On February 7, 2019, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), issued a number of new compliance tools including a revised administrative monetary penalties (AMPs) policy, FINTRAC’s compliance framework, FINTRAC’s assessment manual, and a notice on voluntary self-declaration of non-compliance.
The new compliance tools provide valuable guidance and transparency for reporting entities (described below) about how FINTRAC monitors compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its regulations. Reporting entities should review these tools and update policies, procedures, and internal training practices accordingly to strengthen their compliance programs to meet the expectations of FINTRAC.
Part of FINTRAC’s mandate is to assess reporting entities compliance with the PCMLTFA and its regulations. Non-compliance may subject a reporting entity to criminal penalties or AMPs. FINTRAC has had the authority to issue AMPs since late 2008, however, its AMP program has been on hiatus since 2016 after the Federal Court of Appeal’s decision in Canada v. Kabul Farms (Kabul Farms).
In Kabul Farms, the Court quashed a $6,000 AMP assessed by FINTRAC, citing a lack of transparency in the manner FINTRAC assessed fines. The revised AMP policy addresses the decision, inter alia, outlining how FINTRAC assesses non-compliance, the criteria for determining the AMP amount, and the AMP process.
The revised AMP program’s guiding principles are objectivity, reasonableness, transparency, fairness, consistency, and documentation.
The revised AMP policy outlines the framework where FINTRAC assesses an AMP to address non-compliance. FINTRAC may issue an AMP where it has reasonable grounds to believe a reporting entity has not complied with the PCMLTFA and its regulations. AMPs are not issued automatically and are generally issued where other compliance options are unsuccessful.
Violations are categorized by three degrees of importance with the following penalty ranges:
FINTRAC will take the following into account when determining the penalty amount (1) the purpose of AMPs, which is to encourage compliance, (2) the “harm” done by the violation, and (3) the reporting entity’s compliance history. FINTRAC defines harm as the degree to which a violation interferes with achieving the objectives of the PCMLTFA or FINTRAC’s ability to carry out its mandate.
Assessing AMP Amount
FINTRAC uses a two-step process to assess an AMP amount.
FINTRAC has provided penalties calculation examples, as to the criteria it applies when assessing harm from failure to report a large cash transaction, an electronic funds transfer or a casino disbursement.
FINTRAC has issued a new Assessment Manual, which describes FINTRAC’s approach and methods used during examinations. The manual serves as guidance for reporting entities as to how FINTRAC assesses compliance with the requirements under the PCMLTFA and its regulations. The assessment methods provided in the Assessment Manual are subject to change as a result of consultations or changes in law.
The Assessment Manual is divided into three parts:
Voluntary Self-Declaration of Non-Compliance
Reporting entities are encouraged to voluntarily disclose non-compliance in writing to FINTRAC. Prescribed information must be included in the voluntary self-declaration (e.g., information about the reporting entity and the nature of the non-compliance).
FINTRAC recognizes that there may be circumstances where a reporting entity may come across unreported transactions and may not impose penalties for voluntary self-declaration of non-compliance. For instance, where the non-compliance is not a repeated instance and the declaration is not made after a reporting entity has been notified of an upcoming examination, FINTRAC will not propose AMPs.
FINTRAC has prepared a graphic illustrating its compliance framework for assessing compliance with the PCMLTFA and its regulations. The graphic sets out:
o Transparency, engagement, and clarity
o Accountants, agents of the Crown, British Columbia notaries, casinos, dealers in precious metals and stones, financial entities, life insurance, money services businesses, real estate, and securities dealers
o Compliance program
o Assistance (providing assistance through various channels including online publications and technical support)
FINTRAC is Canada’s financial intelligence unit and its mandate is to facilitate the detection, prevention, and deterrence of money laundering and the financing of terrorist activities.
FINTRAC does not operate as a criminal authority or law enforcement agency and, among other responsibilities, FINTRAC collects reports and voluntary information, monitors compliance by reporting entities with the PCMLTFA and its regulations, and provides financial intelligence to a number of law enforcement and intelligence agencies.