FINTRAC assessment manual: The approach and methods used during examinations

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

May 2023

Introduction

Why is the manual important and what does it cover?

The Financial Transactions and Reports Analysis Centre of Canada, known as FINTRAC, is committed to helping you meet the legal requirements set out in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations.

Our objective is to support businesses as we work together to protect Canadians and the integrity of Canada's financial system from money laundering and terrorist activity financing vulnerabilities.

To this end, in the spirit of openness and transparency, we have published this assessment manual detailing how we conduct examinations.

Examinations are one of the main activities we use to assess whether businesses are adequately implementing and maintaining a compliance program, which is important to detecting and mitigating the money laundering and terrorist activity financing risks your business may face. In turn, it can also reduce financial, reputational and legal risks should criminals try to exploit your business's vulnerabilities.

The manual does not replace the PCMLTFA and associated Regulations, establish new legal requirements or expectations, serve as regulatory guidance, or tell you how to carry out your day-to-day business operations.

The manual, which is for all Canadian businesses covered by the PCMLTFA, describes how FINTRAC conducts its compliance examinations. It is meant to help you understand how we assess whether you have implemented and maintained a compliance program that adequately meets all of the legal requirements, and to help you prepare for a FINTRAC examination.

The manual is divided into three parts:

Part 1—the framework we apply to ensure that we conduct our examinations in a consistent manner;
Part 2—the phases of an examination; and
Part 3—the methods we use in examinations to assess whether you are adequately meeting the legal requirements.

Canadian businesses covered under the PCMLTFA

Description of image

Canadian businesses covered under the Act:

Accountants
British Columbia notaries
Casinos
Dealers in precious metals and stones
Financial entities
Life insurance
Money services businesses
Real estate
Securities dealers

While our examinations take into account the differences across business sectors, our overall examination approach and methods remain the same for all.

The assessment methods we may use in an examination are not limited to those described in the manual. The manual is an evergreen document that we will update through consultations with businesses as our assessment methods evolve, or as legislative and regulatory changes are introduced.

The manual represents FINTRAC's examination approach and methods. It does not address how other federal or provincial regulators or supervisors carry out their oversight activities relating to compliance with anti-money laundering and anti-terrorist activity financing requirements.

Note: FINTRAC typically refers to the businesses covered by the PCMLTFA as reporting entities, while the PCMLTFA refers to "persons" and "entities". In this manual, the term "businesses" will be used.

Part 1—Examination framework

The examination framework we use ensures that we conduct our examinations in a consistent manner, while taking into account the type, nature, size, and complexity of different businesses.

The framework is comprised of three main components outlined below.

Risk-based examinations

We focus our examinations on areas where your business may be vulnerable to money laundering or terrorist activity financing risks and where there is a greater risk of not meeting the legal requirements (risk of non‑compliance). Using this approach reduces the burden on businesses by minimizing disruptions and ensuring the effective and efficient use of resources.

When determining the risks your business may be exposed to, we rely on our experience, knowledge, training, and professional judgment. We take into account relevant information from FINTRAC publications and guidance. We may also take into consideration relevant information taken from publicly available reports and publications issued by well-known credible sources on money laundering and terrorist activity financing.

We recognize that businesses will adopt different approaches to implementing and maintaining their compliance programs, based on their type, nature, size, complexity and risk profile. In light of this, we will include in our examination plans the areas you have identified as posing a higher risk to your business as well as gaps you have identified in your compliance program, where appropriate.

Part 2 of the manual describes in more detail how risk informs our examinations.

Assessment methods

Once we have evaluated your business's risks, we select assessment methods described in Part 3 that we will use as part of our examination.

We use the methods to assess how you comply with the legal requirements set out in the PCMLTFA and associated Regulations. We also consider FINTRAC guidance, which sets out how we interpret the legal requirements.

For example, the PCMLTFA requires that Suspicious Transaction Reports be submitted to FINTRAC under certain circumstances. FINTRAC guidance presents money laundering and terrorist activity financing indicators to help businesses better understand typical risks they may be exposed to, and should watch for, in their day-to-day activities. When we assess the requirement to report suspicious transactions using the methods described in the manual, we may refer to the indicators we provide in the guidance, in addition to the obligation in the PCMLTFA, to support the rationale for suspicion.

When applying our assessment methods, we may review your documents, client records, records of transactions, and financial transaction reports, as well as conduct interviews.

Assessment approach to evaluating findings

We take an assessment approach when evaluating examination findings. This means that we take a holistic approach when evaluating findings rather than evaluating them in isolation. We focus less on technical non-compliance and more on the overall soundness of the areas of your compliance program we are assessing.

We look at all the information gathered to ensure that your compliance program is complete and put into practice. When we identify technical non-compliance within an otherwise adequate system of policies, procedures, processes, and controls, we will notify you of the non-compliance, but the overall result of our assessment may not be negatively affected by it.

With our findings, we aim to make decisions that are reasonable, fair, and balanced. We base our decisions on what we believe a reasonable, experienced and knowledgeable person in your business sector would have done if they were assessing the same set of facts and circumstances.

We expect you to provide us with, or make available, all relevant facts and information so that we can make decisions based on complete information.

Finally, in the spirit of transparency, openness, and fairness in our examinations, we will share our findings with you during the examination, explain them, and offer you the opportunity to provide us with additional information for our consideration.

Part 2—Examination phases

Examinations are conducted on weekdays, during FINTRAC's regular business hours (8 a.m. to 5 p.m.). If these hours do not suit your business, please notify us, as we may be able to offer some flexibility.

The number of days we will spend on your premises will depend on the type, nature, size, and complexity of your business. For example, the examination of a small or medium-sized business may take less than a week, while the examination of a bank may take several weeks.

In order to ensure the examination runs efficiently, and to reduce unnecessary business disruptions, it is important that you provide us with the requested information, documents, client records, records of transactions, and access to your staff, for interview purposes, in a timely manner.

Our examinations are broken down into three phases: planning and scoping; examination and assessment; and developing the findings and finalizing the examination. Below, we present each phase and describe the roles and responsibilities of each party to an examination.

Roles and responsibilities

You can expect us to be professional, provide clear information, respect your privacy and the confidentiality of your clients' personal and financial information, and offer services in either official language. You can also expect us to observe the highest standard of ethical conduct.

The PCMLTFA requires FINTRAC to protect the personal information under its control. We take this mandate very seriously and safeguard all personal information when we carry out an examination.

The PCMLTFA also requires that you provide FINTRAC with assistance during an examination. This assistance includes providing us with the information we ask for within the agreed upon timelines, giving us access to your place of business, providing us with the documents and records we request, answering our questions about your business and making employees available for interviews. We may also ask you to assist us in accessing information stored on your computers and systems, to help us better understand your operations.

Phase 1—Planning and scoping

Once we select a business for examination, we begin planning the examination, which includes selecting the areas and requirements we will examine (examination scope), as well as the assessment methods we will use.

Planning the examination

We develop the overall plan to determine the staffing needs and level of expertise required to conduct the examination based on the type, nature, size, and complexity of the business to be examined.

Setting the scope of the examination

When we set the scope of the examination, we choose the business areas and the specific requirements that we will examine.

To do this, we first gain a general understanding of your business model, environment, activities and operations. We then look at the risks your business may be exposed to, as well as the risks associated with your business sector. This includes determining:

your business areas at risk of being used for money laundering and terrorist activity financing; and
your business areas at risk of not meeting the legal requirements of the PCMLTFA and associated Regulations (the risk of non‑compliance).

In order to gather this information and assess your risk, we may consult the files we have on your business and search the internet. For example, we may look at, as applicable:

Your history of compliance with the PCMLTFA and associated Regulations;
Findings from previous FINTRAC examinations or examinations conducted by a regulator or supervisor with whom FINTRAC has established a Memorandum of Understanding (MOU) to share information related to compliance with the PCMLTFA;
Letters and emails you may have sent us describing how you will address previously found non‑compliance;
Voluntary self-declarations of non-compliance (VSDONC) in which you informed us that you have not met certain requirements;
Previous questions you asked about the requirements or requests for policy interpretations to ensure that potential non-compliance has been addressed in a reasonable period following the enquiries (if applicable);
Financial transaction reports you sent to FINTRAC;
Actions taken when you received feedback from us about the quality, timing or volume of your financial transaction reports;
Policies and procedures, risk assessments and two‑year reviews and other documents and information that we may have on file from a previous examination;
Information about your business or your clients available on the internet; and
History of enforcement actions (administrative or criminal), in respect of your business, taken by FINTRAC, other regulatory/supervisory bodies, and law enforcement.

We use this information to assess risk and determine the scope of the examination, including the requirements we will assess and the appropriate assessment methods we will use. We also use a risk-based approach to establish the number of sample documents, client records, records of transactions, and financial transaction reports we plan to examine, the period covered by the examination, and who will be interviewed from your business.

When we have limited information on file regarding a business, we rely on the characteristics of similar businesses, and on the information obtained in our examination notification call to define the scope of the examination.

Desk versus on-site examinations

We conduct examinations either remotely (a desk examination), or at your place of business (an on-site examination). You will be informed of the examination's location during our notification call and in the notification letter.

In either case, you must send all the requested information, documents and records to FINTRAC for a preliminary review.

When we conduct an examination remotely, we hold interviews with your compliance officer, employees, and agents (if applicable). When we conduct our examination at your place of business, we typically hold in‑person interviews at your main location and may visit or call your other locations, if applicable, to conduct our interviews.

If you have multiple business locations, we typically ask that the information, documents, and records from all your locations be made available for our review at the location that has been selected for the examination.

Examination notification

We will call the person responsible for the implementation of your compliance program (commonly referred to as the compliance officer) to discuss an upcoming examination's scope and date.

After our notification call, we will confirm the examination details in writing with a notification letter addressed to your compliance officer. The letter will indicate where and when we will conduct the examination. We will usually send you the letter 30 to 45 days before the examination date. Given the amount of information and data involved, we may provide larger businesses with more than 45 days' notice to grant them sufficient time to gather the required information.

The letter is our formal request for information, documents and records, and for your assistance during the examination. We will ask you to send the requested material to FINTRAC, including, for example, your compliance program documents and when applicable, lists of transactions and records of transactions.

While we always encourage businesses to address non-compliance whenever they detect it, we will not generally accept certain documents, records, or financial transaction reports once an examination has started.

If you identify non-compliance after a FINTRAC examination has started, you should inform the FINTRAC officer immediately and send us a voluntary self-declaration of non-compliance. We consider the date on which we notify you of the examination to be the start of the examination (that is, the date of the notification call).

When we receive a voluntary self-declaration of non-compliance on an issue that was not previously voluntarily disclosed before a FINTRAC examination has started, we will not consider enforcement actions, such as an administrative monetary penalty. However, if we receive a self-declaration during an examination, we will assess the non-compliance as part of the examination, work with the business to correct it, and determine if the non-compliance warrants an enforcement action.

For example, if you did not submit a financial transaction report to FINTRAC when required and then submit it after the notification date, we will consider that you did not meet your requirement to submit the report. In addition, there may be situations where compliance program documents (for example, compliance policies and procedures) are created or adjusted after the notification date. In such cases, we may determine that you did not meet the compliance program requirements.

When we ask you to send us documents, client records and transaction records in advance of the examination, we do so to conduct the examination more efficiently and to minimize any disruption to your business during the on-site examination.

While we request most of the documents that we will need during the planning phase, we may request additional information or documents at a later stage of the examination process.

Given the sensitive nature of the documentation, and in the interest of limiting the risk of loss during transit, we encourage you to provide the material electronically through a secure digital mailbox service. This type of service uses advanced encryption that allows for the transmission of sensitive information securely. If you agree to use this option, please contact FINTRAC for further information on the process.

Reviewing the material you send us

We will review the material we requested in our notification letter, including your compliance program documents. This material is used to help us prepare interview questions. It may also further inform the scope of our examination. If the scope of the examination changes, we will notify you.

Phase 2—Examination and assessment

In this phase, we apply the assessment methods described in Part 3.

We start by conducting a preliminary assessment of the requirements that were part of the initial examination scope. We review your documents, conduct preliminarily interviews with your compliance officer, employees, or agents and review a sample of your transaction records and financial transaction reports. The objective of this preliminary assessment is to determine areas where we need to focus our attention.

If we identify areas or issues that require further attention, we will sample more client records, transaction records and reports, and if required, conduct follow‑up interviews with your compliance officer, employees or agents. This may lead us to broaden the scope of the examination. If we need to adjust the scope of the examination, you will be notified.

This phase of the examination may extend beyond our last day on your premises or beyond the date of our videoconference or telephone interviews for desk examinations. This may be necessary if we need to further review and analyze certain documents, client records, transaction records, and reports before we consolidate our findings.

Conducting interviews

We may interview different members of your staff and your agents. These one-on-one interviews may be in person, by telephone, or by videoconference.

We do our best to minimize undue business disruptions, particularly as they relate to front-line business functions. We also make every effort to make employees feel at ease.

We do not expect interviewees to memorize your business's policies and procedures or other documents. Rather, our goal is to confirm that your employees and agents are aware of the requirements applicable to their duties and know how to seek clarification when needed.

Exit meeting

Even if we need to continue our review, once we are ready to leave your premises or have concluded the desk examination, we will hold an exit meeting in person, by telephone, or videoconference to discuss our preliminary findings with you. The findings are presented as "deficiencies". Each deficiency is a violation of a provision in the PCMLTFA or associated Regulations.

At this time, you may offer additional information to help clarify a deficiency. We will agree on a timeline for you to provide this material. After our review of this material, we may maintain our original deficiency, modify it, or withdraw it.

Phase 3—Developing conclusions and finalizing the examination

Deciding on our findings

When we consolidate our findings, we use the assessment approach described in Part 1. Using this approach, we focus less on technical non-compliance and more on the overall soundness of the areas of your compliance program we are assessing. We evaluate findings holistically, rather than in isolation, to determine if you are adequately meeting the requirements.

As part of our evaluation, we consider the harm done by not meeting a requirement. In doing so, we assess the nature, relative importance, extent, the root cause of the non-compliance, and any mitigating or aggravating factors.

The nature of the non-compliance means which requirement (such as a compliance program or financial transaction reporting requirement) was not met.

We consider the relative importance of the requirement with which you were not compliant. While all requirements are important, and we expect businesses to fulfill them, certain requirements have a greater impact on FINTRAC's ability to carry out its mandate and on Canada's anti-money laundering and anti-terrorist financing regime. For example, the requirement to submit financial transaction reports could have a greater impact on FINTRAC's intelligence mandate and the regime as a whole than the requirement to submit reports that are free of minor data-quality issues.

We also assess the extent (degree) of the non-compliance; that is, how much information is missing from a required document, record or financial transaction report; how many times the non-compliance is repeated; and if the non-compliance points to gaps in the compliance program. We also try to identify the root cause of the non-compliance.

We look at all of the information we have gathered to ensure that your compliance program is complete and put into practice. When we identify technical non-compliance within an otherwise adequate system of policies, procedures, processes, and controls, we will make note of the non-compliance, but the overall results of our assessment may not be negatively affected by it.

Finally, we take into account other mitigating or aggravating factors that may influence how we view the non‑compliance. Mitigating factors may decrease the seriousness of the non-compliance, while aggravating factors may increase it. For example, a business may have submitted a Suspicious Transaction Report (STR), but omitted to send a Large Cash Transaction Report (LCTR) that was also required. If most of the LCTR's information is included in the STR, we may consider this a mitigating factor.

Examination findings letter

We will send our examination findings letter to your compliance officer. This letter describes the findings that we discussed during the exit interview.

The letter will indicate the documents, client records, transaction records and financial transaction reports we have examined, as well as the consolidated results of our interviews with your employees and agent. When applicable, we will provide additional information, such as the number of documents we sampled and the number of instances of non-compliance that were found in the sample. The individual records and reports that we have found to be deficient will be listed in an annex to the letter.

In some cases, the letter may also include "observations". They are included to help you improve your business processes and practices in order to strengthen your compliance program.

The letter will also state which of the following three actions we may take following an examination based on the results of our assessment:

no further compliance or enforcement action;
possible follow-up compliance action; or
a recommendation for an enforcement action, such as an administrative monetary penalty (AMP).

When you receive a findings letter, we expect you to address the causes of the identified deficiencies within a reasonable amount of time. In certain cases, we may ask you to send us an action plan that describes how and when the cause of the deficiencies will be addressed. When requested, an action plan must be sent within 30 calendar days of the receipt of the findings letter, unless otherwise specified. When an action plan is not requested, we still expect that you will take the time to address the cause of the deficiencies. Whether an action plan has been requested or not, you do not need to send us documents that demonstrate that the deficiencies have been addressed. We will evaluate these documents should we conduct a follow-up compliance activity.

If, on the basis of the examination findings, FINTRAC is considering issuing an administrative monetary penalty, this will be stated in the findings letter. The findings letter will also inform you how many days you have to send us any additional information, which is generally 30 calendar days, that you believe could influence our findings or our decision to issue an administrative monetary penalty. We will take into consideration additional relevant information you provide us within the established timeline and send you a written response of our decision. In cases where any adjustment to the findings is required, our response will include a revised findings letter.

Follow-up activities

After an examination, we may follow up to make sure that you have addressed the deficiencies we identified in our findings letter. We may:

Conduct a follow-up on-site or desk examination;
Monitor the reports you send to FINTRAC, if the examination revealed that the quality of your reports was inadequate or that the reports were late; and
Monitor the progress of your action plan, if we asked you to provide one.

Penalties for non-compliance

Our focus is on supporting businesses—administrative monetary penalties are not meant as an automatic response to non-compliance. If we decide to impose a penalty, our aim is to encourage a change in compliance behaviour. When deciding whether a penalty should be considered, FINTRAC compliance officers assess the harm done by looking at various factors. They will assess the nature, relative importance, extent, and root cause of the non-compliance, mitigating or aggravating factors, and a business's history of compliance. Generally speaking, penalties may be issued in cases of serious or repeated non-compliance. We will consider the unique factors in each case to determine if the examination should result in a penalty.

Should you receive a penalty, you have the right to make representations to FINTRAC's Director and Chief Executive Officer (CEO) for the review of your file. You also have the right to appeal the Director and CEO's decision to the Federal Court. Please visit our administrative monetary penalties page for more information.

We may disclose cases of non‑compliance to law enforcement when there is extensive non-compliance or little expectation of immediate or future compliance, and where there are reasonable grounds to suspect that the information would be relevant to investigating or prosecuting an offence arising out of a contravention of Part 1 or Part 1.1 of the PCMLTFA (related to non-compliance). It is then up to law enforcement to conduct an investigation and decide whether further action is warranted. Please visit our penalties for non‑compliance page for more information.

Part 3—Assessment methods

In Part 3, we describe the assessment methods that we use to ensure that you are adequately meeting the requirements.

We assess the following requirements, unless exemptions apply:

compliance program requirements;
client identification and other know your client requirements;
financial transactions reporting requirements;
record keeping requirements;
correspondent banking relationship requirements;
foreign branches, foreign subsidiaries and affiliates requirements;
registration of money services business and foreign money services business requirements; and
ministerial directives' requirements.

We may not assess all of the requirements listed above during an examination, nor will we use every assessment method described in this section. Instead we will choose the requirements and the assessment methods that best fit our risk assessment of your business and the scope of the examination.

In the interest of efficiency, we may apply some of our assessment methods simultaneously, or use variations of the methods described in this section.

3.1. Compliance program requirements

This section describes the methods we use to assess whether you have adequately implemented and maintained a compliance program.

The five required elements of a compliance program are to:

appoint a compliance officer;
develop policies and procedures;
conduct a risk assessment;
develop and provide an ongoing compliance training program; and a plan for the delivery of the program; and
develop a plan to conduct an effectiveness review of the compliance program, and carry it out every two years.

We will verify that you have a well-documented and complete compliance program in place, and assess whether your compliance program is put into practice.

To do so, we assess your compliance with other requirements, such as client identification and other know your client requirements, reporting requirements, and record keeping requirements. We may consider deficiencies identified through the assessment of these other requirements to be an indication that one or more of the five elements of your compliance program is not being applied.

3.1.1. Compliance officer—the person responsible for the implementation of the compliance program

(Applicable to all business sectors)

We use the methods described in this section to assess your compliance with the requirement to appoint a compliance officer who is responsible for implementing your compliance program.

We verify that the following criteria have been adequately met: appointment (selection), authority, knowledge, and duties.

To conduct this assessment, we may:

Review documents that show you have formally appointed a compliance officer. We may also review your compliance officer's job description, documents that describe their authority, and an organizational chart. We may also review your policies and procedures to confirm that they give your compliance officer enough guidance to meet the legal requirements.
- Confirm that the compliance officer has direct access to senior management or the board of directors, to those who make important decisions about compliance issues or who control the company (where applicable).
- Confirm that the compliance officer has timely access to information from all business lines to ensure they have knowledge of and are aware of potential compliance related risks or concerns (where applicable).
Look at the compliance officer's background and experience, as well as the training you have given them to verify that you have made sure that the officer has enough knowledge of:
- your business's functions and structure;
- your sector's money laundering and terrorist activity financing risks and vulnerabilities, as well as related trends and typologies; and
- your sector's requirements under the PCMLTFA and associated Regulations.

Our focus

While we assess the appointment, authority, knowledge and duties of the compliance officer, our focus is on verifying that the compliance officer is fulfilling their duties to implement a sound compliance program. To make this determination, we assess whether the areas of your compliance program that we examined are adequately put into practice.

3.1.2. Policies and procedures

(Applicable to all business sectors)

We use the methods described in this section to assess your compliance with the requirement to develop, document and apply policies and procedures.

We verify that your policies and procedures cover requirements such as (if applicable, and not meant to be exhaustive):

compliance program, including special measures you take for high risk;
client identification and other know your client requirements;
financial transactions reporting;
record keeping;
correspondent banking relationships;
foreign branches, foreign subsidiaries and affiliates;
registration of money services businesses and foreign money services businesses;
travel rule;
reasonable measures; and
ministerial directives.

We also verify that your policies and procedures include the processes and controls you have in place to implement your policies and meet your requirements. For example:

The process you have in place and the source you use to convert foreign currency and virtual currency into Canadian dollars to meet your reporting, verifying identity and record keeping obligations when an exchange rate is not published by the Bank of Canada.
The processes you have in place to take reasonable measures to obtain and report information.
The process you have in place to establish reasonable grounds to suspect that transactions or attempted transactions may be related to money laundering or terrorist activity financing, and your process for submitting Suspicious Transaction Reports "as soon as practicable" and as a priority over other tasks.
The process you have in place for electronic funds transfer and virtual currency transfers to meet your travel rule obligations. We will also review the process you follow when, after taking reasonable measures, you are unable to obtain the required information and the steps that you take to decide whether you allow, suspend or reject a transaction, and any follow-up measures you take.

We also verify that your policies and procedures are adequate, tailored to your business (that is, they take into account the type, nature, size, and complexity of your business) and are designed to control the risks you may face.

To conduct this assessment, we may:

Review your policies and procedures to confirm that they are written, up to date and, if your business is an entity, approved by a senior officer.
Review your policies and procedures to confirm that they provide enough guidance for your employees or agents.
Interview your employees and agents to assess their knowledge of your policies and procedures.

Our focus

While we assess your policies and procedures, we will focus on ensuring that you are adequately putting them into practice with respect to your obligations, including reporting, client identification, beneficial ownership, third party determination, politically exposed persons and heads of international organizations, ministerial directives, and special measures for high-risk client requirements, when required.

3.1.3. Risk assessment

(Applicable to all business sectors)

We use the methods described in this section to assess your compliance with the requirement to assess and document your business risks and vulnerabilities related to money laundering and terrorist activity financing.

We verify that you have a documented risk assessment and that it includes the following elements, as applicable: products, services and delivery channels; clients and business relationships; geographic locations; new developments and new technologies; foreign and domestic affiliated entities (if applicable), and other prescribed high-risk elements such as persons or entities listed in ministerial directives.

We also verify that your risk assessment takes into account the type, nature, size, and complexity of your business, and we consider the rationale for each element of your business risk assessment.

To conduct this assessment, we may:

Verify that you have assessed and documented the risks to your business related to money laundering and terrorist activity financing and that you have identified measures to mitigate these risks, and applied special measures for any high risks.
Verify that you have assessed and documented risk using a risk-based approach before you implement a new development or introduce a new technology that may affect your clients, business relationships, products, services or delivery channels, or the geographic location of your activities. We may also review the process you follow before introducing new developments or new technologies.
Verify that you have assessed risks adequately by looking at the areas you have identified as posing a high-risk and the assessment's written rationale. We may review a sample of client records and transaction records in order to determine whether your risk assessment is reasonable and consistent with your business's risk profile, and policies and procedures.
Verify that you document and apply special measures to elements you have determined pose a high risk. Special measures include taking enhanced measures to identify clients and to mitigate risks such as keeping client identification information up to date and conducting ongoing monitoring for the purpose of detecting suspicious transactions, as well as any other enhanced measures you identify.
Verify that the controls you have in place are consistent with your identified risk levels (ratings or rankings) and adequately mitigate your business risks.
Verify that your compliance program is in line with and informed by the results of your risk assessment. For example, we will confirm that your policies and procedures, ongoing training documentation and two-year review documentation adequately address the areas you have assessed as posing a higher risk and that they provide adequate guidance to your employees or agents.
Verify how you use publicly available information to inform your compliance program.
Interview the employees and agents responsible for your risk assessment to assess their knowledge of the requirements associated with conducting a risk assessment.

Our focus

While we review the elements of your risk assessment, we will focus on verifying that you have considered and rated the risk of all aspects of your business, that you have provided rationales for your decisions, and that you have applied special measures to areas identified as posing a high risk.

3.1.4. Ongoing compliance training program and plan

(Applicable to all business sectors)

We use the methods described in this section to assess your compliance with the requirement to develop and maintain a written, ongoing compliance training program for employees, agents, and those acting on your behalf. We will also assess your compliance with the requirement to have a documented plan to deliver your training program on an ongoing basis.

We look at who receives training, what topics are covered, when and how often training takes place, how you have implemented your training program, and how training is delivered.

We also verify that your training program is adequate, takes into account the size, type, nature and complexity of your business, and is put into practice.

To conduct this assessment, we may:

Review your policies and procedures to confirm that they provide enough guidance to your employees, agents, and those acting on your behalf to develop, implement and maintain an ongoing training program.
Review your training plan to confirm that it considers and documents the steps you take to develop, maintain, and deliver your training program.
Review your training material to confirm that the training content is suitable. For example, we verify that it is tailored to your business and adequate for your employees, agents and their respective responsibilities.
Interview your employees and agents to confirm that they understand the requirements as they relate to their positions, understand and follow the policies and procedures, understand how your business could be vulnerable to ML/TF activities, and have received adequate ongoing training.

Our focus

While we assess your ongoing training program, we will focus on whether it helps your employees and agents understand the requirements, your policies and procedures, and indicators and trends of money laundering and terrorist activity financing. We will also pay close attention to the training you provide regarding the detection of suspicious transactions.

3.1.5. Two-year effectiveness review

(Applicable to all business sectors)

We use the methods described in this section to assess your compliance with the requirement to institute and document a review of the compliance program to test its effectiveness.

We will verify that you have a documented plan to conduct a review of your policies and procedures, risk assessment, and training program for the purpose of testing their effectiveness, and that you carry out this plan to conduct a review every two years.

We will verify that your two-year effectiveness review is adequate, tailored to your business by taking into account the type, nature, size, and complexity of your business, and consistent with your risk assessment.

To conduct this assessment, we may:

Review your documented plan to verify that it considers all the elements of your compliance program for the purpose of testing its effectiveness.
Review your policies and procedures to determine whether they give enough guidance to your employees or agents to conduct a two-year effectiveness review.
Look at the scope of the review (what the review covered) and methodology (how the review was conducted):
- Interview the person who conducted the review to learn about its scope and methodology, and to ensure that they understand all the requirements that apply to your business;
- When looking at the scope, for example, we assess whether your policies and procedures, risk assessment and ongoing compliance training program have been reviewed and cover the current legal requirements and your current operations. We also confirm that the review covers and tests all the requirements applicable to your sector; and
- When looking at the methodology, for example, we verify whether the review was carried out by an internal or external auditor, or by you if you do not have an auditor; whether it was conducted within the required timelines; and whether the testing methods and methodology used were adequate and reasonable.
Verify that a written report has been provided to a senior officer within 30 days after the completion of the review, and that the report includes the findings of the review, updates made to the policies and procedures within the reporting period of the review, and the status of the implementation of these updates.
Verify that the findings of the review are being actioned.

Our focus

We verify that your review assesses whether you have a well-documented compliance program and that your program is adequately put into practice. We will also focus on whether your review adequately identifies areas where you did not meet your requirements, whether you updated your policies and procedures, and the status of these updates.

3.2. Client identification and other know your client requirements

We use the methods described in this section to assess your compliance with client identification and other know your client requirements.

3.2.1. Client identification requirements

(Applicable to all business sectors)

To conduct our assessment of your compliance with the verifying client identity requirements we may:

Review your policies and procedures to confirm that they give enough guidance to your employees or agents to verify the identity of your clients.
Review client records and transaction records to confirm that you apply these policies and procedures.
Confirm, through a review of client records and transaction records, that you verify the identity of persons and entities in all situations where you are required to do so. These situations include, but are not limited to, when you:
- open an account for a client, if applicable;
- receive cash or virtual currency in the amount of $10,000 or more from, or on behalf of, the same person or entity within a 24-hour period;
- must submit a Suspicious Transaction Report;
- must create an information record; and
- are unable to obtain or confirm beneficial ownership information and must therefore take reasonable measures to identify the most senior managing officer of the entity.
Verify that you use the methods prescribed by law to verify the identity of a person or an entity and that you rely on valid and current information, or authentic, valid and current documents to do so.
Confirm that you verify the identity of your clients within the prescribed timeframe.
Interview your employees and agents to assess their knowledge of verifying client identity requirements.

If you use an agent, another reporting entity, or a foreign affiliated entity to help you verify the identity of clients, we may:

Verify that you have a written agreement with the agent, reporting entity, or the foreign affiliate.
Verify that you obtain all the required information from the agent, reporting entity, or the foreign affiliate as soon as feasible.
Verify how you ensure that your agent, reporting entity, or foreign affiliate is using the identity verification methods required by law.

In addition, we verify that you document the required information when you verify the identity of a person or an entity. Refer to our record keeping guidance for more information on the requirement to keep records and to the section of this manual that describes the methods we use to assess record keeping.

When you have verified the identity of a client as required by the PCMLTFA and associated Regulations, you may have additional responsibilities related to know your client requirements. Refer to our know your client guidance and to the section of this manual that describes the methods we use to assess these requirements for more information.

Our focus

We will focus on the steps you take to ensure that you verify the identity of a person or an entity.

3.2.2. Know your client requirements

We use the methods described in this section to assess your compliance with the know your client requirements, including:

Business relationships and ongoing monitoring requirements;
Beneficial ownership requirements;
Third party determination requirements; and (based on specific activity)
Politically exposed persons and heads of international organizations requirements. (Based on specific activity)

To assess the requirements listed above, we may:

Review your policies and procedures to confirm that they provide enough guidance for your employees or agents.
Review your client records and transaction records to confirm that you put the policies and procedures into practice.
Review records of transactions to confirm that you take the necessary steps for all the know your client requirements (as applicable) including:
- taking all the measures as described in the know your client guidance;
- obtaining the required approvals;
- identifying your clients;
- obtaining and keeping records of required information;
- performing a risk assessment and ongoing monitoring;
- taking special measures when required; and
- meeting the requirements within the prescribed timeframes.
Interview your employees and agents to assess their knowledge of the know your client requirements.

We use the methods listed below to evaluate your risk assessment practices relating to knowing your client.

Business relationships and ongoing monitoring

To conduct this assessment, we may:

Verify that you used the results of your risk assessment to determine how often you monitor your clients, or which transactions you will monitor more often or more closely. We focus on situations where you may not be adequately monitoring a client or transactions that you consider to pose a high-risk or to be suspicious.
Verify that you monitor your high-risk business relationships more frequently to identify suspicious transactions, and apply special measures to mitigate risks.
Review business relationships that you have ranked as posing a low or medium risk to determine whether this ranking is appropriate. We will compare your low-risk and medium-risk clients to your high-risk clients in light of the criteria you have established to identify high-risk situations.
Review your ongoing monitoring of low and medium risk business relationships to ensure they are adequately monitored.
Verify that you identify and address inconsistencies between a client's actual and expected transactional activity. Transactional activity inconsistency is a common indicator of money laundering and terrorist activity financing.

Beneficial ownership

To conduct this assessment, we may:

Verify that you have a process in place to obtain beneficial ownership information.
Verify your records and the process you have in place to confirm the accuracy of the information obtained.
Verify whether you take reasonable measures to identify the chief executive officer of an entity, or the person who performs that function, for which you are unable to obtain or confirm the beneficial ownership information, and treat the entity as posing a high risk and apply special measures.
Verify whether you monitor the entities you consider to pose a high risk more frequently than other entities, and apply special measures to mitigate the risks.

Third party transactions

To conduct this assessment, we may:

Review your procedures, processes and controls for situations where you are not able to determine whether an account is to be used by, or on behalf of, a third party when there are reasonable grounds to suspect that it would be.

Politically exposed persons and heads of international organizations

To conduct this assessment, we may:

Verify your records to confirm that you rate all your foreign politically exposed person clients as posing a high risk, as well as their family members and close associates.
Review your records of domestic politically exposed persons and heads of international organizations, as well as those of their family members and close associates, to ensure that you have adequately assessed the level of risk posed by these clients. To do so, we look at a sample of these clients to see if they meet the criteria you have established to rate a client as posing a high-risk.
Verify whether you monitor your high-risk clients more frequently than your lower risk clients and apply special measures.
Review transaction records involving politically exposed persons and heads of international organizations, as well as their family members and close associates, to confirm that you are reporting suspicious transactions when required.

Our focus

We will focus on the following:

Business relationships and ongoing monitoring: we will focus on ensuring you have an adequate ongoing monitoring process in place.
Beneficial ownership: we will focus on ensuring that you have a process in place to obtain, and take reasonable steps to confirm the accuracy of beneficial ownership information.
Third party determination: we will focus on ensuring that you are taking reasonable steps to determine whether there is a third party to a transaction or giving instructions on an account.
Politically exposed persons and heads of international organizations: we will focus on ensuring that you are taking reasonable steps to find out if your clients are politically exposed persons or heads of international organizations (including family members and close associates), and for those who pose a high risk, we will focus on the special measures you have in place.

3.3. Financial transactions reporting requirements

We use the methods described in this section to assess your compliance with financial transaction reporting requirements.

To conduct this assessment, we may:

Review your policies and procedures to confirm that they provide enough guidance for your employees or agents to meet the reporting requirements.
Review your client records, transaction records and submitted reports to confirm that you adequately apply your policies and procedures.
Interview your employees and agents to assess their knowledge of the reporting requirements.

Our focus

We will focus on confirming that you have sound policies, procedures, processes and controls in place to adequately meet the following requirements: to submit financial transaction reports to FINTRAC (when required); to submit the reports on time; and to submit complete and accurate reports.

3.3.1. Requirements related to all reports types (all report types)

(Applicable to all business sectors)

We use the methods described in this section to assess your compliance with reporting requirements. The methods apply to all report types (Large Cash Transaction Reports, Large Virtual Currency Transaction Reports, Electronic Funds Transfer Reports, Casino Disbursement Reports, and Suspicious Transaction Reports), with the exception of Terrorist Property Reports, for which only the assessment method titled "All report types 5" applies.

We use comparison testing, follow-up testing, quality testing, and timing testing.

Comparison testing

(All report types 1) Reviewing changes in your reporting behaviour

We review your reporting history to identify important variations, such as a noticeable increase or decrease in reporting, and confirm that you send reportable transactions when required. If we observe changes, we check to see if we have an explanation for them on file. If not, we follow up with you. We may review your transaction records to see if there are reports that should have been sent to us.

Follow-up testing

(All report types 2): Ensuring that you resubmit the reports FINTRAC rejected for technical errors

FINTRAC can reject a report if it contains technical errors, such as the way the report is formatted, or when quality issues are identified by our validation process. At the assessment, we provide you with a list of rejected reports which you did not correct and resubmit.

If you think this list is incorrect, we may ask you to provide us with the FINTRAC generated External Report Reference Number or the Reporting Entity's Report Reference Number to allow us to further enquire. Refer to our guidance on Batch Reporting Instructions and Specifications and FINTRAC Web Reporting system (FWR, formerly F2R).

For the reports that were not resubmitted, we may ask you why that was the case. We may also look at the records of transactions to confirm whether they were reportable.

(All report types 3) Ensuring past reporting issues have been fixed

We review your records and transaction records to confirm that you have fixed previous compliance issues related to reporting, such as those identified by way of a voluntary self-declaration of non-compliance, and those identified through previous compliance assessment activities that FINTRAC has conducted.

Quality testing

(All report types 4) Ensuring you report on transactions handled by your agents

We verify that you are reporting the transactions conducted by your agents on your behalf. You, not your agents, are ultimately responsible for submitting these reports. We may ask you to give us a list of your agents, including agency agreements, and a list of the transactions conducted by each agent to ensure that reportable transactions were submitted to FINTRAC.

(All report types 5) Ensuring your reports are complete and accurate

We review the information in your reports to verify that they are complete and accurate.

When we assess the quality of your reports, we verify whether any information is missing, inadequate or incomplete. For example, if the address field in a report was blank, we would consider this to be missing information. If the field included a post office box rather than a civic address, we would consider this to be inadequate information. If the field showed a civic address without the city, we would consider this to be incomplete. All of the fields in your reports must be complete and accurate.

We review the quality of your reports by considering all of the fields, including those that are mandatory, mandatory if applicable, and reasonable measures fields.

When reasonable measure fields are left blank, we will examine your records to see if you had the information at the time of the transaction. If you did have the information but did not include it in the report, as required, we will ask you to explain why.

We assess the information reported in Part G, "Description of Suspicious Activity" of Suspicious Transaction Reports to verify that there is an adequate description of the reasonable grounds to suspect that the reported transaction(s), or attempted transaction(s), were related to the commission, or attempted commission, of a money laundering offence or a terrorist activity financing offence.

In Terrorist Property Reports, we verify that information about the property and the persons or groups that own or control it, and information about transactions or attempted transactions related to the property, has been provided.

(All report types 6) Ensuring that your third party service provider reports correctly

When you use a third-party service provider to submit reports on your behalf, we verify that the reports list the correct identification information, such as your business name, phone number and location, not the identification information of the service provider.

We examine your records of transactions to identify the ones that should have been reported, and then verify that the service provider sent us the reports with the correct identification information. If we cannot find the reports in our database under the name of your business, we will seek to determine if your service provider used the wrong identification information when it sent the reports to FINTRAC or if the reports were not submitted.

Timing testing

(All report types 7) Ensuring that you are sending reports on time

We assess whether you are submitting reports within the timelines set out in the PCMLTFA and associated Regulations, and as described in FINTRAC guidance. We may review the reports you submitted and compare them to your transaction records to confirm that the reports were sent on time.

3.3.2. Large Cash Transaction Reports (LCTRs)

We use methods described in this section to assess your compliance with requirements relating to Large Cash Transaction Reports.

(LCTR 1) Confirming you are submitting LCTRs

(Applicable to all business sectors)

We ask you to provide us with a list of your cash transactions or records of transactions of $10,000 or more, or both, including transaction and client identification information, so that we can compare the transactions with your reporting. If we cannot find a report for a given transaction, we will enquire into the reasons behind this discrepancy.

To be clear, we do not require a list of the Large Cash Transaction Reports you or your third‑party service provider have submitted; we already have these reports in our database. What we require is a list that includes the information about your large cash transactions, one that comes directly from your business records or the systems that you or your third-party service provider may have used to gather the information to submit Large Cash Transaction Reports. We may ask you to send us a sample of this list before requesting the complete list in order to verify that it is in the format that we need.

If you do not have an automated system that can extract the information and produce a list, you will need to provide the records of the transactions. These could be deposit slips, invoices, sales receipts, receipt books, foreign currency exchange transaction tickets, pit logs (casino sector), records of player buy‑ins (casino sector), etc.

(LCTR 2) Confirming you are correctly applying the 24-hour rule to LCTRs

(Applicable to all business sectors)

We review your policies and procedures, records of transactions, internal records and reports and other documents to identify how you treat cash transactions of less than $10,000 conducted by, or on behalf of, the same person or entity, that, when combined, total $10,000 or more within a 24-hour period. We confirm that you combine these transactions and send us the required Large Cash Transaction Reports when the transactions were made within 24 consecutive hours.

We also verify that you send us separate Large Cash Transaction Reports for lump-sum cash transactions of $10,000 or more, and that you do not combine these with cash transactions of less than $10,000 conducted within a 24-hour period.

(LCTR 3) Confirming that you are submitting all the required reports for a given transaction

(Applicable to financial entities, casinos and money services businesses)

We review your records to verify that you have submitted a Large Cash Transaction Report and an Electronic Funds Transfer Report when you have received $10,000 or more in cash from, or on behalf of, the same person or entity, in a lump sum or over a 24-hour period, for the purpose of initiating an outgoing international electronic funds transfer of $10,000 or more. We look at your transaction records or the Large Cash Transaction Reports in which you indicated that the disposition of funds was through an "outgoing electronic funds transfer". We may ask you to provide the report numbers for the Electronic Funds Transfer Reports and the Large Cash Transaction Reports to confirm that both types of reports were submitted to FINTRAC.

(LCTR 4) Reviewing exceptions to submitting LCTRs

Exception—Alternative to large cash transactions

(Applicable to financial entities)

If a financial entity has used the alternative to submitting Large Cash Transaction Reports, as permitted under the PCMLTFA and associated Regulations and as described in our guidance, we verify that all of the conditions associated with this exception were respected. We confirm that you submitted, within the prescribed timeframe, a complete and accurate Financial Entity Business Client Report that includes a list of all the clients to which the exception has been applied. If you continue to apply the alternative to a client who no longer meets the prescribed conditions, we will review the client's cash transactions to determine whether Large Cash Transaction Reports should have been submitted to FINTRAC.

Exception—Cash received from financial entities or public bodies or from a person who is acting on behalf of a client that is a financial entity or public body

(Applicable to all business sectors)

If you did not send us Large Cash Transaction Reports for clients who are financial entities, public bodies, or a person who is acting on behalf of a client that is financial entity or public body as the law permits, we will verify that the clients are financial entities or public bodies as defined in the PCMLTFA and associated Regulations. If they do not meet the definition, we may review the client's cash transaction history to determine if there are Large Cash Transaction Reports that should have been submitted to FINTRAC.

3.3.3. Large Virtual Currency Transaction Reports (LVCTRs)

We use the methods described in this section to assess your compliance with the requirements relating to Large Virtual Currency Transaction Reports.

(LVCTR 1) Confirming you are submitting LVCTRs

(Applicable to all business sectors)

We ask you to provide us with a list of your virtual currency transactions or records of virtual currency transactions of $10,000 or more, or both, including transaction and client identification information, so that we can compare the transactions with your reporting. If we cannot find a report for a given transaction, we will enquire into the reasons behind this discrepancy.

To be clear, we do not require a list of the Large Virtual Currency Transaction Reports you or your third‑party service provider have submitted; we already have these reports in our database. What we require is a list that includes the information about your large virtual currency transactions, one that comes directly from your business records or the systems that you or your third-party service provider may have used to gather the information to submit Large Virtual Currency Transaction Reports. We may ask you to send us a sample of this list before requesting the complete list in order to verify that it is in the format that we need.

If you do not have an automated system that can extract the information and produce a list, you will need to provide the records of the transactions. These could be virtual currency exchange transaction tickets, deposit slips, invoices, sales receipts, receipt books, foreign currency exchange transaction tickets, pit logs (casino sector), records of player buy‑ins (casino sector), etc.

(LVCTR 2) Confirming you are correctly applying the 24-hour rule to LVCTRs

(Applicable to all business sectors)

We review your policies and procedures, records of transactions, internal records and reports, and other documents to identify how you treat virtual currency transactions that total $10,000 or more within 24 consecutive hours, and that are conducted by, or on behalf of, the same person or entity, or when the amounts are for the same beneficiary. We confirm that you combine these virtual currency transactions and send us the required Large Virtual Currency Transaction Reports when the transactions were made within 24 consecutive hours.

(LVCTR 3) Confirming that you are submitting all the required reports for a given transaction

(Applicable to financial entities, casinos, money services businesses and foreign money services businesses)

We review your records to verify that you have submitted a Large Virtual Currency Transaction Report and an Electronic Funds Transfer Report when you have received $10,000 or more in virtual currency, in a deemed single transaction, for the purpose of initiating an outgoing international electronic funds transfer of $10,000 or more. We look at your transaction records or the Large Virtual Currency Transaction Reports in which you indicated that the disposition of funds was an "outgoing international electronic funds transfer". We may ask you to provide the relevant report numbers to confirm that both types of reports were submitted to FINTRAC.

3.3.4. International Electronic Funds Transfer Reports (EFTRs)

(Applicable to financial entities, casinos, money services businesses and foreign money services businesses)

We use methods described in this section to assess your compliance with the requirements relating to Electronic Funds Transfer Reports.

(EFTR 1) Confirming that you are submitting EFTRs

We ask you to provide us with a list of your international electronic funds transfers of $10,000 or more, including transaction and client information, when you are the initiator or final receiver of the international electronic funds transfer, so that we can compare the transactions with your reporting. If we cannot find a report for a given transaction, we will enquire into the reasons behind this discrepancy.

To be clear, we do not require a list of the Electronic Funds Transfer Reports that you or your third‑party service provider have submitted; we already have these reports in our database. What we require is a list that includes the information about your international electronic funds transfer transactions, one that comes directly from your business records or the systems you or your third-party service provider may have used to submit Electronic Fund Transfer Reports. We may ask you to send us a sample of this list before requesting the complete list in order to verify that it is in the format that we need.

If you do not have an automated system that can extract the information and produce a list, you will need to provide the records of the transactions. These could be transfer slips, wire logs, foreign currency exchange transaction tickets, invoices, etc.

(EFTR 2) Confirming that you are applying the 24-hour rule to EFTRs

We review your policies and procedures, records of transactions, internal records and reports and other documents to identify how you treat international electronic funds transfers of less than $10,000 conducted by, or on behalf of, the same person or entity, that, when combined, total $10,000 or more within a 24-hour period. We then confirm that you combine these transactions and send us the required Electronic Funds Transfer Reports.

We verify that you send us separate Electronic Funds Transfer Reports for lump-sum international transfers of $10,000 or more, and that you do not combine these with international electronic funds transfers of less than $10,000 conducted within a 24-hour period.

We also verify that you do not combine incoming international electronic funds transfers with outgoing international electronic funds transfers. In addition, for outgoing international electronic funds transfers, we verify that you combine transactions correctly when applying the 24-hour rule for transactions conducted by, or on behalf of, the same client. We also ensure you correctly combine incoming international electronic funds transfers.

(EFTR 3) Confirming that you are submitting all the required reports for a given transaction

(Applicable to financial entities, casinos, money services businesses and foreign money services businesses)

We review your records to verify that you have submitted a Large Cash Transaction Report and an Electronic Funds Transfer Report when you have received $10,000 or more in cash, in a deemed single transaction, for the purpose of initiating an outgoing international electronic funds transfers of $10,000 or more. We look at your transaction records or the Large Cash Transaction Reports in which you have indicated that the disposition of funds was an "outgoing electronic funds transfer". We may ask you to provide the relevant report numbers to confirm that both types of reports were submitted to FINTRAC.

Assessment methods LCTR 3, LVCTR 3 and EFTR 3 are identical and are repeated for ease of reference.

3.3.5. Casino Disbursement Reports (CDRs)

(Applicable to casinos)

We use the methods described in this section to assess your compliance with the requirements related to Casino Disbursement Reports.

(CDR 1) Confirming that you are submitting CDRs

For this test, we ask you to provide us with a list of your casino disbursement records of $10,000 or more, including transaction and client information, so we can compare the transactions with your reporting. If we cannot find a report for a given transaction, we will enquire into the reason behind this discrepancy.

To be clear, we do not require a list of the Casino Disbursement Reports that you or your third‑party service provider have submitted; we already have these reports in our database. What we require is a list that includes the information about your cash disbursements, one that comes directly from your business records or systems. We may ask you to send us a sample of this list before requesting the complete list, in order to verify that it is in the format we need.

If you do not have an automated system that can extract the information and produce a list, you will need to provide records of the disbursements. These could be cheque registers, player tracking sheets, transaction logs, etc.

(CDR 2) Confirming that you are applying the 24-hour rule to CDRs

We review your policies and procedures, records of transactions, internal records and reports and other documents to identify how you treat disbursements of less than $10,000 received by, or on behalf of, the same client, that, when combined total $10,000 or more, within a 24-hour period. We confirm that you combine these transactions and send us the required Casino Disbursement Reports.

We also confirm that you send us separate Casino Disbursement Reports for lump-sum disbursements of $10,000 or more and that you do not combine these with disbursements of less than $10,000 conducted within a 24-hour period.

3.3.6. Suspicious Transaction Reports (STR)

(Applicable to all business sectors, with the exception of STR 13, STR 14 and STR 15)

We use the methods described in this section to assess your compliance with Suspicious Transaction Report requirements.

Suspicious Transaction Reports are of significant intelligence value to FINTRAC as they are the cornerstone of the Centre's mandate to detect, deter and prevent money laundering and terrorist activity financing. Suspicious Transaction Reports, and other reports, enable the Centre to conduct analysis and produce actionable financial intelligence, which it discloses to police, law enforcement and national security agencies when prescribed thresholds are met.

Most of the assessment methods described in this section are based on money laundering and terrorist activity financing indicators published in FINTRAC guidance and other well-known reliable sources, such as the Financial Action Task Force (FATF).

The assessment methods for Suspicious Transaction Reports serve to evaluate how you address suspicious transactions, as well as other requirements. We use them to:

Assess your compliance with other requirements, such as the risk assessment, special measures, and ongoing monitoring requirements;
Verify that you identify money laundering and terrorist activity financing indicators, as well as transactions that may give rise to reasonable grounds to suspect that the transactions, or attempted transactions, are related to the commission or attempted commission of a money laundering offence or terrorist activity financing offence;
Verify that you have a sound escalation and decision-making process for suspicious transactions;
Verify that all relevant business areas receive key information regarding suspicious transaction activity; and
Verify that you are sending us Suspicious Transaction Reports when required.

When assessing the information we gather through the application of these methods, we will use the approach described in Part 1 to arrive at our conclusions. We will evaluate the body of information and the totality of the circumstances and take a holistic and reasonable approach when arriving at our conclusions.

We use monitoring and unusual transactions testing, testing of high-risk areas, money laundering and terrorist activity financing indicator testing, external information testing, comparison testing, transaction reversal and relationship termination testing, and business sector specific testing.

The methods described in this section apply to both completed and attempted suspicious transactions. Assessment methods relating to the quality and timing of reports can be found in section 3.3.1 (all reports types).

Monitoring and unusual transaction testing (STRs)

In this section, the words "alerts" and "unusual transactions" refer to completed or attempted transactions that have been identified or flagged as part of your internal monitoring process because they may be related to money laundering or terrorist activity financing. Alerts and unusual transactions should be further assessed in keeping with your policies and procedures and could eventually lead to a Suspicious Transaction Report.

(STR 1) Reviewing your policies and procedures on how you monitor activities and transactions

We review your policies and procedures to confirm that you have a monitoring process that enables you to detect, assess and, when required, report suspicious transactions related to money laundering and terrorist activity financing. If you use generic policies and procedures developed by an industry group or consultant, we verify that you have adapted these policies and procedures to your business, including monitoring procedures.

We may ask questions such as:

Is your monitoring process automated, manual or both?
How are you alerted to, or informed of, unusual transactions, and how do you prioritize and action these?
When you receive an alert, what process do you follow to identify, assess, and make a decision about the unusual transaction and, when required, report the transaction to FINTRAC?
How often do you review your transaction monitoring process to make sure it remains in line with your risk assessment, and policies and procedures?

(STR 2) Reviewing your monitoring rules

We review the automated and manual monitoring rules that you have put in place to confirm that they help you detect unusual transactions and provide alerts on potentially suspicious transactions. When we review your rules, we confirm that they are reasonable, put into practice, and that they monitor transactions in keeping with your risk assessment. We may also ask you how often you adjust the rules, what would cause you to adjust them, what steps you take to do so, and how you document these adjustments. We may verify whether you periodically review your rules, to confirm that you are not overlooking potentially suspicious transactions.

(STR 3) Reviewing unusual transactions

We review the unusual transactions identified by your monitoring system that you did not report to confirm that your decisions were sound.

We look into whether you use a risk-based approach to identify unusual transactions and generate alerts, so that you can direct more of your time and effort to areas of higher risks of money laundering and terrorist activity financing. For example, you may place more importance on transactions that present two or more money laundering or terrorist activity financing indicators.

If you do use a risk-based approach to manage unusual transactions, we will determine if your approach is reasonable. To do this, we will assess:

If you have sufficient resources to monitor and review transactions based on the size of your business and its transaction volume.
If you have a reasonable rationale to support the thresholds placed on the monitoring rules and unusual transactions.
How often you monitor and action unusual transactions that pose a lower risk.

Testing high-risk areas (STR)

(STR 4) Reviewing your high-risk areas

We review client records and transaction records related to the high-risk areas identified in your risk assessment, such as high-risk clients, high-risk delivery channels, or high-risk jurisdictions. We may also review a sample of client records and transaction records for areas you did not determine to pose a high risk to ensure no gaps exist in your risk assessment or reporting procedures.

Money laundering and terrorist activity financing indicator testing (STR)

(STR 5) Identifying indicators consistently

We ensure that you are applying your money laundering or terrorist activity financing indicators in a consistent manner when submitting Suspicious Transaction Reports. We first review Part G of the reports you have submitted to identify the most common indicators listed. We then verify your records to assess whether you continue to submit suspicious transaction reports when these common indicators are present in other transactions, and there are reasonable grounds to suspect that the transactions are potentially related to money laundering or terrorist activity financing. If we identify suspicious transactions that were not reported, we will prioritize transactions that would have given FINTRAC new information for analysis.

(STR 6) Reviewing transactions for money laundering and terrorist activity financing indicators

As part of our risk assessment of your business, we identify money laundering and terrorist activity financing indicators that you may come across in the course of your business. We verify that these indicators inform your compliance program and support your efforts to detect, assess, and report suspicious transactions. Should we detect transactions that reflect these indicators in our review of your client records and transaction records, we will look into the actions you took to determine whether they were reasonable.

In addition, while we recognize that you may prioritize certain indicators over others, we verify that your processes and systems do not overlook suspicious behaviour.

