FINTRAC guidance related to the Ministerial Directive on Financial Transactions Associated with the Islamic Republic of Iran issued on July 25, 2020

This guidance is related to the Ministerial Directive (MD) issued by the Minister of Finance that was published in the Canada Gazette and came into force on July 25, 2020.

This guidance will answer the following questions:

  1. Why was this MD issued?
  2. When does this MD come into force and who does it apply to?
  3. What are the requirements of this MD?
  4. What records must you keep under this MD and what is the retention period?
  5. How do you report the transactions captured under this MD?

1) Why was this MD issued?

The Financial Action Task Force (FATF) issued a statement in February 2020 which expressed its particular and exceptional concerns regarding Iran's failure to address strategic 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. The FATF called on its members to apply effective counter-measures to protect their financial sectors from such risks. As such, Canada's Finance Minister, under subsection 11.42(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) issued this MD to ensure the safety and integrity of Canada's financial system.

2) When does this MD come into force and who does it apply to?

This MD comes into effect on July 25, 2020, and is applicable to every person or entity referred to in paragraphs 5(a), (b) and (h) of the PCMLTFA. The specific persons and entities that are to take action in response to this MD are banks, credit unions, financial services cooperatives, caisses populaires, authorized foreign banks and money services businesses (MSBs).

3) What are the requirements of this MD?

Every bank, credit union, financial services cooperative, caisse populaire, authorized foreign bank and MSB mustFootnote 1:

a) Determining that a transaction originated from or is bound for Iran

When determining whether a transaction originates from or is bound for Iran, you need to look at a variety of elements because the circumstances of each transaction are different. Transactions originating from or bound for Iran may include, but are not limited to:

For further clarity, this MD does not apply to transactions where there is no suspicion or explicit connection with Iran and there is no evidence of the transaction originating from or being bound for Iran. For example:

** Note: When you have determined that a transaction originated from or was bound for Iran, you must apply the measures outlined in the MD.

b) Verifying the identity of every client who requests or benefits from a transaction originating from or bound for Iran

Under this MD, you are required to take enhanced identification measures that go beyond the identification triggers and requirements prescribed under the PCMLTFR. Transactions that fall below the reporting threshold amounts (outlined in the PCMLTFR) typically do not require that you verify the identity of clients. However, under this MD, you must:

c) Additional measures required

You must treat all transactions originating from or bound for Iran as high risk. In addition to verifying the identity of any client requesting or benefiting from such a transaction, under this MD, you must:

4) What records must you keep under this MD and what is the retention period?

a. Records of electronic funds transfers– of any amount

For an EFT of any amount originating from or bound for Iran, you must keep:

b. Records of receipt of Cash – of any amount

You must keep a record of every cash transaction (any amount) that you receive that reflects a connection to Iran (such as cash received for the issuance of negotiable instruments or foreign exchange using Iranian rial). You must record:

c. Records of redeeming other negotiable instruments and records for issuing or redeeming transactions – of any amount:

Transactions originating from or bound for Iran also include the redemption of other negotiable instruments (for example, bank drafts, money orders, traveller's cheques, etc.) in any amount. These too will have to reflect a connection with Iran, such as the use of Iranian rial in the transaction, for the MD to be applicable. You must record:

d. Information on records and retention

If you are required by this MD to keep a record of information that is readily available in other records, you do not have to record the same information again. This means that if you keep the required information and can produce it during a FINTRAC examination, you do not need to create a new record to meet the obligations.

You must keep all records applicable to this MD in accordance with their associated record retention requirement, or for at least five years from the date the record was created.

5) How do you report the transactions captured under this MD?

a. Reporting an EFT in any amount to FINTRAC:

b. Reporting the receipt of any amount of cash to FINTRAC:

c. Reporting negotiable instruments and issuing or redeeming transactions or the exchange of VC for Iranian rial:

d. Reporting suspicious transactions and terrorist property:

Other

Your compliance program's policies and procedures should already include information on how your organization becomes aware of MDs issued by the Minister of Finance and information on how your organization will respond. Once an MD has been issued, you must take steps to meet its requirements.

Your policies and procedures must also fully describe how you will make the determination that a transaction originates from or is bound for Iran and what specific mitigation measures you will take upon making this determination.

Guidance on how to conduct and document your risk assessment can be found in the Risk-based approach guide. You are required to implement certain measures to mitigate the risk of transactions involving jurisdictions that are identified in MDs. Examples of these measures can be found in General information on Part 1.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act provided by the Department of Finance Canada.

During a compliance examination, FINTRAC may assess your compliance with any MD in order to verify that you have taken appropriate mitigating measures in relation to related transactions. FINTRAC may also review your overall risk assessment to verify that you have documented and assessed the risk related to your business activities and clients involving these jurisdictions. Failure to comply with the measures of an MD is a very serious offence. The existing administrative monetary penalties (AMP) regime extends to all MDs, and failure to comply with a directive could result in a penalty. Penalties applicable to the breach of a directive can be found in the Proceeds of Crime (Money Laundering) and Terrorist Financing AMP Regulations.

Date Modified: