Financial statements of the
Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
and independent auditors’ report thereon

For the year ended March 31, 2024

Statement of management responsibility including internal control over financial reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2024, and all information contained in these statements rests with the management of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgement, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of FINTRAC’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in FINTRAC’s Departmental Results Report is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities, and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout FINTRAC and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

The system of ICFR is designed to mitigate risks to a reasonable level based on an ongoing process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

Effective fiscal 2022–23, the Office of the Comptroller General of Canada (OCG) has revised its audit approach of small departments (as defined in Section 2 of the Financial Administration Act). Amongst other things, they have transitioned from a Horizontal Internal Audit Engagements to a Horizontal Risk-based Core Control Audit (CCA) approach, and from periodic Core Control Audits to Core Control Self-Assessments to further support small departments, including FINTRAC. The intent of this new approach was to enhance coverage of small departments’ risks in the area of financial management, while continuing to perform audit procedures to ensure compliance with the Treasury Board Policy on Financial Management. FINTRAC self-assessed as compliant for both fiscal 2022–23 (delegation of spending and financial authorities) and fiscal 2023–24 (contracting, payables at year-end, and receivables).

FINTRAC had a change of auditor as of fiscal 2023–24 from KPMG LLP to Welch LLP. The firm of Welch LLP has expressed an opinion on the fair presentation of the financial statements of FINTRAC, which does not include an audit opinion on the annual assessment of the effectiveness of the organization's internal controls over financial reporting.

Contractual obligations (note 8)

The accompanying notes form an integral part of these financial statements.

Segmented information (note 10)

The accompanying notes form an integral part of these financial statements.

The accompanying notes form an integral part of these financial statements.

The accompanying notes form an integral part of these financial statements.

Notes to the financial statements
For the year ended March 31

1. Authority and objectives

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) was legislated into existence in July 2000 to be Canada’s Financial Intelligence Unit. The Centre exists to assist in the detection, prevention and deterrence of money laundering and the financing of terrorist activities, while ensuring the protection of personal information under its control. FINTRAC’s Financial Intelligence and Compliance programs strive to disrupt the ability of criminals and terrorist groups that seek to abuse Canada’s financial system and to reduce the profit incentive of crime.

FINTRAC acts at arm’s length and is independent from the law enforcement agencies and other entities to which it is authorized to disclose financial intelligence. It reports to the Minister of Finance, who is in turn accountable to Parliament for the activities of the Centre. FINTRAC was established by, and operates within, the ambit of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations.

To effectively pursue its mandate, FINTRAC aims to achieve the following strategic outcome: A Canadian financial system resistant to money laundering and terrorist financing.

2. Summary of significant accounting policies

These financial statements have been prepared using FINTRAC's accounting policies stated below, which are based on Canadian Public Sector Accounting Standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

(a) Parliamentary authorities

FINTRAC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to FINTRAC do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament.

Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the “Expenses” and “Revenues” sections of the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future-Oriented Statement of Operations included in the 2023–2024 Departmental Plan. Planned results are not presented in the "Government funding and transfers" section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2022–2023 Departmental Plan.

(b) Net cash provided by Government of Canada

FINTRAC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by FINTRAC is deposited to the CRF, and all cash disbursements made by FINTRAC are paid from the CRF. The net cash provided by the Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the Government.

(c) Amounts due from or to the CRF

Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that FINTRAC is entitled to draw from the CRF without further authorities to discharge its liabilities.

(d) Revenues

FINTRAC has the legislative authority to issue Administrative Monetary Penalties (AMPs) to Reporting Entities (RE) that are in non-compliance with Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). AMPs and related interest charges are treated as a source of non-respendable revenue (not available to discharge FINTRAC’s liabilities as it is earned on behalf of the Government of Canada). AMPs are considered to be earned on behalf of the Government of Canada and are therefore, presented in reduction of the entity’s gross revenues.

This type of revenue is recognized as a “non-exchange transaction”, where FINTRAC receives cash consideration for which the payor does not receive any goods or services in return. These are also deemed “involuntary” because the right to the economic resource is attributable to the PCMLTFA to enforce laws and regulations (PS 3400.03). As such, FINTRAC recognizes revenue when a RE is not in compliance with the Act and that they have been notified via Notice of Violation (NOV). The amount recorded in the financial statement is its realizable value, which is the amount dictated in the NOV and applicable interest.

(e) Expenses

Expenses are recorded on the accrual basis:

• Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
• Services provided without charge by other government departments for employer contributions to the health and dental insurance plans are recorded as operating expenses at their estimated cost.

(f) Employee future benefits

• Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. FINTRAC’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. FINTRAC’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.
• Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.
• The accrued liability related to sick leave benefits is recognized in the financial statements of the Government of Canada and is not reported in these financial statements under Treasury Board accounting policies for government departments.