External information testing (STR)

(STR 7) Reviewing how you use publicly available information

We look at how you use publicly available information as part of your risk assessment, monitoring and Suspicious Transaction Report processes. Publicly available information includes news releases issued by industry regulators, police and other law enforcement agencies, mainstream news media, and other credible sources. We assess whether you take reasonable steps when you discover something of interest about a client. We will enquire about your reasons for not acting upon publicly available information.

(STR 8) Reviewing how you process information from credible sources

We verify how you use information received from police, law enforcement and national security agencies, and regulatory or supervisory bodies, related to money laundering and terrorist activity financing, to inform your compliance program. This information could include production orders, comfort letters, alerts and internal referrals. Specifically, we look at how you use this information to identify potential high-risk clients, take measures to reduce the risk related to these clients, and submit Suspicious Transaction Reports when required. We verify that the information is forwarded to your compliance officer or your compliance department when it is addressed to a different person or department.

FINTRAC will not ask to see sealed production orders nor those that include an order of non-disclosure.

Comparison testing (STR)

(STR 9) Verifying variances in actual versus expected transactional behaviour

We verify whether you detect when a client's transactions differ noticeably from what is expected and that you take action. We may review the client records and transaction records of clients whose transactions noticeably differ from those of similar clients. For example, a client may conduct more transactions or transactions of higher value than what is expected when compared to a group of similar clients.

(STR 10) Detecting unusual patterns

We review your client records of transactions for unusual patterns or connections that we determine meet the reasonable grounds to suspect threshold and should be reported. For example, we may look for:

Clients who appear unrelated but have the same address or phone numbers.
Clients who are in school or unemployed and conducting high‑value transactions.
People without any apparent relation making deposits into the same account.

When we search for patterns or connections, we look through your electronic or paper records, as well as through the reports you sent us. We also ask if you look for such patterns or connections and how you do so.

Transaction reversal and relationship termination testing (STR)

(STR 11) Reviewing your refunds, cancellations and overpayments

We review records of transactions where a refund cheque was issued because a customer returned an item, cancelled a life insurance policy, terminated a service, cancelled a real estate transaction, or overpaid for transactions. These situations may represent common money laundering and terrorist activity financing indicators, and as such, we review your procedures to ensure that you are adequately assessing these situations and taking the necessary measures, as applicable.

(STR 12) Reviewing how you end relationships with clients and agents

The PCMLTFA and associated Regulations do not require you to end business relationships. That decision remains yours to make. However, if you decide to end a relationship with a client or an agent because of concerns related to money laundering or terrorist activity financing, we verify that you continue to monitor their transactions for possible suspicious transactions, and take steps to mitigate risks, until the relationship is officially ended.

Business-sector-specific testing (STR)

The Suspicious Transaction Report assessment methods described above are applicable to most business sectors. However, some sectors have characteristics that require specific testing.

(STR 13) Real estate: Reviewing how you use market values and local market conditions

(Applicable to real estate)

We verify that you detect purchase or sale transactions that are noticeably below or above the expected market value, based on local market conditions, to determine whether the transaction is suspicious. Real estate values and market conditions vary across Canada based on location, the economic cycle and other factors. We assess whether you are aware of these market conditions and that you identify transactions that are well outside their expected or average market value.

(STR 14) Real estate: Reviewing deals with last-minute changes in ownership

(Applicable to real estate)

We review transaction records, including client records, receipt of funds records, bank drafts and third party determination records where there are unexplained or last-minute substitutions of the buyer. We assess whether you have identified these cases as needing further review and assessment for possible layering or hiding of the true ownership, or that the original purchaser may be instructed by a third party until the property is assigned.

(STR 15) Casino: Reviewing your issued cheques for unusual buy‑ins or disbursements

(Applicable to casinos)

We review the cheques you issued to clients to identify unusual buy‑ins or disbursements that may indicate an attempt to layer proceeds of crime. We first ask you to explain how you identify unusual buy‑ins or disbursements, reduce potential risks, monitor the transactions, and decide whether to submit a Suspicious Transaction Report.

Then, we may ask you for a list of the clients you have issued cheques to, so that we can identify irregularities, such as clients who may have received more cheques than what would usually be seen. If we do identify irregularities, we ask for the client history information and look for suspicious buy‑ins or disbursements that should have been reported.

3.3.7 Terrorist Property Report (TPRs)

We use the methods described in this section to assess your compliance with Terrorist Property Report requirements.

(TPR 1) Reviewing your correspondence with authorities

(Applicable as indicated below)

We review:

For all business sectors, correspondence with the Royal Canadian Mounted Police (RCMP) or the Canadian Security Intelligence Service (CSIS) in which you indicated that you are in possession or in control of property owned or controlled by, or on behalf of, a terrorist, terrorist group, or listed person.
The reports that financial entities, life insurance companies, and securities dealers are required to submit under the Criminal Code or the Regulations Implementing the United Nations Resolution on the Suppression of Terrorism. These reports are sent to provincial or federal regulators, in which the business indicated being in possession or control of property owned or controlled by, or on behalf of, a listed entity or listed person.

If you have disclosed that you are in possession of such property, we confirm that you sent us a Terrorist Property Report. We also verify that the information in the Terrorist Property Report is consistent with the information you sent the RCMP, CSIS, and your regulator (if applicable).

(TPR 2) Verifying lists for terrorist or terrorist groups and listed persons

(Applicable to all business sectors)

We confirm the steps you take to determine whether your business possesses or controls the property of a terrorist, terrorist group or listed person, and submit a Terrorist Property Report. If you are, or were, in possession or control of such property, we verify that you sent us a Terrorist Property Report.

We may assess how you handle situations where you cannot determine, based on the information you have, if you are dealing with a terrorist, terrorist group or listed person.

Whether you cannot file a Terrorist Property Report because you cannot make the necessary determination, or whether you are able to file a Terrorist Property Report, we verify that you send us Suspicious Transaction Reports when required. The added information in the Suspicious Transaction Report may prove valuable to FINTRAC in its intelligence work.

We may compare your clients' names against the list published in the Regulations Establishing a List of Entities issued under the Criminal Code and the list published in the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism. If one of your clients is on either list, we verify that you submitted a Terrorist Property Report.

3.4. Record keeping requirements

(Applicable to all business sectors)

We use the methods described in this section to assess your compliance with record keeping requirements.

To conduct this assessment, we may

Review your policies and procedures to confirm that they give enough guidance to your employees or agents to meet the record keeping requirements.
Review your client records and records of transactions to confirm that you put these policies and procedures into practice.
Verify that you keep records as required by the PCMLTFA and associated Regulations when reviewing your client records and transaction records.
Records may include the following, as applicable:
- account opening records;
- credit card account and transaction records;
- prepaid payment product account and transaction records;
- records of large cash transactions or large virtual currency transactions
- records of electronic funds transfer or virtual currency transfer transactions;
- records of casino disbursements;
- foreign currency exchange or virtual currency exchange transaction tickets;
- information records;
- records that you are required to keep under client identification and know your client requirements; and
- copies of reports submitted to FINTRAC
Verify that you keep the information that is required (for example, name, address, date of transaction, etc.) for each type of record. The information that you are required to keep is determined by the type of record that needs to be kept.
Verify that your records are kept in a format that can be produced within 30 calendar days of a request, and confirm that you keep the records for five years, or as long as required by the PCMLTFA and associated Regulations.
Interview your employees and agents to assess their knowledge of record keeping requirements.

Our focus

While we assess record keeping, we will focus on ensuring that you accurately record information that identifies persons and entities that open or control accounts, and conduct or direct transactions.

3.5. Correspondent banking relationship requirements

(Applicable to financial entities)

We use the methods described in this section to assess your compliance with correspondent banking relationships requirements.

To conduct this assessment, we may:

Review your policies and procedures to confirm that they provide enough guidance for your employees or agents.
Review your records, including records of transactions to confirm that your policies and procedures are put into practice.
Review your records of transactions to confirm that you, as applicable:
- take all required measures as per the PCMLTFA and associated Regulations—described in FINTRAC guidance;
- do not deal with a shell bank;
- obtain the required approvals;
- identify your clients, when required;
- obtain and keep records of required information;
- risk assess the relationship;
- take special measures, when required; and
- meet the requirements within the prescribed timeframes.
Interview your employees and agents to assess their knowledge of correspondent banking requirements.

When we evaluate your risk assessment, we may:

Verify whether you have considered correspondent banking relationship risks such as the correspondent bank's location, corporate structure, profile and reputation, clientele, products and services, type and volume of activity, openness to sharing information as needed, and regulatory history.
Review your record of the correspondent bank's anticipated account activity, including products or services. We may ask if, and how, you use this information to review the transactions conducted through your correspondent banking accounts in order to determine whether there are transactions or attempted transactions that deviate from the terms of your agreement. We may also review the records of transactions to this end.

If your policies and procedures allow for:

Payable‑through accounts: we verify that you take reasonable measures to confirm that the correspondent bank identifies its clients who have direct access to your correspondent banking services in a manner that is consistent with Canadian client identification requirements and that it has agreed to provide you with relevant client identification data upon request;
Nested accounts: as a best practice, we may review the information that you have about the downstream bank and the controls you have implemented to mitigate risk and monitor the transactions conducted by the downstream banks and their clients.

If your policies and procedures prohibit payable-through accounts and nested accounts, we will ensure you have the appropriate controls in place to detect transactions involving these types of accounts and, if detected, that you have taken remedial action in keeping with your policies and procedures.

As part of our assessment, we may also:

Verify that you update information regarding your correspondent banking relationship, the type of information that you update, and how often you update it.
Verify that you have disclosed all your correspondent relationships to us, which may include a review of your records of transactions to confirm.
Review your process to end a correspondent banking relationship because of money laundering or terrorist activity financing concerns.

Our focus

We will focus on the steps you take to ensure that senior management has approved your correspondent banking relationships and is aware of the risks involved.

We will also focus on the steps you take to ensure that you are not dealing with a shell bank. Shell banks operate outside the country where they are incorporated and licensed; they are not affiliated to a financial services group that is supervised in that country. Shell banks pose a serious risk to the Canadian anti‑money laundering and anti‑terrorism financing regime because of the difficulty that exists in ensuring regulatory oversight for requirements such as customer due diligence and risk mitigation measures.

3.6. Foreign branches, foreign subsidiaries and affiliates requirements

(Applicable to financial entities, securities dealers, and life insurance)

We use the methods described in this section to assess your compliance with requirements relating to foreign branches, foreign subsidiaries and affiliates.

Foreign branches and foreign subsidiaries

Information on requirements relating to foreign branches and foreign subsidiaries is available in our guidance.

To conduct this assessment, we may:

Review the policies and procedures that you developed for your foreign branches and foreign subsidiaries to ensure that they are adequate, and reflect Canadian obligations when it comes to:
- the establishment and implementation of a compliance program, including policies and procedures to evaluate the risk of money laundering and terrorist activity financing and risk mitigation measures when risk is considered high;
- record keeping and retention; and
- client identification.
Confirm that the Board of Directors (if you have one) has approved these policies and procedures before they are put into practice.
Review your client records and transaction records to confirm that your foreign branches and foreign subsidiaries apply these policies and procedures to the extent permitted by the laws of the country where the branch or subsidiary is located. If the policies and procedures conflict with local laws, we may ask you for the reason of the conflict and whether you have informed FINTRAC and your primary regulator of this issue, and have considered how you plan to mitigate any associated risks.
Confirm how you ensure that your foreign branches and foreign subsidiaries are implementing the policies and procedures.

Domestic and foreign affiliates

Information on requirements relating to affiliates is available in our guidance.

To conduct this assessment, we may confirm that you have adequate policies and procedures in place to share information with your affiliates for the purpose of assessing the risk of money laundering and terrorist activity financing, and detecting and deterring such offences.

As part of our evaluation of your risk assessment, we may:

Verify that you have assessed the risk of money laundering and terrorist activity financing for all of your foreign and domestic affiliates. This includes verifying that you have implemented measures to reduce risks should foreign affiliates be located in higher-risk countries.
Ask you how you use information from affiliates about suspicious activities or transactions in your compliance program.

Our focus

We will focus on whether, as described, your foreign branches and foreign subsidiaries have policies and procedures in place and whether you have policies and procedures in place to share information with your affiliates.

3.7. Money services business (MSB), and Foreign money services business (FMSB) registration requirements

(Applicable to money services businesses and foreign money services businesses)

We use the methods described in this section to assess your compliance with money services business and foreign money services business registration requirements.

We verify that you keep registration information up to date, respond to clarification requests, renew your registration, and cancel your registration (if applicable).

To conduct this assessment, we may:

Review your policies and procedures to confirm that they give enough guidance to your employees or agents to meet the requirements relating to money services business and foreign money services business registration.
Review your client records and transaction records to confirm that the information provided to FINTRAC is accurate and that your policies and procedures are put into practice.
Interview your employees and agents to assess their knowledge of the registration requirements.

Our focus

We will focus on ensuring that your registration information is accurate and up to date.

3.8. Ministerial directives' requirements

(Applicable to all business sectors)

We use the methods described in this section to assess your compliance with requirements relating to ministerial directives.

The instructions provided in each ministerial directive will vary and, as such, our assessment will focus on the essence of the directive.

To conduct this assessment, we may:

Review your policies and procedures to confirm that they give enough guidance to your employees or agents to meet the ministerial directive requirements.
Verify that your policies and procedures clarify what ministerial directives are and where they can be found. We may also look to see whether your policies and procedures indicate how often you should check for new, updated or amended directives; who should be informed when a directive is applicable to your business; and what steps to take to make sure the directive is being followed.
Review your client records and transaction records to confirm that you put the policies and procedures into practice.
Verify that you have taken action when directives are applicable through our review of your client records and transaction records. These records may include:
- the verification of the identity of a person or an entity;
- the exercise of customer due diligence, including ascertaining the source of funds of a financial transaction, the purpose of a financial transaction or the beneficial ownership or control of an entity;
- monitoring financial transaction for an account;
- keeping records;
- reporting financial transactions to FINTRAC; and
- complying with other requirements of the PCMLTFA and associated Regulations.
Interview your employees and agents to assess their knowledge of the requirements relating to ministerial directives.
Verify that your business, including foreign branches and subsidiaries (if applicable), follows the directives.

