By Rachel Puma
Robins Appleby
In 2019, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act was amended to modernize identity verification procedures, among other things. As a result of the amendment, real estate developers, sales representatives and brokers that are subject to the Act (“Reporting Entities”) are able to verify clients’ identities virtually, when the client is not physically present.
Given the importance of social distancing amid the COVID-19 pandemic, development readers need to understand their options and responsibilities when identifying clients virtually.
Government-issued photo identification method*
The most common way to verify clients’ identities has been through the so-called “government-issued photo identification method.” This method requires the Reporting Entity to identify clients (when required) by reviewing government-issued photo ID to confirm it is (a) authentic, (b) valid and (c) current.
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* There are other less common ways of verifying clients’ identities, such as the “Credit File Method” or the “Dual-Process Method,” which are described on FINTRAC’s website. FINTRAC’s website also describes the “Government-Issued Photo Identification Method” in greater detail (it sets out the types of ID permitted).
‘In-person’ verification
Before the 2019 amendments, clients were required to present their ID “in person.” The Reporting Entity would then look at the characteristics of the original physical document and its security features (or markers) in the presence of the client to be satisfied that it is (a) authentic as issued by the competent governmental authority, (b) that it is valid (unaltered, not counterfeit), and (c) that it is current (not expired) and that the face/name on the ID matches the client. Human judgment is applied to verify all of the above.
This “in-person” process is still available and widely used today.
‘Not physically present’ verification
As a result of the amendments, Reporting Entities are now able to verify the identity of clients who are “not physically present” when presenting their IDs. The Reporting Entity must still verify that the government-issued ID is (a) authentic, (b) valid, and (c) current, but this can be done through virtual means.
In order to verify that the ID is valid and current, Reporting Entities may use FaceTime, Zoom or other video services to confirm the name/face of the ID matches the name/face of the client, and must confirm through the video service that the ID is not expired, and that it is valid (unaltered). Reporting Entities may also accept scanned copies of IDs and use facial recognition software to confirm validity and currency and to match the name/face of the client.
To confirm the authenticity of the ID, Reporting Entities must use a “technology” to compare the features of the identification document against known characteristics, security features or markers to be satisfied that it is an authentic document as issued by the competent authority. In this case, Zoom and FaceTime would not suffice. Reporting Entities can find technologies capable of authenticating IDs online, but must be satisfied with the technology as it is ultimately the Reporting Entity’s responsibility to verifying client identities.
COVID-19 temporary measures
During the COVID-19 pandemic, certain FINTRAC requirements have been relaxed to promote social distancing.
For example, when the client is not physically present, Reporting Entities do not need to use a “technology” to authenticate IDs, and can instead apply human judgment to determine whether the ID appears to be authentic. This allows Reporting Entities to authenticate IDs through Zoom or FaceTime, without another “technology.”
This measure is only temporary and Reporting Entitles should refer to the latest guidance from FINTRAC before taking advantage of the relaxed requirements.
Compliance policy
As a final point, Reporting Entities are required to keep a written and up-to-date compliance policy which outlines the verification methods and processes being used, among other things.**
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** More information on compliance policy requirements can be found on FINTRAC’s website.
Rachel Puma is an Associate Lawyer in Robins Appleby’s Real Estate Group.
