Entities that are designated as reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, such as money services businesses and designated financial institutions have certain obligations to fulfill under the Act and corresponding Regulations. One of these obligations is to verify the identity of their clients, also known as “KYC” requirements.
The Regulations specify when reporting entities must identify an individual or confirm the existence of an entity, and how they must do this. The point at which a reporting entity must identify a client will vary depending on the activity or transaction its clients are carrying out.
On June 17, 2016 the federal government released amendments to the Regulations, which included new client identification and verification methods. These amendments were intended to come into force the following year on June 30, 2017 in order to provide reporting entities with a transition period to adopt to the amendments. However, there have been questions around the interpretation of some of the new identify verification methods that have caused some industry confusion. In response to feedback from some reporting entities, FINTRAC published clarification on how to interpret the new amendments on January 23, 2017.
Consequently, more time is needed for reporting entities to transition to the new requirements. In response, the government has published regulations on June 14, 2017 that extend the transition period to adopt the new methods of client identification until January 23, 2018, providing reporting entities with an additional seven months to incorporate the new amendments into their operations. During this transition period, reporting entities can rely on either the new client identification methods or the old methods.