FINTRAC – the Canadian regulatory watchdog – enforces AML compliance to better prevent global and nationwide financial crime

Canada’s financial regulatory authority FINTRAC came into force in 2000 with the purpose of mitigating financial crime instances. The financial intelligence unit, created under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), aims at identifying criminal activities leading to possible monetary crime and funding of terrorism. In 2001, the watchdog expanded its responsibilities with a legal amendment in the previous Proceeds of Crime (Money Laundering) Act. 

What is FINTRAC?

The FINTRAC – Financial Transactions and Reports Analysis Center of Canada – is an autonomous regulatory body working directly under Canada’s Department of Finance. Headquartered in Ottawa, it is currently run by Sarah Paquet who took the role of Director and CEO in November 2020. The financial intelligence unit was created to protect the legal financial system of Canada from the increasing threats of money laundering.  

What is the Purpose of FINTRAC?

FINTRAC takes the role of Canada’s federal regulator in the financial market and takes measures to identify and take down potential money laundering activities. Its responsibilities are not only limited to auditing and regulating financial entities, but also raising public awareness. This helps financial entities create a firm understanding of the possible risks so they can address them better. 

What are the Responsibilities of FINTRAC?

Apart from enforcing regulatory frameworks across Canadian markets, FINTRAC is accountable for protecting the financial information it holds. To ensure FINTRAC is operating as per standards of the Privacy Act, a comprehensive audit is carried out every two years by the Privacy Commissioner of Canada. FINTRAC performs its operations taking into account Anti Money Laundering and Countering the Financing of Terrorism regulations, according to which, here are its responsibilities:

  • Analyze information acquired from service providers in the financial sector to detect any unusual pointers leading to monetary crime
  • Create and maintain a record-keeping system of all the businesses operating in Canada
  • Gather financial information regarding AML/CFT efforts that can enable better security practices
  • Make sure that obligated entities are compliant with FINTRAC regulations and how punctual they are in fulfilling their reporting requirements
  • Conduct investigations on transactional information or any unusual customer behavior reported by financial institutions
  • Frequently publish guidelines so that people are more aware of money laundering and terrorism financing

The Role of FINTRAC in AML

FINTRAC’s duty is to ensure that financial organizations remain compliant with the PCMLTFA, and for that, it performs frequent reviews and audits. Since it cannot directly carry out investigations against criminal proceeds, it works with other departments such as the Canada Revenue Agency, the Canada Border Services Agency, and the police. These collaborations not only enable law enforcement to speed up their efforts but also allows better compliance with the PCMLTFA.

Extending Global Efforts

FINTRAC is not confined to just regulating the financial sector of Canada but also plays its role in preventing international money laundering. As part of the Egmont Group of Financial Intelligence Units, it communicates information with other regulatory bodies directed towards AML/CFT compliance efforts. It also provides technical guidance to financial watchdogs like the Financial Action Task Force (FATF), and the Asia-Pacific Group on Money Laundering (APGML) that helps them in developing robust regulatory policies and guidelines. 

FINTRAC Amendments to the PCMLTFA

Given the increasing risks of money laundering and terrorism financing, FINTRAC made regulatory changes to the PCMLTFA that came into effect on June 1, 2021. Here are some aspects of the new major update:

  • All reporting entities (REs) are now obligated to perform verification of Ultimate Beneficial Ownership (UBO) and proof of corporate existence
  • Screening of Politically Exposed Persons (PEPs) and Heads of International Organizations (HIOs) is mandatory
  • Information regarding high-risk entities acquired during ongoing monitoring must be recorded for five years
  • REs are required to maintain a large virtual currency transaction record (LVCTR) for digital currency transfers of more than 10,000 CAD
  • Requirements for compliance programs and third-party determination have been revised in light of stringent AML regulations

Suggested Reads:

KYC/AML Compliance in light of FINTRAC
FINTRAC Amends PCMLTFA – More AML Requirements for Reporting Entities

Monitor your customers’ AML risk profile in real-time and stay ahead of the regulatory compliance requirements