Verification of Individuals
You must verify the identity of individuals at the time that you engage in or give instructions with respect to the receipt, payment, or transfer of funds. This applies to:
- individual clients;
- individuals who give instructions on behalf of clients who are organizations; and
- individuals who are third parties who may be instructing the client or on whose behalf the client is retaining the lawyer.
You are not subsequently required to verify that individual’s identity unless you have reason to believe the information, or the accuracy of it, has changed.
The Rules of the Law Society of Alberta provide that you must take steps to verify the individual’s identity.
Verification requirements vary depending on the type of documents used. You must obtain and retain a copy of every document used to verify the identity of any client. The Rules require you to verify the identity of clients who are individuals in one of the ways set out below.
For the Government-issued Photo Identification method, the individual must be physically present at the time of verification and the photo identification must be valid, original, and current. Ensure it contains the individual’s name and photograph. You must verify in person to compare the photograph with the individual.
The individual need not be physically present at the time of verification for:
- Credit file method: you can rely on information contained in a credit file located in Canada that has been in existence for at least three years; and
- The dual process method: information must be from two different, independent sources. Neither you nor the client can be a source. Documents must be valid, original, and current. You can rely on any two of:
- information from a reliable source containing the individual’s name and address;
- information from a reliable source containing the individual’s name and date of birth; and/or
- information containing the individual’s name confirming they have a deposit account or credit card or other loan amount with a financial institution.
You must identify minor clients and, if there is a financial transaction, you must verify the minor’s identity. Record the details and the applicable date.
If the minor is under 12 years of age, you must verify the identity of one of the child’s parents or guardians.
If the minor is at least 12 years of age but not more than 15 years of age, you may refer to information from a reliable source that contains the name and address of one of the individual’s parents or their guardian and verifying that the address is that of the individual.
Using an Agent
You may use an agent in any circumstances to obtain the required verification information and must use an agent when the client is not physically present in Canada. Although the Rules do not specify who may act as an agent, you must use due diligence to ensure the agent is reputable and capable. Further, you may rely on an agent’s previous verification of a client in certain circumstances.
When retaining an agent to verify a client’s identity, you must enter into an express written arrangement or agreement with the agent. When using an agent, your records should include, through the agreement itself and the report from the agent:
- the full name of the agent who verified the individual’s identity;
- the agent’s status or occupation and business address;
- the client identification method the agent used;
- copies of the information and documents obtained by the agent to verify the individual’s identity; and
- the date on which the agent verified the individual’s identity.
Verification of Organization’s Identity
If your client or the third party is an organization, you have verification obligations with respect to the organization as well as the individual who gives instructions on its behalf:
1. You must take reasonable steps to verify the organization’s identity and obtain what you reasonably believe to be reliable independent source documents, data or information and retain a copy of every document on which you rely.
If the organization is a corporation or a society created pursuant to legislative authority, you should consult a government organization or the client to obtain:
- written confirmation of the existence, name and address of the organization;
- names of its directors;
- appropriate source documents, including certificates of corporate status or annual returns;
- any other similar records which may confirm the organization’s existence; and
- minute books, where available.
This list is not exhaustive. You may rely on any reliable documents, even if they do not come from a government source. If the organization is not a corporation or a society and is not registered in a government registry, you can consider:
- copies of constating documents;
- articles of association;
- partnership agreements;
- if the client is a trust, documents which create or amend the trust; and
- other records that confirm the organization’s existence, such as GST registration or information relating to the organization’s business license.
2. You must obtain and record the names and occupations of all directors (unless the organization is a securities dealer as defined in Rule 119.45(m)). You must also make reasonable efforts to obtain and record the names, addresses and occupations of all persons who own, directly or indirectly, 25 per cent or more of the shares in the organization.
To obtain beneficial ownership information, as well as the ownership, control and structure information, you can have the entity provide it, either verbally or in writing.
- The entity can provide you with official documentation,
- The entity can tell you the beneficial ownership information and you can write it down for record-keeping purposes, or
- The entity can fill out a document to provide you with the information.
Confirm accuracy by referring to official documentation or records, such as:
- Articles of incorporation
- Annual returns
- Certificate of corporate status
- Shareholder agreements
- Partnership agreements
- Board of Director's meeting records of decisions
Reasonable measures must be taken to confirm the accuracy of the information obtained. This can include referring to official documentation or records.
It is also acceptable to have the client sign a document to confirm the veracity of the beneficial ownership information, as well as ownership, control and structure information obtained. In this case, it is possible for one document to be used to satisfy the two distinct steps, namely to obtain the information and to confirm the accuracy of it.
Other reasonable measures can include:
- Asking the client to provide supporting official documentation,
- Conducting an open-source search, and/or
- Consulting commercially available information.
3. If a lawyer is not able to obtain the information required to verify a client or to confirm the accuracy of that information, the lawyer must take reasonable measures to ascertain the identity of the most senior managing officer of the organization. The senior managing officer of a corporation or an entity may include, but is not limited to, a director, chief executive officer, chief operating officer, president, secretary, treasurer, controller, chief financial officer, chief accountant, chief auditor or chief actuary, or an individual who performs any of those functions. It may also include any other individual who reports directly to the entity's board of directors, chief executive officer or chief operating officer. In the case of a partnership, the most senior managing officer can be one of the partners. In the case of a trust, the senior managing officer of a trust is the trustee, that is, the person who is authorized to administer or execute on that trust.
To verify the identity of the most senior managing officer, you could use one of the methods used to verify an individual client - Government-issued documentation, Credit File or Dual Process.
4. When dealing with trusts and estates, lawyers should refer to Rule 119.50(7), as the rule requires you to make reasonable efforts to obtain and record the names and addresses of all trustees and known beneficiaries and settlors of the trust.
You must verify the identity of the organization within 30 days of engaging in or giving instructions with respect to the receipt, payment, or transfer of funds. If, however, you are unable to verify the client’s identity after taking all reasonable steps, you must keep a record with the applicable date of the efforts made and measures taken.
Once you have verified the identity of a client, you are not required to subsequently verify that identity or obtain that information, unless you have reason to believe the information, or the accuracy of it, has changed.