Unit 1 Lesson 2 Flashcards
Legislation and Regulations
Explain the purpose of the PCMLTFA.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) is legislation designed to combat money laundering and the financing of terrorist activities.
Its objectives include detecting and deterring such activities, providing law enforcement with tools for investigation and prosecution, and fulfilling Canada’s international commitments against multinational crime.
The Act imposes reporting and other obligations on entities vulnerable to money laundering or terrorist financing, encompassing/including financial entities, life insurers, money service businesses, real estate entities, securities dealers, dealers in precious metals and stones, and casinos.
Discuss the role of FINTRAC.
Financial Transactions and Reports Analysis Centre of Canada, FINTRAC, Canada’s financial intelligence unit, is dedicated to detecting and preventing money laundering and the financing of terrorist activities domestically and internationally. Its mission is to enhance public safety and protect the integrity of Canada’s financial system by deterring these illicit activities. Money laundering, as defined by Canadian law, involves disguising the source of money or assets derived from criminal activity, transforming “dirty money” into clean, untraceable funds integrated into the legitimate economy.
One common method of money laundering involves using illegal funds held in cash accounts to purchase securities within the financial system.
Terrorist financing, providing funds for terrorist activities, relies on developing funding sources and concealing links between these sources and the supported activities.
Two primary sources of terrorist financing include countries, organizations, or individuals and revenue-generating activities. The methods employed by terrorist groups to generate funds often mirror those used by traditional criminal organizations, necessitating the laundering of these illicit funds to use them discreetly and avoid attracting authorities’ attention.
Name the 4 key responsibilities of a dealing representative (your responsibilities), under the PCMLTFA?
As a Dealing Representative under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), your main responsibilities encompass four key areas:
1) Reporting to FINTRAC
2) Record-keeping
3) Confirming your client’s identity
4) Identifying politically exposed foreign persons
Discuss the 4 key responsibilities/obligations of a dealing representative (your responsibilities), under the PCMLTFA.
As a Dealing Representative under the PCMLTFA, your four key responsibilities involve reporting to FINTRAC, record-keeping, confirming your client’s identity, and identifying politically exposed foreign persons.
1) Reporting to FINTRAC:
Advise your dealer of completed and attempted suspicious transactions.
Your dealer reports these transactions to FINTRAC, following guidelines for when to file reports and instructions, for how to file them, provided by FINTRAC.
2) Record-keeping:
Maintain records, including large cash transaction records, account-related records, and other records designated by your Compliance Department.
Records must be kept in such a way that they can be accessible for inspection by FINTRAC within 30 days of a request.
3) Confirming Your Client’s Identity:
Confirm your client’s identity when opening a non-registered account, during large cash transactions, when a client conducts a suspicious transaction, or when an individual provides instructions for an account.
Accepted identification documents include birth certificates, driver’s licenses, passports, record of landing, permanent resident cards, social insurance numbers, old age security cards, certificates of Indian status, provincial identification cards, or similar documents, whether Canadian or foreign equivalents.
Important considerations:
Health cards from Ontario, Manitoba, and PEI are not acceptable for identification.
In Quebec, you cannot request to see a client’s health card, but you can accept it if the client voluntarily uses it for identification.
If unable to identify an individual at the account opening, you may accept an initial deposit but cannot proceed with further transactions until proper identification is obtained.
If a client is evasive or unwilling to provide adequate identification information, you must inform your Compliance Department.
4) Identifying Politically Exposed Foreign Persons:
Individuals are considered politically exposed foreign persons if they or their immediate family held certain positions in a foreign country, including head of state or government, ambassador, military general, president of a state-owned company, and others.
Enhanced due diligence is required when dealing with politically exposed foreign persons.
What is your role/obligation, as a dealing representative, when collecting personal information?
As a Dealing Representative, it is your responsibility to collect personal information from clients, and you are obligated to maintain the confidentiality of this information. Legislation, including the Privacy Act and the Personal Information Protection and Electronic Documents Act (PIPEDA) at the federal level, safeguards the collection, use, and disclosure of individual personal information. Additional protection may be provided by provincial privacy acts.
What is the privacy act?
The Privacy Act is a law that applies to federal government departments and agencies, setting obligations to protect privacy rights by restricting the collection, use, and disclosure of personal information. It grants individuals the right to access their personal information held by these organizations and allows them to request corrections if needed.
What is PIPEDA and what is its purpose?
The Personal Information Protection and Electronic Documents Act, (PIPEDA), is Canada’s private sector privacy law, governing how federally regulated private sector organizations handle personal information.
PIPEDA sets rules for the collection, use, and disclosure of personal information, emphasizing the importance of consent, reasonable purpose, accuracy, accessibility, and secure storage.
PIPEDA does not apply in provinces with similar legislation (Quebec, Alberta, and British Columbia), but it governs the sharing of personal information across provincial, territorial, or international borders.
