Garbage In, Garbage Out…
…a reasonably reasonable assessment of the
reasonably unreasonable “Reasonable
Grounds to Suspect” threshold and its
unreasonably definitive ill-defined definition.
Chris Randle, CAMS-Audit
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EXECUTIVE SUMMARY
“Reasonable grounds to suspect” is the Canadian regulatory threshold that triggers a reporting
entity’s obligation to report suspicious transactions, and their liability for failing to do so. It
is an inherently subjective threshold, applicable to all reporting entities, under all of their
various operating models, and in all circumstances; by its very nature, scope, and purpose it
is an expansive threshold which remains open to a variety of interpretations from a variety of
perspectives.
The product of this, the suspicious transaction report, is the primary purpose served by every
requirement of the Canadian anti-money laundering/countering terrorist financing (AML/CTF)
regime; to provide financial intelligence to the Financial Transactions and Reports Analysis
Centre of Canada (FINTRAC), who can analyze the information and in turn provide actionable
intelligence to law enforcement and intelligence agencies in Canada and abroad. All record-
keeping, risk scoring, training, and effectiveness testing activities exist to drive the
identification and reporting of suspicious transactions.
Reporting entities of all sizes grapple with whether or not to report transactions, and material
risk exists on either side of that decision. The failure to identify and report legitimately
suspicious transactions can result in catastrophic penalties for the reporting entity, and a
critical gap in intelligence data for FINTRAC; on the other side, defensive over-reporting can
cause a strain and misappropriation of resources, resulting in the potential for a reporting
entity to fail to identify and report other activities of material value to the regime.
The suspicious transaction reporting threshold is of foundational importance. The continued
evolution and maturation of Canada’s regime requires that this threshold be defined as clearly
as possible, and for a reporting entity’s effectiveness against it to be tested and publicly
reported on with commensurate priority. This is not presently the case. FINTRAC’s guidance
relative to this threshold is conflicting and ambiguous; its published audit findings fail to
provide any value to other reporting entities seeking to learn lessons from the failures of
others. Stakeholders, including the Financial Action Task Force (FATF), have noted that
material deficiencies are present across the regime, both at the reporting-entity level but also
on the part of FINTRAC in its capacity as the national financial intelligence unit (FIU).
Through a comprehensive review of the available guidance, this paper strives to define,
clarify, and articulate the present standard, and then to propose new language and guidance
relative to this standard to assist reporting entities with their adjudications against it.
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Notice to Reader:
Canada’s national AML/CTF regime is enacted through the Proceeds of Crime (Money
Laundering) and Terrorist Financing Act (PCMLTFA, The Act) and its enabling regulations. The
Act grants FINTRAC the mandate to act as Canada’s FIU, responsible for the analysis of
intelligence related to financial transactions conducted through designated reporting entities
in Canada; reporting entities include all financial entities inclusive of banks and credit unions,
as well as money services businesses, dealers in precious metals and stones, accountants,
British Columbia notaries, real estate brokers and agents, life insurance agents, securities
dealers, and casinos. The Act further grants FINTRAC the authority to act as a regulator of
every reporting entity, with the ability to audit and enforce the requirements of Canada’s
AML/CTF regime.
Where appropriate in this paper, I have chosen to reference FINTRAC’s Guidelines (The
Guidelines), as opposed to The Act and its regulations, to define the various obligations of
reporting entities to detect and report suspicious transactions; The Guidelines are derived
from The Act and its regulations, are written in plain language, and document FINTRAC’s
expectations for the conduct of reporting entities relative to their obligations under The Act.
There are minor variances between The Act and its regulations, and The Guidelines, where
The Guidelines interpret a reporting entity’s obligations to The Act and its regulations, and in
some cases, this interpretation does expand the scope of those obligations; FINTRAC conducts
audits relative to the requirements articulated within The Guidelines, and can assess
administrative monetary penalties for failure to comply with The Guidelines, or with the
underlying obligations of The Act and regulations. Alternatively FINTRAC can refer evidence
of a reporting entity’s non-compliance to law enforcement for investigation and the
assessment of criminal sanctions for any failure to comply with The Act and its regulations.
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CONTENTS
INTRODUCTION ................................................................................................................................. 5
SETTING THE CONTEXT .................................................................................................................. 6
Understanding How FINTRAC Detects Unreported Suspicious Transactions .............. 6
Understanding Penalties for Non-Compliance ...................................................................... 9
Summary of Context .................................................................................................................. 10
UNDERSTANDING THE THRESHOLD ......................................................................................... 12
“Financial Transactions” ............................................................................................................ 12
“Reasonable Grounds to Suspect” ......................................................................................... 14
“Related to the Commission of a Money Laundering Offense” ..................................... 17
“Related to the Attempted Commission of a Money Laundering Offense” ................ 19
FINTRAC’s Public Notices of Administrative Monetary Penalties .................................. 22
EVIDENTIARY STANDARD ............................................................................................................ 27
RISKS TO THE REGIME ................................................................................................................. 30
Risks of Under-Reporting .......................................................................................................... 30
Risks of Over-Reporting ............................................................................................................ 31
Personal Liability ................................................................................................ 32
FINTRAC’s Disclosures ......................................................................................... 33
RE-DEFINING THE THRESHOLD ................................................................................................. 35
Proposing a New Standard ....................................................................................................... 35
CONCLUSION ................................................................................................................................... 40
Calls to Action .............................................................................................................................. 40
APPENDIX I – FINTRAC POLICY INTERPRETATIONS ........................................................... 42
APPENDIX II – SURVEY RESPONDENT DEMOGRAPHICS .................................................... 53
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INTRODUCTION
Reporting entities maintain extensive obligations under The Act. Primary among these are
requirements that reporting entities submit suspicious transaction reports to FINTRAC:
Transactions if reasonable grounds to suspect
7) Subject to section 10.1, every person or entity referred to in section 5 shall
report to the Centre, in the prescribed form and manner, every financial
transaction that occurs or that is attempted in the course of their activities and
in respect of which there are reasonable grounds to suspect that
(a) the transaction is related to the commission or the attempted commission
of a money laundering offense; or
(b) the transaction is related to the commission or the attempted commission
of a terrorist activity financing offense. 1
Though they share a common reporting threshold, this paper will focus on requirements
relative to the reporting of transactions related to money laundering as opposed to terrorist
financing. All references to transactions include reference to attempted transactions unless
otherwise stated.
Understanding this definition of a suspicious transaction, which is the threshold that triggers
both an obligation to report but also a reporting entity’s liability should they fail to do so,
remains a challenge. A comprehensive review and interpretation of FINTRAC’s guidance
relative to this regulatory threshold is necessary to fully understand, articulate, and manage
against these obligations.
1 Proceeds of Crime (Money Laundering) and Terrorist Financing Act, Section 7: http://laws-
lois.justice.gc.ca/eng/acts/P-24.501/page-2.html#h-8
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SETTING THE CONTEXT
Canada’s national AML/CTF regime is constantly evolving and maturing; FINTRAC’s approach
to compliance enforcement generally, and with respect to the suspicious transaction reporting
obligations of reporting entities, has been an area of particular focus. In 2014, FINTRAC
announced its strategy to modernize its suspicious transaction reporting compliance
assessment methodology, expending significant resources to improve their capacity to
identify instances where a reporting entity may have failed to report a suspicious transaction.
In 2016, national media reported that FINTRAC had fined a bank more than $1.1 million.
FINTRAC disclosed that the fine, formally called an administrative monetary penalty (AMP),
was assessed for multiple compliance failures including the bank’s failure to report one
transaction that FINTRAC deemed to have met the criteria for suspicious transaction
reporting. In media interviews, a spokesperson for FINTRAC stated that the size of this AMP
was intended as a message of deterrence to all reporting entities in Canada:
“In this case, the entity paid the penalty. We decided not to name the entity,
so that we could send a message of deterrence now, as quickly as possible,”
the spokesman said.
“Generally, Canadian financial institutions have a positive history of
compliance. But we wanted to send a message of deterrence right across all
sectors, to all entities that have obligations,” he said. 2
While FINTRAC has issued AMPs previously, 79 since December 30th 2008, the average value
of the other 78 is a little more than $30 thousand each. Prior to this specific AMP, only entities
in the securities dealers industry had been issued AMPs relative to their failure to report a
suspicious transaction 3; the format and content of FINTRAC’s public reporting of these prior
AMPs makes it impossible to determine how many entities in that industry have been
assessed AMPs for that specific violation type. The imposition of this AMP demarcates a
material change in FINTRAC’s approach to compliance enforcement; given FINTRAC’s efforts
to enhance their suspicious transaction reporting compliance assessment methodology, and
their increased appetite to issue AMPs and at values intended to act as a deterrent to all, it is
critical that reporting entities understand their obligations and liabilities relative to the
requirement to report suspicious transactions.
Understanding How FINTRAC Detects Unreported Suspicious Transactions
FINTRAC has not provided any formal guidance relative to how it seeks to detect suspicious
transactions that a reporting entity has failed to report. FINTRAC has the authority to audit
all aspects of a reporting entity’s operations, including the authority to inspect all documents
2 The Globe and Mail, ”Canadian bank fined $1.1-million for failing to report suspicious transaction”:
http://www.theglobeandmail.com/report-on-business/canadian-bank-fined-11-million-for-failing-to-report-
suspicious-dealing/article29533055/ 3 FINTRAC, Public notice of administrative monetary penalties: http://www.fintrac-canafe.gc.ca/pen/4-eng.asp
7 | P a g e
that have or ought to have been retained by the entity, and to interview all of its employees.
FINTRAC can initiate an audit at any time, and may choose to limit or broaden the scope of
any such engagement at its sole discretion.
To understand how FINTRAC may seek to detect unreported suspicious transactions, a brief
explanation of FINTRAC’s sources of financial intelligence is necessary.
Prescribed Reporting
Reporting entities are required to send certain prescribed reports to FINTRAC, within specific
prescribed timelines and containing certain prescribed information. These reports include:
suspicious transaction reports (STR), for any transaction or attempted transaction for
which a reporting entity has established that there are reasonable grounds to suspect
that the transaction is related to the commission or attempted commission of a money
laundering offense4;
large cash transaction reports (LCTR), for any deposit of $10,000 or more of cash, in
a single transaction or through any combination of transactions conducted within a 24
hour period, by or on behalf of the same individual or entity5;
electronic funds transfer reports (EFTR), for any transfer of funds in to or out of
Canada, totalling $10,000 or more, in a single transaction or through any combination
of transactions conducted within a 24 hour period, by or on behalf of the same
individual or entity6; and
casino disbursement reports, for any disbursements of $10,000 or more, in a single
transaction or through any combination of transactions conducted within a 24 hour
period, by or on behalf of the same individual or entity7.
Other Reporting
FINTRAC also receives reporting from other sources beyond designated reporting entities,
including:
cross-border currency or monetary instruments reports, submitted by the Canada
Border Services Agency (CBSA) any time a person enters or leaves Canada carrying a
sum of currency or monetary instruments totalling $10,000 or more, or if such sums
are sent by mail; a seizure report is also filed where a person fails to properly declare
to the CBSA that such currency has been carried or sent8; and
voluntary disclosures may be submitted to report suspicions of money laundering, by
any person in Canada or abroad9.
Law Enforcement
4 FINTRAC, Guideline 2(3.1): http://www.fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s3-1 5 FINTRAC, Guideline 7A(3.2): http://www.fintrac-canafe.gc.ca/publications/guide/Guide7A/lctr-eng.asp#s3-2 6 FINTRAC, Guideline 8A(3.4): http://www.fintrac-canafe.gc.ca/publications/guide/Guide8A/nseft-eng.asp#s3-4 7 FINTRAC, Guideline 10A(2.2): http://www.fintrac-canafe.gc.ca/publications/guide/Guide10A/10A-eng.asp#s2-2 8 Cross-border Currency and Monetary Instruments Reporting Regulations (SOR/2002-412), sections 2, 4, 11:
http://laws-lois.justice.gc.ca/eng/regulations/SOR-2002-412/page-1.html#h-2 9 FINTRAC, Providing Voluntary Information to FINTRAC: http://www.fintrac-canafe.gc.ca/reporting-
declaration/vol/1-eng.asp
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As a financial intelligence unit, FINTRAC is also responsible for the receipt and management
of financial intelligence disclosures from law enforcement agencies in Canada and abroad,
including:
the Canada Revenue Agency;
local, provincial, and national law enforcement and intelligence agencies; and
international sources including other financial intelligence units, international law
enforcement and intelligence agencies.
