December 12, 2017 – FINTRAC Advisory: Financial transactions related to countries identified by the Financial Action Task Force (FATF)

Financial transactions related to countries identified by the Financial Action Task Force (FATF)

In order to protect the international financial system from money laundering and terrorist financing risks, the Financial Action Task Force (FATF) issued two statements on November 3, 2017.

In its November 3, 2017 public statement, FATF remained concerned by the Democratic People's Republic of Korea's (DPRK) failure to address the significant deficiencies in its anti-money laundering and combatting the financing of terrorism (AML/CFT) regime and the serious threat this poses to the integrity of the international financial system. Further, FATF is deeply concerned about the threats posed by the DPRK's illicit activities related to the proliferation of weapons of mass destruction (WMDs) and its financing.Footnote 1 FATF reaffirmed the call on its members to apply effective preventive measures to protect their financial sectors from such risks.

On November 3, 2017, FATF also issued a separate statement on the DPRK.Footnote 2 The statement emphasizes FATF's deep concerns with the proliferation financing risk emanating from the DPRK. It also highlights the importance of robust implementation of the FATF standards to disrupt the DPRK's illicit financial activities.

Ministerial directive on the DPRK

Accordingly, in order to safeguard the integrity of Canada's financial system, and in accordance with section 11.42 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), the Minister of Finance has issued the following directive in the Canada Gazette.

“Every person or entity referred to in section 5 of the PCMLTFA shall treat all transactions originating from, or destined to, North Korea (Democratic People's Republic of Korea) as high risk for the purposes of subsection 9.6(3) of the Act.”

FINTRAC will assess compliance with the ministerial directive. Additional guidance can be found on FINTRAC's website: FINTRAC guidance relating to the Ministerial Directive on the Democratic People’s Republic of Korea (DPRK).

The Department of Finance also provides additional information on its website: General Information on Part 1.1 of the PCMLTFA.

On December 12, 2017, FINTRAC also published an Operational Alert on the DPRK's use of the international financial system for money laundering and terrorist financing. The purpose of this Operational Alert is to inform Canadian reporting entities of money laundering and terrorist financing patterns and risk areas related to the DPRK's financial activity.Footnote 3

Islamic Republic of Iran

In June 2016, FATF welcomed the Islamic Republic of Iran's (Iran) adoption of, and high-level political commitment to, an action plan to address its strategic AML/CFT deficiencies. However, until Iran implements the measures required to address the deficiencies identified in the action plan, FATF will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system.

Accordingly, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is reiterating to all reporting entities subject to the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), the risks of doing business with individuals and entities based in, or connected to, Iran.

FINTRAC is advising that reporting entities should consider the above in determining whether they are required to file a suspicious transaction report in respect of one or more financial transaction(s) or attempted financial transaction(s) emanating from, or destined to, Iran where there are reasonable grounds to suspect that the transactions are related to the commission or attempted commission of a money laundering offence or a terrorist activity financing offence. Reporting entities are also encouraged to undertake enhanced customer due diligence with respect to clients and beneficiaries involved in such financial transactions or attempted financial transactions.Footnote 4

Other jurisdictions

In its November 3, 2017 compliance document, FATF brought to the attention of its members several jurisdictions that have strategic AML/CFT deficiencies. The following jurisdictions have developed an action plan with FATF to address identified deficiencies and have demonstrated some progress with the execution of their plans: Bosnia and Herzegovina, Ethiopia, Iraq, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, Vanuatu, and Yemen.

Uganda No Longer Subject to FATF Monitoring Process

FATF welcomed Uganda's significant progress in improving their AML/CFT regime. The jurisdiction has met its commitments in its action plan regarding the strategic deficiencies that FATF had identified. Uganda is therefore no longer subject to FATF's monitoring process.

Caribbean Financial Action Task Force (CFATF) public statement

Reporting entities should take note that, on November 15, 2017, the Caribbean Financial Action Task Force (CFATF), under a process that is separate and distinct from the FATF monitoring process, issued a public statement regarding the progress Haiti has made to address the strategic AML/CFT deficiencies identified in its agreed action plan.

CFATF Public Statement – November 2017

FATF action on the terrorist group Islamic StateFootnote 5

FINTRAC would like to reiterate the preceding statements issued by FATF, expressing its deep concern with the financing generated by, and provided to, the terrorist group the Islamic State (IS).

On September 22, 2014, the Government of Canada updated the Criminal Code list of terrorist entities to include the IS, which was previously listed as Al Qaeda in Iraq.

Accordingly, FINTRAC is reminding all reporting entities subject to the requirements of the PCMLTFA of their obligationsFootnote 6 to submit a terrorist property report if they:

In this context, property includes any type of real or personal property. This also includes any deed or instrument giving title or right to property, or giving right to money or goods. A terrorist property report includes information about the property as well as any transaction or attempted transaction relating to that property.

FINTRAC is advising that reporting entities should consider the above in determining whether to file a suspicious transaction report in respect of financial of one or more financial transaction(s) emanating from, or destined to, a jurisdiction under IS control or a surrounding jurisdiction where there are reasonable grounds to suspect that the transactions or attempted transactions are related to the commission or attempted commission of a money laundering offence or a terrorist activity financing offence. Reporting entities are also encouraged to undertake enhanced customer due diligence with respect to clients and beneficiaries involved in such financial transactions or attempted financial transactions.Footnote 7

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