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FINTRAC

FINTRAC NEEDS TO CHANGE ITS GUIDANCE AS SOON AS POSSIBLE AS IT IS OUTDATED!

FINTRAC NEEDS TO CHANGE ITS GUIDANCE AS SOON AS POSSIBLE AS IT IS OUTDATED!

Here is what FINTRAC continues to have in its Guidance as of May 11:

https://www.fintrac-canafe.gc.ca/guidance-directives/overview-apercu/Guide1/1-eng

 

I predict that FINTRAC will be changing its website because it is missing a new (but not all that new) and important component of the money laundering offence in Canada. It is troubling that despite the fact that the Criminal Code changed nearly a year ago, FINTRAC has not updated its Guideline 1: Backgrounder description in which it describes what it considers money laundering to be in Canada. The Guideline makes no mention of “reckless” as a way to commit money laundering.  And as a result of this gap, it provides no Guidance on how this is going to be dealt during evaluations and what will be expected of reporting entities.

A search for “RECKLESS” turns up a single result from the FINTRAC website.

https://recherche-search.gc.ca/rGs/s_r?st=s&s5bm3ts21rch=x&num=10&st1rt=0&langs=eng&cdn=canafefintrac&hq=&q=reckless&wb-srch-sub=#wb-land

 

A review of this single result reveals a document that is for the most part accurate, but it just does not emphasize enough the fact that the offence itself has changed.  The search result leads one to the speaking notes of Nada Semaan , Director and Chief Executive Officer of FINTRAC for the 2019 Casino Forum on December 10, 2019, which includes a single reference to “reckless”:

“Legislative changes were announced, including the addition of recklessness to the offence of money laundering in the Criminal Code. This criminalizes the activity of moving money on behalf of another person or organization while being aware that there is a risk that this activity could be money laundering.

https://www.fintrac-canafe.gc.ca/new-neuf/ps-pa/2019-12-10-eng

 

 

Kudos to Neda Semaan for being right on top of this issue but it is concerning that staff have not translated this reality into the Guidance.  The gravity of this change is simply not being brought home to the public or to reporting entities who have obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated Regulations.

The quoted passage could be restated more clearly to truly capture the seriousness of the change to read (emphasis added):

 

“Legislative changes were announced, including the addition of recklessness to the offence of money laundering in the Criminal Code. This means that in Canada it is now money laundering to move money on behalf of another person or organization while being aware that there is a risk that this activity could be money laundering.

 

Let’s hope we see Guidance on this soon and at the very least an update to Guideline 1: Backgrounder.

In the interim, every CAMLO should be developing a plan to deal with the change and engaging with FINTRAC to determine whether existing measures are sufficient to address this change or whether a change in approach is needed.  I suggest that at the very least:

  1. The new offence must be incorporated into the Risk Based Approach of every reporting entity; and
  2. Every reporting entity must properly train all staff who receive AML training, in a way that is tailored to their role and engage with how the change may materially alter their work and obligations under the PCMLTFA/R.

In order to help, I am providing a series of 12 short and focused educational webinars on this and other complex AML topics.  Session 4 will take place on Saturday May 16, 2020 and will specifically address the effect of the inclusion of “recklessness” into the Canadian Criminal Code offence of money laundering (s. 462.31).

Brief outline of this Saturday’s webinar:

We all know about Placement, Layering and Integration.  For the most part this is about property or proceeds derived or obtained directly or indirectly from the commission of a predicate indictable (serious) offence.

But does the money always have to be “dirty”? This Saturday join me for an in-depth webinar on how, for the purpose of identifying Suspicious Transactions, Canadian law does not require the proceeds or property to be obtained or derived from a criminal offence.

In Canada the criminal offence of money laundering law changed significantly in June 2019. There are more regulatory changes coming and the existing regulations are all affected by any change in the substantive underlying offence.  It is, after all, along with the terrorist activity financing offence, the bedrock on which the regulatory regime is built.

Are you ready to deal with this change and as importantly, are your managers and front-line staff? Join me on Saturday May 16, 2020 for a brief review of this complex area of the Canadian anti-money laundering landscape.

Register here:

 

https://us02web.zoom.us/webinar/register/3815892898623/WN_VKyFzXFOTZCREY9ThyauRQ

 

 

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CAMLO ALERT - UPDATING YOUR TECHNOLOGY TOOLS?

CAMLO ALERT - UPDATING YOUR TECHNOLOGY?

Canadian Anti-Money Laundering Compliance Programs:  It's just over a year until the regulations change so it's time to get started on the changes now!  

As of June 21, 2021, one of the key changes to AML compliance programs relates to adoption and implementation of technology. This is a big deal because there are rapid changes happening all the time, and these are now happening at breakneck speed due to COVID-19 and the need to work differently.

