ABW Brokers FINTRAC Obligations

Know Your Client (KYC)
When dealing with a client, brokers and agents must follow the required Know Your Client (KYC) procedures. This helps identify and verify who the client is and ensures an understanding of the client’s background, the purpose of the mortgage, and the expected transactional activity.


The KYC process includes establishing the client’s business or personal rationale for the mortgage, source of funds, countries of operation or connection (including any high-risk jurisdictions), business or self-employed ownership structure, identification of beneficial owners, and the involvement of any third parties.


During the KYC phase of a client relationship, you should determine the client’s ownership structure, identify and verify any beneficial owners, identify the source of wealth and funds, and screen for sanctions links and negative news.


Red flags include the lack of transparency inherent in opaque business structures such as those with bearer shares, the lack of transparency inherent in the use of offshore accounts, and also rapid and unexplained growth and profits. All of these factors could turn out to be innocent, but they require further investigation.



Client Identity Verification
A clients identity must be verified using an approved FINTRAC method at the start of the business relationship. This is when an application is taken or a consent is signed, whichever comes first. Commonly used methods include in-person verification method, credit bureau method and the dual-process method.


The chosen verification method must be clearly indicated in the Risk Assessment section of the Velocity file so it can be communicated to the compliance team. Each individual client involved in the transaction must have their identity verified to ensure compliance with the PCMLTFA and FINTRAC requirements and to reduce the risk of fraud or money laundering.



Politically Exposed Persons (PEP) and HIO Searches

PEP and HIO searches are conducted to determine whether a client, beneficial owner, or related party is a politically exposed person or a head of an international organization, which may increase the risk of corruption, bribery, or money laundering. This includes domestic and foreign PEPs, their family members, and close associates.


At A Better Way Mortgage Group, PEP and HIO screening is completed through a client-signed PEP declaration form within the Velocity file. Identifying a PEP or HIO does not prohibit proceeding with a transaction, but it does require enhanced due diligence, appropriate escalation, and ongoing monitoring in accordance with PCMLTFA and FINTRAC requirements.



Sanctions Screening
Sanctions screening is the process of checking clients and related parties against applicable sanctions and terrorist listings to ensure the brokerage does not engage in prohibited transactions. This includes screening borrowers, co-borrowers, guarantors, beneficial owners, and any relevant third parties.


At A Better Way Mortgage Group, sanctions screening is completed directly within the Velocity file. This process helps confirm compliance with Canadian sanctions laws and PCMLTFA requirements, reduces the risk of facilitating terrorist financing, and ensures appropriate escalation if a potential match is identified.



Risk Assessment
A client risk assessment is the process used to identify and evaluate the potential risk of money laundering or terrorist financing associated with a client and their mortgage transaction. It considers factors such as the client’s background, source of funds, geographic connections, High Risk Indursties and the mortgage products or services being requested.


At A Better Way Mortgage Group, brokers and agents complete the client risk assessment directly within the Velocity file. This includes assigning a risk rating and documenting the reasoning in the conclusion section that supports that rating. The risk assessment determines the level of customer due diligence required, including whether enhanced due diligence measures are necessary, and provides a clear, auditable record to support compliance with the PCMLTFA and FINTRAC requirements.



Beneficial Ownership
Beneficial owners are the natural persons who directly or indirectly own or control 25% or more of an entity. For AML and ATF purposes, beneficial owners must always be natural persons, not corporations or other entities.


Licensees must:

  • Identify and document all natural persons who directly or indirectly own or control 25% or more of the entity
  • Trace ownership through all layers of ownership until the ultimate beneficial owners or controlling individuals are identified
  • Understand and document the commercial rationale for entities with complex or multi-layered ownership structures
  • Escalate the application to the AML Officer if the ownership structure or business rationale is unclear, before submitting the mortgage to a lender


When official ownership documentation is not available, such as in the case of a sole proprietorship, licensees may rely on a signed certification, attestation, or statement from an authorized individual. A completed and executed ABW Beneficial Ownership Form must be saved on file for all applicable entity clients.



 Third Party Determination
A third-party transaction occurs when a person or entity instructs another individual or business (the applicant) to apply for or carry out a mortgage transaction on their behalf. This determination focuses on who is giving the instructions, not who owns or benefits from the property or who completes the transaction.


At A Better Way Mortgage Group, third-party determination is completed through each Mortgage Broker/Agent asking each client if they are acting on behalf of or under the direction of another individual, entity, or organization in this transaction?


To confirm this inquiry was made with each client on the file, the Licensee must complete the "Yes/No" prompt in the bottom section of the Velocity Risk Assessment.


This comfirms to the compliance team and FINTRAC that the Broker/Agent did complete this step for all clients.


To mitigate third-party risk, licensees must:

  • Ensure clients understand what constitutes a third party under applicable legislation
  • Conduct a third-party determination for every mortgage transaction, including repeat transactions for the same borrower
  • Report any suspected or confirmed third-party involvement to the Compliance Officer ASAP. compliance@abwmortgage.ca
  • Wait for further instructions from the compliance team before proceeding with the transaction


Some examples of Third-Party Transactions

A mortgage broker may be dealing with a third-party transaction when:

  • A family member provides instructions on how the mortgage should be structured or funded.
  • An accountant, lawyer, or business associate directs the transaction on behalf of the borrower.
  • A parent instructs the broker on mortgage details for an adult child purchasing a property.
  • An investor uses a nominee or another individual to apply for a mortgage while controlling the transaction.




Reporting and Escalation

All questions, concerns, and escalations related to anti–money laundering and terrorist financing must be directed to the compliance team. You should contact the compliance team at compliance@abwmortgage.ca for guidance, to report suspicious activity, or to escalate any AML-related issues.