Canadian Securities Watchdogs May Reject IDA Money Laundering Rules

by Mike Godfrey, Tax-News.com, Washington

27 February 2002

Several Canadian investment watchdogs look likely to reject anti-money laundering proposals put forward by the Investment Dealers Association of Canada (IDA), it was revealed recently.

Released in the wake of the September 11th terrorist attacks, the new rules suggested by the self-regulatory body to crack down on the use of secret offshore accounts have been criticised as 'not strict enough', and there are signs that securities watchdogs in British Columbia, Alberta, Ontario and Quebec will resist, or even reject adoption of the new rules.

'There is resistance to the proposal,' an industry official was quoted in the Canadian Financial Post as observing. 'We'd like to see it stronger. Right now it doesn't add a lot to the current situation.'

The amendments to its 'know your customer' rules proposed by the IDA last fall were intended to better define when brokerage firms need to identify the beneficial owners of accounts, and to put in place procedures to deal with the vulnerability of brokerage accounts to money laundering activity.

Late last year, Ontario Securities Commission Manager of Investigation, Brian Butler, outlined the concerns of the four provincial securities regulators. Speaking at a presentation in the Bahamas in December, Mr Butler commented that the proposed rules were clearly 'not intended to pierce every corporate veil', as the IDA proposals only require members to 'attempt to ascertain' the beneficial owners of more than 20% of a company.

He also complained that the IDA rules fail to clarify exactly how brokers should fulfill their 'know your customer' obligations, as they do not stipulate when dealers should refuse to open an account for a client who 'appears to be of poor reputation'.

However, speaking to the Canadian media this week, the Senior Vice President of member regulation at the IDA defended the amendments, revealing that the Association would likely comply with international regulatory standards on beneficial ownership disclosure. 'What we have proposed is certainly more stringent than what we had before,' he observed.

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