March 1, VIA to

Transcription

1 March 1, 2012 VIA t [email protected] Ms. Leah Andersn Directr, Financial Sectr Divisin Department f Finance L Esplanade Laurier 20 th Flr, East Twer 140 O Cnnr Street Ottawa, ON K1A 0G5 Dear Ms. Andersn, Thank yu fr the pprtunity t cmment n the Cnsultatin Paper, Strengthening Canada s Anti- Mney Laundering and Anti-Terrrist Financing Regime published n December 21, 2011 ( the cnsultatin paper ). While there are several prpsals, Questrade wuld like t cmment specifically n Prpsal 1.2 and 1.3 which deal with nn-face-t-face client identificatin requirements. Abut Questrade, Inc. Questrade Inc. ( Questrade ), headquartered in Trnt, prvides Canadians with high-speed, direct access trading in the U.S. and Canadian stck and ptins markets as well as frex trading. Questrade s clients are described as self-directed investrs, meaning they chse their investment vehicles and gals themselves based n research and educatin prvided by Questrade and ther primarily nline resurces. Questrade maintains nly tw physical lcatins in Canada, yet clients are spread acrss the cuntry. Clients manage their investments nline. They manage their accunts and recrds, such as trade cnfirmatins, mnthly statements, and tax receipts, nline. When they want t speak with us, they call and , but mst use the cnvenient nline help feature live chat. At the end f a chat, clients are ed a ticket cnfirmatin and cpy f their entire cnversatin with us. The nline experience defines their relatinship with Questrade and their assets. Questrade Inc. is a member firm f the Investment Industry Regulatry Organizatin f Canada (IIROC) and the Canadian Investr Prtectin Fund (CIPF). Questrade is registered as a Mney Services Business with FINTRAC. Prpsal 1.2 Nn-Face-t-Face Situatins Questrade thanks the Department f Finance fr recgnizing electrnic bank statements as cnfirmatin that an individual has a depsit accunt under the nn-face-t-face identificatins requirements. That

2 said, we nte that this infrmatin was nt readily available n FINTRAC s website. It wuld seem, based n the cnsultatin paper, that the Department f Finance has accmmdated this evlutin in the past. We are unaware as t hw lng this methd has been allwed and have cncerns that this has set an unlevel playing field fr thse firms that were unaware. Questrade agrees that an electrnic bank statement cnfirms that an individual(s) has a depsit accunt with a financial institutin. Questrade believes the review f that statement shuld be n different than that f a hard cpy statement, nting f curse that sme electrnic bank statements d nt include the address f the accunt wner. Determining the authenticity f an electrnic bank statement wuld be n different than determining the authenticity f a hard cpy bank statement. Questrade believes the risks f dctred dcuments are the same in bth cases. Questrade suggests that the Department f Finance cnsider screen prints f banking infrmatin in lieu f a bank statement. Questrade suggests that any updates r blanket exceptins t the methdlgies fr nnface-t-face client identificatin be published n FINTRAC s website fr the industry t see and act n at the same time in rder t create a level playing field fr industry participants. Questrade has experienced many challenges in implementing the methds available fr nn-face-tface client identificatin, the primary client identificatin methd used by ur clients. We are listing ur challenges by methd t illustrate ur difficulties in nbarding clients in the face f the rapid expansin f n-line financial services. Questrade has included additinal suggestins fr nn-face-t-face verificatin f identity. OPTION 1: Affiliate r c-member Questrade is an independent, privately wned cmpany. Questrade is nt affiliated with any financial institutin. This autmatically limits Questrade t ptin 2, which requires the mre nerus cmbinatin f methds. Unlike the bank-wned nline brkerages, wh have n challenges with the nn-face-t-face methd because they can simply rely n the verificatin f identity prcess used by their physical bank branch netwrk, Questrade and all ther independent nline brkerages are disadvantaged. We believe this t be the largest barrier fr any independent nline brkerage t vercme. Independent nline brkerages cannt cmpete n a level playing field because the client identificatin prcess in nn-face-t-face situatins favurs the big banks. Questrade suggests that mre ptins be available fr nn-face-t-face verificatin f identity, specifically electrnic methds. Sme f the ptins are detailed belw. OPTION 2: Cmbinatin f methds

