Seven Misconceptions About FINTRAC That REALTORS May Have

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Hundreds of real estate brokerages across Canada are subject to annual audits by the Financial Transactions and Reports Analysis Centre of Canada to check on their compliance with anti-money laundering regulations.

When FINTRAC conducts an audit and discovers that a brokerage isn't complying with its duties, the broker may be subject to a large penalties. The severity of these fines varies, but they can top $250,000!

Prevent audits and penalties

Numerous myths exist regarding the part REALTORS play in aiding the government in stopping money laundering and how the responsibilities may affect a broker's company.

Today, we assist in separating fact from fiction so that you may fulfil your duties and reduce the chance of incurring penalties.

Myth: You cannot complete a transaction after submitting a Suspicious Transaction Report.

Reality: An agent or broker is still permitted to conclude a real estate deal even after filing a suspicious transaction report under the Proceeds of Crime & Terrorist Financing Act. However, as the brokerage may have its own standards & procedures when dealing with such transactions, agents may want to speak with the compliance officer of the brokerage to determine the best course of action.

Myth: When receiving cash, you must include an account number on a receipt of funds record.

Reality: When money is received in cash, there is no need to enter account numbers on a receipt of funds document.

Account numbers are only required when an account is affected, for the sake of clarity. In D.2 of the CREA's Receipt of Funds Record, a list of some instances of when accounts are impacted is provided.

All other forms of payment must be reported on a receipt of funds record because the account from which the money was withdrawn is considered to have been affected.

Myth: In order to comply with privacy laws, you must notify and obtain permission from your client before filling out and submitting a suspicious transaction report.

Reality: A small exception to privacy laws applies to reports like a Suspicious Transaction Report, which are intended to inform FINTRAC of potential money laundering operations. The submission of a Suspicious Transaction Report is made without the knowledge or approval of the individuals concerned.

In reality, the PCMLTFA Regulations provide that you are not allowed to mention that you have submitted, are submitting, or will submit a Suspicious Transaction Report.

Myth: You may confirm a client's identification even if they aren't physically present by looking at their photo ID via a video conference or using another form of virtual application.

Reality: Although FINTRAC initially approved these techniques during the COVID-19 outbreak, it has now revoked these initial approvals. It is no longer sufficient to view a photo ID through video software like Facetime, Skype, or Zoom.

If technology can establish the legitimacy of the document, it can be used to validate a client's identification. It could be necessary for you to request that the client use the camera on their mobile device to scan a valid and current ID before employing technology to compare attributes of the ID to validate characteristics, security features, or markers.

Misconception: When money is deposited into the lawyer's trust account, it is the buyer's agent's responsibility to complete the Receipt of Funds Record.

Reality: In actuality, the money is being transferred right to a lawyer's trust account. The broker or agent is no longer responsible for documenting the receipt of funds.

It's significant to consider how "receiving funds" is defined. Through communication with FINTRACT, CREA has come to understand that a broker or agent "receives monies" when money is deposited into the brokerage's trust account. However, no monies are considered to have been received if they are not put into the brokerage's account, hence no Receipt of Funds Record is required to be kept by the brokerages.

In other words, the brokerage doesn't keep a Receipt of Funds Record if no REALTOR sees the money.

Misconception: During a transaction, agents are always required to confirm the client's identity.

Reality: This practice has two exceptions.

If the agent has the client's ID from a prior transaction and the agent is confident on the data that was previously used to authenticate the client's existence.

Certain public bodies, extremely large corporations, a very large trust, or a consolidated subsidiary of these institutions are exempt from the requirement that brokers disclose their identities. A Canadian hospital authority, a Canadian provincial or federal department, or a Crown agency are examples of public bodies that are incorporated in Canada.

An organisation with net assets of $75 million or more as of its most recent audited balance sheet is considered to be a very large company or trust.

Myth: The PCMLFTA allows a brokerage to proceed with a transaction without incurring a fine if it keeps enough documents demonstrating that a client refused to furnish identification.

Reality: According to the strict interpretation of the law, the broker would be in violation of the PCMLTFA if they failed to identify a client for whatever reason. However, FINTRACT has indicated that the thorough examination of a broker's compliance history and of their office's compliance processes will determine whether fines are imposed for such a violation.

Brokers are entirely free to decide whether or not to move forward with such transactions, but if they do, FINTRAC suggests they file a Suspicious Transaction Report.

 

SOURCE BY: CREA