Speaking Notes for Nada Semaan, Director and Chief Executive Officer, Financial Transactions and Reports Analysis Centre of Canada at the 2019 Casino Forum
From the Financial Transactions and Reports Analysis Centre
December 10, 2019, Ottawa ON
Check against delivery
- Good morning and thank you for joining us today. I am pleased to welcome everyone to Ottawa and to FINTRAC's second Casino Forum.
- I would like to begin by acknowledging that the land on which we gather is the traditional and unceded territory of the Algonquin nation.
- Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime is a collective effort and a national one. It involves thousands of Canadian businesses, provincial and federal regulators, 13 federal departments and agencies, police, law enforcement, national security agencies and many other stakeholders across the country.
- And it is only effective when we work together to protect the safety of Canadians and the integrity of Canada's financial system.
- That is ultimately the goal of this forum: to come together, share information and ideas, and look for ways to more effectively combat money laundering and terrorist activity financing, and the crimes they help to facilitate, here at home and abroad.
- We are going to focus this morning on our new public-private sector partnership, Project Athena, including providing you with a copy of our most recent Operational Alert and money laundering case disclosure related to this project. I am pleased that our colleagues from Canada's major banks could join us for these discussions.
- Our conversations this afternoon will include FINTRAC, law enforcement, Finance Canada and representatives from the casino sector: reporting entities and regulators. We want to have open and frank discussions about some recent trends and vulnerabilities in the casino sector, issues that we have found in our recent compliance exams, and some of the challenges that we are all facing in a rapidly evolving AML/ATF environment.
- Before we launch into our agenda, I want to provide a few comments on:
- The results that we are achieving collectively through Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime;
- The measures that the Government of Canada, including FINTRAC, is taking to more effectively combat money laundering and terrorist activity financing; and
- The role that the casino sector plays in helping to protect Canadians and the integrity of Canada's financial system.
- In all of our discussions, we will emphasize the importance of collaboration and information sharing to the collective success of Canada's AML/ATF Regime.
Role and Results of Canada's AML/ATF Regime
- As Canada's financial intelligence unit and AML/ATF regulator, FINTRAC is at the heart of Canada's broader Regime. We ensure the compliance of Canadian businesses with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and we provide actionable financial intelligence in support of investigations by Canada's police, law enforcement and national security agencies.
- We are not responsible for crafting the legislative or regulatory requirements of the Regime. Nor are we an investigative or enforcement agency. However, working closely with you, we are helping to keep the criminals and terrorists out of Canada's financial system. And our financial intelligence is supporting investigations that are protecting vulnerable Canadians and saving lives.
- With the information that FINTRAC receives from Canadian businesses, we were able to provide 2,276 unique disclosures of actionable financial intelligence last year in support of investigations related to money laundering, terrorist activity financing and threats to the security of Canada.
- The number of disclosures that we generate for Canada's police, law enforcement and national security agencies has increased by more than 80 percent over the past five years.
- Just a few weeks ago, the Alberta Law Enforcement Response Teams recognized FINTRAC's contribution to Project Coyote, a two-year international investigation that led to Canada's largest seizure of fentanyl – 250,000 pills – and 81 kilograms of cocaine. It is not hard to imagine the terrible damage that a quarter of a million fentanyl pills could do to communities across Western Canada. In total, 15 million dollars worth of drugs, over 4.5 million dollars in cash and assets and 13 firearms were seized by police. Seven people face more that 77 charges, including laundering the proceeds of crime.
- This is only one example of the many hundreds of project-level investigations that FINTRAC supports every year across the country and around the world.
- Canada's police, law enforcement and national security agencies are seeking our financial intelligence in record numbers. We received 2,754 voluntary information records from these agencies last year, essentially doubling in number over the past five years. These records contain information on alleged criminals and terrorist financiers and are often the starting point for our analysis and the financial intelligence that we are able to generate and disclose.
- We have also significantly increased the number of proactive disclosures that we provide to Canada's police and law enforcement agencies, bringing their attention to potential money laundering and terrorist activity financing that may not have been on their radar.