3 This cmbinatin f methds is very difficult fr ur clients t understand and quite difficult t implement frm a technlgy standpint. Instead f ne simple methd, a client is t use a cmbinatin f tw f three methds, tw f which have additinal ptins within them. This means that ur systems need t be cded t require tw f three methds, each with their wn set f ptins, requirements and/r cnditins. Nt nly d ur clients get cnfused, but ur back ffice spends an inrdinate amunt f time reviewing and verifying what the client has prvided as verificatin f identity against the rule. Questrade suggests that simpler, electrnic, nn-cmbinatin methdlgies be cnsidered. Fr example, requiring verificatin f several data pints such as name, address, previus address, date f birth, Scial Insurance Number, telephne number, recent transactins and ther identifying infrmatin using ne methdlgy such as the credit check methdlgy. Identificatin prduct r credit file methd This methdlgy seems t be the client-preferred methd fr nn-face-t-face client identificatin likely because it is an electrnic slutin. We believe this methd t be the mst secure since varius data pints are cmpared and there are security questins t be answered crrectly prir t passing. Questrade suggests that this be a stand-alne methdlgy and shuld nt be required t be used in cmbinatin with ther methdlgies. Attestatin methd We d nt believe this methd t be a gd slutin fr nn-face-t-face situatins, nr a reliable methd 1. Individuals using this methdlgy are required t find a guarantr, have a face-t-face meeting and are smetimes required t pay fr this service. There are n prcesses t verify the guarantr. We believe that such attestatins may easily be created and/r manipulated by thse wishing t fraudulently pen accunts. Questrade suggests that ther electrnic methdlgies be cnsidered, including thse suggested herein. Cleared cheque r depsit accunt methd We have many clients stating that they d nt have cheques. In fact, we are aware that there are technlgies in the U.S. allwing mbile cheques invlving the digital transmissin f cheques eliminating the need fr the physical exchange f paper. Questrade believes that the cleared cheque methd is r will sn be bslete in tday s technlgical envirnment. 1 Nt t be cnfused with the agent/mandatary methdlgy, which Questrade finds quite useful in the case f accunts pened by thse resident utside f Canada.

4 Questrade strngly recmmends that ther electrnic methdlgies t verify the existence f an accunt be cnsidered. Fr example, bill payment and cash transfer technlgies exist. Such payments and transfers cme frm bank accunts t entities like Questrade fr depsit int brkerage accunts. Banks shuld be required t prvide the fllwing: the full name(s) registered n the bank accunt frm which mnies are withdrawn including bth names if it is a jint accunt, the accunt number, and the type f accunt r verificatin if a depsit accunt r nt. This ensures that the bank accunt is verified by virtue f the transactin. Similarly, when institutins like Questrade wh send EFTs tgether with the clients full name, banks shuld be required t ensure the name matches prir t allwing the transactin. In this way, securities dealers culd als EFT small payments int a bank accunt, and if accepted by the bank, ID verificatin wuld be cmplete. As stated earlier, Questrade welcmes the change allwing electrnic bank statements t be used in place f riginal bank statements. Hwever, we have fund that there are banks that simply prvide nline access t accunt transactinal activity in lieu f electrnic bank statements. A client may have n bank statements at all. In such cases, banks are willing t prvide letters cnfirming the existence f bank accunts. While we are nt big fans f this mre manual methdlgy, we d have clients wh believe this shuld be a viable alternative t a bank statement. Questrade suggests that cnfirmatin letters frm banks be cnsidered as verificatin f a bank accunt. Such letters are written by bank branch fficials, signed and stamped. Accrding t ur clients, this is a secure and mre efficient way t prvide evidence f a bank accunt withut relying n cheques r bank statements. Prpsal 1.3 Nn-face-t-face Custmer Identificatin Measures fr Credit Card Cmpanies Questrade, until having reviewed the cnsultatin paper, was unaware that credit card cmpanies may use a telecmmunicatins directry as a reliable independent data surce t ascertain a client s identity. While it seems that credit card cmpanies have fund decreased usefulness f this methdlgy, Questrade wnders why such a methdlgy was nt allwed fr ther business categries such as securities dealers. We wuld be pleased t learn mre abut this methdlgy and evaluate what sunds like an electrnic methd fr verificatin f identity. Questrade suggests that nn-face-t-face methdlgies fr identity verificatin be the same acrss business categries. Any independent data surces r methds identified shuld be equally as effective fr securities dealer clients as they are fr credit card clients.

5 Questrade thanks the Department f Finance fr cnsidering ur cmments and suggestins. Shuld there be any questins, please cntact the undersigned. Questrade cnsents t the Department f Finance psting f this Submissin with Questrade s name. Sincerely, Mary Jyce Empensand Chief Cmpliance Officer Questrade, Inc.