FINTRAC: Latest News

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Disclaimer: The contents of this article are intended to provide a general understanding of the subject matter. However, this article is not intended to provide legal or other professional advice, and should not be relied on as such.

 

 

Keep on top of the latest advisories and guidance from the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). This blog will update with any new information from the regulator as it becomes available.

 

 

FINTRAC’s Latest Advisories and Guidance

 

August 18, 2023 – Draft documents to help you prepare for changes to FINTRAC’s reporting forms

FINTRAC has released draft documents to aid with the upcoming changes to its reporting forms

 

View the draft documents here.

 

July 27, 2023 – Money services businesses with revoked registration

FINTRAC has released an overview of the legal obligations of money service businesses (MSBs), the circumstances to revoke MSB registrations, the number of revoked registrants, and a list of businesses with revoked registrations. 

 

Legal Obligations

Legal obligations of MSBs under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated Regulations include: 

 

  • Keeping records
  • Verifying client identity
  • Implementing a compliance regime
  • Reporting certain types of financial transactions to FINTRAC
  • Registering the business to FINTRAC

 

Circumstances to Revoke MSB Registration

Circumstances to revoke a business’s registration include:

 

 

View the full guidance here

 

July 17, 2023 – FINTRAC advisory: Financial transactions related to countries identified by the Financial Action Task Force

FINTRAC has released statements on countries that have deficiencies in their anti-money laundering and anti-terrorist financing systems. 

 

This guidance includes: 

 

 

July 13, 2023 – FINTRAC has updated the schedule to implement changes to its reporting forms

FINTRAC has released a schedule of its upcoming changes for reporting forms, available here

 

For additional information on these changes, view our blog overviewing the upcoming changes to FINTRAC reporting forms.

 

May 17, 2023 – Schedule to implement changes to FINTRAC’s reporting forms

FINTRAC has released a revised schedule of key milestones to implement important changes to its reporting forms.

 

View the full schedule here

 

March 16, 2023 – Schedule to implement changes to FINTRAC’s reporting forms

FINTRAC has released the schedule for implemented changes to its reporting forms.

 

View the schedule here

 

February 22, 2023 – Update to the Guidance on methods to verify the identity of persons and entities: New section entitled “How to verify the identity of a person who does not have any identity verification documentation or information for a retail deposit account”

FINTRAC has made amendments to the ‘Methods to verify the identity of persons and entities.’

 

The amendment states that if a bank is unable to verify a person’s identity when opening a retail deposit account, they will still be in accordance with anti-money laundering/ anti-terrorist financing obligations if they meet the conditions in subsections 627.17(1) and (3) of the Bank Act.

 

Additionally, the amendment states that if a person opening a retail deposit account does not have the proper identification documentation or information, a bank must:

 

  • follow the measures as defined by the Bank Act and any bulletins published by the Financial Consumer Agency of Canada that further define the measures to be taken
  • document in their compliance policies and procedures the types of circumstances where their organization would follow the Bank Act for verification of identification
  • ensure that the banking products provided to the individual opening the account are limited to a basic retail deposit account until which time the account holder returns with the proper form of identification as specified in paragraphs 105(1)(a) to (e) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations
  • verify the person’s identity using the appropriate form of identification as specified in paragraphs 105(1)(a) to (e) of the Regulations, within 6 to 12 months, or as described in their risk-based approach and keep appropriate records
  • continue to follow their customer due diligence and “know your client” processes, ensure ongoing monitoring activities are conducted as per the bank’s risk assessment of the client and monitor transactions to ensure that the financial activity and use of associated products/services aligns with what is known about the person.

 

For additional information, view the full amendment

 

February 16, 2023 – Money services businesses with revoked registration

FINTRAC has released a publication containing:

 

  • Legal obligations of money services businesses
    • keeping records
    • verifying their clients’ identity
    • implementing a compliance regime
    • reporting certain types of financial transactions to FINTRAC
    • and registering their business with FINTRAC
  • Circumstances to revoke registration
  • Number of revoked registrations (updated in February 2023)
  • List of businesses with revoked registration (updated in February 2023)

 

For additional information, view the full publication.

 

December 16, 2022 – Resource documents to help reporting entities prepare for changes to the Suspicious Transaction Report (STR) form

FINTRAC is expected to make important changes to the Suspicious Transaction Report (STR) in 2023. As a result, it has provided documents for further clarification, including:

 

  • STR mock form
  • Reporting suspicious transactions to FINTRAC guidance
  • STR JSON schemas (reports and transactions)

 

FINTRAC has provided these documents here.

 

View the full publication here.

 

November 28, 2022 – FINTRAC Advisory: Financial transactions related to countries identified by the Financial Action Task Force (FATF)

FINTRAC has released an advisory in relation to the October 21, 2022 FATF statements on high-risk jurisdictions subject to a call for action and jurisdictions under increased monitoring

 

The advisory discusses the following jurisdictions:

 

  • Democratic People’s Republic of Korea (DPRK)
  • Iran
  • Myanmar
  • Islamic State
  • Afghanistan
  • Ukraine
  • Russian Federation

 

The advisory additionally states that the following jurisdictions have implemented a plan with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing:

 

Albania, Barbados, Burkina Faso, Cambodia, Cayman Islands, the Democratic Republic of the Congo, Gibraltar, Haiti, Jamaica, Jordan, Mali, Morocco, Mozambique, Panama, Philippines, Senegal, South Sudan, Syria, Tanzania, Türkiye, Uganda, the United Arab Emirates, and Yemen.