Exemptions include government institutions under the Privacy Act, personal use, and organizations using information for journalistic, artistic, or literary purposes without other objectives.
Define what qualifies as personal information under PIPEDA.
PIPEDA governs how private sector organizations handle “personal information,” defined as any factual or subjective information, recorded or not, about an identifiable individual. This includes various details such as age, weight, medical records, ID numbers, opinions, employee files, credit records, loan records, dispute with a merchant, intentions (for example, to
acquire goods or services or change jobs). PIPEDA’s rules require organizations to collect, use, and disclose personal information responsibly, ensuring accuracy, security, and accessibility. However, certain information, like an employee’s name, title, business address, or telephone number on a business card, is not considered personal information under PIPEDA.
Explain the requirements under the DNCL.
The Canadian Radio-television and Telecommunications Commission (CRTC) has established the National Do Not Call List (DNCL) to provide consumers with the choice of whether to receive telemarketing calls. Telemarketing, defined as unsolicited telecommunications to sell or promote a product or service, is restricted for individuals on the DNCL unless express permission has been granted. This prohibition includes cold-calling potential new clients and former clients not engaged in business within the last 18 months who are on the DNCL. The same restriction applies to former clients who have done business within the last 18 months and are on the dealer’s own do-not-call list. However, calling existing clients or a dealer’s clients is permitted, considering the nature of the relationship and the expectation of contact for investment advice, market updates, or regulatory matters.
Explain the requirements under the CASL.
The Electronic Commerce Protection Act (ECPA) in Canada addresses the issue of unsolicited commercial electronic messages, commonly known as spam. Governed by this legislation, senders of such messages are required to obtain consent from recipients before sending a message. Additionally, senders must identify themselves and provide recipients with the option to withdraw consent. The Canadian Anti-Spam Legislation (CASL) is designed to regulate not only commercial electronic messages (CEMs) but also other electronic threats to commerce, including malware, spyware, pretexting, and the unauthorized harvesting of electronic addresses and personal information.
Explain what a CEM is and summarize an overview of CASL requirements.
The Canadian Anti-Spam Legislation (CASL) centers around the concept of Commercial Electronic Messages (CEMs), which are electronic messages containing commercial or promotional content aimed at encouraging participation in a commercial activity. This includes messages seeking consent to send such communications. CASL prohibits organizations from sending CEMs to consumers unless the recipient has given consent, the message identifies the sender, and it provides the recipient with the ability to withdraw consent and unsubscribe from all future messages. Organizations can allow consumers to unsubscribe from specific message types, but they must also provide the option to unsubscribe from all future messages.
Under the Canadian Anti-Spam Legislation (CASL), recipients must actively opt in to receive Commercial Electronic Messages (CEMs) from an organization. Express or implied consent is acceptable, but pre-checked boxes for express consent are not allowed. Recipients must take a positive action, like checking a blank box, to indicate consent. The Canadian Radio-television and Telecommunications Commission (CRTC) has the authority to impose penalties for CASL violations, with maximum fines ranging from $1 million for individuals to $10 million for organizations. Businesses may also face damages, statutory damages, and potential liability for directors and officers. As a Dealing Representative, adherence to your dealer’s CASL policies and procedures is crucial, and sending CEMs to recipients who haven’t opted in is generally prohibited.
Explain the requirements under the United States FATCA.
The US Foreign Account Tax Compliance Act (FATCA) addresses concerns about US taxpayers evading taxes by investing offshore. It mandates foreign financial institutions, including those in Canada, to report on financial accounts held by US taxpayers and substantial ownership interests in foreign entities. Non-compliance by Canadian financial institutions results in a 30% withholding tax on certain US-source payments. To facilitate compliance, the Canadian and US governments have an Intergovernmental Agreement (IGA) incorporated into the Income Tax Act of Canada (ITA). Under this agreement, Canadian financial institutions, including mutual fund dealers, must identify and report accounts held by clients classified as US persons for US tax purposes to the Canada Revenue Agency (CRA).
How is a US person identified for tax purposes?
For US tax purposes, a person is typically considered a US person if they are a US resident or a US citizen. However, individuals with economic and social ties closer to Canada than the US would generally not be regarded as US residents.
How to identify existing clients under FACTA?
To identify existing clients under FATCA, Canadian financial institutions must review the information already in their possession for signs that the client may be a US person, such as having a US address. If such an indication is found, the institution must request the client to certify whether they are a US person. Clients may also be required to provide supporting documentation if they claim not to be a US person.
How to identify new clients under FACTA?
To identify new clients under FACTA, Canadian financial institutions must request clients to certify their US person status at the time of account opening. The institution must then verify the reasonableness of the client’s certification using other information provided during the account opening process. Alternatively, the institution may follow a process similar to that used for existing clients, relying on the information provided by the client during the account opening.
