On May 30, 2019, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and the Investment Industry Regulatory Organization of Canada (IIROC) announced they entered into an enhanced Memorandum of Understanding (MOU) that allows the two organizations to share compliance-related information with each other, including the results of compliance examinations of investment dealers.
IIROC is the self-regulatory organization that oversees investment dealers and trading activity on Canadian securities marketplaces.
FINTRAC is Canada’s financial intelligence unit responsible for deterring money laundering and terrorist financing, created under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). In addition to securities and IIROC rules, investment dealers are also subject to the PCMLTFA.
The MOU represents the two regulators’ strengthened efforts to collaborate against money laundering and terrorist financing activity in the securities industry. The enhanced collaboration aims to strengthen compliance by investment dealers with the PCMLTFA and to better protect investors and the integrity of the Canadian capital markets.
Under the PCMLTFA, investment dealers are subject to obligations in connection with certain financial activities and transactions. These obligations, which are in addition to the dealers’ obligations under securities and IIROC rules, include compliance programs, transaction reporting requirements, record keeping requirements and know your client requirements:
- Compliance programs must be created and approved by a senior officer of the dealer. A compliance officer must be appointed to implement and oversee the dealer’s compliance program. Compliance policies and procedures should explicitly address Canadian law requirements by assessing and documenting the risks of money laundering and terrorist financing, and developing measures to mitigate high risks.
- Investment dealers are required to file reports with FINTRAC for certain types of transactions. These transactions include (i) suspicious transactions where there are reasonable grounds to suspect that a transaction or an attempted transaction is related to the commission of a money laundering or terrorist financing offence; (ii) large transactions involving amounts of C$10,000 or more received in cash; and (iii) where the securities dealer has in its possession or control property that is owned or controlled by or on behalf of a terrorist or a terrorist group.
- Investment dealers must keep certain records and be able to provide them to FINTRAC within 30 days if required. Keeping records aids in the investigation and prosecution of criminal and terrorist financing offences and provides intelligence to police, law enforcement and national security agencies.
- Investment dealers have an initial and ongoing obligation to verify their client’s identities for certain financial activities.
FINTRAC collaborates with federal and provincial organizations to maximize its efforts and ensure PCMLTFA compliance across sectors.