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Development and administration of the assessment of expenses funding model : Charging reporting entities for FINTRAC’s compliance program

From: Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

Learn how FINTRAC developed the assessment of expenses funding model to charge reporting entities (businesses and individuals) for the annual cost of its compliance program. Understand how FINTRAC will administer and be accountable for the model.

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Development of the funding model

FINTRAC developed its assessment of expenses funding model in collaboration with the Department of Finance Canada. It ensures that the reporting entities that contribute towards the annual cost of their supervision are those with the highest:

Considerations guiding the development of the funding model

Several considerations guided the development of FINTRAC’s assessment of expenses funding model, including:

Guiding principles for the funding model

The Department of Finance Canada and FINTRAC established guiding principles for FINTRAC’s assessment of expenses funding model:

Consultations with key stakeholders

In 2022 and 2023, the Department of Finance Canada and FINTRAC held consultations with key stakeholders on its proposed assessment of expenses funding model. These stakeholders include 2 other portfolio agencies of the Department of Finance Canada:

These agencies have established funding models that allow them to recover the costs of their supervisory functions from the financial entities they regulate. FINTRAC is responsible for regulating and supervising some of the same financial entities, in addition to persons and entities from other sectors.

The consultations resulted in modifying and refining certain aspects of the funding model, particularly the method for charging reporting entities that is prescribed in the Regulations.

Determining the cost of FINTRAC’s compliance program

Every year, as part of its corporate reporting requirements, FINTRAC carries out a planning exercise to forecast the full costs of its compliance program for the upcoming 3 fiscal years for inclusion in its Departmental Plan. This includes the costs of the enabling internal services that support the program, such as human resources, information management/information technology (IM/IT), and communications, among others.

This planning exercise will inform the estimated total cost that FINTRAC will charge to reporting entities for the upcoming year.

Note: The Departmental Plan is approved by the Minister of Finance and tabled in Parliament prior to its publication, which typically occurs in late winter.

FINTRAC follows the Treasury Board of Canada Secretariat’s Guideline on the Attribution of Internal Services.

A factor that may result in fluctuations in the annual cost and, consequently, to the charges to reporting entities is the evolution of FINTRAC’s compliance program in response to:

Annual meeting on FINTRAC’s compliance program

FINTRAC will hold a dedicated annual meeting with key stakeholders where it will present key compliance program plans included in its most recent Departmental Plan.

During this meeting, reporting entities will have the opportunity to ask questions and seek clarifications on FINTRAC’s forward-looking compliance agenda.

Annual reporting

After the first year of the implementation of its assessment of expenses funding model, and every year thereafter, FINTRAC will communicate how funds were spent against plans and priorities during the previous fiscal year. This information will be included in FINTRAC’s annual Departmental Results Report.

Note: The Departmental Results Report leverages FINTRAC’s audited Financial Statements and is used to report the actual cost for the fiscal year. It is approved by the Minister of Finance and tabled in Parliament prior to its publication, which typically occurs in the fall.

Evaluation and enhancement of the funding model

FINTRAC will routinely review and evaluate the effectiveness and efficiency of the assessment of expenses funding model throughout its maturity, including the method for charging reporting entities, as required.

Through existing working groups, fora, and other communication channels, FINTRAC will continually engage, consult, and collaborate with reporting entities (for example, key stakeholders such as federally regulated banks, trust and loan companies, and life insurance companies) and industry on the evolution of its assessment of expenses funding model.

Given that the funding model’s method for charging reporting entities is prescribed in the Financial Transactions and Reports Analysis Centre of Canada Assessment of Expenses Regulations, any changes to it will require undergoing the regulatory process, which includes consultations with stakeholders.

FINTRAC’s assessment of expenses funding model may also be subject to review by a committee of the House of Commons or Senate as part of the Parliamentary Review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, which must be conducted every 5 years.

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