Quarterly Financial Report for the quarter ended December 31, 2022
(unaudited)
ISSN 2817-2949
Cat. No. FD3-3E-PDF
1. Introduction
This quarterly report has been prepared by management as required by Section 65.1 of the Financial Administration Act, and in the form and manner prescribed by the Treasury Board of Canada Secretariat in the Directive on Accounting Standards, GC 4400 Departmental Quarterly Financial Reports. This Quarterly Financial Report should be read in conjunction with the 2022–23 Main Estimates for the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
This quarterly financial report has not been subject to an external audit or review.
1.1. Authority, Mandate and Program Activities
FINTRAC (the Centre) is Canada’s financial intelligence unit and anti-money laundering and anti-terrorist financing regulator. The Centre assists in the detection, prevention and deterrence of money laundering and the financing of terrorist activities. FINTRAC's financial intelligence and compliance functions are a unique contribution to the safety of Canadians and the integrity of Canada's financial system.
FINTRAC acts at arm's length and is independent from the police services, 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’s headquarters is in Ottawa, with regional offices located in Montréal, Toronto, and Vancouver.
FINTRAC was established by, and operates within the ambit of, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations. The Centre is one of several domestic partners in Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime, which is led by the Department of Finance Canada.
FINTRAC fulfills its mandate by engaging in the following activities:
- Receiving financial transaction reports and voluntary information in accordance with the legislation and regulations;
- Safeguarding personal information under its control;
- Ensuring compliance of reporting entities with the legislation and regulations;
- Maintaining a registry of money services businesses in Canada;
- Producing financial intelligence relevant to investigations of money laundering, terrorist activity financing and threats to the security of Canada;
- Researching and analyzing data from a variety of information sources that shed light on trends and patterns in money laundering and terrorist activity financing; and
- Enhancing public awareness and understanding of the threat posed by money laundering and terrorist activity financing.
In addition, FINTRAC is part of the Egmont Group, an international network of financial intelligence units that collaborate and exchange information to combat money laundering and terrorist activity financing across the globe. FINTRAC also contributes to other multilateral fora such as the Financial Action Task Force (FATF), the Asia-Pacific Group on Money Laundering (APG), the Caribbean Financial Action Task Force (CFATF) and the Global Coalition to Fight Financial Crime, participating in international policy-making and the provision of technical assistance to other FIUs.
The description of the program activities for the Centre can be found in Part II of the 2022–23 Main Estimates and in the 2022–23 Departmental Plan.
1.2. Basis of Presentation
This quarterly financial report has been prepared by management using an expenditure basis of accounting and a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities. The accompanying Statement of Authorities includes the Centre’s spending authorities granted by Parliament, and those used by the Department, consistent with the Main Estimates and Supplementary Estimates for both fiscal years as well as transfers from Treasury Board central votes that are approved by the end of the quarter.
The authority of Parliament is required before monies can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.
FINTRAC uses the accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted on by Parliament remain on an expenditure basis.
2. Highlights of Fiscal Quarter and Fiscal Year-to-Date (YTD) Results
This departmental quarterly financial report reflects the results of the current fiscal period. The following graph provides a comparison of budgetary and statutory authorities available for the first nine months of 2022–23 compared to 2021–22.
2.1. Authorities Analysis
The following table provides a comparison of cumulative authorities by vote for the current and previous fiscal years.
