Archived FINTRAC Policy Interpretations

Are REs listed in subsection 120.1(3) of the amended Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) now obliged to establish the source of funds (which is broader than cash) when they receive $100,000 or more in cash or virtual currency from a politically exposed person, the head of an international organization, or the family members and close associates?

Currently pursuant to subsection 1(2) of the PCMLTFR:

• Cash means coins referred to in section 7 of the Currency Act, notes issued by the Bank of Canada pursuant to the Bank of Canada Act that are intended for circulation in Canada or coins or bank notes of countries other than Canada.
• Funds means either:
  • (a) cash; or
  • (b) currency, securities, negotiable instruments or other financial instruments, in any form, that indicate a person’s or entity’s title or right to, or interest in, them.

Pursuant to the amended subsection 1(2) of the PCMLTFR, effective June 1, 2021:

• Cash means coins referred to in section 7 of the Currency Act, notes issued by the Bank of Canada under the Bank of Canada Act that are intended for circulation in Canada or coins or bank notes of countries other than Canada.
• Funds means:
  • cash and other fiat currencies, and securities, negotiable instruments or other financial instruments that indicate a title or right to or interest in them; or
  • a private key of a cryptographic system that enables a person or entity to have access to a fiat currency other than cash.

    For greater certainty, it does not include virtual currency.

• Virtual currency means:
  • A digital representation of value that can be used for payment or investment purposes, that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds; or
  • A private key of a cryptographic system that enables a person or entity to have access to a digital representation of value referred to in paragraph (a).

In addition, pursuant to the amended PCMLTFR, effective June 1, 2021:

• 120.1(3) A British Columbia notary public, British Columbia notary corporation, accountant, accounting firm, real estate broker or sales representative, real estate developer, dealer in precious metals and precious stones or department or agent of Her Majesty in right of Canada or agent or mandatary of Her Majesty in right of a province shall take reasonable measures to determine whether a person from whom they receive an amount of $100,000 or more, in cash or in virtual currency, is a politically exposed foreign person, a politically exposed domestic person or a head of an international organization, or a family member — referred to in subsection 2(1) — of, or a person who is closely associated with, one of those persons.
• 122.1(2) A person or entity that determines under subsection 120.1(3) that a person is a politically exposed foreign person or a family member — referred to in subsection 2(1) — of, or a person who is closely associated with, a politically exposed foreign person shall:
  • (a) take reasonable measures to establish the source of the funds or virtual currency used for the transaction and the source of the person’s wealth; and
  • (b) ensure that a member of senior management reviews the transaction.

As can be seen above, the definition of “Cash” remains the same, the definition of “Funds” has been amended to account for digital fiat currencies, and a definition of “Virtual currency” has been added.

Where a reporting entity (RE) determines that the person from whom it receives $100,000 or more in cash or virtual currency is a foreign PEP, family member or close associate, then it is required to take reasonable measures to establish the source of the funds or virtual currency used for that transaction. In a scenario where the $100,000 transaction is solely made up of cash, there is no need to consider the source of other types of funds not used in the transaction. However, in a scenario where the RE receives $100,000 in cash, plus any additional amount(s) in another form of funds, the RE would be required to determine the source of all funds that were part of the transaction. As such, while it is $100,000 cash that triggers the obligation to determine source of funds, it is all of the funds in that transaction for which reasonable measures must be taken to determine their source.

Does simply being on the same board as a politically exposed person (PEP) make an individual a close business or personal associate. It is common practice for Boards to recruit members specifically because of their independence from other Board members and the corporation. How strictly does FINTRAC view the idea that all those on the same Boards as PEPs should be considered close business or personal associates?

Pursuant to subsection 9.3(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), reporting entities are required to determine whether they are dealing with:

1. a foreign PEP, a prescribed family member of a foreign PEP, or a person who the person or entity knows or should reasonably know is closely associated, for personal or business reasons, with a foreign PEP;
2. a domestic PEP, a prescribed family member of a domestic PEP, or a person who the person or entity knows or should reasonably know is closely associated, for personal or business reasons, with a domestic PEP; or
3. the head of an international organization (HIO), a prescribed family member of a HIO, or a person who the person or entity knows or should reasonably know is closely associated, for personal or business reasons, with a HIO.

The term “close associate” is not defined further within the PCMLTFA or its associated Regulations. However, FINTRAC’s guidance clarifies that a close associate can be an individual who is closely connected to a PEP or HIO for personal or business reasons. The term "close associate" is not intended to capture every person who is associated with a PEP or HIO. For this reason, a reporting entity will need to have a means to determine if this is a close association they need to identify and treat as such.

Therefore, a reporting entity is not required to automatically consider every member of a board that a PEP/HIO is on to be a close associate, but has to take reasonable measures to determine whether they are dealing with a close associate of a PEP/HIO. The reasonable measures to be taken must be outlined in their compliance program’s policies and procedures.

Why are the obligations different for foreign politically exposed persons than for domestic politically exposed persons?

Pursuant to subsection 9.3(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), every person or entity that is referred to in section 5 and that is prescribed shall determine, in the prescribed circumstances and in accordance with the regulations, whether it is dealing with:

1. a politically exposed foreign person (foreign PEP), a prescribed family member of a politically exposed foreign person, or a person who the person or entity knows or should reasonably know is closely associated, for personal or business reasons, with a politically exposed foreign person;
2. a politically exposed domestic person (domestic PEP), a prescribed family member of a politically exposed domestic person, or a person who the person or entity knows or should reasonably know is closely associated, for personal or business reasons, with a politically exposed domestic person;

If the person or entity determines that it is dealing with a person described in paragraph (1)(a), the person or entity shall take the measures referred to in the regulations. As such, foreign PEPs, their family members, and their close associates are automatically subject to the enhanced measures that are associated with high-risk clients. If the person or entity determines that it is dealing with a person described in paragraph (1)(b) and considers, based on a risk assessment, that there is a high risk of a money laundering (ML) offence or a terrorist activity financing (TF) offence being committed, the person or entity shall take the measures referred to in the regulations.

A PEP is a person entrusted with a prominent position that typically comes with the opportunity to influence decisions and the ability to control resources, including an increased access to, or control of, large sums of funds. The influence and control a PEP has puts them in a position to impact policy decisions, institutions and rules of procedure in the allocation of resources and finances, which can make them vulnerable to corruption. A foreign PEP is an individual who holds, or has held, certain important public functions at a national level on behalf of a country other than Canada.

In June of 2017, the Government of Canada established these requirements based on internationally recognized standards established by the Financial Action Task Force (FATF), the international standard-setting body that recommends that all countries consider domestic and foreign PEPs as part of the approach to combatting ML and TF. The requirements were in response to both Canada’s 2016 evaluation by the FATF and the Government of Canada's 2015 Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada. The threat from corruption and bribery of PEPs was considered to be very high. This is due to their involvement in, and often influence over, the awarding of large public contracts. These contracts have the ability to launder large amounts of illicit money and are a frequent target of organized crime groups.

Is the Director position within a Crown corporation a “politically exposed person”? Would a Director, the President or Chairperson of such a board be a PEP?

A domestic PEP is a defined term within the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and means a person who, at a given time, holds — or has held within a prescribed period before that time — one of the offices or positions referred to in any of paragraphs (a) to (j) in or on behalf of the federal government or a provincial government or the office or position referred to in paragraph (k) in a municipal government:

   (a) Governor General, lieutenant governor or head of government;

   (b) member of the Senate or House of Commons or member of a legislature;

   (c) deputy minister or equivalent rank;

   (d) ambassador, or attaché or counsellor of an ambassador;

   (e) military officer with a rank of general or above;

   (f) president of a corporation that is wholly owned directly by Her Majesty in right of Canada or a province;

   (g) head of a government agency;

   (h) judge of an appellate court in a province, the Federal Court of Appeal or the Supreme Court of Canada;

   (i) leader or president of a political party represented in a legislature;

   (j) holder of any prescribed office or position; or

   (k) mayor.