While the entirety of FINTRAC’s detection methodologies may not be known publicly, FINTRAC
has many detection vehicles at its disposal, which can be deployed either remotely or through
the execution of a formal audit. A reporting entity must reasonably assume that each of these
elements could be included in FINTRAC’s detection regime.
Remote Detection
FINTRAC may review LCTRs or EFTRs submitted by the reporting entity, to detect
scenarios that may be similar to transactions or typologies previously reported as
suspicious by the reporting entity, which have not been reported in the present
circumstance.
FINTRAC may review LCTRs and EFTRs submitted by the reporting entity, for entities
related to a previously filed STR, where the presently (or previously) reported large
cash transaction (LCT) or electronic funds transfer (EFT) has not also been reported
as suspicious.
FINTRAC may review previous STRs submitted by the reporting entity, to identify
where the reporting entity has ceased to file for ongoing activity for the same entity.
FINTRAC may identify entities that maintain business relationships with the reporting
entity and with other reporting entities, through the information contained in any
prescribed reports received from either; where an entity has been found to be
suspicious by another reporting entity, FINTRAC may challenge the subject reporting
entity if the reporting entity has failed to identify indicators of potentially suspicious
transactions conducted within its own business relationship.
FINTRAC may identify entities that maintain business relationships with the reporting
entity through the information contained in any prescribed reports or other
intelligence, which are suspected by law enforcement to be involved in money
laundering, and may challenge the reporting entity if it has failed to identify indicators
of potentially suspicious transactions conducted within its own business relationship.
FINTRAC may evaluate the money laundering typologies detected and reported, the
sophistication of those typologies, as well as the volume and quality of any reports
submitted by the reporting entity, against other entities within the reporting entity’s
peer group, to assess the quality of the subject reporting entity’s detection regime.
Audit Detection
FINTRAC may review the reporting entity’s policies and procedures relative to the
obligation of all employees to detect and report indicators of potentially suspicious
activity; FINTRAC may interview employees involved in the management of specific
business relationships to determine if any indicators were identified and not reported.
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FINTRAC may audit all documented cases and case sources to challenge the escalation
or adjudication of any indicators identified. Case sources may include but are not
limited to: system-generated money laundering alerts; production orders or other
requests from law enforcement; fraud detection or case management systems; list
scan results; and unusual transaction reports submitted by the reporting entity’s
employees.
FINTRAC may review all de-marketed or closed business relationships and rejected
account applications, where any closure or denial may be related to an attempt to
commit a designated offense (i.e. fraud).
FINTRAC may review all rejected credit applications, or files where a credit loss has
been realized, to determine if the reason for the rejection or loss may be related to a
designated offense or an attempt to commit a designated offense (i.e. fraud, tax
evasion). FINTRAC may also review approved credit applications, to determine
whether any deviations in reported or verified income versus actual or apparent
income have been escalated for review relative to the commission of a designated
offense (i.e. fraud, tax evasion).
FINTRAC may review any fraud loss or other loss records, including their corresponding
general ledger entries, to determine if the money laundering activities associated with
those designated offenses went unreported.
Understanding Penalties for Non-Compliance
As the Proceeds of Crime (Money Laundering) and Terrorist Financing Act is a part of the
Criminal Code of Canada, failure to comply with a provision of The Act, including failing to
report a suspicious transaction, may result in criminal penalties for both the reporting entity,
and for any employee that fails to report or appropriately escalate a suspicious transaction.
Alternatively, FINTRAC also has the ability to assess an administrative monetary penalty
(AMP) against both the reporting entity and its individual employees.
Non-compliance with Part 1 of the Proceeds of Crime (Money Laundering)
Terrorist Financing Act may result in criminal or administrative penalties. Both
criminal and administrative monetary penalties (AMPs) cannot be issued
against the same instances of non-compliance.
Criminal penalties
FINTRAC may disclose cases of non-compliance to law enforcement when there
is extensive non-compliance or little expectation of immediate or future
compliance. Criminal penalties may include the following:
Failure to report suspicious transactions: up to $2 million and/or 5 years
imprisonment.
Failure to report a large cash transaction or an electronic funds transfer:
up to $500,000 for the first offense, $1 million for subsequent offenses.
Failure to meet record keeping requirements: up to $500,000 and/or 5
years imprisonment.
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Failure to provide assistance or provide information during compliance
examination: up to $500,000 and/or 5 years imprisonment.
Disclosing the fact that a suspicious transaction report was made, or
disclosing the contents of such a report, with the intent to prejudice a
criminal investigation: up to 2 years imprisonment. 10
Administrative monetary penalties (AMPs) are an additional tool to criminal
sanctions with the objective of supporting and enhancing efforts to ensure
compliance on the part of reporting entities. AMPs allow for a measured and
proportionate response to particular instances of non-compliance.
Violations are classified by the Proceeds of Crime (Money Laundering) and
Terrorist Financing Regulations as minor, serious or very serious and carry the
following range of penalties:
Minor violation: from $1 to $1,000 per violation
Serious violation: from $1 to $100,000 per violation
Very serious violation: from $1 to $100,000 per violation for an
individual, and from $1 to $500,000 per violation for an entity (e.g.
corporation)
The limits above apply to each violation, and multiple violations can result in a
total amount that exceeds these limits. 11
There are penalties if you fail to meet the suspicious transaction reporting
obligations. Failure to report a suspicious transaction could lead to up to five
years imprisonment, a fine of up to $2,000,000, or both. Alternatively, failure
to meet the suspicious transaction reporting obligations can lead to an
administrative monetary penalty.
Penalties for failure to report do not apply to employees who report suspicious
transactions to their superior.
There are also penalties if you tip anyone off about a suspicious transaction
report, if your intent is to harm or impair a criminal investigation. 12
Summary of Context
FINTRAC maintains the regulatory authority to audit and issue penalties, and the intelligence
information necessary to know where to look to find suspicious transactions that a reporting
entity has failed to identify and/or report. FINTRAC can issue penalties based on any systemic
or enterprise-level failures assessed, but can also challenge each individual decision to report
10 FINTRAC, Penalties for non-compliance: http://fintrac-canafe.gc.ca/pen/1-eng.asp 11 FINTRAC, Administrative monetary penalties: http://fintrac-canafe.gc.ca/pen/2-eng.asp 12 FINTRAC, Guideline 2(5.3): http://fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s5-3
11 | P a g e
or not to report a specific suspicious transaction given a specific set of circumstances.
Referring to the foregoing Penalties for Non-Compliance, the failure to report a single
transaction which, at FINTRAC’s sole discretion, meets the ‘reasonable grounds to suspect’
threshold, may result in the assessment of the most severe penalties applicable under The
Act and its regulations. Reporting entities should therefore consider their compliance against
this requirement to be the single greatest threat to their regimes.
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UNDERSTANDING THE THRESHOLD
The definition of a suspicious transaction, as derived from the foregoing, is comprised of three
parts:
Suspicious transactions are financial transactions (completed or attempted) where
reasonable grounds to suspect that they are related to the commission or attempted
commission of a money laundering offense has been established.
FINTRAC provides formal guidance relative to this threshold in the form of The Guidelines,
and also through alternate channels including Policy Interpretations (FPI); sourced from
inquiries submitted by reporting entities, FINTRAC has published these questions and their
responses in order to supplement the guidance they have provided in The Guidelines.
The full texts of the FPIs summarized in this guidance and those otherwise identified
as relevant are provided in the appendices as a resource for the Reader.
In order to gain a robust understanding of this obligation, a comprehensive analysis of the
guidance relative to each of the contingent parts of the threshold is necessary.
“Financial Transactions”
While not specifically defined within The Act, its regulations, nor The Guidelines, Statistics
Canada defines a financial transaction as:
A transaction involving the acquisition or disposal of a financial asset. 13
Applying this definition to the operation of a reporting entity, it encompasses a wide variety
of activities undertaken by the reporting entity through the course of their business activities.
Intuitively, examples of non-financial transactions may include activities like the opening of
an account or operation of a safe-deposit box. However, through a FPI, FINTRAC has provided
the following opinion relative to the operation of a safe-deposit box:
In order for safety deposit boxes to be subject to section 7 of the Act as a
financial transaction that occurs or that is attempted, the renting of the safety
deposit box can be considered the "financial transaction" aspect of section 7.
The financial transaction would then be the paying of an amount and in return
the client can use the safety deposit for a set time period. 14
13 Statistics Canada; Glossary: http://www.statcan.gc.ca/eng/nea/gloss/gloss_f#Financialtransaction 14 FINTRAC; Policy Interpretations, Reporting #219: http://www.fintrac-canafe.gc.ca/publications/FINS/2-
eng.asp?s=1
13 | P a g e
This guidance means that reporting entities should identify suspicions relative to non-financial
transactions in order to assess whether or not a reportable financial transaction may have
been attempted or completed through the execution of these non-financial transactions.
With respect to both completed and attempted transactions, FINTRAC provides some direct
guidance:
Completed Transactions:
A completed transaction is one that has occurred. For example, if you process
a deposit from a client towards the purchase of an asset such as a life insurance
policy or a house, a financial transaction has occurred. This is true even if the
final sale associated to the deposit does not go through. In this example, the
refund of the deposit would also be a financial transaction. 15
Note in the example provided, the distinction established between a ‘business’ transaction
and a ‘financial’ transaction, where even a failed ‘business’ transaction is still considered a
completed ‘financial’ transaction for the purposes of reporting.
Attempted Transactions:
An attempted transaction is one that a client intended to conduct and took
some form of action to do so. An attempted transaction is different from a
simple request for information, such as an enquiry as to the fee applicable to a
certain transaction. An attempted transaction includes entering into
negotiations or discussions to conduct the transaction and involves concrete
measures to be taken by either you or the client.
The following are examples of attempted transactions:
A financial entity or casino refuses to accept a deposit because the client
refuses to provide identification as requested.
A securities dealer or life insurance agent refuses to process a
transaction for which the client insists on using cash because their
business practice is not to accept cash.
A client of a real estate agent starts to make an offer on the purchase
of a house with a large deposit, but will not finalize the offer once asked
to provide identification.
An individual asks an accountant to facilitate a financial transaction
involving large amounts of cash. The accountant declines to conduct the
transaction.
A money services business will not process a request to transfer a large
amount of funds because the client requesting the transfer refuses to
provide identification requested. 16
15 FINTRAC; Guideline 2(3.2): http://fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s3-2 16 FINTRAC; Guideline 2(3.2): http://fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s3-2
14 | P a g e
Note that in each of these examples, a specific transaction was initiated; inferred therefore is
that an attempted transaction must be one where the intended purpose (e.g. to deposit) and
nature (e.g. deposit of cash) of the transaction attempted is evident, rather than a situation
where a transaction was possible or contemplated, but that it had not yet been defined as
material action was not taken in its attempt.
Guidance relative to financial transactions can be summarized as:
both financial and non-financial transactions should be assessed for indicators that
could result in ‘reasonable grounds to suspect’, but only financial transactions are
reportable; and
both completed and attempted financial transactions are reportable.
“Reasonable Grounds to Suspect”
FINTRAC has provided some guidance relative to the definition of this standard. This guidance
is broken into two contingent parts; guidance relative to the level of the threshold, and an
expansive list of common indicators that may lead to a determination that the threshold has
been met.
As a resource for the Reader, FINTRAC’s list of indicators may be found on its website
at:
o “Examples of Common Indicators”
http://www.fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s7
o “Examples of Industry-Specific Indicators”
http://www.fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s8
Relative to defining of the threshold:
“Reasonable grounds to suspect” is determined by what is reasonable in your
circumstances, including normal business practices and systems within your
industry. 17
Transactions, whether completed or attempted… may give rise to reasonable
grounds to suspect that they are related to money laundering… regardless of
the sum of money involved. There is no monetary threshold for making a report
on a suspicious transaction. A suspicious transaction may involve several
factors that may on their own seem insignificant, but together may raise
suspicion that the transaction is related to the commission or attempted
commission of a money laundering offense…
17 FINTRAC Guideline 2(3.1): http://fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s3-1
15 | P a g e
As a general guide, a transaction may be connected to money laundering…
when you think that it (or a group of transactions) raises questions or gives
rise to discomfort, apprehension or mistrust. 18 (emphasis FINTRAC)
In a recent presentation, representatives from FINTRAC provided additional guidance relative
to the “reasonable grounds to suspect” threshold, describing it as:
A legal threshold reached through considering several facts including financial
transaction(s) occurring in the course of your business, and the context around
those transaction(s). 19
FINTRAC went further, describing “reasonable grounds to suspect” in the context of thresholds
considered lower and higher than same.
