Canada: New Amendments To The Proceeds Of Crime (Money Laundering) And Terrorist Financing Act Regulations

Last Updated: July 19 2016
Article by Delna Contractor and Elizabeth Kurz

Most Read Contributor in Canada, October 2018

On June 17, 2016, the Department of Finance released amendments to the regulations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the "New Amendments"). These were published in the Canada Gazette on June 29th, 2016.

The New Amendments follow proposed draft amendments to the PCMLTFA regulations, which were published in the Canada Gazette a year ago, on July 4, 2015 (the "Proposed Amendments").

A new guideline was also published on June 17 by FINTRAC on its website (the "Guideline"). It contains the amendments relating to individual client verification methods.

Highlights of the New Amendments:

  • New client verification methods to identify clients who are not physically present, providing some flexibility to the rigid and outdated verification process.
  • After the expiry of the transition period on June 30, 2017, all individual client verification processes must comply with the new Guideline.
  • Greater flexibility when relying on agents to verify client identity.
  • The definition of signature is broadened to include electronic signatures.
  • Increased obligations when identifying politically exposed persons.

The New Amendments, particularly those relating to the client identity verification process, will alleviate some of the regulatory burdens imposed on reporting entities. For example, the inclusion of electronic signatures obviates the need for clients to attend in person to sign account opening documents. Unfortunately, the amendments do not go far enough. For example, the failure to introduce simple measures, such as accepting scanned identification documents, could have significantly lessened the time and cost spent on client verification. Nonetheless, the amendments are a step in the right direction.

The significant changes contained in the New Amendments are described below.

  1. Client Verification Amendments

The New Amendments provide reporting entities with more options in how they carry out identity verification, particularly where the client is not physically present.

Three verification methods are available: (1) Credit File (2) Dual Process (3) Single Process.

  1. The Credit File Method is the most straightforward process to identify a client who is not physically present.
  2. The Dual Process Method also allows for verification absent a client's presence, but it is a convoluted process with some uncertainties.
  3. The Single Process Method is relatively straightforward, but requires the client be physically present during the verification process.

The Guideline provides for a year-long transitional period between June 30, 2016 and June 17, 2017. During this period, both the old and new client identification methods may be utilized. After June 17, 2017, the reporting entities must use the identification methods set out in the Guideline, and discussed below.

The Credit File Method:

As discussed in the Proposed Amendments, the Credit File Method allows a reporting entity to verify client identity by referring to a Canadian credit file (available through institutions like Equifax Canada or Trans Union Canada).

The Credit File Method requires the following:

  1. The credit file must be Canadian and must have been in existence for a minimum of 3 years.
  2. The credit file details must match the name, date of birth and address provided by the client. If any of the information does not match, another client identification verification method must be utilized.
  3. The credit file search must occur contemporaneously with the client verification process.

Where available, this process serves as a relatively straightforward method of client verification.

The Dual Process Method:

The Dual Process Method was a key feature of the Proposed Amendments. It allows for client verification without the client's physical presence by confirming the client's name, address, date of birth, and financial account through two sources taken from the following categories:

  1. Original documents, including original electronic documents1; and / or
  2. Information from independent and "reliable" sources.

As the name suggests, the dual process method does not allow for verification from a single source, even if that single source confirms all the requisite information.

The Dual Process Method will provide reporting entities with much needed flexibility in the client verification process. However, it still falls short of embracing technological features that could lessen the cost and time of the verification process, such as viewing documents through online video conferencing. This failure to deploy existing technology exemplifies the excessively cautious approach taken in these New Amendments, and represents a lost opportunity to streamline the client identification process.

Additionally, some of the changes miss the mark entirely. For example, in an attempt to alleviate the strict reliance on original paper documents, clients can now use original electronic documents by showing a reporting entity their phone or tablet containing downloaded documents or emails in their inbox from the original sender. However, if the client is available to show their electronic device in person, the need for the dual process method is obviated.

The requirement that the source be "reliable" creates some uncertainty as well. What exactly constitutes a reliable source? The Guideline is of little assistance in this matter. It defines "reliable" to mean a source that is well known, considered reputable, and is one that the reporting entity trusts. These qualitative criteria are difficult to assess objectively and invariably lead to more questions:

  • How do you determine that a source is well known or reputable?
  • Does the reporting entity's trust have to be reasonably placed?
  • Will the reporting entity have to demonstrate the basis for its trust?
  • If so, how will a reporting entity justify its trust?

Examples provided in the Guideline of "reliable" sources include cards or statements issued by a Canadian government body, including CRA documents, utility bills, RRSP documents or documents issued by financial institutions, including bank statements or cheques.

The Single Process Method:

The single process method allows for in person client identification by reference to valid and current photo identification.

Unfortunately, the Guideline explicitly prohibits reporting entities from viewing photo identification through video conference or through any virtual type of application. Scanned copies of identification are also prohibited.

  1. Use of Agents

Under the current regulations, reporting entitis may use an agent to verify client identity where a written agreement with that agent is in place. The New Amendments have maintained this requirement, but have introduced additional provisions allowing for greater flexibility.

The Guideline allows a reporting entity to rely on valid client identification information obtained by the agent. If the client information obtained by the agent has since expired, the reporting entity can still rely on the agent's prior verification of the client's identity if a written agreement existed between the agent and reporting entity before the information expired.

Reporting entities should ensure that written agreements are in place with all agents utilized for client verification. Based on these new changes, reporting entities may consider memorializing existing oral agreements with agents in the form of a written agreement.

  1. Electronic Signatures

The PCMLTFA regulations require that reporting entities receive and maintain signature cards when an account is opened. Consequently, under the old rules clients were obligated to attend in person to sign account opening documents.

Fortunately, the New Amendments have broadened the definition to include electronic signature, obviating the need for clients to appear in person. "Signature" and "signature card" are now defined to include electronic signature or other information in electronic form that is unique to that client and adopted by the reporting entity.

  1. Expansion of Politically Exposed Persons

The PCMLTFA regulations require reporting entities to make a determination of whether it is dealing with a "Politically Exposed Foreign Person" ("PEPs"). PEPs are defined to include individuals who hold certain senior ranking positions in or on behalf of a foreign country and include close family members of that individual. The New Amendments have expanded the scope of the obligations relating to PEPs.

Reporting entities are now required to determine not only whether they are dealing with a PEP, but also whether the individual falls within any of the following categories:

  • A domestic PEP;
  • The head of an international organization; and/or
  • Closely associated with a PEP.

Additionally, reporting entities are now required to perform periodic checks of existing clients to see if they are domestic or foreign PEPs, or are closely affiliated with PEPs.

We anticipate that FINTRAC's new guideline on PEPs, once published, will assist in clarifying some of these changes. For example, currently there is no indication in the New Amendments as to when an individual will be "closely associated" with a PEP.

Unfortunately, the expanded scope of obligations with respect to PEPs will require reporting entities to revise their established procedures and will undoubtedly add to due diligence costs.


1 Original electronic documents are defined in the Guideline to mean documents received by the client through email or by downloading it directly from the issuer's website.

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
Norton Rose Fulbright Canada LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
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