 

It further states that Nicaragua and Pakistan are no longer subject to the FATF’s increased monitoring process.

 

For additional info, view the full advisory.

 

November 17, 2022 – Updated resource documents to help you prepare for changes to the Large Cash Transaction Report (LCTR) form

In an effort to improve the accuracy and effectiveness of Large Cash Transaction Report (LCTR) forms, FINTRAC has made updates to various draft documents.

 

Updates have been made to the:

 

  • LCTR mock form
  • LCTR validation rules
  • LCTR schemas and samples
  • API endpoints and specifications portal

 

For further information on these changes, view the full notice.

 

November 10, 2022 – FINTRAC revokes 32 registrations of money services businesses between April and September 2022

As with most Canadian financial institutions, money services businesses (MSBs) are subject to legal obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations. 

 

In addition to verifying MSB compliance with the PCMLTFA and associated Regulations, FINTRAC has the authority to revoke MSB registration, as detailed in sections 11.1(2) and 11.17(2) of the PCMLTFA. 

 

FINTRAC revoked the registrations of 32 MSBs between April 1 and September 30, 2022, for not meeting the requirements of the PCMLTFA and associated Regulations.

 

View the list of 32 MSBs here.

 

August 18, 2022 – Updated schedule for changes to FINTRAC’s reporting forms

To improve the accuracy and effectiveness of reporting forms, FINTRAC has released an implementation schedule for modernizing both the Large Cash Transaction Report (LCTR) form and the Suspicious Transaction Report (STR) form.

 

View the implementation schedule here.

 

July 21, 2022 – Crowdfunding platforms and certain payment service providers must register with FINTRAC

FINTRAC has released a notice reiterating that crowdfunding platforms and certain payment service providers are covered as money service businesses, or foreign money service businesses, under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). This means that businesses that engage with crowdfunding and certain payment service providers have obligations under the PCMLTFA, such as registering with FINTRAC.

 

The notice additionally states that FINTRAC has retracted its position on merchant servicing and payment processing (PI-7670).

 

For further details and information view the full notice.

 

July 8, 2022 – FINTRAC Advisory: Financial transactions related to countries identified by the Financial Action Task Force (FATF)

This advisory released on July 8, 2022, is a result of the FATF-issued statement on June 17, 2022, on high-risk jurisdictions that are subject to a call for action and a statement on jurisdictions under increased monitoring.

 

FATF’s statement discusses action on the terrorist group, Islamic State as well as the following countries:

 

  • Democratic People’s Republic of Korea
  • Iran
  • Malta
  • Afghanistan
  • Ukraine
  • Russia

 

View the full advisory as well as our regularly updated FATF blog to learn more.

 

July 6, 2022 – Resource documents to help reporting entities prepare for changes to the LCTR form

On July 6, 2022, FINTRAC announced that they are expecting to make changes to the Large Cash Transaction Report (LCTR) form in June 2023. These changes are a result of the legislative amendments that came into effect on June 1, 2021, as well as added functionality for simplified reporting.

 

FINTRAC provided a source on Draft documents for assistance in preparing business processes and IT systems for the coming change.

 

Read the full advisory for further information.

 

March 28, 2022 – Financial transactions related to countries identified by the Financial Action Task Force (FATF)

This advisory provides information on financial transactions relating to countries identified by the FATF, guidance and Ministerial Directives on the Democratic People’s Republic of Korea (DPRK) and Iran, other jurisdictions, updates to Zimbabwe FATF monitoring process, FATF action on the Islamic State, and FATF public statements on the situations in Afghanistan and Ukraine.

 

Financial Transactions Relating to Countries Identified by the FATF

The advisory begins by mentioning the FATF’s statement released on March 4, 2022:

 

“Since February 2020, in light of the COVID-19 pandemic, the FATF has paused the review process for countries in the list of High-Risk Jurisdictions subject to a Call for Action, given that they are already subject to the FATF’s call for countermeasures. 

 

Therefore, please refer to the statement on these jurisdictions adopted in February 2020. While the statement may not necessarily reflect the most recent status of Iran and the Democratic People’s Republic of Korea’s AML/CFT regimes, the FATF’s call for action on these high-risk jurisdictions remains in effect.”  

 

DPRK

The advisory reiterates FATF’s statement released on February 21, 2020, and includes a directive from the Minister of Finance:

 

“Every person or entity referred to in section 5 of the PCMLTFA shall treat all transactions originating from, or destined to, North Korea (Democratic People’s Republic of Korea) as high risk for the purposes of subsection 9.6(3) of the Act.”

 

FINTRAC has released guidance relating to this directive, as well as an Operational Alert concerning DPRK’s use of the international financial system for money laundering and the financing of terrorist activity. 

 

Iran

The advisory reiterates the statement released by the FATF on February 21, 2020. 

 

FINTRAC has also released guidance relating to the Ministerial Directive published in the Canada Gazette on July 25, 2020. 

 

Other Jurisdictions

The FATF released a statement concerning jurisdictions under increased monitoring on March 4, 2022, highlighting jurisdictions that have AML/CFT deficiencies. Information regarding countries that chose to defer reporting can be found in the statements on jurisdictions under increased monitoring released in June and October of 2021. It has been noted that some of these statements may not fully reflect the most recent status of some jurisdictions’ AML/CFT regimes. 

 

Countries that have worked with the FATF to develop an action plan to address deficiencies include:

 

Albania, Barbados, Burkina Faso, Cambodia, the Cayman Islands, Haiti, Jamaica, Jordan, Mali, Malta, Morocco, Myanmar, Nicaragua, Pakistan, Panama, Philippines, Senegal, South Sudan, Syria, Turkey, Uganda, United Arab Emirates, and Yemen.

 

Zimbabwe

On March 4, 2022, the FATF stated that Zimbabwe is no longer subject to the FATF monitoring process. 

 

FATF Action on the Terrorist Group, Islamic State

In the advisory FINTRAC reiterates statements previously made by the FATF concerning financing generated by and provided to the Islamic State. It additionally reiterates previous reporting requirements of the PCMLTFA. 

 

Read the full advisory for more in-depth information regarding the Islamic State.

 

FATF Statement on the Situation in Afghanistan

This public statement reiterates that reporting entities must submit a TPR to FINTRAC without delay once a disclosure under the Criminal Code or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism has been made. 

 

FATF Statement on the Situation in Ukraine

The advisory states that reporting entities should consider the information given in FATF’s statement on the invasion of Ukraine when determining whether to file a suspicious transaction report. It also advised that reporting entities should undergo enhanced customer due diligence with clients and beneficiaries involved in financial transactions or attempted transactions emanating from or destined to Russia. 

 

The advisory additionally states that Canada has imposed new sanctions measures in response to the invasion of Ukraine, which can be found on the Sanctions webpage and the Canadian sanctions website

 

Additional Information

To read the advisory in its entirety, view the FINTRAC advisory.

 

November 30, 2021 – Financial transactions related to countries identified by the Financial Action Task Force (FATF)

The advisory discusses financial transactions related to FATF-identified countries, information and Ministerial directives on both the Democratic People’s Republic of Korea (DPRK) and Iran, information on other jurisdictions, changes to FATF monitoring processes of Botswana and Mauritius, new FATF action on the terrorist group the Islamic State and a FATF public statement on Afghanistan. 

 

A statement has been released concerning high-risk jurisdictions subject to a call for action, as well as which jurisdictions should be under increased monitoring. The statement details for which jurisdictions the FATF has called on its members to apply either countermeasures or enhanced due diligence. 

 

Countries No Longer Subject to FATF Monitoring Process

Countries that have improved their AML/CFT regime are no longer subject to FATF monitoring processes. These countries now include Botswana and Mauritius. 

 

Ministerial Directives

The advisory additionally includes two Ministerial Directives, one on Iran and one on the DPRK.

 

DPRK

The Minister of Finance released guidance for the following directive:

 

“Every person or entity referred to in section 5 of the PCMLTFA shall treat all transactions originating from, or destined to, North Korea (Democratic People’s Republic of Korea) as high risk for the purposes of subsection 9.6(3) of the Act.”

 

Additionally, FINTRAC has published an Operational Alert regarding DRPK’s use of the international financial system for money laundering and the financing of terrorist activity.

 

Iran

The Minister of Finance issued the following directive on Iran:

 

“Every person or entity referred to in paragraphs 5‍(a), (b) and (h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) shall

 

(a) treat every financial transaction originating from or bound for Iran, regardless of its amount, as a high-risk transaction for the purposes of subsection 9.6‍(3) of the Act;

 

(b) verify the identity of any person or entity requesting or benefiting from such a transaction in accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations);

 

(c) exercise customer due diligence, including ascertaining the source of funds in any such transaction, the purpose of the transaction and, where appropriate, the beneficial ownership or control of any entity requesting or benefiting from the transaction;

 

(d) keep and retain a record of any such transaction, in accordance with the Regulations; and

 

(e) report all such transactions to the Centre.”

 

FINTRAC has issued guidance relating to this directive.

 

Other Jurisdictions

The advisory reiterates to refer to the FATF statement on jurisdictions under increased monitoring released on October 21, 2021. Countries that chose to defer reporting should refer to the FATF statement released in February of 2021, however, acknowledges that this information may not reflect the most recent status of jurisdictions’ AML/CFT regimes.

 

It also states that the following countries have collaborated with the FATF to address deficiencies in their regimes:

 

Albania, Barbados, Burkina Faso, Cambodia, the Cayman Islands, Haiti, Jamaica, Jordan, Mali, Malta, Morocco, Myanmar, Nicaragua, Pakistan, Panama, Philippines, Senegal, South Sudan, Syria, Turkey, Uganda, Yemen, and Zimbabwe.

 

FATF Action on the Terrorist Group Islamic State

 

In this advisory FINTRAC reiterated previous statements released by the FATF concerning the financing by and to the Islamic State. It reminds in the advisory that reporting entities subject to PCMLTFA must submit a terrorist property report when meeting the threshold to disclose under the Criminal Code or under the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism. 

 

In the context of the advisory, this pertains to property which includes any type of real or personal property, and deeds or instruments that give a title to property, or give the right to receive or recover money or goods.

 

FINTRAC advises that reporting entities consider the above information when deciding to file a suspicious transaction report in regards to a jurisdiction under IS control, or a surrounding jurisdiction where there are reasonable suspicions relating to money laundering offenses or terrorist activity financing offenses. 