“Simple Suspicion” (lower)
Hunch or intuition leads you to think that ML (money laundering) or TF
(terrorist financing) may be occurring
Cannot articulate reasons for suspicion
“Reasonable Grounds to Suspect”
There is a possibility that ML or TF is occurring
Able to present reasons for why you are suspicious but they do not need
to be proven or verified
“Reasonable Grounds to Believe” (higher)
There is a probability that ML or TF is occurring
Able to present a set of verified facts that can be proven and support
this suspicion 20
In this, FINTRAC has set a very low bar for this threshold; arguably, money laundering is
always ‘possible’, and their guidance here includes no mention of a standard relative to what
evidentiary threshold these ‘reasons’ should meet in order to constitute ‘reasonable grounds’.
To this standard, it could be argued that the presence of any indicia of money laundering
must result in the filing of a suspicious transaction report, irrespective of neither their
assessed credibility nor the context in which they have occurred.
Relative to the review of indicators of potentially suspicious activity, FINTRAC provides
the following:
The context in which the transaction occurs or is attempted is a significant
factor in assessing suspicion. This will vary from business to business, and from
one client to another. You should evaluate transactions in terms of what seems
18 FINTRAC Guideline 2(6.1): http://www.fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s6-1 19 FINTRAC, “Compliance for Intelligence” presented at the Canadian Institute’s 15th Annual Forum on Anti-Money
Laundering, April 26th, 2016. 20 FINTRAC, “Compliance for Intelligence” presented at the Canadian Institute’s 15th Annual Forum on Anti-Money
Laundering, April 26th, 2016.
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appropriate and is within normal practices in your particular line of business,
and based on your knowledge of your client. The fact that transactions do not
appear to be in keeping with normal industry practices may be a relevant factor
for determining whether there are reasonable grounds to suspect that the
transactions are related to money laundering…
An assessment of suspicion should be based on a reasonable evaluation of
relevant factors, including the knowledge of the customer's business, financial
history, background and behavior. Remember that behavior is suspicious, not
people. Also, it could be the consideration of many factors–not just one factor–
that will lead you to a conclusion that there are reasonable grounds to suspect
that a transaction is related to the commission or attempted commission of a
money laundering offense… All circumstances surrounding a transaction should
be reviewed. 21 (emphasis FINTRAC)
The indicators have to be assessed in the context in which the transaction
occurs or is attempted. Each indicator may contribute to a conclusion that there
are reasonable grounds to suspect that the transaction is related to the
commission or attempted commission of a money laundering offense…
However, it may also offer no indication of this in light of factors such as the
client's occupation, business, financial history and past investment pattern.
Taken together, the presence of one or more indicators as well as your
knowledge of your client's business or financial affairs may help you identify
suspicious transactions. 22
An attempt to conduct a transaction does not necessarily mean the transaction
is suspicious. However, the circumstances surrounding it might contribute to
your having reasonable grounds for suspicion. 23
…behavior is suspicious, not people. …it is the consideration of many factors–
not any one factor–that will lead to a conclusion that there are reasonable
grounds to suspect that a transaction is related to the commission or attempted
commission of a money laundering… offense. All circumstances surrounding a
transaction should be reviewed, within the context of your knowledge of your
client. 24 (emphasis FINTRAC)
Becoming aware of certain indicators could trigger reasonable grounds to
suspect that one or more transactions from the past (that had not previously
seemed suspicious) were related to money laundering… For example, this could
happen if it were reported in the media or some other reliable source that one
of your clients is suspected of being involved in illegal activity. If this amounts
21 FINTRAC Guideline 2(6.1): http://fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s6-1 22 FINTRAC Guideline 2(6.3): http://fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s6-3 23 FINTRAC Guideline 2(3.2): http://fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s3-2 24 FINTRAC Guideline 2(8.1): http://fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s8-1
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to suspicion regarding a previous transaction with this client, you would have
to report it to FINTRAC within 30 days of detecting this new fact.25
The regulatory threshold of ‘reasonable grounds to suspect’ remains poorly defined; an
emotive response like discomfort, apprehension or mistrust is represented as sufficient in
some parts of the guidance, where a contextual review of multiple indicators is required in
others. The threshold may be as low as the presence of any indicia of money laundering, or
of a single indicator, or may require the consideration of multiple indicators to establish that
the threshold has been met. The most consistent guidance provided suggests that a
determination that ‘reasonable grounds to suspect’ exist should include consideration for:
Transactional and behavior behavioral norms in the reporting entity’s industry;
Transactional and behavior behavioral norms of the client, when considered against
their specific attributes;
Transactional and behavior behavioral norms of other clients that share similar
attributes with the subject client;
The context in which the subject transactions were conducted;
Transactional and behavior behavioral activities that, irrespective of client or industry
attribute considerations, are consistent with established money laundering
methodologies; and
Indicia must be based on behaviors and actions, not attributes or risks.
Risks are attributes, which may include transactional behaviors/activities, that indicate
the likelihood that money laundering is or could occur.
Indicia are behaviors and/or transactional activities that suggest that money
laundering is occurring.
“Related to the Commission of a Money Laundering Offense”
FINTRAC defines a money laundering offense as:
…a money laundering offense involves various acts committed with the
intention to conceal or convert property or the proceeds of property (such as
money) knowing or believing that these were derived from the commission of
a designated offense. In this context, a designated offense means most serious
offenses under the Criminal Code or any other federal Act. It includes, but is
not limited to those relating to illegal drug trafficking, bribery, fraud, forgery,
murder, robbery, counterfeit money, stock manipulation, tax evasion and
copyright infringement. A money laundering offense may also extend to
property or proceeds derived from illegal activities that took place outside
Canada. 26
25 FINTRAC Guideline 2(6.3): http://fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s6-3 26 FINTRAC Guideline 2(3.1): http://fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s3-1
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In this case, FINTRAC’s guidance requires clarification and expansion through referral to its
definition in the Criminal Code of Canada:
Laundering proceeds of crime
462.31 (1) Every one commits an offense who uses, transfers the possession
of, sends or delivers to any person or place, transports, transmits, alters,
disposes of or otherwise deals with, in any manner and by any means, any
property or any proceeds of any property with intent to conceal or convert that
property or those proceeds, knowing or believing that all or a part of that
property or of those proceeds was obtained or derived directly or indirectly as
a result of
(a) the commission in Canada of a designated offense; or
(b) an act or omission anywhere that, if it had occurred in Canada,
would have constituted a designated offense. 27
designated offense means
(a) any offense that may be prosecuted as an indictable offense under this or
any other Act of Parliament, other than an indictable offense prescribed by
regulation, or
(b) a conspiracy or an attempt to commit, being an accessory after the fact in
relation to, or any counselling in relation to, an offense referred to in paragraph
(a); 28
A designated offense therefore, is any indictable (serious) criminal offense or violation
of other Federal Acts, not limited to those identified in FINTRAC’s guidance.
If reasonable grounds to suspect have been established relative to the commission of a
designated offense, then based on the terms included in the definition “uses, transfers the
possession of, sends or delivers to any person or place, transports, transmits, alters, disposes
of or otherwise deals with, in any manner and by any means,” 29every subsequent financial
transaction related to the proceeds of that designated offense are clearly reportable as being
related to the commission of a money laundering offense.
What of the transaction(s) related to the commission of the designated offense itself? The
language used in The Act, its regulations, and The Guidelines is very specific, and potentially
misleading. A suspicious transaction must be “reported where there are reasonable grounds
to suspect that the transaction is related to the commission or attempted commission of a
money laundering offense;” 30in drafting these requirements, the term ‘money laundering’
offense was chosen over ‘designated’ offense. One could infer therefore, based on the
27 Criminal Code (R.S.C., 1985, c. C-46); Part XII.2 462.3(1): http://laws-lois.justice.gc.ca/eng/acts/C-46/page-
93.html?txthl=462.3#s-462.3 28 Criminal Code (R.S.C., 1985, c. C-46); Part XII.2 462.3(1): http://laws-lois.justice.gc.ca/eng/acts/C-46/page-
93.html?txthl=462.3#s-462.3 29 Criminal Code (R.S.C., 1985, c. C-46); Part XII.2 462.3(1): http://laws-lois.justice.gc.ca/eng/acts/C-46/page-
93.html?txthl=462.3#s-462.3 30
FINTRAC, Guideline 2(3.1): http://www.fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s3-1
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language chosen, the reporting obligation exists only in relation to those transactions that are
related to the commission of the money laundering offense and not the designated offense
that generated the proceeds to be laundered.
Scenario 1:
As an example under this interpretation, a client deposits a counterfeit check to their account,
and then transfers the funds to a different account. In this scenario, the deposit of the
counterfeit check would not be reportable. Instead only the transfer of its proceeds, the
transaction related to the commission of a money laundering offense, would be reported.
Scenario 2:
In a different example under this same interpretation, the client deposits the same counterfeit
check, but this time the bank prevents the transfer of any funds; in this case no transaction
would be reportable as there weren’t any proceeds of the designated offense for there to be
any transactions related to the commission of the money laundering offense.
“Related to the Attempted Commission of a Money Laundering Offense”
Reviewing again the terms in the definition of the Laundering Proceeds of Crime offense “uses,
transfers the possession of, sends or delivers to any person or place, transports, transmits,
alters, disposes of or otherwise deals with, in any manner and by any means” 31, it becomes
virtually impossible to conceive of any scenario where a designated offense, committed to
generate proceeds (intentionally or otherwise), does not then also result in the commission
of a laundering offense relative to those proceeds.
Revisiting Scenario 2 from above, where the attempt to commit fraud was unsuccessful, the
attempted commission of a designated offense must therefore also be considered related to
the attempted commission of the subsequent money laundering offense. By the same logic,
the transaction related to the commission of the fraud in Scenario 1 must then also be
reported.
Considered from the perspective of a reporting entity’s obligations, it is not necessary for the
reporting entity to conclusively establish the nexus between the commission of a designated
offense and the subsequent implied money laundering offense to a standard of ‘absolute
certainty’; but rather they need only be able to demonstrate that ‘reasonable grounds to
suspect’ exist that a money laundering offense has been committed or attempted. Therefore
in any context, and in any case, transactions related to the commission or attempted
commission of a designated offense must be considered to be related to the commission or
attempted commission of a money laundering offense for the purposes of suspicious
transaction reporting.
31 Criminal Code (R.S.C., 1985, c. C-46); Part XII.2 462.3(1): http://laws-lois.justice.gc.ca/eng/acts/C-46/page-
93.html?txthl=462.3#s-462.3
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FINTRAC’s Policy Interpretations, however, offer conflicting guidance. Across three examples,
FINTRAC states that the transactions related to the designated offense are reportable, might
be reportable, and are not reportable.
Question:
Company A provided an overview of a case in which a person is suspected of
committing fraud. The fraud was committed with funds provided by 500
individuals. The 500 individuals may be, either knowingly or not, involved in
tax evasion. The primary question is whether or not the 500 individual
transactions are required to be reported, or if only the transactions subsequent
to the receipt of the funds, which would be the point in time at which the
predicate offense (fraud) was completed, must be reported.
Answer:
…If the reporting entity has reasonable grounds to suspect that a financial
transaction that occurs or that is attempted in the course of their activities is
related to the commission or the attempted commission of a money laundering
offense…, a suspicious transaction report must be submitted to FINTRAC. Based
on the information provided, the reporting entity has, reasonable grounds to
suspect that these financial transactions, which occurred in the course of their
activities, are related to the commission or the attempted commission of a
money laundering offense. They are therefore reportable.
Date Answered: 2015-01-19 32
Here, FINTRAC has taken a definitive position that the transactions related to the
commission of the designated offense are reportable.
