Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) released new suspicious transaction report guidance this year covering changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and subsequent regulations.
The guidance covered issues such as when must a suspicious transaction be reported and how to submit STRs. However, there is debate over the wording of FINTRAC’s timeline expectations.
FINTRAC states: “An STR must be submitted to FINTRAC when you detect a fact that leads you to determine that you have reasonable grounds to suspect that a transaction is related to the commission or attempted commission of a money laundering or terrorist financing offence. You must submit an STR to FINTRAC within 30 days of reaching that determination.”
During a recent ACAMS conference in Toronto, lawyer Jacqueline Shinfield, a Partner in the Financial Services Group at Blake, Cassels & Graydon LLP, spoke to the audience about the main elements of the guidance.
While FINTRAC outlines its expectations, Shinfield told the conference she is concerned about how the word “reasonable” could be interpreted.
Change in FINTRAC’s STR Rules
Shinfield wrote in a recent legal blog, the change in rules means STR Regulations now require regulated entities (REs) to report suspicious transactions to FINTRAC as soon as “reasonably practicable” after they have reasonable grounds to suspect that a transaction or attempted transaction is related to money laundering or terrorist financing.
The previous draft of the Regulations had required a filing to be made within three days, said Shinfield, adding this change seems to reflect a compromise to the regulatory pushback that many REs had expressed with having a three-day timeline.
Shinfield said she is concerned with the interpretation that may come along with those rules now that FINTRAC plans to look at STRs on a case-by-case basis with a view to understanding how REs respond in these circumstances.
“It will be interesting to see how FINTRAC interprets this provision in its examinations.”
“My concern is that FINTRAC is going to come and judge and say what as soon as reasonable practical and they’re going to say well, I don’t think 10 days was as soon as reasonably practical, I think you could have done it in five,” Shinfield said.
“And I’m concerned that their subjective judgment (will be) in everything that we do, especially with STRs – this is the highest sensitivity area.”
More information on STRs
STRs will also require much more information than before.
“For items that are not mandatory, FINTRAC takes the view that if the required information is in a RE’s records, it is required to be included in the report.”
Examples of new categories of information include IP addresses, ID number of device, and the type of device used to conduct a transaction.
In addition to the the STRs, for Terrorist Property Reports, the timing requirement for filing has changed from “without delay” to “immediately”.
Most of the changes will come into force June 1, 2020 while others will be delayed until June 1, 2021.
In the next part of this blog, we will hear from Shinfield on EFTs and how the rules are changing for financial institutions.
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