What Triggers a FINTRAC Examination?

As a real estate brokerage, mortgage brokerage, or law firm in British Columbia, you're well aware of your obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Staying compliant with FINTRAC regulations is a continuous effort, and a key part of that is understanding what might lead to a FINTRAC examination.

TL;DR FINTRAC examinations are triggered by a mix of routine cycles, specific risk indicators like unusual transaction patterns or late reporting, and intelligence from law enforcement or other regulators.

Understanding the FINTRAC Examination Process

FINTRAC, Canada's financial intelligence unit, conducts examinations to ensure businesses are meeting their anti-money laundering and anti-terrorist financing (AML/ATF) obligations. These examinations are not always a sign of suspected wrongdoing. They can be part of a regular compliance review cycle, especially for businesses in sectors identified as higher risk.

The goal of an examination is to assess your compliance program, including your risk assessment, policies and procedures, training, and record-keeping practices. It's an opportunity for FINTRAC to verify that you have robust systems in place to detect and deter money laundering and terrorist financing.

Common Triggers for a FINTRAC Examination

While FINTRAC does not publish a definitive list of triggers, several factors commonly lead to an examination:

• Routine Compliance Reviews: FINTRAC conducts scheduled examinations across various sectors to ensure ongoing compliance. Your business might simply be selected as part of this regular rotation.

• Late or Inconsistent Reporting: Failing to submit required reports (e.g., Suspicious Transaction Reports, Large Cash Transaction Reports) on time, or submitting reports with significant errors or inconsistencies, can flag your business for review.

• Intelligence from Law Enforcement: Information shared by police forces or other government agencies regarding suspicious activities linked to your business can prompt an examination.

• Public Complaints or Media Reports: Allegations of non-compliance or involvement in suspicious activities, even if unproven, can draw FINTRAC's attention.

• Sector-Specific Risk Assessments: If your industry sector is identified as having a higher risk of money laundering or terrorist financing, your business may face closer scrutiny.

• Previous Compliance Issues: If your business has had compliance deficiencies in the past, FINTRAC may conduct follow-up examinations to ensure corrective actions have been implemented and are effective.

What FINTRAC Looks For During an Examination

When FINTRAC conducts an examination, they typically review several key areas of your compliance program:

Your Compliance Regime

• Risk Assessment: Do you have a current and comprehensive assessment of the money laundering and terrorist financing risks specific to your business and clients?

• Compliance Policies and Procedures: Are your written policies and procedures clear, up-to-date, and effectively communicated to staff? Do they cover all required elements, such as client identification, record keeping, and reporting?

• Training Program: Is your staff adequately trained on their AML/ATF obligations and your internal policies? Is the training ongoing and tailored to their roles?

• Compliance Officer: Have you designated a compliance officer responsible for overseeing your AML/ATF program?

• Effectiveness Review: Do you conduct regular reviews of your compliance program to assess its effectiveness and make necessary adjustments?

Transaction Monitoring and Reporting

• Client Identification and Verification: Are you consistently identifying and verifying the identity of your clients and beneficial owners according to regulations?

• Record Keeping: Are you maintaining all required records for the specified periods, and are they readily accessible?

• Suspicious Transaction Reporting (STRs): Do you have a process for identifying and reporting suspicious transactions to FINTRAC?

• Other Required Reports: Are you filing Large Cash Transaction Reports (LCTRs), Electronic Funds Transfer (EFT) reports, and Casino Disbursement Reports (CDRs) when applicable?

Proactive Steps to Maintain Compliance

The best way to prepare for a FINTRAC examination is to maintain a robust and up-to-date compliance program. Regular internal reviews and staff training are essential. Consider seeking external support to help ensure your program meets all regulatory requirements. Our compliance services can help you identify and address potential gaps before they become issues.

Understanding your obligations and proactively managing your AML/ATF program can significantly reduce the likelihood of an examination resulting in penalties. We can also assist with advisory services to optimize your financial systems and prepare for future regulatory changes.

What to Do if FINTRAC Contacts You

If FINTRAC contacts your business for an examination, it's important to respond promptly and cooperatively. Gather all requested documents and information efficiently. Having organized records and a well-documented compliance program will make the process smoother.

If you have concerns about your readiness or need assistance responding to an examination request, our team can provide support. We offer accounting services that ensure your financial records are accurate and support your regulatory compliance needs.

Ensure your compliance program is always audit-ready. Review your policies, train your staff, and keep meticulous records. If you have any questions or need assistance in strengthening your AML/ATF framework, contact us for expert guidance.