Tag: anti-money laundering
Not too long ago, when opening a trust account at a financial institution, the customer doing so had no requirement to provide the bank with information about the beneficiaries of the trust. However, in February 2014, amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (SOR/2002-184) came into effect. These amendments significantly enhanced the obligations of financial institutions in these situations, and consequently, significantly changed the information that a customer must provide upon opening a trust account.
The law in this area has developed quite rapidly. Before 2008, there was no requirement to obtain information with respect to the beneficiaries of a trust. Between 2008 and 2014, there was not yet a requirement to obtain information, but financial institutions and securities dealers had to take reasonable measures to obtain the name, address and occupation of all beneficiaries with an interest of 25% or more in a trust.
The most recent amendments to the Regulations came into effect February 1, 2014. The relevant section of the Regulations is as follows:
11.1(1) Every financial entity or securities dealer is required to confirm the existence of an entity in accordance with these Regulations when it opens an account in respect of that entity…shall, at the time the existence of the entity is confirmed, obtain the following information:
(b) in the case of a trust, the names and addresses of all trustees and all known beneficiaries and settlors of the trust;
(d) in all cases, information establishing the ownership, control and structure of the entity.
Thus, the financial institution must obtain the names of all beneficiaries, settlors, and trustees of the trust, as well as information about the ownership, control and structure of the trust. Section 11.1(2) also requires that the financial institution confirm the accuracy of the information obtained. As per section 11.1(4), if the required information cannot be obtained or confirmed, the financial institution must treat that customer as “high risk” and “apply the prescribed special measures” as set out in the Regulations.
Furthermore, included in the definition of “ongoing monitoring” in section 1(2) of the Regulations is the requirement that the information referred to in section 11.1 be kept up to date through periodic monitoring.
While the Regulations are directed at financial institutions, the reality is that customers opening trust accounts will also be subject to these requirements. This means that the information will need to be produced upon opening the trust account, as well as maintained over the life of the trust.
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