AML/ATF Update
Sept 2021 Charity & NFP Law Update
Published on September 29, 2021

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


FINTRAC Updates Guidance for Reporting Foreign and Domestic Politically Exposed Persons

A new guidance from the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) updates the information on requirements for doing business with Politically Exposed Persons (“PEP”s). The guidance will be relevant for registered charities that must manage record-keeping and due-diligence requirements regarding PEPs under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”). For example, charities that carry on a related business that meets the definition of a money services business (“MSB”) are affected by the requirements, and would be included as a reporting entity under the PCMLTFA and its regulations.

The Canada Revenue Agency’s policy statement CPS-019, “What is a related business?” explains what it means for a charity to “carry on a related business”. In brief, to carry on a related business means that a charity operates a continuous, regular commercial activity that either: has unpaid volunteers for substantially all (90%) or more of its workforce; or is “linked to a charity’s purpose and is subordinate to that purpose.” FINTRAC has a webpage explaining what a MSB is, which includes businesses that engage in: foreign exchange dealing; money transferring; issuing or redeeming money orders, traveller’s cheques or anything similar; and/or dealing in virtual currency. Although not likely applicable to the vast majority of charities that operate a related business, those that do fall within the definition of a MSB will need to become aware of the new guidance.

The new FINTRAC guidance for PEPs and Heads of International Organizations (“HIO”s) was published in May and came into effect on June 1, 2021 (the “New Guidance”), coinciding with the coming-into-force of regulatory amendments on the same date. The New Guidance has detailed definitions of what a PEP and HIO are. Generally, a domestic PEP “is a person who currently holds, or has held within the last 5 years, a specific office or position in or on behalf of the Canadian federal government, a Canadian provincial (or territorial) government, or a Canadian municipal government.” A foreign PEP is someone who holds or has held a public office or position in a foreign state. An HIO

is a person who currently holds or has held within the last 5 years the specific office or position of head of an international organization and the international organization that they head or were head of is either:

  1. an international organization established by the governments of states; or
  2. an institution established by an international organization.

Charities that are reporting entities — because they carry on a related MSB — are obligated under the PCMLTFA to take additional measures and keep records when engaging in business with a PEP, HIO, or a family member or close associate of one. These additional measures and record-keeping requirements are triggered whenever the RE enters a business relationship, conducts periodic monitoring of or detects a fact about a business relationship, which “indicates a PEP or HIO” connection. The New Guidance outlines these requirements in detail and charities that are reporting entities must diligently familiarize themselves and comply with these obligations.


Read the September 2021 Charity & NFP Law Update