On September 30, 2013, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) announced revised criteria for determining whether it will publicly name a reporting entity that has been the subject of an administrative monetary penalty (AMP) for contravening the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PC Act) and associated regulations.
AMPs were introduced in December 2008 as an alternative to criminal sanctions and are imposed by FINTRAC for various violations of the PC Act. The amount of AMPs varies depending on the nature of the violation: minor violations carry a penalty of up to C$1,000 per violation, serious violations can result in an AMP of up to C$100,000 per violation and very serious violations can carry a penalty of up to C$500,000 per violation. The level of seriousness of each violation is determined in accordance with the Administrative Monetary Penalties Regulations made under the PC Act. In determining the appropriate amount of the penalty, the legislation also requires FINTRAC to consider the harm caused by the violation, the compliance history of the reporting entity that committed the violation, and the size of the reporting entity based on the number of its employees. Unlike the criminal sanctions available under the PC Act, AMPs are aimed at encouraging compliance with the legislation rather than punishing for a contravention.
FINTRAC considers publication of AMPs an important component of its compliance regime and has in the past issued public notices naming the reporting entities against which AMPs were issued. In announcing the new criteria for issuing such public notices, the Director of FINTRAC, Mr. Gérard Cossette, noted that FINTRAC will be fair in imposing penalties and naming businesses but added that "FINTRAC will also be firm and public with our penalties."
According to the new criteria adopted by FINTRAC, a reporting entity that is subject to an AMP will be publicly named if one of the following criteria is met:
- The reporting entity has committed a very serious violation, or
- The base penalty amount is equal to or greater than C$250,000, before adjustments are made in consideration of the reporting entity's compliance history and ability to pay, or
- Repeat significant non-compliance on the part of the reporting entity.
The Administrative Monetary Penalties Regulations designate only two violations as very serious: (1) failure to include the information required by the legislation when sending a suspicious transaction report to FINTRAC, and (2) failure to send a terrorist property report to FINTRAC with the required information without delay.
FINTRAC will publish the name of the reporting entity that committed the violation, the business sector in which the entity operates, the nature of the violation, the city where the business is located, and the penalty amount imposed.
The reporting entities that are subject to the PC Act, including financial institutions, life insurance companies, securities dealers, money services businesses, real estate brokers and others, will need to be mindful of the reputational risk that a public notice of an AMP imposed by FINTRAC will have on their businesses.