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Real Estate Exam > 2.2 - Money Laundering/FINTRAC > Flashcards

2.2 - Money Laundering/FINTRAC Flashcards

1
Q

what are some reasons that real estate is attractive for money launderers?

A

high value
stable asset, secure
potential for profit
subjective value
speculation (flip)

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2
Q

what is a nominee?

A

an individual/entity that is legally registered as the owner of property, with true control and ownership belonging to one other unregistered person/entity

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3
Q

what are the 3 steps in the money laundering process?

A
  1. Placement (bring money into the financial system - through Smurfs, gambling, loan repayment)
  2. Layering (converting criminal funds to another form - onshore/offshore bank transfers)
  3. Integration (reintroducing money - buying real estate/luxury, renovating, etc)
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4
Q

what are the 3 money laundering methods in real estate?

A
  1. use of corporate entities, trusts, nominees
  2. use of cash
  3. unregulated lenders (not subject to PCMLTFA requirements)
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5
Q

what does PCMLTFA stand for?

A

Proceeds of Crime, Money Laundering, Terrorist Financing Act

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6
Q

what does FINTRAC stand for?

A

Financial Transactions and Reports Analysis Centre of Canada

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7
Q

who does the PCMLTFA apply to (3)?

A

real estate brokers
sales representatives
real estate developers

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8
Q

do PCMLTFA requirements apply to property management activities?

A

no

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9
Q

what is FINTRAC?

A

independent government agency established by PCMLTFA that collects, analyzes and discloses info to law enforcement about money laundering and terrorist financing

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10
Q

4 key obligations for licensees under PCMLTFA

A
  1. Compliance program
  2. Know Your Client
  3. Reporting
  4. Record Keeping
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11
Q

5 parts of compliance program (PCMLTFA)

A
  1. compliance officer
  2. policies and procedures
  3. risk assessment
  4. training program
  5. review of compliance program (every 2 years)
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12
Q

4 triggers to identify the person/entity (KYC)?

A
  1. getting $ from them
  2. purchase/sale transaction
  3. large cash transaction
  4. suspicious transaction
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13
Q

is the information contained in record for identification the same for everyone?

A

different depending on who it’s for (individuals, non-corporate entities, corporate entities all have different requirements)

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14
Q

what is considered a large cash transaction?

A

a single transaction >$10,000 or multiple transactions adding up to >$10,000 in 24 hours

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15
Q

3 main methods to identify an individual?

A
  • government issued photo ID (in person or virtually through sophisticated software)
  • credit file method (matching info to credit file that is at least 3 years old)
  • dual process method (compare 2 reliable sources of the party’s info, and ensure they match)
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16
Q

what is a beneficial owner under PCMLTFA?

A

any individual who directly or indirectly own or control 25% or more of a corporation or entity

17
Q

2 obligations for licensees with respect to beneficial ownership info?

A
  1. obtain beneficial ownership info (name and address of >25% owners and name all directors of corporation)
  2. take reasonable measures to confirm that the beneficial ownership info is accurate
18
Q

what is LOTA?

A

land owner transparency act
requires transparency declaration to be filed when applying to register certain interests in land at the land title office

19
Q

what are the 3 methods for identifying someone based on KYC?

A
  1. government issued photo ID (in person or through sophisticated software)
  2. credit file method (match to credit file that has existed for at least 3 years)
  3. dual process method (match confirmation to the info they have from the client)
20
Q

can KYC obligations extend to non-clients?

A

yes

21
Q

hoe do you identify a 3rd party and take reasonable measures to determine if a client is acting on behalf of someone else?

A

reasonable measures record

22
Q

what is considered a large cash transaction?

A

> $10,000 in one transaction or in multiple transactions over a 24-hour period

23
Q

how do licensees confirm the existence of a corporate entity?

A

super flexible - any of the below:
certificate of incorporation
certificate or active corporate status
record that has to be filed annually
any other record that confirms corporation’s existence

24
Q

what is a beneficial owner (PCMLTFA)?

A

any individual who directly or indirectly owns/controls 25% or more of a corporation or other entity

25
Q

what 2 obligations do licensees have with respect to beneficial owner information?

A
  1. obtain beneficial ownership info (names of directors, names and addresses of beneficial owners)
  2. take reasonable measures to confirm that beneficial ownership info is accurate
26
Q

who do reports go to (PCMLTFA)?

A

FINTRAC

27
Q

what are the 3 reports licensees have to send to FINTRAC under PCMLTFA?

A
  1. terrorist property
  2. large cash transactions (report within 15 days)
  3. suspicious transactions (report electronically as soon as practicable)
28
Q

how fast must records be submitted to FINTRAC after a request?

A

30 days

29
Q

how long must documents submitted to FINTRAC be kept?

A

5 years

30
Q

what does LOTA ask for?

A

transparency report, showing who holds interest in a property

31
Q

what are AMPs?

A

Administrative Monetary Penalties
range from $1 - $100,000 per violation
given when non-compliance to PCMLTFA occurs

32
Q

max criminal penalties for non-compliance of PCMLTFA?

A

$2M and/or 5 years imprisonment

Real Estate Exam (16 decks)

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