Administrative monetary penalty on Simple Canadian Services
From: Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
[2024-11-28]
1121920 B.C. Ltd, also operating as Simple Canadian Services, a money services business in Surrey, British Columbia, was imposed an administrative monetary penalty of $229,350 on August 14, 2024, for committing 5 violations. The violations were found during the course of a compliance examination in 2022. Simple Canadian Services has appealed the decision to the Federal Court.
Nature of violation
- Violation #1
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Failure of a money services business to report the receipt from a client of an amount of $10,000 or more in the course of a single transaction, together with the prescribed information, which is contrary to subsection 9(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and paragraph 28(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations
Simple Canadian Services failed to submit 21 incoming electronic funds transfer reports during the period of December 10, 2020 to May 7, 2021, where they received instructions electronically from outside of Canada for transactions totalling $10,000 or more by or on behalf of the same individual or entity. FINTRAC determined that Simple Canadian Services was not consistently following their respective policies and procedures with respect to reporting of electronic wire transfers. - Violation #2
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Failure to develop and apply written compliance policies and procedures that are kept up to date and, in the case of an entity, are approved by a senior officer – Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, paragraph 71(1)(b)
FINTRAC determined that Simple Canadian Services’ compliance policies and procedures do not comply with the requirements of paragraph 71(1)(b) of the Regulations. Overall, Simple Canadian Services had incomplete, and in some cases, inconsistently applied policies and procedures. This was determined based on the results from the review of the documentation provided, interviews, as well as testing of transaction records.
Notably, FINTRAC confirmed that Simple Canadian Services’ policies and procedures lacked documentation regarding enhanced due diligence requirements. When FINTRAC examined Simple Canadian Services’ transaction records to ensure compliance with its policies and procedures, it was discovered that there were no records showing that ongoing monitoring and enhanced due diligence had been conducted for Simple Canadian Services’ business relationships resulting in the non-application of the compliance policies and procedures. Furthermore, FINTRAC confirmed that the organization’s business relationships had not been risk assessed or monitored.
In addition, FINTRAC found that Simple Canadian Services inconsistently applied its policies and procedures related to electronic funds transfers resulting in unreported incoming electronic funds transfers and data quality issues related to outgoing incoming electronic funds transfers.
Finally, FINTRAC determined that while Simple Canadian Services policies and procedures do refer to directives, they do not address specific requirements pertaining to Ministerial Directives. - Violation #3
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Failure of a person or entity to assess and document the risk referred to in subsection 9.6(2) of the Act, taking into consideration prescribed factors, which is contrary to subsection 9.6(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and paragraph 71(1)(c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations
Simple Canadian Services’ risk assessment does not provide sufficient details on how it assesses risk on its business relationships. There is a lack of information on how its client and business relationship process is implemented in practice, as well as a lack of record keeping regarding these relationships. There is no mention of risk ratings being applied to any of its business relationships.
Simple Canadian Services’ primary clients have connections to, or are based in, Iran, yet there is no comprehensive analysis of the risks associated with money laundering and terrorist activity financing for each type of client and business relationship. In particular, Simple Canadian Services has not assessed the specific geographical risks that are associated with its operations. - Violation #4
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Failure to institute and document the prescribed review which is contrary to paragraph 71(1)(e) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations
Simple Canadian Services’ prescribed review provided insufficient detail on how the reviews were conducted, as Simple Canadian Services did not demonstrate whether and how the program’s effectiveness was tested, or how the deficiencies were addressed. While Simple Canadian Services confirmed that it was previously advised of the requirement to review all elements of its compliance program and include effectiveness testing every two years, it could not recall conducting any effectiveness testing nor did Simple Canadian Services provide details on how its reviews were conducted. - Violation #5
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Failure to comply with a ministerial directive which is contrary to section 11.43 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act
Simple Canadian Services failed to comply with the Ministerial Directive on Financial Transactions Associated with the Islamic Republic of Iran. Specifically, the examination of the money services business revealed 21 instances where Simple Canadian services failed to report to FINTRAC transactions originating from Iran, conducted on or after July 25, 2020, regardless of the amount.
Related link
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