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The New Anti-Money Laundering Regulations The Canadian Real Estate Association.

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Presentation on theme: "The New Anti-Money Laundering Regulations The Canadian Real Estate Association."— Presentation transcript:

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2 The New Anti-Money Laundering Regulations The Canadian Real Estate Association

3 Background & Players Current Requirements Major Changes Issues to be resolved CREA Resources Questions and Answers New FINTRAC Regulations In this presentation well cover: The Canadian Real Estate Association

4 FATF – Paris-based agency sets international standards. They are concerned about the real estate industry globally. Finance Canada – studies FATF standards, then creates policy & law for Canada. FINTRAC – Canadian agency that implements laws, promotes compliance, gathers information and refers cases to police. New FINTRAC Regulations Some of the key players include: The Canadian Real Estate Association

5 PCMLTFA - Created in 2002 following the September 11th attacks on NYC. Real estate has been captured since 2002 because it has been identified as a high risk sector. (All Money Laundering cases have some real estate component) Other high-risk industries: banks, credit unions, securities dealers, foreign exchange dealers, casinos, etc New FINTRAC Regulations Some of the background: The Canadian Real Estate Association

6 June 2005 – Canada responds to FATF recommendations 2 years of consultations, C-25 passed in 2006 Negotiations with CREA cut off in April 2007 New Regulations passed in June 2007 Guidelines prepared in winter 2007 & 2008 Real estate sector implementation date – June 23, 2008 New FINTRAC Regulations These are the timelines: The Canadian Real Estate Association

7 Compliance Officer required in every broker office; Develop and deliver compliance training program for all designated employees; Create office policies and procedures, and update them with new regulatory requirements; Report all large cash and suspicious transactions to FINTRAC Current FINTRAC Requirements There have been 4 pillars:

8 The Canadian Real Estate Association Expanded reporting requirements; Expanded record keeping requirements; Expanded client identification (ID) requirements; New 5 th pillar of compliance – a broker self-assessment of risk and mitigation New FINTRAC Requirements A summary of whats new: Now, lets look at each one in a little more detail…..

9 The Canadian Real Estate Association Receipt of Funds Record must be completed for every transaction by buyer agent; Suspicious ATTEMPTED transactions must be reported within 30 days. The offer triggers the need to report an attempted transaction (up to time of closing); You must not tip off the individual that you have, or intend to file, a report New FINTRAC Requirements Expanded Reporting Requirements

10 entre The Canadian Real Estate Association Five kinds of information must be kept: Large Cash Transaction (not new) Form is on FINTRAC website Receipt of Funds Records(new) Form is on WEBForms or in Compliance Centre Client Information Record(new) Forms are on WEBForms or in Compliance Centre Suspicious Transaction Record (not new) Form is on FINTRAC website New FINTRAC Requirements Expanded Record Keeping

11 The Canadian Real Estate Association ALL funds received must be recorded on a new Receipt of Funds record; Detailed individual information must now be obtained and kept on file; Detailed Corporate client identification must be obtained and kept on file; All reports must be secured in the brokerage, in electronic or hard copy, for five years; If requested by FINTRAC – all records must be produced within 30 days. New FINTRAC Requirements Expanded Record Keeping

12 The Canadian Real Estate Association Discuss FINTRAC compliance requirements before any real estate documents are signed. This is to ensure your client will not refuse to provide the required information after you have signed listing or buyer agency agreement. New FINTRAC Requirements When Records must be created

13 The Canadian Real Estate Association Individual Identification Information Record must be completed by closing. Corporate/Other Entity Identification Information Record should be completed at same time as Receipt of Funds Record. CREA Recommendation: identification records be completed for buyers when an offer is submitted and/or deposit made; identification for sellers be completed when they accept an offer. New FINTRAC Requirements When Records must be created

14 New FINTRAC Regulations

15 The Canadian Real Estate Association reflects money handled by real estate practitioner in transaction, NOT total value of the transaction; Must be completed by buyer agent, no matter where the deposit ends up; In transaction where one party may not be represented, real estate agent representing other party must complete this Record; Buyer agent must make reasonable effort to acquire trust account info of listing broker. If info is not available, indicate that on Record. New FINTRAC Requirements Receipt of Funds Record

16 The Canadian Real Estate Association If deposit ends up directly in the account of an unrepresented sector (lawyer, notary, builder, developer) then a Receipt of Funds Record is not required. New FINTRAC Requirements Receipt of Funds Record

17 New FINTRAC Regulations

18 The Canadian Real Estate Association Brokers and Agents must: Verify client ID, date of birth, and occupation; Confirm the existence of the entity they represent; For unrepresented buyers or sellers attempt to collect identification and record findings; If suspicious, report to FINTRAC. New FINTRAC Requirements Client ID Requirements This is area with most substantive changes.

19 The Canadian Real Estate Association If the client is not present, you must use an agent (representative) or mandatary to identify clients on your behalf You MUST have a contractual agreement with the agent or mandatary in question If no agent/mandatary – you must use 2 of 5 methods approved by FINTRAC (Only for clients residing in Canada) CREA has provided template agreement for mandatary/agent service brokers can use. New FINTRAC Requirements Special Client ID Requirements

20 The Canadian Real Estate Association You must use an agent or mandatary to identify your clients (i.e. an accredited real estate agent) You MUST have a contractual agreement with the agent or mandatary in question They must verify ORIGINAL identification documents, send copies to broker office You are ultimately responsible for what they do New FINTRAC Requirements If the prospective buyer or seller resides overseas – offshore buyers and sellers Special Client ID Requirements

21 The Canadian Real Estate Association Confirm legal existence of corporation or entity; Verify certificate of corporate status; Verify records filed manually under provincial securities legislation; Confirm the names of the Directors of the corporation; Confirm individuals mandate to represent the corporation in a real estate transaction. New FINTRAC Requirements Identification of Corporations

22 The Canadian Real Estate Association Existence of entity must also be confirmed. Verify a partnership agreement Verify articles of association/corporation Verify an original document confirming the existence of entity. Verify mandate of individual representing entity in real estate transaction. New FINTRAC Requirements Identification of Entities

23 New FINTRAC Regulations

24 The Canadian Real Estate Association Existence of third party must also be confirmed. Question of third party involvement in transaction must be asked of individual and corporate clients; If client denies involvement of third party but REALTOR® is suspicious, that should be noted on Identification Record; Third party defined by FINTRAC as someone/corporation issuing instructions to REALTOR® client. New FINTRAC Requirements Identification of Third Party

25 New FINTRAC Regulations

26 The Canadian Real Estate Association This is the new 5 th Pillar of compliance. Engaging senior management in the detection and deterrence of money laundering and terrorist financing Built on a Risk-Based Approach Risk assessment of your business Risk mitigation, i.e. controls to handle risks Ongoing monitoring of higher risk transactions New FINTRAC Requirements Self-Assessment of Risk

27 The Canadian Real Estate Association Consider the following factors: Products & services + delivery channels Geographic locations where you operate Your clients & business relationships Any other relevant factor that exposes you Must be conducted once every 2 years Risk mitigation steps – to be determined CREA has prepared a checklist to assist brokers New FINTRAC Requirements Self-Assessment of Risk

28 Compliance Centre – 5 new modules CREA forms (P. 13 of booklet, or on REALTOR Link® Receipt of Funds Record Client Information Record Self-Assessment of Risk Checklist Support from Staff Consumer Brochure Compliance training video New FINTRAC Regulations There is support available:

29 New FINTRAC Regulations Questions? The Canadian Real Estate Association Many issues are addressed and explained in CREA booklet on FINTRAC Compliance, or on internet reference centre on

30 The New Anti-Money Laundering Regulations The Canadian Real Estate Association


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