Client Identification Requirements for Real Estate Agents

Posted on: Tuesday, March 26th, 2013

As a real estate agent you are subject to abide by certain legislation and regulations with respect to confirming your client/customers identity and personal identification information. Since June 23, 2008, real estate agents have been required to collect personal identification information from buyers and sellers, and to complete a report on all funds that are received throughout the course of the transaction, even those less than $10,000.

The main requirements that are applicable to real estate agents under this legislation include:

- documentation of personal information and proof of identity of clients in each and every transaction, including occupation (acceptable forms of identification verification include a government issued identification document such as a drivers licence, passport, or residency card);

- if the client is located in another city, province or country, and a face-to-face meeting is not possible, realtors are required to use an agent in that city, province or country, in order to identify third parties and verify the accuracy of their personal information;

- when a buyer/ seller is conducting a private transaction, in which a real estate agent is representing the other party involved, the realtor is required by law to verify the private buyer/seller’s information;

- if there is a third party involved in the transaction, a realtor must obtain their identification information;

- any time that funds are deposited or exchanged in a transaction a realtor must complete a report outlining the amount that was received and how it was obtained, no matter what the monetary amount is; and

- in relation to clients who are corporations, realtors must obtain the corporation’s confirmation of existence, the corporation name, the corporation address, the names of the directors, and any other relevant corporate documentation in order to complete an accurate Client Information Record.

All of these requirements are to be met for every single transaction that a realtor is involved with, whether they are representing the clients directly or acting for the other side involved in a private transaction. Realtors are required by law to keep this information on record for a period of five years at their brokerage office. This information is collected only to comply with the federal legislation, and is not to be used in any commercial way or given out to anyone else.

If you are an agent acting on behalf of a broker, the broker has the sole responsibility for everything except suspicious transaction reporting, which is the responsibility of both the agent and the broker. The broker is responsible for keeping any records that were retained for the broker by an employee or independent contractor acting on their behalf. This means that the real estate agent is required to leave all records in relation to the transactions that they conducted while working with that brokerage at the brokerage office. The broker is then responsible for keeping the records for five years, and the real estate agent is not required to keep those records once the relationship with the brokerage has been terminated.

If a real estate agent is unable to comply with any of these requirements and adequately establish the identity of the client in accordance with the prescribed measures, they are legally not allowed to open an account/file for that client. It is important to note that any breaches of this legislation may be subject to certain penalties under the Criminal Code of Canada. The criminal penalties that apply may include the following:

- Failure to report suspicious transactions: up to $2 million and/or 5 years imprisonment.

- Failure to report a large cash transaction or an electronic funds transfer: up to $500,000 for the first offence, $1 million for subsequent offences.

- Failure to meet record keeping requirements: up to $500,000 and/or 5 years imprisonment.

- Failure to provide assistance or provide information during compliance examination: up to $500,000 and/or 5 years imprisonment.

- Disclosing the fact that a suspicious transaction report was made, or disclosing the contents of such a report, with the intent to prejudice a criminal investigation: up to 2 years imprisonment.

If you are interested in obtaining more information on this topic you can refer to a guide that was put out by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) in June 2010. The document, Guideline 6B: Record Keeping and Client Identification for Real Estate, contains important information on what records are to be kept, how records are to be stored, when and how clients are to be identified, and the various penalties associated with non-compliance. This guide can be accessed by clicking here.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

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