Client identification is the foundation of your AML obligations

Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), FINTRAC requires life insurance companies, brokers and agents to report certain transactions, including suspicious transactions.

Effective anti-money laundering (AML) compliance starts with knowing who you are doing business with. Strong Know Your Client (KYC) practices help you confirm your client’s identity, understand the purpose of the insurance transaction, keep accurate records, and identify any activity that does not seem right.

Why client identification matters

Verifying a client’s identity helps you confirm that the person is who they say they are and that the transaction makes sense. It also helps you recognize when something does not seem right, such as unusual payment activity, inconsistent information, or if the client or entity is reluctant to provide required details. Complete and accurate client identification supports FINTRAC reporting and helps protect you, your clients, and the financial system from misuse. Taking the time to verify identity properly can also reduce your exposure to compliance issues, legal risk, reputational harm and potential penalties.

When you must verify identity

FINTRAC’s client identification guidance for the life insurance industry sets out specific triggers. You must verify the identity of a person or entity when you encounter:

• Large cash transactions – Receiving the equivalent of $10,000 CAD or more in cash in a single transaction or within a 24-hour period
• Large virtual currency transactions –  Receiving virtual currency equivalent to $10,000 CAD or more within a 24-hour period
• Suspicious transactions – When you have reasonable grounds to suspect a transaction, including an attempted transaction, is related to money laundering or terrorist financing.
• Information records and certain group plans – Where regulations require a record to be kept

Because cash is uncommon in life insurance, a $10,000 cash payment toward a policy or annuity should prompt closer review.

Looking behind the policy: Beneficial ownership

When your client is a corporation or other entity, you must identify the real people who ultimately own or control it. Criminals often hide illicit funds through complex ownership structures, shell companies or third-party intermediaries. Rigorously asking questions, verifying the identity of the corporation and reviewing its directors and officers, and authenticating client IDs allows the trace of individuals who ultimately control or benefit from the assets.

Beneficial ownership checks help prevent shell companies, layered ownership structures, or third-party intermediaries from being used to hide illicit funds.

Higher-risk clients: PEP and HIO screening

Some clients carry higher risk because of their position. Politically exposed persons (PEPs), heads of international organizations (HIOs), and their family members or close associates may be more exposed to bribery, corruption or illicit funds.

FINTRAC requires reasonable measures to make a PEP, HIO, family member, or close associate determination when you receive a lump-sum payment of $100,000 or more in funds or virtual currency for an annuity or life insurance policy, and in certain remittance situations. If a client is high-risk, apply enhanced due diligence, including source-of-funds checks, senior management review, and closer monitoring.

Authenticating the documents

Verification is only effective if the identity document is authentic. Fraudsters often use forged or altered IDs to conceal their true identity and facilitate money laundering or other financial crimes. Check security features, validate the information, and use available tools to detect signs of tampering or fraud.

Identity is ongoing, not one-and-done

Client identification is not a one-time obligation—it is an ongoing process that ensures continued compliance with AML regulations. Clients may move, change names, restructure their affairs, or shift risk profiles. Regular updates help keep records accurate and support ongoing monitoring.

Verifying clients you never meet in person

As more business moves online, remote verification must be secure and reliable. Digital tools such as biometric checks, document scanning, and encrypted data transfer can help confirm identity, but they should be paired with strict authentication standards.

Your reporting obligations

Strong identification supports timely, accurate reporting. As a life insurance advisor, you must file:

• Unusual Activity Reports (UARs) – As soon as practicable after you establish reasonable grounds to suspect money laundering or terrorist financing, including attempted transactions. There is no dollar threshold. To submit a UAR, use the reporting tool in webcappow.
• Terrorist Property Reports – When you know property is owned or controlled by a terrorist or terrorist group. To submit a Terrorist Property Report, submit a UAR through the reporting tool in webcappow.

The bottom line

For advisors, AML compliance is part of protecting clients, your business, and the financial system. Strong identity verification reduces exposure to financial crime, supports accurate FINTRAC reporting, and protects the trust your business is built on. When in doubt, consult FINTRAC guidance or your compliance officer.

To help you complete the key checks when working with clients, download and save our AML checklist.