Canada: Anti-Money Laundering Update: FINTRAC Releases Guidance In Respect Of Politically Exposed Persons

On December 20, 2016, the Financial Transactions and Reports Analysis Centre of Canada ("FINTRAC") released new guidelines (collectively, the "Guidelines") in respect of politically exposed persons ("PEPs") and heads of international organizations ("HIOs"). A separate guideline was released for each of financial entities, securities dealers, life insurance companies, agents and brokers and money services businesses (collectively, the "reporting entities"). The Guidelines will be effective June 17, 2017.


The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the "PCMLTFA") was amended pursuant to the 2014 federal budget to expand the concept of PEP to include domestic PEPs and HIOs, in addition to foreign PEPs. Corresponding amendments to the regulations to the PCMLTFA were also enacted in 2016. For further detail on the amendments to the PCMLTFA and the regulations, please see our prior legal updates " Anti-Money Laundering Update: Proposed Amendments to the Regulations to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act Issued" and Anti-Money Laundering Update: Final Amendments to Regulations to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act Released".

PEP/HIO Determination

As a result of these amendments, effective June 17, 2017, financial entities will be required to take "reasonable measures" to determine whether a client is a domestic or foreign PEP or a HIO, or a "close associate" or family member of such a person:

  • at account opening;
  • on a "periodic basis";
  • if the financial entity "detects a fact" that leads it to suspect the client is a PEP, HIO, or close associate or family member of such person; and
  • upon receiving or sending an electronic funds transfer of $100,000 or more.

Similarly, life insurance companies, brokers and agents will need to make this determination when a person makes a lump-sum payment of $100,000 or more towards an annuity or life insurance policy; securities dealers will need to make this determination at account opening, on a periodic basis and if they detect a fact that leads it to suspect the client is a PEP, HIO, or close associate or family member of such person; and money services businesses will need to make this determination for incoming and outgoing electronic funds transfers of $100,000 or more.

The Guidelines provide additional guidance on some of these terms, including the terms "close associate", "periodic basis", "reasonable measures" and "detecting a fact":

  • "Close associates" are individuals who are closely connected to a PEP or HIO for personal or business reasons and could include, for example, business partners, romantic partners, persons involved in financial transactions with the PEP or HIO, prominent members of the same political party or union, persons serving on the same board or persons closely carrying out charitable works with the PEP or HIO.
  • The Guidelines stipulate that reporting entities must have a process in place to assess whether existing account holders are PEPs, HIOs, or close associates or family members of such persons, on a "periodic basis". The Guidelines do not set out specifically what "periodic basis" means in this context. This will need to be determined by each reporting entity based on its own facts and situation. The Guidelines do indicate, for example, that reporting entities may want to consider timing this obligation with existing requirements to conduct ongoing monitoring of business relationships.
  • "Reasonable measures" that can be used to determine whether a client is a domestic or foreign PEP or a HIO, or a "close associate" or family member thereof, would include, for example, asking the client, media monitoring, ongoing monitoring of business relationships, and consulting a public or private database. More than one measure may be used. A reporting entity must keep a record when the reasonable measure undertaken is unsuccessful, which record must include the measure taken, the date and a record of why it was unsuccessful.
  • "Detecting a fact" means having actual information that "constitutes reasonable grounds to suspect" that a person is a PEP or HIO or close associate or family member of a PEP or HIO. This could occur based on information provided by the client, as a result of media monitoring or knowledge of world events, or based on a search on a public or commercial database. The detection of such fact triggers a requirement to complete a determination as to whether the client is in fact a PEP or HIO or close associate or family member thereof.

In terms of timing, a foreign PEP is forever a foreign PEP, while a person ceases to be a domestic PEP 5 years after they have left the office. A HIO ceases to be a HIO when he or she is no longer the head of the international organization.

Risk Assessment

A client who is a foreign PEP, or a "close associate" or family member of such a person is automatically deemed to be a high-risk client. If a client is a domestic PEP or HIO, or a "close associate" or family member of such a person, the reporting entity must perform a risk assessment to determine whether the client is a high-risk client.

In either case, if the client is a high-risk client, the client must be subject to the reporting entity's policies and procedures for high-risk clients. The reporting entity is required to take measures to obtain information on sources of funds, obtain senior management approval to keep the account open within 30 days of determining the client is a high-risk client, and conduct enhanced ongoing monitoring.

The Guidelines set out a fairly detailed list of risk factors that may be relevant when conducting the risk assessment to determine whether a domestic PEP or HIO (or close associate or related person of a domestic PEP or HIO) is high-risk. These include, but are not limited to, the amount of time since the person held the position, the relevant organization where the person held the position and its reputation and industry, whether the person sought to hide their identity (through the use of intermediaries, nominees, family members, corporate vehicles, or otherwise), or whether the person has provided incomplete or inadequate information.


The Guidelines should assist reporting entities in better understanding their obligations under the PCMLTFA and regulations as recently amended. Reporting entities should update their policies and procedures to ensure compliance with the updated requirements in advance of the June 17, 2017 effective date.

To view original article, please click here

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.

In association with
Related Topics
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