Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

16 (1) For the purposes of subsections 9.4(1) and (3) of the Act,

• (a) a prescribed entity is

  • (i) an entity referred to in paragraph 5(f) of the Act,

  • (ii) a financial services cooperative,

  • (iii) a life insurance company, or an entity that is a life insurance broker or agent, in respect of loans or prepaid payment products that it offers to the public or accounts that it maintains with respect to those loans or prepaid payment products, other than

    • (A) loans that are made by the insurer to a policy holder if the insured person has a terminal illness that significantly reduces their life expectancy and the loan is secured by the value of an insurance policy,

    • (B) loans that are made by the insurer to the policy holder for the sole purpose of funding the life insurance policy, and

    • (C) advance payments to which the policy holder is entitled that are made to them by the insurer,

  • (iv) a credit union central when it offers financial services to a person, or to an entity that is not a member of that credit union central, and

  • (v) a department, or an entity that is an agent of His Majesty in right of Canada or an agent or mandatary of His Majesty in right of a province, when it accepts deposit liabilities in the course of providing financial services to the public; and

• (b) a prescribed foreign entity is a foreign financial institution.

(2) A financial entity shall, when it enters into a correspondent banking relationship, keep the following records:

• (a) a record of the foreign financial institution’s name and address, its primary business line and the names of its directors;

• (b) a copy of the foreign financial institution’s most recent annual report or audited financial statement;

• (c) a copy of the foreign financial institution’s banking licence, banking charter, authorization or certification to operate issued by the competent authority under the legislation of the jurisdiction in which the foreign financial institution was incorporated, of its certificate of incorporation or of a similar document;

• (d) a copy of the correspondent banking agreement or arrangement, or product agreements, defining the respective responsibilities of the financial entity and the foreign financial institution;

• (e) a record of the anticipated correspondent banking account activity of the foreign financial institution, including the products or services to be used;

• (f) a written statement from the foreign financial institution that it does not have, directly or indirectly, a correspondent banking relationship with a shell bank;

• (g) a written statement from the foreign financial institution that it is in compliance with anti-money laundering and anti-terrorist financing legislation in every jurisdiction in which it operates;

• (g.1) a record of measures taken to determine the nature of the clientele and markets served by the foreign financial institution;

• (h) a record of the measures taken to ascertain whether any civil or criminal penalties have been imposed on the foreign financial institution in respect of anti-money laundering or anti-terrorist financing requirements and the results of those measures;

• (i) a record of the measures taken to assess the reputation of the foreign financial institution with respect to its compliance with anti-money laundering and anti-terrorist financing requirements and the results of those measures; and

• (j) a record of measures taken to assess the quality of the anti-money laundering and anti-terrorist financing supervision of the jurisdiction in which the foreign financial institution was incorporated and the jurisdiction in which it conducts transactions in the context of the correspondent banking relationship and the results of those measures.

(3) The financial entity shall take reasonable measures to ascertain whether the foreign financial institution has in place anti-money laundering and anti-terrorist financing policies and procedures, including procedures for approval for the opening of new accounts and, if the reasonable measures are unsuccessful or the policies and procedures are not in place, shall, for the purpose of detecting any transactions that are required to be reported to the Centre under section 7 of the Act, take reasonable measures to monitor all transactions conducted in the context of the correspondent banking relationship.

(3.1) A financial entity that enters into a correspondent banking relationship shall periodically conduct, at a frequency that is appropriate to the level of risk, based on a risk assessment referred to in subsection 9.6(2) of the Act that takes into account the information collected in respect of the foreign financial institution in accordance with the Act and these Regulations, ongoing monitoring of that correspondent banking relationship for the purpose of

• (a) detecting any transactions that are required to be reported in accordance with section 7 of the Act;

• (b) keeping the information referred to in subsections (2) and (3) and sections 90 and 91 of these Regulations up to date;

• (c) reassessing the level of risk associated with the foreign financial institution’s transactions and activities related to the correspondent banking relationship; and

• (d) determining whether transactions or activities are consistent with the information obtained about the foreign financial institution and with the risk assessment.

(4) For greater certainty, section 12 does not apply in respect of an account that is opened for a foreign financial institution in the context of a correspondent banking relationship.