Canada is one of the big players in the global economy. With a marketplace worth around 2 trillion, it's a hotspot for international trade, drawing investors from all over the world. Federal authorities have estimated that almost 113 billion gets laundered in Canada each year, with a good chunk of it coming from places like China and Russia.
The Canadian government have tightened up its anti-money laundering (AML) game to tackle this issue head-on, as per the 2023 Federal Budget. So, if you're running a business, it's super important to stay on top of these AML rules. You need to know what's changing and how it might affect your compliance needs.
AML/CTF authority in Canada
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) - it's a mouthful, right? But it's super important. It lays down the law for financial institutions and other businesses to follow when it comes to anti-money laundering.
So, what's it all about? The PCMLTFA has three main goals:
- It's all about taking action to spot and put a stop to money laundering and terrorist financing. This helps make it easier to investigate or prosecute these kinds of crimes.
- It's also about responding to the threat posed by organised crime. It gives law enforcement the info they need to go after money laundering or terrorist financing offences.
- And lastly, it's about helping Canada do its part in the global fight against money laundering and terrorist activities.
Let’s talk about the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canada's financial watchdog under the Ministry of Finance. It's an independent entity that works with the National Committee against Money Laundering and Terrorism Financing. Its main job? To investigate, identify, and report suspicious financial activities related to money laundering or terrorism financing. In essence, it's like a detective, always on the lookout for financial misconduct.
How to stay compliant with AML/CTF regulations in Canada
So, the PCMLTFA says that financial institutions and other businesses need to have a Compliance Program. And it's not just for show - you'll have to go through a FINTRAC compliance check to make sure you're playing by the rules.
So, what's in this Compliance Program? Here's the rundown:
- Get a Compliance Officer: you need someone in charge of making sure everything's on the up and up.
- Write down your compliance policies and procedures: this includes how you identify customers and do your due diligence, especially if you're a financial institution.
- Assess your risks: you need to figure out where you might be vulnerable to money laundering and terrorism financing.
- Keep records: you need a written training program for your employees and agents, and you need to keep it updated.
- Monitor and report: every two years, you need an internal or external auditor to review your policies, risk assessment, and training program. And you need to document it all.
- Identify your clients: you need to know who you're dealing with.
What do I need to report for AML/CTF?
- Large cash transactions must be reported. So, if you or your business gets handed CAD$10,000 or more in cash from a client in one go, that's a big deal. The only exception is if it's coming from a financial entity or a public body. And remember, 'one go' can also mean a couple of cash transactions that add up to CAD$10,000 or more, as long as they all happen in 24 consecutive hours.
- If you're a financial entity, a money services business (MSB), or a casino, read this carefully. You've got to report any international electronic funds transfers of CAD$10,000 or more. This applies whether the money is coming into Canada or going out, and it's all about the total in a single transaction.
- SWIFT MT 103 messages.
- If a transaction seems suspicious, and you think it might be linked to money laundering or terrorism financing, it's time to flag it.
What are the penalties?
Fines can start from as little as one Canadian dollar and go all the way up to a whopping CAD $500,000 (that's about US $375,000) for each violation. How much you'll have to cough up depends on how serious the breach is.
Conclusion: staying compliant in 2024
As Canada's government ramps up its anti-money laundering and combating financing of terrorism rules (AML/CFT), businesses across the globe will need to keep up with the changes. To meet these new requirements, you will need to roll-out AML/CFT solutions that can handle a ton of financial data and analyse it effectively. But it's not just about handling the data - these solutions also need to be able to adapt quickly when new risks pop up.
If done right, a good AML solution can help keep criminal activity at bay, keeping you on the right side of the law, and helping you to prevent financial fraud.
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