Source: http://www.fintrac.gc.ca/guidance-directives/overview-apercu/FINS/2-eng.asp?s=9
Timestamp: 2017-12-17 19:39:00
Document Index: 556370743

Matched Legal Cases: ['art 1', 'art 1', 'art 1', 'art 3', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 5']

FINTRAC Policy Interpretations - Administrative Monetary Penalties
Citing for Guidance
I am seeking clarification on FINTRAC’s guidance and how it is applied in the context of examinations, specifically regarding discrepancies in a reporting entity’s compliance regime. Specifically, can FINTRAC's guidance be cited as deficiencies in examinations? If so, what is the legislative basis for these citations?
Under Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), an entity that is subject to the Act is obliged to establish a compliance regime – among other requirements – in order to report specific transactions, ascertain client identity, and keep particular records. A proper compliance regime allows FINTRAC to receive the quantity and quality of information it requires to produce solid financial intelligence in the effort to combat money laundering and terrorist financing activity.
FINTRAC’s mandate includes ensuring the compliance of reporting entities with the PCMLTFA and its associated Regulations. To that end, the PCMLTFA and its associated Regulations provide the legislative framework for FINTRAC to apply its compliance mandate.
FINTRAC’s guidance products describe how FINTRAC administers and interprets provisions of the PCMLTFA and its associated regulations, and are used to set standards for reporting entity activities and behaviour. These guidance products specifically align with the legislation and are developed to provide reporting entities with an expanded explanation on how the legislation can be applied in practical terms, while allowing FINTRAC to meaningfully assess entity compliance.
Through its examinations and other compliance activities, FINTRAC determines whether reporting entities are duly adhering to legislative requirements, and this includes what is described in the guidance.
Date answered: 2016-07-21
PI Number: PI-6881
Obligation(s): Administrative Monetary Penalties
Failure to ID client in the sale of real estate
What should a real estate broker or sale representative do when a seller refuses to provide identification? Could this result in a fine?
FINTRAC administers the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations, and ensures that entities subject to this legislation are in compliance with the obligations outlined therein. The obligations established for the real estate sector, and other sectors, provide important measures for countering criminal behaviour in order to deter criminals from operating within the legitimate economy. For example, the simple requirement to identify a customer when they are purchasing or selling real estate is an important measure of deterrence as it eliminates the anonymity of the transaction. Compliance with the law also ensures that FINTRAC receives information that serves as the foundation of its analysis and intelligence. FINTRAC provides disclosures of financial intelligence to its partners when it has reasonable grounds to suspect the information would be relevant to investigations or prosecutions of money laundering and terrorist activity financing offences. These disclosures may contain information provided by reporting entities, including real estate brokers and sales representatives.
Real estate brokers and sales representatives are subject to the PCMLTFA and its associated Regulations when they act as an agent in respect of the purchase or sale of real estate. Once subject, specific obligations must be met when engaging in these activities.
In accordance with the record keeping obligations for real estate brokers and agents, outlined at section 39 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a client information record must be kept in respect of every purchase or sale of real estate. As identified at subsection 1(2) of the PCMLTFR, a client information record means a record that sets out a client’s name and address and, if the client is a person, their date of birth and the nature of their principal business or their occupation, as applicable.
When a record, such as the client information record, is required to be kept in respect of a transaction, subsection 59.2(1) of the PCMLTFR specifies that client identification must be obtained. As such, except as identified in subsection 62(2) and section 63 of the PCMLTFR, every real estate broker and sales representative must:
As a result, when representing a client for the purchase or sale of real estate, client identification information must be obtained. Failure to do so, or to keep the necessary records, results in non-compliance with the obligations of the PCMLTFA and its associated Regulations. By being non-compliant, FINTRAC has legislative authority to issue administrative monetary penalties (AMPs), depending on the severity of the violation, up to $100,000 for individuals and up to $500,000 for entities (e.g. corporations). As well, a failure to meet the obligations outlined in Part 1 of the PCMLTFA and its associated Regulations could also result in criminal penalties.