 

It is also encouraged that reporting entities undergo increased customer due diligence when dealing with involved individuals and beneficiaries.

 

FATF Statement on the Situation in Afghanistan

 

The statement reminds reporting entities that they are obliged to submit a TPR to FINTRAC once a disclosure has been made under the Criminal Code or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism. 

 

It additionally advises reporting entities to consider the official FATF statement for when they are deciding whether to file a suspicious transaction report due to financial transactions relating to Afghanistan. 

 

Additional Information

To see the full advisory and all related information, view the advisory on FINTRAC’s official website. 

 

Jul 30, 2021 – FINTRAC Updates Indicators of Laundering of Proceeds from Sexual Exploitation

FINTRAC has published its latest Operational Alert, Updated Indicators: Laundering of proceeds from human trafficking for sexual exploitation. Developed in consultation with major financial institutions and the RCMP, these additional indicators are meant to further assist businesses in identifying and reporting to FINTRAC financial transactions suspected of being related to the laundering of funds associated with human trafficking for sexual exploitation.

 

The in-depth document provides a wealth of information, including contextual and money laundering indicators (see 20 of these indicators below):

 

  1. Rounded sum purchases at grocery stores and/or other retailers that sell gift cards and/or prepaid credit cards.
  2. Atypical high-value purchases at convenience stores, particularly those that sell gift cards, prepaid credit cards, or offer money transfer services.
  3. Purchases at online merchants that specialize in selling gift cards.
  4. Purchases and/or payments at luxury vehicle dealerships or for limousine services.
  5. Purchases and/or payments at higher-end restaurants.
  6. Purchases and/or payments at higher-end clothing, footwear, or accessories retailers.
  7. Purchases and/or payments at entities offering cosmetic surgery or other medical procedures to enhance one’s physical appearance.
  8. Purchases at higher-end nightclubs.
  9. Purchases at jewelry retailers.
  10. Frequent low-value payments for parking.
  11. Frequent purchases for food delivery services, often on the same day. (This may indicate the food is for multiple people or the account is used by multiple people to purchase food.)
  12. Purchases and/or payments to entities associated with jail collect calls.
  13. Frequent transfers to virtual currency exchangers, particularly if these funds were sourced from incoming email money transfers from multiple individuals.
  14. Transfers to individuals or entities that advertise their virtual currency services on escort websites.
  15. Frequent purchases and/or payments to online gambling/online casino platforms, particularly if these funds were sourced from incoming email money transfers from multiple individuals.
  16. Frequent funds transferred to a reloadable prepaid credit card, particularly to multiple prepaid cards.
  17. Female’s reloadable prepaid credit card is funded by reloads or transfers from a male, usually the same male.
  18. Excessive payments to multiple telephone or internet service providers.
  19. Credit card receives payments from multiple financial institutions followed by cash advances on the credit card.
  20. Excessive and/or large cash advances on a credit card.

 

Reporting entities must reach reasonable grounds to suspect that a transaction is related to the laundering or attempted laundering of proceeds of crime before they can submit a suspicious transaction report to FINTRAC.

 

On its own, an indicator may not initially appear suspicious. However, when reviewed in context, may increase the suspicion to the point where submitting a Suspicious Transaction Report (STR) to FINTRAC would be required.

 

To facilitate the disclosure process, FINTRAC requests to include the term #Project PROTECT or #PROTECT in Part G-Description of suspicious activity on the STR.

 

To view the complete list of indicators, visit the FINTRAC site. To learn more about how you can automate the monitoring of transactions, contact us.

 

Jul 20, 2021 – Transactions Related to Countries Identified by the FATF

On June 25, 2021, the Financial Action Task Force (FATF) issued a statement on jurisdictions under increased monitoring. According to the FATF, the current list of jurisdictions with strategic deficiencies is as follows: Albania, Barbados, Botswana, Burkina Faso, Cambodia, Cayman Islands, Haiti, Jamaica, Malta, Mauritius, Morocco, Myanmar, Nicaragua, Pakistan, Panama, Philippines, Senegal, South Sudan, Syria, Uganda, Yemen and Zimbabwe.

 

As of this update, Ghana is no longer subject to increased monitoring by the FATF.

 

Democratic People’s Republic of Korea (DPRK)

With regard to high-risk jurisdictions, FINTRAC reminds us that the Ministerial directive on the Democratic People’s Republic of Korea (DPRK) states that:

 

Every person or entity referred to in section 5 of the PCMLTFA shall treat all transactions originating from, or destined to, North Korea (Democratic People’s Republic of Korea) as high risk for the purposes of subsection 9.6(3) of the Act.

 

FINTRAC has issued guidance related to the Ministerial Directive and the agency will assess compliance with the Ministerial Directive.

 

Iran

FINTRAC reminds us that the Ministerial directive on Iran states that:

 

“Every person or entity referred to in paragraphs 5‍(a), (b) and (h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) shall

 

(a) treat every financial transaction originating from or bound for Iran, regardless of its amount, as a high-risk transaction for the purposes of subsection 9.6‍(3) of the Act;

 

(b) verify the identity of any person or entity requesting or benefiting from such a transaction in accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations);

 

(c) exercise customer due diligence, including ascertaining the source of funds in any such transaction, the purpose of the transaction and, where appropriate, the beneficial ownership or control of any entity requesting or benefiting from the transaction;

 

(d) keep and retain a record of any such transaction, in accordance with the Regulations; and

 

(e) report all such transactions to the Centre.”

 

FINTRAC has issued guidance related to the Ministerial Directive and the agency assesses compliance with the Ministerial Directive.

 

FATF Action on the Terrorist Group Islamic State

FINTRAC reiterates previous statements issued by the FATF, expressing its deep concern with the financing generated by, and provided to, the terrorist group known as the Islamic State (IS).

 

FINTRAC reminds all reporting entities of their obligation to submit a terrorist property report (TPR), once they have met the threshold to disclose under the Criminal Code or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (RIUNRST). “Property” includes any type of real or personal property, any deed or instrument giving title or right to property, or giving a right to recover or receive money or goods.

 

Reporting entities should consider the above in determining whether to file a suspicious transaction report (STR) for one or more financial transaction(s) emanating from, or destined to, a jurisdiction under IS control. The same applies to transactions from a surrounding jurisdiction where there are reasonable grounds to suspect that the transactions or attempted transactions are related to the commission or attempted commission of a money laundering offense or a terrorist activity financing offense.

 

FINTRAC also encourages reporting entities to undertake enhanced customer due diligence on clients and beneficiaries involved in such financial transactions or attempted financial transactions.

 

To learn more about this update, visit the FINTRAC website. If you are a reporting entity looking to monitor both domestic and international transactions, including those from high-risk jurisdictions, Alessa offers transaction monitoring and FINTRAC regulatory reporting capabilities. Contact us to learn more about how our solution can make monitoring, investigations and reporting easier.

 

May 21, 2021 – Regulatory Amendments in Effect on June 1, 2021

FINTRAC has issued a reminder that a number of regulatory amendments will come into force on June 1, 2021, that will create or change obligations for reporting entities (REs) that are subject to the PCMLTA. The amendments include:

 

  • New and revised definitions
  • Additional foreign money services businesses (FMSBs) obligations
  • Virtual currency (VC) obligations for all REs, including submitting Large Virtual Currency Transaction Reports (LVCTRs) to FINTRAC starting on June 1, 2021
  • Prepaid payment products and accounts obligations for financial entities (FEs)
  • Obligations for life insurance companies, brokers and agents when they are acting as FEs
  • Beneficial ownership obligations extended to all REs
  • Business relationships and ongoing monitoring obligations extended to all REs
  • Politically exposed persons obligations extended to all REs
  • Deemed receipt of funds and VC obligations
  • Repeal of third-party deeming for persons acting on behalf of an employer
  • Certain record-keeping obligations

 

REs are advised to review these changes as FINTRAC will begin assessing compliance with the amended Regulations on April 1, 2022. From June 1, 2021 to March 31, 2022, FINTRAC will assess compliance with the regulatory requirements in effect prior to June 1, 2021.

 

Below is a quick summary of some of the changes. Please refer to the FINTRAC site for full details.

 

Compliance Program Requirements

The updated guidance requires RE compliance programs to contain references to the travel rule requirements, including risk-based policies and procedures to help determine whether REs should suspend or reject received electronic funds transfers (EFT) or virtual currency transfers.

 

The program should also include other follow-up measures, including if the transfer does not include the required travel rule information and the RE is unable to obtain the information through reasonable measures.

 

After June 1, 2021, compliance policies and procedures must also contain specific references to ministerial directive requirements and updates to their training plans.

 

Reporting Large Virtual Currency Transactions

As of June 1, 2021, REs will be required to comply with obligations related to virtual currency (VC) transactions. REs will have to submit a Large Virtual Currency Transaction Report (LVCTR) when they receive an amount of virtual currency equivalent to $10,000 or more in a single transaction (the 24-hour rule may apply).

 

Reporting Electronic Funds Transfers

Reporting entities will have to submit an EFT report to FINTRAC when:

 

  • The RE is the final recipient of an international EFT of $10,000 or more in a single transaction (the 24-hour rule may apply).
  • The RE initiates, at the request of a person or entity, an international EFT of $10,000 or more in a single transaction (the 24-hour rule may apply).

 

FINTRAC provides guidance on how to manage the cases where:

 

  • REs who are the first to receive an EFT from outside of Canada and those that are the last in Canada to send an international EFT no longer have the obligation to report these transactions to FINTRAC
  • REs have identified a reportable international EFT but have not updated or implemented their reporting systems to submit an EFT report to FINTRAC as required under the amended Regulations

 

PEPs and HIOs

As of June 1, 2021, all reporting entity sectors will have politically exposed person (PEP) and head of an international organization (HIO) obligations. These obligations include determining whether a person is a foreign or domestic PEP, HIO, or a family member or close associate of a foreign or domestic PEP, as applicable.

 

Methods to Verify the Identity of Persons and Entities

The guidance has been updated to include the reliance method as a way to identify a person or entity. When relying on measures that were previously taken by another RE or an affiliated foreign entity. The RE’s compliance program must describe the processes it follows when using the reliance method.

 

Another change to the guidance includes the addition of the simplified identification method to verify the identity of certain prescribed entities. This method is only available to certain REs and only used if the RE considers there is a low risk of a money laundering or terrorist activity financing offense. REs must keep a record of their risk assessment outlining the grounds for their determination that there is a low risk of an offense.