It is only the president of a Crown corporation that is wholly owned directly by Her Majesty in right of Canada who is a domestic PEP for the purposes of the PCMLTFA and its associated Regulations. As such, appointment as a director of a Crown Corporation would not make that person a domestic PEP. However, it could be determined that a director is a close associate of a domestic PEP (i.e., the President of the Crown Corporation), which also generates prescribed obligations.

A man who is a foreign PEP has a son who is then the family member of a foreign PEP. However, should the grandson be considered as an associate of the foreign PEP where he is not a prescribed family member?  Given that he has a close association (through family contacts) with the foreign PEP.  

The foreign PEP's son is a foreign PEP by family association and he continues to be a foreign PEP even after the foreigh PEP dies (His father).  

Is it reasonable that, for the grandson, the association to the foreign PEP ends when the grandfather dies?  

Once a person is a foreign PEP they are a foreign PEP for life and are to be managed as such. This also applies to the prescribed family members of a foreign PEP. This is based on the knowledge that family members can be used to carry out, knowingly or unknowingly, illicit financial activity by PEPs  who are looking to distance themselves from money they receive from illegal activities. Similarly, a foreign PEP may use a close associate to distance themselves from an account or transaction. However, a close associate is an individual who is closely connected to a PEP or HIO for personal or business reasons. As such, a person may not forever be closely associated with a foreign PEP. If, in the course of its business activities, a financial entity determines that a person is no longer closely associated, for personal or business reasons, with a foreign PEP, then it appears this person is no longer required to be considered a close associate of a foreign PEP

In the example provided, once the foreign PEP is deceased, there is no longer a requirement to consider the grandson’s close association to the grandfather. However, it would be reasonable for a financial entity to consider the continued association between the son, as a prescribed family member of the foreign PEP, and the grandson.   

Is it a requirement to do a PEP/HIO determination on all owners of the entity, including beneficial owners, the directors of a corporation, the directors and officers of an entity other than a corporation? 

In accordance with section 54.2 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a financial entity is required to take reasonable measures to determine whether a person is a foreign or domestic PEP, a HIO, or a family member of a foreign or domestic PEP or HIO, when an account is opened for them; when they request or are the beneficiary of an electronic funds transfer (EFT) of $100,000 or more (or the EFT is requested on their behalf); during the periodic review of account holders; and when a fact is detected about an account holder. Financial entities are also required to take reasonable measures to determine whether a person is a close associate of a foreign PEP for all of these activities, and to determine whether a person is a close associate of a domestic PEP or HIO when a fact is detected about an account holder and when an EFT of $100,000 or more is sent or received. These requirements pertain to persons and not entities. Therefore, reasonable measures to make PEP or HIO related determinations are only required to be taken for the owners, directors, or officers of an entity if they engage in any of these activities. For example, when an account is opened for an entity rather than a person, the financial entity is not required to extend the PEP or HIO related determinations to the owners, directors, or officers of the entity. That said, a financial entity may wish to undertake these measures as a business practice or as part of their enhanced measures for high risk clients.

A reporting entity is seeking clarification on the definition of a domestic politically exposed person (domestic PEP) in relation to a provincial court of appeal. More specifically, it has been asked whether, under paragraph 9.3(3)(h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFR), a judge of the Court of Québec or a Quebec administrative tribunal that can serve as an appellate court is a domestic PEP.

The PCMLTFA and its associated Regulations were amended to expand the concept of politically exposed person to include domestic PEPs and heads of international organizations, as well as their family members or persons closely associated with such PEPs.

In accordance with paragraph 9.3(1)(b) of the PCMLTFA, every person or entity that is referred to in section 5 and that is prescribed shall determine whether it is dealing with a domestic PEP, a prescribed family member of a domestic PEP or a person who the person or entity knows or should reasonably know is closely associated, for personal or business reasons, with a domestic PEP.

