Transcript: New obligations webinars - Life Insurance and Securities Dealers

Good afternoon, I´m Peter Lamey. Welcome to FINTRAC´s webinar for life insurance and securities dealers.

This series of seminars will explain the new legislative requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act or PCMLTFA. Many of these changes will come into force in 2008 and 2009.

Today's presenter for life insurance and securities dealers is Christopher Lawton, Compliance Officer with FINTRAC.

I would like to remind participants that it is possible to ask questions during the (live) presentation by using the email on their screen.

We will pause from time to time to take questions from the audience. We have more than 200 people registered for today's presentation. It may not be possible to answer all of the questions in the time that we have allotted, but rest assured that if you send in the question, we will reply to your questions

We will now turn things over to Chris and begin today's seminar.

Thanks very much Peter and thank you to all of you for being with us this afternoon. As Peter mentioned, there are a number of you online with us this afternoon. I'll ask, if you can, to please try to focus your questions on the new obligations, on the content of the presentation itself. As Peter mentioned, we will be happy to get back to you on any questions that we are not able to address during the presentation.

You will be responsible for advancing your own slides. You will be given an indication of what slide we are on. You will have control over moving forwards or backwards within the deck of slides that are going to be presented today. Listen to the cues that will be given in terms of what slide we will be advancing to.

I will move past slide 1, our first slide, and on to slide 2.

Presentation Overview

Slide 2 gives an overview of what we will be discussing this afternoon. Primarily, we will review the overall goals and objectives of all these new changes that will be coming into force over the next year or so, and then the categories of each of these new changes; we will go into specific details for reporting requirements, client identification and record keeping requirements, some due diligence measures that are being introduced, changes to the compliance regime, including the addition of a new element to the compliance regime, and then we will discuss the administrative monetary penalties regime which will be coming into force at the end of this year. With that, we will move on to our third slide and just give you a bit of background.

Introduction

In December 2006, the Parliament of Canada amended the PCMLTFA, and following those amendments, changes were also made to related regulations. This is what created the authorization for the development of these new regulations and included these new requirements. The regulations that have been amended include our main PCMLTFA regulations, changes to our suspicious transaction reporting requirements and the addition, as I mentioned, of regulations with respect to administrative monetary penalties. By and large, all of these new obligations will be coming into force on
June 23, 2008. This will be the date when you are expected to have these new programs, new policies, and new procedures in place. For any requirements that have a different coming into force date, I will be sure to mention that, at the time, as I am covering the slide.

We will move on to slide 5 which covers the objectives of the new requirements.

Objectives of the New PCMLTFA Requirements

In terms of what we are trying to achieve and what the Department of Finance was aiming to achieve in actually developing and introducing these new obligations. Certainly, after five years, we are looking to build on FINTRAC's existing experience and ensure that we have the most robust and strongest anti-money laundering (AML) and counter terrorist financing (CTF) regime possible. We want to address gaps in the legislation that we had identified, areas that needed enhanced due diligence measures based on our experience of the previous five years, and to take steps to further enhance our ability to detect money laundering (ML) offences and to deter terrorist financing (TF). We are certainly aiming to make it more difficult to conduct illicit transactions and to take steps to combat organized crime. I'll move into some of the changes now.

Definition

On slide 6, I will speak to one change, which applies only to securities dealers. That is to say we have actually changed the definition of what a securities dealer is, in the context of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). This is, in some cases, different than the definition that you would be aware of under provincial legislation. We want to clarify just what in fact constitutes a securities dealer under our legislation.

The definition of "securities dealer" is: "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."

Words in bold that you see are modifications aiming at clarifying our intent and clarifying who is covered under the definition, who then has compliance and reporting obligations under the PCMLTFA with respect to the securities sector.

Changes to Reporting

This is where we get into more specific discussions about the changes and how they impact both the securities and the life insurance sector. I should note that, for the purposes of this presentation, we have combined these sectors because the obligations are relatively similar. In any instance where a particular obligation only applies to one of these sectors, I will be sure to indicate to which sector the obligation applies. It will be indicated on the slide as well.

Suspicious Attempted Transactions

One of the main changes is in the area of reporting and this is in the area of SATs (suspicious attempted transactions).

I am sure that most of you are aware that there has been a requirement up until now to report all suspicious transactions to FINTRAC. That is to say, a transaction that you complete with a client, but for whatever reason, you may believe could be related to a terrorist financing or money laundering event.

We are expanding that obligation so that suspicious circumstances that were intended to lead to a transaction, that is not completed - be that because the customer decides not to go through with the transaction or because you decide not to carry through with the transaction for whatever reason - there is also a reporting obligation in this area.

Specifically, what do we mean when we say an attempted transaction? This is a transaction where a client clearly intended to carry through with the transaction and took concrete forms of action to do so. It is not simply taking an enquiry or taking very initial business inquiry related steps; there has to be a clear intent on the part of the client initially to complete this transaction. So perhaps they are negotiations that lead up to the transaction, but ultimately, in the end, the transaction is not completed.

This is when the reporting obligation kicks in. There are two considerations to take into account when you are deciding whether you have to report a SAT. First, refer to the criteria that I just described. That is to say, the client took clear steps to go through with this transaction. Secondly, the suspicious aspect is also very important to keep in mind. The requirement to report to FINTRAC only kicks in when you have those grounds, when you have concerns about a money laundering or terrorist financing offence that was attempted, in this particular respect, at a transaction (level).

Suspicious Attempted Transactions (cont'd)

Slide 9 covers some of the points I just discussed. You need to have the presence of key elements of an attempt in determining whether an activity constitutes a suspicious transaction and the activity itself also has to be inherently suspicious. You evaluate each case on a case by case basis when you are making this determination.

If you are looking for a little more guidance, some advice to help you determine what constitutes an attempted transaction, what circumstances might be considered suspicious in terms of some of the experiences of your colleagues in the life insurance and securities dealers sectors, you can go to FINTRAC's Web site and consult Guideline 2, which was recently published on our Web site and contains a great deal of guidance and advice in terms of under what circumstances a ST or SAT needs to be reported.

Suspicious Attempted Transactions (cont'd)

Here we have some examples as to when you are required to make these types of reports to FINTRAC. This might include a situation where you have a policy of not accepting cash from your clients. If a client makes concerted efforts to initiate a deposit in cash, you refuse as per your policies, and you detect that maybe there was an attempt at money laundering. This is a situation where you would report a SAT.

I should note that the form that will be provided to the reporting entities to actually report this kind of activity to FINTRAC is actually the same form as our current suspicious transactions reporting form. The form itself will be modified somewhat. You will now indicate whenever you are reporting a suspicious transaction to FINTRAC, whether or not that transaction is completed, and if it was an attempted transaction, you will also provide the reason why the transaction was not completed: whether the client refused, that you decided not to carry through with the transaction, and any other details that you have to report in respect to that attempted transaction.

This is a good time to see if we have received any questions.

Questions

Question:
A general question: When a company deals with both mutual funds and segregated funds, or if life insurance companies deal with different products; do they have to register more than once as separate entities or just once and submit multiple reports?

Answer:
This is a common scenario. This is another reason that we are able to group these two sectors together for the purposes of this presentation: there are a number of entities out there that do have both life insurance and securities products. It is a logical grouping.

The first thing I will clarify is that there is a registration requirement, only for the money services business sector, that is coming into effect in June (2008). There is no requirement for other sectors to be registered with FINTRAC. (However) We do sign up reporting entities to report to FINTRAC. So, if that is what you are referring to, it is acceptable to be enrolled as one reporting entity, even if you offer multiple services, and to provide all of your reporting through that same enrolment channel regardless of what product generated the report.

Changes to Client Identification and Record Keeping

We will move from our discussion of the new reporting requirements, which specifically applies to suspicious transactions, to a bit of a longer section which specifically deals with changes to client identification and record keeping requirements.

Client Identification

On slide 12, you will see that we are reiterating what are the common practice and certainly the most robust method in terms of determining the identity of your client. The standard practice, despite some of these changes that I will be discussing in a moment, is certainly to refer to a valid issued government identification document and that you meet the client face to face (FTF) in order to do so. There is no question that it is the most robust method possible.

That said, we are introducing in these regulatory changes some new methods that you will be able to use in non face to face situations (NFTF). When you do conduct business online, or with clients in other jurisdictions, this will give you an increased range of different types of options to ascertain the identity of those clients that you are not able to meet in a FTF situation. For those of you who do meet FTF, you still need to review government issued ID, but the options that I will describe over the next couple of slides apply to those that you are meeting in NFTF scenarios.

Securities Dealers Client Identification

Before we discuss new methods, I do want to indicate a new rule that will also come into force on June 23 (2008), and that is that if you are unable to establish identify of client, and this applies to accounts held by securities dealers, you will not be able to conduct further transactions on that account until you have been able to ascertain that (client's) identity. You can initiate the first deposit; that is acceptable. If you are not able to ascertain the identity before the first deposit, that is acceptable, but as of that point, you will be required to ascertain the identity of your client before you are able to continue with further transactions in respect to that account.

Client Identification: Non Face to Face Methods

Here we get into some of the new obligations that I mentioned moments ago, that pertain to NFTF situations, and will facilitate your identifying your clients in those situations. There are a number of methods; the first one is the use of an affiliate, and I will explain what we mean by that in a moment. There is a second method that you will be able to use, which is actually a combination of steps, where you will take a couple of steps to obtain information that will allow you to confirm whether the client you are dealing with is who they say they are.

Now, we will just go into a little bit more detail as to what each of the methods listed on this slide actually entail.

Affiliate Method

The first method is the use of an affiliate. This method allows you to use information that has already been collected by a parent company of yours, a subsidiary of yours or an affiliated company of yours. This method is somewhat limited because there is a requirement that the affiliate must have a 100% ownership relationship with you. So that is to say, if you are going to use an affiliate to identify a client on your behalf, they either have to be a wholly owned subsidiary, you have to be a wholly owned subsidiary of that parent, or you both have to be wholly owned subsidiaries of another entity.

That sort of explains the sub-bullets on this slide. If you are in a scenario that fits that type of ownership / relationship, and you have an affiliate that is either a bank, a credit union, a trust company, a loan company, a securities dealer or a life insurance company; you can rely on identification information obtained by that affiliate if you know that you are dealing with a client that is a client of that affiliate. A bank that has whole ownership of an insurance company, for example, has a client who is a client of both; when the client goes from the bank to buy an insurance product and there is an ID requirement triggered, the insurance company can rely on the ID that was verified by their parent bank. So, that is an example of how this method can be used.

Should this method not apply in your particular case, I will move onto slide 16.

Affiliate Method (cont'd)

Slide 16 explains the information you have to obtain from your affiliate in order to use this method.

Has the affiliate obtained the name, address, and date of birth of the client? Have you confirmed with the affiliate that it has identified the individual with the standard method? That is to say, verified original government issued ID that is valid? You must verify that the name, address, and date of birth kept by your affiliate correspond to the information that that client has. Does this information match what the client has provided to you?

New Non Face to Face Methods

Here we discuss some of the other methods that are available if the affiliate method does not apply to you.

I will say at the beginning, before going into the description of these, that you will be required to pair two of the five methods that I will discuss, because these are non face to face methods (NFTF) and, basically, because using these methods means that nobody will have met this client in a FTF scenario. That is the reason for the requirement to pair two of these methods, as opposed to relying on only one of them.

Now, I will go into a little bit of detail of these methods. The first method that you can use is an ID product, which is a product offered by a credit agency. This product contains personal information about the individual that you are trying to identify, and it will also include information about their credit history of at least six months duration. This product uses specific questions drawn from the individual's credit file to enable you to verify their identity.

These products - the identification product, the credit file - must be from a Canadian source for you to be able to rely on them to use for identification purposes. I will speak in a moment about some options that apply to foreign clients.

Somewhat different from the identification product, but along the same vein, is the client credit file method. This is a file that will contain the name, address, and date of birth of the client drawn from their credit file, and must be in respect of a Canadian credit history. These products are available commercially and are provided by the major credit agencies.

New Non Face to Face Methods (cont'd)

Slide 18 discusses additional methods that can be used, and we will describe the possible combinations that are allowed, in a moment. There are three other methods that can be used.

One of the methods that can be used is to obtain an attestation. That is when a commissioner of oath or a guarantor reviews original government issued ID, attests to the fact that they verified and viewed the ID from this client of yours, and then provide you with an attestation or guarantee that they have seen the original documentation.

These last few methods on this slide tie information to banking records. You can have a cheque clear, and this confirms that the client holds a deposit account with the financial entity involved. If there are other channels through which the financial entity will provide you with the customer's account information and confirmation that that client has a deposit account, you can also use that method. This last method is most likely to apply in a situation where you have an agreement or perhaps an ownership relationship with the financial entity. Certainly we are aware that, in a lot of cases, financial institutions won't disclose this type of information to just anybody, and there is good reason for that; but because there are some scenarios where this information is available, we wanted to ensure that there were as many identification methods for NFTF situations available as possible, which is why we have included this method in the list.

Now, if all of these seem like a blur of various methods, I am hoping that slide 19 provides a little bit of clarity in terms of how to use these various methods.

Client Identification: Non Face to Face Methods

In a NFTF situation, to summarize, you can use an affiliate that has a 100%
ownership / relationship, and very specific information has to be obtained from that affiliate. If you use this particular method, you don't have to take any other measures to identify your client. If you are not able to use the affiliate method, one of the combinations, as described on the chart in slide 19, summarizing these (acceptable alternative) methods, are also available to you in order to ascertain the identity of your client in NFTF situations.

