Transition period extended
The Government of Canada has extended the transition period for the new methods for verification of identity under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations until January 23, 2018. The new ID verification methods came into effect as of June 30, 2016 but a transition period was established to give entities subject to these requirements (Reporting Entities) until June 30, 2017, during which period either the previous or the new ID verification methods may be used. This transition period has now been extended until January 23, 2018. FinTRAC’s current guidance on the new ID verification methods is available here. We described the new ID verification methods in our post from July, 2016.
Although the new ID verification methods were intended to provide flexibility to Reporting Entities, they have been criticized as being overly prescriptive and not going far enough to allow Reporting Entities to use new and improved technologies. Also, FinTRAC’s guidance has not been particularly helpful. Under the dual-process method for verification of identity non-face-to-face, a Reporting Entity may refer to information from two reliable sources. FinTRAC’s guidance as to what is a reliable source states that a “reliable source is an originator or issuer of information that you trust to verify the identity of the client” and further that the “source should be well-known and considered reputable”. FinTRAC has not provided effective guidance as to what it means for the Reporting Entity to “trust” the source or as to what diligence must be conducted to enable the Reporting Entity to conclude that the source is well-known and reputable. Also, why does a source have to be well-known in order for it to be reliable?
As a result of the extension, Reporting Entities may continue using the old methods to verify identity in addition to the new methods until January 23, 2018. Reporting Entities therefore have additional time to implement changes to their identity verification procedures.