FINTRAC examinations: your responsibilities and what you can expect from FINTRAC
Updated June 23, 2015
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) plays an integral role in the fight against money laundering and the financing of terrorist activities. As an independent government agency, FINTRAC fulfills part of its mandate by providing law enforcement and security agencies with information relevant to investigations or prosecutions of money laundering or terrorist financing activities, called financial intelligence. The Centre receives, collects, and analyses financial transaction reports sent by the many entities – such as banks, securities dealers, money services businesses – that are required by law to send reports.
FINTRAC's mandate also includes assessing compliance with Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Under Part 1, an entity that is covered under the Act is obliged – among other requirements – to report specific transactions, ascertain identity and keep particular records. A proper compliance regime allows FINTRAC to receive the quantity and quality of reports it requires to produce solid financial intelligence and assures law enforcement and security agencies of quick access to information because of improved client identification and record keeping practices. In other words, by creating a compliance regime that conforms to the law, an entity becomes part of a larger effort to combat money laundering and terrorist activity financing.
For the purpose of assessing compliance, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act provides FINTRAC with the authority to inquire into the business and affairs of any entity covered under the Act. To that end, FINTRAC undertakes on-site and office examinations. FINTRAC applies a risk-based approach to select reporting entities for compliance examinations. This selection is based on various risk assessment methodologies and strategies employed by FINTRAC. By using this approach, FINTRAC ensures that compliance activities are commensurate with the risk and potential impact of non-compliance.
It is important to note that, for the purpose of assessing compliance, FINTRAC considers the date on its examination notification letter to be the date of the beginning of the compliance examination process. As a result, any reportable financial transaction that has occurred during the period under review that has not been reported to FINTRAC as of the date of the examination notification letter will be considered as not having been reported and could result in a deficiency (failure to submit a report). Deficiencies may result in a violation under the Proceeds of Crime (Money Laundering) and Terrorist Financing AMPs Regulations. Similarly, any other compliance program document (e.g. compliance policies and procedures) that is found to have been created or adjusted after the date of the letter may result in a deficiency and potential violation.
- Normally, a FINTRAC compliance officer will provide advance notice of the examination, which is scheduled with you by telephone and confirmed by letter. Prior to arriving, the FINTRAC compliance officers may request documentation including your compliance policies and procedures, assessment of risks of money laundering and terrorist financing, and measures to mitigate high risks, samples of transaction documentation, and other documents. This will allow a portion of the examination to begin before arriving on-site and thus limit the amount of time our officers are in your place of business.
- In some special circumstances, FINTRAC can enter any premises, other than a dwelling house, to carry out a compliance examination without prior notice.
- In addition to on-site examinations, FINTRAC compliance officers also conduct office examinations. Unlike an on-site examination conducted at the reporting entity premises, an office examination is conducted at a FINTRAC office location.
- A FINTRAC compliance officer will contact you by telephone to provide advance notice of an office examination which is also confirmed by letter. Your organization may be required to provide documentation and/or records to assess the extent to which your compliance regime, reporting, maintenance of client records and client identification policies and practices meet the legislative requirements.
What will be examined
A FINTRAC compliance examination will assess whether an entity is meeting its obligations under the legislation. Some areas of review can include:
- Implementation of a compliance regime;
- Reporting of all required transactions;
- Implementation of client identification;
- Record keeping requirements; and
- Third party determination.
The following checklist of questions can serve as a guide:
- Has a compliance officer been appointed?
- Are policies and procedures in place?
- Are appropriate measures in place to identify, document and mitigate risks related to money laundering and terrorist financing?
- Is a training program established?
- Is there a periodic review of the compliance regime?
- Are the reporting requirements being met?
- Are client identification requirements being met?
- Are the appropriate records being kept?
FINTRAC has published Guideline 4 to provide you with additional guidance on how to implement a compliance regime.
Presenting the findings
At the conclusion of an on-site or office examination, a FINTRAC compliance officer will provide details of the findings as part of an exit interview. Following the exit interview these findings will be communicated by way of a findings letter, which will state either of these possibilities:
- no further compliance or enforcement action;
- possible follow-up compliance action; or
- a recommendation for an administrative monetary penalty (AMP).
The issuance of a findings letter will conclude the examination.
FINTRAC's examination process ensures that the findings and expectations for corrective measures are communicated clearly through an exit interview and in the findings letters.
What you can expect from FINTRAC compliance officers
You should expect to be treated professionally and courteously.
- Clear information
Compliance officers strive to provide clear and consistent explanations of the examination findings, and guidance to facilitate your understanding of your legislative obligations, as well as of FINTRAC guidelines, policies, and procedures.
If you feel that the findings given during the examination are incorrect or unfair, a dispute resolution program exists to address your concerns. For more information, you can contact FINTRAC.
- Privacy and confidentiality
Your personal, transactional and financial information will be protected against unauthorized use or disclosure.
- Bilingual service
Service is available in every region in the official language of your choice.
Giving access to premises
The Act allows authorized FINTRAC personnel to enter your business premises to ensure compliance with the law. You are therefore required to give access to authorized FINTRAC officers.
The PCMLTF Regulations require that you produce any record that is required to be kept within 30 days of a request by an authorized officer. FINTRAC's compliance officers are authorized to make such requests.
The Act indicates that an owner or person in charge of the premises involved in a compliance examination shall give the authorized FINTRAC officer all reasonable assistance and furnish them with any information with respect to the administration of the Act and Regulations. This includes making copies of documents when required.
FINTRAC has legislative authority to issue administrative monetary penalties (AMPs) for addressing non-compliance identified during a compliance examination. The Centre may also disclose cases of non-compliance to law enforcement when there is extensive non-compliance or little expectation of immediate or future compliance.
Both criminal and administrative monetary penalties cannot be pursued against the same instances of non-compliance.
Penalties outlined in the Act are as follows:
Administrative monetary penalties
- Depending on the severity of the violation, AMPs can be issued up to $100,000 for individuals and up to $500,000 for entities (e.g. corporations).
- These limits apply to each violation and multiple violations can result in total fines that exceed these limits.
Failure to meet the obligations outlined in Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and accompanying Regulations could also result in criminal penalties.
For more information
Guidelines have been developed by FINTRAC to help you understand your obligations.
You can also contact us:
- Date Modified: