On April 5 2016 newspapers in Canada reported that the Financial Transactions Reports and Analysis Centre of Canada (FINTRAC) had imposed its first-ever penalty on a bank. FINTRAC was created by the Proceeds of Crime (Money Laundering) and Terrorist Finance Act to receive reports from banks and other reporting entities regarding large cash and suspicious transactions and provide to law enforcement agencies information discerned from those reports. It also has the authority to issue administrative monetary penalties on reporting entities that fail to meet their obligations under the act. While it is not unusual for FINTRAC to impose a penalty on a reporting entity, a number of aspects of this particular case are noteworthy.
The case was first reported in the press and not as a result of any communication from FINTRAC, although it appears that FINTRAC has confirmed the newspaper reports. While FINTRAC routinely issues press releases when it imposes penalties, it has yet to issue its own press release or make any reference on its website to a case involving a bank.
While FINTRAC has provided no official notice of the particular case, it does publish a breakdown of the aggregate penalties imposed by type of reporting entity. The current list shows only one penalty involving a bank. Perhaps an enterprising reporter noticed the addition of a penalty involving a bank and investigated further.
FINTRAC also publishes a cumulative list of penalties that it has imposed including both the name of the person or entity and the amount of the penalty. Twenty-four cases are listed, each mentioning the name of the offending person or entity. The case involving a bank is not mentioned.
Much has been made in the press about the apparent favourable treatment that the bank received by being spared from public disclosure. The Proceeds of Crime (Money Laundering) and Terrorist Finance Act gives FINTRAC the authority to publish the name of the offending person or entity, the nature of the offence and the amount of the penalty, but only if the proceedings in respect of the violation have been completed. At least one press report quotes FINTRAC as having decided to exercise its discretion not to publish the name of the bank or, presumably, any details of the case.
FINTRAC's website provides information on the three criteria it uses to determine whether to name a person or entity:
- The person or entity must have committed a serious violation;
- The base penalty amount must be equal to or greater than C$250,000, before adjustments are made in consideration of the person or entity's compliance history and ability to pay; or
- There must have been repeat significant non-compliance on the part of the person or entity.
Given that the penalty was over C$1 million, at least two of these criteria appear to have been met.
It is not clear whether FINTRAC has previously exercised its discretion not to publish. FINTRAC's website states that the list of prior penalties incudes "details on administrative monetary penalties imposed, from the start of the program in 2009". This reinforces the impression that this case was treated differently from other cases.
The case is also noteworthy because of the size of the penalty imposed. While penalties in the hundreds of millions of dollars appear to be routinely imposed in other jurisdictions, before this case the largest penalty imposed by FINTRAC was just under C$350,000 – roughly one-third of the penalty imposed on the bank. In the prior case, FINTRAC found that the reporting entity had committed nine violations covering almost the complete range of the obligations imposed on reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Finance Act. In order to understand the message that FINTRAC is sending from the new high-water mark, it would be helpful to compare the violations committed in the two cases. However, because FINTRAC did not publish information about the bank case, a comparison is impossible.
The press has argued that FINTRAC's decision not to publish the name of the bank is unfair, particularly since it appears that it has published the name of the person or entity in every previous case. By not having its name published, the bank has undoubtedly been spared some damage to its reputation. However, since it is unknown which bank was involved, suspicion has instead been cast on the entire industry. It will be interesting to see whether the controversy surrounding this case will lead FINTRAC to reconsider its approach in future cases.
For further information on this topic please contact John Jason at Norton Rose Fulbright Canada by telephone (+1 416 216 4000) or email (firstname.lastname@example.org). The Norton Rose Fulbright Canada website can be accessed at www.nortonrosefulbright.com/ca/en/.
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