Canada’s anti-money laundering (AML) regime is set to undergo its largest transformation yet with the sweeping amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act proposed in Bill C-2. In anticipation of heightened scrutiny and enforcement from the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), businesses should maintain strong compliance programs and prepare for potential examinations.
Here are five key considerations for financial institutions and other reporting entities:
- Meeting a High Compliance Standard. Bill C-2 introduces a new requirement for compliance programs to be “reasonably designed, risk-based and effective.” Best practices include appointing a responsible person, maintaining up-to-date policies and procedures and conducting comprehensive risk assessments. These assessments must cover client profiles, delivery channels, geography and evolving technologies. It’s also important to document training programs and review the entire compliance framework every two years.
- Adopting Escalation Procedures. A robust compliance program includes procedures to ensure that red flags in transaction activity that could be indicative of serious issues (such as systemic issues or internal complicity in illegal activity) are quickly escalated to senior legal and compliance personnel. The early involvement of legal counsel can help preserve a company’s legal privilege.
- Preparing for FINTRAC Examinations. Businesses should prepare for a potential examination by conducting proactive internal audits, refreshing staff training and reviewing guidance documents such as FINTRAC’s assessment manual. Deficiencies identified in the regulator’s published Notices of Violation can inform updates to both policy and practice across the sector. Risk assessments, particularly, are a frequent focus of examination findings.
- Responding to a FINTRAC Notice of Violation. Upon receiving a Notice of Violation, businesses may pay the proposed penalty or make written submissions within 30 days. Submissions should address both legal and factual issues, clearly outline mitigating factors and provide information on the entity’s ability to pay. A robust initial response can help businesses protect their appeal rights.
- Keeping Up With Case Law. Federal Court decisions such as Norwich are reshaping how administrative monetary penalties (AMPs) are quantified and reviewed. In Norwich, the court set aside a fine after finding FINTRAC failed to consider proportionality and failed to properly analyze statutory factors to avoid a punitive fine. This case reinforces the need for fair and reasoned AMP assessments and provides guidance on how to frame an appeal of FINTRAC fines.
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