The Know Your Client Process Flashcards
7 cards from real IFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 The Know Your Client Process flashcards as text
Under Canadian anti-money laundering rules, what is the primary reason dealers must verify client identity as part of the KYC process?
Answer: To meet FINTRAC obligations aimed at detecting and deterring money laundering and terrorist financing
Identity verification is required under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, overseen by FINTRAC, to prevent illegal activity through the financial system.
A client claims to be investing on behalf of a corporation. What additional KYC step is required beyond identifying the client contact?
Answer: Identifying beneficial owners who own 25% or more of the corporation
For corporate accounts, FINTRAC requires identifying individuals who ultimately own or control 25% or more of the corporation to prevent anonymous beneficial ownership.
How does a client's 'investment time horizon' affect which mutual fund categories are generally considered suitable?
Answer: Longer time horizons generally support higher-risk, growth-oriented funds; shorter horizons favour lower-risk, income or money market funds
A longer time horizon allows the client to ride out market volatility, making growth funds more suitable, while short horizons favour capital preservation and lower-risk products.
A registered representative suspects an elderly client is being financially exploited by a family member. What is the appropriate first step?
Answer: Contact the trusted contact person on file and escalate internally per firm procedures
Contacting the trusted contact person and escalating through the firm's internal protocols is the appropriate response to suspected financial exploitation of a vulnerable client.
Which of the following best explains why 'annual income' is a relevant KYC data point?
Answer: It helps assess the client's ability to sustain losses and continue investing without financial hardship
Annual income contributes to understanding the client's financial resilience — whether they can absorb losses and still meet living expenses without relying on invested capital.
What obligation arises under the client-focused reforms if a registrant identifies a conflict of interest between the firm's interests and the client's interests?
Answer: The registrant must disclose the conflict and, if material, resolve it in the client's favour
The CFRs require disclosure of all material conflicts and that material conflicts be resolved in the client's favour, not simply disclosed.
A prospective client is categorized as a 'permitted client' under NI 31-103. What KYC-related relief may apply?
Answer: Certain suitability determination requirements may be waived if the client requests it in writing
Permitted clients (sophisticated institutional or high-net-worth clients) may waive certain suitability requirements under NI 31-103, provided the waiver is documented in writing.