 

Third-Party Determination Requirements

The updated guidance states that REs must take reasonable measures to determine whether a third party is involved when they are required to:

 

  • report a large cash transaction or keep a large cash transaction record;
  • report a large virtual currency transaction or keep a large virtual currency transaction record;
  • keep a signature card or an account operating agreement;
  • keep an information record; or
  • submit a Casino Disbursement

 

If the RE is not able to make a third-party determination but has reasonable grounds to suspect that a third party is involved, they must record information about the person and transaction and keep the information for five years.

 

The 24-hour Rule

FINTRAC has provided new guidance describing when REs must consider multiple transactions within a 24-hour period as a “single transaction.”

 

On June 1, 2021, the obligation to aggregate multiple transactions when they total $10,000 or more within a consecutive 24-hour window and the transactions are conducted by the same person or entity, on behalf of the same person or entity, or for the same beneficiary (person or entity) will apply only to the reporting of large virtual currency transactions.

 

The obligations will apply to large cash transactions, EFTs and casino disbursements when FINTRAC updates the report forms for those transactions. Until then, REs should continue to apply the 24-hour rule as outlined in FINTRAC Interpretation Notice No. 4 (pre-June 1, 2021).

 

Prepaid Payment Products and Prepaid Payment Product Accounts

FINTRAC has provided new guidance applicable to financial entities, life insurance companies, and life insurance broker and agent entities that offer prepaid payment products (PPP) or maintain PPP accounts.

 

PPP accounts are subject to account-opening obligations, just like other types of accounts. As well, transactions carried out with PPPs connected to PPP accounts are subject to transaction obligations.

 

The guidance goes on to explain the requirements and exceptions applicable to PPP accounts and related transactions including when to verify the identity of persons and entities, methods to verify identities, record-keeping requirements, transaction reporting requirements, ongoing monitoring requirements, beneficial ownership requirements and more.

 

Foreign MSBs

The PCMLTFA has been amended to include foreign money services businesses (FMSBs). FMSBs are entities providing MSB services in Canada, do not have a place of business in Canada and provide services to Canadian clients.

 

FMSBs will now be required to do the following:

 

  • Register your business with FINTRAC;
  • Report certain financial transactions to FINTRAC;
  • Keep certain records;
  • Identify clients; and
  • Have a compliance program in place.

 

Travel Rule for EFTs and VCs

FINTRAC has provided new guidance applicable to financial entities, MSBs, and casinos regarding the travel rule. The travel rule is the requirement to ensure that specific information is included with the information sent or received in an EFT or a VC transfer. Information received under the travel rule cannot be removed from a transfer.

 

The following travel rule information when initiating an EFT:

 

  • the name, address and account number or other reference numbers (if any) of the person or entity who requested the transfer;
  • the name and address of the beneficiary; and
  • if applicable, the beneficiary’s account number or other reference numbers.

 

The required travel rule information for VC transfers is:

 

  • the name, address and the account number or other reference number (if any) of the person or entity who requested the transfer (originator information); and
  • the name, address and the account number or other reference number (if any) of the beneficiary.

 

If an EFT or a VC transfer is received that should include the travel rule information but does not, the RE must take reasonable measures to obtain such information. These reasonable measures should be outlined in the RE’s policies and procedures, along with what to do when travel rule information is not obtainable and when the transaction will be allowed, suspended or rejected.

 

As this update indicates, there are many changes coming into effect on June 1, 2021, and REs should consult the FINTRAC site to learn more. For those looking to leverage technology to help them meet these are other regulatory requirements, Alessa is an AML compliance solution with due diligence, transaction monitoring and regulatory reporting capabilities. Contact us to learn more about how we can help.

 

Feb 19, 2021 – Large Virtual Currency Transaction Report Upload Documentation

Reporting entities (REs) dealing in virtual currency (VC) have large virtual currency transaction reporting obligations coming into force on June 1, 2021. REs can begin developing the Large Virtual Currency Transaction Report (LVCTR) Upload and test it from March 15, 2021, to May 28, 2021. The following documentation is available upon request:

 

  • Reporting Large Virtual Currency Transaction to FINTRAC guidance;
  • Validation rules; and
  • JSON Schema

 

Please contact guidelines-lignesdirectrices@fintrac-canafe.gc.ca for the documents or for more information.

 

Feb 17, 2021 – Updated Guidance on Ongoing Monitoring, PEPs and Business Relationship Requirements

In anticipation of the guidance that comes into effect on June 1, 2021, FINTRAC has updated a number of reports. The revised guidance comes into effect on June 1, 2021. Ongoing monitoring requirements answer the following questions:

 

  1. What is ongoing monitoring?
  2. When must I conduct ongoing monitoring?
  3. When must I conduct enhanced ongoing monitoring?
  4. What are the exceptions to conducting ongoing monitoring?
  5. What records do I need to keep for ongoing monitoring?
  6. When does the requirement for ongoing monitoring end?
  7. When does the requirement for enhanced ongoing monitoring end?

 

The updated guidance on politically exposed persons (PEPs) and heads of international organizations (HIOs) affects financial entities (FEs), securities dealers and casinos (account-based reporting entities) who have obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations. It answers the following questions:

 

  1. When or for whom must I make a PEP, HIO, family member or close associate determination?
  2. What are the exceptions to making a PEP, HIO, family member or close associate determination?
  3. What measures do I need to take after making a PEP, HIO, family member or close associate determination?
  4. What PEP, HIO, family member or close associate records do I need to keep?

