Beneficial Ownership Requirements - YouTube

A fundamental requirement of successful money laundering is concealment

– creating layers of separation between the criminals and the criminal proceeds.

One effective way of achieving this is through the use of corporations or trusts

to facilitate money laundering transactions while concealing the identity of those bad actors.

Effective June 1, 2021, if your client is not a person,

but rather an entity, such as a corporation, partnership, trust or non-profit organization,

you must obtain beneficial ownership information

at the time you are required to confirm the existence of that entity.

As before, this obligation lies with the brokerage, but in practice, it's typically delegated to REALTORS®.

With that in mind, we'll refer to “you,” the Realtor, in this video and your role in meeting these obligations.

These are also federal regulations and requirements, which are different from any provincial regulatory obligations.

FINTRAC defines a beneficial owner as an individual who directly or indirectly owns or controls at least 25 per cent of an entity.

For a corporation, this includes directors and any shareholder that owns or controls at least 25 per cent of the company’s shares.

For trusts, this would include all trustees, beneficiaries and settlers of the trust.

And for trusts that are widely held, or publicly traded,

it would include all trustees and any persons who own or control at least 25 per cent of the trust units.

And for any other entity, it includes all persons who control, directly or indirectly, at least 25 per cent of the entity.

A beneficial owner must be an actual person.

If an entity is owned by another entity, the beneficial ownership of that parent entity must be obtained.

And there are specific records you are required to collect.

You are required to obtain and keep a record of information that describes the ownership, control and structure of the entity.

For corporations, you are required to obtain the names of all the directors,

and the names and addresses of the beneficial owners.

If the business is not incorporated, then only the names and addresses of the beneficial owners must be obtained.

If the entity is a trust, you are required to obtain the names and addresses of all trustees, known beneficiaries and settlers of the trust.

If the entity is a non-profit organization, you must also determine if that entity is a registered charity under the income tax act,

or if it is an unregistered, not-for-profit organization that solicits charitable donations from the public.

These records must be maintained for the duration of your business relationship with the client,

which is five years from the last transaction or activity that requires the brokerage to verify the client’s identity.

And you also have an ongoing responsibility to take reasonable measures to confirm the accuracy of that information

– both at the time when it was first obtained and throughout the course of your business relationship.

To obtain information about the entity, including information about the beneficial owners,

the entity can provide you with official documentation, such as a partnership agreement,

articles of incorporation,

shareholder agreements,

certificate of corporate status,

or a board of director’s meeting records.

If an entity is the owner of a property located in BC,

you might be able to search for publicly available information in the Land Owner Transparency Registry, or LOTR.

If it’s not possible to collect the necessary information through official documentation,

or you're unable to find your client in the LOTR,

another way to obtain the information is by asking the entity to explain the details verbally.

Take detailed notes and ensure that you are collecting the necessary information:

details of the beneficial owners, and ownership, control and structure of the entity.

Reasonable efforts must be taken to ensure the accuracy of the information collected,

either with official documentation or searching for available information online.

If a client provides the information verbally,

having that person review and sign the documented records will help towards ensuring its accuracy.

For more complex entities, a more diligent approach is needed.

Keeping beneficial ownership information current and up-to-date is part of your ongoing monitoring of business relationships.

For entities deemed “high risk”, you'll need to follow the enhanced monitoring procedures that your brokerage has in place.

But what happens if it’s not possible to obtain beneficial ownership information of an entity?

Or confirm its accuracy?

In these cases, the agent or broker must take reasonable measures to verify the identity of the entity’s Chief Executive Officer,

or the person performing a similar function;

and that entity must be monitored with the same enhanced ongoing monitoring protocols used for high-risk clients.

There may also be circumstances where there are no beneficial owners,

if no individual person controls at least 25 per cent of an entity.

This is different than being unable to obtain beneficial ownership.

However, you are still required to make that determination;

and obtain and confirm information about the entity’s ownership, control and structure.

In the next video, we’ll talk about new anti-money laundering obligations around politically exposed persons

and heads of international organizations.