When a foreign branch or foreign subsidiary cannot comply with a directive because it conflicts with local laws, we may:

Review your records to verify that you obtained documents to confirm the conflict.
Verify that you informed FINTRAC of the reasons for the conflict and, as applicable, the principal agency or body that supervises or regulates your business under federal or provincial law within a reasonable period.
Ask about the measures you put in place to reduce the risks.

When you conduct business in a foreign jurisdiction or with a foreign entity named in a ministerial directive, we may:

Verify that your risk assessment considers the parameters of the ministerial directive.
Verify that you apply the processes that you have in place to manage high-risk transactions associated with ministerial directives, including monitoring the transactions more frequently, applying special measures, and submitting Suspicious Transaction Reports when required.

Our focus

We will focus on determining whether you are adequately implementing ministerial directives.

Definitions

Accountant

A chartered accountant, a certified general accountant, a certified management accountant or, if applicable, a chartered professional accountant. (comptable)

Reference:
Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), SOR/2002-184, s. 1(2).

Accounting firm

An entity that is engaged in the business of providing accounting services to the public and has at least one partner, employee or administrator that is an accountant. (cabinet d'expertise comptable)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Act

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). (la Loi)

Reference:
Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations (PCMLTFAMPR), SOR/2007-292, s. 1, Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations (PCMLTFRR), SOR/2007-121, s. 1, PCMLTFR, SOR/2002-184, s. 1(2), and Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations (PCMLTFSTRR), SOR/2001-317, s. 1(2).

Administrative monetary penalties (AMPs)

Civil penalties that may be issued to reporting entities by FINTRAC for non-compliance with the PCMLTFA and associated Regulations. (pénalité administrative pécuniaire [PAP])

Affiliate

An entity is affiliated with another entity if one of them is wholly owned by the other, if both are wholly owned by the same entity or if their financial statements are consolidated. (entité du même groupe)

Reference:
PCMLTFR, SOR/2002-184, s. 4.

Annuity

Has the same meaning as in subsection 248(1) of the Income Tax Act. (rente)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Armoured cars

Persons or entities that are engaged in the business of transporting currency, money orders, traveller’s cheques or other similar negotiable instruments. (Véhicules blindés)

As soon as practicable

A time period that falls in-between immediately and as soon as possible, within which a suspicious transaction report (STR) must be submitted to FINTRAC. The completion and submission of the STR should take priority over other tasks. In this context, the report must be completed promptly, taking into account the facts and circumstances of the situation. While some delay is permitted, it must have a reasonable explanation. (aussitôt que possible)

Attempted transaction

Occurs when an individual or entity starts to conduct a transaction that is not completed. For example, a client or a potential client walks away from conducting a $10,000 cash deposit. (opération tentée)

Authentic

In respect of verifying identity, means genuine and having the character of an original, credible, and reliable document or record. (authentique)

Authorized person

A person who is authorized under subsection 45(2). (personne autorisée)

Reference:
Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), S.C. 2000, c 17, s. 2(1).

Authorized user

A person who is authorized by a holder of a prepaid payment product account to have electronic access to funds or virtual currency available in the account by means of a prepaid payment product that is connected to it. (utilisateur autorisé)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Beneficial owner(s)

Beneficial owners are the individuals who are the trustees, and known beneficiaries and settlors of a trust, or who directly or indirectly own or control 25% or more of i) the shares of a corporation or ii) an entity other than a corporation or trust, such as a partnership. The ultimate beneficial owner(s) cannot be another corporation or entity; it must be the actual individual(s) who owns or controls the entity. (bénéficiaire effectif)

Beneficiary

A beneficiary is the individual or entity that will benefit from a transaction or to which the final remittance is made. (bénéficiaire)

Branch

A branch is a part of your business at a distinct location other than your main office. (succursale)

British Columbia notary corporation

An entity that carries on the business of providing notary services to the public in British Columbia in accordance with the Notaries Act, R.S.B.C. 1996, c. 334. (société de notaires de la Colombie-Britannique)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

British Columbia notary public

A person who is a member of the Society of Notaries Public of British Columbia. (notaire public de la Colombie-Britannique)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Cash

Coins referred to in section 7 of the Currency Act, notes issued by the Bank of Canada under the Bank of Canada Act that are intended for circulation in Canada or coins or bank notes of countries other than Canada. (espèces)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2) and PCMLTFSTRR, SOR/2001-317, s. 1(2).

Casino

A government, organization, board or operator that is referred to in any of paragraphs 5(k) to (k.3) of the Act. (casino)

Reference:
PCMLTFR, SOR/2002-184, s 1(2) and PCMLTFSTRR, SOR/2001-317, s. 1(2).

Certified translator

An individual that holds the title of professional certified translator granted by a Canadian provincial or territorial association or body that is competent under Canadian provincial or territorial law to issue such certification. (traducteur agréé)

Clarification request

A clarification request is a method used to communicate with money services businesses (MSBs) or foreign money services businesses (FMSBs) when FINTRAC needs more information about their registration form. This request is usually sent by email. (demande de précisions)

Client

A person or entity that engages in a financial transaction with another person or entity. (client)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Client identification information

The identifying information that you have obtained on your clients, such as name, address, telephone number, occupation or nature of principal business, and date of birth for an individual. (renseignements d'identification du client)

Competent authority

For the purpose of the criminal record check submitted with an application for registration, a competent authority is any person or organization that has the legally delegated or invested authority, capacity, or power to issue criminal record checks. (autorité compétente)

Completed transaction

Is a transaction conducted by a person or entity, that is completed and results in the movement of funds, virtual currency, or the purchase or sale of an asset. (opération effectuée)

Completing action

With respect to a reportable transaction, information related to the instructions provided by the person or entity making the request to the reporting entity to complete a transaction. For example, an individual arrives at a bank and requests to purchase a bank draft. The completing action is the details of how the reporting entity fulfilled the person or entity’s instructions which led to the transaction being completed. This includes what the funds or virtual currency initially brought to the reporting entity was used for (see “disposition”). A transaction may have one or more completing actions depending on the instructions provided by the person or entity. (action d’achèvement)

Compliance officer

The individual, with the necessary authority, that you appoint to be responsible for the implementation of your compliance program. (agent de conformité)

Compliance policies and procedures

Written methodology outlining the obligations applicable to your business under the PCMLTFA and its associated Regulations and the corresponding processes and controls you put in place to address your obligations. (politiques et procédures de conformité)

Compliance program

All elements (compliance officer, policies and procedures, risk assessment, training program, effectiveness review) that you, as a reporting entity, are legally required to have under the PCMLTFA and its associated Regulations to ensure that you meet all your obligations. (programme de conformité)

Context

Clarifies a set of circumstances or provides an explanation of a situation or financial transaction that can be understood and assessed. (contexte)

Correspondent banking relationship

A relationship created by an agreement or arrangement under which an entity referred to in any of paragraphs 5(a), (b), (d),(e) and (e.1) or an entity that is referred to in section 5 and that is prescribed undertakes to provide to a prescribed foreign entity prescribed services or international electronic funds transfers, cash management or cheque clearing services. (relation de correspondant bancaire)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 9.4(3) and PCMLTFR, SOR/2002-184, s. 16(1)(b).

Country of residence

The country where an individual has lived continuously for 12 months or more. The individual must have a dwelling in the country concerned. For greater certainty, a person only has one country of residence no matter how many dwelling places they may have, inside or outside of that country. (pays de résidence)

Credit card acquiring business

A credit card acquiring business is a financial entity that has an agreement with a merchant to provide the following services:

enabling a merchant to accept credit card payments by cardholders for goods and services and to receive payments for credit card purchases;
processing services, payment settlements and providing point-of-sale equipment (such as computer terminals); and
providing other ancillary services to the merchant.

(entreprise d'acquisition de cartes de crédit)

Credit union central

A central cooperative credit society, as defined in section 2 of the Cooperative Credit Associations Act, or a credit union central or a federation of credit unions or caisses populaires that is regulated by a provincial Act other than one enacted by the legislature of Quebec. (centrale de caisses de crédit)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Crowdfunding platform

A website or an application or other software that is used to raise funds or virtual currency through donations. (plateforme de sociofinancement)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Crowdfunding platform services

The provision and maintenance of a crowdfunding platform for use by other persons or entities to raise funds or virtual currency for themselves or for persons or entities specified by them. (services de plateforme de sociofinancement)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Current

In respect of a document or source of information that is used to verify identity, is up to date, and, in the case of a government-issued photo identification document, must not have been expired when the ID was verified. (à jour)

Dealer in precious metals and stones

A person or entity that, in the course of their business activities, buys or sells precious metals, precious stones or jewellery. It includes a department or an agent of His Majesty in right of Canada or an agent or mandatary of His Majesty in right of a province when the department or the agent or mandatary carries out the activity, referred to in subsection 65(1), of selling precious metals to the public. (négociant en métaux précieux et pierres précieuses)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Deferred profit sharing plan

Has the same meaning as in subsection 248(1) of the Income Tax Act. (régime de participation différée aux bénéfices)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Deposit slip

A record that sets out:

(a) the date of the deposit;
(b) the name of the person or entity that makes the deposit;
(c) the amount of the deposit and of any part of it that is made in cash;
(d) the method by which the deposit is made; and
(e) the number of the account into which the deposit is made and the name of each account holder.

(relevé de dépôt)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Directing services

A business is directing services at persons or entities in Canada if at least one of the following applies:

The business's marketing or advertising is directed at persons or entities located in Canada;
The business operates a ".ca" domain name; or,
The business is listed in a Canadian business directory.

Additional criteria may be considered, such as if the business describes its services being offered in Canada or actively seeks feedback from persons or entities in Canada. (diriger des services)

Distributed ledger

For the purpose of section 151 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), a digital ledger that is maintained by multiple persons or entities and that can only be modified by a consensus of those persons or entities. (registres distribués)

Reference:
PCMLTFR, SOR/2002-184, s. 151(2).

Disposition

With respect to a reportable transaction, the disposition is what the funds or virtual currency was used for. For example, an individual arrives at a bank with cash and purchases a bank draft. The disposition is the purchase of the bank draft. (répartition)

Electronic funds transfer

The transmission—by any electronic, magnetic or optical means—of instructions for the transfer of funds, including a transmission of instructions that is initiated and finally received by the same person or entity. In the case of SWIFT messages, only SWIFT MT-103 messages and their equivalent are included. It does not include a transmission or instructions for the transfer of funds:

(a) that involves the beneficiary withdrawing cash from their account;
(b) that is carried out by means of a direct deposit or pre-authorized debit;
(c) that is carried out by cheque imaging and presentment
(d) that is both initiated and finally received by persons or entities that are acting to clear or settle payment obligations between themselves; or
(e) that is initiated or finally received by a person or entity referred to in paragraphs 5(a) to (h.1) of the Act for the purpose of internal treasury management, including the management of their financial assets and liabilities, if one of the parties to the transaction is a subsidiary of the other or if they are subsidiaries of the same corporation.

(télévirement)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Employees profit sharing plan

Has the same meaning as in subsection 248(1) of the Income Tax Act. (régime de participation des employés aux bénéfices)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Entity

A body corporate, a trust, a partnership, a fund or an unincorporated association or organization. (entité)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Facts

Actual events, actions, occurrences or elements that exist or are known to have happened or existed. Facts are not opinions. For example, facts surrounding a transaction or multiple transactions could include the date, time, location, amount or type of transaction or could include the account details, particular business lines, or the client's financial history. (faits)

Family member

For the purposes of subsection 9.3(1) of the Act, a prescribed family member of a politically exposed foreign person, a politically exposed domestic person or a head of an international organization is:

(a) their spouse or common-law partner;
(b) their child;
(c) their mother or father;
(d) the mother or father of their spouse or common-law partner; or
(e) a child of their mother or father.

(membre de la famille)

Reference:
PCMLTFR, SOR/2002-184, s. 2(1).

Fiat currency

A currency that is issued by a country and is designated as legal tender in that country. (monnaie fiduciaire)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2) and PCMLTFSTRR, SOR/2001-317, s. 1(2).

Final receipt

In respect of an electronic funds transfer, means the receipt of the instructions by the person or entity that is to make the remittance to a beneficiary. (destinataire)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Financial entity

Means:

(a) an entity that is referred to in any of paragraphs 5(a), (b) and (d) to (f) of the Act;
(b) a financial services cooperative;
(c) a life insurance company, or an entity that is a life insurance broker or agent, in respect of loans or prepaid payment products that it offers to the public and accounts that it maintains with respect to those loans or prepaid payment products, other than:
1. (i) loans that are made by the insurer to a policy holder if the insured person has a terminal illness that significantly reduces their life expectancy and the loan is secured by the value of an insurance policy;
2. (ii) loans that are made by the insurer to the policy holder for the sole purpose of funding the life insurance policy; and
3. (iii) advance payments to which the policy holder is entitles that are made to them by the insurer;
(d) a credit union central when it offers financial services to a person, or to an entity that is not a member of that credit union central; and
(e) a department, or an entity that is an agent of His Majesty in right of Canada or an agent or mandatary of His Majesty in right of a province, when it carries out an activity referred to in section 76.

