Notice on the assessment of obligations coming into force on June 1, 2021

On June 1, 2021, amendments to certain Regulations made under the Proceeds of Crime (Money Laundering and Terrorist Financing Act (PCMLTFA) (the amended Regulations) will come into force and create or change obligations for reporting entities (REs) that are subject to the PCMLTFA. The amendments were published in the Canada Gazette on July 10, 2019 and on June 10, 2020; they can be found here:

REs are required to comply with all the obligations under the PCMLTFA and associated Regulations. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) understands that some REs may experience certain challenges in meeting their obligations by June 1, 2021. Wherever possible, FINTRAC is committed to working constructively with REs.

When will FINTRAC assess the obligations coming into force on June 1, 2021?

Given the scope of the amended Regulations, and its impact on FINTRAC and REs, FINTRAC will exercise flexibility and reasonability when assessing REs' compliance with the amended Regulations.

Using its operational policy that focusses on the examination period, FINTRAC will begin assessing compliance with the amended Regulations on April 1, 2022.

From June 1, 2021 to March 31, 2022, FINTRAC will assess compliance with the regulatory requirements in effect prior to June 1, 2021. During this period, FINTRAC will also review REs' most up-to-date compliance program elements. As some REs may have updated their compliance program to reflect new regulatory requirements, this approach will provide REs with feedback to help them meet the requirements of the amended Regulations.

FINTRAC will begin assessing compliance with the amended Regulations on April 1, 2022. However, FINTRAC may assess transactional information for a period prior to April 1, 2022, while exercising reasonability and taking into consideration the flexible measures that FINTRAC has previously communicated in the Notice on forthcoming regulatory amendments and flexibility.

Reporting large virtual currency transactions

As of June 1, 2021, REs will be required to comply with obligations related to virtual currency transactions. REs will have to submit a Large Virtual Currency Transaction Report (LVCTR) when they receive an amount of virtual currency equivalent to $10,000 or more in a single transaction (the 24-hour rule may apply).

FINTRAC recognizes that, given the short timeline and the level of effort required to implement this new reporting obligation, some REs may be facing challenges in meeting this obligation on June 1, 2021. When an RE is not able to meet this reporting obligation, FINTRAC expects it to:

  1. Keep records of the reportable transactions as of June 1, 2021.
  2. Complete the implementation of its LVCTR system as soon as possible and no later than December 1, 2021.
  3. Submit all the unreported large virtual currency transactions for the period of June 1, 2021 to November 30, 2021 via the FINTRAC Upload or the FINTRAC web reporting system (F2R) as soon as possible and no later than March 31, 2022.

In the fall of 2021, F2R will be updated so that REs can use it to submit LVCTRs. REs that do not report large virtual currency transactions via FINTRAC Upload are expected to start submitting all large virtual currency transactions, including those transactions that were previously reportable but had not been submitted, as soon as F2R becomes available.

By December 1, 2021, FINTRAC expects that REs will have fully implemented their large virtual currency transaction reporting systems. Consequently, from that date and going forward, REs must submit LVCTRs within five working days after the day on which they receive the large virtual currency amount.

Reporting electronic funds transfers

Amendments to the obligation to report electronic funds transfers (EFTs) will come into force on June 1, 2021, as per the amended Regulations. Reporting entities will have to submit an EFT report to FINTRAC when:

FINTRAC acknowledges that some REs may be facing challenges in updating or implementing their reporting systems to submit EFT reports as per the amended Regulations. Certain REs may be facing two different scenarios.

Scenario 1—Reporting transactions that do not meet the legal requirements to be reportable under the amended Regulations: REs who are the first to receive an EFT from outside of Canada and those that are the last in Canada to send an international EFT no longer have the obligation to report these transactions to FINTRAC. It is vital that REs do not submit these reports to FINTRAC. However, some REs may be in a situation where they have not updated their reporting system and are continuing to report although they no longer have the obligation to do so (over reporting). As such, they are reporting transactions to FINTRAC which do not meet the legal requirement of a reportable transaction under the amended Regulations. In such a case, an RE will be expected to:

  1. Submit a voluntary self-declaration of non-compliance (VSDONC) to FINTRAC; and
  2. Delete from FINTRAC's database, as soon as possible, those EFT reports that do not meet the legal requirements for submission.

Scenario 2—Not reporting the required EFTs as per the Regulations: This scenario reflects situations in which REs have identified a reportable international EFT but have not updated or implemented their reporting systems to submit an EFT report to FINTRAC as required under the amended Regulations. Consequently, they are not able to report as the final recipient of an international EFT. Other REs may be in a situation where they are not reporting as the RE that first initiates an international EFT, but have the obligation to do so (under-reporting). As such, they are not reporting the required EFTs as per the amended Regulations. In these situations, an RE will be expected to:

  1. Submit a VSDONC to FINTRAC;
  2. Keep records of the reportable transactions;
  3. Update or implement its reporting system to comply with the requirements as soon as possible, but no later than December 1, 2021; and
  4. Submit the unreported EFTs for the period of June 1, 2021 to November 30, 2021 as soon as possible, and no later than March 31, 2022.

To declare non-compliance in reporting as described in the above-mentioned EFT scenarios, please complete the VSDONC form and submit it to VSDONC-ADVNC@fintrac-canafe.gc.ca.

Below is an overview of the above-mentioned timelines.

Figure 1. Assessment, large virtual currency transactions and EFT reporting timelines

Declaring non-compliance to FINTRAC as of June 1, 2021

FINTRAC expects REs to comply with their obligations under the PCMLTFA and associated Regulations on June 1, 2021. FINTRAC understands that, under the current circumstances, some REs may face challenges in complying with some of the regulatory requirements coming into force on June 1, 2021.

With the exception of the scenarios listed above, REs do not have to submit a VSDONC to FINTRAC for non-compliance with the amended Regulations until December 1, 2021.

However, should an RE not be compliant with the regulatory requirements that were in force prior to June 1, 2021 and remain in force under the amended Regulations, it must declare its non-compliance and submit a VSDONC to FINTRAC as soon as possible, per the usual process.

When will FINTRAC update its Assessment Manual?

The FINTRAC Assessment Manual will be updated later this year, and over the next several years to reflect the amendments to the Regulations. This will include updates following the rollout of the changes to the reporting forms, flexibility measures, and new or updated assessment methodologies. The first update will be published by March 31, 2022. Until that time, REs should continue to refer to the current assessment manual, as well as FINTRAC's guidance publications.

FINTRAC is committed to communicating and consulting with businesses as it develops these updates.

When will FINTRAC update its Administrative Monetary Penalties harm done assessment guides?

FINTRAC will update its Harm done assessment guides in accordance with the amended Regulations by spring 2022.

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