2.2 - Money Laundering/FINTRAC Flashcards
what are some reasons that real estate is attractive for money launderers?
high value
stable asset, secure
potential for profit
subjective value
speculation (flip)
what is a nominee?
an individual/entity that is legally registered as the owner of property, with true control and ownership belonging to one other unregistered person/entity
what are the 3 steps in the money laundering process?
- Placement (bring money into the financial system - through Smurfs, gambling, loan repayment)
- Layering (converting criminal funds to another form - onshore/offshore bank transfers)
- Integration (reintroducing money - buying real estate/luxury, renovating, etc)
what are the 3 money laundering methods in real estate?
- use of corporate entities, trusts, nominees
- use of cash
- unregulated lenders (not subject to PCMLTFA requirements)
what does PCMLTFA stand for?
Proceeds of Crime, Money Laundering, Terrorist Financing Act
what does FINTRAC stand for?
Financial Transactions and Reports Analysis Centre of Canada
who does the PCMLTFA apply to (3)?
real estate brokers
sales representatives
real estate developers
do PCMLTFA requirements apply to property management activities?
no
what is FINTRAC?
independent government agency established by PCMLTFA that collects, analyzes and discloses info to law enforcement about money laundering and terrorist financing
4 key obligations for licensees under PCMLTFA
- Compliance program
- Know Your Client
- Reporting
- Record Keeping
5 parts of compliance program (PCMLTFA)
- compliance officer
- policies and procedures
- risk assessment
- training program
- review of compliance program (every 2 years)
4 triggers to identify the person/entity (KYC)?
- getting $ from them
- purchase/sale transaction
- large cash transaction
- suspicious transaction
is the information contained in record for identification the same for everyone?
different depending on who it’s for (individuals, non-corporate entities, corporate entities all have different requirements)
what is considered a large cash transaction?
a single transaction >$10,000 or multiple transactions adding up to >$10,000 in 24 hours
3 main methods to identify an individual?
- 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)
what is a beneficial owner under PCMLTFA?
any individual who directly or indirectly own or control 25% or more of a corporation or entity
2 obligations for licensees with respect to beneficial ownership info?
- obtain beneficial ownership info (name and address of >25% owners and name all directors of corporation)
- take reasonable measures to confirm that the beneficial ownership info is accurate
what is LOTA?
land owner transparency act
requires transparency declaration to be filed when applying to register certain interests in land at the land title office
what are the 3 methods for identifying someone based on KYC?
- government issued photo ID (in person or through sophisticated software)
- credit file method (match to credit file that has existed for at least 3 years)
- dual process method (match confirmation to the info they have from the client)
can KYC obligations extend to non-clients?
yes
hoe do you identify a 3rd party and take reasonable measures to determine if a client is acting on behalf of someone else?
reasonable measures record
what is considered a large cash transaction?
> $10,000 in one transaction or in multiple transactions over a 24-hour period
how do licensees confirm the existence of a corporate entity?
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
what is a beneficial owner (PCMLTFA)?
any individual who directly or indirectly owns/controls 25% or more of a corporation or other entity
what 2 obligations do licensees have with respect to beneficial owner information?
- obtain beneficial ownership info (names of directors, names and addresses of beneficial owners)
- take reasonable measures to confirm that beneficial ownership info is accurate
who do reports go to (PCMLTFA)?
FINTRAC
what are the 3 reports licensees have to send to FINTRAC under PCMLTFA?
- terrorist property
- large cash transactions (report within 15 days)
- suspicious transactions (report electronically as soon as practicable)
how fast must records be submitted to FINTRAC after a request?
30 days
how long must documents submitted to FINTRAC be kept?
5 years
what does LOTA ask for?
transparency report, showing who holds interest in a property
what are AMPs?
Administrative Monetary Penalties
range from $1 - $100,000 per violation
given when non-compliance to PCMLTFA occurs
max criminal penalties for non-compliance of PCMLTFA?
$2M and/or 5 years imprisonment
