Latest News from FINTRAC

February 19, 2021

Keeping on top of the latest advisories and guidances from Canada’s FINTRAC. This blog will update with any new information from the regulator as it becomes available.

 

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 guidances. The revised guidance on ongoing monitoring requirements answers 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 under way 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 more recently 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 combine 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 regards 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 regards 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 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, has 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 PCMLTFA, contact us.

 

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