Therefore, when a client refuses to provide identification, it is for the real estate broker or sales representative to determine whether or not to proceed with the transaction, knowing it can be cited for non-compliance. Reasonable measures are only acceptable when dealing with an unrepresented party, namely a party to the transaction that is not represented by a real estate broker or agent.
Date answered: 2016-06-22
PI Number: PI-6427
Obligation(s): Administrative Monetary Penalties, Ascertaining Identification
Guidance: 6B
Regulations: 1(2), 37, 39, 59.2
AMPs - Proof of ownership and source of funds
How long do financial entities have in order to establish proof of ownership on people or companies that have made larges deposits into Canadian accounts? What could be the consequences if the financial entity does not establish proof, within a certain time frame?
How long do financial entities have to identify the source of funds? What could be the consequences if the financial entity does not identify the source of funds, within the certain time frame?
Reporting entities have to confirm the existence of any corporation or other entity for which they open an account, other than a credit card account, before any transaction other than the initial deposit, is conducted. An account cannot be opened if this requirement is not met.
FINTRAC undertakes a number of enforcement activities to ensure reporting entities meet their legal obligations. This may include the assessment of the entity’s compliance with reporting, record keeping and other anti-money laundering and anti-terrorist financing obligations through an examination. Failure to keep records or ascertain the identity of clients can lead to an administrative monetary penalty. Alternatively, FINTRAC may also refer cases of non-compliance to law enforcement when there is severe non-compliance, or little expectation of immediate or future compliance. In such cases, conviction of failure to retain records could lead to up to five years imprisonment, to a fine of $500,000, or both.
Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, certain reporting entities must record the source of funds when their client is deemed to be a politically exposed foreign person as defined in the Act.
This determination is made in a couple of scenarios. First, when a person opens a new account or becomes politically exposed following the opening of an account. Second, when a person initiates or receives an international electronic funds transfer of $100,000 or more. In these cases, the reporting entity is required to use reasonable measures to confirm the source of funds as soon as the determination is made that the person is politically exposed. The timeline to make this determination is currently 14 days after the account is opened or the electronic funds transfer has occurred.
In addition, when the business relationship with the client is deemed to be high-risk, enhanced measures must be applied to mitigate the risk. One of the enhanced measures that may be applied in such a case is to obtain information on the source of funds or source of wealth of the client.
Above and beyond these requirements, a transaction (or attempted transaction) may present characteristics that lead the reporting entity to find they have reasonable grounds to suspect that it is related to the commission of a money laundering or terrorist financing offence. In such a case they are required to report the transaction to FINTRAC as suspicious. Suspicious transaction reports are not linked to a mandatory monetary threshold. Rather, they provide details about the transaction and the grounds for suspicion. In the presence of additional indicators of money laundering, being unable or unwilling to confirm the source of funds or provide complete information on activities may lead to grounds for suspicion.
If the reporting entity failed to take reasonable measures, within the prescribed period, to determine whether the person who opens an account, or has an existing account holder, or is the initiator or beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign person, FINTRAC has the authority to issue administrative monetary penalty.
Date answered: 2015-09-04
PI Number: PI-6356
Guidance: 4(10)
Regulations: 1.1
Act: 9.3
For Exempt Market Dealers (securities), I would like to confirm if this sector is subject to the PCMLTFA, thus having to comply with Fintrac's reporting, client identification, etc. requirements. Also, are securities dealers subject to FINTRAC compliance examinations and would their information be posted by FINTRAC in the event they are issued an Administrative Monetary Penalty (AMP)?
Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines a securities dealer as “a person or entity that is authorized under provincial legislation to engage in the business of dealing in securities or any other financial instruments or to provide portfolio management or investment advising services.” Consequently, any individuals or entities, including Exempt Market Dealers, that fall within this definition are subject to the PCMLTFA and its associated Regulations.
Regarding FINTRAC examinations and AMPS, securities dealers and all reporting entities covered under the PCMLTFA and its associated Regulations, are subject to compliance examinations. FINTRAC also has the discretion to publicly identify a reporting entity that has been issued an AMP and proceedings have ended. FINTRAC will exercise this discretion when one of the following criteria has been met:
A very serious violation has been committed
The base penalty amount is $250,000 or more
Repeat significant non-compliance has been committed.