(entité financière)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Financial Action Task Force

The Financial Action Task Force on Money Laundering established in 1989. (Groupe d'action financière)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Financial services cooperative

A financial services cooperative that is regulated by an Act respecting financial services cooperatives, CQLR, c. C-67.3 or the Act respecting the Mouvement Desjardins, S.Q. 2000, c. 77, other than a caisse populaire. (coopérative de services financiers)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Foreign currency

A fiat currency that is issued by a country other than Canada. (devise)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Foreign currency exchange transaction

An exchange, at the request of another person or entity, of one fiat currency for another. (opération de change en devise)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Foreign currency exchange transaction ticket

A record respecting a foreign currency exchange transaction—including an entry in a transaction register—that sets out:

(a) the date of the transaction;
(b) in the case of a transaction of $3,000 or more, the name and address of the person or entity that requests the exchange, the nature of their principal business or their occupation and, in the case of a person, their date of birth;
(c) the type and amount of each of the fiat currencies involved in the payment made and received by the person or entity that requests the exchange;
(d) the method by which the payment is made and received;
(e) the exchange rates used and their source;
(f) the number of every account that is affected by the transaction, the type of account and the name of each account holder; and
(g) every reference number that is connected to the transaction and has a function equivalent to that of an account number.

(fiche d'opération de change en devise)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Foreign money services business

Persons and entities that do not have a place of business in Canada, that are engaged in the business of providing at least one of the following services that is directed at persons or entities in Canada, and that provide those services to their clients in Canada:

(i) foreign exchange dealing,
(ii) remitting funds or transmitting funds by any means or through any person, entity or electronic funds transfer network,
(iii) issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments except for cheques payable to a named person or entity,
(iv) dealing in virtual currencies, or
(v) any prescribed service.

(entreprise de services monétaires étrangère)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 5(h.1), PCMLTFRR, SOR/2007-121, s. 1 and PCMLTFR, SOR/2002-184, s. 1(2).

Foreign state

Except for the purposes of Part 2, means a country other than Canada and includes any political subdivision or territory of a foreign state. (État étranger)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Funds

Means:

(a) cash and other fiat currencies, and securities, negotiable instruments or other financial instruments that indicate a title or right to or interest in them; or
(b) a private key of a cryptographic system that enables a person or entity to have access to a fiat currency other than cash.

For greater certainty, it does not include virtual currency. (fonds)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2) and PCMLTFSTRR, SOR/2001-317, s. 1(2).

Head of an international organization

A person who, at a given time, holds—or has held within a prescribed period before that time—the office or position of head of

a) an international organization that is established by the governments of states;
b) an institution of an organization referred to in paragraph (a); or
c) an international sports organization.

(dirigeant d'une organisation internationale)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 9.3(3).

Immediately

In respect of submitting a Terrorist Property Report (TPR), the time period within which a TPR must be submitted, which does not allow for any delay prior to submission. (immédiatement)

Information record

A record that sets out the name and address of a person or entity and:

(a) in the case of a person, their date of birth and the nature of their principal business or their occupation; and
(b) in the case of an entity, the nature of its principal business.

(dossier de renseignements)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Initiation

In respect of an electronic funds transfer, means the first transmission of the instructions for the transfer of funds. (amorcer)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Institutional trust

For the purpose of section 15 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), means a trust that is established by a corporation or other entity for a particular business purpose and includes a pension plan trust, a pension master trust, a supplemental pension plan trust, a mutual fund trust, a pooled fund trust, a registered retirement savings plan trust, a registered retirement income fund trust, a registered education savings plan trust, a group registered retirement savings plan trust, a deferred profit sharing plan trust, an employee profit sharing plan trust, a retirement compensation arrangement trust, an employee savings plan trust, a health and welfare trust, an unemployment benefit plan trust, a foreign insurance company trust, a foreign reinsurance trust, a reinsurance trust, a real estate investment trust, an environmental trust and a trust established in respect of endowment, a foundation or a registered charity. (fiducie institutionnelle)

Reference:
PCMLTFR, SOR/2002-184, s. 15(2).

International electronic funds transfer

An electronic funds transfer other than for the transfer of funds within Canada. (télévirement international)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Inter vivos trust

A personal trust, other than a trust created by will. (fiducie entre vifs)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Jewellery

Objects that are made of gold, silver, palladium, platinum, pearls or precious stones and that are intended to be worn as a personal adornment. (bijou)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Large cash transaction record

A record that indicates the receipt of an amount of $10,000 or more in cash in a single transaction and that contains the following information:

(a) the date of the receipt;
(b) if the amount is received for deposit into an account, the number of the account, the name of each account holder and the time of the deposit or an indication that the deposit is made in a night deposit box outside the recipient's normal business hours;
(c) the name and address of every other person or entity that is involved in the transaction, the nature of their principal business or their occupation and, in the case of a person, their date of birth;
(d) the type and amount of each fiat currency involved in the receipt;
(e) the method by which the cash is received;
(f) if applicable, the exchange rates used and their source;
(g) the number of every other account that is affected by the transaction, the type of account and the name of each account holder
(h) every reference number that is connected to the transaction and has a function equivalent to that of an account number;
(i) the purpose of the transaction;
(j) the following details of the remittance of, or in exchange for, the cash received:
1. (i) the method of remittance;
2. (ii) if the remittance is in funds, the type and amount of each type of funds involved;
3. (iii) if the remittance is not in funds, the type of remittance and its value, if different from the amount of cash received; and
4. (iv) the name of every person or entity involved in the remittance and their account number or policy number or, if they have no account number or policy number, their identifying number; and
(k) if the amount is received by a dealer in precious metals and precious stones for the sale of precious metals, precious stones or jewellery:
1. (i) the type of precious metals, precious stones or jewellery;
2. (ii) the value of the precious metals, precious stones or jewellery, if different from the amount of cash received, and
3. (iii) the wholesale value of the precious metals, precious stones or jewellery.

(relevé d'opération importante en espèces)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Large virtual currency transaction record

A record that indicates the receipt of an amount of $10,000 or more in virtual currency in a single transaction and that contains the following information:

(a) the date of the receipt;
(b) if the amount is received for deposit into an account, the name of each account holder;
(c) the name and address of every other person or entity that is involved in the transaction, the nature of their principal business or their occupation and, in the case of a person, their date of birth;
(d) the type and amount of each virtual currency involved in the receipt;
(e) the exchange rates used and their source;
(f) the number of every other account that is affected by the transaction, the type of account and the name of each account holder;
(g) every reference number that is connected to the transaction and has a function equivalent to that of an account number;
(h) every transaction identifier, including the sending and receiving addresses; and
(i) if the amount is received by a dealer in precious metals and precious stones for the sale of precious metals, precious stones or jewellery:
1. (i) the type of precious metals, precious stones or jewellery;
2. (ii) the value of the precious metals, precious stones or jewellery, if different from the amount of virtual currency received; and
3. (iii) the wholesale value of the precious metals, precious stones or jewellery.

(relevé d'opération importante en monnaie virtuelle)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Life insurance broker or agent

A person or entity that is authorized under provincial legislation to carry on the business of arranging contracts of life insurance. (représentant d'assurance-vie)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Life insurance company

A life company or foreign life company to which the Insurance Companies Act applies or a life insurance company regulated by a provincial Act. (société d'assurance-vie)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Listed person

Has the same meaning as in section 1 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism. (personne inscrite)

Reference:
PCMLTFSTRR, SOR/2001-317, s. 1(2).

Managing general agents (MGAs)

Life insurance brokers or agents that act as facilitators between other life insurance brokers or agents and life insurance companies. MGAs typically offer services to assist with insurance agents contracting and commission payments, facilitate the flow of information between insurer and agent, and provide training to, and compliance oversight of, insurance agents. (agent général de gestion)

Mandatary

A person who acts, under a mandate or agreement, for another person or entity. (mandataire)

Marketing or advertising

When a person or entity uses promotional materials such as advertisements, graphics for websites or billboards, etc., with the intent to promote money services business (MSB) services and to acquire business from persons or entities in Canada. (marketing ou publicité)

Minister

In relation to sections 24.1 to 39, the Minister of Public Safety and Emergency Preparedness and, in relation to any other provision of this Act, the Minister of Finance. (ministre)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Money laundering offence

An offence under subsection 462.31(1) of the Criminal Code. The United Nations defines money laundering as "any act or attempted act to disguise the source of money or assets derived from criminal activity." Essentially, money laundering is the process whereby "dirty money"—produced through criminal activity—is transformed into "clean money," the criminal origin of which is difficult to trace. (infraction de recyclage des produits de la criminalité)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Money laundering and terrorist financing indicators (ML/TF indicators)

Potential red flags that could initiate suspicion or indicate that something may be unusual in the absence of a reasonable explanation. [Indicateurs de blanchiment d'argent (BA) et de financement du terrorisme (FT) (indicateurs de BA/FT)]

Money services business

A person or entity that has a place of business in Canada and that is engaged in the business of providing at least one of the following services:

(i) foreign exchange dealing,
(ii) remitting funds or transmitting funds by any means or through any person, entity or electronic funds transfer network,
(iii) issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments except for cheques payable to a named person or entity,
(iv) dealing in virtual currencies, or
(v) any prescribed service.

(entreprise de services monétaires)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 5(h), PCMLTFRR, SOR/2007-121, s. 1 and PCMLTFR, SOR/2002-184, s. 1(2).

Money services business agent

An individual or entity authorized to deliver services on behalf of a money services business (MSB). It is not an MSB branch. (mandataire d'une entreprise de services monétaires)

Mortgage administrator

A person or entity, other than a financial entity, that is engaged in the business of servicing mortgage agreements on real property or hypothec agreements on immovables on behalf of a lender. (administrateur hypothécaire)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 5(i), PCMLTFRR,SOR/2002-184, subsection 1(2)

Mortgage broker

A person or entity that is authorized under provincial legislation to act as an intermediary between a lender and a borrower with respect to loans secured by mortgages on real property or hypothecs on immovables. (courtier hypothécaire)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 5(i), PCMLTFRR,SOR/2002-184, subsection 1(2)

Mortgage lender

A person or entity, other than a financial entity, that is engaged in the business of providing loans secured by mortgages on real property or hypothecs on immovables. (prêteur hypothécaire)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 5(i), PCMLTFRR,SOR/2002-184, subsection 1(2)

Nature of principal business

An entity's type or field of business. Also applies to an individual in the case of a sole proprietorship. (nature de l'entreprise principale)

New developments

Changes to the structure or operations of a business when new services, activities, or locations are put in place. For example, changes to a business model or business restructuring. (nouveaux développements)

New technologies

The adoption of a technology that is new to a business. For example, when a business adopts new systems or software such as transaction monitoring systems or client onboarding and identification tools. (nouvelles technologies)

No apparent reason

There is no clear explanation to account for suspicious behaviour or information. (sans raison apparente)

Occupation

The job or profession of an individual. (profession ou métier)

Person

An individual. (personne)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Person authorized to give instructions

In respect of an account, means a person who is authorized to instruct on the account or make changes to the account, such as modifying the account type, updating the account contact details, and in the case of a credit card account, requesting a limit increase or decrease, or adding or removing card holders. A person who is only able to conduct transactions on the account is not considered a person authorized to give instructions. (personne habilitée à donner des instructions)

Politically exposed domestic person

A person who, at a given time, holds—or has held within a prescribed period before that time—one of the offices or positions referred to in any of paragraphs (a) and (c) to (j) in or on behalf of the federal government or a provincial government or any of the offices or positions referred to in paragraphs (b) and (k):

(a) Governor General, lieutenant governor or head of government;
(b) member of the Senate or House of Commons or member of a legislature of a province;
(c) deputy minister or equivalent rank;
(d) ambassador, or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a corporation that is wholly owned directly by His Majesty in right of Canada or a province;
(g) head of a government agency;
(h) judge of an appellate court in a province, the Federal Court of Appeal or the Supreme Court of Canada;
(i) leader or president of a political party represented in a legislature;
(j) holder of any prescribed office or position; or
(k) mayor, reeve or other similar chief officer of a municipal or local government.

(national politiquement vulnérable)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 9.3(3).

Politically exposed foreign person

A person who holds or has held one of the following offices or positions in or on behalf of a foreign state:

(a) head of state or head of government;
(b) member of the executive council of government or member of a legislature;
(c) deputy minister or equivalent rank;
(d) ambassador, or attaché or counsellor of an ambassador;
(e) military officer with a rank of general or above;
(f) president of a state-owned company or a state-owned bank;
(g) head of a government agency;
(h) judge of a supreme court, constitutional court or other court of last resort;
(i) leader or president of a political party represented in a legislature; or
(j) holder of any prescribed office or position.

(étranger politiquement vulnérable)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Possibility

In regards to completing a suspicious transaction report (STR), the likelihood that a transaction may be related to a money laundering/terrorist financing (ML/TF) offence. For example, based on your assessment of facts, context and ML/TF indicators you have reasonable grounds to suspect that a transaction is related to the commission or attempted commission of an ML/TF offence. (possibilité)

Precious metal

Gold, silver, palladium or platinum in the form of coins, bars, ingots or granules or in any other similar form. (métal précieux)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Precious stones

Diamonds, sapphires, emeralds, tanzanite, rubies or alexandrite. (pierre précieuse)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Prepaid payment product

A product that is issued by a financial entity and that enables a person or entity to engage in a transaction by giving them electronic access to funds or virtual currency paid to a prepaid payment product account held with the financial entity in advance of the transaction. It excludes a product that:

(a) enables a person or entity to access a credit or debit account or one that is issued for use only with particular merchants; or
(b) is issued for single use for the purposes of a retail rebate program.

(produit de paiement prépayé)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Prepaid payment product account

An account – other than an account to which only a public body or, if doing so for the purposes of humanitarian aid, a registered charity as defined in subsection 248(1) of the Income Tax Act, can add funds or virtual currency – that is connected to a prepaid payment product and that permits:

(a) funds or virtual currency that total $1,000 or more to be added to the account within a 24-hour period; or
(b) a balance of funds or virtual currency of $1,000 or more to be maintained.

