An Overview of the PCMLTFA

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The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) is a Canadian law that aims to identify and stop money laundering and terrorist funding.

 

Complying with these regulations helps companies protect themselves and contributes to a safer financial environment. Ignoring them, on the other hand, can lead to hefty fines and reputational damage.

 

 

Who Enforces the PCMLTFA?

The Canadian government and various authorities enforce the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) leads this effort, an agency dedicated to ensuring compliance with the Act.

 

FINTRAC was set up in 2000 under the PCMLTFA. Its goal is to detect and deter money laundering and terrorist financing while safeguarding personal information. It works independently from other law enforcement and government bodies but can share financial details with them. The Minister of Finance oversees the agency and reports to Parliament.

 

 

 

Industries Regulation Under the PCMLTFA

Here’s a breakdown of the industries regulated under the PCMLTFA:

 

  • Financial institutions, including banks, financial services providers, credit unions, trust and loan companies, securities dealers, and money services businesses (MSBs).

  • Money services businesses (MSBs) that handle currency exchange, foreign exchange dealing, and money transfers.

  • Securities dealers.

  • Life insurance companies, brokers, and agents.

  • Casinos.

  • Real estate brokers and developers

  • Accountants and accounting firms

  • Dealers in precious metals and stones.

 

 

 

Penalties for Non-Compliance with AML/CTF Laws

Not following anti-money laundering (AML) and counter-terrorism financing (CTF) laws in Canada can lead to serious consequences, depending on the violation’s nature and severity. Here are the main penalties:

 

  • Fines: The FINTRAC can fine businesses for breaking AML/CTF rules. These fines can be large, from thousands to millions of dollars, based on how serious the non-compliance is. Also, FINTRAC must publicly list all fines on their website for five years.

  • Criminal Charges: Major violations can lead to criminal charges, including significant fines and jail time. Convictions can mean prison sentences of up to five years for lesser offenses and up to ten years for serious offenses.

  • Seizure of Assets: Authorities can seize and take away assets suspected of being linked to crime or terrorist activities. This includes freezing bank accounts and taking properties or other assets.

 

 

 

Compliance Strategies

To follow the PCMLTFA and manage risks, reporting entities need to do the following:

 

  • Check Client Identity: Set up methods to verify who your clients are, making sure they meet ID requirements.

  • Check Beneficiary and Non-Owner Payee Identity: Have steps in place to confirm the identity of beneficiaries and non-owner payees in transactions.

  • Find Beneficial Owners: Identify and keep records of the real owners of accounts, products, or services for transparency. For additional information, view our blog overviewing ultimate beneficial ownership.

  • Identify Third Parties: Have measures to spot and record any third-party involvement in transactions to stop hidden illegal activities.

  • Spot Foreign Politically Exposed Persons (PEFPs): Create ways to identify foreign politically exposed individuals and conduct thorough checks to reduce risks of corruption.

  • Spot Domestic Politically Exposed Persons (PEDP): Similar to international protocols, figure out domestic politically exposed persons and do the necessary checks.

  • Collect Source of Wealth: Gather and confirm how clients got their wealth to ensure it’s legitimate and to notice any warning signs.

  • Collect Source of Payments or Funding: Keep information about where the money for payments or investments comes from to ensure it’s not from illegal activities.

  • Note Account Purpose and Use: Record why an account or product is used to maintain clarity and detect unusual activities.

  • Keep Records: Keep detailed records of transactions, client IDs, and documents for at least five years from the last transaction date.

  • Report Suspicious Transactions: Have a system to quickly report any suspicious financial transactions to FINTRAC, ensuring timely compliance.

  • Build a Compliance Program: Create and run a compliance program including policies, procedures, and controls to prevent money laundering and terrorist financing. Include staff training and regular independent checks to keep it effective and compliant.

 

At Alessa, we offer comprehensive AML compliance software and fraud management solutions with multiple modules. These modules can function independently or integrate seamlessly to provide streamlined compliance and fraud management, and include:

 

 

Reach out to us today to schedule a free and quick demonstration of our products.

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