Canada’s financial crime watchdog appears to have just woken up. This week, FINTRAC announced they fined two of the country’s biggest banks for anti-money laundering (AML) non-compliance. Sampling just a small number of transactions, the agency found serious gaps in reporting procedures that may have allowed dodgy money to slip through the system.
RBC Failed To Report Suspicious Transactions, Hit With $7.5 Million Fine
Two days ago, FINTRAC announced it fined RBC over a lack of administrative compliance. The agency hit the bank with a $7.5 million fine on Nov 3, 2023, in relation to a routine audit they conducted on their 2022 books. Out of 130 cases chosen for review, the agency found 16 failures to follow AML procedures.
RBC was hit with fines for the following issues:
- Failure to submit suspicious transaction reports when there were reasonable grounds to suspect that transactions were related to a money laundering offense;
- Failure to provide information in the prescribed form and manner in suspicious transaction reports; and
- Failure to keep written policies and procedures up to date.
FINTRAC typically uses a tiered system for determining the size of penalty:
- Minor: $1 to $1,000 per violation.
- Serious: $1 to $100,000 per violation; and
- Very Serious: $1 to $500,000 per violation by an entity.
To get a $7.5 million penalty over 16 incidents appears to require serious reporting issues.
CIBC Failed To Report, In Some Cases Failed To Collect Names & Addresses of International Transfers
Today FINTRAC announced they also hit CIBC with administrative failures related to anti-money laundering procedures. The bank was hit with a $1.33 million fine on Oct 23, 2023, based on two major areas of failure uncovered in a routine 2021 audit.
The first is the bank’s failure to submit suspicious transaction reports when it had reason to suspect it was money laundering. FINTRAC stated this was in relation to a client of the bank who had been arrested and charged with a criminal offense.
Despite the bank being made aware of the issue and reviewing the client’s transactions, they decline to file a suspicious transaction report. FINTRAC alleges they ignored the presence of money laundering indicators.
The second issue was a failure to submit suspicious transaction reports for Electronic Funds Transfers (ETF). The agency found 1,003 instances in a sample of 20,000 SWIFT ETFs over a short period, where the name and/or address of the international sender was incomplete.
FINTRAC is Trying To Shed Canada’s Reputation As A Money Laundering Haven
FINTRAC has expressed concerns about gaps in the AML reporting procedures at financial institutions. They notably conducted a case study where it found a family had moved $167 million through Canadian banks, even getting mortgages, without setting off alarms. It wasn’t until a subsidiary of a Swiss bank rang the alarm that the agency was alerted.
The sudden motivation to actually hit institutions with fines comes after criticism. Despite a surge in suspicious transaction reports, the agency was conducting fewer audits. This may be due to increased noise from higher reporting, or cases are becoming more complex and straining resources. In any case, it has resulted in some high-profile criticism.
The most notable criticism came from the conclusion of BC’s inquiry into anti-money laundering. The final report warned the province should establish its own AML resources, since it can’t rely on the agency. Ouch.
