If you (as an individual or a business) are subject to the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated regulations (also referred to as Canadian AML Law), you are required to establish and implement a comprehensive and effective compliance program.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is Canada's financial intelligence unit. Among other things, it is responsible for the enforcement of Canadian AML Law. In December 2017, FINTRAC released a revised guidance document relating to the compliance program requirements.
This guidance document should be reviewed carefully to ensure that you satisfy all the requirements of a compliance program.
Compliance program requirements
The importance of a comprehensive and effective compliance program cannot be overstated. The guidance document notes that establishing and implementing such a compliance program is the basis for meeting the reporting, record keeping, client identification and know-your-client requirements under the Canadian AML Law.
FINTRAC requires that compliance programs must have the following five elements (the guidance document includes detailed description of these elements):
- Compliance officer: You are required to appoint a person who will be responsible for the implementation of the compliance program.
- Compliance policies and procedures: You are required to develop and apply written compliance policies and procedures that need to be kept up to date and include enhanced measures to mitigate high risks.
- Risk assessment: You are required to conduct a risk assessment of your business activities and relationships.
- Compliance training: You are required to develop and maintain a written ongoing compliance training program for employees, agents and others authorized to act on your behalf.
- Effectiveness review: You are required to institute and document an effectiveness review of your compliance program (policies and procedures, risk assessment and training program) every two years (minimum) for the purpose of testing its overall effectiveness.
FINTRAC acknowledges that the level of detail and sophistication of your compliance program must reflect the size of your business as well as its complexity, structure and risk of exposure to money laundering and terrorist activity financing.
FINTRAC regularly audits businesses to ensure compliance with the Canadian AML. In addition, entities that are subject to the regulatory authority of Canada’s federal financial regulator (the Office of the Superintendent of Financial Institutions known as OSFI) are also subject to regulatory examination by OSFI.
During recent years (partly because of global geopolitical issues), we are seeing a heightened focus from the regulators on issues relating to money laundering and terrorist financing. In this environment, it is important for all relevant businesses to pay careful attention to their compliance program requirements.