On February 22, 2023 (Human Trafficking Awareness Day), the Financial Consumer Agency of Canada (“FCAC”) issued a Bulletin (the “FCAC Bulletin”) to clarify the requirements under s. 627.17 (1) of the Bank Act when the identification presented by a consumer to open a retail deposit account differs from, what it calls, “standard identification”.[1] 

Concurrently, the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) updated its identification guidance to specify how to verify the identity of a person who does not have any identity verification documentation or information (the “FINTRAC Guidance”).[2] FINTRAC noted that it was issuing this guidance to “provide clear direction on how banks, authorized foreign banks and federal credit unions, as defined by the Bank Act, can verify, for example, the identity of a victim of human trafficking, when that victim may not have proper identification documentation or information to open a retail deposit account.” It also reiterated its involvement in Project Protect, a public-private partnership launched in 2016 to target money laundering associated with human trafficking.

The FCAC Bulletin titled Access to Basic Banking Services: Opening a Retail Deposit Account, attempts to address the narrow interpretation that the FCAC noted some banks have been giving to s. 627.17 (1) requirements. FCAC sets out its expectation for banks to exercise flexibility that it says the section affords consumers.

Requirements

Under the Bank Act, consumers have the right to open a retail deposit account (“account”) if they provide a bank with two documents from a reliable source. One of those document must contain the consumer’s name and address and the other must provide their name and date of birth.

A consumer can also open an account if they provide the bank with one document, also from a reliable source, that states their name and date of birth and their identity can be confirmed by a bank customer in good standing or a good standing member of the community where the account is to be opened.

Collaboration with FINTRAC and FINTRAC expectations

The FCAC explains that the FCAC Bulletin is informed by its collaboration with FINTRAC, which requires banks to ensure the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (“PCMLTFR”) requirements are met in confirming a prospective customer’s identification. The FCAC Bulletin clarifies that the identification requirements of the PCMLTFR are also met if a consumer provides non-standard identification document (“ID”) in compliance with s. 627.17 of the Bank Act.

The updated FINTRAC Guidance issued concurrently provides that, in the case where a person does not have the proper identification documentation or information, a bank may still comply with the PCMLTFR requirements if it:

• follows the measures required by the Bank Act and FCAC bulletins;
• documents in its AML compliance policies and procedures the types of circumstances where their organization would follow the Bank Act for verification of identification;
• ensures that the banking products provided to the individual opening the account are limited to a basic retail deposit account;
• verifies the person's identity using the appropriate form of identification within 6 to 12 months, or as described in its risk-based approach and keep appropriate records;
• continues to follow its customer due diligence and "know your client" processes, conducts ongoing monitoring and monitors transactions to ensure that the financial activity and use of products/services aligns with what is known about the person.

FCAC expectations

FCAC expects banks to put in place the appropriate policies and procedures to accommodate requests to open retail deposit accounts with non-standard ID. These policies and procedures must include setting out how banks plan to operationalize and apply phrases such as “document(s) from a reliable source,” “customer in good standing with the Bank” and “natural person of good standing in the community”. Banks must also be informed by a risk assessment and provide for the use of controls to mitigate such risks.

a) Documents from a reliable source

 FCAC indicates that bank policies must set out the criteria and process used to establish what constitutes a “reliable source” but also indicates that this can be established if the bank can verify the content of the documents with their source. Additional information may be required by the bank such as the identity, position and contact details of the reliable source’s representative and how the representative has come to know the consumer.

b) Customer or natural person/entity in good standing

Policies and procedures must also set out the criteria and processes used to establish what constitutes a customer in good standing or a natural person or entity in good standing in the community. In order to be considered “in good standing”, a customer, natural person or entity’s identity and credentials must be verifiable.

FCAC invites questions relating to the FCAC Bulletin at:

1. [email protected] or

2. Financial Consumer Agency of Canada

   Attention: Deputy Commissioner, Supervision and Enforcement Branch

   427 Laurier Ave West, 6^th Floor

   Ottawa ON K1R 5C7

[1] FCAC’s reference to “standard identification” means the identification provided in s. 627.17(1)(a)(i) (A) to(G) of the Bank Act.

[2] https://fintrac-canafe.canada.ca/guidance-directives/client-clientele/Guide11/11-eng#s6