The reason that you can't pair ANY two, and why you have to use (one of) the three different combinations listed on this chart, is because you cannot use a combination of information drawn from the same source. For instance, a cleared cheque and confirmation of a deposit account are just two ways of obtaining the same information. You would have to pair that with either the attestation method or one of the methods related to the credit file.

We want to ensure that each of the combination of methods that you use is drawn from different sources, that you can better ensure that you are in fact confirming the identity of that client.

That has been a lot of information to take in; I will just be going through a couple of more slides and then I will take some questions before we move on to the record keeping requirements.

I will now discuss a requirement that will apply to you in any scenario, including NFTF and foreign clients. This is probably the best method for you to use if you are dealing with clients out of the city, out of the province, or out of the country, and (if) you are not able to see them at any point in a face to face environment.

Client Identification: Use of Agents

You are able to engage an agent to enter into a contractual arrangement, with that agent able to identify clients on your behalf. This agent may take these identification measures, once they have signed a written agreement for that purpose, on your behalf. Then they provide that information on the client to you. However, you have an obligation to obtain this customer information from the agent.

Ultimately, the obligation rests with the RE. You have to be sure that your agent is aware of what information has to be collected, that he has to see a government issued ID, and that he then has to provide all the relevant information to you. You may have to provide him with some training in that regard. There is no limitation (as to) with whom you can enter into one of these contractual arrangements. You simply have to have a written arrangement between you two; but it does not have to be a notary, it does not have to be another financial intermediary. There is no real restriction on who that agent can be.

Client Identification: Doubts about Identification

This is a clarification on requirements to re-identify your clients, if you are doing ongoing monitoring of your accounts, and over the next few slides, we will discuss the circumstances where that is going to be required. You are not required to re-identify your clients unless you have doubts about the information that you have collected.

Generally speaking, if a new opportunity to ascertain the identity of a client or somebody that you have already identified arises, you don't have to identify them again if you are aware that they are the same person, if you recognize them. However, if you do have doubts, for whatever reason, that they have provided you with inaccurate or incomplete information, even though you have already identified them, you will be required to re-identify whenever a new obligation arises; when they open a new account or when they conduct a large cash transaction, for example.

So, with all of that said, hopefully it is somewhat clear, especially the new options that are available in NFTF situations. Peter, I will ask you if there are any questions coming in.

Questions

Question:
Does the government issued ID need to have a photo?

Answer:
It does not have to be a photo ID. It does have to be valid, to be current, and to be government issued. It could be a birth certificate; that is acceptable. In certain provinces, it could be a health card, regardless if there is a picture on it or not. I know that in provinces such as Ontario and Manitoba, they prohibit the use of health cards for other identification purposes. In those provinces where it's allowed, it is acceptable.

Any form of valid government issued ID is acceptable.

Question:
Where do FINTRAC's obligations stand relating to other regulators, in terms of client identification?

I should clarify that when I am speaking to these requirements, I am speaking to those under the PCMLTFA. Certainly, this does in some cases differ from what other organizations might require of you. I am afraid that I can't speak very specifically to those requirements of other regulators of both federal and provincial self regulating bodies, but there are circumstances where timelines for identification and the type of documents that are required for identification do differ between regulators; and unfortunately all I can say is that I would have to refer you to the other regulators as far as what their requirements are.

Question:
One last question about client identification, which deals with the opening of an account: at the opening of the account, when there have been no other deposits and the identification still hasn't been confirmed; could you elaborate a little for the questioner who wants to know the client ID rule regarding account opening and subsequent transactions?

Answer:
The initial deposit(s) is acceptable in the time frame in which you have to ID your client. There is a 30 day time frame where you have the opportunity to obtain identification information. You aren't able to transact in any other way until you are able to verify the identity of that client. For example, let's say that a client ultimately has some investment goals, but they're initially depositing funds into a money market account for determining specific shares that they want to purchase. You can make that initial deposit and place it in the money market fund, but prior to moving those funds, transferring them by wiring them somewhere else, or having funds withdrawn, in fact any other transactions on that account will require that you ascertain the identity of that customer.

There is more information on record keeping and client identification contained in FINTRAC's Guideline 6, which is available on our Web site. If you would like me to address that specific scenario that you have encountered, you can consult that Guideline and see if it addresses your concerns; if not, you can send us an email at that outreach address, but generally speaking, you cannot have your client conduct further transactions other than initial deposit until you are able to ascertain their identity.

Question:
This deals with NFTF transactions. When I use a guarantor to establish the identity of the client; do I have to check with the professional organization of the guarantor in order to ensure that the guarantor is actually a chartered accountant or a doctor as the case may be?

Answer:
Your requirement in terms of using the attestation method, using a guarantor to ascertain the identity of that client, is to acquire the name, profession, and address of the person supplying the attestation, the guarantor. Obtaining their signature attests to the fact that they are who they say they are, and indicates that the client is who they say they are. You have to ensure that the type of document that they verify and the number of that document - driver's license number for example - and the information contained in that document is included in the attestation; beyond that, you do not have to do a verification on the guarantor, or determine that they are listed with one of the professional bodies like a medical association for example. Simply attain the attestation from the guarantor; should later on some issues as to the veracity of that information arise, then you are protected because you have taken your due diligence. Once the guarantor signs, they are making a legal statement as to their participation, their applicability to this process.

I should mention that the professions eligible are slightly different from the passport list. I will just run through them quickly for you. This info is available in Guideline 6. For the purposes of a guarantor, the following professions are acceptable: dentist, medical doctor or chiropractor, judge or magistrate, lawyer, notary or notary public, optometrist or pharmacist, professional accountant, professional engineer, veterinarian, or commissioner of oath, as I mentioned earlier, is also acceptable for that attestation provision.

Again, I hope that that clarifies your question and we will move on to our record keeping section now.

Suspicious Transaction Reports

Here we cover a new record keeping requirements (RKR) with respect to suspicious transactions reports. Reporting entities will now have to keep copies of all STRs that they submit to FINTRAC, both for completed and attempted suspicious transactions. As I mentioned earlier, this will be the same form. You will be required to keep a copy of that.

In the cases of completed transactions, you are going to have to take reasonable measures to try and have the identity information for the client about whom you submit a suspicious transaction report.

We recognize that, in the context of a suspicious transaction, you might not be able to ask for this information without tipping off the client. We certainly understand that. We don't want you to feel that anything you are doing would give the client reason to be concerned that you might be reporting on them to FINTRAC. Use your judgment if you feel that asking for ID would tip them off. However, if you are able to ascertain their identity or if you have already ascertained their identity, you should add that information as well so that it can be included on the STR, so that accurate information can be submitted to FINTRAC as well.

Record Keeping: New Exemption

Here we talk about a new exemption that has been created under these regulations. This is to reduce the paper burden. We want to clarify that if you are keeping information in one record that is required for a reason other than our legislation, you don't have to keep the record in multiple places. So, if you need to keep the same information submitted on a client, if there are two different record keeping obligations, I just want to clarify that you only need to keep this information in one place. It can be in paper form or in electronic form. The important thing to remember is that you have to be able to access it. If it is in a warehouse somewhere, you simply have to be able to know where it is, access it, and be able to produce it should it be requested in the context of a FINTRAC examination, for example. This provision is already in force and has been since last year.

Securities Dealers: Intended Use of Account

We talk about a provision that only applies to securities dealers. This is with respect to the intended use of an account. As part of our efforts to better assist in the monitoring of suspicious transactions, reporting entities in the securities sector are going to have to ask their clients up front what their purposes are in respect to any account that they open. It will assist the reporting entities in monitoring the accounts and better enable them to track suspicious transactions, if there is a sudden deviation from the client's stated use of account.

Asking this question can be done verbally or it may be done in the context of the form that they are going to sign during the account opening process. What is important ultimately is that you do have on record the client's intended use of account somewhere, so a good way to answer this question is to listen to investment goals: long and short term goal savings, income for retirement, speculation, investment of earnings - anything like this that describes what their purpose is in opening this account.

Life Insurance: Record Keeping and Client Identification Exemptions

On slide 25, we discuss additional exemptions that will be coming in under these new regulations that come into force on June 23, 2008. We start with the life insurance sector. There are some new exemptions. This is not an exhaustive list. The full list of exemptions, both those that currently exist and the new ones that will come into force in June (2008), are also contained on FINTRAC Web site under Guideline 6.

Some of the exemptions that are coming in for life insurance, that is to say circumstances under which you are not required to identify your client or to keep records, include the purchase of a registered annuity policy or a registered retirement income fund, in the case of group plan accounts or the purchase of a group life insurance policy with no cash surrender value or savings component. These are all areas in which it is not necessary to ascertain identity and keep records.

Securities Dealers: Record Keeping and Client Identification Exemptions

There are similar exemptions that are being added for the securities dealers sector and this is discussed on slide 26, where we have added some new exemptions including the opening of an account that is established under the escrow requirement of the Canadian securities regulator stock exchange or under provincial statute. The second exemption for securities dealers is the opening of an account that is solely intended to provide accounting services. These are only a few of the securities exemptions, and again, I encourage you to consult the full list in Guideline 6.

Securities Dealers: Timelines for Client Identification

Lastly, on slide 27, and this is something that I referred to a little bit earlier, which is also exclusively for the securities dealers sector. There is a timeline that has been shortened with respect to ascertaining the identity of the client. It is required to determine the ID of those who hold the account or are authorized to give instructions with respect to the account. For those authorized to give instructions with respect to an account, once the initial deposit is made, as I said, it is required to confirm the existence of that corporation and obtain the name and address of all the directors in 30 days. This does not mean that you have to consult the driver's license of all of the directors of a corporation; you simply need to have the information on file. You do not actually have to consult government issued ID, but within 30 days, you do have to obtain the information of all the directors.

Since that brings us close to our record keeping and client identification section, I will just check with Peter to see if there are any questions.

Questions

Question:
You mentioned that a credit file summary can be used for ID; will FINTRAC provide a list of credit institutions that supply credit file summaries?

Answer:
This is a question that we get a lot. It's a good question and we get it in respect of client identification obligations, politically exposed persons, and other areas. We won't, actually. As a government agency, we aren't able to provide a specific list or a specific endorsement of private sector entities that make this information available, but what I can tell you is that the credit bureaus and the credit agencies do make this information commercially available and they have products that are similar to those that we are describing here. Those types of agencies can be used to obtain this type of information. Unfortunately, that is as detailed as I can be in that respect.

Question:
We have another question that is rather fundamental in that it has to do with transactions. Is a money order considered equal to cash or cheques, and subject to large cash transactions reporting?

Answer:
There are requirements with respect to negotiable instruments in respect of reporting large cash transactions. Where as it is very clear that cheques are not deemed to be reportable for the sake of large cash transactions, negotiable instruments like money orders are seen as cash. Specifically, for the large cash transactions report, I can expand on this a little bit later one. Ultimately, there is that differentiation between cheques which are not covered at all under the reporting requirements for any suspicious transactions reporting.

Please note: Large cash reporting requirements are triggered exclusively upon receipt of cash in amounts greater than $10,000. There are no large cash transactions requirements for cheques or other negotiable instruments (including money orders). For more information, please consult Guideline 7 on the FINTRAC Web site.

While there are provisions for money order redemption, they do not apply to the securities dealers or life insurance sectors.

Any type of transactions may be considered a suspicious transaction. For more information, please consult Guideline 2 on the FINTRAC Web site.

Question:
On client ID, if the deposit is made in cash and no ID is provided immediately or in the 30-day window; can the client initiate a transfer of funds out of the account before client ID?

Answer:
I should clarify that, in terms of corporate account opening for those accounts that I was mentioning, there is a 30-day time period in which you can obtain the name and address of directors.

For a cash transaction, let's say for an individual who is opening an account and is doing so with a large cash deposit over $10,000, you have to obtain the identification information of that client in order to ascertain that client's identity conducting or finalizing that large cash transaction. It is a different requirement from corporate account openings. You do need to consult their ID in that sort of cash scenario.

Now, let's take the corporate account scenario or an individual account scenario. You open an account for a client with a wire transfer as opposed to cash. That is an initial deposit. Ascertain ID before further transactions regarding the account, which includes wiring of those funds into another account for the purposes of opening a new account. Make it clear to your customers: if they are not able to provide ID information ever, then they should not open the account because they are not going to be able to do anything with those funds until you are able to confirm their identity. Make it clear to your customers that, if they are not ever able to confirm their identity, they should not be opening an account.

Question:
Could you please provide examples or scenarios where information about existing clients identified under the legislation prior to June 23, 2008? Will they be required to be updated with client identification information prior to June 23 (2008)? What will not be required? Does this trigger date… will it require any additional work in terms of updating client identification?

Answer:
These are no retroactive regulations. They will come into force on June 23, 2008 and they will say that beneficial ownership requirements, that come into force on
June 23 (2008), will not require you to go back and determine beneficial owners of existing accounts. There are a couple of provisions with respect to higher risk clients, such as politically exposed foreign persons. You will have to go back and verify whether your existing clients are affected.

There are two scenarios, and I will speak to them specifically in the last couple of slides of the presentation. Scenarios where you will have to go back and check up on the information that you have on existing clients; except for these two scenarios, that I will explain in the next couple of slides, these are not in anyway retroactive regulations and you will not have to go back on your existing clients.

Title Slide: Foreign Branches and Subsidiaries

This slide is introducing a discussion of foreign branches.