Date answered: 2015-03-17
PI Number: PI-6295
Administrative monetary penalties - failure to provide Terrorist Property Reports
We are seeking information regarding the administrative monetary penalty (AMP) provisions associated with the failure to provide FINTRAC with Terrorist Property Reports (TPRs) in the prescribed form and manner, particularly for the Real Estate sector.
Since subsection 7.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) applies to all reporting entities, real estate agents and brokers, when they are subject to Part 1 of the Act (i.e. when they engage in activities described in subsection 39(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations), they would be subject to the AMPs provision.
This information can be found in the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations, Part 3.
The provision 7.1 (1) of the PCMLTFA states that "Every person or entity referred to in section 5 that is required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism shall also make a report on it to the Centre, in the prescribed form and manner."
The provision 10 of Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations indicates that :
" REPORT MADE UNDER SECTION 83.1 OF THE CRIMINAL CODE OR UNDER SECTION 8 OF THE REGULATIONS IMPLEMENTING THE UNITED NATIONS RESOLUTIONS ON THE SUPPRESSION OF TERRORISM
10. Subject to section 11, a report made under section 7.1 of the Act shall be sent without delay to the Centre and shall contain the information set out in Schedule 2."
Therefore, the failure of a person or entity to send a report containing the prescribed information without delay consists in a very serious violation.
Date answered: 2014-11-13
PI Number: PI-6255
Obligation(s): Administrative Monetary Penalties, Reporting
Regulations: 10, 39(1)
Act: Part 1, 7.1(1)
Clarification of application of section 62 of the PCMLTFA
Would it be possible to clarify the application of section 62 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)?
Subsection 62(1) of the PCMLTFA provides that an authorized person may, from time to time, examine the records and inquire into the business and affairs of any person or entity referred to in section 5 for the purpose of ensuring compliance with Part 1, and for that purpose may:
a) at any reasonable time, enter any premises, other than a dwelling-house, in which the authorized person believes, on reasonable grounds, that there are records relevant to ensuring compliance with Part 1;
b) use or cause to be used any computer system or data processing system in the premises to examine any data contained in or available to the system;
c) reproduce any record, or cause it to be reproduced from the data, in the form of a printout or other intelligible output and remove the printout or other output for examination or copying; and
d) use or cause to be used any copying equipment in the premises to make copies of any record.
You asked us whether, under section 62 of the PCMLTFA, FINTRAC can require direct access to the computer system of the reporting entity, so as to control ourselves how records are consulted, within the limits of what is required for compliance. I note that subsection 62(1)(b) indicates only that we must have access to any computer system and not that we must have a means of controlling for ourselves how records are examined.
You would also like to know whether the wording "from time to time" in section 62 prevents us from requesting access to files and computer systems in order to examine them systematically to ensure compliance with Part 1. The wording "from time to time" does not limit the number of times that access can be requested, but, rather, is used to clarify the fact that access can be requested a number of times in order to ensure compliance with Part 1.
Lastly, you asked us whether the reporting entity could be cited under subsection 62 (2) (assistance to the Centre), if it did not give us access to its computer systems in order to ensure compliance with Part 1. We can cite entities under subsection 62(2) only if the authorized person has not provided all possible assistance and has not provided the information that could reasonably be required, for example, if he or she refuses to allow the use of or access to the necessary computer systems.
Date answered: 2014-06-12
PI Number: PI-6161
Act: 62
Reports Returned For Further Action As Information Demand
We are currently reviewing our Reports Returned For Further Action (RRFA) process and one of the issues we are seeing is that several Reporting Entities are failing to respond to RRFAs.
We were wondering if RRFAs could be considered as an information demand as per section 63.1 of the Act. If so, in the future, would it be possible to administer an administrative monetary penalty on both failure to provide information and failure to report a transaction together with the information set out in the Schedules?
No, we should be citing as a deficiency or AMPing reporting entities that are failing to respond to RRFAs under "failure to report a transaction" (as the report submitted is not in the form and manner prescribed), not under subsection 63.1 of the Act. Subs. 63.1 is more of a catch all in regards to failure in providing information that would not be covered otherwise or specifically under our regulations.