 

The guidance on business relationship requirements answers the following questions:

 

  1. What is a business relationship?
  2. When do I enter into a business relationship with a client?
  3. Are there circumstances where a business relationship is not created?
  4. How much time do I have to determine if I have entered into a business relationship with a client?
  5. What business relationship records do I need to keep?
  6. When does a business relationship end?

 

This guidance includes examples of the purpose and intended nature of a business relationship for all reporting entities sectors.

 

Jan 29, 2021 – Update to Ministerial Directive

FINTRAC has updated its Ministerial Directive guidance published on July 25, 2020. The update clarifies the extended obligations that the Ministerial Directive places on reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations.

 

Additional clarity has been provided in the guidance to ensure that reporting entities understand the types of transactions that should be reviewed, assessed and reported to FINTRAC under the Ministerial Directive.

 

The change includes electronic funds transfers, remittances or transfers (EFTs) that include an Iranian originating or destination address which may include transactions where the ordering person or entity, beneficiary, or third party details are Iranian; and the transactions made by representatives of the Government of Iran (e.g., transactions on an Embassy of Iran’s bank account in Canada).

 

The instructions on how to report these transactions and the timeframes for reporting have also been updated.

 

Jan 22, 2021 – Regulatory Amendments Implementation Plan

FINTRAC has published a Notice on its website detailing its plan for the implementation of new reporting obligations related to upcoming regulatory amendments.

 

The message pertains to work underway in relation to the delivery of updated reporting forms, report specifications and over 60 guidance documents.

 

At the centre of the guidance are efforts to further improve the effectiveness of the Anti-Money Laundering and Anti-Terrorist Financing Regime. Two sets of regulatory amendments were published in the Canada Gazette on July 10, 2019, and another one on June 10, 2020. Some of the regulatory amendments came into force last year on June 1, but the majority of the amendments will come into force on June 1, 2021.

 

The schedule provides reporting entities with time to update their systems to comply with reporting obligations, and to allow FINTRAC to make necessary modifications to its reporting forms, reporting specifications and guidance documents.

 

Jan 07, 2021 – Updated Risk Assessment Guidance

FINTRAC has published updated risk assessment guidance to include legislative amendments from June 2017 and legislative amendments that will come into force on June 1, 2021.

 

The guidance answers the following questions:

 

  1. What is risk?
  2. What are inherent and residual risks?
  3. What is a risk-based approach (RBA)?
  4. What is the RBA cycle?

 

It also contains the following annexes, which provide additional references, examples and tools to help you develop your RBA:

 

  • Annex 1 — FINTRAC’s RBA expectations
  • Annex 2 — Examples of higher risk indicators and considerations for your business-based risk assessment
  • Annex 3 — Examples of risk segregation for your business-based risk assessment
  • Annex 4 — Likelihood and impact matrix
  • Annex 5 — Examples of higher risk indicators and considerations for your relationship-based risk assessment

 

The full guidance can be found here.

 

Nov 16, 2020 – June 2021 Regulatory Amendments and Flexibility

FINTRAC issued an announcement to remind reporting entities (RE) that are subject to the PCMLTFA that the following regulatory amendments will come into force on June 01, 2021:

 

  • New and revised definitions
  • Additional foreign money services businesses (FMSBs) obligations
  • Virtual currency (VC) obligations for all REs, including submitting Large Virtual Currency Transaction Reports (LVCTRs)
  • Prepaid payment products and accounts obligations for financial entities (FEs)
  • Obligations for life insurance companies, brokers and agents when they are acting as FEs
  • Beneficial ownership obligations extended to all REs
  • Business relationships and ongoing monitoring obligations extended to all REs
  • Politically exposed persons (PEPs) obligations extended to all REs
  • Deemed receipt of funds and VC obligations
  • Repeal of third-party deeming for persons acting on behalf of an employer
  • Certain record-keeping obligations

 

While FINTRAC expects REs to comply with the amendments, the agency acknowledges that many may be challenged to meet these obligations due to the pandemic. For this reason, FINTRAC also issued guidance on where it will exercise flexibility in assessing and enforcing compliance. Some points to note:

 

  • Flexibility measures will not apply to the new virtual currency obligations – The agency expects REs to implement all virtual currency-related obligations, starting on June 1, 2021.
  • Current Large Cash Transaction Reports (LCTRs), Electronic Funds Transfer Reports (EFTRs), Casino Disbursement Reports (CDRs) and Suspicious Transaction Reports (STRs) – REs are expected to continue submitting reports using the current reporting forms and systems while FINTRAC updates its reporting forms. Also, REs will not be expected to aggregate and submit SWIFT and non-SWIFT transactions in one reporting form until the updated EFT reporting forms are implemented.
  • Aggregating multiple transactions based on the beneficiary for LCTRs and EFTRs (under the 24-hour rule) – The current LCTR and EFTR forms do not allow REs to aggregate information based on the beneficiary. FINTRAC will expect REs to continue complying with the reporting and record-keeping obligations until updated reporting forms are implemented.
  • Aggregating transactions of $10,000 or more with transactions of less than $10,000 for LCTRs, EFTRs and CDRs (under the 24-hour rule) – FINTRAC’s current LCTR, EFTR and CDR forms do not allow REs to submit a report that combines aggregated transactions of less than $10,000 made within 24 consecutive hours that total $10,000 or more with a transaction of $10,000 or more. Until the updated reporting forms are implemented, REs are expected to continue submitting a report for each transaction of $10,000 or more, and where two or more transactions of less than $10,000 made within 24 consecutive hours that total $10,000 or more.
  • Application of reasonable measures to obtain reporting information for non-mandatory information for LCTRs, EFTRs, and CDRs – FINTRAC will be flexible when assessing whether an RE took reasonable measures to obtain non-mandatory information but the agency expects REs to have processes in place.
  • Reporting and record keeping of non-mandatory information for existing reports – FINTRAC will be flexible when assessing whether non-mandatory information related to certain fields in the amended Schedules were reported and kept in a record. FINTRAC encourages REs to continue providing this information in STRs and TPR.

