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To Be or Not to Be a Reporting Entity? That is the Question

24/05/2016


Note: This blog was co-authored by David Chesworth, CAMS, and Hayley Labbe, CAMS

For many, such as banks and other financial services providers to name a few, it’s been 15 long years of complying with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) and implementing Regulations. For others it’s been more recent. There are still some who haven’t taken stock of the risks and implemented appropriate compliance programs.

The following is criteria for the real estate sector that are defined as reporting entities under the Act with obligations to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). MNP has seen these sectors as slow adopters and at risk of being levied with Administrative Monetary Penalties (AMPS) by FINTRAC and reputational risk of being named and shamed. Not everyone will be as lucky as the unnamed bank recently fined.

  1. Real Estate Broker / Sales Representative – If you are employed by an individual or entity who is subject to compliance regime requirements, your employer is responsible for the compliance regime. However, if you are a real estate broker or independent sales representative (that is, you are not an employee), you are responsible for your own compliance regime.
  2. Real Estate Developer - An individual or an entity other than a real estate broker or sales representative, who in any calendar year after 2007 has sold one of the following to the public:
    • at least five new houses or condominium units;

    • at least one new commercial or industrial building;

    • at least one new multi-unit residential building each of which contains five or more residential units; or

    • at least two new multi-unit residential buildings that together contain five or more residential units.
      ​
      • If the real estate developer is a corporation, you are subject to this whether you sell those buildings on your own behalf or on behalf of a subsidiary or affiliate.

      • ​If the real estate developer contracts with other individuals or entities to collect and keep records, you have to get and keep the records that were kept for you by any employee or contractor before the end of that individual's employment or contract with you.
      ​
​​Depending on where you are in the compliance lifecycle you will have different needs. After deciding “to be or not to be” a reporting entity, you may have questions about your next steps. Below are some of the common questions we hear at various stages of the process:

No Program At All

  • How do I get started?
  • What are the program requirements?
  • What gaps exist within the requirements?
  • How can I undertake a compliance effectiveness review?

Compliance Program Maintenance

  • What compliance effectiveness measures do I need to undertake?
  • How often should I be conducting a review?

FINTRAC Inquiry

  • I have a compliance regime and up-to-date compliance effectiveness testing in place. Why is FINTRAC calling?
  • What should I be prepared for in the event of a FINTRAC inquiry?

For any of these or any other anti-money laundering issues, MNP has the experience to assist you. Contact David Chesworth, CAMS, at 416.263.6949 or [email protected], or contact Hayley Labbe, CAMS, at 604.637.1589 or [email protected], or your local MNP Advisor.