Three words describe Canada’s system of fighting money laundering and financing of terrorism; intricate, rigorous, and evolving. We have the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTF), which is not only the cornerstone of the entire framework but also the legislative backbone on which government bodies and law enforcement agencies heavily rely.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTF) require specific types of financial entities and businesses to be vigilant in their dealings. Customer due diligence is a very big part of this, whereby customer information is accurately recorded and verified, and so are reporting obligations when any of these businesses or entities see any suspicious financial activity.
Today we’ll be discussing this entire framework in more detail, including the approach taken by the Canadian government in fighting money laundering and terrorism financing, and the role played by designated persons (more on that below) and the private sector.
The Role of FINTRAC: Canada's AML Intelligence Unit
The key government body for fighting money laundering is the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
FINTRAC was originally conceived to detect and investigate money laundering, but its role was expanded in 2001 to include disclosing any suspicious activity to law enforcement agencies and, in the event of financing of terrorism, to intelligence agencies as well.
Today, FINTRAC’s role covers receiving information from reporting entities and businesses, analyzing, record-keeping, client identification, and registrations of financial entities and businesses, such as banks, brokerages, and foreign exchange traders.
FINTRAC also collaborates with other international financial intelligence bodies like itself and is a member of the Egmont Group of Financial Intelligence Units, which is an international body dedicated to facilitating cooperation between financial intelligence bodies of different countries.
Designated Persons (DPs) and Their Responsibilities
Designated Persons refer to public and private entities that play a significant role in the finances of a country and include banks, securities exchanges, brokerages, real estate agents/developers, and even casinos.
Any entities that fall under this umbrella are required by law to implement adequate measures to ensure customer due diligence, in addition to verifying client information and monitoring transactions. If they come across any suspicious activity, then they are legally obligated to report such matters to FINTRAC.
While there is no doubt that entities and businesses like these do a great deal to contribute to Canada’s economy, they need to exercise responsibility given the significant financial positions they hold and the amount of information they have at their disposal. As such, their role in reporting, and fighting money laundering and financing of terrorism is incredibly vital.
Canada's Risk-Based Approach to AML
Canada’s approach to fighting money laundering significantly revolves around risk. Customer due diligence plays a huge part in the entire system and requirements are based on the amount of risk that is perceived with any given client and their transactions as time goes on.
If entities consider any specific customer or client to be high-risk, whether at the time of registration or based on any transaction that occurs in the future, then the appropriate due diligence measures are implemented.
So, the higher the risk, the more stringent the due diligence measures.
International Collaboration in AML
Canada is also quite active on the international stage, extending its cooperation to various international efforts to fight money laundering. In the past, it has participated in numerous initiatives of the Financial Action Task Force and also constantly follows recommendations made by the FATF.
The Egmont Group of Financial Intelligence Units we discussed above is also headquartered in Ottawa, lending more credibility to Canada’s commitment to fighting money laundering and terrorism financing.
Addressing Emerging Threats
The advent of the Internet has affected every aspect of our lives, and finances are no different. With the introduction of virtual currencies such as BitCoin and Ethereum, and other finance platforms which allow money to change hands more easily, the risk of money laundering becomes all the more glaring.
However, the Canadian government goes to great extents in keeping itself informed of such developments in the tech sector and regularly provides regulatory guidance for any emerging technology that could pose a financial risk. At various times the PCMLTF has also been amended to account for such technological developments.
Public and Private Sector Collaboration
The efforts of the Canadian government in fighting money laundering cannot be effective without the role played by private businesses and entities. Some may go so far as to say that the most significant strides made in this fight were after government agencies started to collaborate with private businesses and entities.
Whether it’s banks, financial institutions, or casinos, any private business that deals in money can offer a great deal of information and help in ensuring that money laundering and terrorism financing are effectively mitigated.
Contributing to Global Financial Stability and Security
Considering the entire anti-money laundering framework that Canada has in place, both within its borders and in its collaborative efforts on the international stage, one can confidently say that the country does contribute to overall global financial stability.
This very framework is what prevents individuals from using the Canadian financial system for money laundering and financing terrorism. Its effectiveness is proven by the fact that most people who are involved in such activities do not even glance toward Canada when considering a haven for their ill-gotten gains.
Learn More About Anti-Money Laundering Measures - Speak To An Expert
While we hope the above gives you a brief overview of the Canadian financial system’s efforts against money laundering, if you require more information, then the best option is to speak to an expert.
Financial advisors have in-depth knowledge on these subjects and, if you are a business that needs to comply with many of the financial reporting obligations we've discussed above, then speaking to such an expert at Eastport Financial Group may help you a great deal.