| Authorities Available ($ thousands) |
2022–23 | 2021–22 | Variance ($) | Variance (%) |
|---|---|---|---|---|
| Budgetary | ||||
| Voted | ||||
| Vote 1 – Program Authorities | 88,080 | 72,912 | 15,168 | 21% |
| Statutory | ||||
| Employee Benefits Plan | 9,053 | 6,840 | 2,213 | 32% |
| Total Budgetary authorities | 97,133 | 79,752 | 17,381 | 22% |
| Non-budgetary | 0 | 0 | 0 | 0% |
| Total authoritiesFootnote 1 | 97,133 | 79,752 | 17,381 | 22% |
2.1.1. Voted Budgetary Authorities
The total Vote 1 – Program Authorities available as at December 31, 2022 are $88.1 million compared to $72.9 million for the same period in 2021–22. The increase of approximately $15.2 million or 21% is attributable to the following factors:
- An increase of $15.8 million following the receipt of new funding announced in Budget 2022 to strengthen Canada’s Anti-Money Laundering/Anti-Terrorist Financing Regime;
- An increase of $1.9 million following the receipt of new funding announced in Budget 2021 to develop expertise in virtual currency and the supervision of armoured car companies, and implement a cost recovery funding model for FINTRAC’s Compliance Program;
- An increase of $0.1 million in personnel funding for an approved annual cost of living increase and other compensation funding adjustments; offset by
- A decrease of $0.7 million based on the profile of funding announced in the Economic and Fiscal Snapshot 2020 for fighting financial crime, relocating FINTRAC's headquarters and modernizing the cross-border currency reporting framework, inclusive of subsequent approved reprofile requests and frozen allotments;
- A decrease of $0.6 million in funding received through reprofile requests to support operational pressures;
- A decrease of $0.4 million based on the funding profile of initiatives announced in the Budget 2019 to strengthen Canada’s anti-money laundering and anti-terrorist financing regime, inclusive of subsequent reprofile requests;
- A decrease of $0.4 million due to the difference in timing of salary funding allocation related to paylist expenditures;
- A decrease of $0.3 million in the operating budget carry forward for this fiscal year, compared to last fiscal year; and
- A decrease of $0.2 million attributable to variances in transfers to other government departments for services provided to FINTRAC.
2.1.2. Statutory Budgetary Authorities
The total statutory authorities available as at December 31, 2022 are $9.1 million compared to $6.8 million for the same period in 2021–22. The increase of $2.2 million or 32% is attributable to the following factors:
- An increase of $2.1 million following the receipt of new funding announced in Budget 2022 to strengthen Canada’s Anti-Money Laundering/Anti-Terrorist Financing Regime;
- An increase of $0.3 million following the receipt of new funding announced in Budget 2021 to develop expertise in virtual currency and the supervision of armoured car companies, and implement a cost recovery funding model for FINTRAC’s Compliance Program; offset by
- A decrease of $0.1 million based on the profile of funding announced in the Economic and Fiscal Snapshot 2020 for fighting financial crime, relocating FINTRAC's headquarters and modernizing the cross-border currency reporting framework, inclusive of subsequent approved reprofile requests and frozen allotments; and
- A decrease of $0.1 million attributable to variances in transfers to other government departments for services provided to FINTRAC as well as the funding profile of initiatives announced in the Budget 2019 to strengthen Canada’s anti-money laundering and anti-terrorist financing regime, inclusive of subsequent reprofile requests.
2.2. Expenditure Analysis
The following table provides a comparison of year-to-date spending as at December 31st by Vote for the current and previous fiscal years.
| Year-to-date expenditures ($ thousands) |
2022–23 | 2021–22 | Variance ($) |
Variance (%) |
|---|---|---|---|---|
| Budgetary | ||||
| Voted: | ||||
| Vote 1 – Program Expenditures | 50,341 | 46,930 | 3,411 | 7% |
| Statutory | ||||
| Employee Benefits Plan | 4,463 | 5,130 | -668 | -13% |
| Total Budgetary expenditures | 54,804 | 52,060 | 2,743 | 5% |
| Non-budgetary | 0 | 0 | 0 | 0% |
| Total year-to-date expendituresFootnote 2 | 54,804 | 52,060 | 2,743 | 5% |
2.2.1. Voted Budgetary Expenditures
Total voted expenditures at December 31, 2022 were $50.3 million in 2022–23 compared to $46.9 million in 2021–22, an increase of $3.4 million or 7%. The net increase is the result of the following variances in expenditure categories:
- Personnel expenditures increased by $3.4 million following an increase in hiring of employees and students, and the implementation of an approved annual cost of living increase;
- Expenditures for information increased by $0.4 million following an increase in electronic subscriptions;
- Expenditures for the acquisition of machinery and equipment increased by $0.3 million following an increase in the acquisition of application software;
- Expenditures for repairs and maintenance increased by $0.3 million following an increase in the repair/maintenance of computer equipment and servers. This increase is partially due to timing differences in the payment of certain annual maintenance payments;
- Rental costs decreased by $0.7 million. Expenditures related to the license/maintenance of application software have decreased by $0.9 million. Part of this variance is due to differences in the timing of payments ($0.5 million). Expenditures related to the rental of office buildings have also decreased by $0.4 million due to differences in timing of payments. This is offset by an increase of $0.6 million in computer equipment rental costs.
