Guideline 9: Alternative to Large Cash Transaction Reports to FINTRAC

February 2004

This new guideline replaces the information about the alternative to large cash transaction reports previously published as part of Guideline 7A: Submitting Large Cash Transaction Reports to FINTRAC Electronically.

The changes made since the text was published in Guideline 7A in March 2003 are indicated in the right margin of the PDF version.

Table of Contents

1. General
2. Can You Choose the Alternative to Large Cash Transaction Reports?

   2.1	Which Clients Can You Consider?
   2.2	How to Choose the Alternative to Large Cash Transaction Reports

3. Report to FINTRAC About the Business Client

   3.1	If You Use Batch Transmission Software.
   3.2	If You Do Not Use Batch Transmission Software.
   3.3	Report Certain Changes About the Business Client
   3.4	Annual Verification.

4. List to be maintained.
5. Comments?
6. How to Contact FINTRAC.

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1. General

If you are a financial entity (such as a bank, credit union, caisse populaire, trust and loan company or an agent of the Crown that accepts deposit liabilities), you have to report large cash transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). The same is true for other reporting entities, such as securities dealers, money services businesses, etc. However, as a financial entity, you may be able to choose an alternative to sending large cash transaction reports about transactions for certain of your clients that are corporations. This is not available to any other reporting person or entity.

If you are a financial entity, this guideline has been prepared by FINTRAC to help you submit alternative to large cash transaction reports. It explains what criteria have to be met before you can choose the alternative to large cash transaction reports and what is involved in making this choice. It also explains what type of alternative to large cash transaction reports have to be sent to FINTRAC, and what information has to be included in these reports.

This guideline uses plain language to explain the most common reporting situations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) as well as the related Regulations. It is provided as general information only. It is not legal advice, and is not intended to replace the Act and Regulations. For more information about money laundering, terrorist financing or other requirements under the Act and Regulations, see the guidelines in this series:

• Guideline 1 : Backgrounder explains money laundering, terrorist financing, and their international nature. It also provides an outline of the legislative requirements as well as an overview of FINTRAC's mandate and responsibilities.
• Guideline 2 : Suspicious Transactions explains how to report a suspicious transaction. It also provides guidance on how to identify a suspicious transaction, including general and industry-specific indicators that may help when conducting or evaluating transactions.
• Guideline 3 : Submitting Suspicious Transaction Reports to FINTRAC explains when and how to submit suspicious transaction reports. There are two different versions of Guideline 3, by reporting method.
• Guideline 4 : Implementation of a Compliance Regime explains the requirement for reporting persons and entities to implement a regime to ensure compliance with their obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated Regulations.
• Guideline 5 : Submitting Terrorist Property Reports to FINTRAC explains when and how to submit terrorist property reports.
• Guideline 6 : Record Keeping and Client Identification explains the requirement for reporting persons and entities to identify their clients and keep records. There are eight different versions of Guideline 6, by sector.
• Guideline 7 : Submitting Large Cash Transaction Reports to FINTRAC explains when and how to submit large cash transaction reports. There are two different versions of Guideline 7, by reporting method.
• Guideline 8 : Submitting Electronic Funds Transfer Reports to FINTRAC explains when and how to submit EFT reports.
• Guideline 9 : Submitting Alternative to Large Cash Transaction Reports to FINTRAC explains when and how financial entities can choose the alternative to large cash transaction reports. This is only applicable to financial entities.

If you need more help after you read this or other guidelines, call FINTRACs national toll-free enquiries line at 1-866-346-8722.

Throughout these guidelines, several references are provided to additional information that may be available on external Web sites. FINTRAC is not responsible for the accuracy or reliability of the information contained on those external Web sites.

Throughout this guideline, any references to dollar amounts (such as $10,000) refer to the amount in Canadian dollars or its equivalent in foreign currency.

Furthermore, all references to cash mean money in circulation in any country (bank notes or coins). In this context, cash does not include cheques, money orders or other similar negotiable instruments.

