Background
Back on July 10, 2019, the highly anticipated final version of the amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its enacted regulations were published. However, on June 10, 2020, further amendments to those amended regulations were published in the Canada Gazette. To make reading these changes a little easier, we have created a redlined version of the regulations, with new content showing as tracked changes, which can be found here.
The purpose of this round of amendments is to better align measures with international standards and level the playing field across reporting entities by applying stronger customer due diligence requirements and beneficial ownership requirements to designated non-financial businesses and professions (DNFBPs). The amendments come into force on June 1, 2021.
We have summarized the changes that will have an impact on Dealers in Precious Metals and Stones (DPMS) below.
PEP
The amendments will require DPMSs to make a Politically exposed persons (PEP) determination when they enter into a business relationship with a client. In addition, they will also be required to take reasonable measures to determine whether a client from whom they receive an amount of CAD 100,000 or more is a PEP.
A reminder that a business relationship is defined as:
If a person or entity does not have an account with you, a business relationship is formed once you have conducted two transactions or activities for which you have to:
- verify the identity of the individual; or
- confirm the existence of the entity.
Given the definition of a business relationship, we do not expect this requirement to be overly burdensome. If you currently conduct list screening, PEP screening could easily be added to that process.
If a positive determination is made, the following records must be kept:
- the office or position, and the organization or institution, in respect of which the person is determined to be a politically exposed foreign person, a politically exposed domestic person or a head of an international organization, or a family member of, or a person who is closely associated with, one of those persons;
- the date of the determination; and
- the source, if known, of the person’s wealth.
Beneficial Ownership
The amendments will require DPMSs to comply with existing beneficial ownership requirements that apply to other reporting entities.
This means when identifying an entity, a reporting entity needs to collect the following information for all Directors and individuals who own or control, directly or indirectly, 25% or more of the organization:
- Their full legal name;
- Their full home address; and
- Information establishing the ownership, control, and structure of the entity.
A record of the reasonable measures to confirm the accuracy of the information, when it is first obtained and in the course of ongoing monitoring of business relationships, must be retained.
We’re Here To Help
If you would like assistance in updating your compliance program and processes, or have any questions related to the changes, please get in touch!