Question:
Does FINTRAC require companies that provide a medium for victims to make
payments related to ransomware (a type of malware that prevents or limits
users from accessing their system) to file STRs/ASTRs in Canada?
Answer:
…As a result, for a transaction to qualify as a suspicious transaction, reportable
under the PCMLTFA and the Proceeds of Crime (Money Laundering) and
Terrorist Financing Suspicious Transaction Reporting Regulations, the reporting
entity must have reasonable grounds to suspect it is related to the commission
or attempted commission of… a money laundering offense… A money
laundering offense is typically committed or attempted with the intention to
conceal or convert proceeds derived from the commission of a designated
offense, which could include drug trafficking, bribery, or fraud. It is, therefore,
for the individuals and entities that are reporting entities under Part 1 of the
PCMLTFA, to determine whether they have reasonable grounds to suspect that
32 FINTRAC; Policy Interpretations, Reporting #41: http://fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=1
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a transaction or attempted transaction is related to a money laundering…
offense. If so, an STR must be sent within 30 calendar days.
Date Answered: 2015-08-11 33
In this case, where the subject transactions are clearly related to the commission of a
designated offense and definitive guidance could be provided, FINTRAC chose only to reiterate
that the decision-making onus remains with the reporting entity.
Question:
Are credit unions required to report the suspicious alerts they receive from their
Fraud Alert System regarding their clients’ debit cards. More specifically, the
Fraud Alert System sends alerts to the reporting entity when their clients’ debit
cards have been suspected of being skimmed (i.e.: where debit card
information such as the personal identification number has been illegally
recorded). Are these transactions, or attempted transactions, to be reported to
FINTRAC as Suspicious Transaction Reports (“STR”)?
Answer:
…In the current case, the alerts being issued by the Fraud Alert System are in
relation to the skimming or suspected skimming of debit cards, a criminal
offense amounting to fraud, as opposed to a money laundering or terrorist
activity financing offense. However, if following the card skimming, efforts are
made to conceal or convert the proceeds, this may amount to the commission
or attempted commission of a money laundering offense. Any transactions or
attempted transactions related to these efforts would then be reportable as
STRs in accordance with section 7 of the PCMLTFA.
Date Answered: 2013-08-19 34
This FPI clearly distinguishes between the commission of a designated offense and the
commission of a money laundering offense, directing that the transactions related to the
commission of a designated offense are not reportable.
It is the opinion of the writer that transactions related to card-present fraud
exploitation should be exempt from suspicious transaction reporting requirements;
reporting entities already report these under contract to the card-service system
providers, like the Interac Association, and this information is of little intelligence value
to FINTRAC as reporting entities could only report the locations where the exploitation
transactions occurred along with the victim’s personal data.
Multiple other FPIs have been posted by FINTRAC relative to the suspicious transaction
reporting threshold. The full texts of these have been included in the appendices as a
reference for the Reader.
33 FINTRAC; Policy Interpretations, Reporting #26 http://fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=1 34 FINTRAC; Policy Interpretations, Reporting #107: http://fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=1
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The purpose and intent of Canada’s AML/CTF regime is clear - to generate actionable
intelligence for use by law enforcement agencies to detect, investigate, and prosecute illegal
acts committed domestically or abroad. While FINTAC’s guidance relative to what
transactions are actually reportable remains contradictory, understanding what constitutes a
money laundering offense per the Criminal Code of Canada affirms that failing to report
transactions related to the commission or attempted commission of a designated offense runs
counter to the purpose and intent of the suspicious transaction reporting requirement.
FINTRAC’s Public Notices of Administrative Monetary Penalties
Another possible source of formal guidance could be found in the publication of FINTRAC’s
enforcement activities; however, FINTRAC does not publish detailed reports of any of its
‘enforcement actions’ like other regulators may do in other jurisdictions. FINTRAC has the
discretion to publicly identify or keep secret the name of a reporting entity that has been the
subject of an enforcement action, and, in either case, will only report basic violation data
publicly. For example, FINTRAC issued an administrative monetary penalty of $1.1 million
against a Canadian bank, reported in April of 2016; FINTRAC used its discretionary authority
and chose not to identify the bank publicly, issuing notice only that a bank had been fined for
the failure to report a suspicious transaction and other money transfer transactions. FINTRAC
failed to provide any detailed synopsis for how it came to the determination that a suspicious
transaction should have been filed, what facts lead them to the determination that the
“reasonable grounds to suspect” threshold had been met, nor did they provide information
relative to any other mitigating or aggravating factors.
Even where FINTRAC decides to publicly name a penalized entity, it only includes the value
of the AMP assessed and a description of the specific regulatory requirement(s) not met;
FINTRAC does not release any information about the specific violation(s) committed by the
penalized entity, nor any information relative to the assessment of the AMP and how they
determined its value in that specific circumstance.
Primary public notice of the assessment of an AMP:
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35
35 FINTRAC, Public notice of administrative monetary penalties: http://www.fintrac-canafe.gc.ca/pen/4-eng.asp
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Public notice of the specific nature of the violations that resulted in the assessment of an
AMP:
36
Aside from their public notices of administrative monetary penalties, FINTRAC provides only
a summary list of violations that have resulted in AMPs, by industry. Where multiple entities
from a specific industry have been penalized, the summary list does not indicate which
violations were committed by which sanctioned entity, nor if any entity had multiple instances
of the same violation. There is also no information from FINTRAC to indicate the frequency
with which a specific violation is found to occur within a given industry.
In the case of the bank that received the AMP of $1.1 million, the single largest AMP ever
issued by FINTRAC and the first to be issued to a bank, FINTRAC disclosed only that the fine
amount was $1,154,670, and that the following violations were committed:
36 FINTRAC, Public notice of administrative monetary penalties, Howell Investment Management Inc., ‘violation’
view: http://www.fintrac-canafe.gc.ca/pen/4-eng.asp?m=41
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37
The amount of the fine and the nature of the violations that promulgated it are only
attributable to this single instance with this single bank, because no other bank has yet been
fined; therefore, the summary table by industry, in this case for banks, contains only the
information related to this single instance.
37 FINTRAC, Public notice of administrative monetary penalties, Bank ‘View’: http://www.fintrac-
canafe.gc.ca/pen/4-eng.asp
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38
As evidenced by these examples, reporting entities cannot derive any meaningful guidance
from FINTRAC’s enforcement actions in order to improve and secure their own regimes.
FINTRAC’s failure to disclose details of their AMP determinations, results in a failure of
Canada’s AML/CTF regime to establish precedent, against which reporting entities could
reasonably be measured. Given that transparency of enforcement is a foundational tenet of
a society based on the democratic rule of law, FINTRAC must begin publishing detailed
summaries explaining its findings and the specific reasons for them, even if they continue to
use their discretion in choosing not to name those entities found to be non-compliant.
An additional concern is the fact that so few findings relative to a reporting entity’s failure to
identify and report a suspicious transaction have been identified. This represents a
fundamental risk to the effectiveness of Canada’s regime; since the requirement was
introduced in 2008, FINTRAC has found that only one financial entity (bank or credit union)
has failed to report a suspicious transaction. Given the size of Canada’s economy and the
overwhelming share of that economic activity that is conducted through its banks and credit
unions every day, this is an unacceptably low level of enforcement against, and feedback
provided to, reporting entities relative to these obligations.
38 FINTRAC, Public notice of administrative monetary penalties: http://www.fintrac-canafe.gc.ca/pen/4-eng.asp
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EVIDENTIARY STANDARD
As an alternative to the contradictory and inadequate formal guidance provided, Canada’s
court system has considered the definition of several subjective standards and thresholds,
which are applicable in a wide variety of circumstances. The court considers these relevant
evidentiary standards in order (high-to-low):
“absolute certainty”
“beyond a reasonable doubt”
“on a balance of probabilities”
“reasonable and probable grounds to believe”
“reasonable grounds to suspect”
“mere suspicion”
To seek a better understanding of the “reasonable grounds to suspect” threshold, a review of
Canada’s evidentiary standards established through its Courts is necessary. In Sellathurai v.
Canada (Public Safety and Emergency Preparedness), 2007 FC 208 (CanLII), Justice Simpson,
through referral to several other precedent cases that established the standards both above
and below the subject standard, articulated the evidentiary threshold required to establish
“reasonable grounds to suspect”.
[67] Although this case concerns “reasonable grounds to suspect”, the
Supreme Court of Canada’s interpretation of the phrase “reasonable grounds
to believe” is an appropriate starting point. In Mugesera v. Canada (Minister
of Citizenship and Immigration), 2005 SCC 40 (CanLII), [2005] 2 S.C.R. 100
at paragraph 114, the Court said the following:
The first issue raised by s. 19(1)(j) of the Immigration Act is the meaning of
the evidentiary standard that there be “reasonable grounds [page 145] to
believe” that a person has committed a crime against humanity. The FCA has
found, and we agree, that the “reasonable grounds to believe” standard
requires something more than mere suspicion, but less that the standard
applicable in civil matters of proof on the balance of probabilities: Sivakumar
v. Canada (Minister of Employment and Immigration), 1993 CanLII 3012 (FCA),
[1994] 1 F.C. 433 (C.A.), at p. 445; Chiau v. Canada (Minister of Citizenship
and Immigration), 2000 CanLII 16793 (FCA), [2001] 2 F.C. 297 (C.A.), at para.
60. In essence, reasonable grounds will exist where there is an objective basis
for the belief which is based on compelling and credible information: Sabour
v. Canada (Minister of Citizenship & Immigration) (2000), 2000 CanLII 16300
(FC), 9 Imm. L.R. (3d) 61 (F.C.T.D.). [my emphasis]
[68] In the earlier case of R. v. Monney, 1999 CanLII 678 (SCC), [1999] 1
S.C.R. 652, the Court had considered section 98 of the Customs Act, R.S.C.,
1985, c. 1 (2nd Supp.), which required a customs officer to suspect on
reasonable grounds that a person had narcotics secreted on or about his person
before conducting a strip search.
[69] In this context, the Court said at paragraph 49:
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…Having determined, however, that the search conducted by the customs
officers was constitutionally permissible pursuant to s. 98 of the Customs Act
on the basis of reasonable grounds to suspect, which can be viewed as a lesser
but included standard in the threshold of reasonable and probable grounds to
believe, I see no reason to interfere with the implicit factual finding at trial,
confirmed on appeal, that Inspector Roberts had at the very least reasonable
grounds to suspect that the respondent had ingested narcotics. [my emphasis]
[70] The question then is how to describe the lesser but included standard. In
my view, even reasonable grounds to suspect must involve more than a “mere”
or subjective suspicion or a hunch. The suspicion must be supported by
credible objective evidence. In this regard, see R v. Calderon, 2004 CanLII
7569 (ON CA), [2004] O.J. No. 3474. There, the Ontario Court of Appeal
considered whether police officers had reasonable grounds to suspect that the
appellants had been implicated in the transportation of drugs. In that
connection, the Court noted that an objective assessment was essential. The
Court said at paragraph 69 that “… even a hunch born of intuition gained by
experience …” would not support a conclusion that reasonable grounds to
suspect were present.
[71] If credible objective evidence is required to support a suspicion, the
question becomes where does the lesser standard appear. To this point, both
reasonable grounds to believe and suspect have been treated identically. In
my view, the difference must appear in the characterization of the evidence. In
Mugasera, supra, the Court said that “compelling” evidence was needed to
support reason to believe. In my view, this is where the distinction is
made. Evidence to support a suspicion need not be compelling; it must simply
be credible and objective. 39
The Court therefore defines “reasonable grounds to suspect” as being:
any case where evidence to support the suspicion is “credible and objective”;
a higher standard than “mere suspicion” which may be based on a “hunch born of
intuition and gained by experience”; and
a lower standard than “reasonable grounds to believe”, where “there is an objective
basis for the belief which is based on compelling and credible information”.
Reasonable: Having sound judgment; fair and sensible; based on good sense; 40
Credible: Able to be believed; convincing; capable of persuading people 41
Objective: (Of a person or their judgement) not influenced by personal feelings or
opinions in considering and representing facts; Not dependent on the mind for
existence; actual 42
39 Sellathurai v. Canada (Public Safety and Emergency Preparedness), 2007 FC 208 (CanLII), par. 67:
http://canlii.ca/t/1qp2l#par67
40 Oxford Dictionaries: http://www.oxforddictionaries.com/us/definition/english/reasonable 41 Oxford Dictionaries: http://www.oxforddictionaries.com/us/definition/english/credible 42 Oxford Dictionaries: http://www.oxforddictionaries.com/us/definition/english/objective
29 | P a g e
Compelling: Not able to be refuted; inspiring conviction 43
One might assume that the regulatory threshold envisioned in The Act would equate to the
evidentiary threshold established by Canada’s judicial system. However, FINTRAC’s guidance
does not clearly align the regulatory threshold to its evidentiary counterpart, and may in fact
represent it as a lesser threshold. At the very least, this is a possible interpretation given
FINTRAC’s representations throughout some portions of their guidance.
43 Oxford Dictionaries: http://www.oxforddictionaries.com/us/definition/english/compelling
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RISKS TO THE REGIME
The foundational nature of the requirement to identify and report suspicious transactions
means that the risks associated with the failure of a reporting entity to execute against it are
existential. Absent a clearly articulated and consistently enforced standard, the effectiveness
of the entire national regime is at risk.
Risks of Under-Reporting
The two primary risks associated with the under-reporting of suspicious transactions are:
the failure of the national regime to receive the financial intelligence necessary to be
effective in its purpose; and
the potential assessment of catastrophic penalties against reporting entities who fail
to comply with their obligations to detect and report suspicious transactions.
As an example of the possible scope of this potential under-reporting due to the
misinterpretation of the current reporting threshold, a survey was recently conducted among
credit unions in Canada seeking to understand the current state of their money laundering
detection regimes. Of the 14 respondents, who represented 44 percent of the assets under
management by the industry, only the responses of two credit unions indicated that their
suspicious transaction detection regimes were designed to systemically identify indicia relative
to the commission or attempted commission of a designated offense and the subsequent
transactions related to money laundering offenses:
Requirement
all activities relative to the commission or attempted commission of a
designated offense through the credit union must be reviewed for eligibility
to report as a suspicious transaction;
Success against this requirement necessitates that the credit union assess all
points of contact with a member, and all sources of information about a member
obtained through the normal course of business, to reasonably identify enhanced
risks of involvement by that member in the commission of a designated offense.
High Risk: no documented formal activities
specific to the detection of identifiable
designated offenses
Medium Risk: some documented formal
activities specific to the detection of
identifiable designated offenses
Low Risk: robust documented formal
activities specific to the detection of
identifiable designated offenses
Unscored: no response
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Only two credit unions provided a comprehensive list of case intake sources
to indicate that reasonable efforts to identify evidence of a designated
offense are undertaken, and therefore reviewed to determine eligibility for
reporting; this list included: indicators of fraud, inquiries from law
enforcement including the receipt of production orders, referrals from the
Credit Union Office of Crime Prevention Investigators (CUOCPI), and the
formal review of negative media.
One other credit union noted that their AML cases are ‘sometimes’ referred
from a fraud investigation; another stated that they are ‘exploring the
possibility’ of including fraud in their reporting regime, though they also
report sharing human resources between their AML and fraud operations;
two others that share human resources between AML and fraud operations
did not reference referrals from fraud investigations as a source of their AML
cases.
Several noted the use of structured or unstructured negative media review
processes.
One additional credit union noted referrals from the receipt of production
orders.
High risk; absent a structured and comprehensive regime specific to the detection
of activities related to the commission of an identifiable designated offense,
material deficiencies are likely to occur frequently. 44
Apparent from this is that the under-reporting of suspicious transactions is a risk present in
today’s regime, where in this case, many reporting entities in the credit union system fail to
recognize the breadth of their detection and reporting obligations; their failure to maintain
detection regimes capable of systemically identifying transactions for review based on such
foundational indicator-types, for example their own fraud detection efforts or referrals from
law enforcement, instructs that they are very likely to fail to identify reportable transactions
on a frequent basis. This risk is likely to be present across multiple reporting entity industries,
particularly given the poor quality of the guidance provided.
Risks of Over-Reporting
The risks to both the regime and to reporting entities of over-reporting are several:
it can strain the resources of both the national FIU and also the reporting entity; in
the case of the reporting entity, this strain on resources may actually lead to the under-
reporting of suspicious transactions (additionally exposing them to those associated
risks) as their resources may then fail to adequately review and adjudicate other
instances in an attempt to keep up;
it can skew analytical data, used both to detect reportable activities, but also used to
assist in resource management and workforce planning activities; and
44 Chris Randle, “Money Laundering Detection Regimes, Credit Unions in Canada”, CAMS-Audit White Paper, 2016
32 | P a g e
it establishes precedent for the reporting entity, both at the client level and the
typology level, that FINTRAC may use in their audit assessments of the reporting
entity’s detection and reporting regimes to detect unreported suspicious transactions.
Further, once the reasonable grounds to suspect threshold has in-fact been met, the Courts
have established that evidence to the contrary must meet the ‘beyond a reasonable doubt’
standard, or else reasonable suspicion survives:
[72] With regard to the burden of proof on an applicant who wishes to dispel
a suspicion based on reasonable grounds, it is my view that such an applicant
must adduce evidence which proves beyond a reasonable doubt that there are
no reasonable grounds for suspicion. Only in such circumstances will the
evidence be sufficient to displace a reasonable suspicion.
[73] I have reached this conclusion because, if a Minister’s Delegate were only
satisfied on the balance of probabilities that there were no reasonable grounds
for suspicion, it would still be open to him to suspect that forfeited currency
was proceeds of crime. The civil standard of proof does not free the mind from
all reasonable doubt and, if reasonable doubt exists, suspicion survives. 45
Therefore, once a reporting entity has determined that a client is suspicious, practically, that
client must always be considered suspicious and the reporting entity must continue to report
every transaction related to that suspicion. A deeper interpretation could also include that
once reasonable suspicion is established, the mere presence of any relevant indicators,
irrespective of any critical testing, must also be considered reportable thereby lowering the
threshold-test for any subsequent reviews of that client. As a result, over-reporting may have
material implications for a reporting entity in the maintenance of its business relationships;
while FINTRAC does not require that reporting entities de-market business relationships that
it has deemed suspicious, a reporting entity’s ongoing obligation to monitor and report on the
activities of a client may result in the unjust and/or unnecessary termination of a relationship.
Personal Liability
The Act has also established personal liability for all employees or representatives of a
reporting entity, relative to their obligation to report suspicious transactions. Any employee
who fails to report a suspicious transaction, either to FINTRAC or their ‘superiors’, is liable for
the same potential penalties as the reporting entity itself. This liability, when combined with
the ‘good faith’ immunity clause, result in many reporting entities adopting a culture of
‘defensive filing’ which ironically, may only serve to aggravate their risk.
5.2 Immunity
45 Sellathurai v. Canada (Public Safety and Emergency Preparedness), 2007 FC 208 (CanLII), par. 72:
http://canlii.ca/t/1qp2l#par72
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No criminal or civil proceedings may be brought against you for making a report
in good faith concerning a suspicious transaction. This also applies if you are
not required to submit a report to FINTRAC, but decide to provide information
voluntarily to FINTRAC because of your suspicions of money laundering or
financing of terrorist activity. 46
FINTRAC’s Disclosures
As Canada’s financial intelligence unit, FINTRAC not only receives financial intelligence, but
also analyzes it and provides proactive disclosures to law enforcement and other intelligence
agencies, where it has met the ‘reasonable grounds to suspect’ threshold.
FINTRAC must disclose designated information to appropriate recipients once
reasonable grounds to suspect a money laundering, terrorist activity financing
offense or a threat to the security of Canada are met. 47 (emphasis FINTRAC)
In its annual report for 2015, FINTRAC claims to have completed 1,260 disclosures of
actionable intelligence to law enforcement and other intelligence agencies. 48 In the same
report, FINTRAC claims to have received 92,531 suspicious transaction reports 49; those
reports represent each instance where a reporting entity believes that it has met the
‘reasonable grounds to suspect’ threshold, virtually the same threshold that triggers
FINTRAC’s obligation to disseminate that information to law enforcement; reasonably it can
be assumed that many of those disclosures made by FINTRAC were comprised of numerous
suspicious transaction reports. In spite of that assumption, a disclosure ratio of 73:1 raises
questions about the effectiveness of both FINTRAC’s analysis, and the quality of the
submissions being made by reporting entities. FINTRAC further reports that it received 1,380
voluntary information records from Canadian law enforcement agencies during this period 50;
it can therefore be further assumed that a significant percentage of FINTRAC’s disclosures
were triggered as a result of the receipt of the voluntary information records received directly
from law enforcement, as opposed to FINTRAC’s analytical efforts determining that threshold
for disclosure had been met. The necessary conclusion derived from this is that either a
significant disparity exists between how FINTRAC and reporting entities interpret ‘reasonable
grounds to suspect’, or else that FINTRAC is failing to review a significant percentage of the
reports submitted, perhaps as a result of over-reporting by reporting entities.
Per the Financial Action Task Force’s (FATF) most recent mutual evaluation of Canada’s regime
(2015), they generally comment that the effectiveness of Canada’s financial intelligence
analysis and law enforcement activities are not commensurate with Canada’s risk of money
laundering:
46 FINTRAC, Guideline 2(5.2): http://fintrac-canafe.gc.ca/publications/guide/Guide2/2-eng.asp#s5-2 47 FINTRAC, FINTRAC, law enforcement and intelligence partners: Sharing intelligence, making the links:
http://www.fintrac.gc.ca/publications/brochure/2011-02/1-eng.asp 48 FINTRAC, FINTRAC Annual Report 2015: http://www.fintrac.gc.ca/publications/ar/2015/1-eng.asp#s8.3 49 FINTRAC, FINTRAC Annual Report 2015: http://www.fintrac.gc.ca/publications/ar/2015/1-eng.asp#s8.1 50 FINTRAC, FINTRAC Annual Report 2015: http://www.fintrac.gc.ca/publications/ar/2015/1-eng.asp#s8.3
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3. Financial intelligence and other relevant information are accessed by
Canada’s financial intelligence unit, FINTRAC, to some extent and by law
enforcement agencies (LEAs) to a greater extent but through a much lengthier
process. They are used to some extent to investigate predicate crimes and TF
activities, and, to a much more limited extent, to pursue ML.
5. Law enforcement results are not commensurate with the ML risk and asset
recovery is low.
20. …FINTRAC’s analysis and disclosures are mainly prepared in response to
the requests made by LEAs (law enforcement agencies) in Voluntary
Information Records (VIRs)… 51
Clearly defined thresholds and effective feedback and enforcement efforts should result in
more targeted and effective detection efforts, as well as the provision of better quality and
more relevant intelligence information in the resultant reports.
51 The FATF, Canada’s Measures to Combat Money Laundering and Terrorist Financing 2016, Executive Summary:
http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-canada-2016.html
RE-DEFINING THE THRESHOLD
The Department of Finance, responsible for drafting the Proceeds of Crime (Money
Laundering) and Terrorist Financing Regulations in response to any changes to The Act,
suggested a change in the language defining the reporting threshold in July of 2015.
Former language:
9 (2) The report shall be sent to the Centre within 30 days after the day on
which the person or entity or any of their employees or officers detects a fact
respecting a financial transaction or an attempted financial transaction that
constitutes reasonable grounds to suspect that the transaction or attempted
transaction is related to the commission of a money laundering offense or a
terrorist activity financing offense. 52
Proposed language:
Subsection 9(2) of the Regulations is replaced by the following:
(2) The report shall be sent to the Centre within 30 days after the day on which
the person or entity or any of their employees or officers detects a fact
respecting a financial transaction or an attempted financial transaction that
could reasonably be expected to raise reasonable grounds to suspect that the
transaction or attempted transaction is related to the commission of a money
laundering offense or a terrorist activity financing offense. 53(emphasis mine)
The Department of Finance issued the proposed language to reporting entities for
consultation. Those reporting entities largely interpreted that the new language, “could
reasonably be expected to raise reasonable grounds to suspect”, appeared to reduce the
‘reasonable grounds to suspect’ threshold, and further confused the expected standard. After
this consultation, the Department of Finance chose to maintain the present regulatory
language stating that it was not their intention to reduce the threshold, only to clarify it.
While the use of a term to define the use of the same term does not improve its clarity, this
attempt does appear to indicate that policy makers recognize that the present threshold is
problematic and ill-defined.
Proposing a New Standard
Developing a new standard requires review of what exists today:
52 Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting
Regulations (SOR/2001-317), Subsection 9(2): http://laws-lois.justice.gc.ca/eng/regulations/SOR-2001-317/page-
2.html#docCont 53 Canada Gazette, Regulations Amending Certain Regulations Made under the Proceeds of Crime (Money
Laundering) and Terrorist Financing Act, 2015, Subsection 9(2): http://gazette.gc.ca/rp-pr/p1/2015/2015-07-
04/html/reg2-eng.php
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Suspicious transactions are financial transactions (completed or attempted) where
reasonable grounds to suspect that they are related to the commission or attempted
commission of a money laundering offense has been established.
Changing some of the language in the current definition can provide significantly greater
clarity:
A suspicious transaction is one where credible and objective evidence can be
articulated to indicate that a financial transaction (completed or attempted) may be
related to the commission or attempted commission of a designated offense.
Replacing ‘reasonable grounds to suspect’ with ‘credible and objective evidence’ aligns the
threshold with the evidentiary standard and clarity provided by Canada’s court system. While
this threshold does remain subjective, its precedent guidance has been well tested, is
transparent, and is available both to reporting entities and FINTRAC.
Replacing ‘money laundering offense’ with ‘designated offense’ ensures that reporting entities
aren’t inappropriately attempting to distinguish between those transactions that are related
to the commission or attempted commission of a designated offense versus those that may
be related to the laundering if its proceeds.
However, as the primary purpose of Canada’s regime is to generate actionable intelligence,
the reporting of suspicious activity should not be limited solely to the reporting of transactions.
Arguably it may be impossible for a reporting entity to be able to identify specific financial
transactions that may be related to a suspicion that an individual or entity may be in some
way related to the commission of a designated offense; reporting entities are unlikely to have
a complete understanding of the nature of the offenses suspected, or else are unlikely to have
access to the sum total of the financial activities of that individual or entity for use in their
assessments. A reporting entity may therefore fail to identify a reportable transaction,
thereby depriving FINTRAC of what may be useful intelligence and exposing themselves to
potential penalty. Canada’s suspicious transaction reporting regime should go a step further,
and change the threshold which defines it to include the reporting of suspicious activities that
are not necessarily attributable to a specific transaction or series of transactions. The
threshold should not be reliant on a transaction at all, but rather should be dependent on the
identification and articulation of indicators that result in the determination that an individual
or entity is suspicious; where transactional indicators are present, they should still be required
to be reported.
Proposed new standard:
The suspicious activity threshold is met when credible and objective evidence can be
articulated to indicate that a subject may be related to the commission or attempted
commission of a designated offense. If those indicators include transactions, then
those transactions must also be reported.
‘Subject’ is defined as:
o an individual or entity that has, or has attempted, to establish a business
relationship with a reporting entity; or
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o an individual or entity that has conducted a financial transaction with a
reporting entity outside of a business relationship.
‘Transaction’ is defined as:
o any interaction between a reporting entity and subject that establishes or
attempts to establish a business relationship;
o any interaction between a reporting entity and subject that occurs once a
business relationship has been established or attempted; or
o any financial transaction completed or attempted outside of a business
relationship.
‘Interaction’ is defined as any financial or non-financial transaction, communication, or
other engagement of any kind between a reporting entity and a subject.
For greater clarity, FINTRAC defines a business relationship as:
…a relationship that you establish with a client to conduct financial transactions
or provide services related to those transactions.
For financial institutions, these relationships can be established within or
outside of an account.
Account-based business relationship: You are in a business relationship with a
client that holds an account with you. You enter into a business relationship
when a client opens an account with you. For a new or existing client that has
one or more accounts, the business relationship includes all transactions and
activities relating to those accounts.
Non-account-based business relationship: If your client does not have an
account, you enter into a business relationship when you conduct two or more
transactions in which you have to:
ascertain the identity of the individual; or
confirm the existence of a corporation or other entity.
In such a case, the business relationship only includes transactions and related
activities for which you have to ascertain the identity of your client…
If you have a client without an account who conducts two or more suspicious
transactions, you have still entered into a business relationship with that client,
even if you are unable to ascertain the identity of that client. This is because
suspicious transactions require you to take reasonable measures to ascertain
the identity of the client…, and so two or more of these transactions will trigger
a business relationship.
A business relationship is established when two transactions that require you
to ascertain the identity of your client occur within a maximum of five years
from one another. If a period of five years passes from the last transaction that
required you to ascertain the identity of your client, the business relationship
with that client ceases in the case of non-account-based business relationships.
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In the case of clients who hold an account, the business relationship ceases five
years after the client closes that account. 54
The adoption of this new standard and definition would oblige reporting entities to submit
suspicious activity reports in every instance where they can articulate credible and objective
evidence that an individual or entity may be related to the commission or attempted
commission of a designated offense. Whether those indicators be related to, among other
activities, account openings and closings, conversations and communications, credit
applications that do not meet the current ‘attempted financial transaction’ threshold, or wealth
planning activities that do not necessarily result in a financial transaction, these would all now
be reportable irrespective of the identification of specific financial transactions related to those
suspicions. Credible and objective evidence must also include indicators from sources that
are not the subject, for example articles in the media or production orders from law
enforcement; therefore the implication that indicators may or may not be related to a direct
engagement with the subject is a critical inclusion in the proposed standard.
This standard also expands the scope of what a reporting entity must consider relative to the
commission of a designated offense; where the existing standard focuses on the reporting of
financial transactions related to a designated offense, this implies that reporting entities need
only consider those designated offenses that could potentially generate proceeds to be
laundered, being predicate offenses. This inference by the reporting entity is problematic as
many designated offenses may be indicative of money laundering risk, without being
themselves predicate offenses. For example, a reporting entity’s awareness that a subject
has been charged with a violent offense, assault or murder, may not trigger a review for
transactions related to a money laundering offense as neither is considered a predicate
offense. Each may however be indicative of, for example, an affiliation of the subject with
organized crime or some other money laundering risk; absent context, which the reporting
entity is unlikely to have, valuable financial intelligence may go unreported.
To further supplement this standard and provide still greater clarity, the establishment of
specific indicators could trigger a requirement to report, irrespective of context. This list of
indicators could be developed to include reporting triggers specific to each reporting entity’s
industry, and be reviewed periodically to align with risks identified in the National AML/CTF
Risk Assessment and any other tactical or strategic objectives identified by the national
regime. Some examples specific to financial entities could include:
Cash deposit structuring to avoid prescribed reporting thresholds; evidence of intent
to avoid the prescribed reporting threshold is not required.
Electronic funds transfer structuring to avoid prescribed reporting thresholds;
evidence of intent to avoid the prescribed reporting threshold is not required.
Misrepresentation of personal identification.
Misrepresentation of beneficial ownership and/or control information relative to an
entity.
Where a material misstatement of assets, income, or liabilities has been provided for
any purpose.
54 FINTRAC, Guideline 6G(5): http://fintrac-canafe.gc.ca/publications/guide/guide6/6G-eng.asp#s5
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Where income reported to the Canada Revenue Agency is not commensurate with the
income apparent through a business relationship, where the reporting entity has
obtained the information relative to the income reported to the Canada Revenue
Agency through the course of its business activities; minimum threshold of $10,000
variance in the reporting year. (Amend Guideline 6 to require the obtainment of tax
filing data for the two years prior to an application for credit)
Where apparent business transactional activity is being transacted through an account
held for an individual that is not a sole proprietorship; minimum threshold of $10,000
in a rolling 12-month period.
Where apparent personal transactional activity is being transacted through an account
held for an entity; minimum threshold of $10,000 in a rolling 12-month period.
Exemptions:
Victim transactions related to a card-present fraud exploitation should not be reportable.
Adopting this standard would serve to improve clarity and therefore result in:
a reduced risk of non-compliance for reporting entities;
improved quality in the intelligence received by FINTRAC;
improved ability of reporting entities to determine and articulate the level of human
and technological resources necessary to execute against this standard;
less subjectivity, allowing reporting entities to better test the compliance and
effectiveness of their systems and processes; and
easier to understand training for all employees of a reporting entity.
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CONCLUSION
The risks to Canada’s AML/CTF regime are several and severe as a result of the lack of clarity
inherent in the current ‘reasonable grounds to suspect’ threshold; effectiveness testing and
compliance programs cannot out-audit a standard that is poorly designed, poorly defined, and
poorly articulated. The result is that reporting entities will continue to struggle to provide
actionable intelligence to FINTRAC and will continue to be at risk of being assessed
catastrophic penalties for these failures; FINTRAC and law enforcement agencies will continue
to fail to provide commensurate response to the threats posed by money laundering. Both
groups will continue to struggle to balance the needs of the regime against their limited
resources, failing to use them to their best effect and challenging the credibility of any
business case that could justify an increase. To improve the effectiveness of the national
suspicious transaction detection and reporting regime, several ‘calls to action’ should be
considered.
Calls to Action
There are several stakeholders who are responsible for the management and effectiveness of
the national AML/CTF regime. Principal amongst these are Canada’s federal Department of
Finance and FINTRAC. The Department of Finance is responsible for the drafting and
maintenance of the regulations that enable the Proceeds of Crime (Money Laundering) and
Terrorist Financing Act, and is responsible for the oversight of FINTRAC’s operations. FINTRAC
provides interpretive guidance relative to The ACT and its regulations, and is the primary
regulator for all reporting entities relative to their obligations under the regime. These two
stakeholders therefore have primacy relative to the establishment of policies within the
regime. In their roles, they must consider enacting these recommendations to improve the
effectiveness of the regime:
make the auditing of suspicious transaction detection, adjudication, and reporting
activities the highest priority of the regime;
improve the clarity and consistency of guidance provided to reporting entities relative
to these obligations;
provide non-audit and investigative feedback directly to reporting entities with respect
to the suspicious transaction reports that are submitted;
establish precedent and provide detailed guidance through the publishing of audit
findings that result in the assessment of AMPs, irrespective of whether the sanctioned
entity is publicly identified; and
clearly align the regulatory threshold “reasonable grounds to suspect” to the
evidentiary threshold established by Canada’s judicial system.
While reporting entities must also take action to:
establish and maintain robust detection regimes, while providing sufficient human and
technological resources to ensure their effectiveness;
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ensure that all employees have the training and tools necessary to understand their
obligations to detect and recognize indicators of all designated offenses that they are
likely to encounter in their roles; and
actively seek feedback from their regulators, auditors, peers, and law enforcement
partners to identify applicable best practices, and to ensure their alignment to the
priorities of the regime.
Change is necessary. Continuing to feed poor-quality intelligence into the regime will result
in the regime continuing to generate ineffectual results that are incommensurate with the real
risks that exist.
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APPENDIX I – FINTRAC POLICY INTERPRETATIONS
All of the following excerpts are available from FINTRAC’s Policy Interpretations.
http://www.fintrac.gc.ca/publications/FINS/1-eng.asp
219. Safety Deposit Box
http://www.fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=1
Question:
Do safety deposit boxes meet the definition in section 7 of the Act of a "financial transaction"
for filing suspicious transaction reports?
Answer:
In order for safety deposit boxes to be subject to section 7 of the Act as a financial transaction
that occurs or that is attempted, the renting of the safety deposit box can be considered the
"financial transaction" aspect of section 7. The financial transaction would then be the paying
of an amount and in return the client can use the safety deposit for a set time period.
Therefore, if there are reasonable grounds to suspect that the "rental" of the deposit box is
related to money laundering or terrorist funding, then the financial institution can file a STR.
However, the mere fact that the client visits his safety deposit box, without a another factor
attached to it, such as a duffel bag filled with cash, does not mean that it is suspicious. The
problem with the safety deposit boxes is that the financial institutions do not know what is
being deposited or withdrawn from them. Thus, it becomes even more difficult to determine
if any activities surrounding the safety deposit boxes would trigger the threshold of reasonable
grounds to suspect that it is related to money laundering or terrorist funding.
Date Answered: 2009-09-10
Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union,
Trust and/or loan company
Obligation: Reporting
Guidelines: 2 , 3A, 3B
41. STR Reporting - Related Transactions
http://www.fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=1
Question:
Company A provided an overview of a case in which a person is suspected of committing
fraud. The fraud was committed with funds provided by 500 individuals. The 500 individuals
may be, either knowingly or not, involved in tax evasion. The primary question is whether or
not the 500 individual transactions are required to be reported, or if only the transactions
subsequent to the receipt of the funds, which would be the point in time at which the predicate
offense (fraud) was completed, must be reported.
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Answer:
Section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)
stipulates that, "Subject to section 10.1, every person or entity referred to in section 5 shall
report to the Centre, in the prescribed form and manner, every financial transaction that
occurs or that is attempted in the course of their activities and in respect of which there are
reasonable grounds to suspect that (a) the transaction is related to the commission or the
attempted commission of a money laundering offense; or (b) the transaction is related to the
commission or the attempted commission of a terrorist activity financing offense." If the
reporting entity has reasonable grounds to suspect that a financial transaction that occurs or
that is attempted in the course of their activities is related to the commission or the attempted
commission of a money laundering offense or a terrorist activity financing offense, a
suspicious transaction report must be submitted to FINTRAC. Based on the information
provided, the reporting entity has, reasonable grounds to suspect that these financial
transactions, which occurred in the course of their activities, are related to the commission or
the attempted commission of a money laundering offense. They are therefore reportable.
Date Answered: 2015-01-19
Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union,
Trust and/or loan company
Obligation: Reporting
Guidelines: 2,3
26. Payments related to ransomware
http://www.fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=1
Question:
Does FINTRAC require companies that provide a medium for victims to make payments
related to ransomware (a type of malware that prevents or limits users from accessing their
system) to file STRs/ASTRs in Canada?
Answer:
Section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)
states that “Subject to section 10.1, every person or entity referred to in section 5 shall report
to the Centre, in the prescribed form and manner, every financial transaction that occurs or
that is attempted in the course of their activities and in respect of which there are reasonable
grounds to suspect that (a) the transaction is related to the commission or the attempted
commission of a money laundering offense; or (b) the transaction is related to the commission
or the attempted commission of a terrorist activity financing offense.” As a result, for a
transaction to qualify as a suspicious transaction, reportable under the PCMLTFA and the
Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction
Reporting Regulations, the reporting entity must have reasonable grounds to suspect it is
related to the commission or attempted commission of either a money laundering offense or
a terrorist activity financing offense. A money laundering offense is typically committed or
attempted with the intention to conceal or convert proceeds derived from the commission of
a designated offense, which could include drug trafficking, bribery, or fraud. A terrorist activity
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financing offense occurs when property (including funds) are knowingly collected to carry out
terrorist crimes. It is therefore for the individuals and entities that are reporting entities under
Part 1 of the PCMLTFA, to determine whether they have reasonable grounds to suspect that
a transaction or attempted transaction is related to a money laundering or a terrorist activity
financing offense. If so, an STR must be sent within 30 calendar days.
Date Answered: 2015-08-11
Activity Sector: Money services business
Obligation: Reporting
Guidelines: 2,3
Act: Part 1, 7
107. Card skimming
http://www.fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=1
Question:
Are credit unions required to report the suspicious alerts they receive from their Fraud Alert
System regarding their clients’ debit cards. More specifically, the Fraud Alert System sends
alerts to the reporting entity when their clients’ debit cards have been suspected of being
skimmed (i.e.: where debit card information such as the personal identification number has
been illegally recorded). Are these transactions, or attempted transactions, to be reported to
FINTRAC as Suspicious Transaction Reports (“STR”)?
Answer:
Pursuant to section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing
Act (PCMLTFA), financial entities have the obligation to report every financial transaction that
occurs, or is attempted in respect of which there are reasonable grounds to suspect that the
transaction is related to the commission or the attempted commission of a money laundering
offense or a terrorist activity financing offense. Under Canadian law, a money laundering
offense involves various acts committed with the intention of concealing or converting
property or the proceeds of property (such as money), while knowing or believing that this
property was derived from the commission of a designated offense. In the current case, the
alerts being issued by the Fraud Alert System are in relation to the skimming or suspected
skimming of debit cards, a criminal offense amounting to fraud, as opposed to a money
laundering or terrorist activity financing offense. However, if following the card skimming,
efforts are made to conceal or convert the proceeds, this may amount to the commission or
attempted commission of a money laundering offense. Any transactions or attempted
transactions related to these efforts would then be reportable as STRs in accordance with
section 7 of the PCMLTFA.
Date Answered: 2013-08-19
Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union,
Trust and/or loan company
Obligation: Reporting
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82. International Sanctions - STR
http://www.fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=1
Question:
I would like your opinion on cases in which we find potential breaches of international
sanctions and on whether or not we have to report to FINTRAC. For example: 1. A Canadian
entity wants to conduct a transaction with a foreign entity against which sanctions have been
imposed by the U.S. After we intervened, the Canadian entity changed the name of the foreign
entity with which it wants to do business to a name that is not sanctioned. Our analysis shows
that this transaction relates to the entities' trade activities and we do not question the
legitimacy of these activities, so there is no doubt under the PCMLTFR. However, we question
the Canadian entity's behavior and its compliance with international sanctions. Should we
submit a suspicious transaction report in accordance with the PCMLTFA? 2. We are receiving
or sending an electronic funds transfer out of Canada (to a country that is not sanctioned)
and we have reason to believe that the electronic funds transfer could be in breach of
international and Canadian sanctions even though the sending/receiving country is not
sanctioned. The transaction relates to the business activities of the entities in question and
we do not question the legitimacy of these activities. Should we submit a suspicious
transaction report in accordance with the PCMLTFA? In all cases of possible sanction breaches,
we apply risk management measures to international sanctions, but we are still unsure as to
whether or not we have to report these activities to FINTRAC even though there is no doubt
under the PCMLTFR.
Answer:
Section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act)
stipulates that, "Subject to section 10.1, every person or entity referred to in section 5 shall
report to the Centre, in the prescribed form and manner, every financial transaction that
occurs or that is attempted in the course of their activities and in respect of which there are
reasonable grounds to suspect that (a) the transaction is related to the commission or the
attempted commission of a money laundering offense; or (b) the transaction is related to the
commission or the attempted commission of a terrorist activity financing offense. If you have
reasonable grounds to suspect that the financial transaction that occurred or that was
attempted in the course of your activities is related to the commission or the attempted
commission of a money laundering offense or a terrorist activity financing offense, a
suspicious transaction report must be submitted to FINTRAC. "Reasonable grounds to
suspect" are determined based on what is reasonable for the reporting entity's circumstances,
including its common business practices and the systems in place in its industry. It is up to
the reporting entity to judge the legitimacy of transactions, taking into account what is
appropriate in the circumstances and consistent with common industry activities as well as
the client's level of knowledge. Moreover, section 7.1 of the Act indicates the following: 7.1
(1) Every person or entity referred to in section 5 that is required to make a disclosure under
section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the
United Nations Resolutions on the Suppression of Terrorism shall also make a report on it to
the Centre, in the prescribed form and manner. If a reporting entity concludes that it is
necessary to make a disclosure under section 7.1 of the Act, the entity must also make a
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report to the Centre. Moreover, it is important to note that, according to subparagraph
71(1)(c)(i) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations
(the Regulations), every person or entity must assess the risks of their clients and business
relationships. If the risk assessment reveals that the client or business relationship is high
risk, then the reporting entity would be required to take special measures to identify clients,
keep records and monitor financial transactions for high risk activities, in accordance with
subsection 9.6(3) of the Act, and discussed in more detail in section 71.1 of the Regulations.
Date Answered: 2013-12-19
Activity Sector: Bank, Caisse populaire, Centrals/Coops, Co-op credit society, Credit Union,
Trust and/or loan company
Obligation: Reporting
Guidelines: 2, 3
Regulations: 71(1)(c)(i), 71.1
Act: 7, 7.1, 9.6(3)
87. STR Inquiry - Hacker
http://www.fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=1
Question:
One of the entities of a Canadian securities dealer and reporting entity under the Proceeds of
Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) was contacted by a hacker,
who took over their email address and attempted to solicit funds from various individuals. He
would like clarification on whether this incident should be reported to FINTRAC as a Suspicious
Transaction Report.
Answer:
According to section 7 of the PCMLTFA, a reporting entity must report every financial
transaction that occurs or that is attempted in the course of their activities in respect of which
there are reasonable grounds to suspect that: 1. the transaction is related to the commission
or the attempted commission of a money laundering offense; or 2. the transaction is related
to the commission or the attempted commission of a terrorist activity financing offense As
such, for a transaction to qualify as a suspicious transaction, reportable under the PCMLTFA,
the entity must have reasonable grounds to suspect it is related to the commission or
attempted commission of either a money laundering offense or a terrorist activity financing
offense. With respect to the Security Dealers sector, some relevant indicators that a
transaction is suspicious and may be related to money laundering and/ or terrorist financing
might include the following: • Accounts that have been inactive suddenly experience large
investments that are inconsistent with the normal investment practice of the client or their
financial ability. • Any dealing with a third party when the identity of the beneficiary or
counter-party is undisclosed. • Client attempts to purchase investments with cash. • Client
wishes to purchase a number of investments with money orders, traveller's checks, cashier's
checks,
Date Answered: 2013-12-02
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Activity Sector: Securities dealer
Obligation: Reporting
Guidelines: 2, 3
237. Guidance on identifying transactions which are suspicious because they
may be in furtherance of money laundering
http://www.fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=1
Question:
In particular, I am looking for guidance on identifying those transactions which are suspicious
because they are or may be in furtherance of money laundering. I am aware of the 'common
indicators' and I am aware of what the term 'suspicious' means. My question has solely to do
with the nexus of suspicion with a money laundering offense. Guideline 2 provides the
following insight regarding what is a money laundering offense: "Money laundering offense
Under Canadian law, a money laundering offense involves various acts committed with the
intention to conceal or convert property or the proceeds of property (e.g. money) knowing or
believing that these were derived from the commission of a designated offense. In this
context, a designated offense means most serious offenses under the Criminal Code or any
other federal Act. It includes those relating to illegal drug trafficking, bribery, fraud, forgery,
murder, robbery, counterfeit money, stock manipulation, etc. The few exceptions to what is
a designated offense are for offenses such as those related to tax evasion or breach of
copyright." From that it seems obvious that I would need to know what the "various acts"
are; and what offenses are designated, in order to determine whether a transaction (or
attempted transaction) is suspicious because it is in furtherance of money laundering and
therefore ought to be reported to FINTRAC. We discussed my situation of a client who wished
to make a transaction, submitted a KYC with all required information, and when we ran his
name through the World Check database, it generated a hit indicating that he had been
charged with a federal offense of tax evasion. The details of the charge were that he owned
a warehouse where illegally imported cigarettes were stored. I confirmed with the client that
the hit related to him. He advised that it had all been a mistake and the charges had been
withdrawn and he had a letter from the RCMP so stating. I asked him for the document, and
for the name of his lawyer and asked him to instruct his lawyer to speak to me regarding the
charges. He agreed, but we never heard from him again. Of course, without satisfying me,
no transaction by him can proceed. You agreed that it was difficult to relate those
circumstances to money laundering. Suspicious? A bit. But how to tie it in to a suspicion of
money laundering? It would help to have some direction on the "various acts" and "designated
offenses".
Answer:
Following is a statement that might help the reporting entity in their identification of suspicious
transactions (however, it lists more the offenses found in the securities world). However, we
should be careful when we suggest to reporting entities to review the designated offenses
found in the criminal code, as it is not the predicated or designated offenses listed that should
be reported to FINTRAC as an STR, but financial transactions that reporting entities have
reasonable grounds to suspect are related to the commission of a money laundering offense,
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or the commission of a terrorist activity financing offense. Money Laundering offenses Under
Canadian Law, a money laundering offense involves various acts committed with the intention
to conceal or convert property or the proceeds of property (e.g. money) knowing or believing
that these were derived from the commission of a designated offense. In this context, a
designated offense means most serious offenses under the Criminal Code or any other federal
Act [ 4 ] . It includes those relating to illegal drug trafficking, bribery, fraud, forgery, murder,
robbery, counterfeit money, stock manipulation [ 1 ], insider trading [ 2 ], False prospectus
[ 3 ], secret commission, etc. [ 1 ] s. 382 of the Criminal Code [ 2 ] s. 382.1 of the Criminal
Code [ 3 ] s. 400 of the Criminal Code [ 4 ] Include most federal laws except the exemptions
listed in s. 462.3(1)of the criminal code.
