REALTORS® across Canada are now required to collect personal identification information from their clients in order to comply with federal legislation.

These new federal laws and regulations took effect June 23, 2008 and are aimed at combating money laundering and terrorist financing activities. As part of the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), financial institutions and REALTORS®, among other professionals and services, must identify customers who conduct financial transactions.

Under the new rules, REALTORS® must obtain, record, and retain the personal information of their clients, including their full legal name, address, date of birth and occupation. To do this, they will ask for a government-issued identification document such as a driver’s licence, passport, or residency card. You should not provide your Social Insurance card as identification.

“The public needs to be aware that REALTORS® are asking for this personal information to comply with the new federal laws," said Kelvin Neufeld, president of the Fraser Valley Real Estate Board . “The information received will not be used in any commercial way and will not be provided to anyone except in response to a request from the federal agency responsible for compliance.”

The regulations are enforced by the federal agency known as the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC.

REALTORS® are to track the amount and source of funds received during the course of a real estate transaction. The Act also requires that these identification records and FINTRAC reports be kept for five years.

If the client is a corporation, that information must include corporate documentation and the names of the corporation directors. REALTORS® are further obligated to ascertain whether a third party is involved in a given transaction.

These new compliance requirements affect even a buyer or seller not using the services of a licensed real estate practitioner or lawyer. If a REALTOR® is involved in the transaction, he or she must make best efforts to verify the unrepresented buyer or seller’s information.

Also under the new FINTRAC regulations, REALTORS® need to verify the personal information of clients with whom they have no face-to-face interaction. One way to do this is for the broker office to hire an agent in the area where the client is located. That agent must then meet the client, verify the identification of the client, and provide the information to the office actually handling the transaction in Canada.

What you need to know about this new federal law.

While Bill C-25 is Canada’s newest legislative attempt to curtail money laundering and terrorist financing, we have had legislation since 2001 that required designated industries in Canada (including real estate) to report suspicious transactions and large cash transactions of $10,000 or more.

Money laundering

Money laundering is the process used to disguise the source of money or assets derived from criminal activity. This illegal activity can include drug trafficking, smuggling, fraud, extortion and corruption. Criminals must launder the profits and proceeds from these crimes to be able to enjoy them. The scope of criminal proceeds is significant; the International Monetary Fund (IMF) estimated that some $500 billion (U.S.) is laundered worldwide each year.

Terrorist financing

Terrorist financing operates somewhat differently from money laundering. While terrorist groups do generate funds from criminal activities such as drug trafficking and arms smuggling, they also obtain revenue through legal means. Supporters of terrorist causes may, for example, raise funds from their local communities by hosting events or membership drives. In addition, some charity or relief organizations may unknowingly become the route where donors contribute funds that may eventually be used to commit a terrorist act.

How does FINTRAC assist law enforcement and security agencies?

The Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC, collects, analyzes and discloses financial information and intelligence on suspected money laundering and terrorist financing activities. It was created as part of a Canadian government initiative to fight money laundering and terrorist financing. Although it operates at arm’s length from law enforcement, FINTRAC's primary role is to provide law enforcement agencies with information to help them with their investigations.

FINTRAC is required by law to protect the personal information it receives from unauthorized disclosure.

Who must report to FINTRAC?

The following persons and entities must report suspicious and certain other transactions to FINTRAC:

• real estate brokers and agents;
• financial entities including banks, credit unions, trust and loan companies and agents of the Crown that accept deposit liabilities;
• life insurance companies, brokers or agents;
• securities dealers, portfolio managers and investment counsellors who are provincially authorized;
• persons engaged in the business of foreign exchange dealing;
• money services businesses;
• accountants and accounting firms when carrying out certain activities on behalf of their clients;
• casinos; and
• individuals and any entity importing or exporting currency or monetary instruments (such as a money order) of $10,000 or more.

Additional information about this federal initiative, the federal legislation, and the role of FINTRAC in the reporting system is available at http://www.fintrac-canafe.gc.ca or call toll-free: 1-866-346-8722.