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Mutual Funds And Scholarship Plans

The Proceeds Regulations govern the maintenance of certain files by securities brokers that must make declarations to FINTRAC. These files must contain…

  • statements of major cash transactions
  • signature cards, account holding agreements, and account opening requests
  • copies of official registers of legal persons
  • information on account holders
  • new account opening requests
  • purchase and sale confirmations
  • guarantees
  • trade authorizations
  • powers of attorney
  • joint account agreements
  • correspondence regarding account maintenance
  • client account statements
  • information on the intended use of an account
  • copies of statements of suspicious transactions
  • documents regarding beneficiaries of record

The advisor is probably the person who, from the front line, must ensure all the useful and necessary information for maintaining these files is included. They must therefore fulfil the obligations stated in the Proceeds Regulations and the requirements of the dealer for which they work and send the necessary information to the dealer, as needed.

Statement content

When a client pays an amount equal to or greater than $10,000 in cash with one transaction, or when they execute two or more cash transactions of less than $10,000 each that equal $10,000 or more within one consecutive 24-hour period, for a single person or entity or for themselves, the independent representative (advisor) or the independent partnership or firm for which the advisor works must follow the procedure described below.

  1. Produce a major cash transaction statement that includes the following information:
    Name of the person who paid this amount
    Address, date of birth, and occupation of this person
    Transaction date and type
    Number and type of each account impacted by the transaction, name of the account holder, and currency in which the transaction was made
    Details and purpose of the transaction
    Method in which the amount was received
    Amount and currency of the amount received
    Identity verification of each person completing this transaction
    Declaration of a third party signed by the client if they are acting on behalf of a third party
  2. Take reasonable measures to determine whether the person paying this amount is acting on behalf of a third party and, if so, collect information on this third party as well as the connection between this third party and the client, including:
    Name and address of the third party, and description of their main company or their occupation
    If the third party is a natural person, their date of birth
    If the third party is a legal person, its incorporation number and the location its certificate of incorporation was issued
  3. Determine the true beneficiaries of the transaction

When a client is a legal person, the advisor must confirm the existence of this entity and take necessary measures to determine their beneficiaries of record. A beneficiary of record is a person who could benefit from the transaction, such as an administrator or shareholder.

The client file regarding money laundering must include the information included below for beneficiaries.

If it is a legal person

  • Name and occupation of all administrators
  • Name, address, and occupation of all people who directly or indirectly hold or control at least 25% of its shares

If it is an entity other than a legal person

  • Name, address, and occupation of all people who directly or indirectly hold or control at least 25% of this entity

When it is not possible to obtain the information regarding the beneficiaries of record, the advisor must keep a document that explains the reasons.

Retention period for a client file

The Proceeds Regulations specify a retention period of five years for client files.

Exemptions for producing statements

In some special circumstances, a major cash transaction statement is not required.

This includes cases where the amount comes from one of the following entities (when the payment is made by the institution):

  • a Canadian bank or an authorized foreign bank
  • a cooperative credit society or credit union
  • a financial services cooperative
  • a trust or loan company
  • an agent of the Crown that accepts deposits
  • a Canadian federal or provincial department
  • a Canadian municipal body (city, municipality, village)
  • a hospital administration

The advisor must verify the identity of the following people and entities:

  • Any person making a major cash transaction
  • Any person signing a signature card
  • Any person able to give instructions regarding an account
  • Any company or other entity for which an account is opened, before any transaction is completed on this account
  • Any person for whom a suspicious transaction statement is submitted
  • Any member of a group plan when contributions to the plan are not made by the plan promoter or as payroll deductions

The identity of the person must be established through one of the following pieces of documentation:

  • Birth certificate
  • Driver’s licence
  • Health insurance card
  • Passport

The advisor must take reasonable measures to determine whether the person with whom they are conducting business is a “politically exposed foreign person.”

A “politically exposed foreign person” is any person who occupies or has occupied any of the following positions in a foreign country or who is an immediate family member of such a person:

  • Head of state or head of government
  • Member of a government’s legislative assembly or executive counsel
  • Deputy minister
  • Ambassador, or ambassador’s attaché or advisor
  • High-ranking official
  • State bank or government corporation director
  • Government agency head
  • Judge
  • Political party president represented in a legislative assembly
  • Holder of a position governed by the Proceeds Regulations

If the advisor determines that a client is a politically exposed foreign person, they must take all reasonable measures to determine the origin of the funds that were used. The transaction must be verified by a member of the dealer’s management team, within a period of 14 days. The advisor must also keep a file on this person.