With an estimated $113 billion getting “washed” in Canada each year, it’s fair to say that money laundering touches nearly every aspect of our society.1 Given the magnitude of the problem and money launderers’ ever-changing efforts to evade detection, there’s a growing focus on regulatory compliance. This is especially evident in the anti-money laundering (AML) world, where scrutiny from regulatory bodies continues to intensify.
In keeping with these developments, CPABC recently finished enhancing its regulatory framework to address the final recommendations made by the Commission of Inquiry into Money Laundering in British Columbia (Cullen Commission). At its annual general meeting in June 2024, CPABC added Rule 219—which requires members and registered firms to complete certain client identification and verification processes—to the CPABC Code of Professional Conduct. At the same time, CPABC implemented new bylaws and bylaw regulations to establish a trust account oversight program. Combined with the new mandatory AML CPD requirement (Bylaw Regulation 600/2.1), cash transaction rule (Rule 411), and amendments to the guidance of Rule 102.4 that were introduced in 2023,2 these changes mark a significant milestone for the profession in BC.3
CPAs play an important role in maintaining the integrity of Canada’s financial system, and one of the ways CPAs can protect themselves, their clients, and the companies they work for from money laundering is by complying with applicable regulations. With this in mind, we wanted to provide some guidance on Rule 219 and the trust account oversight program.
Rule 219 – Client identification and verification
Why it was introduced
Client identification and verification (CIV) is not, in principle, a new concept for CPAs. However, to mitigate the risks of fraud and other financial crimes, it is becoming increasingly important for CPAs to confirm the identity of their clients. Accordingly, the new CIV requirements under Rule 219 necessitate that members and registered firms obtain, verify, and record certain information regarding their clients when providing specified services.
Many other industries and sectors, such as banking, also have CIV requirements under FINTRAC and other regulators. Implementing CIV processes is one of the most effective ways to combat money laundering and other financial crimes.
Who it applies to
The CIV requirements under Rule 219 apply to members and registered firms who provide specified services and/or specified transactions. However, the new requirements do not apply to members who are providing professional services to their employers.
When it’s applicable
Rule 219.1 codifies a member or registered firm’s requirement to obtain and record basic information about their client’s identity when providing specified services, which include:
- Advice respecting a specified transaction;
- Advice respecting the use of corporations or other legal entities; and
- Private-sector bookkeeping services.
These services do not include audits and reviews.
Rule 219.2 similarly codifies a member or registered firm’s requirement to confirm or verify information about their clients when providing services in relation to a specified transaction. Specified transactions are similar to FINTRAC triggering activities4 and include:
- The receipt or payment of funds or virtual currency;
- The purchase or sale of securities, real property, or business assets or entities;
- The transfer of funds, virtual currency, or securities by any means; and
- The giving of instructions in connection with any activity referred to in points 1, 2, or 3.
Note that although members and registered firms are only required to obtain and record information when providing the specified transactions, CPABC strongly encourages everyone to perform the necessary due diligence before providing any professional services to clients. The CIV requirements are just one way for CPABC to help members and registered firms protect themselves and their clients from those with questionable motives.
More information online
Additional information and resources regarding Rule 219 can be found on CPABC’s AML website at bccpa.ca/aml.
Trust account oversight program
Why it was created
Trust accounts present an elevated risk for money laundering, as they create an arm’s-length way for criminals to store and move dirty money. Trust accounts were a key concern identified by the Cullen Commission, and the Commission specifically recommended that CPABC monitor their use.
The CPABC trust account oversight program enables CPABC to monitor and inspect trust accounts and their use by members and registered firms who hold these accounts in their professional capacity.
Trust accounts that will be subject to the program
Professionals in several different industries, including lawyers, real estate agents, notaries, and accountants, use trust accounts to handle their clients’ funds.
CPAs may, for example, use trust accounts when:
- Holding others’ property or money to pay taxes, royalties, or other invoices;
- Acting as a receiver or trustee; and
- For the sale or administration of property.
CPABC’s trust account oversight program intentionally excludes:
- Trusts for the purpose of bankruptcy or insolvency;
- Estates that are subject to court review and approval; and
- Trusts that are subject to regulatory oversight by another governing body under the Legal Professions Act, Real Estate Services Act, or another similar enactment.
What is required
The trust account oversight program is based on Rule 212 – Handling property of others and the accompanying guidance in the CPABC Code of Professional Conduct. Members and registered firms are encouraged to review and familiarize themselves with both the rule and guidance.
Want to learn more?
More information about the CPA profession’s AML obligations can be found in CPA Canada’s Guide to Comply with Canada’s Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) Legislation, which was released in March 2022 and can be downloaded from cpacanada.ca. You can also find resources on CPABC’s AML website at bccpa.ca/aml.
More changes ahead
It appears that more changes are on the horizon, as the federal government is currently reviewing the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and all of its regulations (i.e., Canada’s AML regime) as part of a five-year review process and in advance of the next mutual evaluation for Canada by the Financial Action Task Force (fatf-gafi.org), coming in 2026. Stay tuned!
Jessica McKeachie is the director of public interest and corporate secretary at CPABC. This article was originally published in the November/December 2024 issue of CPABC in Focus.
Footnotes
1 Macdonald-Laurier Institute, “An Estimated $113 Billion Gets Laundered in and Through Canada Annually: Christian Leuprecht on BNN Bloomberg,” macdonaldlaurier.ca, May 24, 2024.
2 For more information about previous AML measures at CPABC, see: “Combatting Money Laundering: Important Regulatory Updates,” CPABC in Focus, November/December 2023 (30-33).
3 They are significant for the profession in the Yukon as well. Members and firms in the Yukon are also subject to the AML compliance requirements, with the exception of the trust account oversight program.
4 Triggering activities are defined in the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations as: a) receiving or paying funds or virtual currency; b) purchasing or selling securities, real property, or immovables or business assets or entities; c) transferring funds, virtual currency, or securities by any means; or d) giving instructions in connection with any of the triggering activities.