In subsection 9.3(3) of the PCMLTFA, a domestic PEP is defined as a "person who, at a given time, holds — or has held within a prescribed period before that time — one of the offices or positions referred to in any of paragraphs (a) to (j) in or on behalf of the federal government or a provincial government or the office or position referred to in paragraph (k) in a municipal government:
(a) Governor General, lieutenant governor or head of government;
(b) member of the Senate or House of Commons or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador, or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a corporation that is wholly owned directly by Her Majesty in right of Canada or a province;
(g) head of a government agency;
(h) judge of an appellate court in a province, the Federal Court of Appeal or the Supreme Court of Canada;
(i) leader or president of a political party represented in a legislature;
(j) holder of any prescribed office or position; or
(k) mayor."

Although the PCMLTFA and its associated Regulations do not define "an appellate court in a province", usually it refers to the court of appeal that exists in each of Canada's provinces. Consequently, for the province of Quebec, solely a judge of the Court of Appeal of Québec satisfies the definition of a domestic PEP under paragraph 9.3(3)(h) of the PCMLTFA. Parliament's intention was not to include judges of the lower courts, but to include the highest provincial courts of appeal. As a result, a judge of the Court of Québec or of a Quebec administrative tribunal does not satisfy the definition of domestic PEP in paragraph 9.3(3)(h) of the PCMLTFA.

Having said that, according to subsection 9.6(2) of the PCMLTFA and paragraph 71(1)(c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), any reporting entity is obliged to assess the level of risk of money laundering and terrorist financing associated with each client and business relationship. Consequently, in accordance with subsection 9.6(3) of the PCMLTFA, if, as part of this risk assessment, the reporting entity considers that the risks are high, it has to take the special measures set out in section 71.1 of the Regulations.

Clarification on the legislative changes with respect to close associates of politically exposed foreign persons (foreign PEPs) has been requested. Specifically, it has been asked whether close associates of foreign PEPs are always considered as such, and whether financial entities are required to determine on an ongoing basis if the person is still a close associate of the foreign PEP. In this context, it has been further enquired if a close associate can be disassociated if they are able to demonstrate that the relationship with the foreign PEP no longer exists.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations have been amended to include politically exposed domestic persons, heads of international organizations, as well as prescribed family members and persons closely associated with a politically exposed person.

Pursuant to paragraph 9.3(1)(a) of the PCMLTFA, “every person or entity that is referred to in section 5 and that is prescribed shall determine, in the prescribed circumstances and in accordance with the regulations, whether it is dealing with a politically exposed foreign person, a prescribed family member of a politically exposed foreign person, or a person who the person or entity knows or should reasonably know is closely associated, for personal or business reasons, with a politically exposed foreign person”.

In accordance with section 54.2 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), and subject to section 62 and subsection 63(5) of the PCMLTFR, the prescribed circumstances for a financial entity to take reasonable measures to determine whether a person is a close associate of a foreign PEP include:
• an account opening;
• when an international EFT of $100,000 or more is sent or received;
• during a periodic review of existing account holders; and
• if a fact is detected about an existing account holder outside of the periodic review.

Once a person is determined to be a close associate of a foreign PEP, it must be treated as a high-risk client.

Subsection 63(5) of the PCMLTFR states, “If a person or entity determines that a person is a politically exposed foreign person or a family member of such a person — or if, before the coming into force of this subsection, they determined that a person is a politically exposed foreign person, as defined in subsection 9.3(3) of the Act as it read at the time the determination was made — they are not required to make the determination again.” However, close associates are not referenced in this provision, and neither the PCMLTFA nor its associated Regulations prescribe any period for which a person should remain a close associate of a foreign PEP.

Consequently, unlike foreign PEPs or the prescribed family members of a foreign PEP, a person may not forever be closely associated, for personal or business reasons, with a foreign PEP. Therefore, to address the specific questions asked, if in the course of its business activities the financial entity determines that a person is no longer closely associated, for personal or business reasons, with a foreign PEP, then it appears this person is not required to be considered a close associate of a foreign PEP.

That said, as per subsection 9.6(2) of the PCMLTFA, and pursuant to paragraph 71(1)(c) of the PCMLTFR, financial entities are required to assess the level of risk of a money laundering or terrorist financing offence associated with their clients and business relationships, and pursuant to subsection 9.6(3) of the PCMLTFA, if a financial entity considers that the risks associated are high, it must take the prescribed special measures outlined in section 71.1 of the PCMLTFR.