In 2021 the new Regulation will REQUIRE that your AML risk assessment happen in advance, and will read:

S. 156(2) – If the person or entity intends to carry out a new development or introduce a new technology that may have an impact on their clients, business relationships, products or delivery channels or the geographic location of their activities, they shall, in accordance with paragraph 1(c), assess and document the risk referred to in subsection 9.6(2) of the Act before doing so. (emphasis added)

The specific section 9.6(2) risk mentioned is the requirement that the Compliance Program address the “risk of a money laundering offence” or a “terrorist activity financing offence”.  You need to start considering how your new technology will engage with and affect your ability to assess and document these risks.

To develop, update and review your AML compliance progam you will almost certainly need an external consultant (or significant in-house expertise) but prior to doing so, frank discussions with counsel in the course of obtaining privileged legal advice can aid in improving your compliance program efficiently and effectively while protecting your entity as the client.

I have a background in information governance and I have been recognized by the IAPP as a Fellow of Information Privacy (FIP) (having IAPP/C, IAPP/E and CIPM certification).  I am also a former crown attorney (criminal prosecutor), and the Law Society of Ontario has granted me the status of Certified Specialist in Criminal Law.

As such I am uniquely qualified to provide privileged legal advice on risk assessment in the area of the criminal offence of money laundering and how adoption of new technology tools affects the risk profile for an organization.

There are some fantastic, experienced and knowledgeable AML consultants out there (there are quite a few but for example the AML Shop and Outlier Solutions are two such companies) and I have a great deal of respect for the work they do to help reporting entities and others to address all their obligations (and beyond).

As legal counsel I can work with you to coordinate the efforts of external AML consultants and assist you in exploring your legal options and assessing the potential impact on your organization and its senior management.

www.RiskBased.Solutions

 

Gerry McGeachy, CAMS, CFE, CFCS

 

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Money Laundering: Let's not forget that it is Criminal, not just Regulatory.

Money Laundering:  Let's not forget that it is Criminal, not just Regulatory.

 

"...If the current state of your anti-money laundering training or written material says the following is the offence of Money Laundering in Canada, it is wrong..."

"...If the current state of your anti-money laundering training or written material says the following is the offence of Money Laundering in Canada, it is wrong..."

 

Under Canada's Proceeds of Crime (Money Laundering) and Terrorist Financing Act, the core obligation to submit a suspicious transaction report re money laundering is found in s. 7. It is essential that senior management and front line personnel at any reporting entity understand and can answer the question "Suspicious of what?" because it is not just any old suspicion that triggers the reporting obligation (as it relates to money laundering, similar issues apply to terrorist activity financing offences found in sections 83.02 to 83.04 and 83.12 of the Criminal Code of Canada).

The obligation emanates from reasonable grounds to suspect that the transaction is related to a "money laundering offence" (MLO). The concept of MLO includes but is not limited to "money laundering" (ML).

An MLO can be committed in many ways through the Criminal Code. The vast majority of offences in the Code are hybrid offences which makes them indictable because they can be prosecuted through a summary proceeding or indictably, based on an election by the prosecutor. Similar rules surround indictable offences created by other Acts such as the Income Tax Act (see for example s. 239(2) if the ITA).

I am certified by the Law Society of Ontario as a specialist in criminal law, and was a crown prosecutor for many years. My cases included financial crime, conspiracies and offences involving criminal organizations. I was also senior litigation counsel at the Ontario Securities Commission - Enforcement Branch and when there I investigated a broad range of financial businesses ranging from large banks to international internet-based operations. I am not a criminal defence lawyer. Instead I have chosen to leave full-time prosecution and practice proactive compliance for AML/Financial Crime and related issues. I can help your staff make sense of complex ML issues. Please contact me if your people need training on fundamental AML issues including:

a) conspiracy;

b) attempts;

c) aiding and abetting;

d) counselling someone to commit an offence;

e) being an accessory after the fact....

... Or they need more clarity on:

- What is a money laundering offence (MLO)?

- What is money laundering (ML) in Canadian criminal law?

 

Here is an example of the importance of involving experienced criminal law counsel as an integral part of your AML compliance program:

If the current state of your anti-money laundering training or written material says the following is the offence of Money Laundering in Canada, it is wrong. Please contact me and I will be happy to explain why.

462.31 (1) Every one commits an offence who uses, transfers the possession of, sends or delivers to any person or place, transports, transmits, alters, disposes of or otherwise deals with, in any manner and by any means, any property or any proceeds of any property with intent to conceal or convert that property or those proceeds, knowing or believing that all or a part of that property or of those proceeds was obtained or derived directly or indirectly as a result of

 

 

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