 

To read more details about how FINTRAC will exercise flexibility in assessing and enforcing compliance, visit here.

 

July 27, 2020: FATF and High-Risk Jurisdictions

On June 30, 2020, the FATF issued a statement on high-risk jurisdictions subject to a call for action and a statement on jurisdictions under increased monitoring.

 

FATF has identified the following:

 

  • Jurisdictions identified as high-risk jurisdictions: Iran and Democratic People’s Republic of Korea (DPRK)
  • Jurisdictions identified for increased monitoring: Albania, The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Myanmar, Nicaragua, Pakistan, Panama. Syria, Uganda, Yemen and Zimbabwe
  • Jurisdictions no longer subject to monitoring: Iceland and Mongolia.

 

With regard to the DPRK, the Canadian Minister of Finance has provided the following directive:

 

“Every person or entity referred to in section 5 of the PCMLTFA shall treat all transactions originating from, or destined to, North Korea (Democratic People’s Republic of Korea) as high risk for the purposes of subsection 9.6(3) of the Act.”

 

With regard to Iran, the Canadian Minister of Finance has provided the following directive:

 

“Every person or entity referred to in paragraphs 5‍(a), (b) and (h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) shall

(a) treat every financial transaction originating from or bound for Iran, regardless of its amount, as a high risk transaction for the purposes of subsection 9.6‍(3) of the Act;

(b) verify the identity of any person or entity requesting or benefiting from such a transaction in accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations);

(c) exercise customer due diligence, including ascertaining the source of funds in any such transaction, the purpose of the transaction and, where appropriate, the beneficial ownership or control of any entity requesting or benefiting from the transaction;

(d) keep and retain a record of any such transaction, in accordance with the Regulations; and

(e) report all such transactions to the Centre.”

 

FINTRAC is also reminding all reporting entities subject to the requirements of the PCMLTFA of their obligation to submit a terrorist property report (TPR) to FINTRAC without delay, once they have met the threshold to disclose under the Criminal Code or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (RIUNRST). Guidance related to TPRs can be found on FINTRAC’s website.

 

Read the entire brief here.

 

July 2020 – Special Bulletin on COVID

FINTRAC has issued a special bulletin on their analysis of transaction reporting during the COVID-19 pandemic. This new report follows an earlier guidance on temporary flexibility issued by FINTRAC on March 25, 2020.

 

While the COVID-19 pandemic has not had a significant impact on the overall volume of suspicious transaction reports (STR) and electronic funds transfer reports (EFTRs), the volume of casino disbursement reports (CDR) and large cash transaction reports (LCTR) has significantly decreased. FINTRAC says the overall decrease in large cash transactions is likely a result of the physical distancing and public health measures as they have resulted in a general decline in cash transactions and business closures, including casinos.

 

The COVID-19 pandemic represents an unprecedented situation that may lead to unusual transaction activities, FINTRAC stated. While many unusual patterns may reflect legitimate needs to access financial services during this challenging time, some individuals may attempt to profit from the current situation to facilitate money laundering.

 

The COVID-19 pandemic, and associated closures and physical distancing measures, have disrupted some money laundering methods – particularly those that rely on the placement of illicit cash into cash-intensive businesses – and may expose criminals seeking alternate venues to integrate illicit proceeds into the financial system.

 

Read the entire brief here.

 

Apr 21, 2020 – Reporting Suspicious Transactions

All reporting entities (REs) and individuals employed by REs must report suspicious transactions (STR) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations. An employee is only expected to report STRs to FINTRAC should they believe that their employer has not submitted an STR as prescribed by the PCMLTFA and associated Regulations.

 

This April 2020 guidance should be read in conjunction with the two other suspicious transaction reporting guidance documents:

 

 

This guidance document answers the following questions:

 

  • What is a suspicious transaction report (STR)?
  • What measures do you need to take to enable your submission of STRs to FINTRAC?
  • What are reasonable grounds to suspect (RGS)?
  • When do you submit an STR to FINTRAC?
  • How does FINTRAC assess your compliance with the obligation to submit STRs?
  • How can you assess your own compliance with the obligation to submit STRs?

 

Read the full guidance here.

 

Alessa is an AML compliance solution that offers customer due diligence, sanctions and watchlist screening, real-time transaction monitoring and regulatory reporting. With the ability to integrate with existing AML and banking systems, the solution provides a holistic view of data so organizations can take a risk-based approach to compliance. To learn how Alessa can be used to comply with FINTRAC and PCMLTFA, contact us today.

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