Date Answered: 2009-07-17
Activity Sector: Money services business
Obligation: Reporting
Guidelines: 2
267. STR file - Identity fraud
http://www.fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=1
Question:
This was filed under an ATTEMPTED Transaction. A gentleman left a small deposit for a
purchase of currency in order to safeguard the rate. After doing our verification of facts that
he had provided, and other circumstances, we decided to cancel the transaction. We left a
message on client's voice mail and did not hear from him further to our voice mail message.
We mailed out a refund check to the address noted on the Driver License as well as our
Transaction Invoice indicating that the sale was being cancelled. This morning, we received a
phone call from another gentleman, who had received our paperwork and check in the mail
informing us that he never had transacted anything in our office. Furthermore, he advised us
that he had received a Bank Statement, with his name from a bank where he did not have an
account. He continued that he contacted this Bank who had advised him that " le gars a été
arrêté/(the man was arrested)". The caller wanted to know what type of Identification I had
on him and I said that I could not discuss this. I called back the number that he had provided
and asked him to mail back the paperwork as well as the check. I also asked him to write that
he did not conduct anything at our office. He said that he will contact his lawyer to see what
he is going to do. He also said that the Police will want to see what I have. Please advise
what, if anything, if I am visited by Police, that I should disclose, or do I refer them to contact
FINTRAC? I believe that we may be looking at Identity Fraud.
Answer:
I agree with you. I suspect that there is a definite identity fraud in this case (so the police
should be involved), and a SATR should be filed with FINTRAC as well. As for divulging the
fact that they filed a SATR, under subsection 8 of the Act - no person or entity shall disclose
that they have made a report under section 7 (i.e. report on a transaction in respect of which
there are reasonable grounds to suspect that the transaction is related to a ML/TF offense),
or disclose the contents of such a report, with the intent to prejudice a criminal investigation,
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whether or not a criminal investigation has begun. In this particular case (and PI group please
correct me if I am wrong) - I do not believe that indicating that a SATR has been filed with
FINTRAC would prejudice a criminal investigation? However, on the other hand the report
should not be shared with law enforcement. I don't think there is any real risk in also telling
the RE that the prohibition would not apply in the given case if the RE chose to tell the police
it had filed an STR in those circumstances (or chose to share the content of the STR with
police).
Date Answered: 2009-03-24
Activity Sector: Money services business
Obligation: Reporting
Guidelines: 2,3
Act: 7, 8
305. Scenario referencing guideline 2
http://www.fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=1
Question:
As the criteria in Guideline 2: Suspicious Transactions, are still at the consultation stage with
our industry, guidance is also requested concerning how the sales transactions described in
this scenario would be viewed by FINTRAC in relation to requirements for reporting suspicious
transactions.
Answer:
You are required to file a Suspicious Transaction report where there are reasonable grounds
to suspect that the transaction (or attempted transaction) is related to money laundering or
terrorist financing. Since exactly what constitutes reasonable grounds to suspect can vary
greatly from transaction to transaction it is impossible for FINTRAC to provide an exhaustive
list of what circumstances constitute reasonable grounds to suspect ML or TF. Because you
are very familiar with your industry, you and your members are in an excellent position to
determine if the particular circumstances of a given transaction should reasonably give rise
to suspicion. A transaction is certainly reportable to FINTRAC as suspicious when the
developer has concerns about the transaction in question. FINTRAC's guidance is intended to
assist developers in making this determination, but the fact that a client is non-resident does
not by itself automatically constitute a suspicious transaction and might be linked to ML or
TF.
Date Answered: 2008-11-20
Obligation: Reporting
Guidelines: 2,3
32. Lawyer making purchase/sale on behalf of a company
http://www.fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=11
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Question:
Are the names of the Directors of a company required when the purchase or sale of real estate
is conducted by a lawyer on behalf of the company?
Answer:
Real estate agents or brokers are subject to record keeping requirements under section 39 of
the PCMLTFR, which include keeping receipt of funds records, client information records, and
large cash transaction records. Subsection 59.2(1) of the PCMLTFR further requires that
“subject to subsection 62(2) and section 63, every real estate broker or sales representative
shall, in respect of a transaction for which a record is required to be kept under subsection
39(1), (a) in accordance with subsection 64(1), ascertain the identity of every person who
conducts the transaction; (b) in accordance with section 65, confirm the existence of and
ascertain the name and address of every corporation on whose behalf the transaction is
conducted and the names of its directors; and (c) in accordance with section 66, confirm the
existence of every entity, other than a corporation, on whose behalf the transaction is
conducted.” As per section 8 of the PCMLTFR, when a large cash transaction record is required
to be kept, a real estate agent or broker must also take reasonable measures to determine
whether the individual who provides the cash is acting on behalf of a third party. If it is
determined that the individual is acting on behalf of a third party, a real estate agent or broker
shall keep a record that sets out: (a) the third party’s name, address and date of birth and
the nature of the principal business or occupation of the third party, if the third party is an
individual; (b) if the third party is an entity, the third party’s name and address and the nature
of the principal business of the third party, and, if the entity is a corporation, the entity’s
incorporation number and its place of issue; and (c) the nature of the relationship between
the third party and the individual who gives the cash. Similarly, in respect of every client
information record that is kept, section 10 of the PCMLTFR requires that a real estate agent
or broker take reasonable measures to determine whether a client is acting on behalf of a
third party. If it is determined that the client is acting on behalf of a third party, a record must
be kept that sets out: (a) the third party’s name, address and date of birth and the nature of
the principal business or occupation of the third party, if the third party is an individual; (b)
if the third party is an entity, the third party’s name and address and the nature of the
principal business of the third party, and, if the entity is a corporation, the entity’s
incorporation number and its place of issue; and (c) the relationship between the third party
and the client. While the lawyer is making the purchase or sale on behalf of the corporation,
the lawyer is, essentially, operating as the physical body of the corporation. The lawyer is
therefore considered to be the client for record keeping and identification purposes and the
real estate agent or broker is required to keep a receipt of funds or large cash transaction
record and a client information record, for which the real estate agent or broker must then
ascertain identity and carry out a third party determination (client information or large cash
transaction record requirement). As stated above, according to paragraphs 59.2(1)(a), (b),
and (c), real estate agents or brokers must ascertain the identity of every person who
conducts the transaction, and confirm the existence of the corporation or the entity on whose
behalf the transaction is conducted. As such, the lawyer should be prepared to: a) be identified
in accordance with subsection 64(1) of the PCMLTFR, and b) provide documents confirming
the existence of the corporation, including the names of the directors in the case of a
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corporation. Of course, should the lawyer’s corporation fall under the exception outlined in
paragraph 62(2)(m) of the PCMLTFR, then the real estate agent or broker would not be
required to carry out the record keeping and client identification requirements outlined above.
The real estate agent or broker is required to take reasonable measures to determine if there
is a third party involved in the transaction, and it is only when they determine that there is in
fact a third party involved in the transaction that the record keeping obligation kicks in. In
addition, if an employee is acting on behalf of their employer, the employee is considered to
be acting on behalf of a third party. If the real estate agent or broker is not able to determine
that there is in fact a third party, but the real estate agent or broker has reasonable grounds
to suspect that there are instructions of a third party involved, the real estate agent or broker
has to keep a record to indicate the following: • in the case of a large cash transaction,
whether, according to the individual giving the cash, the transaction is being conducted on
behalf of a third party; or • in the case of a client information record, whether, according to
the client, the transaction is being conducted on behalf of a third party. This record must also
indicate details of why the real estate agent or broker suspects the individual is acting on a
third party's instructions. Finally, as per section 7 of the Proceeds of Crime (Money
Laundering) and Terrorist Financing Act, an STR is expected to be submitted to FINTRAC when
the real estate agent or broker has reasonable grounds to suspect that: “(a) the transaction
is related to the commission or the attempted commission of a money laundering offense; or
(b) the transaction is related to the commission or the attempted commission of a terrorist
activity financing offense.” A single indicator, such as not being able to determine if there is
a third party involved in the transaction, is not necessarily indicative of reasonable grounds
to suspect money laundering or terrorist financing activity. However, if a number of indicators
are present during a transaction or a series of transactions, then the real estate agent or
broker might want to take a closer look at other factors prior to making the determination as
to whether the transaction must be reported.
Date Answered: 2015-07-08
Activity Sector: Real estate
Obligation: Ascertaining Identification
Guidelines: 6B
Regulations: 8, 10, 39, 59.2(1), 62(2)(m), 64(1)
2. AMPs - Proof of ownership and source of funds
http://www.fintrac-canafe.gc.ca/publications/FINS/2-eng.asp?s=9
Question:
1. How long do financial entities have in order to establish proof of ownership on people or
companies that have made larges deposits into Canadian accounts? What could be the
consequences if the financial entity does not establish proof, within a certain time frame? 2.
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How long do financial entities have to identify the source of funds? What could be the
consequences if the financial entity does not identify the source of funds, within the certain
time frame?
Answer:
1. Reporting entities have to confirm the existence of any corporation or other entity for which
they open an account, other than a credit card account, before any transaction other than the
initial deposit, is conducted. An account cannot be opened if this requirement is not met.
FINTRAC undertakes a number of enforcement activities to ensure reporting entities meet
their legal obligations. This may include the assessment of the entity’s compliance with
reporting, record keeping and other anti-money laundering and anti-terrorist financing
obligations through an examination. Failure to keep records or ascertain the identity of clients
can lead to an administrative monetary penalty. Alternatively, FINTRAC may also refer cases
of non-compliance to law enforcement when there is severe non-compliance, or little
expectation of immediate or future compliance. In such cases, conviction of failure to retain
records could lead to up to five years imprisonment, to a fine of $500,000, or both. 2. Under
the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, certain reporting
entities must record the source of funds when their client is deemed to be a politically exposed
foreign person as defined in the Act. This determination is made in a couple of scenarios.
First, when a person opens a new account or becomes politically exposed following the
opening of an account. Second, when a person initiates or receives an international electronic
funds transfer of $100,000 or more. In these cases, the reporting entity is required to use
reasonable measures to confirm the source of funds as soon as the determination is made
that the person is politically exposed. The timeline to make this determination is currently 14
days after the account is opened or the electronic funds transfer has occurred. In addition,
when the business relationship with the client is deemed to be high-risk, enhanced measures
must be applied to mitigate the risk. One of the enhanced measures that may be applied in
such a case is to obtain information on the source of funds or source of wealth of the client.
Above and beyond these requirements, a transaction (or attempted transaction) may present
characteristics that lead the reporting entity to find they have reasonable grounds to suspect
that it is related to the commission of a money laundering or terrorist financing offense. In
such a case they are required to report the transaction to FINTRAC as suspicious. Suspicious
transaction reports are not linked to a mandatory monetary threshold. Rather, they provide
details about the transaction and the grounds for suspicion. In the presence of additional
indicators of money laundering, being unable or unwilling to confirm the source of funds or
provide complete information on activities may lead to grounds for suspicion. If the reporting
entity failed to take reasonable measures, within the prescribed period, to determine whether
the person who opens an account, or has an existing account holder, or is the initiator or
beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign
person, FINTRAC has the authority to issue administrative monetary penalty.
Date Answered: 2015-09-04
Activity Sector: Real estate
Obligation: AMPs
Guidelines: 4(10)
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APPENDIX II – SURVEY RESPONDENT DEMOGRAPHICS
The distribution of assets within the credit union system in Canada is heavily skewed in favor
of a small number of credit unions. As some respondents wished to remain anonymous, only
the most basic of demographic data may be presented in order to preserve their anonymity.
As a result of this distribution, the limited number of respondents represents a material
portion of the credit union system in Canada.
The figures are accurate as of August 2015, and represent all credit unions in Canada
excluding Quebec. 55
55 Credit Union Central of Canada; 2Q 2015 System Results, Aug 26, 2015 & Largest 100 Credit Unions 2Q 2015,
Sep 22, 2015 http://www.cucentral.ca/SitePages/Publications/FactsAndFigures.aspx