When to identify individuals and confirm the existence of entities – Life insurance companies, brokers and agents
This guidance on client identification is applicable to life insurance companies, brokers and agents that are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations.
Details on how to identify individuals and confirm the existence of entities is available in FINTRAC’s guidance Methods to identify individuals and confirm the existence of entities.
Throughout this guidance, references to dollar amounts (such as $10,000) are in Canadian dollars. Furthermore, all references to cash mean money in circulation in any country (bank notes or coins) and do not include cheques, money orders or other similar negotiable instruments.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) specify when you must identify an individual or confirm the existence of an entity, and how you must do this. The point at which you identify a client will vary depending on the activity or transaction that is carried out. Knowing your client includes identifying them in accordance with the Regulations, but you also have further obligations in this regard, such as requirements related to the ongoing monitoring of business relationships, the determination of politically exposed persons or heads of international organizations, beneficial ownership, and third party determination.
As a life insurance company, broker or independent agent, you must identify individuals and confirm the existence of entities for certain activities and transactions, as listed below. Entities can be corporations, trusts, partnerships, funds, and unincorporated associations or organizations.
When you have to confirm the existence of an entity that is a corporation, you also have to verify its name and address, and the names of its directors.
The formation of a business relationship and the ensuing obligations are tied to your requirements to identify clients. For non-account-based relationships, you are considered to be in a business relationship with every individual you have had to identify at least twice, and with every entity whose existence you have had to confirm at least twice. If you have not identified an individual or confirmed the existence of an entity because an exception applied, you are still considered to be in a business relationship and must conduct ongoing monitoring and keep certain records.
You are also required to take reasonable measures to determine if a client is acting on the instruction of a third party when creating a client information record or conducting a large cash transaction. In this case, reasonable measures may include asking the individual, or relying on information you already have about the individual. If you determine that the individual in front of you is acting on someone else's instructions, that “someone else” is the third party.
As a life insurance company, broker or independent agent, you are responsible for identifying clients for:
Client information records
Large cash transactions
**Note: Exceptions to your client identification requirements are listed in the last section of this guidance.
1. Client information records
You are required to identify an individual who conducts the purchase of an immediate or deferred annuity or a life insurance policy that costs $10,000 or more over the duration of the annuity or policy, regardless of how it is paid for. If the purchase has been made on behalf of a third party, you must identify the person who conducts the purchase but the client information record must be created for the applicant of that life insurance policy or annuity. The conductor must be identified within 30 days of creating this record.
You must confirm the existence of an entity within 30 days of creating a client information record.
You must identify the conductor in the purchase of a group life insurance policy or group annuity but the client information record must be kept for the applicant of the policy or annuity.
2. Group plans
You must identify individual members of a group plan when they make a contribution to the plan, if:
the existence of the plan sponsor has not been confirmed; or,
the member’s contributions are not made by the sponsor of the plan or by payroll deduction.
3. Large cash transactions
You must identify every individual who conducts a large cash transaction at the time the transaction takes place. A large cash transaction occurs when you receive $10,000 or more in cash in a single transaction. A large cash transaction also occurs when there are multiple cash transactions of less than $10,000 each that total $10,000 or more within a 24-hour period, when you know they are conducted by, or on behalf of, the same individual or entity.
4. Suspicious transactions
You must take reasonable measures to identify an individual who conducts or attempts to conduct a suspicious transaction before sending a Suspicious Transaction Report. Reasonable measures in this case may include asking the individual to provide photo identification.
All suspicious transactions and attempted suspicious transactions, including transactions that are normally exempt from client identification requirements, require you to take reasonable measures to identify your clients.
Keeping client identification information up to date
You must update client information at a frequency that will vary based on your risk assessment. As a part of your ongoing monitoring requirements, you must keep all client identification information up to date. High-risk clients’ identification information must be updated more frequently, and you must take any other appropriate enhanced measures.
To keep client identification information up to date, you must take measures such as asking the client to provide information to confirm or update their identification information. In the case of an individual, this may include confirming or updating the information by using the options that are available to identify individuals who are not physically present.
In the case of clients that are entities, measures to keep client identification information up to date may include consulting a paper or electronic record, or obtaining information verbally.
You do not have to re-identify an individual or re-confirm the existence of an entity if you previously did so using the methods specified in the Regulations in place at the time and kept the associated records, so long as you have no doubts about the information used.
There are specific exceptions that apply to your requirement to identify clients. You do not have to identify an individual or confirm the existence of an entity in respect of one of the following:
the purchase of a policy that is an exempt policy (that is, a policy issued for insurance protection and not for significant investment purposes as defined in subsection 306(1) of the Income Tax Regulations);
the purchase of a group life insurance policy that does not provide a cash surrender value or a savings component;
the purchase of an immediate or deferred annuity that is paid for entirely with funds that are directly transferred from a registered pension plan or from a pension plan that is required to be registered under the Pension Benefits Standards Act, 1985 or similar provincial legislation;
the purchase of an immediate or deferred annuity that is paid for entirely with the funds from the proceeds of a group life insurance policy; or
the purchase of a registered annuity policy or a registered retirement income fund.
If the corporation for which you have to keep a client information record is a securities dealer, you do not have to verify the names of the corporation’s directors.
In the case of a group plan, you do not have to identify individual members of the plan if the member’s contributions are made by the sponsor of the plan or by payroll deduction, and you have already confirmed the existence of the entity that is the plan sponsor.
If you conduct a transaction for a public body or very large corporation, you do not have to identify them. The same is true regarding a subsidiary of either of those types of entities, if the financial statements of the subsidiary are consolidated with those of the public body or very large corporation.
You do not have to identify the individual who conducts a large cash transaction if the cash is received from a financial entity or public body.
You do not have to identify an individual if you have reasonable grounds to believe that another life insurance company, broker or agent identified the individual in accordance with the Regulations, for the same transaction or a transaction that is part of a series of transactions that includes the original transaction.
You do not have to identify a client if you deal in reinsurance. However, this does not apply to suspicious transactions.
You do not have to take reasonable measures to identify the individual who conducts or attempts to conduct a suspicious transaction only if:
you have already identified the individual as required and have no doubts about the identification information; or
you believe that identifying the individual would inform them that you are submitting a Suspicious Transaction Report.
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