(compte de produit de paiement prépayé)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Prescribed

Prescribed by regulations made by the Governor in Council. (Version anglaise seulement)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Probability

The likelihood in regards to completing a suspicious transaction report (STR) that a financial transaction is related to a money laundering/terrorist financing (ML/TF) offence. For example, based on facts, having reasonable grounds to believe that a transaction is probably related to the commission or attempted commission of an ML/TF offence. (probabilité)

Production order

A judicial order that compels a person or entity to disclose records to peace officers or public officers. (ordonnance de communication)

Public body

Means

(a) a department or an agent of His Majesty in right of Canada or an agent or mandatary of His Majesty in right of a province;
(b) an incorporated city or town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body in Canada or an agent or mandatary in Canada of any of them; and
(c) an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or an agent or mandatary of such an organization.

(organisme public)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Real estate broker or sales representative

A person or entity that is authorized under provincial legislation to act as an agent or mandatary for purchasers or vendors in respect of the purchase or sale of real property or immovables. (courtier ou agent immobilier)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Real estate developer

A person or entity that, in any calendar year after 2007, has sold to the public, other than in the capacity of a real estate broker or sales representative:

(a) five or more new houses or condominium units;
(b) one or more new commercial or industrial buildings; or
(c) one or more new multi-unit residential buildings each of which contains five or more residential units, or two or more new multi-unit residential buildings that together contain five or more residential units.

(promoteur immobilier)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Reasonable measures

Steps taken to achieve a desired outcome, even if they do not result in the desired outcome. For example, this can include doing one or more of the following:

asking the client,
conducting open source searches,
retrieving information already available, including information held in non-digital formats, or
consulting commercially available information.

(mesures raisonnables)

Receipt of funds record

A record that indicates the receipt of an amount of funds and that contains the following information:

(a) the date of the receipt;
(b) if the amount is received from a person, their name, address and date of birth and the nature of their principal business or their occupation;
(c) if the amount is received from or on behalf of an entity, the entity's name and address and the nature of their principal business;
(d) the amount of the funds received and of any part of the funds that is received in cash;
(e) the method by which the amount is received;
(f) the type and amount of each fiat currency involved in the receipt;
(g) if applicable, the exchange rates used and their source;
(h) the number of every account that is affected by the transaction in which the receipt occurs, the type of account and the name of each account holder;
(i) the name and address of every other person or entity that is involved in the transaction, the nature of their principal business or their occupation and, in the case of a person, their date of birth;
(j) every reference number that is connected to the transaction and has a function equivalent to that of an account number; and
(k) the purpose of the transaction.

(relevé de réception de fonds)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Registered pension plan

Has the same meaning as in subsection 248(1) of the Income Tax Act. (régime de pension agréé)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Registered retirement income fund

Has the same meaning as in subsection 248(1) of the Income Tax Act. (fonds enregistré de revenu de retraite)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Reliable

In respect of information that is used to verify identity, means that the source is well known, reputable, and is considered one that you trust to verify the identity of the client. (fiable)

Representative for service

An individual in Canada that has been appointed by a person or entity that is a foreign money services business (FMSB), pursuant to the PCMLTFA, to receive notices and documents on behalf of the FMSB. (représentant du service)

Risk assessment

The review and documentation of potential money laundering/terrorist financing risks in order to help a business establish policies, procedures and controls to detect and mitigate these risks and their impact. (évaluation des risques)

Sanctions evasion

Sanctions evasion offence means an offence arising from the contravention of a restriction or prohibition established by an order or a regulation made under the United Nations Act, the Special Economic Measures Act or the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law). (contournement des sanctions)

Securities dealer

A person or entity that is referred to in paragraph 5(g) of the Act. (courtier en valeurs mobilières)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Senior officer

In respect of an entity, means:

(a) a director of the entity who is one of its full-time employees;
(b) the entity's chief executive officer, chief operating officer, president, secretary, treasurer, controller, chief financial officer, chief accountant, chief auditor or chief actuary, or any person who performs any of those functions; or
(c) any other officer who reports directly to the entity's board of directors, chief executive officer or chief operating officer.

(cadre dirigeant)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Service agreement

An agreement between a money services business (MSB) and an organization according to which the MSB will provide any of the following MSB services on an ongoing basis:

money transfers;
foreign currency exchange;
issuing or redeeming money orders, traveller's cheques or anything similar; or
dealing in virtual currencies.
Crowdfunding
Armoured Cars

(accord de relation commerciale)

Settlor

A settlor is an individual or entity that creates a trust with a written trust declaration. The settlor ensures that legal responsibility for the trust is given to a trustee and that the trustee is provided with a trust instrument document that explains how the trust is to be used for the beneficiaries. A settlor includes any individual or entity that contributes financially to that trust, either directly or indirectly. (constituant)

Shell bank

A foreign financial institution that:

(a) does not have a place of business that:
1. (i) is located at a fixed address—where it employs one or more persons on a full-time basis and maintains operating records related to its banking activities—in a country in which it is authorized to conduct banking activities; and
2. (ii) is subject to inspection by the regulatory authority that licensed it to conduct banking activities; and
(b) is not controlled by, or under common control with, a depository institution, credit union or foreign financial institution that maintains a place of business referred to in paragraph (a) in Canada or in a foreign country.

(banque fictive)

Reference:
PCMLTFR, SOR/2002-184, s. 1(1).

Signature

Includes an electronic signature or other information in electronic form that is created or adopted by a client of a person or entity referred to in section 5 of the Act and that is accepted by the person or entity as being unique to that client. (signature)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Signature card

In respect of an account, means a document that is signed by a person who is authorized to give instructions in respect of the account, or electronic data that constitutes the signature of such a person. (fiche-signature)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Source

The issuer or provider of information or documents for verifying identification. (source)

Source of funds or of virtual currency (VC)

The origin of the particular funds or VC used to carry out a specific transaction or to attempt to carry out a transaction. It is how the funds were acquired, not where the funds may have been transferred from. For example, the source of funds could originate from activities or occurrences such as employment income, gifts, the sale of a large asset, criminal activity, etc. (origine des fonds ou de la monnaie virtuelle (MV))

Source of wealth

The origin of a person's total assets that can be reasonably explained, rather than what might be expected. For example, a person's wealth could originate from an accumulation of activities and occurrences such as business undertakings, family estates, previous and current employment income, investments, real estate, inheritance, lottery winnings, etc. (origine de la richesse)

Starting action

With respect to a reportable transaction, information related to the instructions provided by the person or entity making the request to the reporting entity to start a transaction. For example, an individual arrives at a bank and requests to purchase a bank draft. The starting action is the details of the instructions for the purchase which includes the funds or virtual currency that the requesting person or entity brought to the reporting entity. A transaction must have at least one starting action. (action d’amorce)

SWIFT

The Society for Worldwide Interbank Financial Telecommunication. (SWIFT)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Terrorist activity

Has the same meaning as in subsection 83.01(1) of the Criminal Code. (activité terroriste)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Terrorist activity financing offence

An offence under section 83.02, 83.03 or 83.04 of the Criminal Code or an offence under section 83.12 of the Criminal Code arising out of a contravention of section 83.08 of that Act.

A terrorist financing offence is knowingly collecting or giving property (such as money) to carry out terrorist activities. This includes the use and possession of any property to help carry out the terrorist activities. The money earned for terrorist financing can be from legal sources, such as personal donations and profits from a business or charitable organization or from criminal sources, such as the drug trade, the smuggling of weapons and other goods, fraud, kidnapping and extortion. (infraction de financement des activités terroristes)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Third party

Any individual or entity that instructs another individual or entity to act on their behalf for a financial activity or transaction. (tiers)

Threats to the security of Canada

Has the same meaning as in section 2 of the Canadian Security Intelligence Service Act. (menaces envers la sécurité du Canada)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Training program

A written and implemented program outlining the ongoing training for your employees, agents or other individuals authorized to act on your behalf. It should contain information about all your obligations and requirements to be fulfilled under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations. (programme de formation)

Trust

A right of property held by one individual or entity (a trustee) for the benefit of another individual or entity (a beneficiary). (fiducie)

Trust company

A company that is referred to in any of paragraphs 5(d) to (e.1) of the Act. (société de fiducie)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Trustee

A trustee is the individual or entity authorized to hold or administer the assets of a trust. (fiduciaire)

Tutor

In the context of civil law, a person who has been lawfully appointed to the care of the person and property of a minor. (tuteur)

Two year effectiveness review

A review, conducted every two years (at a minimum), by an internal or external auditor to test the effectiveness of your policies and procedures, risk assessment, and training program. (examen bisannuel de l'efficacité)

Valid

In respect of a document or information that is used to verify identity, appears legitimate or authentic and does not appear to have been altered or had any information redacted. The information must also be valid according to the issuer, for example if a passport is invalid because of a name change, it is not valid for FINTRAC purposes. (valide)

Verify identity

To refer to certain information or documentation, in accordance with the prescribed methods, to identify a person or entity (client). (vérifier l'identité)

Very large corporation or trust

A corporation or trust that has minimum net assets of $75 million CAD on its last audited balance sheet. The corporation's shares or units have to be traded on a Canadian stock exchange or on a stock exchange designated under subsection 262(1) of the Income Tax Act. The corporation or trust also has to operate in a country that is a member of the Financial Action Task Force (FATF). (personne morale ou fiducie dont l'actif est très important)

Violation

A contravention of the Act or the regulations that is designated as a violation by regulations made under subsection 73.1(1). (violation)

Reference:
PCMLTFA, S.C. 2000, c 17, s. 2(1).

Virtual currency

Means:

(a) a digital representation of value that can be used for payment or investment purposes that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds; or
(b) a private key of a cryptographic system that enables a person or entity to have access to a digital representation of value referred to in paragraph (a).

(monnaie virtuelle)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2) and PCMLTFSTRR, SOR/2001-317, s. 1(2).

Virtual currency exchange transaction

An exchange, at the request of another person or entity, of virtual currency for funds, funds for virtual currency or one virtual currency for another. (opération de change en monnaie virtuelle)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Virtual currency exchange transaction ticket

A record respecting a virtual currency exchange transaction—including an entry in a transaction register—that sets out:

(a) the date of the transaction;
(b) in the case of a transaction of $1,000 or more, the name and address of the person or entity that requests the exchange, the nature of their principal business or their occupation and, in the case of a person, their date of birth;
(c) the type and amount of each type of funds and each of the virtual currencies involved in the payment made and received by the person or entity that requests the exchange;
(d) the method by which the payment is made and received;
(e) the exchange rates used and their source;
(f) the number of every account that is affected by the transaction, the type of account and the name of each account holder;
(g) every reference number that is connected to the transaction and has a function equivalent to that of an account number; and
(h) every transaction identifier, including the sending and receiving addresses.

(fiche d'opération de change en monnaie virtuelle)

Reference:
PCMLTFR, SOR/2002-184, s. 1(2).

Working days

In respect of an electronic funds transfer (EFT) report or a large virtual currency transaction report, a working day is a day between and including Monday to Friday. It excludes Saturday, Sunday, and a public holiday. (jour ouvrable)

Date Modified:: 2023-05-08

FINTRAC assessment manual: The approach and methods used during examinations

On this page

Introduction

Why is the manual important and what does it cover?

Part 1—Examination framework

Risk-based examinations

Assessment methods

Assessment approach to evaluating findings

Part 2—Examination phases

Roles and responsibilities

Phase 1—Planning and scoping

Planning the examination

Setting the scope of the examination

Desk versus on-site examinations

Examination notification

Reviewing the material you send us

Phase 2—Examination and assessment

Conducting interviews

Exit meeting

Phase 3—Developing conclusions and finalizing the examination

Deciding on our findings

Examination findings letter

Follow-up activities

Penalties for non-compliance

Part 3—Assessment methods

3.1. Compliance program requirements

3.1.1. Compliance officer—the person responsible for the implementation of the compliance program

Our focus

3.1.2. Policies and procedures

Our focus

3.1.3. Risk assessment

Our focus

3.1.4. Ongoing compliance training program and plan

Our focus

3.1.5. Two-year effectiveness review

Our focus

3.2. Client identification and other know your client requirements

3.2.1. Client identification requirements

Our focus

3.2.2. Know your client requirements

Business relationships and ongoing monitoring

Beneficial ownership

Third party transactions

Politically exposed persons and heads of international organizations

Our focus

3.3. Financial transactions reporting requirements

Our focus

3.3.1. Requirements related to all reports types (all report types)

Comparison testing

(All report types 1) Reviewing changes in your reporting behaviour

Follow-up testing

(All report types 2): Ensuring that you resubmit the reports FINTRAC rejected for technical errors

(All report types 3) Ensuring past reporting issues have been fixed

Quality testing

(All report types 4) Ensuring you report on transactions handled by your agents

(All report types 5) Ensuring your reports are complete and accurate

(All report types 6) Ensuring that your third party service provider reports correctly

Timing testing

(All report types 7) Ensuring that you are sending reports on time

3.3.2. Large Cash Transaction Reports (LCTRs)

(LCTR 1) Confirming you are submitting LCTRs

(LCTR 2) Confirming you are correctly applying the 24-hour rule to LCTRs

(LCTR 3) Confirming that you are submitting all the required reports for a given transaction

(LCTR 4) Reviewing exceptions to submitting LCTRs

3.3.3. Large Virtual Currency Transaction Reports (LVCTRs)

(LVCTR 1) Confirming you are submitting LVCTRs

(LVCTR 2) Confirming you are correctly applying the 24-hour rule to LVCTRs

(LVCTR 3) Confirming that you are submitting all the required reports for a given transaction

3.3.4. International Electronic Funds Transfer Reports (EFTRs)

(EFTR 1) Confirming that you are submitting EFTRs

(EFTR 2) Confirming that you are applying the 24-hour rule to EFTRs

(EFTR 3) Confirming that you are submitting all the required reports for a given transaction

3.3.5. Casino Disbursement Reports (CDRs)

(CDR 1) Confirming that you are submitting CDRs

(CDR 2) Confirming that you are applying the 24-hour rule to CDRs

3.3.6. Suspicious Transaction Reports (STR)

Monitoring and unusual transaction testing (STRs)

(STR 1) Reviewing your policies and procedures on how you monitor activities and transactions

(STR 2) Reviewing your monitoring rules

(STR 3) Reviewing unusual transactions