A financial entity is seeking clarification from FINTRAC regarding legislative amendments affecting politically exposed domestic persons (domestic PEPs), persons closely associated and the recording of information related to the issuing jurisdiction of an identification document.
1. More specifically, regarding domestic PEPs, the financial entity stated that it receives a list that it checks its clients against, but it only considers mayors of municipalities with a population of 100,000 or more. In this regard, the financial entity asked whether FINTRAC expects mayors of municipalities with a population of less than 100,000 to be checked as well.
2. It was asked what "persons closely associated" means. 
3. The financial entity also asked whether FINTRAC requires that the jurisdiction that issued the document be recorded in the file. By way of background, the entity referred to the proposed amendment to paragraph 64.2(a) of the PCMLTFR, published in the Canada Gazette on July 4, 2015, regarding the requirement to record information related to the issuing jurisdiction of an identification document.

1. As you know, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations were amended to expand the concept of politically exposed persons (PEPs), which previously applied only to foreign PEPs, to include domestic PEPs and heads of international organizations, as well as their family members or persons closely associated with such PEPs.

Under paragraph 9.3(1)(b) of the PCMLTFA, every person or entity that is referred to in section 5 and that is prescribed shall determine whether it is dealing with a domestic PEP, a prescribed family member of a domestic PEP or a person who the person or entity knows or should reasonably know is closely associated, for personal or business reasons, with a domestic PEP.

A domestic PEP is defined in subsection 9.3(3) of the PCMLTFA as a "person who, at a given time, holds — or has held within a prescribed period before that time — one of the offices or positions referred to in any of paragraphs (a) to (j) in or on behalf of the federal government or a provincial government or the office or position referred to in paragraph (k) in a municipal government:
(a) Governor General, lieutenant governor or head of government;
(b) member of the Senate or House of Commons or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador, or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a corporation that is wholly owned directly by Her Majesty in right of Canada or a province;
(g) head of a government agency;
(h) judge of an appellate court in a province, the Federal Court of Appeal or the Supreme Court of Canada;
(i) leader or president of a political party represented in a legislature;
(j) holder of any prescribed office or position; or
(k) mayor."

Although the PCMLTFA and its associated Regulations do not define it, a "mayor" usually refers to the head of a village, town, or rural or metropolitan municipality. Accordingly, any person who holds or has held, within the period prescribed by regulation, the office of mayor, regardless of the population size, is considered to be a domestic PEP.  As such, FINTRAC expects the financial entity to apply the regulatory measures and fulfil the associated obligations in identifying all mayors as domestic PEPs, including those of municipalities with a population of less than 100,000.

2. Furthermore, regarding "what persons closely associated means", according to paragraph 9.3(1)(b) of the PCMLTFA, it means a "person who the person or entity knows or should reasonably know is closely associated, for personal or business reasons, with a politically exposed domestic person". For example, a person or entity may know or should reasonably know that the person and the domestic PEP are closely associated because of transactions made, business activities, media coverage or a personal relationship. However, such close associates must not be already described by subsection 1.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) as being prescribed family members of a domestic PEP, that is, their spouse or common-law partner; their child; their mother or father; the mother or father of their spouse or common-law partner; or the child of their mother or father.

3. Paragraph 64.2(a) of the PCMLTFR now provides that every person or entity that is required to ascertain a person’s identity and to keep a record shall include with that record the person's name and, "if the person or entity ascertained the person’s identity in accordance with paragraph 64(1)(a), the date on which they did so, the type of document referred to, its number, the jurisdiction and country of issue of the document and, if applicable, its expiry date". In addition, FINTRAC's guidance states that information on "the issuing jurisdiction and country of the document" must be recorded to meet record-keeping obligations. The issuing jurisdiction can be federal, provincial or territorial. 

Accordingly, whether the PCMLTFR refers to "the issuing jurisdiction and place of issue" or to the "jurisdiction and country of issue", in any case, the legislative intent is the same, namely, to record the information related to the issuing jurisdiction. For example, when verifying the identity of clients with a Quebec driver's licence, Quebec must be identified as the jurisdiction of issue, and Canada as the country of issue.

I am seeking clarification regarding the definition of politically exposed domestic person (domestic PEP) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations. Specifically, I would like to know whether a client who is an immediate family member of a Court of Queen's Bench (Saskatchewan) judge is considered to be a family member of a domestic PEP.

The PCMLTFA and its associated Regulations have been amended to include domestic PEPs, heads of international organizations, as well as prescribed family members and persons closely associated with a politically exposed person. These legislative changes will come into force on June 17, 2017.

Pursuant to paragraph 9.3(1)(b) of the PCMLTFA, “every person or entity that is referred to in section 5 and that is prescribed shall determine, in the prescribed circumstances and in accordance with the regulations, whether it is dealing with … a politically exposed domestic person, a prescribed family member of a politically exposed domestic person, or a person who the person or entity knows or should reasonably know is closely associated, for personal or business reasons, with a politically exposed domestic person”.

For this purpose, and as per subsection 1.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a prescribed family member of a domestic PEP is:
(a) their spouse or common-law partner;
(b) their child;
(c) their mother or father;
(d) the mother or father of their spouse or common-law partner; or
(e) a child of their mother or father.

A domestic PEP is defined, at subsection 9.3(3) of the PCMLTFA, as “a person who, at a given time, holds – or has held within a prescribed period before that time – one of the offices or positions referred to in any of paragraphs (a) to (j) in or on behalf of the federal government or a provincial government or the office or position referred to in paragraph (k) in a municipal government:
(a) Governor General, lieutenant governor or head of government;
(b) member of the Senate or House of Commons or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador, or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a corporation that is wholly owned directly by Her Majesty in right of Canada or a province;
(g) head of a government agency;
(h) judge of an appellate court in a province, the Federal Court of Appeal or the Supreme Court of Canada;
(i) leader or president of a political party represented in a legislature;
(j) holder of any prescribed office or position; or
(k) mayor.”

The definition of domestic PEP specifies “judge of an appellate court in a province, the Federal Court of Appeal or the Supreme Court of Canada”, which differs from “a Court of Queen’s Bench (Saskatchewan) judge”. Therefore, it appears that your client is not considered to be a family member of a domestic PEP, specifically with respect to a judge, as outlined in paragraph 9.3(3)(h) of the PCMLTFA.

That said, pursuant to subsection 9.6(3) of the PCMLTFA, if, in the course of your risk-assessment, you consider that the risks associated with the client are high, you must take the prescribed special measures outlined in section 71.1 of the PCMLTFR.

One of our clients is a judge who is considered to be a politically exposed foreign person (PEFP). One year later, the judge's sister opens an account with our office. Since she is considered to be a member of the judge's family, she is deemed to be a PEFP. One year later, the daughter of the judge's sister opens an account with our office. Does this mean that the daughter of the PEFP's sister, namely the judge's niece, is also considered to be a PEFP?

Paragraph 9.3(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) states that a PEFP "means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:
(a) head of state or head of government;
(b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position."

For the purpose of this definition, the prescribed family members of a PEFP are:
(a) the person’s spouse or common-law partner;
(b) a child of the person;
(c) the person’s mother or father;
(d) the mother or father of the person’s spouse or common-law partner; and
(e) a child of the person’s mother or father.

Under the scenario provided, the niece does not meet the definition under paragraph 9.3(3) of the PCMLTFA or with respect to prescribed family members of a PEFP under section 1.1 of the PCMLTFR. Thus, in light of these facts, we confirm that the judge's niece is not considered to be a PEFP.

That being said, the securities dealer has the obligation to make an assessment of the risk associated with the client, namely the niece. When the securities dealer makes his or her risk assessment and feels that the risks associated with the client are high, the dealer must take the special measures set out in section 71.1 of the PCMLTFR.

Senior teacher positions in a foreign department and honorary consul positions are not positions whose duties within a foreign government are similar to executive, legislative, legal, diplomatic or military authorities. Moreover, these jobs and their equivalents are not mentioned in FINTRAC Guideline 6G.

Consequently, is an honorary consul of a foreign department in Canada considered a PEFP?

Subsection 9.3(3) of the Proceeds of Crime and Terrorist Financing Act states: “For the purposes of this section, politically exposed foreign person means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:
(a) head of state or head of government; (b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position.

You have asked whether someone who was a senior teacher at the Department of National Defence and honorary consul for a foreign department in Canada is considered a PEFP. An honorary consul mainly refers to someone who is responsible abroad, who after holding certain duties keeps the titles and honorific prerogatives and without any real duties. In light of these facts, we confirm that this person is not a PEFP.

Please clarify what is meant by paragraph 9.3(3)(j) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), specifically, what “prescribed office or position” refers to.

Subsection 9.3(3) of the PCMLTFA states that ““politically exposed foreign person” means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:
(a) head of state or head of government;
(b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position.”

And it includes any prescribed family member of such a person:

(a) the person’s spouse or common-law partner;
(b) a child of the person;
(c) the person’s mother or father;
(d) the mother or father of the person’s spouse or common-law partner; and
(e) a child of the person’s mother or father.”

In response to your question, at this time, no other office or position has been prescribed in accordance with paragraph 9.3(3)(j) of the PCMLTFA.

Can you please opine and provide explanation with respect to:

1. The definition of a “counsellor of an ambassador”.
2. The difference between a “counsellor of an ambassador” and “consul”, and “councellor”.
3. Whether or not a ”deputy ambassador” of a foreign state would qualify as a PEFP. If not, please articulate the material difference between a “deputy ambassador” and an “ambassador’s attache” or a “counsellor of an ambassador”.
4. Whether or not a ”counsellor from the embassy” of a foreign state would qualify as a PEFP.
5. Whether or not a ”counsellor from the high commission” of a foreign state would qualify as a PEFP.
6. Whether or not a ”high commissioner” or “acting high commissioner” of a foreign state would qualify as a PEFP.
7. Whether or not a ”charge d’affaires” of a foreign state would qualify as a PEFP.

Pursuant to subsection 9.3(3) of the PCMLTFA, a PEFP means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:
(a) head of state or head of government;
(b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position.

And it includes any prescribed family member of such a person, as:
(a) the person’s spouse or common-law partner;
(b) a child of the person;
(c) the person’s mother or father;
(d) the mother or father of the person’s spouse or common-law partner; and
(e) a child of the person’s mother or father.

With this in mind, our answers to your specific questions are outlined below.

1. As per the Department of Foreign Affairs, Trade and Development Canada (DFATD), a Counsellor is a designation given to staff working in embassies, high commissions and permanent missions and is defined as “the fourth rank in Canadian embassies, high commissions or permanent missions; but number two or three in missions without a minster or minster-counsellor.”
    
2. A Consul General or Consul is defined as “…functional - denoting staff who provide consular services….” A Counsellor of an Ambassador therefore denotes a higher ranking position than a Consul General and as such, it falls within the purview of paragraph 9.3(3)(d) of the PCMLTFA as “attaché or counsellor of an ambassador”.
    
3. Deputy Ambassadors would be considered PEFPs, as this is also considered to be a senior-ranking position and would typically sit just below an Ambassador. As such, it falls within the purview of paragraph 9.3(3)(d) of the PCMLTFA as “attaché or counsellor of an ambassador”.
    
4. A Counsellor from an embassy of a foreign state, if equivalent to the definition provided above from DFATD, would also qualify as a PEFP.
    
5. Given that a high commission is essentially equivalent to an embassy, a Counsellor from a high commission would also qualify as a PEFP.
    
6. A High Commissioner is equivalent to an Ambassador in commonwealth countries, therefore, it too would qualify as a PEFP.
    
7. It will always be a question of fact to be able to determine whether a person fits into this category. Based on our understanding, a Chargé d’affaires is typically appointed on a temporary or permanent basis, and those appointed on a temporary basis generally also occupy a counsellor or similarly ranked position and would therefore already be considered PEFPs. In situations where a person is appointed as a Chargé d’affaires on a temporary basis and does not also occupy another position covered under the definition of PEFP, they would not be considered a PEFP. However, Chargé d’affaires appointed on a permanent basis would be.

What is the definition of a politically exposed foreign person?

Pursuant to subsection 9.3(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), every person or entity that is referred to in section 5 of the PCMLTFA and that is prescribed, shall determine, in the prescribed circumstances and in accordance with the regulations, whether it is dealing with a politically exposed foreign person. As per subsection 9.3(3) of the PCMLTFA, a politically exposed foreign person means a person who holds or has held one of the following offices or positions in or on behalf of a foreign state:

(a) head of state or head of government;
(b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position.

And it includes any prescribed family member of such a person, defined in section 1.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations as :

(a) their spouse or common-law partner;

(b) their child;

(c) their mother or father;

(d) the mother or father of their spouse or common-law partner; or

(e) a child of their mother or father.

Can the daughter of the Israeli consul general in Montreal be considered a Politically Exposed Foreign Person (PEFP) and is this position equivalent to the ambassador's attaché or counsellor?

Subsection 9.3(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) states that, “Every person or entity that is referred to in section 5 and that is prescribed shall determine, in the prescribed circumstances and in accordance with the regulations, whether it is dealing with a politically exposed foreign person.” Additionally, paragraph 9.3(3)(d) of the PCMLTFA specifies that a politically exposed foreign person can include an, “ambassador or attaché or counsellor of an ambassador” and any prescribed family member of such a person. According to subparagraph 1.1(b) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a prescribed member includes a child of the PEFP.

An ambassador is the foreign diplomatic representative of a nation who is authorized to handle political negotiations between his or her country and the country where the ambassador has been assigned. A consul is the commercial agent of a nation, who is empowered only to engage in business transactions, and not political matters in the country where he or she is stationed. Consuls are not diplomatic agents (such as an ambassador) and, therefore, they are usually amenable to civil lawsuits and criminal prosecution in the country

A consul general is a consular officer who heads a consulate general and is a consul of the highest rank serving at a particular location. A consul general may also be responsible for consular districts which contain other, subordinate consular offices within a country. The consul general serves as a representative who speaks on behalf of his or her state in the country to which he or she is located, although ultimate jurisdiction over the right to speak on behalf of a home country within another country ultimately belongs to the single ambassador. In most embassies, the consular section is headed by a consul general who is also a member of the ambassador's country team. In short, it does not appear that a consul general equates to an ambassador’s attaché or counselor, nor that it falls under either of the definitions of a PEFP found under subsection 9.3(3) of the PCMLTFA. As such, the daughter of the Israeli consul general in Montreal is not considered a PEFP pursuant to the PCMLTFA and its associated regulations.

Are there PEP requirements for these transactions?

Real Estate transactions involving foreign buyers. What are the risks? Are there any risks of money laundering or foreign criminal proceeds entering Canada in this way? Are there PEP requirements for these transactions the transactions?

The keeping of politically exposed foreign person records is triggered by the requirement to make a politically exposed foreign person determination. That determination is associated to either the opening of an account or the conducting of certain transactions, depending on the reporting entity sector. The following reporting entity sectors are prescribed in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations for politically exposed foreign person determinations:

• financial entities
• life insurance
• securities dealers
• money services businesses

Therefore, there are no politically exposed foreign person requirements for real estate transactions involving foreign buyers.

We have said that once a PEFP always a PEFP (s 63(5)). This said, however, for how long would a RE have to keep the prescribed information regarding a PEFP? According to 69(1)(c), the answer is 5 years, however, does that conflict with 63(5) "once a PEFP always a PEFP"? Would the RE have to keep the information on a PEFP indefinitely?

The records must be retained five years regardless of which record we are talking about.

The adage "once a PEFP always a PEFP" should be read as saying you are a PEFP even if you are deceased.. therefore your children and other members of your family designated as PEFPs are still PEFP even though the original PEFP is deceased.

However, part of the RE's risk based approach would be that the RE may want to keep that information longer/or in storage as one never knows when the daughter of a deceased PEFP may open an account with the CU at some time and that information sure would be useful.