- We would not be able to generate this financial intelligence without the dedicated efforts of Canadian businesses that are on the front lines of Canada's legitimate economy. Canada's casinos and big banks, which are represented here today, provide well over 90 percent of the financial transaction reporting that we need to fulfill our intelligence mandate. I want to thank you for the critical contributions that you make to Canada's AML/ATF Regime.
Strengthening Canada's AML/ATF Regime
- While the Regime is producing real and meaningful results for Canadians, there is no question that we are facing a challenging environment. I can tell you from conversations with my international colleagues that this is not unique to Canada.
- The global banking system and transnational nature of money flows have become increasingly complex and sophisticated.
- Technology has brought new and evolving challenges such as anonymity, speed and much larger volumes of transactions.
- Cash transactions are being replaced by other negotiable instruments, including use of electronic and digital means.
- Criminal organizations, hostile state actors and terrorist groups have become more adept at using the financial systems to achieve their goals.
- New and emerging technologies are adopted quickly by criminal organizations and individuals.
- While these challenges are common throughout the world, we have to meet them head on. And we have to meet them together.
- The last federal budget saw the creation of the Anti-Money Laundering Action, Coordination and Enforcement Team – the ACE Team – which is bringing together dedicated experts from across intelligence and law enforcement agencies to strengthen inter-agency coordination and cooperation and identify and address significant money laundering and financial crime threats.
- The federal government also created a new Trade Fraud and Trade-Based Money Laundering Centre of Expertise, which will complement the efforts of the ACE Team.
- Legislative changes were announced, including the addition of recklessness to the offence of money laundering in the Criminal Code. This criminalizes the activity of moving money on behalf of another person or organization while being aware that there is a risk that this activity could be money laundering.
- The federal budget provided nearly 70 million dollars to strengthen federal policing operational and investigative capacity.
- FINTRAC also received new funding, which we are using to strengthen compliance functions in relation to virtual currencies, foreign money services businesses and customer identification.
- With this new funding, we are also increasing our outreach and examinations in the real estate and casino sectors with a focus on the province of British Columbia. This work is well underway. In fact, this forum is the direct result of this new funding.
- We are also expanding our contributions to public-private sector partnerships to improve the overall efficiency and effectiveness of Canada's AML/ATF Regime. The new partnership, which is being launched this morning, is focused on combating money laundering in British Columbia and across Canada. You will hear more about Project Athena and FINTRAC's latest Operational Alert this morning.
- What I will say is that Project Athena is modelled after the successful public-private sector partnerships targeting the trafficking of fentanyl with Project Guardian, romance fraud with Project Chameleon, and human trafficking in the sex trade with Project Protect.
- With Project Protect alone, FINTRAC has seen a 750 percent increase in suspicious transaction reporting related to the laundering of proceeds from human trafficking in the sex trade, and we have provided well over 500 disclosures of actionable financial intelligence to law enforcement agencies across the country and internationally.
- In one year alone, police in Toronto uncovered 67 victims, 60 percent of whom were 16 and under. The youngest victim was 13 years old. The financial intelligence that we were able to provide, based on suspicious transaction reporting from Canada's banks, played a key role in rescuing many of these victims.
- We are expecting to have the same type of impact with Project Athena. With enhanced reporting, we will be able to more effectively target the illicit money flowing through Canada's banks and casinos – laundered money connected to the international drug trade, corruption, fraud and real estate manipulation. Laundered money that threatens the safety and security of Canadians across the country.
- As we look to strengthen Canada's AML/ATF Regime, we are also focused on opening up our programs to a much greater degree and sharing more information with Canadian businesses, with an eye to ensuring they understand and are able to fulfill the obligations that are so critical to our financial intelligence mandate.
- Over the past year, as part of a broader transparency initiative, we published our Compliance Framework, FINTRAC Assessment Manual, and our revised Administrative Monetary Penalties policy, which outlines – clearly and transparently – our new method of calculating penalties for non-compliance. No other AML/ATF regulator in the world has done this.
