Anti-money laundering body says Canada's rules can be improved

Thu Sep 15, 2016 8:03am EDT
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TORONTO (Reuters) - Canada can improve its anti-money laundering rules regime, an international group that monitors the worldwide laundering of illicit cash said on Thursday, calling into question the effectiveness of the country's financial intelligence agency.

The Financial Action Task Force (FATF) said Canada had strong anti-money laundering measures in place and rules to combat terrorism financing that had achieved good results, but needed to make further improvements to be fully effective.

It said the Financial Transactions and Reports Analysis Center of Canada (FINTRAC), was hampered by the fact that it is not authorized to request information from the firms that it monitors. It noted, however, that FINTRAC had co-operated effectively with law enforcement agencies.

"The Canadian authorities have achieved some success in combating money laundering, notably when conducting law enforcement efforts with the support of FINTRAC's analysis. These are not entirely in line with the money laundering risks that Canada faces and, overall, the recovery of proceeds of crime appears to be relatively low," FATF said in the report.

FINTRAC issued its first ever penalty against a bank in April, fining the unnamed lender C$1.1 million ($834,000) for failing to report a suspicious transaction and various money transfers.

It had previously leveled fines against multiple credit unions totaling just C$676,795, over a swath of issues from the failure to submit suspicious transaction reports (STRs) to a failure to determine whether a client is a politically exposed foreign person (PEFP).

Its U.S. equivalent, the Financial Crimes Enforcement Network, has by contrast fined a dozen banks and one credit union more than $500 million over the last five years.

The FATF report also criticized the fact that lawyers in Canada, unlike financial institutions and other professionals, are exempt from the obligation to report suspicious transactions, allowing them to use trust accounts to move around money for clients without notifying regulators.

"The lack of coverage of these professions is a significant loophole in Canada's AML framework and raises serious concerns. Legal persons and arrangements are at high risk of misuse for money laundering or terrorist financing purposes and that risk is not satisfactorily mitigated," it said.   Continued...