Guidelines for Compliance

with

Canada’s Anti-Money Laundering

and Terrorist Financing Regime

Updated June 2014

Contents

An Introduction to FINTRAC 3

Understanding FINTRAC Obligations 4

Mandatory Reporting to FINTRAC 4

1. Suspicious transaction or attempted transaction reporting (STATR) 5

2. Large Cash Transaction Record 5

3. Terrorist Group or Listed Person Property Report 5

Interacting with FINTRAC 5

1. Suspicious Client Activities that Result in Reporting 5

Reporting Timelines for Suspicious Transactions or Attempted Transactions 6

Reporting Guidelines 6

2. FINTRAC-Imposed Audit of either Agent or Agency 7

What to Expect During an Audit 7

Ensuring FINTRAC Compliance 8

Politically Exposed Foreign Person (PEFP) Record 9

Highlights from the 2008 CLHIA Guidance Manual 10

Understanding Money Laundering 10

FINTRAC Stages of Money Laundering 10

Indicators of Suspicious Transactions or Attempted Transactions - Industry Specific (STATR) 11

Scenarios of Suspicious Life Insurance Transactions or Attempted Transactions 12

Record Keeping Changes 2014 ……………………………………………………………..14

National Best Forms …………………………………………………………………………..20

Checklist of Requirements 21

AML Risk Matrix - Documenting & Assessment of Risk 22

AML Risk Matrix - Client 24

Anti-Money Laundering, Anti-Terrorist Financing Training 27

Sign-in Sheet 28

An Introduction to FINTRAC

Changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act became effective June 23, 2008. Visit www.fintrac.gc.ca for full details.

The objectives of the Act are:

·  to help detect and deter money laundering and the financing of terrorist activities and

·  to facilitate investigations and prosecutions of money laundering and terrorist activity financing offences.

FINTRAC is an independent financial intelligence unit, operating independently from law enforcement agencies such as the RCMP. They have a dual mandate:

  1. To facilitate more effective and efficient recognition of money laundering and/or terrorist activity financing, and
  2. To conduct their own internal research and obtain information from other international sources.

Because FINTRAC is also responsible for ensuring life insurance agents and brokers comply with the Act, they have the authority to inquire into your business and examine your records to ensure compliance with the Act.

As an independent insurance Agent or Agency working directly with the public, you are considered to be in a front-line position to detect Money Laundering (AML) and Terrorist Financing (ATF) situations.

Each National Best member must ensure he or she is aware of, and complies with, the obligations under the AML/ATF Regulations. It is your responsibility to ensure that you have appropriate procedures in place and that you are prepared in the event you are audited by FINTRAC staff.

For more information or details regarding your obligations, we encourage you to visit the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) at www.fintrac-canada.gc.ca.

Some of the changes that affect your business are:

·  Client identification requirements

·  Source of funds

·  Third-party determination

·  Suspicious transaction reporting

·  Development of AML/ATF procedures

·  Auditing compliance

·  Enforcement of procedures as laid out in the Act

National Best is committed to assisting you in your own personal and financial protection, and the protection from others who may attempt to use your legitimate business to fund illicit practices. This manual outlines what you need to know, and what you need to do, to protect yourself and your business, and abide by the regulations as set out in the Act.

Understanding FINTRAC Obligations

The Act requires all Brokers to adopt a compliance regime and ensure that all employees and those who act on their behalf comply with the Act. According to FINTRAC, our compliance regime needs to be tailored to fit each agency’s business needs. It should also reflect the nature, size and complexity of the entire organization. The Act’s five requirements include, and are covered within this manual:

  1. Appointing a compliance officer (the compliance officer should be someone senior, in a decision-making role within the management team)
  2. Developing detailed written, auditable compliance policies and tested procedures for reporting and record-keeping
  3. Ongoing review of the effectiveness of the compliance program through self-assessments and/or audits
  4. Compliance training for employees, Brokers, or others acting on behalf of your Agency plus an ongoing training plan (evidence must be provided that you and your staff review the training program and update as necessary)
  5. Assessing and documenting the money laundering and terrorist financing risks unique to your business. Risk mitigation is about implementing controls to limit the potential money laundering and terrorist financing risks you have identified – stay within your risk tolerance level. Full review of our compliance regime and FINTRAC exam is at least every two years.

