Kyc in Canada: A Comprehensive Guide to Regulations and Compliance

In Canada, Know Your Customer (KYC) regulations are enforced by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

The Financial Consumer Agency of Canada (FCAC) is responsible for protecting consumers by monitoring compliance with financial institutions' KYC obligations.

Financial institutions in Canada must verify a customer's identity and obtain necessary documentation to ensure compliance with KYC regulations.

This includes verifying a customer's name, date of birth, and address, as well as obtaining a copy of their government-issued ID.

In Canada, the regulatory framework for Know Your Customer (KYC) is governed by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) of 2001. This act primarily applies to financial services businesses and aims to combat money laundering and terrorist financing.

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is responsible for managing compliance with this act. FINTRAC oversees crypto-asset trading platforms, which are regulated as Money Service Businesses (MSBs) under the PCMLTFA.

FINTRAC also regulates foreign money service businesses (FMSBs). The Investment Industry Regulatory Organisation of Canada has its own rules for advisors, including requirements for suitability analysis and documentation.

Advisors are prohibited from mischaracterizing client information, failing to document suitability analysis, or reversing-engineering a suitability determination to fit a recommendation. They must also put client interests first.

Here are some key regulatory bodies in Canada's KYC framework:

The Travel Rule requirements in Canada are designed to prevent money laundering and terrorist financing.

On June 1, 2021, amendments to the Travel Rule came into force.

The amendments require specific identifying information to be recorded when an electronic funds transfer (EFT) or virtual currency transfer is sent or received.

All reporting entities, including Money Services Businesses (MSBs), have to submit an electronic funds transfer report to FINTRAC when they initiate or receive funds electronically in an international transaction.

The threshold for reporting transactions is set to $10,000 or more for a single transaction or multiple small transactions that take place over a 24-hour period.

The identifying information includes the name, address, and account or another reference number (if any) of the person or entity who requested the transfer.

The name and address of the beneficiary are also required.

If applicable, the beneficiary’s account or other reference numbers must be included.

The FINTRAC has extended these requirements to include not just domestic MSBs and financial institutions but also foreign MSBs (and casinos with respect to EFTs).

In Canada, financial institutions must have a Customer Identification Program (CIP) as part of their Know Your Customer (KYC) program. The CIP focuses on verifying information provided by the customer.

To onboard a new customer, you'll need to collect their name, address, date of birth, and social-security number or other government-issued ID numbers. This is the minimum requirement for a CIP.

For businesses, you'll also need to collect corporate/business registration documents, the company's registration number (CRN), and ultimate beneficial ownership (UBO) information, which includes the names of the business's owner(s) and top management employees.

In the iGaming industry, operators can onboard players using identity data or document verification, with most using identity credit data verification for KYC-compliant onboarding decisions in seconds.

In Canada, digital identity data verification involves matching personal data against trusted credit bureau data, with two routes to achieving a successful player data match.

In today's digital world, risk and fraud detection is even more important than ever before. Mitigating risk is crucial for financial institutions in Canada, where the threat of organized fraud and identity theft is high.

To mitigate risk, financial institutions in Canada must implement effective Know Your Customer (KYC) and Anti-Money Laundering (AML) processes. This includes conducting thorough customer due diligence, which involves gathering and evaluating additional information on customers to assess potential risks.

Customer Due Diligence (CDD) is not technically part of a Customer Identification Program (CIP), but it's an essential step in understanding the nature of a customer's business and assessing potential risks. CDD helps financial institutions better understand their customers and identify potential red flags.

The CDD process involves gathering information on a customer's business, such as their ownership structure, business activities, and financial history. This information is used to assess the customer's risk profile and determine whether they pose a risk to the financial institution.

If the CDD process uncovers anything unusual or questionable, an Enhanced Due Diligence (EDD) process may be necessary. EDD is aimed at high-risk customers and involves in-depth investigations that may include site visits, interviews, and advanced search tools.

Here are some reasons why a customer may require EDD:

By conducting thorough CDD and EDD processes, financial institutions in Canada can mitigate risk, detect fraudulent activity, and streamline investigations. This helps to protect both the institution and its customers from the risks associated with money laundering and terrorist financing.

In Canada, operating a business that deals with money or financial services requires compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). This law aims to prevent money laundering and terrorist financing, and it's enforced by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

To comply with PCMLTFA, businesses must verify the identity of their customers, which is known as Know Your Customer (KYC) regulations. The PCMLTFA outlines the methods that regulated businesses can use to verify customer identity, and FINTRAC manages compliance.

Businesses that fail to follow the law can face stiff fines and reputational damage. To avoid these consequences, it's essential to understand the KYC regulations in Canada and implement them in your business.

In Canada, it's legal to own and exchange cryptocurrencies. The Canadian government primarily regulates them under securities laws, which vary by province and territory.

The Canadian Securities Administrator (CSA) harmonizes these laws to ensure consistency across the country. Businesses issuing cryptocurrencies that are deemed securities must meet registration, prospectus, and AML/KYC requirements.

The Financial Transactions and Report Analysis Centre of Canada (FINTRAC) considers cryptocurrencies virtual currencies, which can be used for payment, investment, or retail activities. This definition includes blockchain-based cryptocurrencies like bitcoins.

Entities dealing in virtual currencies, such as exchanges, must comply with these regulations. They include those offering virtual currency exchange services and transfer services.

The FINTRAC is Canada's financial intelligence unit, established under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to detect, prevent, and deter money laundering and the financing of terrorist activities.

The FINTRAC has oversight over crypto-asset trading platforms, which are regulated as Money Service Businesses (MSBs) under the PCMLTFA, and also regulates foreign money service businesses (FMSBs).

CSA is an industry forum comprising all of Canada's territorial and provincial securities regulators, with a goal to collaborate on the creation and harmonization of securities regulations across Canada.

The FINTRAC plays a crucial role in ensuring the protection of personal information under its control, while also facilitating the detection and prevention of money laundering and terrorist financing activities.

Navigating PCMLTFA compliance can be a complex task, but it's essential for financial institutions to stay on top of the regulations. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act of 2001 (PCMLTFA) primarily applies to financial services businesses, with the aim of combating money laundering and terrorist financing.

Compliance is managed by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), which oversees crypto-asset trading platforms (CTPs) and regulates foreign money service businesses (FMSBs). The PCMLTFA outlines the methods that regulated businesses can use to verify the identity of their customers.

To create digital onboarding journeys that are compliant and scalable, you can use a drag-and-drop interface. This will help you navigate PCMLTFA compliance and ensure that your business is meeting the necessary standards.

Here are some key requirements to keep in mind:

By staying on top of these requirements and using the right tools, you can ensure that your business is compliant with PCMLTFA regulations and reduce the risk of fines and reputational damage.

To comply with KYC regulations in Canada, businesses must verify the identity of their customers. This involves collecting and verifying personal data, such as name, address, and date of birth.

FINTRAC-compliant digital identity data verification is a crucial step in the onboarding process, and it involves matching personal data against trusted Canadian credit bureau data. There are two routes to achieving a successful player data match.

Age verification is also essential to provide a safe gambling environment, and in regulated markets, individuals must be 19 years of age or older to participate in iGaming sites and services managed by iGaming Ontario.

iGaming Ontario operators must ensure robust age verification takes place alongside KYC checks to ensure that only individuals of legal age can access their services.

To deliver FINTRAC-compliant player identity verification at onboarding, there are three successful routes to consider.

Businesses can verify identity using remote identity verification methods, such as scanning government ID using a smartphone or electronic device and taking a selfie photo to be matched against the photo on their ID.

Onfido's document verification uses advanced techniques to assess documents for authenticity, powered by Atlas AI, and can verify supported Canadian-issued photo IDs such as a driver's licence, passport, residence permit, service ID, and indigenous card.

Data verification is also essential, and businesses can validate user-submitted data against a range of trusted data sources globally and locally, including Identity Record, PEPs, and Sanctions Watchlists.

Onfido's AI-powered solution enables the capture of ID documents and facial biometrics, giving businesses confidence in the identity of their users.