New rules make “know your client” even more important for CPAs

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Learning the new rules will naturally take some time, but is very important (Getty Images / FreshSplash)

Knowing your clients has never been more important to CPAs now that new anti-money laundering and anti-terrorist financing (AML / FTA) requirements have come into effect. As of June 1, 2021, CPAs carrying out activities covered by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) must adhere to new rules designed to ensure they know who they are dealing with and why. (There are also new rules affecting compliance programs, record keeping and reporting.)

“These new requirements are really meant to strengthen the regime and level the playing field in Canada,” said Michele Wood-Tweel, FCPA, FCA, Vice President, Regulatory Affairs at CPA Canada. “Now accountants and accounting firms will take the necessary steps that other sectors such as financial institutions, as well as accountants and accounting firms in other jurisdictions must take. ”

TRIGGER ACTIVITIES

Under the rules, accountants and accounting firms involved in certain triggering activities (such as receiving or paying funds on behalf of a person or entity) are required to verify the identity of the persons and entities with which they deal with in certain circumstances. :

  • Large cash transactions ($ 10,000 or more over a 24 hour period, as defined by the 24 hour rule)
  • Large virtual currency transactions (again, $ 10,000 or more in a 24 hour period)
  • Suspicious transactions, whatever the amount
  • Receiving funds of $ 3,000 or more

There are of course details to know about trigger activities, as well as exceptions to the requirements. [See New “know your client” AML/ATF rules for CPAs.]

VERY SPECIAL CIRCUMSTANCES

It is important to stress that the requirements of the PCMLTFA have a specific scope. As Wood-Tweel says, “This doesn’t apply to all CPAs and what every CPA does every day. It generally applies to CPAs in practice, who engage in triggering activities – for example, if they receive or disburse funds on behalf of another person, if they buy or sell assets for an entity. , or if they’re doing security operations on behalf of someone else — that’s the kind of circumstance. There is a lot of the work that we do as a CPA that would never move towards this. But if CPAs are going to do it, they need to know that there are requirements and that the requirements have been tightened. ”

Given the scale of the changes and the fact that they will require accounting firms to develop or modify their compliance programs, the Financial Transactions and Reports Analysis Center of Canada (FINTRAC) has released advice as well as posting notices on its website on how it will handle the transition.

While it will take some effort to adapt to the new rules, CPAs welcome the changes. CPA Marc Tassé, professor who teaches the fight against corruption at the MBA level at the University of Ottawa, puts it this way: “As accountants, we do not want to be seen as facilitators of money laundering. or any other type of financial behavior. So we want to make sure that whatever we do, we are doing it right. “

KNOW YOUR CUSTOMER (KYC)

The main know-your-client obligations under the PCMLTFA are:

  • Verify the identity of your client (person or entity)
  • Determine if a third party is giving instructions to the client
  • Determine business relationships and carry out ongoing monitoring
  • Obtain information on the beneficial owners
  • Determine if you are dealing with politically exposed persons or heads of international organizations, family members or close associates.

When it comes to deciding how to collect information, FINTRAC has published numerous advice. It details, for example, what forms of identification are acceptable, how to assess them and what records should be kept.

“The challenge with KYC is first of all to get the right information on time and keep it up to date,” explains CPA Éric Lachapelle, partner, forensic lawyer and national leader in financial crime at KPMG in Canada. “[It’s easier to do this] for individuals and businesses. As you can imagine, companies like KPMG tend to deal with corporations or non-individuals. They can be trusts, they can be corporations.

CPA Jennifer Fiddian-Green, Partner, Forensic Accounting and Investigative Services at Grant Thornton LLP in Canada, agrees. “The biggest challenge is really bending down, even for small assignments, to make sure we know the client,” she says. “It is difficult to manage due diligence with budgets and pace of client expectations for our services. [But] our customers are great and they get it. i would say we have [only] encountered push-backs and problems with organizations we decide not to work with for various reasons.

WORKFORCE OWNERS AND SPECIFIC CATEGORIES OF INDIVIDUALS

As Wood-Tweel points out, new applicable requirements must also be taken into account. “The rules on beneficial ownership have been broadened to include accountants and accounting firms. And they need to build that into their company’s compliance program and training.

Canada does not have a beneficial ownership registry like some other countries, she explains, so if you are required to maintain and confirm beneficial ownership, you need to get that information or get it from the client and you make sure you know who ultimately controls, for example, a private company. And that may or may not be the registered shareholders. There may be a party behind the shareholders who ultimately has control.

“If you are already undertaking or considering triggering activities, you really need to think about how you are going to get the exact beneficial ownership of businesses and other entities,” says Wood-Tweel.

Another challenge will be what FINTRAC calls politically exposed persons and heads of international organizations. “These are usually people who can be targeted by people with illicit objectives,” says Wood-Tweel. Given the higher risk attached to these people, accountants have new requirements to know and meet.

A PROFESSIONAL NECESSITY

Learning the new rules will naturally take some time, but it is very important. As Fiddian-Green says, “Make sure you know your customers, do your research. If you need any help understanding the rules, please do not hesitate to contact us.

Lachapelle agrees. “For me, training is the most important part of any compliance program, regardless of the type of segment,” he explains. “But just for CPAs today: training, training, training. Because in the end, when something bad happens, it hurts the whole profession. ”

LEARN TO KNOW THE NEW AML RULES

CPA Canada has extensive resources that can help you familiarize yourself with the new AML requirements, including KYC. Plus, stay up to date on other major AML developments and find out how Canada stacks up against other jurisdictions around the world.

In addition, improve your knowledge with our on-demand course, Anti-Money Laundering and Ethics: A Canadian and Global Perspective, to have an overview of the relevant information, tools and strategies that you need to know in order to better understand the ethical issues and challenges related to the fight against the risk of money laundering and terrorist financing.


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