The New Anti-Money Laundering Regulations The Canadian Real Estate Association

The New Anti-Money Laundering Regulations


The Canadian Real Estate AssociationThe Canadian Real Estate Association

• Background & Players• Current Requirements• Major Changes• Issues to be resolved• CREA Resources• Questions and Answers

New FINTRAC Regulations New FINTRAC Regulations

In this presentation we’ll cover:


FATF – Paris-based agency sets international standards. They are concerned about the real estate industry globally.

Finance Canada – studies FATF standards, then creates policy & law for Canada.

FINTRAC – Canadian agency that implements laws, promotes compliance, gathers information and refers cases to police.


Some of the key players include:


PCMLTFA - Created in 2002 following the September 11th attacks on NYC.

Real estate has been captured since 2002 because it has been identified as a “high risk” sector. (All Money Laundering cases have some real estate component)

Other “high-risk” industries: banks, credit unions, securities dealers, foreign exchange dealers, casinos, etc


Some of the background:


• June 2005 – Canada responds to FATF recommendations

• 2 years of consultations, C-25 passed in 2006• Negotiations with CREA cut off in April 2007• New Regulations passed in June 2007• Guidelines prepared in winter 2007 & 2008• Real estate sector implementation date – June

23, 2008


These are the timelines:


The Canadian Real Estate Association

• Compliance Officer required in every broker office;

• Develop and deliver compliance training program for all designated employees;

• Create office policies and procedures, and update them with new regulatory requirements;

• Report all large cash and suspicious transactions to FINTRAC

Current FINTRAC Requirements

There have been 4 “pillars”:


• Expanded reporting requirements;• Expanded record keeping requirements;• Expanded client identification (ID)

requirements;• New “5th pillar” of compliance – a broker

self-assessment of risk and mitigation

New FINTRAC Requirements

A summary of what’s new:

Now, let’s look at each one in a little more detail…..


• Receipt of Funds Record must be completed for every transaction by buyer agent;

• Suspicious ATTEMPTED transactions must be reported within 30 days.

• The “offer” triggers the need to report an attempted transaction (up to time of closing);

• You must not “tip off” the individual that you have, or intend to file, a report


Expanded Reporting Requirements

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Five kinds of information must be kept:• Large Cash Transaction (not new) Form is on FINTRAC website

• Receipt of Funds Records(new) Form is on WEBForms™ or in Compliance Centre

• Client Information Record(new) Forms are on WEBForms™ or in Compliance Centre

• Suspicious Transaction Record (not new) Form is on FINTRAC website


Expanded Record Keeping


• ALL funds received must be recorded on a new “Receipt of Funds” record;

• Detailed individual information must now be obtained and kept on file;

• Detailed Corporate client identification must be obtained and kept on file;

• All reports must be secured in the brokerage, in electronic or hard copy, for five years;

• If requested by FINTRAC – all records must be produced within 30 days.


Expanded Record Keeping


• Discuss FINTRAC compliance requirements before any real estate documents are signed. This is to ensure your client will not refuse to provide the required information after you have signed listing or buyer agency agreement.


When Records must be created


• Individual Identification Information Record must be completed by closing.

• Corporate/Other Entity Identification Information Record should be completed at same time as Receipt of Funds Record.

CREA Recommendation: • identification records be completed for

buyers when an offer is submitted and/or deposit made;

• identification for sellers be completed when they accept an offer.


When Records must be created



• reflects money handled by real estate practitioner in transaction, NOT total value of the transaction;

• Must be completed by buyer agent, no matter where the deposit ends up;

• In transaction where one party may not be represented, real estate agent representing other party must complete this Record;

• Buyer agent must make reasonable effort to acquire trust account info of listing broker. If info is not available, indicate that on Record.


Receipt of Funds Record


• If deposit ends up directly in the account of an unrepresented sector (lawyer, notary, builder, developer) then a Receipt of Funds Record is not required.


Receipt of Funds Record



Brokers and Agents must:• Verify client ID, date of birth, and

occupation;• Confirm the existence of the entity they

represent;• For unrepresented buyers or sellers

attempt to collect identification and record findings;

• If suspicious, report to FINTRAC.


Client ID RequirementsThis is area with most substantive changes.


• If the client is not present, you must use an agent (representative) or mandatary to identify clients on your behalf

• You MUST have a contractual agreement with the agent or mandatary in question

• If no agent/mandatary – you must use 2 of 5 methods approved by FINTRAC (Only for clients residing in Canada)

• CREA has provided template agreement for mandatary/agent service brokers can use.


Special Client ID Requirements


• You must use an agent or mandatary to identify your clients (i.e. an accredited real estate agent)

• You MUST have a contractual agreement with the agent or mandatary in question

• They must verify ORIGINAL identification documents, send copies to broker office

• You are ultimately responsible for what they do


If the prospective buyer or seller resides overseas – “offshore buyers and sellers”

Special Client ID Requirements


• Confirm legal existence of corporation or entity;

• Verify certificate of corporate status;• Verify records filed manually under

provincial securities legislation;• Confirm the names of the Directors of the

corporation;• Confirm individual’s mandate to represent

the corporation in a real estate transaction.


Identification of Corporations


Existence of entity must also be confirmed.•Verify a partnership agreement•Verify articles of association/corporation•Verify an original document confirming the existence of entity.•Verify mandate of individual representing entity in real estate transaction.


Identification of Entities



Existence of third party must also be confirmed.• Question of third party involvement in transaction must be asked of individual and corporate clients;• If client denies involvement of third party but REALTOR® is suspicious, that should be noted on Identification Record;•Third party defined by FINTRAC as someone/corporation issuing instructions to REALTOR® client.


Identification of Third Party



• This is the new “5th Pillar” of compliance.

• Engaging senior management in the detection and deterrence of money laundering and terrorist financing

• Built on a Risk-Based Approach• Risk assessment of your business• Risk mitigation, i.e. controls to handle

risks• Ongoing monitoring of higher risk

transactions


Self-Assessment of Risk


Consider the following factors:• Products & services + delivery channels• Geographic locations where you operate• Your clients & business relationships• Any other relevant factor that exposes you• Must be conducted once every 2 years• Risk mitigation steps – to be determined• CREA has prepared a checklist to assist

brokers


Self-Assessment of Risk

• Compliance Centre – 5 new modules• CREA forms (P. 13 of booklet, or on

REALTOR Link®• Receipt of Funds Record• Client Information Record• Self-Assessment of Risk Checklist

• Support from Staff• Consumer Brochure• Compliance training video


There is support available:


Questions?


Many issues are addressed and explained in CREA booklet on FINTRAC Compliance, or on internet reference centre on www.realtorlink.ca.




Documents

The New Anti-Money Laundering Regulations The Canadian Real Estate Association