Insurance And Financial Planning

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act ((the “Proceeds Regulations”) governs individual record keeping by all life underwriters who must make declarations to FINTRAC. These files must contain…

statements of major cash transactions
client files
a copy of official registers of legal persons
a copy of statements of suspicious transactions
a document regarding beneficiaries of record

The advisor must themselves adhere to these requirements if they are independent, and uphold the requirements of the company or firm for which they work and send them the pertinent information, as needed.

Statement content

When a client pays an amount equal to or greater than $10,000 in cash with one transaction, or when they execute two or more cash transactions of less than $10,000 each that equal $10,000 or more within one consecutive 24-hour period, for a single person or entity or for themselves, the independent representative (advisor) or the independent partnership or firm for which the advisor works must follow the procedure described below.

1. Produce a major cash transaction statement that includes the following information:

Name of the person who paid this amount
Address, date of birth, and occupation of this person
Transaction date and type
Number and type of each account impacted by the transaction, name of the account holder, and currency in which the transaction was made
Details and purpose of the transaction
Method in which the amount was received
Amount and currency of the amount received
Identity verification of each person completing this transaction
Declaration of a third party signed by the client if they are acting on behalf of a third party

2. Take reasonable measures to determine whether the person paying this amount is acting on behalf of a third party and, if so, collect information on this third party as well as the connection between this third party and the client, including:

Name and address of the third party, and description of their main company or their occupation
If the third party is a natural person, their date of birth
If the third party is a legal person, its incorporation number and the location its certificate of incorporation was issued
The advisor must also ensure that a client file is maintained and determine whether the client is acting for a third party when purchasing an annuity or life insurance policy through which they can pay $10,000 or more during the period included in the annuity or the policy, regardless of the payment method.

3. Determine the true beneficiaries of the transaction:

When a client is a legal person, the advisor must confirm the existence of this entity and take necessary measures to determine their beneficiaries of record. A beneficiary of record is a person who could benefit from the transaction, such as an administrator or shareholder.

The client file regarding money laundering must include the information included below for beneficiaries:

If it is a legal person

Name and occupation of all administrators
Name, address, and occupation of all people who directly or indirectly hold or control at least 25% of its shares

If it is an entity other than a legal person

Name, address, and occupation of all people who directly or indirectly hold or control at least 25% of this entity

When the advisor receives an amount of $10,000 or more for the purchase of an annuity or a life insurance policy, they must maintain a client file that includes this information.

If it is not possible to obtain the information regarding the beneficiaries of record, the advisor must keep a document that explains the reasons.

Client file content

Client files regarding money laundering must contain the following items:

If it is a natural person

Name, address, and date of birth
Primary occupation or profession
Number of the documentation used to identify them

If it is a legal person

Copy of its certificate of incorporation
Copy of all documents that it is required to file annually under the terms of provincial law or
Copy of all other documents that establish its existence

If it is an entity other than a legal person

Copy of the partnership agreement
Copy of the articles of association or
Copy of any other document of this nature

Retention period for a client file

The Proceeds Regulations specify a retention period of five years for client files.

In the following cases in a particular, the advisor is not required to produce a major cash transaction statement or maintain a client file regarding money laundering:

Purchase of an exempt policy (a policy issued for protection purposes, not for major investments)
Purchase of a group life insurance policy with no cash surrender value or savings component
Purchase of an immediate or deferred annuity fully funded by money transferred directly from a registered pension plan or the proceeds of a group life insurance policy
Purchase of a registered annuity contract or a registered retirement income fund
For a registered plan, including a locked-in retirement plan account, a registered retirement savings plan account, a registered group retirement savings plan account, a registered education savings plan, or any other registered plan
Opening of an account if the account holder or purchaser is a pension fund governed by a federal or provincial law
For a transaction carried out under a reverse mortgage or a structured settlement

Also, the advisor is not responsible for producing a major cash transaction statement if the amount comes from a financial entity (when the remittance is made by the institution), for example:

a bank
a savings and credit cooperative
a credit union
a provincial or federal service
a city or an incorporated municipal body

Identity verification

The advisor must verify the identity of the following people and entities:

Any person making a major cash transaction
Any person or entity paying $10,000 or more to purchase an annuity or a life insurance policy
Any person for whom a suspicious transaction statement is submitted
Any member of a group plan when contributions to the plan are not made by the plan promoter or as payroll deductions

The identity of the person must be established through one of the following pieces of documentation:

Birth certificate
Driver’s licence
Health insurance card
Passport

When a client pays $100,000 or more to purchase an annuity or a life insurance policy, the advisor must, in addition to verifying their identity, take reasonable measures to determine whether they are a “politically exposed foreign person.”

A “politically exposed foreign person” is any person who occupies or has occupied any of the following positions in a foreign country or who is an immediate family member of such a person:

Head of state or head of government
Member of a government’s legislative assembly or executive counsel
Deputy minister
Ambassador, or ambassador’s attaché or advisor
High-ranking official
State bank or government corporation director
Government agency head
Judge
Political party president represented in a legislative assembly
Holder of a position governed by the Proceeds Regulations

If the advisor determines that a client is a politically exposed foreign person, they must take all reasonable measures to determine the origin of the funds that were used. The transaction must be verified by a member of the management team of the company or firm for which they work, within a period of 14 days. The advisor must also keep a file on this person.

For more information, see the FINTRAC website.

The advisor must take reasonable measures to determine whether the person with whom they are conducting business is a “politically exposed foreign person.”