(g) Accounts receivable

Accounts receivable are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for receivables where recovery is considered uncertain.

(h) Contingent liabilities

Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense is recorded. If the likelihood is not determinable or if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(i) Tangible capital assets

All tangible capital assets and leasehold improvements having an initial cost of $5,000 or more are recorded at their acquisition cost. FINTRAC does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian reserves and museum collections.

(j) Measurement uncertainty

The preparation of these financial statements, in accordance with Canadian public sector accounting standards, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses reported in the financial statements and accompanying notes at March 31. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. Actual results could significantly differ from those estimated. Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

(k) Financial instruments

Financial instruments are recorded at fair value on initial recognition, and are subsequently recorded at cost or amortized cost unless management has elected to carry the instrument at fair value. Management has not elected to record any financial instruments at fair value. A statement of remeasurement gains and losses is not presented in these financial statements as FINTRAC does not have financial instruments requiring remeasurement.

(l) Foreign currency translation

Transactions involving foreign currencies are converted into Canadian dollar equivalents using rates of exchange in effect at the time of the transactions.

3. Parliamentary authorities

FINTRAC receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statements of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, FINTRAC has different net results of operations for the year on a government funding basis. The differences are reconciled in the following tables:

4. Accounts payable and accrued liabilities

5. Employee future benefits

(a) Pension benefits

FINTRAC’s employees participate in the public service pension plan (the “Plan”), which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plan benefits and they are indexed to inflation.

Both the employees and FINTRAC contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 201, employee contributors have been divided into two groups – Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2023–24 expense amounts to $5,467,725 ($4,991,191 in 2022–23). For Group 1 members, the expense represents approximately 1.02 times (1.02 times in 2022–23) the employee contributions and, for Group 2 members, approximately 1.00 time (1.00 time in 2022–23) the employee contributions.

FINTRAC’s responsibility with regards to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan’s sponsor.

(b) Employee severance benefits

Severance benefits provided to FINTRAC’s employees were previously based on an employee’s eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

6. Accounts receivable and advances

7. Tangible capital assets

Assets under construction are recorded in the applicable asset class in the year they are put into service and are not amortized until they are put into service.

8. Contractual obligations

The nature of FINTRAC’s activities can result in some large multi-year contracts and obligations whereby FINTRAC will be obligated to make future payments when the services are received. For example, FINTRAC has entered into lease agreements with Public Services and Procurement Canada for office space in four locations across Canada. Significant contractual obligations that can be reasonably estimated are summarized as follows:

9. Related party transactions

FINTRAC is related as a result of common ownership to all government departments, agencies, and Crown corporations. Related parties also include individuals who are members of key management personnel or close family members of those individuals, and entities controlled by, or under shared control of, a member of key management personnel or a close family member of that individual. FINTRAC enters into transactions with these entities in the normal course of business and on normal trade terms.

During the year, FINTRAC received common services which were obtained without charge from other government departments as disclosed below.

(a) Common services provided without charge by other government departments

During the year, FINTRAC received services without charge from certain common service organizations, related to the employer's contribution to the health and dental insurance plans and workers' compensation coverage. These services provided without charge have been recorded in FINTRAC’s Statement of Operations and Departmental Net Financial Position as follows:

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Services and Procurement Canada, are not included in FINTRAC’s Statement of Operations and Departmental Net Financial Position. The costs of information technology infrastructure services provided by Shared Services Canada are also not included in FINTRAC’s Statement of Operations and Departmental Net Financial Position.

(b) Other transactions with other government departments and agencies

10. Segmented information

Presentation by segment is based on FINTRAC’s program alignment architecture. The presentation by segment is based on the same accounting policies described in the Summary of Significant Accounting Policies in note 2. The following table presents the expenses incurred and revenues generated for the main programs, by major object of expenses and type of revenue. The segment results for the period are as follows:

11. Risk management

FINTRAC has exposure to the following risks from its use of financial instruments: credit risk, market risk and liquidity risk.

(a) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss. FINTRAC’s maximum exposure to credit risk at March 31, 2024 is the carrying amount of its financial assets. FINTRAC has determined that there is no significant concentration of credit risk related to accounts receivable from external parties. An analysis of the age of these financial assets and the associated valuation allowances used to reflect these accounts at their net recoverable value is disclosed in note 6.

(b) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk is comprised of currency risk and interest rate risk.

(c) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities. As the funding for FINTRAC's financial liabilities is drawn from the Consolidated Revenue Fund, its exposure to liquidity risk is fully mitigated.

FINTRAC financial risks, and the process to manage these risks, have not changed significantly from the prior year.