Tax Insights: Canadian qualified intermediaries have a new option to verify the identity of their account holders

Issue 2025-38

In brief

What happened? 

In August 2025, the US Internal Revenue Service (IRS) quietly published an updated version of the Qualified Intermediary (QI) Attachment for Canada (the QI Attachment).¹ The updated version introduces a potentially simple method – the Financial Transactions and Reports Analysis Centre (FINTRAC)‑approved credit file method – to verify account holder identity when QIs² have not met the account holder in person.

Why is it relevant?

The QI regime is a program established by the IRS to facilitate required tax withholding and reporting on US‑source income paid to non‑US persons. A separate QI Attachment exists for, and is specific to, each jurisdiction. It specifies the types of documentation QIs in that jurisdiction may rely on when verifying the identity of their account holders for purposes of the QI regime. Most of the time, QIs are required to verify identification in person with the account holder. This update creates an option for collecting documentary evidence without a face‑to‑face meeting with the account holder.

Actions to consider

QIs should review their current account opening processes and determine whether leveraging the FINTRAC‑approved credit file method would be advantageous for their business.

In detail

Background

Canadian QIs are required to verify the identity of all account holders that receive US­‑source fixed, determinable, annual or periodic (FDAP) income, such as US‑source interest or dividends. Non‑US individual account holders can provide either:

• a valid IRS Form W-8BEN to the QI, or
• certain acceptable forms of identification, as outlined in the QI Attachment, which must typically be verified in person by the QI

Valid documentary evidence serves to confirm the identity of the individual account holder and entitle the account holder to reduced US withholding rates on US‑source FDAP income. 

QI documentation options generally parallel the local jurisdiction’s Anti‑Money Laundering and Know Your Client (AMLKYC) regulations. The Canadian QI Attachment references the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated regulations, as well as the FINTRAC and its guidance.

Historically, photo identification was the most common documentary evidence collected by QIs for account holder identity verification, and QIs were generally required to meet account holders in person to validate their identification. If they did not meet in person, the account holder would instead be asked to complete IRS Form W‑8BEN. Several years ago, Canadian AMLKYC allowed facial recognition technology to be used to help verify an individual’s identity, and the IRS updated the QI Attachment to reflect this updated Canadian guidance. However, at that time, this method required technology that was not commonly available to Canadian financial institutions and, even now, only a few technology solutions are available for financial institutions that would like to leverage this method.

FINTRAC-approved credit file method

In January 2025, the IRS added FINTRAC credit files to the list of acceptable documentary evidence for Canadian QIs. The FINTRAC‑approved credit file method is a proven method for verifying account holder identity and can be relied on when an account holder is not met in person. Established credit file bureaus provide this type of service and many Canadian custodians have the infrastructure needed to integrate these credit file reports into their QI controls and account opening processes. However, the January update did not address approved “methods of collection” for FINTRAC credit files, creating uncertainty for Canadian QIs on how to implement the credit file method.  

In August 2025, the QI Attachment was expanded to specify acceptable methods of collecting FINTRAC credit files. When the QI collects these credit files, it must follow the language in the QI Attachment, which is taken directly from FINTRAC, as follows:

“QI may verify the identity of a person by referring to information that is in the person’s credit file. To do so, the credit file must:

• contain information that is valid and current;
• be from a Canadian credit bureau (credit files from foreign credit bureaus are not acceptable);
• have been in existence for at least three years;
• contain information that is derived from more than one source (i.e. more than one tradeline); and
• match the name, address and date of birth of the person being identified.”

The QI Attachment provides that the QI must perform the credit file search at the same time the account is opened and mentions Equifax Canada and TransUnion Canada as credit bureaus that provide the correct type of credit file to be used for this purpose. In alignment with FINTRAC language, the QI Attachment also addresses how QIs may handle minor information inconsistencies.

The takeaway

QIs with online systems, or who serve customers in remote locations, may be able to benefit from this new change with minimal implementation efforts. Even those with well‑established QI account opening procedures should consider how the credit file method may allow them to streamline AMLKYC controls with QI controls, increasing efficiency and potentially improving customer experience.

<sup>1. The QI Attachment for Canada is available on the IRS website at www.irs.gov/pub/irs-lbi/qiattachcanada.pdf.
2. A QI (as it relates to the IRS) is any foreign intermediary (i.e. financial institution), or foreign branch of a US intermediary, that has entered into a qualified intermediary withholding agreement with the IRS.</sup>