FINTRAC Changes Reporting Requirements for EFTs

October 22, 2019

Lawyer Jacqueline Shinfield, an expert in FINTRAC regulations, says financial institutions need to be prepared for some sweeping changes in the ways Electronic Funds Transfers (EFTs) are done in Canada.

FINTRAC recently issued a new guidance to explain the changes which are being implemented. Shinfield spoke about the changes at a recent ACAMS conference in Toronto and wrote about the subject in a legal blog.  She also fully explained the changes in a recent ACAMS podcast.

In terms of EFTs, Shinfield said regulators have “changed the whole reporting scheme.” “So for banks it will have probably a more favorable effect than others but for others it’s going to have huge operational implications.”

Shinfield said the way that it is structured today, you have two regulated entities involved in the transaction and the money is going across the border. As long as the first person to get the instruction gives the final sending person the name and the address of the originator it’s the final sending person that reports the transaction.

“It’s no longer optional because the traveler will require all that information to be contained. So basically the last person to touch an EFT that leaves the country has to report it.”

Shinfield said if you have a money service business that deals with the bank or foreign exchange company and they send the instruction to the bank and it includes the name and the address of the originator, it’s reportable by the bank.

“And on the converse side when the money comes into the country it’s the first organization to touch it.”

Shinfield said if a bank touches that money but then it’s going onward to an MSB or a foreign exchange dealer or some other party who reports EFT’s, it’s the first to touch that reports it and that’s provided they get the beneficiary name, and event issued address.

“So all the reporting really falls to the financial institution as the last touch and the first to touch that’s gone. So that’s a huge change for organizations other than banks in the reporting.”

 

Change in definition and requirement

The definition of an EFT used to include only cross border transfers, now they’ve taken that out and given a definition of an international EFT which is basically an EFT that goes into Canada, Shinfield explained. “So you have really got to look at your requirements that apply to your sector because they are different depending on if it’s international EFT or an EFT.”

There is also a new requirement that requires reporting entities to verify the identity of beneficiaries of EFTs of $1,000 or more, which is a net new requirement, she said.

 

What FINTRAC says about SWIFT EFTs

According to FINTRAC, if you are a financial entity, a money services business (MSB) or a casino, you will have to report certain electronic funds transfers (EFTs).

This reporting requirement is only applicable to financial entities or MSBs and where an outgoing SWIFT MT 103 message for $10,000 or more outside Canada or an incoming SWIFT MT 103 message for $10,000 or more sent from outside Canada is:

  • in a single transaction for $10,000 or more; or
  • in two or more transfers of less than $10,000 (that total $10,000 or more) if your employee or senior officer knows they were made within 24 consecutive hours of each other by or on behalf of the same individual or entity (24-hour rule).

FINTRAC provides guidance on what information should be included in the report.

 

Non-SWIFT electronic funds transfers

The same reporting requirement applies to non-SWIFT electronic fund transfers. If you are a financial entity, an MSB or a casino, you must report to FINTRAC for the following transactions:

  • Outgoing EFTs of $10,000 or more outside Canada that is transmitted in a single transaction; or in two or more transfers of less than $10,000 (that total $10,000 or more) in the following 24-hour rule situations
  • Incoming EFTs of $10,000 or more outside Canada that is transmitted in a single transaction; or in two or more transfers of less than $10,000 (that total $10,000 or more) in the following 24-hour rule situations

 

CaseWare RCM’s Alessa can help your institution keep track of EFTs and report suspicious transactions to regulators. For more information please contact us.

Try Alessa