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The definition of ‘business relationship’ has been amended to mean “any relationship with a client, established by a 
person or entity to which section 5 of the Act applies, to conduct financial transactions or provide services related to 
those transactions.”

Further amendments to PCMLTFA have 
been proposed with the aim of further 
closing the global AML legislative gap 
and to align Canada’s requirements 
more with key international players. 
These proposed changes will also 
explicitly address deficiencies identified 
in their compliance with FATF’s 2008 
Recommendation 10. 

Proposed changes to 

Canada’s AML/CTF 

regulations 

On October 13, 2012, the Department 
of Finance released draft regulations to 
amend Canada’s AML obligations. These 
changes have now been approved and 
when enforced on February 1, 2014, 
will impact reporting entities’ obligations 
by changing the way they are required 
to identify customers and monitor their 
customers’ behaviour.

Specifically, the amendments address 
the following:

 

•Ongoing monitoring of all business 

relationships with clients using a risk 
based approach. 

 

•Obtaining information on the 

purpose of a business relationship 
when entering into the business 
relationship with a client.

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•Clarifying enhanced due diligence 

measures should be taken for 
all high risk clients, activities or 
transactions. This includes keeping 
client information up to date and 
conducting enhanced ongoing 
monitoring.

 

•Obtaining documentary evidence 

from the client that confirms details 
of beneficial ownership.

 

•Clarifying that no exceptions exist 

to reporting entities’ obligations to 
conduct customer due diligence 
measures in respect of any 

transaction or activity that gives rise 
to a suspicion of money laundering 
or terrorist financing.

So how will the proposed changes to 
legislation impact affected companies? 
General feedback is that the new 
changes will increase the regulatory 
burden on firms, many of whom have 
already invested heavily in meeting 
the current requirements. The most 
significant amendment however will be 
that all customers will have to undergo 
ongoing monitoring which is a significant 
change to the current regime which 
stipulates that only high risk customers 
require this. Comments from market 
players have included concern over 
whether the new rules will mean firms 
will have to look back over customer 
information held and reassess whether 
“business relationships” exist for which 
customer due diligence is now relevant 
(see sidebar).

CUSTOMER DUE DILIGENCE

Customer due diligence (CDD) requires taking steps to identify your customers and 

checking they are who they say they are. CDD measures ensure that the institution 

knows who their clients are, so that they do not accept clients outside of their normal 

risk tolerance, or whose business they do not fully understand.

Elements of an effective CDD Program:

•   Development of an account opening procedure which stipulates the identification 

requirements necessary to commence a business relationship with a customer based on 

whether they are an individual or entity (charity, trust, company, etc.).

•   Ensuring the shareholding structure of an entity is validated and all ultimate beneficial owners 

with a holding of 25% or more are identified.

•   Enforcing a customer AML risk rating framework which takes into consideration a variety of 

AML risk components to ensure that additional due diligence measures are undertaken for 

customers posing higher risk to the institution, such as validating source of wealth or funds.

•   Ensuring high risk customer accounts undergo ongoing monitoring and document refresh 

periodically.

© 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms 
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

At Risk

 

 

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 Volume 7, No. 1 

 

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