Video – Mortgage sector: Scenarios

This video is intended for the mortgage sector and provides mortgage sector–specific examples of how to meet compliance requirements.

Video

Video length: 15:25 minutes

Catalogue number: FD4-53/2026E-MP4

ISBN: 978-0-662-36758-1

Descriptive transcript of the video "Mortgage sector: Scenarios"

Slide #

Narration (audio)

On screen description (text or image)

[Start of video]

Welcome to this information session which provides sector specific scenarios of the compliance requirements for the mortgage sector.

If you are a mortgage administrator, broker or lender, you must comply with a number of requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated Regulations.

Your compliance with these requirements is not just a legal obligation, but also a critical component of protecting the integrity of Canada's financial system.

Therefore, these requirements and the processes you follow to meet these requirements should be clearly described in your policies and procedures. This will help ensure that your operations align with these regulatory requirements. You can refer to the compliance program information session for more information about policies and procedures.

Text on screen: Mortgage sector

Scenarios

Here are a few scenarios to help you understand your obligations.

In the first scenario, ABC Mortgage Broker Corporation arranges a mortgage loan for a new client where the loan will be funded by 123 Lending Company. As per their business process, ABC Mortgage Broker Corporation submits the completed mortgage application to 123 Lending Company.

What must ABC Mortgage Broker Corporation and 123 Lending Company do to comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated Regulations?

ABC Mortgage Broker Corporation and 123 Lending Company must both do a number of things.

First, they must keep an information record on the borrowing client because ABC Mortgage Broker Corporation is arranging a mortgage loan for the client and 123 Lending Company is providing a mortgage loan to the client.
Second, they must keep a mortgage loan record on the client.
Third, they must verify the identity of the client using one of the prescribed methods and keep related records.
Fourth, they must record the purpose and intended nature of the business relationship that they now have with the client, perform ongoing monitoring of their respective business relationships and keep related records. The purpose and intended nature of the business relationship that ABC Mortgage Broker Corporation has with the client should be different from the purpose and intended nature of the relationship that 123 Lending Company has with the client.
Fifth, they must take reasonable measures to determine if a third party is involved in the transaction.
And finally, they must take reasonable measures to determine if the client is a politically exposed person or head of an international organization.

If there is a third party or if the client is a politically exposed person or head of an international organization, then ABC Mortgage Broker Corporation and 123 Lending Company will need to obtain additional information and keep records of this information.

ABC Mortgage Broker Corporation and 123 Lending Company don't need to create new records if the required information is already included in the mortgage application or other documents they keep. They just need to retain a copy of the mortgage application and related documents with the necessary information.

Text on screen: Scenario 1

ABC Mortgage Broker Corporation is arranging a mortgage loan for a new client that will be funded by 123 Lending Company

Animation:

Two cartoon men are on screen, one representing the mortgage broker and one representing the client where the mortgage will be funded by 123 Lending Company.

Animation:

They disappear and the requirements of the transaction appear on screen.

Text on screen:

To be compliant, they must:

Keep an information record on the client
Keep a mortgage loan record on the client
Verify the identity of the client
Record the purpose and intended nature of the business relationship
- Perform ongoing monitoring of the business relationship
Take reasonable measures to determine if a third party is involved
Take reasonable measures to determine if the client is a politically exposed person or head of an international organization

In the second scenario, ABC Mortgage Broker Corporation arranges a mortgage loan renewal for an existing client. The initial mortgage loan was funded by 123 Lending Company and the client decides to renew their mortgage with the same lending company. As per their business process, ABC Mortgage Broker Corporation submits the renewal application to 123 Lending Company.

What must ABC Mortgage Brokerage Corporation and 123 Lending Company do to comply with the Act and Regulations?

ABC Mortgage Broker Corporation and 123 Lending Company must both do a number of things.

First, they must keep an information record on the borrowing client because ABC Mortgage Broker Corporation is arranging a mortgage loan renewal for the client and 123 Lending Company is providing a mortgage loan to the client.
Second, they must keep a mortgage loan record on the borrowing client.
Third, they must verify the identity of the borrowing client using one of the prescribed methods and keep related records. However, if ABC Mortgage Broker Corporation
- previously verified the borrowing client using one of the prescribed methods according to the regulations at that time,
- kept the related records according to the regulations at that time, and
- has no doubts about the information that was used to verify the client's identity,
then it does not have to verify the client's identity again. This is the same for 123 Lending Company.
Fourth, they must update the purpose and intended nature of the business relationship that they each have with the client and continue to perform ongoing monitoring of their business relationships and keep related records.
Fifth, they must take reasonable measures to determine if a third party is involved in the transaction.
And finally, they must take reasonable measures to determine if the client is a politically exposed person or head of an international organization.

Text on screen: Scenario 2

ABC Mortgage Broker Corporation arranges a mortgage loan renewal for an existing client. The initial mortgage loan was funded by 123 Lending Company and the client decides to renew their mortgage with this same lending company.

Text on screen inside image of a clipboard:

The loan details have now changed
The client's information has not changed

Text on screen:

To be compliant, they must:

Keep an information record on the client
Keep a mortgage loan record on the client
Verify the identity of the client
Update the purpose and intended nature of the business relationship
- Continue to perform ongoing monitoring of the business relationship
Take reasonable measures to determine if a third party is involved
Take reasonable measures to determine if the client is a politically exposed person or head of an international organization

In scenario 3, Mortgage Administrator Company provides services to XYZ Lending Company and to the borrowing client, Company B. Specifically, Mortgage Administrator Company receives mortgage payments from Company B and remits them to XYZ Lending Company who funded the loan.

Mortgage Administrator Company receives the first payment of $7,000 from Company B and remits the payment to XYZ Lending Company.

Mortgage Administrator Company receives the second payment of $7,000 from Company B and remits the payment to XYZ Lending Company.

What must Mortgage Administrator Company and XYZ Lending Company do to comply with the Act and Regulations?

Text on screen: Scenario 3

Mortgage Administrator Company provides services to XYZ Lending Company and to the borrowing client, Company B.

Specifically, Mortgage Administrator Company receives monthly mortgage payments from Company B and remits them to XYZ Lending Company who funded the loan.

Animation:

A cartoon woman representing the Company B and a cartoon man representing the Mortgage Administrator Company are on screen, with a green arrow with $7,000 on it between them, pointing to the Mortgage Administrator Company.

When Mortgage Administrator Company receives the first payment, it must do a number of things.

First, it must keep an information record on XYZ Lending Company and on Company B because it is servicing a mortgage agreement for both the lending company and the borrowing client, Company B.
Second, it must keep a receipt of funds records for the $7,000 amount received from Company B.
Because the information records and receipt of funds record are for corporations, it must also keep a copy of the official corporate records that contains any provision relating to the power to bind in respect of transactions with the Mortgage Administrator Company, one in respect of XYZ Lending Company and one in respect of Company B.
Next, it should keep a mortgage loan record in respect of the loan that has been entered into with Company B.
The Mortgage Administrator Company must also verify the identity of XYZ Lending Company and Company B using one of the prescribed methods and keep the related records.

Specifically, it must verify the identity of XYZ Lending Company and the person conducting the transaction on behalf of XYZ Lending Company. It must also verify the identity of the Company B and the person conducting the transaction on behalf of the Company B.
Next, Mortgage Administrator Company must record the purpose and intended nature for its business relationship with XYZ Lending Company and for its business relationship with Company B. It must also perform ongoing monitoring of these business relationships and keep related records. The purpose and intended nature that Mortgage Administrator Company has with the XYZ Lending Company should be different from the purpose and intended nature that Mortgage Administrator Company has with Company B.
Also, it must obtain beneficial ownership information on XYZ Lending Company and Company B and take reasonable measures to confirm the accuracy of the information obtained.
And finally, Mortgage Administrator Company must take reasonable measures to determine if a third party is involved in the transaction. If there is a third party, then it will need to obtain additional information and keep records of this information.

For the records that Mortgage Administrator Company is required to keep, it does not need to create and keep new records to meet this requirement if the information is contained in the mortgage application or other documents that they keep – as long as they keep a copy of the mortgage application and related documents that contains the prescribed information.

Text on screen:
Scenario 3 continued

Requirements for Mortgage Administrator Company – first payment

Keep an information record on XYZ Lending Company and Company B
Keep a receipt of funds record on Company B for first payment of $7,000.
Keep a corporate record on both XYZ Lending Company and Company B
Should keep a mortgage loan record on Company B
Verify the identity of XYZ Lending Company and the person conducting the transaction on behalf of XYZ Lending Company
Verify identity of Company B and the person conducting the transaction on behalf of Company B
Record the purpose and intended nature of the business relationships it has with XYZ Lending Company and Company B
Perform ongoing monitoring of its business relationships
Obtain beneficial ownership information on XYZ Lending Company and Company B and take reasonable measures to confirm the accuracy
Take reasonable measures to determine if a third party is involved

When Mortgage Administrator Company receives the second payment, it must do a number of things similar to when it received the first payment

For example, it must keep

an information record on XYZ Lending Company and Company B,
a receipt of funds record for the second payment of $7,000 received from Company B, and
corporate records on XYZ Lending Company and Company B.

It should also keep a mortgage loan record on Company B.

However, if Mortgage Administrator Company already has these records because of a previous transaction, then it may not have to create or keep a new copy – but it should ensure that the records are up to date as part of its ongoing monitoring.

For example, Mortgage Administrator Company was required to keep an information record on Company B for the first payment. Specifically, Mortgage Administrator Company was required to keep a record of Company B's name, address and nature of its principal business. If, by the second payment, this information has not changed since it was recorded at the first payment, then Mortgage Administrator Company does not have to create a new information record for the second transaction. But if the information has changed, then Mortgage Administrator Company must ensure that the information record is updated to reflect the new information.

Mortgage Administrator Company must also verify the identity of XYZ Lending Company and Company B using one of the prescribed methods and keep the related records – similar to what they were required to do when they received the first payment. However, Mortgage Administrator Company does not have to verify the identity again if it has:

previously verified the company using one of the prescribed methods according to the regulations at that time,
kept the related records according to the regulations at that time, and
has no doubts about the information that was used to verify the client's identity.

Mortgage Administrator Company must continue to perform ongoing monitoring of its business relationships. This includes ensuring that the purpose and intended nature of its business relationships and beneficial ownership information is up to date.

Finally, Mortgage Administrator Company must take reasonable measures to determine if a third party is involved in the transaction. If there is a third party, it will need to obtain additional information and keep records of this information.

Text on screen:
Scenario 3 continued

Requirements for Mortgage Administrator Company – second payment

Keep an information record on XYZ Lending Company and Company B
Keep a receipt of funds record on Company B for second payment of $7,000
Keep a corporate record on both XYZ Lending Company and Company B
Should keep a mortgage loan record on Company B
Verify the identity of XYZ Lending Company and the person conducting the transaction on behalf of XYZ Lending Company
Verify the identity of Company B and the person conducting the transaction on behalf of Company B
Continue to perform ongoing monitoring of its business relationships to ensure purpose and intended nature and beneficial ownership information are up to date
Take reasonable measures to determine if a third party is involved

Finally, let's go over what XYZ Lending Company must do.

At the time XYZ Lending Company provided the loan to Company B, it was required to keep an information record and mortgage loan record on Company B, as well as a copy of the official corporate records that contains any provision relating to the power to bind Company B in respect of transactions with XYZ Lending Company.

XYZ Lending Company was also required to verify the identity of Company B and the person conducting the transaction on behalf of the Company B, record the purpose and intended nature of its business relationship with Company B and perform ongoing monitoring of its business relationship.

It was also required to obtain beneficial ownership information on Company B and take reasonable measures to confirm its accuracy and to take reasonable measures to determine if a third party is involved in the transaction.

Text on screen:
Scenario 3 continued

Requirements for XYZ Lending Company, at the time it provided the loan to Company B

Keep an information record and mortgage loan record on Company B
Keep a copy of the official corporate records where it contains any provision relating to the power to bind Company B in respect of transactions with XYZ Lending Company
Verify the identity of Company B and the person conducting the transaction on behalf of Company B
Record the purpose and intended nature of its business relationship with Company B
Perform ongoing monitoring of its business relationship
Obtain beneficial ownership information on Company B and take reasonable measures to confirm its accuracy
Take reasonable measures to determine if a third party is involved

Each time XYZ Lending Company receives payments from Mortgage Administrator Company that were initially submitted by Company B to the administrator, XYZ Lending Company must keep a receipt of funds record on Mortgage Administrator Company. Company B's name, address and nature of their business must also be recorded on the receipt of funds record.

Because the receipt of funds record is for a corporation, XYZ Lending Company must also keep a copy of the official corporate records that contains any provision relating to the power to bind Mortgage Administrator Company in respect of transactions with the XYZ Lending Company.

XYZ Lending Company must also verify the identity of Mortgage Administrator Company using one of the prescribed methods and keep the related records.

Specifically, it must verify the identity of Mortgage Administrator Company and the person conducting the transaction on behalf of Mortgage Administrator Company and keep related records.

Next, XYZ Lending Company must record the purpose and intended nature for its business relationship with Mortgage Administrator Company. It must also perform ongoing monitoring of this business relationship and keep related records.

Also, it must obtain beneficial ownership information on Mortgage Administrator Company and take reasonable measures to confirm the accuracy of the information obtained.

And finally, XYZ Lending Company must take reasonable measures to determine if a third party is involved in the transaction. If there is a third party, then it will need to obtain additional information and keep records of this information.

However, if XYZ Lending Company already has these records because of a previous transaction, then it may not have to create or keep a new copy – but it should ensure that the records are up to date as part of its ongoing monitoring.

Text on screen:
Scenario 3 continued

Each time XYZ Lending Company receives payments from Mortgage Administrator Company that were initially submitted by Company B to the administrator

Keep receipt of funds record on Mortgage Administrator Company, where Company B's name, address and nature of their business is indicated
Keep a copy of the official corporate records that contains any provision relating to the power to bind Mortgage Administrator Company in respect of transactions with the XYZ Lending Company
Verify the identity of Mortgage Administrator Company and the person conducting the transaction on behalf of Mortgage Administrator Company and keep related records
Record the purpose and intended nature for its business relationship
Perform ongoing monitoring of this business relationship and keep related records
Obtain beneficial ownership information on Mortgage Administrator Company and take reasonable measures to confirm the accuracy of the information obtained
Take reasonable measures to determine if a third party is involved

This brings us to the end of this information session.

Your adherence to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations is not just a legal obligation, but a critical component in the fight against money laundering and terrorist financing.

Your compliance ensures the integrity of Canada's financial system and contributes to the safety and security of Canadians.

Because this information session only provided an overview of your requirements, you should consult the detailed guidance that is available on FINTRAC's website. There you'll find resources to assist you in fulfilling your regulatory requirements effectively.

Remember, by working together and maintaining rigorous compliance standards, we play a pivotal role in protecting our economy and society from the threats of illicit activities. Thank you for your commitment to this vital effort.

On screen:
For more information on your compliance obligations visit FINTRAC's website fintrac-canafe.canada.ca

[End of video]

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