Canadian Financial Transaction Watchdog Given Power to Fine

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), a federal agency that analyzes financial transactions for potential signs of money laundering and terrorist financing, will be able to levy fines in 2008 and operate under new disclosure rules.

The new fine provisions, outlined in the Boxing Day edition of the Canada Gazette, will allow the agency to fine individuals or reporting entities for a variety of offences ranging from the “minor” failure to convert foreign currency transaction figures into Canadian funds, to the “very serious” failure of a person or entity to send a report to FinTRAC within the prescribed 30 day period.

“Right now, our only real stick that we have to ensure compliance is a criminal penalty,” said FinTRAC spokesman Peter Lamey. “We would have to take a case where there is real non-compliance and refer it to law enforcement for criminal action.”

Now, he says the agency can have a more proportionate response to cases where there is non-compliance, but perhaps not criminal intent. The fine regime, which comes into effect December 30, 2008 provides for fines of up to $1,000 for a minor violation, up to $10,000 for a serious violation and as much as $500,000 for a very serious violation.

Established in 2000 initially to detect money laundering by organized crime, FinTRAC was given an expanded mandate in 2001 with the passage of the Anti-Terrorism Act in the wake of the 9/11 terror attacks to analyze transactions for evidence pointing to financing of terrorist groups. FinTRAC operates as an arms-length organization from law enforcement and only reports transactions to the RCMP and other law enforcement agencies when activity is deemed relevant to an investigation of money laundering, terrorist financing or a threat to national security, Lamey said.

Financial institutions as well as insurance companies, real estate agents and other professionals who handle high-value transactions are required to report to the agency suspicious transactions as well as any transaction over $10,000 or electronic funds transfers.

On June 23, foreign exchange dealers and money services businesses – small operations such as hawalas, which specialize in transmitting money to developing countries – will have to register with FinTRAC.

Real estate agents will also be required after June 23 to record who the people are involved in a transaction and will have to ask for supporting identification documents.

In 2006 and 2007, FinTRAC received disclosures of some 17.5 million transactions, Lamey said, noting that only 39,000 of the transactions were reports of suspicious transactions. In its annual report the agency said it made 193 case disclosures to law enforcement agencies involving $9.8 billion worth of financial transactions.

By Sean McKibbon, smckibbon@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca

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