Many of the regulatory amendments that set in motion new provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act will go into effect on June 23. And although the mutual fund industry supports strengthening Canada’s anti-money laundering and anti-terrorist financing efforts, some of the changes will have a significant impact on advisors, particularly with regard to client identification and record-keeping.

Amendments to the anti-money laundering legislation received royal assent in 2006, and regulations needed to implement the amendments were issued in June 2007. The Financial Transactions and Reports Analysis Centre expects to issue revised guidelines reflecting the new requirements toward the end of this year.

Some of the new client identification data may already be in your know-your-client file, but there are some significant new requirements. One is to take reasonable measures to determine whether a prospective client is a “politically exposed” foreign person within 14 days of opening the account.

A politically exposed foreign person, broadly defined, is a person who holds or has held office on behalf of a foreign state, including an ambassador, a head of a government agency or a member of a legislature.

Dealers also will have to take reasonable measures to determine if existing clients are politically exposed persons. As of June, dealers need to have policies and procedures in place outlining what measures need to be taken at the time of opening an account to make the determination.

Other big changes relate to new requirements for identifying clients who are not physically present when an account is opened. This will have an effect on dealers, as well as on money managers who deal directly with clients.

Currently, for example, advisors can identify investors not present at account openings by confirming that they have a valid bank account — or by having a cheque from the investor clear through a bank or other financial institution to the advisor’s firm.

Under the new regulations, there are two options for identification. The first will require an advisor to verify an individual’s name, address and date of birth kept in their records against that of another entity — such as a bank, insurance company or co-op.

The second gives rise to a number of potential combinations for identifying a client. For example, an advisor could obtain a client’s permission to access his or her credit file to get the identification information and also have the investor obtain an “attestation” from a commissioner of oaths or a guarantor.

Another significant change shortens the timeline for identifying individuals who are authorized to give instructions on an account. Right now, advisors have six months after an account is opened to identify any individual authorized to give instructions on the account. As of June 23, advisors will have to confirm the person’s identity before any transaction is made other than the initial deposit.

New record-keeping requirements are coming into effect as well, including a requirement to record, at the time of account opening, the intended use of the account. Advisors will also have to retain records of the investor’s date of birth, address and principal address or occupation.

The advisor also must report attempted suspicious transactions, and dealers will have to incorporate into their policies and procedures measures for identifying and reporting them. All dealer staff will require compliance training.

With all this new information now required in dealer files, the Investment Funds Institute of Canada has compiled a checklist for its members, available on under “Hot Topics” then “Anti-Money Laundering.” IE

Joanne De Laurentiis is president and CEO of the Investment Funds Institute of Canada.