RESULTS FOR 2005-06:

Ensuring Compliance with the Legislation

In fulfilling our mandate to detect suspicious financial transactions, FINTRAC's success continued to depend on the complementary efforts of Canada's financial institutions and financial intermediaries. Their rigorous implementation of anti-money laundering/anti-terrorist financing regimes forms a strong deterrent to those who would launder and conceal illicit funds through legitimate channels.

Since the Centre was created, a key goal has been to assist financial entities and intermediaries in understanding and meeting their obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated regulations.

The production of timely, high-quality financial intelligence is dependent on reporting entities fulfilling their obligations to report and ensuring that reported data is of a high quality. In Canada, there are hundreds of thousands of entities and individuals that, depending on the transactions conducted, could fall within the ambit of the Act's reporting, client identification and record-keeping requirements.

FINTRAC's Compliance Approach

A cooperative, risk-based approach remains the cornerstone of FINTRAC's compliance program. Using our risk-based approach, we identified sectors or individuals with a high risk of non-compliance and then focused on these entities.

Our compliance activities continue to build on the relationships and awareness established within all reporting entity sectors. We feel our compliance activities were more effective in 2005-06 because reporting entities had a better understanding of their obligations under the Act.

Policy Interpretation

Ensuring the proper interpretation of legislative requirements is essential to an effective compliance program. On a daily basis, we continued to ensure that our regional compliance officers across Canada were supplying a consistent interpretation of the Act and Regulations. In addition, two more FINTRAC Interpretation Notices (FINs) were developed this year, addressing the securities and accountants sectors.

Quality, Timing and Volume Monitoring

We spent a considerable part of the year redesigning our data quality capabilities to align with the new reporting systems being offered to reporting entities.

We can now provide instantaneous feedback to reporting entities when they submit reports and advise them of recurring data quality issues. This, in turn, allows us to enhance the quality of data received during the year by facilitating early detection of data quality problems, and allowing for increased feedback to reporting entities on their reporting activities.

This year, the existing reporting mechanisms were streamlined into one secure Web site called F2R. This new system provides a user-friendly method to prepare and submit reports to FINTRAC.

As the bar graph below illustrates, there has been a steady growth in the volume of reports received by FINTRAC since 2001-02. The Centre currently has some 37 million reports in its database.

Examinations

Using a variety of techniques, we conducted examinations in all reporting entity sectors during 2005-06. As a prerequisite to conducting examinations, FINTRAC's compliance officers must undergo rigorous training.

This year, FINTRAC conducted 196 on-site examinations. FINTRAC also entered into an additional 10 compliance information-sharing agreements, or memoranda of understanding (MOU), with both national and provincial regulators. FINTRAC's MOU partners conducted a further 96 examinations, which helped to lessen the regulatory burden placed on reporting entities by limiting duplication of the examinations performed on them.

 

Disclosures of Non-Compliance to Law Enforcement

FINTRAC's examination process has clearly demonstrated that the vast majority of reporting entities want to comply with their legislative obligations. In all our examinations, we have found only a small number of entities with serious compliance deficiencies. Where a reporting entity makes no demonstrable effort to resolve the deficiencies identified by FINTRAC, the Centre can choose to disclose such a case of non-compliance to law enforcement for investigation and prosecution.
In 2005-06, FINTRAC disclosed three cases of non-compliance.

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