The world continues to change since the terrorist attacks of 9/11. The Canadian Government has released significant new amendments to the ‘Proceeds of Crime (Money Laundering) and Terrorist Financing Act effective June 23rd, 2008 which brings the act in line with international standards.
These new amendments to the Act will require financial institutions (banks, investment dealers, and insurance companies etc.) to collect more information on their clients and be more prudent in monitoring client transaction than ever before. Also, be prepared for you financial advisor to ask a lot more questions about your intentions with your money.
Under the new amendments, all financial institutions have an additional obligation to report ‘suspicious transactions’ to the government. If a financial advisor, finds that a client is attempting to request a suspicious transactions (whether or not the transaction is completed), he or she must now file a report with the Financial Transactions and Reports Analysis Centre of Canada.
Further, it is now an Advisor’s duty to understand where your money came from and have an idea of what your purposes are with the money. To be honest, a client does not have to be too specific here. It is acceptable, for example, to tell an advisor, the money comes from your wages and you are saving for retirement.
Also, your financial institutions will have a responsibility to prove their clients identities. Even if you have been dealing with the same person for years, be prepared to provide at least one copy of picture ID for new transactions.
Another new responsibility your advisor or broker will have is to ask if your money is coming from, or being used for, a third person. If you are making an investment for another individual, you will have to answer questions about this person, and your relationship with them. Signatures from the third party may also be necessary in some situations.
Your advisor or broker will also have to know if you or someone from your immediate family has worked for any level of provincial or federal government, including embassies or if you have political exposure to foreign persons.
The act sets out penalties and sanctions against firms that don’t comply with these regulations, so there is no doubt that these new changes will effect all of our financial transactions.
As Investment Professionals, we understand the reasons behind the new regulations and we want to help the government prevent illegal money from entering the system. However, these new requirements will cause more paperwork for everyone in the industry, more frustration for the average investors and at the end of the day will probably raise the costs of doing business for the vast majority of honest consumers. Unfortunately, those that want to break the law will probably find others ways around these regulations.
