Archived FINTRAC Policy Interpretations

Why does a reporting entity have to develop and implement a compliance program and what are the consequences of non-compliance with this obligation?

Pursuant to subsection 9.6(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), every person or entity referred to in section 5 shall establish and implement, in accordance with the regulations, a program intended to ensure their compliance with this Part and Part 1.1.

Further, pursuant to paragraph 73.1(1)(a) of the PCMLTFA, the Governor in Council may make regulations designating the contravention of a specified provision of the PCMLTFA or its associated Regulations as a violation that is subject to an administrative monetary penalty. And, pursuant to the Schedule of the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalty Regulations, there are a series of violations specific to the components of the compliance program required by subsection 9.6(3) of the PCMLTFA. Information on how FINTRAC determines the penalty amount for a violation can be found on our website.

That said, pursuant to subsection 74(1) of the PCMLTFA, every person or entity that knowingly contravenes section 9.6 is guilty of an offence and liable:

1. on summary conviction, to a fine of not more than $50,000 or to imprisonment for a term of not more than six months, or to both; or
2. on conviction on indictment, to a fine of not more than $500,000 or to imprisonment for a term of not more than five years, or to both.

Therefore, non-compliance with section 9.6 of the PCMLTFA may result in either criminal or administrative penalties. However, pursuant to section 73.12 of the PCMLTFA, if a contravention that is designated under paragraph 73.1(1)(a) can be proceeded with either as a violation or as an offence under this Act, proceeding in one manner precludes proceeding in the other. This means that both a criminal and an administrative monetary penalty cannot be issued against the same instance of non-compliance.

I am seeking clarification on FINTRAC’s guidance and how it is applied in the context of examinations, specifically regarding discrepancies in a reporting entity’s compliance regime. Specifically, can FINTRAC's guidance be cited as deficiencies in examinations? If so, what is the legislative basis for these citations?

Under Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), an entity that is subject to the Act is obliged to establish a compliance regime – among other requirements – in order to report specific transactions, ascertain client identity, and keep particular records. A proper compliance regime allows FINTRAC to receive the quantity and quality of information it requires to produce solid financial intelligence in the effort to combat money laundering and terrorist financing activity.

FINTRAC’s mandate includes ensuring the compliance of reporting entities with the PCMLTFA and its associated Regulations. To that end, the PCMLTFA and its associated Regulations provide the legislative framework for FINTRAC to apply its compliance mandate.

FINTRAC’s guidance products describe how FINTRAC administers and interprets provisions of the PCMLTFA and its associated regulations, and are used to set standards for reporting entity activities and behaviour. These guidance products specifically align with the legislation and are developed to provide reporting entities with an expanded explanation on how the legislation can be applied in practical terms, while allowing FINTRAC to meaningfully assess entity compliance.

Through its examinations and other compliance activities, FINTRAC determines whether reporting entities are duly adhering to legislative requirements, and this includes what is described in the guidance.

We are seeking information regarding the administrative monetary penalty (AMP) provisions associated with the failure to provide FINTRAC with Terrorist Property Reports (TPRs) in the prescribed form and manner, particularly for the Real Estate sector.

Since subsection 7.1(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) applies to all reporting entities, real estate agents and brokers, when they are subject to Part 1 of the Act (i.e. when they engage in activities described in subsection 39(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations), they would be subject to the AMPs provision.

This information can be found in the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations, Part 3.
The provision 7.1 (1) of the PCMLTFA states that "Every person or entity referred to in section 5 that is required to make a disclosure under section 83.1 of the Criminal Code or under section 8 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism shall also make a report on it to the Centre, in the prescribed form and manner."

The provision 10 of Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations indicates that :
" REPORT MADE UNDER SECTION 83.1 OF THE CRIMINAL CODE OR UNDER SECTION 8 OF THE REGULATIONS IMPLEMENTING THE UNITED NATIONS RESOLUTIONS ON THE SUPPRESSION OF TERRORISM
10. Subject to section 11, a report made under section 7.1 of the Act shall be sent without delay to the Centre and shall contain the information set out in Schedule 2."

Therefore, the failure of a person or entity to send a report containing the prescribed information without delay consists in a very serious violation.