FINTRAC Requirements Concerning Corporations (For Real Estate Agents)
FINTRAC has now been around for quite some time. Often, its website and information has been confusing. But, it is stepping up its enforcement procedures against the real estate community. So, here is a frequently asked question. This is all drawn directly from FINTRAC, and as a word of caution (DISCLAIMER), it is only as good as the day it is written. It could change tomorrow, so check out the original source material yourself.
FINTRAC Published Information from Website 4 July 2016
“To confirm the existence of a corporation as well as the corporation's name and address, refer to the following documents:
- the corporation's certificate of corporate status;
- a record that has to be filed annually under provincial securities legislation; or
- any other record that confirms the corporation's existence. Examples of these include such other records as the corporation's published annual report signed by an independent audit firm, or a letter or a notice of assessment for the corporation from a municipal, provincial, territorial or federal government.
You also have to confirm the names of the corporation's directors. This does not include ascertaining their identity. To confirm the names of the corporation's directors, you may need to see the list of the corporation's directors submitted with the application for incorporation. For real estate brokers or sales representatives, if the client is a corporation that is a securities dealer, you do not need to ascertain the name of the corporation's directors. In this context, a securities dealer means an individual or entity authorized under provincial legislation to engage in the business of dealing in securities or any other financial instruments or to provide portfolio management or investment advising services.
The record you use to confirm a corporation's existence can be a paper or an electronic version. Although such information may be available verbally (such as by phone), it is not acceptable for these purposes, as you have to refer to a record. If the record is in paper format, you have to keep the record or a copy of it.
If the record is an electronic version, you have to keep a record of the corporation's registration number, the type and source of the record. An electronic version of a record has to be from a public source. For example, you can get information about a corporation's name and address and the names of its directors from a provincial or federal database such as the Corporations Canada database which is accessible from Industry Canada's website (http://www.ic.gc.ca). As another example, you may also get this type of information if you subscribe to a corporation searching and registration service.
Could you provide clarification on the obligations of real estate agents to ascertain identity when selling property for clients that are corporations? More specifically, where it is stated that a real estate agent must identify the corporation’s signing officer and what would happen if a signing officer refused to provide their ID?
Pursuant to section 39 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), when a real estate broker or sales representative acts as an agent in respect of the purchase or sale of real estate, they must keep a client information record in respect of every purchase or sale.
Subsection 1(2) of the PCMLTFR specifies that a client information record means a record that sets out a client’s name and address and, in the case of a client that is a corporation, the nature of their principal business.
When a client is a corporation, section 39 of the PCMLTFR also requires that a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation, in respect of transactions with the real estate broker or sales representative, be kept.
Subsection 59.2(1) of the PCMLTFR further indicates that “subject to subsection 62(2) and section 63, every real estate broker or sales representative shall, in respect of a transaction for which a record is required to be kept under subsection 39(1), (a) in accordance with subsection 64(1), ascertain the identity of every person who conducts the transaction; (b) in accordance with section 65, confirm the existence of and ascertain the name and address of every corporation on whose behalf the transaction is conducted and the names of its directors.”
Therefore, in addition to obtaining and keeping a record of the name and address of the corporation, the nature of the principal business, and a copy of the part of its official corporate records that contains any provision relating to the power to bind the corporation, a real estate agent must confirm the existence of and ascertain the names of a corporation’s directors in accordance with section 65 and ascertain the identity of the individual who conducts the transaction in accordance with subsection 64(1).
If the corporation’s signing officer is conducting the transaction, their identity must be ascertained by the real estate agent in accordance with subsection 64(1) of the PCMLTFR. Failure to ascertain the identity of a client could lead to an administrative monetary penalty for the reporting entity.”
Finally, there is indeed a clear answer.
A real estate agent needs to clearly identify:
1) 123456 Ontario Inc. (either as Buyer or Seller),
2) The Directors of 123456 Ontario Inc., (just the names) and
3) Bob Smith, the Corporate Signing Officer, personally who will sign on behalf of 123456 Ontario Inc. (that means his drivers’ licence etc.)
You will appreciate that although this was at one time somewhat uncertain, it only makes sense to personally identify the Corporate Signing Officer as well.
Brian Madigan LL.B., Broker