- Expenditures for professional and special services decreased by $0.5 million following a decrease in expenditures for other professional services ($1.3 million) offset by an increase in information technology consultant services ($0.8 million).
- The remaining variance is attributable to small increases in transportation and communication and utilities, materials and supplies.
2.2.2. Statutory Budgetary Expenditures
Statutory expenditures in the first three quarters decreased by $0.6 million or -13%, from $5.1 million during 2021–22 to $4.5 million in 2022–23. This is due, in large part, to timing differences in the payment of these expenditures ($0.6 million). The remaining variance is due to a decrease in employer contributions to the public service pension and death benefit programs proportional to the increase in personnel expenditures for students who do not participate in these programs. This decrease was offset by a small increase in employer contributions to Employment Insurance (EI) and Canada Pension Plan (CPP) as a result, of increased personnel expenditures.
3. Risks and Uncertainties
As Canada’s financial intelligence unit and a partner in Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime, FINTRAC operates in a dynamic, constantly changing environment. In seeking to identify risks and opportunities proactively, FINTRAC must anticipate and assess internal and external risk factors that can affect the design and delivery of its programs and the achievement of its strategic objectives. Additionally, FINTRAC must identify factors and risks that could adversely affect its ability to manage its resources effectively.
FINTRAC maintains a Corporate Risk Profile (CRP) to identify and manage its key corporate risks. The development of the CRP is a self-assessment process to identify, validate and measure risks where action or intervention can improve results or prevent harm. Senior level committees review the CRP regularly and the business planning process identifies activities to mitigate the risks. The objective of the CRP is to create information that FINTRAC managers and decision makers can use when planning and setting priorities.
In the context of the global pandemic, there remains some level of risk and uncertainty related to the supply chain, which could affect the timing of certain purchases and related expenditures. Due to this anomaly, year over year expenditure trends may not be as informative as in previous annual cycles.
3.1. Risk Factors and Mitigation
One area of risk identified in FINTRAC’s CRP is that legacy IM/IT hardware and software capacity will limit the Centre’s ability to achieve its objectives. FINTRAC depends on a sophisticated information technology infrastructure to receive, store and secure over 30 million new financial transaction reports every year. The Centre’s systems support the heavily technology-enabled Compliance Framework, allowing businesses to submit financial transaction reports, facilitating the tracking and recording of compliance, and enabling businesses to meet their legislative and regulatory obligations. At the same time, this infrastructure allows intelligence analysts to filter the information, analyze it and generate actionable financial intelligence for Canada’s police, law enforcement and national security agencies. This is only possible with modern systems that can manage the high volume of information, make the connections and produce the needed results, all in real-time or close to it.
To address the risks related to legacy IM/IT hardware and software capacity, FINTRAC is engaged in a broad multi-year modernization effort underpinned by its long-term Digital Strategy. With the support of significant new funding in Budget 2022, the Centre is focused on upgrading its information technology systems in order to keep pace with the rapid technological innovation taking place in the financial sector and all sectors around the world. FINTRAC’s Digital Strategy is focused on ensuring the organization is able to leverage new and emerging technology, add business value, improve performance, enhance digital services, enrich the user experience and explore modern new ways to deliver on the Centre’s mandate.
4. Significant Changes in Relation to Operations, Personnel and Programs
4.1. Key Personnel Changes
There were no key personnel changes at the executive level during the third quarter of fiscal year 2022–23.
4.2. Changes in Funding
Budget 2019 directed resources (up to $20.5 million over 5 years) to FINTRAC to strengthen Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime. The funding supports the following five initiatives:
- the implementation of legislation and regulations package 2;
- trade based money laundering (TBML) analysis;
- disclosures to Revenue Quebec and the Competition Bureau;
- strengthening FINTRAC’s compliance outreach and examinations; and
- expanding FINTRAC’s participation in public-private partnerships.
FINTRAC's 2022–23 funding for these initiatives is $4.2 million (excluding $0.5 million in EBP). This reflects approved reprofile requests.
In 2019–20, FINTRAC received funding in an off-cycle funding announcement to contribute to the National Strategy to Combat Human Trafficking ($2.2 million over 5 years). 2022–23 funding for this initiative is $0.5 million (excluding $0.1 million in EBP). This reflects approved re-profile requests.
The Economic and Fiscal Snapshot of July 8, 2020 announced funding for FINTRAC (up to $130.5 million over 5 years) for fighting financial crime, relocating the Centre’s headquarters and modernizing the cross-border currency reporting framework. FINTRAC's 2022–23 funding for these initiatives is $13.6 million (excluding $1.2 million in EBP). This reflects approved re-profile requests.
Budget 2021 directed resources (up to $4.4 million over 4 years) to FINTRAC to develop expertise in virtual currency and the supervision of armoured car companies, and implement a cost recovery funding model for FINTRAC’s Compliance Program. FINTRAC's 2022–23 funding for these initiatives is $1.9 million (excluding $0.3 million in EBP).
Budget 2022 directed resources (up to $88.3 million over 5 years) to FINTRAC to strengthen Canada’s Anti-Money Laundering/Anti-Terrorist Financing Regime. FINTRAC's 2022–23 funding for these initiatives is $15.8 million (excluding $2.1 million in EBP). The funding supports the following initiatives:
- preserving supervisory capacity over Federally Regulated Financial Institutions (FRFIs);
- further protecting intelligence and information;
- building additional capacity as it relates to virtual currencies;
- modernizing tools and processes in FINTRAC’s intelligence, compliance and corporate sectors; and
- expanding supervisory operations to include coverage of crowdfunding platforms and payment service providers (PSPs).
5. Approval by Senior Officials
Approved by:
Jessica Kaluski, Chief Financial Officer (CFO)
Date: February 24, 2023
Sarah Paquet, Director and Chief Executive Officer
Date: February 27, 2023
| Fiscal Year 2022–23 | Fiscal Year 2021–22 | |||||
|---|---|---|---|---|---|---|
| Total available for use for the year ending March 31, 2023 Footnote 3 | Used during the quarter ended December 31, 2022 | Year-to-date used at quarter-end | Total available for use for the year ending March 31, 2022 Footnote 4 | Used during the quarter ended December 31, 2021 | Year-to-date used at quarter-end | |
| Budgetary authorities | ||||||
| Vote 1 – Program expenditures | 88,080 | 18,162 | 50,341 | 72,912 | 17,256 | 46,930 |
| Budgetary statutory authorities | ||||||
| Contributions to employee benefit plans | 9,053 | 2,231 | 4,463 | 6,840 | 1,710 | 5,130 |
| Total budgetary authorities | 97,133 | 20,393 | 54,804 | 79,752 | 18,966 | 52,060 |
| Non-budgetary authorities | 0 | 0 | 0 | 0 | 0 | 0 |
| Total authorities Footnote 5 | 97,133 | 20,393 | 54,804 | 79,752 | 18,966 | 52,060 |
| Fiscal Year 2022–23 | Fiscal Year 2021–22 | |||||
|---|---|---|---|---|---|---|
| Planned expenditures for the year ending March 31, 2023 | Expended during the quarter ended December 31, 2022 |
Year-to-date used at quarter-end | Planned expenditures for the year ending March 31, 2022 | Expended during the quarter ended December 31, 2021 |
Year-to-date used at quarter-end | |
| Expenditures | ||||||
| Personnel | 63,479 | 15,156 | 42,032 | 54,183 | 13,930 | 39,277 |
| Transportation & communications | 1,345 | 743 | 978 | 1,993 | 326 | 840 |
| Information | 520 | 98 | 821 | 454 | 104 | 400 |
| Professional & special services | 13,487 | 1,894 | 4,599 | 10,293 | 2,147 | 5,064 |
| Rentals | 8,374 | 1,447 | 4,409 | 6,758 | 1,907 | 5,143 |
| Repair & maintenance | 570 | 227 | 596 | 917 | 107 | 331 |
| Utilities, materials & supplies | 278 | 102 | 220 | 404 | 61 | 193 |
| Acquisition of land, buildings & works | 0 | 0 | 0 | 0 | 0 | 0 |
| Acquisition of machinery & equipment | 9,065 | 737 | 1,148 | 4,711 | 389 | 814 |
| Transfer payments | 0 | 0 | 0 | 0 | 0 | 0 |
| Other subsidiaries & payments | 15 | -11 | 1 | 41 | -6 | 0 |
| Total budgetary expendituresFootnote 6 | 97,133 | 20,393 | 54,804 | 79,754 | 18,966 | 52,060 |
- Date Modified: