CANADA Law and Practice Contributed by: Darin Renton, Jill Winton, Amy Chao and Irena Ninkovic, Stikeman Elliott LLP
Distributions from a Canadian-resident trust to a non- resident of Canada may be entitled to a reduced rate of withholding under an applicable tax treaty, assum - ing the non-resident recipient qualifies for benefits under such treaty. Canada has implemented the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (known as the “MLI”), which, where applicable, is designed to counter abus - es of tax treaties. 4.10 Foreign Account Tax Compliance Act (FATCA)/Common Reporting Standard (CRS) Compliance Regime Canada complies with the FATCA and CRS regimes and follows the international self-certification stand - ards. The Income Tax Act (Canada) incorporates the due diligence and reporting requirements under FAT - CA and the CRS. 4.11 Anti-Money Laundering (AML) and Know Your Customer (KYC) Regime Canada’s laws against terrorist financing and sanc - tioned individuals and entities are contained in federal Canadian statutes and regulations, such as: • the Criminal Code (Canada); • the Freezing Assets of Corrupt Foreign Officials Act (Canada); • the Special Economic Measures Act (Canada); • sanctions resolutions and regulations of the United Nations adopted by Canada under the United Nations Act (Canada); • the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law); and • any regulations implementing the foregoing stat - utes. The Proceeds of Crime (Money Laundering) and Ter - rorist Financing Act (PCMLTFA) is the primary anti- money laundering and anti-terrorist financing leg - islation in Canada. It applies to a prescribed set of persons and entities, including “persons and entities authorised under provincial legislation to engage in the business of dealing in securities or any other financial instruments, or to provide portfolio manage - ment or investment advising services”. The use of
the term “authorised”, rather than registered or regu - lated, means that entities operating in Canada under an exemption such as the IAE or IDE are also subject to compliance with Canadian AML rules. The AML compliance obligations include require - ments relating to: • reporting; • filing; • record-keeping; • client identification; • the establishment and maintenance of a compli - ance regime, including an assessment and docu - mentation of related risks to the business; • compliance training; and • certain other monitoring requirements and restric - tions on dealing with designated individuals and groups, which in the case of non-resident dealers may differ from the requirements of their home jurisdiction. However, a fund manager that is registered as an IFM or that relies on the IFME exclusively to engage in the development, marketing, organisation, management and/or administration of investment products is not considered to be authorised under provincial legisla - tion to engage in the business of: • dealing in securities or any other financial instru - ments; or • providing portfolio management or investment advising services. Such a fund manager is therefore not subject to the PCMLTFA, regardless of its residency or registration status. It is nevertheless common for both Canadian resident and non-resident fund managers to screen their clients against Canadian sanctions lists. Canadian registered dealers and advisers and non- resident dealers and advisers relying on the IDE or IAE must also comply with the monthly reporting require - ments under federal anti-terrorist financing and UN sanctions regulations. Registered dealers, PMs and IFMs are also subject to KYC, KYP and suitability requirements under NI
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