A company registration certificate answers only the first layer of questions
The fact that a company exists does not mean that its account is used by authorized persons, nor does it mean that the equity materials have revealed the ultimate beneficial owners. Taking Canada's FINTRAC rules as an example, beneficial ownership should in principle be traced through to natural persons, with an understanding of ownership, control and organizational structure; one cannot stop after finding an offshore holding company. Proportional thresholds, the treatment of trusts and exceptions differ across countries, so it is inadvisable to copy one set of forms directly to all clients.
The focus of verification is how the business makes money and why it pays in this way
For trading companies, contracts, invoices and logistics can help explain transactions; for software companies, subscription revenue, customer distribution and service delivery records may be more relevant. Review materials should match the business rather than requiring all enterprises to provide the same kind of proof. In particular, it is necessary to distinguish whether the client is paying its own bills or collecting and transferring funds on behalf of others; the latter may change the client's risk and the platform's assessment of its business qualifications.
Entity mismatches are especially likely with group clients: the contracting party is a subsidiary, the payment comes from the parent company, yet the invoice is issued by another affiliate. The existence of relationships among the three does not automatically mean the transaction is not genuine, but the respective roles and authority should be explainable. Clients can be asked to provide intra-group settlement arrangements, and actual orders can be checked on a sample basis, to avoid recording all affiliated companies under the same client. If the client's business shifts to receiving and making payments on behalf of external enterprises, the original risk assessment should also be reviewed promptly.
Hypothetical scenario: two enterprises of the same size, with different review difficulty
Assume Company A has verifiable single-layer equity, fixed purchasers and continuous orders; Company B has just been established, its shareholders span multiple layers of entities, and immediately after account opening it requests to make payments on behalf of unrelated third parties. Both are corporate clients and their transaction volumes are similar, but Company B clearly has more control relationships and sources of funds to explain. Even if Company A is rated lower risk, it cannot be permanently exempt from review: after changes in beneficial owners, industry or payees, it should be reassessed.
Turn review into a maintainable client file
Canada's ongoing monitoring guidance requires regulated entities to pay attention to whether transactions are consistent with what is known about the client, which provides a clear example for corporate client management. In practice, an equity chart, a list of authorized persons and an expected transaction profile can be established, recording which materials come from official registries and which are merely the client's own statements; when contradictions arise, it should be clear who will verify them. Familiarity with an industry can reduce ineffective inquiries, but familiarity with the client's responsible person cannot replace necessary verification.
Recommended actions
- Design different material packages by client type, and specify what each document is intended to verify.
- Draw look-through charts for complex equity structures, separately marking matters that cannot be verified and the measures to resolve them.
- Set update trigger conditions for changes in equity, authorized persons, and payment recipients.
This content is for general information only and does not constitute legal advice. Please consult a qualified lawyer about specific matters.
References
- Beneficial ownership requirements — FINTRAC, Canada
- Ongoing monitoring requirements — FINTRAC, Canada
