kept for a period of at least five years following the date the report was made.
• All other records must be kept for a period of at least five years following the date they were created.

Employees or contractors who keep records for you
Your employees who keep records (as described in section 3) for you are not required to keep those records after the end of their employment with you. The same is true for individuals in a contractual relationship with you, after the end of that contractual relationship. This means that you have to get and keep the records that were kept for you by any employee or contractor before the end of that individual's employment or contract with you.

7. Penalties for Non-Compliance

Failure to comply with your record keeping or client identification requirements can lead to criminal charges against you. Conviction of failure to retain records could lead to up to five years imprisonment, to a fine of $500,000, or both. Alternatively, failure to keep records or identify clients can lead to an administrative monetary penalty. For more information on penalties, you can also consult the Penalties for non-compliance section of FINTRAC's Web site.

8. Comments?

These guidelines will be reviewed on a periodic basis. If you have any comments or suggestions to help improve them, please send your comments to the mailing address provided below, or by email to guidelines-lignesdirectrices@fintrac-canafe.gc.ca.

9. How to Contact FINTRAC

For further information on FINTRAC and its activities, reporting and other obligations, please go to FINTRAC's website (http://www.fintrac-canafe.gc.ca) or contact FINTRAC:

Financial Transactions and Reports Analysis Centre of Canada
234 Laurier Avenue West, 24th floor
Ottawa, Ontario
Canada K1P 1H7

Toll-free: 1-866-346-8722

Glossary of Terms

Client information record

A record of information about the client for a purchase or sale of real estate. See subsection 3.4 for more information.

Large cash transaction record

A record of information about the individual from whom you receive $10,000 or more in cash. This is also about the transaction itself. See subsection 3.2 for more information.

New

In the context of real estate developers, a new house, new condominium unit, a new commercial or industrial building or a new multi-unit residential building means one that was constructed within the past two years and was not occupied for its intended purpose before being sold.

Public

In the context of real estate developers, sales to the public include those to an individual, a corporation or any other type of entity. Sales to the public exclude those between affiliates and those between a subsidiary and its owner.

Real estate broker

An individual or an entity that is registered or licensed in a province to sell or purchase real estate.

Real estate sales representative

An individual who is registered or licensed in a province to sell or purchase real estate.

Real estate developer

An individual or an entity, other than a real estate broker or sales representative, who sells new houses or condominium units, new commercial or industrial buildings or new multi-unit residential buildings. See section 1 for more information.

Receipt of funds record

A record of information about the individual or entity from whom you receive any amount of funds. This is also about the transaction itself. See subsection 3.3 for more information.

Third party

A third party is an individual or entity other than the individual who conducts the transaction. See section 5 for more information.

Suspicious transaction

A suspicious transaction is one for which there are reasonable grounds to suspect that the transaction is related to a money laundering offence or a terrorist activity financing offence. It can include one that was attempted. See Guideline 2: Suspicious Transactions for more information.