IFC The Know Your Client Process 5

Question 1

Under Canadian anti-money laundering rules, what is the primary reason dealers must verify client identity as part of the KYC process?

Accepted Answer

To meet FINTRAC obligations aimed at detecting and deterring money laundering and terrorist financing

Answer

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.

Question 2

A client claims to be investing on behalf of a corporation. What additional KYC step is required beyond identifying the client contact?

Accepted Answer

Identifying beneficial owners who own 25% or more of the corporation

Answer

For corporate accounts, FINTRAC requires identifying individuals who ultimately own or control 25% or more of the corporation to prevent anonymous beneficial ownership.

Question 3

How does a client's 'investment time horizon' affect which mutual fund categories are generally considered suitable?

Accepted Answer

Longer time horizons generally support higher-risk, growth-oriented funds; shorter horizons favour lower-risk, income or money market funds

Answer

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.

Question 4

A registered representative suspects an elderly client is being financially exploited by a family member. What is the appropriate first step?

Accepted Answer

Contact the trusted contact person on file and escalate internally per firm procedures

Answer

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.

Question 5

Which of the following best explains why 'annual income' is a relevant KYC data point?

Accepted Answer

It helps assess the client's ability to sustain losses and continue investing without financial hardship

Answer

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.

IFC - Investment Funds in Canada Practice Test

IFC - Investment Funds in Canada Practice Test

IFC The Know Your Client Process 5