- We engaged extensively with businesses in revising our suspicious transaction reporting guidance to make it clearer, more concise and tailored to each reporting sector.
- We also consulted with businesses on the proposed new regulations. We answered technical questions and, as a first, provided preliminary guidance and mock reporting forms based on the proposed regulations to help businesses better understand what is being proposed and equip them to provide informed feedback.
- We provided businesses with strategic financial intelligence to support them with their risk assessments and in fulfilling their reporting obligations, including our Operational Alert on Professional Money Laundering Through Trade and Money Services Businesses and our Terrorist Financing Assessment, which assists businesses in better identifying and reporting suspected terrorist activity financing.
- We have also worked closely with some of you here today through our FINTRAC Reporting Working Group and the Guidance and Policy Interpretation Working Group. Your input has been extremely valuable in helping us to develop clear and effective guidance and tools.
- Our commitment to opening up, to sharing more with Canadian businesses, was just recognized by the Community of Federal Regulators, which presented FINTRAC with an award for Excellence in Regulatory Openness and Transparency on November 27th. This award will fuel a spirit of innovation and transparency within the Centre for years to come.
- Going forward, we are also focused on enhancing our communications with Canadians. The issues we face are complex, multi-dimensional and cut across numerous jurisdictions. We have to do a better job in reaching out to Canadians – to strengthen their understanding of these issues and their trust in the Regime.
Canada's Casino Sector
- Given the importance of Canada's casino sector to the success of Canada's AML/ATF Regime and the limited number of reporting entities in the sector, we are able to maintain more frequent contact with you, particularly through our regional offices.
- This helps to ensure that you have access to the information and support you need to fulfill legislative and regulatory requirements. It also provides us good insight into your sector and the challenges that you face.
- We know that casinos are unique. Unlike financial institutions, the majority of you do not have account-based clientele. The entertainment-oriented focus is another clear example of this distinction. But this does not mean that casinos should be any less vigilant when it comes to fulfilling their obligations.
- There are a number of features inherent to the casino sector that increase the sector's risk profile and its vulnerability to criminal abuse. The lack of customer identification and verification of the source of a client's funds are two points of vulnerability. The casino sector is also cash-intensive, further increasing the risk of being exploited by those looking to launder criminal proceeds.
- We have observed a number of encouraging signs through our examinations and interactions with the casino sector in the past few years. Without scooping our session later this afternoon, we have found that casinos have put in place the compliance regimes needed to fulfill the full range of legislative requirements.
- The quality and timeliness of transaction reporting has improved in recent years. We did see a drop in large cash transaction and suspicious transaction reporting in the most recent fiscal year, which is likely the result of a reduction in the use of cash at some casinos. I want to stress that the vulnerability of the casino sector does not reduce because of a drop in cash, as you will see very clearly in the next two presentations on Project Athena.
- One of the clear lessons from this project is that casinos need to be vigilant and agile in addressing new and emerging vulnerabilities in order to mitigate the risk. Criminals and professional money launderers are resilient and they will always look for gaps in the Regime.
- Another clear lesson is the importance of suspicious transaction reporting, which is critical to our analyses and to the financial intelligence that we provide to our police, law enforcement and national security partners. In our compliance exams, we have observed clear improvements in the quality of STRs submitted and in the description of suspicion.
- Ultimately, this is what it is all about – ensuring that we receive the high-quality reporting that we need to develop financial intelligence for Canada's police, law enforcement and national security agencies. To protect Canadians and Canadian communities.
- We can only do this with your support.
- And Canada's AML/ATF Regime can only do this effectively by working together and sharing information and best practices so that we can stay ahead of the criminals and hostile actors, who are always looking for new ways to exploit our financial system to launder their proceeds from large-scale fraud, trafficking and corruption.
- Thank you again for joining our second Casino Forum. We have a very full agenda over the next day-and-a-half so I will turn the floor back over to our moderator. I am here for the full day and will be happy to answer any questions you may have during our planned breaks.
- Date Modified: