RE/MAX CROSSROADS RULES & REGULATIONS BULLETIN:
New FINTRAC Obligations
New FINTRAC regulations came into force on February 1, 2014 with new requirements focusing on customer due diligence and aiming to have reporting entities better “know their customers” to evaluate risk of money laundering and terrorist financing.
Additional resources to help members comply with the new requirements will be available in the coming weeks and this will include updated forms, a step-by-step policy and procedures manual.
Below are further details of the new FINTRAC requirements to be met by REALTOR® members:
1. A written risk assessment of each client is not required. Rather, flexibility has been provided for REALTOR® members to implement alternative processes, so long as it can be demonstrated that client risk has been assessed. As a result, this effectively maintains requirements that existed prior to these regulatory changes.
2. Obligations to keep client information up to date does not extend beyond the transaction, despite the concept of “ongoing monitoring” in the regulations.
3. A separate record outlining measures taken and information obtained from monitoring of client relationships is not necessary. Rather, policies and procedures can be implemented for REALTORS® to simply retain e-mails and other documentation obtained through the course of customer due diligence, so long as these documents can be assembled and provided to FINTRAC if a brokerage is audited.
4. A five year time limit to the concept of “business relationship,” which forms the basis for a number of obligations, was introduced. As a result of this change, two transactions within a five year period are required to trigger a business relationship. In addition, a business relationship with a client expires five years after the last transaction. Prior to CREA’s lobbying, business relationships did not expire.
5. Business relationships are not formed with large corporations and public bodies.
6. A regulatory requirement to document the purpose and intended nature of a business relationship can be satisfied quickly and easily by getting agents to fill in a check box on a soon to be updated CREA form, greatly mitigating what could have been a confusing, complicated and onerous obligation requiring additional paperwork and time.
7. Information on the purpose and intended nature of a business relationship only needs to be provided once per transaction, addressing a concern that multiple updates may be required.
8. The discretion of REALTOR® members when evaluating client risk was restored, preventing a situation where new clients or all clients from the United States are classified as high risk and thus automatically subject to additional measures.
9. Ongoing monitoring does not need to be conducted for high risk clients where only one transaction is conducted with that client.
10. Client identification information does not need to be confirmed or updated more than once during a transaction in a high risk situation.
While significant changes and clarifications to FINTRAC’s interpretations were made, some alterations to brokers’ existing FINTRAC compliance policies and procedures will be necessary as a result of a new concept known as a “business relationship” in the regulations. These changes include:
1. New requirements for brokers to keep client information up-to-date and keep a record of the purpose and intended nature of the broker’s business relationships with clients.
2. A new obligation to keep records of measures taken to monitor business relationships, which can be satisfied by keeping relevant correspondence with clients and other documentation obtained through the course of customer due diligence.
3. A new obligation for brokers to re-assess a client’s risk of money laundering or terrorist financing for clients who are in a business relationship with the brokerage.
If you have any questions or concerns, please contact David Salvatore, CREA’s Director of External Relations (firstname.lastname@example.org).