By Terrance S. Carter, Sean S. Carter & Nancy E. Claridge

FINTRAC Releases Video on Verifying the Identity of a Client

On May 11, 2023, the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) released a short video which explains how to use the affiliate or member method to verify a client’s identity. There are five prescribed methods to do so, specified by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “Act”). These methods are:

1. Government issues photo identification

2. Credit file

3. Dual-process method

4. Affiliate or member method

5. Reliance Method

Regulated organizations must identify a client when conducting certain transactions.

FINTRAC defines an “affiliate” as:

An entity that is affiliated with another entity if one of them is wholly owned by the other, if both are wholly owned by the same entity, or if their financial statements are consolidated.

The affiliate or member must have previously provided their identity using the government ID, credit file or dual process method. The verifying organization must be satisfied that this information is valid and current.

An affiliate, foreign affiliate or member must be:

1. An affiliate of yours that is a regulated business, referred to in paragraphs 5(a) to (g) of the Act, or

2. A foreign affiliate that carries out activities similar to those referred to in the aforementioned sections, or

3. A financial entity subject to the Act and is a member of the verifying organization’s credit union central or financial services cooperative

A written agreement must be in place between the parties to use the affiliate or member method. To use the method, the verifying organization must obtain the information to confirm the identity from the affiliate or member and check that it matches the information it had previously obtained from them. If there is any question or discrepancy, the identity should be reverified. The onus of having correct information is on the verifying party. 

Charities and not-for-profits subject to the Act are reminded that FINTRAC takes the verification of information seriously, and such organizations have a responsibility to ensure they make a reasonable effort to confirm the identity of any affiliate or member when a transaction falls under the purview of the Act.

Consultations Held for Creation of Foreign Influence Registry by Federal Government

The Canadian government held public consultations as part of a study about possibly establishing a foreign influence transparency registry. Public Safety Minister Marco Mendicino made the announcement on March 10, 2023, but did not provide a specific timeline for when the registry would be operational. The registry would require individuals acting on behalf of foreign states to disclose their affiliations with those governments. Its purpose is to increase transparency and prevent foreign interference in Canadian affairs. Similar registries already exist in Australia and the United States, and non-compliance could result in fines or imprisonment. The public consultations closed on May 9, 2023, and included a virtual portal on the Public Safety Canada website.

According to the Department of Public Safety, foreign governments maintain legitimate channels of engagement with the Canadian government; however, concerns arise when they engage in non-transparent actions that exceed standard diplomacy and lobbying, crossing into foreign interference. Such activities pose significant risks to Canadian interests, national security, and democratic processes, the government reports.

“While Canada has a number of existing tools to support transparency,” the government states, “new measures could be considered, such as a foreign influence transparency registry, which would better align Canada’s approach with those of like-minded partners and allies, bolstering overall collective resilience.”

To initiate the development of a foreign influence transparency registry, the federal government is seeking to involve a diverse range of stakeholders. The registry aims to expand Canada's toolkit to effectively address the evolving threat of foreign interference and promote transparency surrounding foreign influence within the country. The consultation focused on crucial aspects, such as registrable activities, exemptions, information disclosure, and compliance.

A public and stakeholder consultation paper was published March 10, 2023, titled “Enhancing Foreign Influence Transparency: Exploring Measures to Strengthen Canada’s Approach.”

​Read the May 2023 Charity & NFP Law Update