Canada: New FinTRAC Guidance – ID Verification

Since July 2015, when draft amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (Draft Regulations) were published in the Canada Gazette, the industry has been expecting changes to aspects of the current AML/TF regime, particularly with respect to customer identification. After a lengthy delay, caused at least in part by the change in government, FinTRAC signaled the imminent arrival of the updated rules by releasing a new guideline on its website regarding methods to ascertain the identity of individuals (the Guideline). The Guideline refers to amended regulations that were apparently made on June 17th, but are yet to have been officially published in the Canada Gazette. The Guideline offers guidance on certain elements of the yet unseen final amendments to the regulations.

Highlights and Observations

Based on the Guideline, it appears that the methods for verification of identity of individuals proposed in the Draft Regulations have not been substantially changed from what was proposed last summer. For a summary of the proposals in the Draft Regulations, please see our update from July 2015. Here are some areas of note:

Single Process Method

The only single process method of identification of an individual who is not physically present at the time of identification discussed in the Guideline is the credit file method. The Draft Regulations include an additional single process method, which involves referring to information that is received from a federal or provincial government body or an agent of such body. We understand that there is currently no such process available in Canada and for this reason this method is not included in the Guideline.

As in the Draft Regulations, the credit file method referred to in the Guideline requires a Canadian credit file that has been in existence for at least three years. Submissions from various industry participants requesting that the three year period be reduced have apparently not been accepted.

Reliable Sources for Dual Process Methods

One of the key updates proposed in the Draft Regulations is the new concept that identity may be verified by referring to information from two different reliable sources (referred to in the Guideline as the "dual process method"). This is a welcome development as it is less prescriptive than the current requirements and provides flexibility; however, with less prescription, there is also less certainty about what will be considered acceptable. FinTRAC has provided the following criteria for determining whether a source would be considered "reliable":

  1. The source must be an originator or issuer of information;
  2. The reporting entity must trust the source to verify the identity of the client;
  3. The source should be well known and considered reputable; and
  4. The source cannot be the reporting entity or the client.

These criteria are helpful, but they raise additional questions:

  • What does it mean for a reporting entity to "trust" the source?
  • Is this an objective or subjective test?
  • If trust will be determined objectively (i.e. whether it was reasonable for the reporting entity to trust the source), what diligence must the reporting entity have done to come to the conclusion that it may trust the source?
  • What diligence must the reporting entity do to determine whether a source is "well known" and "considered reputable"? Considered reputable by whom?

The Guideline provides some examples of reliable sources: various levels of government, crown corporations, financial entities and utility providers. Note that a municipal government is considered a reliable source for the dual process method, but an identity document issued by a municipal government is excluded from acceptable photo identification.

Use of Agents

Under the current regulations, a reporting entity may use an agent to verify identity on its behalf provided that it has a written agreement or arrangement in place with the agent. The Draft Regulations include additional flexibility with respect to the use of agents. In particular, based on the Draft Regulations, a reporting entity may rely on measures previously taken by the agent to verify identity even if the agent took those measures on its own behalf or on behalf of another reporting entity under a written agreement or arrangement. The Guideline adds the following in connection with these provisions:

  1. If an agent ascertained the client for another entity and the information is still current, the reporting entity may rely on it;
  2. If the identifying information used by the agent has expired, the reporting entity may still rely on it, provided that the reporting entity's agreement with the agent was in place before the information expired.

This appears to give reporting entities some leeway when they use agents who have previously identified clients, but we question whether it is overly cumbersome to be of practical assistance.

Here is an example to illustrate how this would work: ABC Mortgages (a mortgage broker) identified Sally, the prospective borrower, on June 15, 2014 on behalf of Bank A by referring to Sally's Ontario driver's license. Sally's driver's license expires on May 31, 2016. Bank B is now opening a new mortgage account for Sally.

If Bank B has a written agreement with ABC Mortgages for ABC Mortgages to verify the identity of clients on behalf of Bank B and that agreement was in place before May 31, 2016, Bank B can rely on ABC Mortgages' previous identification of Sally. If, however, Bank B entered into the written agreement with ABC Mortgages after May 31, 2016, Sally's identity will have to be re-verified as the previous identification cannot be relied on.

This guidance suggests that reporting entities should enter into written agreements as soon as possible with any potential agent that they may use to verify identity on their behalf. Also, the agent's record of the identity document, and in particular, the expiry date of the document will have to be reviewed for each individual client to determine whether the (a) identity document is still current; or (b) if the identity document is not current, whether the date of the reporting entity's agreement with the agent predates the expiry date of the identity document; if it does not, the individual will need to be re-identified.

Acceptable Documents

The Guideline includes a long list of acceptable Canadian federal, provincial and territorial government-issued photo identification documents. Although the list is stated not to be exhaustive, reporting entities may wish to use the list in the Guideline to help them document which Canadian identity documents they will generally accept.

The Guideline provides that reporting entities are not permitted to accept a copy or a digitally scanned image of photo identification. Further, if a reporting entity is referring to a document in a dual process method, the original document is the one the client received from the issuer. If any information has been redacted, the document is not acceptable.

Application of Guideline

The Guideline applies to all entities that are subject to the PCMLTFA, to the extent that the entity is required to verify identity of individuals. Although the Guideline uses the terminology "individual clients" and "client identity", based on the Draft Regulations and the current regulations under the PCMLTFA, the methods for identifying an individual client and an individual who is an authorized signer or other representative of a corporate client are the same. The Guideline is therefore relevant to reporting entities that only provide services to corporate clients in addition to those that provide services to individuals.

Next Steps

The Guideline provides for a one-year transition period from June 17, 2016 until June 17, 2017 during which the current methods for verification of the identity of individuals (those included in the regulations before amendment and described in FinTRAC Guideline 6) can also be used in addition to the new methods.

We expect that reporting entities will wait until the amended regulations have been published before they begin using the updated methods for identity verification. We will continue to track developments and will post a further update following publication of the final amendments to the regulations.

About Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global law firm. We provide the world's preeminent corporations and financial institutions with a full business law service. We have 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

For more information about Norton Rose Fulbright, see

Law around the world

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions