Designed for licensees and made available for public information, some of the hyperlinks in this guideline are not publicly available.

6. Verifying the identity and legal capacity of the represented party and their representative

The ability to detect, prevent and deter money laundering starts by correctly identifying the natural or legal person in order to review and report suspicious financial activities.

Verifying the identity of natural persons and confirming the existence of legal persons are fundamental elements of Canada’s anti-money laundering and anti-terrorist financing program. Licence holders have a key role to play in this regard since they have an obligation to make these verifications under both the Real Estate Brokerage Act (REBA) and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

It is also an important aspect of the relationship between licence holders and their clients. It allows licensees to know their clients well and to understand and assess any risk that may be associated with their operations or activities. A form called Identity verification has been designed for this purpose and made available to licence holders (specimen for consultation only; for a usable version of the form, go to the InstanetFormsTM tool).

1. Types of real estate transactions for which identity verification of the parties is required

2. Individuals whose identity must be verified

2.1 Representatives of public entities

2.2 Representatives of financial institutions

2.3 Spouses

2.4 Determine politically exposed persons (PEP) and heads of international organizations (HIO)

3. Verifying the identity of a natural person

3.1 Dual-process method

3.2 Remote identification of a natural person

4. Verifying the identity and confirming the existence of a legal person

4.1 Beneficial owners

5. Identifying the occupation of a natural person or the principal business of a legal person

6. Proofs to keep after verifying a party's identity

6.1 Monitoring frequency of the identity verification information obtained

7. Verifying and ensuring the legal capacity of the represented party or their representative

7.1 Representative of a legal person

7.2 Mandatory of the party

7.3 Third party

7.4 The liquidator of a succession

8. How to complete the identification sections in forms

 



1. Types of real estate transactions for which identity verification of the parties is required

The verification must be done by the licence holder acting as intermediary for the sale, purchase or leasing of real estate property, whether residential or commercial.

Although the PCMLTFA states that verification obligation of real estate brokers applies in the context of the purchase or sale of real estate property, the REBA does not make this distinction and extends the verification obligation to include leasing brokerage.

Thus all licence holders working in residential or commercial brokerage must verify the identity of natural persons and confirm the existence of legal persons.

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2. Individuals whose identity must be verified

Licence holders must verify the identity of all parties to a transaction, including that of the person signing a brokerage contract or transaction proposal, whether acting on their own behalf or as representative of an estate, legal person, financial institution, etc.

If a party refuses to provide the information and identification documents required for the purpose of this verification and confirmation, the licence holder cannot act for this party and must withdraw from the transaction. It is not an option to indicate in the identity and legal existence verification clauses that the party has refused to collaborate in the collection of the necessary information.

When the identity of a party has already been verified, it is not necessary to verify it again if the person is recognized in a subsequent activity that would normally require verification.

There is no set time period; it is simply about recognizing the person whose identity has already been verified. The broker must put a note in the record to the effect that the verification has already been made.

Only those parties represented by another licence holder who has already performed this identification and verification do not need to be verified again; this is the only exception.1 The licence holder must also ensure that the collaborating broker has verified the identity of the party he represents.

The PCMLTFA provides for exceptions to the requirement of verifying and confirming the existence of a legal person. This is the case where the party is a public body, a very large corporation or trust (e.g. a final institution) or a subsidiary thereof. Despite these exceptions to the PCMLTFA, the Québec legislator still requires licence holders to verify the existence of any party to a transaction. The REBA therefore makes no exception, whether for residential or commercial brokerage. Since it contains the most stringent requirements, the REBA is the legislation with which the licence holder must comply.

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2.1 Representatives of public entities

Identity verification under the PCMLTFA is not required for federal or provincial ministries, government agencies, municipalities or public hospitals designated as hospital authorities by the Minister of National Revenue under the Excise Tax Act, or any mandatary thereof.

Special cases exist where verification is required for organizations that have a public function, but that don’t come under the designation of “public body” as defined by FINTRAC.

The Public Curator of Québec is a good example of this. By nature, the Public Curator is not considered a public body by FINTRAC.

However, considering that when a representative of the Public Curator acts in this capacity in the context of a real estate transaction, he does not do so in a personal capacity, but rather within the framework of his functions under the Public Curator Act, so this person may not wish to have their identity verified using the usual documents (driver’s licence, passport, etc.).

In such a case, the licence holder must still get the representative to identify himself in accordance with FINTRAC requirements by asking for a copy of the judgment appointing the Public Curator and proof that the individual is authorized to act on behalf of this body. If the representative refuses, he could be asked to identify himself using his Public Curator employee identification. The fact that the person refused to identify themselves using generally accepted documents must be noted in the record.

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2.2 Representatives of financial institutions

Similar to the rule regarding public bodies, FINTRAC’s regulations waive the need for identity verification when the client in a real estate transaction is a legal person with net assets of at least $75 million based on its last audited balance sheet, and whose shares are publicly traded.

The major Canadian banks fall into this category, and the real estate broker does not have to confirm their existence or verify the identity of their representatives. This exemption also extends to a person, such as a bailiff, appointed to conduct a sale under court supervision further to the exercise of the institution’s hypothecary right (repossession).

However, where a credit union is a party to a transaction, its existence must be confirmed and the identity of its representatives verified, as well as the person’s ability to legally bind the credit union. This is because credit unions are entities that are separate from each other, although they belong to the same umbrella organization (i.e. the Desjardins Group). Often, they do not individually have net assets of at least $75 million, and therefore do not fall into the category of entities that do not require confirmation of their existence.

Bankruptcy trustees who are involved in a real estate transaction as part of their mandate under the Bankruptcy and Insolvency Act are also subject to identity verification. FINTRAC provides no exception to the identify verification requirement in their case.

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2.3 Spouses

When an immovable for sale is used in whole or in part as a family residence (whether or not a declaration of family residence is registered), the real estate broker must verify the identity of the non-owner spouse who will be involved in the Signatures section of the brokerage contract or the promise to purchase. In this regard, since the spouse will not be identified in the “1. Identification” section of the form, the use of the Identity Verification form is recommended. The broker must file the document demonstrating that the spouse’s identity has been verified in the record.

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2.4 Determine politically exposed persons (PEP) and heads of international organizations (HIO)

The access, influence and control wielded by politically exposed persons (PEP) and heads of international organizations (HIO) can make them vulnerable to corruption and potential targets for criminals, who could exploit the status of PEPs and HIOs and use them, whether intentionally or not, to commit money laundering or terrorism financing activity offences. PEP and HIO family members and other persons closely associated with them are also potential targets, as they can more easily avoid detection.

FINTRAC has issued the “Politically exposed persons and heads of international organizations guidance for non-account-based reporting entity sectors,” to which licence holders must refer for compliance details on how to act when the individuals are determined to be PEPs and HIOs.

This guidance document contains numerous requirements that licence holders must strictly adhere to in order to be in compliance. It can be summarized as follows: in their business dealings, licensees must take reasonable steps to determine whether a person is a PEP or HIO, a family member of a PEP or HIO, or a person closely associated with a PEP or HIO.

The same applies when receiving an amount of $100,000 or more in cash or an amount of virtual currency (VC) equivalent to $100,000 or more.

If the licence holder:

  • determines that the person is a PEP or HIO, a family member of a PEP or HIO, or a close associate of a PEP or HIO;
  • considers there to be a high risk or a money laundering or terrorist activity financing offence being committed based on the policies and procedures set out in the compliance program developed by the real estate agency or the broker acting on his own account to evaluate the risks of offences under the PCMLTFA (notably if the person is a high-risk foreign or domestic PEP);

he must within 30 days:

  • take reasonable measures to establish the source of the person’s wealth (only in a business relationship);
  • take enhanced measures, including taking additional steps to verify the person’s identity, conducting enhanced ongoing monitoring of the business relationship, and taking any other enhanced measures to mitigate the risks posed by the person (only in a business relationship);
  • take reasonable measures to establish the source of the funds or victual currency used for the transaction and the source of the person’s wealth (only for a cash or victual currency transaction);
  • ensure that a senior management member reviews the transaction (only for a cash or victual currency transaction).

Reasonable measures to collect information consist in at least one of the following activities:

  • asking the client;
  • conducting an open-source search;
  • accessing information from commercial databases.

When a licence holder determines that a person is a PEP, HIO, or a family member or close associate of one of those persons, he must keep a record containing the following information:

  • the office or position and the name of the organization or institution of the PEP or HIO;
  • the date of the determination; and
  • the source of the person’s wealth, if known.

PEP and HIO business relationship records must be kept for a period of at least five years from the date the record was created.

If senior management (if applicable) reviews a transaction in which the licence holder received an amount of $100,000 or more in cash or VC amount equivalent to $100,000 or more for which a PEP or HIO determination was made, then a record containing the following information must be kept:

  • the office or position and the name of the organization or institution of the PEP or HIO;
  • the date of the determination;
  • the source of the cash or VC used for the transaction, if known;
  • the source of the person’s wealth, if known;
  • the name of the senior management member who reviewed the transaction; and
  • the date of the review.

In the case of family members and close associates of PEPs and HIOs, you may also want to include in the record the nature of the relationship between the person and the PEP or HIO, as applicable.

For all details, licence holders should review FINTRAC’s document entitled “Politically exposed persons and heads of international organizations guidance“.

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3. Verifying the identity of a natural person

In accordance with FINTRAC’s guidance on “Methods to verify the identity of persons and entities“,2 verifying the identity of a natural person can made using a government-issued photo identification document that is authentic, valid and current, such as a driver’s licence, health card or passport. The licensee cannot require a specific identification document; the choice must be left to the party.

The authenticity of the government-issued photo identification document must be verified by the licence holder by looking at the characteristics of the original document and its security features in the presence of the person being identified. This will allow the broker to be satisfied that it is authentic as issued by the competent authority (federal, provincial, or territorial government), valid (unaltered not counterfeit), and current (not expired).

This identity verification method (in person, with valid, government-issued photo document) should be preferred, as it poses less risk compared to other methods.

It is recommended to use the form Identity verification to enter the information contained in the identity document. The use of this form is also indicated when the licence holder represents a buyer, whether not he is bound by a brokerage contract.

Note that in accordance with the Privacy Act, if the broker was able to confirm the identity in person, he cannot keep a copy of the identity document.

In collecting personal information, the licensee must apply the “necessity” rule, i.e., only information that is truly necessary (and not merely useful) may be collected and kept. Personal information may not be used after the purpose for which it was collected has been fulfilled, unless expressly provided for by law (ss. 5, 12, 14 of the Act respecting the protection of personal information in the private sector). When the licensee keeps personal information when not required by law (with the exception of remote verification), it also exposes him to greater risk of theft, loss, fraud, etc. The licensee must not keep a copy of the ID, even with the client’s authorization.

In the event that an identification document other than those specified in the contract or on the Identity verification form is provided, the licence holder must check the appropriate box and identify the document used in the space provided. Other details (document number, jurisdiction of issue, expiration) must also be entered.

If the verification of identity is done by means of a Québec driver’s licence, the number of the document to be indicated is the licence number, i.e. the one that begins with the first letter of the driver’s surname, followed by 12 digits that include the person’s date of birth (e.g.: A-XXXX-DDMMYY-XX).

This number appears at the top of the licence in bold print. It should not be confused with the 9-digit sequence (numbers and letters) at the bottom of the licence. Although it is called a “reference number” on the permit, it is not an official number for identity verification purposes.

2 Government of Canada, Financial Transactions and Reports Analysis Centre of Canada, https://www.fintrac-canafe.gc.ca/guidance-directives/client-clientele/Guide11/11-eng, accessed August 19, 2021.

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3.1 Dual-process method

The dual-process method consists in verifying the identity of a person in two stages, including two of the three categories of client information and using two official documents from reliable sources,3 to confirm that the information is consistent. More specifically, the method consists in doing any two of the following:

  • referring to information from a reliable source that includes the person’s name and address and confirming that the name and address are those of the person (e.g. invoice from a public utility such as Hydro-Québec);
  • referring to information from a reliable source that includes the person’s name and date of birth, and confirming that the name and date of birth are those of the person; or
  • referring to information that includes the person’s name and confirms that they have a deposit account, a prepaid payment product account, or a credit card or other loan account with a financial entity, and confirming that information.

The information must be valid and current and come from two different reliable sources. The two categories of information used to verify a person’s identity cannot be from the same source.

For more details, licence holders must refer to the FINTRAC guidance on this topic.4

3 A reliable information source is an information issuer or provider trusted by the licence holder. To be considered reliable, the source must be well known and have a good reputation, e.g. the Federal government.
4 Government of Canada, Financial Transactions and Reports Analysis Centre of Canada, https://www.fintrac-canafe.gc.ca/guidance-directives/client-clientele/Guide11/11-eng, accessed August 19, 2021.

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3.2 Remote identification of a natural person

In accordance with FINTRAC guidelines,5 if the person is not physically present, the licensee must verify the authenticity of the government-issued photo identification document by obtaining a digitized version of the document. Seeing the person with their government-issued photo ID in a chat session or other virtual application is not sufficient.

From the digitized version of the government-issued photo identification document, the licensee must determine if the characteristics of the document correspond to those usually found on this type of document (size, texture, character spacing, raised lettering, format, design), to its security elements (holograms, barcodes, magnetic strips, watermarks, embedded electronic chips), and distinctive markers (logos, symbols) in order to ascertain that it is an authentic document.

The best way to verify if the name and appearance of the person who provided the identity document correspond with the name and photo of the person appearing on the document received is to participate in a live video chat session with the person. You can then compare the name and features of the live video image to the name and photo on the authentic government-issued photo identification document.

FINTRAC specifies that the compliance program’s policies and procedures must describe the processes to follow to determine whether a government-issued photo identification document is authentic, and how to confirm that documents are valid and current. They must also describe the steps to use to confirm that the name and photograph are indeed those of the person. The processes to determine, on the one hand, that a government-issued photo identification document is authentic, valid and current and, on the other hand, that the name and photo match the name and appearance of the person, do not need to happen simultaneously.

In the case where the verification is done by a third party, the licence holder must enter into a written agreement with the person who will be doing the verification. The licence holder must give preference to a mandatary who is a member of a professional order or acting within the framework of a real estate brokerage regulation. The licence holder must be especially prudent if the mandatary was suggested by the person being identified.

When a third party is mandated, the broker can use the OACIQ-designed form Identity verification mandate and mandatary’s declaration.

5 Government of Canada, Financial Transactions and Reports Analysis Centre of Canada, https://www.fintrac-canafe.gc.ca/guidance-directives/client-clientele/Guide11/11-eng, accessed August 19, 2021.

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4. Verifying the identity and confirming the existence of a legal person

The identity of natural persons AND legal persons must be verified to comply with the REBA and the PCMLTFA. This requirement applies to both residential and commercial brokerage.

In its guidance document “Methods to verify the identity of persons and entities,” FINTRAC states that in order to verify the identity and confirm the existence of a legal person, the licence holder can use:

  • a certificate of incorporation;
  • a record that has to be filed annually under provincial securities legislation; or
  • the most recent version of any other record that confirms the legal person’s existence and contains its name and address and the names of its directors, such as a certificate of active corporate status, the legal person’s published annual report signed by an audit firm, or a letter or notice of assessment for the legal person from a municipal, provincial, territorial or federal government.

The reference document must be authentic, valid and current.

A legal person’s name and address and the names of its directors can be obtained from a publicly accessible database, such as a provincial or federal database like the Corporations Canada database, or a corporation search and registration service through subscription.

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4.1 Beneficial owners

The requirements regarding beneficial owners under the PCMLTFA and associated regulations apply to all reporting entities, including real estate brokerage licence holders.

Beneficial owners are the individuals who directly or indirectly own or control 25% or more of a legal person or an entity other than a legal person. Beneficial owners cannot be other legal persons, trusts or other entities. They must be the individuals who are the owners or controllers of the entity.

The FINTRAC guidance document entitled “Beneficial ownership requirements6 states:

“The concealment of beneficial ownership information is a technique used in money laundering and terrorist activity financing schemes. Identifying beneficial ownership removes the anonymity of the individuals behind the transactions and account activities, which is a key component of Canada’s anti-money laundering and anti-terrorist financing regime. By collecting beneficial ownership information and confirming its accuracy, reporting entities are performing an important step to mitigate the risk of money laundering and terrorist activity financing, and ultimately, to protect the integrity of Canada’s financial system.”

Therefore, when a licence holder identifies and verifies the legal capacity of a legal person, trust or entity, within the framework of a purchase or sale, he has an obligation to:

  1. obtain beneficial owner information;
  2. confirm the accuracy of the beneficial owner information.

In accordance with the FINTRAC guidance document on “Beneficial ownership requirements”,7 licence holders must obtain the following information regarding ownership (beneficial owners), control and structure: 

For a legal person:

  • the names of all directors;
  • the names and addresses of all persons who directly or indirectly own or control 25% or more of the shares of the entity;
  • information establishing the ownership, control and structure of the entity.

For a trust:

  • the names and addresses of all trustees and all known beneficiaries and settlors of the trust;
  • information establishing the ownership, control and structure of the trust.

For a widely held or publicly traded trust:

  • the names of all trustees;
  • the names and addresses of all persons who directly or indirectly own or control 25% or more of the units of the trust;
  • information establishing the ownership, control and structure of the trust.

For an entity other than a legal person or trust:

  • the names and addresses of all persons who directly or indirectly own or control 25% or more of the entity;
  • information establishing the ownership, control and structure of the entity.

For a not-for-profit organization:

 You must also keep a document indicating whether the entity is:

  • a charity registered with the Canada Revenue Agency under the Income Tax Act; or
  • an organization, other than one referred to above, that solicits charitable donations from the public.

Licence holders must refer to FINTRAC’s guidelines for more details regarding this, as well as the measures to be taken to confirm the accuracy of the information, both when it is initially collected and as part of the ongoing monitoring requirements for business relationships. FINTRAC’s guidelines also provide guidance on how to deal with situations where licence holders are unable to obtain, maintain or confirm the accuracy of beneficial owner information at initial collection or as part of their ongoing monitoring of business relationships. The client may be considered high-risk, and special measures may need to be put in place, including enhanced ongoing monitoring measures.

FINTRAC also states that if a licence holder determines that no person owns or controls, directly or indirectly, 25% or more of a legal person, a widely held or publicly traded trust, or an entity other than a legal person or trust, he must keep a record of the steps taken and the information obtained that led to the reaching of that conclusion.

6-7 Government of Canada, Financial Transactions and Reports Analysis Centre of Canada, https://www.fintrac-canafe.gc.ca/guidance-directives/client-clientele/bor-eng, accessed August 19, 2021.

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5. Identifying the occupation of a natural person or the principal business of a legal person

Identity verification also includes identifying the occupation of the individual or the principal business of the legal person whose existence is being verified.

FINTRAC guidelines state that licence holders must write down numerous details when the business or occupation is described, and require that the occupation or the nature of the principal business entered be as specific as possible.

For example, for a person in a managerial position, the term used to describe the occupation should specify the field of activity (hotel reservations manager, or manager of a clothing store). In the case of a consultant, the field needs to be specified, such as “IT Consultant” or “Health and Safety Consultant.”

Knowledge of the client’s occupation is important as it provides a good indication of the likely level of the client’s income. In this way, the licensee will be able to determine whether a transaction or activity is consistent with what would normally be expected of this client. In addition, identifying the nature of a company’s business will help determine if the transaction is unusual in relation to the company or the individual’s profile.

For example, a university basketball coach, a Canadian Football League coach, or a National Hockey League coach are all referred to as “coach”, but these occupations are not interchangeable; each involves several different activities and salary categories. In such a case, it is important to clarify.

Examples – Natural persons

Identification that could be considered insufficient

Identification that could be considered sufficiently specific

Unemployed
(without specifying the category of unemployment)

Student” or “On EI

“Retired”
(without specifying the previous occupation)

Retired Nurse

Engineer or Consultant or Doctor
(without specifying the specialty or area of expertise)

“Forest Engineer” or “IT Consultant” or “Family Physician”

 

Examples – Legal persons

Identification that could be considered insufficient

Identification that could be considered sufficiently specific

Construction
(without specifying the company’s principal business)

Residential Construction – New Condos

Sales
(without specifying the company’s principal business)

“Retail Clothing Sales” or “Pharmaceutical Sales”

 

Failure to accurately identify the occupation or principal business of a party to the transaction can result in fines of up to $1,000 under the PCMLTFA. Some real estate agencies have already been issued such fines by FINTRAC.

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6. Proofs to keep after verifying a party’s identity

The licence holder must keep a record of the identity information of all parties.

In addition, where the licence holder has not been able to meet the party to be identified in person, he must keep all the documentation used to verify their identity. In these special cases, the Regulation respecting brokerage requirements, professional conduct of brokers and advertising (RBR) allows licence holders to keep the documents used to verify the identity without fear of violating the Privacy Act.

If paper documents or an electronic version of a document are consulted, they must be kept or copied.

If an electronic version of a document from a publicly available database is accessed, a document containing the registration number of the legal person or entity other than a legal person, the type of document accessed and the source of the electronic version of the document must be kept.

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6.1 Monitoring frequency of the identity verification information obtained

In accordance with the PCMLTFA, from the moment a licence holder is required to verify a client’s identity for the first time, he enters into a “business relationship” with this client. Therefore he must periodically conduct “ongoing monitoring” of this business relationship, based on the “risk assessment” conducted under the “compliance program” put in place by his agency.

“Ongoing monitoring” is the process of periodically reviewing all the information obtained concerning clients with whom a business relationship is being maintained. The purpose of “ongoing monitoring” is to:

  • detect any suspicious transactions that must be reported to FINTRAC;
  • keep client identification information, beneficial ownership information, and the purpose and intended nature of the business relationship record up to date;
  • reassess the level of risk associated with client transactions and activities; and
  • determine whether transactions or activities are consistent with the client information obtained and the risk assessment of the client.

If a client poses a “high risk” of using the licence holder to facilitate money laundering, “enhanced measures” must be taken and “enhanced ongoing monitoring” must be conducted. This means that measures must be taken in addition to the mandatory measures, at a frequency appropriate to the client’s risk level, in order to mitigate that risk.

FINTRAC’s guidance document entitled “Ongoing monitoring requirements8 contains more details and relevant examples. Licence holders must review it to make sure they are compliant.

8 Government of Canada, Financial Transactions and Reports Analysis Centre of Canada, https://www.fintrac-canafe.gc.ca/guidance-directives/client-clientele/omr-eng, accessed August 19, 2021.

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7. Verifying and ensuring the legal capacity of the represented party or their representative

In accordance with section 30 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising, the licence holder must verify and ascertain the legal capacity of the represented party or the party’s representative for the proposed transaction, as well as the legal capacity of the other parties to the transaction if the latter are not represented by a licence holder.9

This is a regulatory requirement that applies to both residential and commercial brokerage.

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7.1 Representative of a legal person

Verification of the legal capacity of the representative of the represented party by the licence holder must be made via the Québec Enterprise Register, where available. The licensee must also obtain a copy of the legal person’s resolution authorizing the representative to act on its behalf. Furthermore, the identity of the representative must be verified to ensure that it corresponds to the person authorized to act by resolution. The file must contain a copy of the statement of information published in the Enterprise Register and a copy of the resolution.

The Québec legislator does not provide any exception in either residential or commercial matters. In both case, the identity and the legal capacity of the represented party or of its representative must be verified by the real estate broker.

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7.2 Mandatary of the party

Where a party (seller or buyer) gives a power of attorney to a mandatary to transact business on its behalf, the licence holder must verify what actions are authorized under the power of attorney and retain a copy of this document in his record. Absent a written power of attorney signed by the parties, the third party cannot act on behalf of the party.

In addition, the identity of the client (mandator) and the mandatary must be verified. The licence holder must use caution when a transaction involves a mandatary, especially if the latter appears to have no connection with the party. Transactions with mandataries pose a greater risk of money laundering, and licence holders must act accordingly.

It is important to note that a power of attorney cannot be used to represent a person declared incapable. Only a homologated protection mandate can be used.

Protective supervision

When a party is under protective supervision, the licensee must follow the instructions of the authorized legal representative. To do this, the licensee must first ensure that the representative is acting under an homologated protection mandate. If in doubt, the licensee must ask his agency executive officer or consult a legal counsel.

If the protection mandate was homologated, the licensee must obtain a copy thereof to determine who has the power to sell, buy or lease the immovable.
If not, the licensee must refer the client to a legal counsel to obtain an homologation of the protection mandate. He cannot intervene until the protection mandate is homologated.

Good to know!  For more information on this subject, see the "Protected adults" section of the Professional practices guide – The real estate broker’s practice and the law.

 

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7.3 Third parties

According to FINTRAC’s guidance document entitled “Third party determination requirements”,10 the Financial Action Task Force (FATF), the Egmont Group and other anti-money laundering and anti-terrorist financing authoritative bodies have observed that third parties have been used in several money laundering and terrorist financing cases. It is not uncommon for criminals to use third parties as a method to evade detection by distancing themselves from the proceeds of crime.”

FINTRAC has therefore set out guidance explaining third party determination requirements under the PCMLTFA and association regulations.

A third party is a person or entity that instructs another person or entity acting on their behalf on how to proceed with the money, or to conduct a particular transaction or activity.

The nature of the relationship that exists between the third party and the person can be, for example, accountant, mandatary, lawyer, borrower, broker, customer, employee, friend or relative.

The licence holder must take reasonable measures to establish whether a third party has given instructions to his client to carry out an activity or transaction. Criminals often use third parties to avoid detection by distancing themselves from the proceeds of crime.

Reasonable measures include asking a client if they are acting at the instruction of another person, or to retrieve this information where it is already in the broker’s records.

When it is established that the person is acting on behalf of a third party, the latter’s identity must be verified and the following information entered in the record:

  • the name, address and occupation or the third party or the nature of their principal business;
  • the date of birth, if the third party is a natural person;
  • the incorporation number and the jurisdiction of issue, if the third party is a legal person;
  • the nature of the relationship between the client and the third party.

The documents concerning a third-party determination must be kept for a period of at least five years from the date the record was created.

If a third-party determination cannot be made but there are reasonable grounds to suspect that a third party is involved, a record must be taken of:

  • the measures taken to determine whether the client was acting on behalf of a third party;
  • if applicable, the reasons why the determination could not be made;
  • the date at which the measures were taken.

For more details, licence holders must review FINTRAC’s guidance document entitled “Third party determination requirements”.11

10-11 Government of Canada, Financial Transactions and Reports Analysis Centre of Canada, https://www.fintrac-canafe.gc.ca/guidance-directives/client-clientele/tpdr-eng, accessed August 19, 2021.

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7.4 The liquidator of a succession

When the owner or one of the owners of the immovable covered by a brokerage contract is deceased, the succession of this person will then be involved in the transaction as a seller.       

Before entering into the brokerage contract, the broker must obtain, review and keep the following documents:

  • The will (a certified copy or a certified extract confirming the liquidator’s powers of simple or full administration);
  • The declaration of transmission (unless there is a particular situation) : The best practice is to have it available at the time of signing the brokerage contract. However, the declaration of transmission may not be available at that time. In this case, it is possible to enter into a brokerage contract if the broker has in his possession a copy or certified extract of the will and the will search certificate and has consulted the client’s notary;
  • The will search certificate (necessary only if the declaration of transmission is not available when the brokerage contract is taken up).

The broker must inform the parties to the transaction that the declaration of transmission is required at the time the deed of sale is signed and that obtaining this declaration may cause delays. He will have to take this into account during the negotiations, especially as to the date the deed of sale is signed.

The broker must keep proof of the verification made with the notary.

The liquidator can be named in the deceased person’s will. If the will does not appoint a liquidator or if the deceased person did not make a will, the heirs will automatically become liquidators. In this case, the heirs can appoint a liquidator by a majority vote, hence the importance of carefully analyzing the above-mentioned documents and ensuring that there is a consensus among the heirs if the liquidator is not appointed. In such a situation, the broker must recommend that his client(s) seek advice from a notary on the proper course of action.

The broker must read the documents and check whether the liquidator has full or simple administration.

  • Full administration empowers the liquidator to sign all the documents related to the sale of the property on behalf of and for the estate.
  • Simple administration does not allow the liquidator to make decisions alone concerning the estate and the sale of the property. The broker must then obtain the signature of all the heirs or a power of attorney from them in favour of the liquidator or another trustworthy person.

When one of the sellers passes away during the brokerage contract, the broker cannot have transaction documents signed, terminate the contract, present promises to purchase or authorize visits. In this situation, it is good practice to send a letter signed by the agency’s executive officer to the information listing service stating the situation and requesting that the property be temporarily taken off the market.

If in doubt, the broker should consult his or her agency executive officer and advise the client to seek legal advice. Remember that brokers must not engage in transactions outside of their field of expertise without seeking the necessary assistance, including from other licensees who have the required skills.

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8. How to complete the identification sections in forms

For identity verification purposes, different sections are provided on the forms to record the verified information. The scenarios below specify what the licensee must do in various situations.

Brokerage contract (sale, purchase or lease)
Sections 1.1 and 1.2

Scenario 1

A broker represents a seller who has given power of attorney to a member of his family to sell his immovable.

Seller owner: Jean Tremblay, Writer
Mandatary: his sister Anne Tremblay, Photographer


What the broker must do:

  • Enter the contact information of the seller (Jean Tremblay) and his representative (Anne Tremblay) in section 1;
  • Identify the representative (Anne Tremblay) in section 1.1 and complete section 1.2;
  • In section 1.1, specify the date on which he checked the representative’s identity, the type and number of the document used, province or territory and country of issuance, expiry date, as well as the date of birth and occupation of the representative;
  • In section 1.2, indicate the nature of the relationship between the seller and his representative, which in this case is “mandatary” (we’re not asking for the family relationship), as well as the date of birth and occupation of the seller.

Identity verification is done the same way if the broker is representing a buyer who has signed a brokerage contract to purchase. If he finds a property for this buyer and the seller of the property in question is not represented (FSBO), the broker must verify the identity of the seller. For this purpose, the Identity Verification form is available (specimen for consultation only; for a usable version of the form, go to InstanetFormsTM tool).



Scenario 2

A broker represents a selling client, a legal person.

The legal person: Les Instruments Crescendo Inc.
The representative of the legal person: Dean Moriarty, Director and Majority Shareholder


What the broker must do:

  • Enter the contact information of the seller (Les Instruments Crescendo Inc) and his representative (Dean Moriarty) in section 1;
  • Complete sections 1.1 and 1.2 of the brokerage contract, identifying Mr. Moriarty as representative, and specifying the main activity of the enterprise.
  • In section 1.1, specify the date on which he checked the representative’s identity, the type and number of the document used, province or territory and country of issuance, expiry date, as well as the occupation of the representative;

Scenario 3

A broker represents a selling client in the context of an estate settlement.

Deceased person: Ms. Héléna Corfou
Liquidator of the succession: Mr. Paul Gascon


What the broker must do:

  • Complete section 1 of the brokerage contract by identifying the seller: Succession of late Ms. Héléna Corfou, Represented by Mr. Paul Gascon and the contact information of the representative of the deceased person;
  • Complete section 1.1 with relevant information about the liquidator(s) to check their identity
  • Complete section 1.2 with the mention “liquidator of the estate,” leaving the seller's information section blank.

The broker must verify and ensure whether the liquidators have simple or full administration of the property. Because of the specifics of the Law of Succession, brokers must take into account their limits and should not hesitate to consult a notary if necessary. Before moving forward, the broker must obtain and keep the following documents:

  • The will (a certified copy or a certified extract confirming the liquidator’s powers of simple or full administration);
  • The declaration of transmission (unless there is a particular situation);
  • The will search certificate (necessary only if the declaration of transmission is not available when the brokerage contract is taken up).

Promise to purchase or lease
Recommended form Identity verification

Scenario A

A broker who is not bound by a brokerage contract  (purchase or lease).

Buyer 1: Abel Turandot, Civil Engineer
Buyer 2: Paul Curie, Health & Safety Consultant


What the broker must do:

  • Complete section 2 of the recommended Identity verification form by identifying buyers (Mr. Turandot and Mr. Curie)
  • In section 2.1, enter all the details required for both buyers
  • In section 2.2, specify Mr. Turandot and Mr. Curie’s occupations; writing simply “Consultant” in Mr. Curie’s case would be insufficient.

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Last updated on: October 30, 2023
Numéro d'article: 208777