As the recently amended Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the "Act") and its regulations come fully into force, many companies will find themselves under the watchful eye of the Financial Transactions and Reports Analysis Centre of Canada ("FINTRAC"), which now has the authority to levy penalties, including significant monetary fines and prison sentences. Even experienced reporting entities are confused by their newly-expanded duties on the front lines of Canada's anti-money laundering (AML) and terrorist detection efforts. Some reporting entities will become "test cases" over the next few years as new regulations are enforced and the standard of "reasonable efforts" are clarified.
Even sophisticated companies that operate in a highly-regulated financial world find compliance with the Act difficult to reconcile with existing practices. Implementation challenges are expensive to resolve. While changing their operations in order to comply is expensive, penalties imposed as well as the reputational damage, may be even more costly.
On January 2, 2009, the US Financial Industry Regulatory Authority (FINRA) announced a $1 million fine against subsidiaries of E*Trade for failing to establish and implement AML policies and procedures which could detect and report suspicious securities transactions. This fine was in addition to the $1 million settlement E*Trade reached in July 2008 with the U.S. Securities and Exchange Commission (SEC) when it was discovered that the identity of 65,000 customers had been inadequately ascertained in contravention to the AML provisions of the US Patriot Act.
The Office of the Superintendent of Financial Institutions Canada (OSFI) has published guidelines to "Deterring and Detecting Money Laundering and Terrorist Financing" (Guideline B-8: Sound Business and Financial Practices) which can be found at www.osfi-bsif.gc.ca. The message from OSFI is clear: Companies must determine the risk associated with their business and draft policies and build procedures that must be followed to detect attempts to launder money or acts of terrorism. Guideline B-8 and the risk based approach will be the subject of The Canadian Institute's 4th Annual Payment Card Compliance in Canada conference on February 5 & 6, 2009 in Toronto which will also include AML, changes to consumer credit, privacy, advertising and marketing and much more.