Fintrac amendments for Ascertaining Identity

The transition period to adopt the new methods to verify the identity of individuals has been extended until January 23, 2018.

Amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations have changed the methods that reporting entities can apply to ascertain the identity of clients. From June 30, 2016 to June 30, 2017*, there will be a transitional period during which either the methods described in this guideline or the methods listed in Guideline 6 (a) to (j) can be used. As of June 30, 2017*, this transitional period will end and you will be required to apply the methods listed in this guideline to ascertain the identity of your clients

Do you report to FINTRAC (Financial Transactions and Reports Analysis Centre of Canada)? Are you ready for June 30, 2017*, the date of full-effect of PCMLTFA amendments? Let’s look at the amendments, especially in regards to identity, what that means to you, and how to ensure you’re in full compliance.

Overall, the amendments strengthen Canada’s AML (Anti-Money Laundering) and ATF (Anti-Terrorist Financing) rules. They strengthen customer due diligence requirements, close loopholes, enable better information sharing and improve compliance, monitoring and enforcement efforts.

Dual Process

The most interesting, in terms of innovation, is the dual process method to ascertain identity. This method allows new digital, techniques to qualify for compliance, enabling firms operating in Canada to introduce new types of services.

  • Dual process
    Two original, valid and current documents or information from independent and reliable sources
    Match: Name, address and date of birth

The key requirement is that this information is independent and reliable. Independent is straight-forward; the information cannot come from you or the customer. Reliable, however, is a bit more complicated. As the legislation is not prescriptive, it is up to FINTRAC to determine exactly what is reliable.

They are looking for reputable, well-known sources. Obvious reliable sources are the federal, provincial, territorial and municipal levels of government, crown corporations, financial entities and utility providers.

But this list is not exhaustive. For example, here are some other reliable sources:

  • Canadian credit file (at least six months’ old)
  • Record of employment
  • Foreign government travel visa
  • Insurance document

For dual process, you need any two of the following categories:

  • Documents or information from a reliable source that contain the client's name and date of birth;
  • Documents or information from a reliable source that contain the client's name and address; or
  • Documents or information that contain the client's name and confirms that they have a deposit, credit card or other loan account with a financial entity.

Impact on Canadian Consumers

These changes will allow Canadians to acquire new financial accounts quicker and easier while still retaining vital AML protections.

For newcomers, refugees, immigrants, and thin-file consumers, these changes make it easier to achieve financial inclusion in Canadian society. It’s difficult enough to come to a new country without having to worry about how to basic financial services, such as banking. These amendments, specifically the clause requiring only a six-month credit file instead of three years, makes a dramatic difference in their lives.

For other Canadians, the ability to get an account over the Internet, or on their phone, saves time and hassle. They don’t have to gather all their paperwork, make a special trip to the financial institution, and go through a lengthy and cumbersome process. In many cases, they can get approval for an account in minutes.

For Canadian financial companies, these new ID amendments allow them to ease the onboarding process and get customers using their services faster. This makes for a happier customer and more likely to refer the company. They also reduce costs of manually handling and checking documentation; in most cases, electronic ID verification can handle the entire process. There’ll be cases requiring more information but these will be the exception, rather than the rule.

Canada’s PCMLTFA amendments are a substantial step forward in enabling mobile and eCommerce and allowing quicker integration of newcomers. Are you taking advantage of these new opportunities for your Canadian operations?

For more information, download our Canada: Identity Verification reference paper.