And no you shouldn't AMP twice for a same deficiency. You have to choose one section or the other (although in this case this is a moot point, as subs. 63.1 does not apply).
PI Number: PI-4620
Act: 63.1
Criminal Penalties (fines)- to the RE and/or employees
In what situations can Criminal Penalties (fines and/or imprisonment) and Amps be imposed on?
The Board of Directors of a Credit Union?
The employees of the credit union?
The Credit Union (as an entity)?
I realize that it is the entity or person who is subject to the obligations of the Act who can be fined and/or imprisoned but also realize that the employees of the credit union can be fined and/or imprisoned as well as the Board of Directors of the Credit Union. Can you provide some feedback as to what can be imposed on each of the above and for what type of situation?
For AMPs: Only the RE, not the employee. Exception: for sole proprietorship, we amp the individual. In regards to criminal penalties:
The Board of Directors of a Credit Union? if they participated - yes they can be charged.
The employees of the credit union? again if they participated, yes they can be charged under the criminal code - section 21 (parties to offences).
The Credit Union (as an entity)? yes as a legal entity.
Date answered: 2009-06-15
PI Number: PI-4599
Act: Part 5
Is there something in the PCMLTFA or its associated Regulations that talks about providing wrong/incorrect information to the Centre? Do you know where I can find that?
If a person or an entity that provides information to the Centre under section 11.12, 11.13, 11.14 or 11.3 (re: application for registration, information on agents etc...) knowingly makes false or misleading statements or gives false or misleading information to a compliance officer is guilty of an offence and is liable under 77.1 of the following:
if charged by summary conviction, can be fined up to $50 000 maximum, or imprisonment of not more than six months - or to both;
if on indictment, then can be fined up to $500 000 maximum, or imprisonment of 5 years max. - or to both.
The offences are listed in the same section i.e. in 77.1.
Date answered: 2009-04-16
PI Number: PI-4566
Act: 11.12, 11.13, 11.14 11.3, 77.1
Clarification Criminal Penalties and AMPS
Am I correct in saying the Criminal Penalties are the result of FINTRAC disclosing to law enforcement cases of non-compliance and Law Enforcement will impose these penalties and the AMPS can be imposed directly by FINTRAC ?
Criminal penalties for contravention to the compliance obligations under the PCMLTFA can occur as a result of police action (taken by the police of their own initiative) even in cases where FINTRAC has not disclosed evidence of non-compliance to police. But can also be as a result of disclosed evidence.
Amps will be imposed by FINTRAC based on the REs non-compliance with the PCMLTFA.
Criminal penalties (fine and/or jail) cannot be imposed in conjunction with an AMPs for a deficiency arising from the same set of facts, and vice versa. For example, failure to report a large cash transaction on November 14, 2009 can only result in either an AMP or a criminal penalty but not both.
Date answered: 2009-03-31
PI Number: PI-4561
Question on Report Timing
When a Reporting Entity (RE) requests a Report For Change (RFC), and then resubmits the report on a date that is past the prescribed reporting timeline, are they in non-compliance with the PCMLTFA for late reporting given that their obligation is to submit reports within the prescribed timelines and in the prescribed form and manner?
In a situation where the FINTRAC Compliance Unit returns a Report for Further Action (RRFA) and the Reporting Entity resubmits the report past the prescribed timeline, are they considered to be in non-compliance with the PCMLTFA for submitting a late report, given that FINTRAC requested that the report be resubmitted?
If, in the situations outlined above, the RE is in non-compliance with the PCMLTFA, would the entity be considered eligible to receive an Administrative Monetary Penalty (AMP)?
In the case of the RFC - technically and legally yes the reporting entity would be in non-compliance, however, because it is a corrective action and there is a full cooperation on the part of the entity, it would be somewhat against the cooperation approach adopted by FINTRAC to AMP the reporting entity in this case, as there is really no consequence to reporting it later.
In the case of the RRFA - because the information is missing in the first place, and it appears that the reporting entity did have the information after all (as per the action of re-submitting the report with the missing info included) and chose to not send it in the first report, then definitively in non-compliance, and probably a more likely candidate to consider for AMPS.
Date answered: 2008-10-03
PI Number: PI-4367
Act: 9(1)