In 2008, CHLIA published its Guidance Manual to Combat Money Laundering and Terrorist Activity Financing. National Best used this manual to develop its organizational protocol and provide agency owners, managers and associates with the tools they need to ensure compliance with the Act. The entire CHLIA Manual is available on the National Best website at http://www.nbbn.ca/jml/nb_documents/nb_general/licensed_agents/Compliance/FINTRAC-CHLIA2008.pdf.

Mandatory Reporting to FINTRAC

The Act has three sections that outline mandatory reporting requirements:

1.  Suspicious transaction or attempted transaction reporting (STATR)

2.  Large cash transactions reporting, and

3.  Terrorist group and listed person property reporting

1.  Suspicious transaction or attempted transaction reporting (STATR)

You are required to submit a STATR report if you have reasonable grounds to suspect that a transaction or attempted transaction is related to money laundering or terrorist activity financing. You are expected to use your judgment when reporting. See the following section on Interacting with FINTRAC for guidance, and discuss the file with your agency owner and compliance officer prior to reporting. Several possible descriptive scenarios are listed later in the manual that can assist with determining if activity is suspicious.

2.  Large Cash Transaction Record

National Best does not accept cash currency as payment for product. We expect additional documentation for payments over $10,000 received in a single transaction from a financial entity that is not a bank, credit union or trust company, or a public body. Please discuss record keeping with the compliance officer.

3.  Terrorist Group or Listed Person Property Report

Property is defined as any type of real or personal property. Examples include cash, bank accounts, insurance policies, money orders, real estate, securities (including mutual funds), and traveler’s cheques. You are legally obligated to report if you have property in your control that you know is owned or controlled by or on behalf of a terrorist group or listed person. This includes attempted transactions. Reports must be sent by paper.

Interacting with FINTRAC

You may become involved with FINTRAC protocols in one of two ways:

  1. Client activities seem suspicious and a report is filed with FINTRAC; or
  2. FINTRAC determines they need to complete an audit on your business activities.

You need to be prepared for both.

1.  Suspicious Client Activities that Result in Reporting

There are four possible scenarios and your course of action depends on which set of circumstances is present. In all cases, if you have been involved in a life insurance transaction you may have a reporting obligation to FINTRAC and under the Criminal Code. If you have not been involved in a life insurance transaction, then your only potential reporting obligation will be under the Criminal Code.

Scenario 1 - If you do not know that the property in your possession or control is terrorist property and you do not suspect that it is, there is no obligation to report to FINTRAC under the Act or under the Criminal Code.

Scenario 2 - If you do not know that the property in your possession or control is terrorist property but you suspect that it is, there is no obligation to file a Terrorist Group or Listed Person Property Report to FINTRAC under the Act or disclose it to the RCMP and CSIS under the Criminal Code. In this circumstance you will have to file a Suspicious Transaction or Attempted Transaction Report regarding such property.

Scenario 3 - If you have property in your possession or control that you know is owned or controlled by or on behalf of a terrorist group or listed person, including information about any transaction or proposed transaction relating to that property, AND you have been involved in a life insurance transaction, you must file a Terrorist Group or Listed Person Property Report to FINTRAC and disclose it to the RCMP and CSIS under the Criminal Code.

Scenario 4 - If you have property in your possession or control that you know is owned or controlled by or on behalf of a terrorist group or listed person, including information about any transaction or proposed transaction relating to that property, BUT you have not been involved in a life insurance transaction, you must disclose it to the RCMP and CSIS under the Criminal Code.

Descriptive scenarios can be found later in the manual.

Reporting Timelines for Suspicious Transactions or Attempted Transactions

You have thirty (30) days from the date on which you have reasonable grounds to suspect that the transaction or attempted transaction is related to a money laundering or terrorist activity financing offence to file your report. If suspicion occurs at the time of the transaction or attempted transaction, the 30-day reporting timeline begins at that time.

If the suspicion occurs after the transaction or attempted transaction or after multiple transactions or attempted transactions, the 30-day reporting timeline begins at that later time.

Reporting Guidelines

1.  You are not permitted to tell the client that you have made a report.

FINTRAC will send National Best an acknowledgement message when your report has been received electronically. This will include the date and time your report was received and a FINTRAC-generated identification number. If your report contains incomplete information, FINTRAC may contact you by phone, or you can file an updated report using the identification number assigned to the original report.

This process must be completed within the 30-day time period. Your obligation to report is not considered fulfilled unless the report is complete.

2.  Liability in relation to reporting STATR to FINTRAC.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act states that no criminal or civil proceedings lie against a person or an entity for making a report in good faith. In other words, you cannot be sued for disclosing information to FINTRAC as long as the report has been made in good faith. Failure to file a STATR carries a maximum $2 million fine and allows up to five years’ imprisonment.

2.  FINTRAC-Imposed Audit of either Agent or Agency

What to Expect During an Audit

Questionnaire: You will receive a letter with instructions to complete an online questionnaire. There is a 30-day time period to complete the questionnaire. should be provided a copy of this questionnaire if/when you are contacted by FINTRAC staff.

Audit: If you are selected for an audit, you will need to provide FINTRAC with a copy of the following:

·  Compliance policies and procedures

·  Reporting policies, procedures and protocols

·  Training program for staff and or brokers

·  Risk assessment for money laundering and terrorist financing

·  Any external review from past audits and your agency’s action plan response

·  Organization chart (see Registered Agent list on our website)

·  List of all non-registered investment cases for the previous 12 months

·  Any large cash transaction records

·  Access to all client information and records

Audit follow up: After the initial audit, you can expect the following:

Deficiency Letter: You will receive a letter 30 to 45 days after the audit which will outline any deficiencies. It will request that you submit an action plan within 30 days to address all deficiencies identified. Please copy this to for creation of the Action Plan Response.

Action Plan Response: You will be required to submit an action plan addressing the deficiencies identified in the audit. Your action plan should provide a timeline which identifies the planned implementation of any required changes to your procedures.

Ensuring FINTRAC Compliance

We ensure compliance with the Act through our documents known collectively as Client Information Records. Annual reviews with clients help to ensure client information is kept current.

National Best obtains the information necessary for the Client Information Record on its Know Your Client form and other documentation as required by the situation. If your agency does not use the Know Your Client form, use the following table to ensure your information is compliant. Be sure your agents verify identification.

Signed copies of the forms may be kept electronically, provided a paper copy can be made at any time. Records must be maintained for at least five years from the date they were created, or five years from the date of the last transaction.

For clients not physically present at the purchase of a product, paying by credit card ensures a tracking of his or her Canadian credit history.

What is a Client Information Record?

Individual Client / ·  Client name
·  Address
·  Date of birth
·  Nature of principal business or occupation
·  Proof you have verified client identity using valid, unexpired documentation including:
o  Birth certificate
o  Driver’s license
o  Provincial health card (where allowed)
o  Passport
o  Any similar record, other than client SIN
·  Record the type of ID viewed, its reference number and place of issue
Corporate Client (ascertain the existence, name and address of the corporation, and the names of its directors) / ·  Certificate of corporate status
·  A record that the corporation is required to file annually under the applicable provincial securities legislation; or
·  Any other record that ascertains its existence as a corporation
Keep a record of the name and occupation of all directors of the corporation and the name, address and occupation of all persons who own or control, directly or indirectly, 25 per cent or more of the shares of the corporation.
Non-Corporate Client / ·  Confirm its existence by reference to a partnership agreement, articles of incorporation, or other similar documentation
Keep a record of the name, address and occupation of all persons who own or control, directly or indirectly, 25 per cent or more of the non-corporation entity.
Not-for-profit Corporation / ·  Documentation that confirms the entity is:
o  A charity registered with CRA
o  An organization that solicits charitable financial donations from the public
Third-Party Determination Record / Written statement must include:
·  Individual and third party’s name, address, date of birth and nature of principal business or occupation
·  The nature of the relationship between the third party and the individual
·  If unable to determine the third party but suspect that there is involvement, a signed statement from the individual stating they are not acting on behalf of a third party must be signed

Politically Exposed Foreign Person (PEFP) Record