2. Can You Choose the Alternative to Large Cash Transaction Reports?

2.1 Which Clients Can You Consider?

If you are a financial entity you can choose the alternative to large cash transaction reports regarding a clients business transactions that would otherwise require such a report if all of the following conditions are met:

• your client is a corporation that carries on business within those types of businesses that can be considered for purposes of the alternative to large cash transaction reports, as described in Appendix 1. You cannot choose the alternative to large cash transaction reports for any client carrying on a pawnbroking business, or for any client whose principal business is the sale of vehicles, vessels, farm machinery, aircraft, mobile homes, jewellery, precious gems or metals, antiquities or art. There are some other exclusions, and these are noted in Appendix 1;
• your client has had an account with you for at least 24 months or, immediately before opening an account with you, your client has had an account with another financial entity for at least 24 months. This means that a client who had an account for 12 months with you and 12 months with another financial entity would not meet this condition;
• you have records to show that your client deposited $10,000 or more in cash into that account at least twice weekly, on average, for the preceding 12 months. This means your client has to have made at least 104 such deposits over the preceding 12 months;
• your clients cash deposits are consistent with the usual practice of this business; and
• you have taken reasonable measures to determine the source of the cash for those deposits.

Once you have determined that all of the conditions outlined above are met for any one of the corporations business accounts, you can choose the alternative to large cash transaction reports for that business. This would apply to all the accounts of that business.

If your client is a corporation with more than one business for income tax purposes, the alternative to large cash transaction reports has to be considered separately for each distinct business. As explained above, you cannot choose the alternative to large cash transaction reports if any of the corporations businesses relate to pawnbroking, or if the corporations principal business is the sale of vehicles, vessels, farm machinery, aircraft, mobile homes, jewellery, precious gems or metals, antiquities or art.

If several corporations operate the same businesses, each corporation has to be considered separately. For example, if you have accounts with a corporation that operates a retail store and you also have accounts with other corporations who have bought franchises of that retail store, you would have to consider each corporation separately for purposes of the alternative to large cash transactions reports.

For additional information to help you determine whether you can choose the alternative to large cash transaction reports for a client, see the following appendices:

• Appendix 3 presents the conditions in a question-based flow.
• Appendix 4 outlines examples of situations for clients for whom you could or could not consider the alternative to large cash transaction reports.

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2.2 How to Choose the Alternative to Large Cash Transaction Reports

If all the conditions listed in Section 2.1 are met and you choose the alternative to large cash transaction reports for a client, you have to do the following:

• send a report to FINTRAC about the business client for whom you are making this choice (see Section 3);
• report certain changes about the business client to FINTRAC (see Section 3);
• verify annually that conditions are met for each client and report this to FINTRAC (see Section 3); and
• maintain a list with the name and address of each client for whom you have chosen not to report large cash transactions (see Section 4).

Once you become aware that any of the conditions are no longer being met for a client for whom you had chosen the alternative to large cash transaction reports, as of the time you become aware, you must resume reporting large cash transactions conducted for that client.

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3. Report to FINTRAC About the Business Client

If all the conditions listed in Section 2.1 are met and you choose the alternative to large cash transaction reports for a client, you have to send a report to FINTRAC with information about the business client for whom you are choosing this. This is to provide information about the client, including name and address, nature of the clients business, incorporation number and incorporation jurisdiction, as well as the total monetary value and number of cash deposits for the clients business over the preceding 12 months.

Until this report, called the Financial Entity Business Client Report, is sent to FINTRAC, you have to report any large cash transactions for the client as explained in Guideline 7: Submitting Large Cash Transaction Reports to FINTRAC.

If you use the batch file transfer mechanism for sending reports to FINTRAC, read Section 3.1 to find out how to make this report. If you do not use the batch file transfer mechanism read section 3.2.

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3.1 If You Use Batch Transmission Software

If you use the batch file transfer reporting mechanism, use your batch transmission software (ViaSafe) to submit your Financial Entity Business Client Report to FINTRAC. You will have to notify FINTRAC that you will use your batch transmission software to send this type of report. If you do not already transmit reports this way, see Section 3.2.

For your first Financial Entity Business Client Report, follow these steps:

If you have sent a Financial Entity Business Client Report before and you need to add new business clients, start with the spreadsheet you saved in its default format, as explained in Step 3 above. Indicate that this is an update to a previously submitted report in the area of the report above Part A. Also, enter A in the Update indicator column to the left of field B1 for each business client to be added. Once you have finished adding the clients to your spreadsheet, follow Steps 3 to 5 above to submit the updated report.

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3.2 If You Do Not Use Batch Transmission Software

If you do not use the batch file transfer reporting mechanism, you can submit your Financial Entity Business Client Report to FINTRAC by fax. Once you have completed the spreadsheet, you should save it for future reference and updating.

For your first Financial Entity Business Client Report, follow these steps: 

If you have sent a Financial Entity Business Client Report before and you need to add new business clients, start with the spreadsheet you saved, as explained in Step 3 above. Indicate that this is an update to a previously submitted report in the area above Part A. Also, enter A in the Update indicator column to the left of field B1 for each new business client to be added. Once you have finished adding the information for each one to your spreadsheet, follow Steps 3 and 4 above to submit the updated report.

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3.3 Report Certain Changes About the Business Client

Once the information about business clients described above has been sent to FINTRAC, if there are any changes to the clients name or address, the nature of the clients business or the business incorporation number, you have to report the change to FINTRAC. This has to be done within 15 calendar days after the change is made.

In this context, a change in the nature of the clients business includes anything that would cause you to revise the description of the nature of the business or the North American Industry Classification System (NAICS) code indicated for the client in your financial entity business client report. For more information about NAICS, refer to Appendix 1.

If there is a change to the nature of the business, you need to ensure the business is still within those types of businesses described as eligible in Appendix 1.

To report these types of changes to FINTRAC, make the change required to your saved spreadsheet described in Step 3 of Section 3.1 or 3.2. Indicate that this is an update to a previously submitted report by entering U in the area above Part A. Also, enter C in the Update Indicator column to the left of field B1 for each business whose information is being changed. Do not complete Part D, as this is only applicable to the annual verification explained in Section 3.4.

Re-save the spreadsheet and submit it in its entirety to FINTRAC, according to the batch transmission or fax instructions that apply to you. Repeat this process any time you have to report a change.

For more information about this report, see Appendix 2.

If you discover that a client no longer meets the criteria described in Section 2.1, you must remove them from your alternative to large cash reports list. You do not have to report to FINTRAC that you have removed a client from your list. However, you must resume reporting any large cash transactions conducted for that client after you discovered that the criteria are no longer met. Delete the information about any removed clients from the spreadsheet before you send your next update or your next annual verification to FINTRAC.

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3.4 Annual Verification

Once you have chosen the alternative to large cash transaction reports, you have to verify at least once every 12 months that all the conditions listed in Section 2.1 are still met for each client. Once this is done, you have to complete Part D of your Financial Entity Business Client Report and send it to FINTRAC to provide the name of your senior officer who has confirmed that the conditions are still being met for a particular client.

To do this, you will need to start with your latest saved copy of your spreadsheet (as described in Step 3 of Section 3.1 or 3.2 or in Section 3.3). Indicate that this is an annual verification by entering a V in the area above Part A. Also, enter V in the Update indicator column to the left of field B1 for each business whose information is being verified and complete Part D for each one.

Please do not include any new business clients and do not make any changes to information in Parts A, B or C on the report at the time of your annual verification. If you need to add new business clients or make changes, do so by submitting the related information as an update as described in Section 3.3.

Re-save the spreadsheet and submit it in its entirety to FINTRAC, according to the batch transmission or fax instructions that apply to you. Repeat this process any time you have to report annual verification for a business client.

While conducting your annual verification for a particular client, if you discover that the client no longer meets the criteria described in Section 2.1, delete the information about that client from the spreadsheet before you send your annual verification to FINTRAC. As explained above, once you become aware that the criteria are no longer met for a client, you must resume reporting any large cash transactions conducted for that client as of that time.

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4. List to be maintained

In addition to the information you send to FINTRAC in the reports described in Section 3, you must maintain a list with the name and address of each client for whom you have chosen this alternative to large cash transaction report.

You can keep this list in paper form, or in a machine-readable or electronic form, as long as a paper copy can be readily produced. You can use your copy of the spreadsheet for this purpose.

The reports that you send to FINTRAC are not to seek approval for the clients on your alternative to large cash transaction list. You are responsible for making sure that each client meets the criteria described in Section 2.1. If you discover that any clients on your list no longer meet these criteria, you must remove them from your list immediately and report large cash transactions for those clients.

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5. Comments

These guidelines will be reviewed on a periodic basis. If you have any comments or suggestions to help improve them, please send your comments to the mailing address provided below or by email to guidelines@fintrac.gc.ca.

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6. How to Contact FINTRAC

For further information on FINTRAC and its activities, and report submission, please go to FINTRACs Web site (http://www.fintrac.gc.ca) or contact FINTRAC:

Financial Transactions and Reports Analysis Centre of Canada
234 Laurier Avenue West, 24^th floor
Ottawa, Ontario
Canada K1P 1H7

Toll-free: 1-866-346-8722

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