Foreign Branches and Subsidiaries

Slide 29, applies to those of you whose organization has foreign branches and subsidiaries, any entity that has a branch or a subsidiary located in a country that is not part of FATF (Financial Action Task Force). The FATF is an international organization that sets international standards on anti-money laundering and counter terrorist financing. The list of those countries that are and are not members of the FATF is readily available on both the FATF Web site and the FINTRAC Web site. For those branches and subsidiaries that are located in FATF countries, entities in those countries must ensure that those branches and subsidiaries develop and apply policies and procedures that are consistent with AML and counter terrorist financing requirements: that is to say on record keeping, client identification, and compliance regime requirements. The only exception to this is if these policies and procedures would contravene the local laws of the country where that subsidiary is located. In those cases, you do have to keep a record of the fact that you haven't implemented this policy because it is a violation of local law. In all other circumstances, you will have to ensure that Canadian compliance rules are respected in those branches and subsidiaries, whether or not FATF standards are in place.

Beneficial Owners

Here we cover some of the due diligence measures that were introduced. More specifically, these apply to determining beneficial ownership of corporate clients and assessing whether clients are politically exposed.

Beneficial Owners: Record Keeping

Here we cover beneficial owners. In all those cases where you are required to confirm the existence of corporate clients or any other entity that is a client of yours, clients that are a not for profit (NFP) corporation, for example, when we say that you are required to confirm the existence of the beneficial owners, this means that all of the identification exemptions that I spoke about earlier are also beneficial owner exemptions. These requirements only apply when you have to confirm the existence of a corporate client or another non-corporate entity that is a client of yours. In these cases, you must take reasonable measures to obtain all the information on beneficial owners. What this means, for the purposes of our legislation, is all individuals who control or own 25% or more of the corporation or entity. This is going to send us back a little to the question that was raised earlier. I know this is different from some of the obligations that are in place, for example with the IDA (Investment Dealers Association). For our purposes, changing IDA requirements is separate from an addition to an IDA requirement, but for the purposes of this legislation, the requirement for beneficial owners is those who have a 25% or greater stake.

When you obtain this information, keep a record. This is primarily a record keeping obligation. If you cannot obtain this information, if the client refuses to provide it, or if it is not clear, you should also take steps to record the fact that you did ask because you are required to keep this information. You may want to consider, in terms of your risk assessment, which I will discuss later on, the implication of an entity refusing to discuss its ownership structure.

In terms of the records you have to keep in respect of this provision; it is different depending on the nature of the client. For a corporate client, you must keep the name and occupation of directors as well as the name, address, and occupation of all beneficial owners. Again, you do not have to ascertain the identity, you don't have to consult their driver's license, but you do have to record and keep this information. For an entity other than a corporation, you must record the name, address, and occupation of all beneficial owners; that is to say all those who own 25% or more. For a not-for-profit organization, you have to obtain the same information as for a non-corporate entity. On top of that, you have to note whether the entity is a registered charity with the Canada Revenue Agency (CRA) under the Income Tax Act, or whether it is an organization that is not registered under the Income Tax Act, but that it is soliciting charitable financial donations from the public. So, these are the requirements for what you have to record with respect to beneficial owners.

Politically Exposed Foreign Persons

Slide 33 now introduces another customer due diligence step which is also new: politically exposed foreign persons (PEFP). This is a requirement that is certainly being introduced in a number of jurisdictions, inspired by well known cases of prominent political or military figures engaging in capital flight - basically removing funds from their country, for their own benefit, into foreign jurisdictions. This provision aims at identifying that. As far as the details go, we will go on to slide 34.

Politically Exposed Foreign Persons (cont'd)

Here we explain a little bit what exactly constitutes a politically exposed foreign person. This is an individual, and I will stress individual, who holds or has held one of many offices or positions on behalf of a foreign state. For your purposes, if they have held this position within the Canadian government, they are not a PEFP, including if they have held a position abroad with the Canadian government. But any foreign client or any domestic client who has held a foreign position does apply. This includes heads of state or government, members of executive government councils or members of a legislature, ambassadors, attaches, counselors, deputy ministers or that of equivalent rank in other jurisdictions, military officers of general rank or above, president of a state-owned government corporation or bank, head of a government agency, judge, leader, or president of a political with representation in the legislature.

In addition, among all of these types of individuals, their immediate family members are also considered PEFP and, if we go to slide 35, we explain exactly what we mean by their immediate family members.

By immediate family members we mean their spouse or common law partner, their child, their parents, their mother-in-law and father-in-law, their brother, their sister, their step brother, their step sister; all of these individuals will be deemed to be PEFPs in respect to that particular relationship and will remain a PEFP even when the person leaves the position they held. You continue to be deemed to be high risk and deemed to be subject to these monitoring requirements.

I should also note that, and this is a question that came up in our French presentation, you do not have to report to FINTRAC if you have clients who are PEFP. I will now explain what you do have to do in respect to these requirements.

Life Insurance: Politically Exposed Foreign Persons

Slide 36 is specific to the life insurance sector, with respect to these requirements. A life insurance reporting entity must take reasonable measures to determine if they have a client who is a PEFP, in one particular instance, and that is: if the client makes a lump sum payment of $100,000 or more in relation to an immediate or deferred annuity or a life insurance policy, including whether it is on their own behalf or on behalf of another party. The entity has 14 days after the transaction is made to determine if the client is a PEFP or not.

Securities Dealers: Politically Exposed Foreign Persons

The requirement is a little broader for securities dealers; they must take reasonable measures to determine if a client is a PEFP whenever they open an account for a client. Now, here is one area where you may have to go back to existing clients: for any client, as per your risk assessment, which I am going to explain momentarily, that is flagged as high risk for any reason. So, any clients that you have dealing in a high risk product or a high risk jurisdiction or a high risk account for whatever reason, you will have to go back on those accounts and assess whether these high risk clients are PEFPs. Those are the only clients that you will have to revisit in respect of PEFP obligations. The timeline for doing so is 14 days. You have 14 days to determine whether this person is politically exposed after the account is open.

PEFP: How to Make the Determination?

In terms of what we mean when we say take reasonable measures: what exactly do we mean by that? It could be something as simple as asking the question and getting them to confirm whether or not they are a PEFP. This will require some explanation on your part about what that means. This may be spelled out on a form providing a brief explanation or a series of check boxes, and getting the client to sign as to whether they are or are not a PEFP, based on the description. FINTRAC will deem that you have done your due diligence in that case.

We will also be providing a pamphlet and information on our Web site that explains what a PEFP is, and you can offer it to your clients to help explain why you are asking these questions. Certainly, we are also aware that there are a number of commercially available and some publicly available information sources that purport to include lists of PEFPs. Like the credit bureaus, we can't specifically confirm whether any particular private service provider conforms exactly to the requirements as laid out in our regulations. Any entity that does choose to run its client list against a database of PEFPs is required to verify with that service provider that the list does meet the regulatory obligations. But in any case, these two sub-bullets here on slide 28 are two ways that we would deem that you are meeting this obligation in terms of taking reasonable measures to determine whether your client is a PEFP.

Life Insurance: Politically Exposed Foreign Persons

Here we specifically address the requirements for the life insurance sector as to what steps must be taken once you determine a client is a PEFP. In these cases, there are two things that you have to do. First, you have to take reasonable measures, again either by asking them or by another mean, to determine the source of funds that were used to open that account. You also need to have senior management review; in the case of life insurance, the source of funds that were used to purchase that annuity or policy. You need to have senior management review the transaction within 14 days, just to ensure that they are aware of it. Now, you have 14 days both to determine whether the client is a PEFP and to have the transaction reviewed by senior management. It is the same 14 days, it is not 28 days total. That is the requirement there.

Securities Dealers: Politically Exposed Foreign Persons

This slide addresses a similar requirement: securities dealers. In this case, once you have determined that you have a client that is a PEFP, you must take reasonable measures to obtain the source of funds that was used to open the account. You have to obtain senior management approval within 14 days to maintain that account open, and you are going to have to conduct ongoing monitoring of that account. So, you will increase your due diligence with respect to that account to ensure that you are flagging any suspicious transactions that might come up, and like with life insurance, you have both 14 days to make the determination and seek senior management's approval of that account. The distinction is, for (appropriate) transactions that take place in the life insurance sector, that it must be reviewed within 14 days. For the securities dealers sector, there is an approval that must be acquired within 14 days, from senior management, to keep that account open.

Politically Exposed Foreign Persons: Senior Management

Slide 41 is just going to give a little bit of guidance as to what senior management means. It is any individual within your organization that meets the following criteria: they have the authority to make and be held accountable for management decisions about accounts or transactions, as the case may be; they have awareness of the risks to which the particular account is exposed or to which the type of transaction is exposed, depending on the sector; and there has to be some awareness of PEFP by this individual as well. So, it might be somebody at a senior level who is responsible for compliance issues, for example.

Politically Exposed Foreign Persons (cont'd)

Slide 42 addresses record keeping relative to PEFP. There are five elements to the record keeping that have to be kept on hand, once you have determined that your client meets the definition of a PEFP. You have to keep on record, it can be either electronic or on paper, their office or position, their source of funds, as I mentioned, the date you made the PEFP determination, the name of the person in senior management who either approved the account or reviewed the transaction, and the date that the review or the approval took place.

As for beneficial owners, I'll note that any transaction or account that is exempt from record keeping and identification requirements is also exempt from this particular determination.

And now, with all that said on customer due diligence, this seems like a good time to break for a few questions.

Well, there have been a few questions coming in on politically exposed persons. I will begin with:

Questions

Question:
If a non-politically exposed person, a client, marries a PEFP; does the existing client become a PEFP?

Answer:
Yes they would.

Question:
I take it that there are no expectations of FINTRAC that a financial institution or a financial entity also subscribe to a PEFP list as well as (asking) the question at the point of sale?

Answer:
We don't require that you subscribe to a commercially available list.

Question:
What is FINTRAC's expectation, with respect to the timeline, to gain an indication of PEFP for existing clients?

Answer:
In respect of existing clients, I will reiterate that it is only for high risk clients. You don't have to go back on all of your existing customers to determine whether they are PEFPs or not. In a few moments, I will be discussing the new risk assessment requirement, which should be up and running within your institution by June 23 (2008). Once you have conducted a risk assessment of your clients generally, not necessarily on a client by client basis, once you have conducted your risk assessment and have identified those clients, or those business clients, that you deem to be high risk, it is those clients that fall under those particular areas that you want to make this determination. We will understand that there will be some time required to obtain this information, especially if there are a large number of clients. I am not absolutely certain if we have prescribed a timeline after June 23 (2008), as to when this has to be done. And so I will undertake to get back to those who have posed this question with that specific answer.

Please note: Reporting entities obligations for PEFP requirements begin as of June 23, 2008. Reporting entities should review their clients and comply with their obligations on a risk informed basis, in as timely a manner as possible. If high risk clients have not been subject to a PEFP determination by June 23, 2008, REs should document a plan detailing when the determination will be completed.

Question:
I have one clarification to make here. The 14-day period that you have spoken of; could you clarify if this is 14 business days or 14 calendar days?

Answer:
Generally, when we say 14 days, we mean 14 calendar days. That is our reporting timeline. There is one type of report which is business days and we specify that, but otherwise, this is a two-week period essentially in which you have to make the determination.

Question:
How long after the individual ceases to hold the position are we required to identify the individual or immediate family member as a PEFP? Once somebody has held one of these offices or positions that are described as being politically exposed, they are definitely a PEFP. And so, if you retain them as clients, they don't lose that status. If you take on as a client somebody who was a general in a foreign country 20 years ago, the requirement isn't retroactive. But in 20 years, if you take on a client who was a general in a foreign country now, you will still be expected, assuming our regulations are the same, to identify that person as such. So, there is no expiry date on this designation.

I've been saying a few times now that we will get to a discussion of risk assessment very shortly, and perhaps I should have moved this to the beginning of the presentation given the number of times that it has come up. But in any case, we will get into that part of the presentation. I'll move to slide 44.

The Compliance Regime and New Changes

Here we discuss on the whole how your compliance regime (CR) will have to have to look after June 23. There are a couple of changes in addition to the new risk assessment requirements.

First of all, as you all know, you are required to have a Compliance Officer in place if you are a reporting entity or a reporting person; that has not changed. Our second element of the compliance regime is being modified somewhat, but you will still be required to develop, maintain, and apply policies and procedures in terms of how you are going to comply with these regulations and what steps you take to ensure your are compliant.

But in the past, there was no actual requirement that these policies and procedures be documented; that is going to change. You will now be required to keep these policies and procedures in writing, to keep them up to date in terms of development in your business lines or with respect to regulatory requirements, and in the case of an entity, that they be approved by a senior officer, which is also a new requirement. What we mean by senior officer is either a director of the entity who works for the entity full time, a senior executive officer such as a president, a secretary, a controller, a CFO, etc. - there are a number of other examples of this and you can find the full list in our guideline - or any other officer who has a direct reporting relationship with the directors or the managing board of a particular entity. So, with all that said, you will have to have senior officer approval.

Another change, one that I have been referring to a lot, is that you will be required to conduct a risk assessment of the ML and TF risks faced by your entity.

The Compliance Regime and New Changes (cont'd)

There are two other elements that are currently in place, but that are being modified somewhat. If you have employees or agents, you will have to maintain a training program that is in writing.

For life insurance agents, there is a bit of a different definition of agent. Life insurance agents in and of themselves are deemed to be reporting entities so they will need to have their own compliance regime. But for any other type of agents, and for any agent of a securities dealer, you must ensure that you provide training to your agents.

The fifth element is that you will have to review not only your policies and procedures, but also your training program and your risk assessment at least every two years. Now, this can be carried out either by an internal or external auditor, if you have one, but you are not required to have an external auditor. In that case, it can be conducted by the reporting entity itself if that audit function isn't available. In the case of reporting, you must report the findings of the review to the senior officer and keep them apprised of any updates that are made as a result of that review, and the implementation status of those updates.

And now, with that quick overview of the changes to the compliance regime, I am going to move to slide 46.

Risk-based Approach

We go into more detail in terms of what we call our risk-based approach, the new requirements for a risk assessment of your ML and TF risks.

What this is and the reason for it, is that it allows you to identify, measure, and assess some of the higher risks that are faced by your business, and to develop strategies to mitigate them. It will allow you to focus your compliance resources where they are most needed and ensure that the risks that you face are managed and brought down to an acceptable tolerance level, that you are able to manage as an entity. This isn't in and of itself altering existing client identification or record keeping requirements. For your low risk customers, you still have to undertake the client identification requirements that we have been discussing this afternoon, for example. This is an enhancement to those requirements, the focus is an enhanced due diligence, an enhanced monitoring on those areas of high risk. There is no question that this isn't a on-size-fits-all approach. The risk-based approach is definitely going to vary depending on the size and complexity of your operation. This is why we are certainly offering extensive guidance in this respect; you will find it in Guideline 4 on our Web site as well as details on all other aspects of the compliance regime. You will see that there is an understanding on our part that there are different sizes of entities, entities with different levels of complexity in their business. We'll be implementing this in a different way and we've tried to address that in our guide.

Risk-based Approach: Requirements

Here we discuss the components of this risk assessment. Again, as I said, as appropriate for your business, you're going to have to both assess and document the risks of ML and TF that are occurring in the course of your activities. Is one of your products or services being used to facilitate one of these offences? In doing so (the assessment), you must take into account a number of things.

You must take a look at your clients and your business relationship with those clients; the products and services that you offer; the delivery channels through which you offer these products and services; the geographic location of where you are doing business, be it in Canada or abroad; and you may also choose, if you so decide, to include other relevant factors in your overall assessment that you feel are relevant to your measuring the level of ML or TF risks that you face.

Risk-based Approach: Requirements (cont'd)

We discuss a little bit what you should do when you determine that certain types of clients, certain groups of clients, products, or business channels are high risk. Our Guideline 4, as I said, goes into much more detail as to how to actually conduct the assessment itself. It provides tools to help as a starting point for this assessment for those of you who have not already developed some risk framework or built some sort of risk framework for your entity in respect of AML compliance. But I won't get into that in great detail here. I will say that, when you do detect activities that pose a high ML or TF risk, you will be required to develop policies and procedures that will help you mitigate those risks. You will also have to take steps to keep the identification and beneficial ownership information of the high risk clients up to date every two years. This is the only area where you are required, on an ongoing basis, to try and update this information on your clients. All high risk client information should be updated on a two-year basis. You should also, like with PEFPs which are deemed high risk, be monitoring these accounts on an ongoing basis.

PEFP is one of the few areas where FINTRAC is actually announcing that these are high risk clients. In virtually every other scenario, we are leaving it up to the entity, based on their understanding of their own business, and based on assistance from the guidance that we are providing, to determine what constitutes high risk in the context of their business.

Risk-based Approach: Tools

Slide 49 is going to speak to some things that I have mentioned already in terms of the great deal of guidance we are offering to assist you in ensuring that you are able to comply with this new requirement as of June 23 (2008), and on an ongoing basis thereafter. We have provided, on our Web site, a great deal of information on precisely what the legislative and regulatory requirements are, with respect to the risk-based approach, compared to what you have a little bit of leeway on in determining, based on your own business realties.

We suggest some mitigation methods that might be broadly applied in the life insurance and securities dealers sectors, as well as other sectors. We give suggestions on how to conduct robust monitoring of high risk clients. We have developed a sample checklist that you can use to start your risk assessment. These checklists suggest some flags, service delivery channels, geographic locations, and types of client relationships that you might want to include in your assessment and that might lead you to decide whether certain situations or certain types of activities are high risk.

For some smaller entities, the checklist may bring you a large part of the way to having a complete risk assessment. For much larger entities, that will most likely not be the case, and there will be other steps that need to be taken; this will then be used as a starting point. There is a great deal of other information there to assist you as well.

We have gone through a fair bit on that and, since the risk-based approach is a fairly new concept, I am interested to see if there are any questions on that issue.

Questions

Question:
I don't know if this question touches on risk-based approach specifically, but if distinction is being made between life insurance and securities dealers in terms of the requirements; wouldn't life insurance also have the obligation to conduct ongoing monitoring of the account to identify suspicious transactions as part of the enhanced due diligence measures for high risk products? Why is this distinction only with securities dealers?

Answer:
There is a distinction in our legislation and regulations in terms of the nature of accounts held by securities dealers as opposed to those held by the entities in the life insurance sector. It stems from risk assessments done both domestically and the guidance of the FATF and others that does make that distinction. Certainly, in terms of ongoing monitoring of products and clients, ultimately the monitoring in the life insurance sector, I think for practical terms, is simpler and so the distinction in legislation probably won't lead to a huge distinction in how the different types of accounts are actually monitored. Life insurance products and securities dealers accounts are treated differently in our legislation, but I can't give a solid explanation of why. But ultimately, in terms of the ongoing monitoring provision, it is true that the monitoring of life insurance products and accounts in the securities dealers sector would also be very similar to determine what risks are faced by them.

Question:
There is one question here dealing with funds that are accepted on an account that is open and the client is later determined to be a PEFP. If the funds or the management sign off is not available; can the account be closed? What is considered to be a further transaction on that account?

Answer:
When it is an account where you are making a determination after the fact, or they have obtained the position well after they have opened the account with you, for whatever reason you become aware that they are a PEFP when they had indicated previously that they were not; you can make this determination and again try to seek that approval within 14 days to continue going. It is true that after that, if you are not able to get that approval to keep that account open, given that this person has now been revealed to be a PEFP, that you wouldn't be able to go forward with operating that account.

Question:
There is one more on PEFPs, and it refers to the June 23 (2008) date. Can you give clarification as to the answer involving PEFPs? Is it that if a person is not a PEFP on June 23 (2008) or is no longer a PEFP on June 23 (2008), that the rules do not apply?

Answer:
That is correct. The provision for monitoring starts on June 23 (2008). Somebody who is a PEFP going forward, as of June 23 (2008), in that respect, the requirement is (voice of speaker fades to inaudible.)

Please note: PEFP obligations apply to those clients that are determined to be PEFPs as of June 23, 2008. If a client has ever held one of the PEFP offices in the past, the client is deemed to be a PEFP as of June 23, 2008, and will continue to be a PEFP. It is impossible to no longer be PEFP; once a client is determined to be a PEFP, they will always be a PEFP.

As of June 23 2008, PEFP determinations will be required upon account opening; when a client is deemed high risk (based on risk assessment of existing accounts); and when a client initiates or receives an international electronic funds transfer (EFT) of $100,000 or more. Please consult the FINTRAC Web site (www.fintrac-canafe.gc.ca) for more information.

Administrative Monetary Penalty (AMP) Regime

On slide 50, we have a quick discussion of our administrative monetary penalty regime. This will come into force on December 30 of this year (2008), and not June 23 (2008). It is at the end of the year (2008) that the administrative monetary penalty regime will come into force.

Administrative Monetary Penalty (AMP) Regime (cont'd)

On slide 51, you will see that, what that means, is that as of that date, FINTRAC can issue administrative monetary penalties, that is to say civil penalties, as a response to non compliance with our legislation and regulations, including those that have been in existence for the past five years. This will apply to all obligations under the PCMLTFA and regulations.

I'll go past slide 52 and on to slide 53.

FINTRAC's Compliance Approach

Although these penalties are coming into force, I want to underline that FINTRAC is not by any means changing its overall approach to compliance. These penalties are seen as a tool to ensure a leveled playing field for all entities. There are a number of reporting entities that are going to great time and expense to be sure that they do conform to all of our regulations, and it is not fair to those of you who are in compliance for there to be no remedy for those who do not follow their obligations. But certainly, FINTRAC is going to continue to work collaboratively with reporting entities to resolve issues, provide guidance on both existing and new requirements through our guidelines, through our Web site, through our onsite presentations, and through liaison with our Compliance Officers across the country. All of these steps will continue and, ultimately, your reporting and the information that you obtain is extremely important to ensure a robust ML and CTF regime; we want to work with you to continue improving the robustness of our regime. So, we will continue to provide a great deal of advice and information.

Key Dates

On slide 54, we will discuss some of these upcoming tools that are available to help you understand and get more information on these new requirements. As I have been mentioning throughout the presentation, we have a number of guidelines that have been updated, including Guideline 2 on suspicious transactions, Guideline 4 on the compliance regime and the risk-based approach and our Guideline 6 on record keeping and client identification. If you go to our Web site at wwwfintrac-canafe.gc.ca, you will see a few separate sections on our Guidelines page: there is one that includes the guidelines that are in force and are current for today, including all obligations that are in force today, and you will also see new guidelines that cover all of the new obligations. Feel free to access our site to obtain more information on everything that I have been discussing today.

Some of you may have visited us back in February. We did present some information sessions and our Compliance Officers, they continue to offer information sessions for various sectors across the country. We are working with regulators and others to disseminate information about those presentations. These webcasts are ongoing (please note that the webinars are now completed) and one that may be of interest to you is coming up on Monday afternoon, where we devote an entire webcast to our risk-based approach and risk assessment. So, that is at the same time on Monday afternoon. Feel free to register for that one.

(Please note that the Risk-based Approach webinar has been completed and is archived.)

I should note that all of these presentations that we are giving in these information sessions during these webcasts are available on our Web site. The presentation that you are seeing today is already available on the FINTRAC Web site; you may want to print the PDF version and refer to it on an ongoing basis.

As I have been saying, the vast majority of these provisions are effective on
June 23 (2008) of this year.

With that, I will see if there are any final questions that have come in.

Questions

Question:
This is regarding the information about the presentation. Can these presentations be copied and used to train our staff? This is a question that just came in recently.

Answer:
I think the answer to that is yes. If you would like to use this presentation for training your staff, and include it as part of your training materials, it is a good complement to the guidelines that are also available. Feel free to make use of it for training.

Question:
As a life insurance agent, am I required to maintain a written training program for myself?

Answer:
If you are an entity, yes. If you as an agent only have… if you are your only employee, I will phrase it that way, if you as an agent aren't working with others in the context of your business, you are not required to have a written training program. You are only required to have that written program if you have employees or if you have other agents that are acting on your behalf.

Question:
Here is another point of clarification regarding negotiable instruments; the questioner wants to know if wire transfers are considered negotiable instruments?

Answer:
Wire transfers are all in a separate section regarding reporting requirements. Under our Act and Regulations, we refer to them as electronic funds transfers or EFTs, and so there are reporting requirements for EFTs in certain sectors; but these particular provisions don't apply in the context of securities dealers or life insurance transactions. It is more in the area of foreign exchange, money services business, and financial entity sectors. So, in those sectors, there are EFT reporting requirements, but they are not extended to the securities dealers and life insurance sectors.

Question:
Another clarification on the prohibition of further transactions after a period of time has gone by for the ascertaining of identity. Can we close the account and give the client the money back or is that considered a transaction and prohibited?

Answer:
Ultimately, wiring the funds back to the client or providing them with a cheque, for example, is ultimately a transaction and in the strictest sense of the regulations, this is also something that should not be conducted. So, what we are saying is that, without saying it implicitly, the implication is that an account really should only be open if the possibility is going to be there to obtain this information from the client. This 30-day window in respect of corporate accounts is largely there because it may take some time to get the list of the directors and their addresses together. Ultimately, returning those funds to that client in a legitimate form is a transaction, and so those funds really should not be moved, wired out, or returned back until you can confirm the identity of that client. The client should be sure of the implications of that before opening an account that they have no intention of providing identification for.

Question:
Alright, one last question that is regarding high risk clients. What would you consider a high risk client other than someone who is determined to be a PEFP?

Answer:
Certainly, as I have said, a PEFP would definitely be one. There are a number of other combinations and scenarios possible, based on the type of products a client would be using, and mainly where their geographic location is, and you may end up deciding that there are a number of factors as well: their location, the type of products that they are using as well as their account balance. Our Guideline 4 does provide a variety of scenarios, and because of the variety of scenarios and the fact that you do have a fair bit of leeway in tailoring something appropriate to your business. I won't go into a great deal of detail giving extra examples, particularly because we are about to run out of time. I will say that some of those examples are available in our Guideline 4, on our Web site, and that if you do want to discuss this further, you can send us another email at that outreach address. There is really no other area where we are explicitly saying that this particular type of client is high risk, but we are certainly giving guidance: it may be a client who frequently conducts NFTF transactions in conjunction with a number of other things, who frequently uses cash when you don't generally see cash from your clients, but it might not be exclusively that. Since there are some shades of gray here, I'll refer you to the Guideline and, once the webinar is completed, I will be happy to answer specific questions.

Conclusion

Thank you Christopher. Thank you everyone for participating in our first webinar for the securities dealers and life insurance sectors. I hope that you enjoyed today's presentation and that some of you will join us for the risk-based approach webinar which will be our presentation for next week.

(Please note that the Risk-based Approach webinar has been completed and is archived.)

Thanks very much Peter.