Penalties calculation examples

Failing to report a large cash transaction, an electronic funds transfer, or a casino disbursement are minor violations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Administration Monetary Penalties Regulations (AMP Regulations). In assessing the harm resulting from these violations, FINTRAC applies the following criteria:

Table 1: Levels of harm and penalties related to reporting prescribed transactions and information violations
Level of harm Type of non-compliance Description of harm Penalty (not considering mitigating factors)
Level 1 Failure to report an LCTR, EFTR or CDR (unreported transactions) Complete loss of financial intelligence $1000
Level 2 LCTR, EFTR or CDR is submitted but information that identifies individuals and entities to the transaction is non-compliant Prevents FINTRAC from identifying all parties to a transaction $750
Level 3 LCTR, EFTR or CDR is submitted but information that identifies relationships or describes transactions/flow of funds is non-compliant Prevents FINTRAC from identifying relationships or from following the flow of funds $500
Level 4 LCTR, EFTR or CDR is submitted but information that enhances the efficiency of FINTRAC's analysis is non-compliant Reduces FINTRAC's ability to analyze information in a timely manner, identify high risk transactions, ML/TF trends, and vulnerabilities in the financial system $250

Scenario 1: Unreported large cash transactions

An examination revealed that an RE did not report a cash transaction of $12,000 and another cash transaction of $10,000.

As outlined in the table above (Table 1), this type of non-compliance constitutes "Level 1" harm and incurs a penalty of $1,000 per instance, which is the prescribed maximum amount. Level 1 is the highest level of harm because failing to submit an LCTR to FINTRAC deprives it from information that would have been available for its analysis and therefore, constitutes a complete loss of financial intelligence.

In Scenario 1, there were two instances of large cash transactions that were not reported to FINTRAC and there were no mitigating factors to consider. It is the second time that FINTRAC will issue an AMP to this RE for unreported large cash transactions therefore; a one-third reduction applies which means paying 66% of the amount. The penalty is calculated as follows:

Table 2: Example penalty calculation for unreported large cash transactions
Classification of the violation Maximum prescribed penalty per instance Description of the violation Level of harm Description of harm Penalty based on harm, per instance Number of instances Subtotal (penalty x instances) Adjustment for CH and NP Description of adjustment Subtotal after adjustment
Minor $1000 Unreported transactions Level 1 Loss of intelligence $1,000 2 $2,000 66% Second time violation $1,320
Total penalty amount $1,320

Legend:

  • CH = compliance history
  • NP = non-punitive

Scenario 2: Missing, incomplete or inadequate information in an LCTR

An examination revealed that three LCTRs submitted to FINTRAC had non-compliant information in Part D (information on the person conducting the transaction). Specifically, the conductor's given name is incomplete in all three reports.

Report 1:

Part D:
Conductor's given name:             J
Conductor's surname:                Smith
Conductor's date of birth:          -
Conductor's address:                -
Conductor's phone:                  -
      

Only the first initial of the conductor's given name was reported. Since no other information about the person conducting the transaction was provided, FINTRAC is unable to determine whether "J Smith" is in fact John Smith. This type of non-compliance prevents FINTRAC from identifying all parties to the large cash transaction, which corresponds to "Level 2" harm (Table 1). The penalty assigned to this violation is $750 per instance, before considering relevant mitigating factors.

Report 2:

 
Part D:
Conductor's given  name:            J
Conductor's surname:                Smith
Conductor's date of birth:          1981-10-23
Conductor's address:                111  Main St, Ottawa, ON, K1K 1K1
Conductor's phone:                  613-555-5555
      

In this report, only the first initial of the conductor's given name was provided. However, the conductor's date of birth, complete address, and telephone number were also reported, mitigating the harm done. While the non-compliance with reporting the given name of the person conducting the transaction is the same as in Report 1, the additional information provided allows FINTRAC to conduct its analysis to determine that a "J Smith", born on October 23, 1981, living at 111 Main St, Ottawa, ON, with telephone number 613-555-5555, conducted the transaction. However, the efficiency of FINTRAC's intelligence mandate is diminished due to the additional time required to conduct the analysis, thus causing "Level 4" harm. Consequently, the penalty assigned to this particular instance, before considering relevant mitigating factors, is $250.

Report 3:

 
Part D:
Conductor's given  name:            J
Conductor's surname:                Smith
Conductor's date of birth:          -
Conductor's address:                -
Conductor's phone:                  -
On behalf of:                       John  Smith's Business
                                    111  Main Street, Ottawa, ON, K1K 1K1
                                    613-555-5555

In this report, only the first initial of the conductor's given name was provided. However, third party information is provided which indicates that the transaction is being conducted on behalf of John Smith's Business and includes its complete address and telephone number, which mitigates the harm done. However, FINTRAC can neither identify the relationship between "J Smith" and "John Smith's Business", nor can it know whether "J Smith" is in fact John Smith at the address and telephone number provided. This corresponds to "Level 3" harm, which incurs a penalty of $500 before considering relevant mitigating factors.

In Scenario 2, there were three LCTRs with data quality issues and mitigating factors to consider. It is the third time that FINTRAC will issue an AMP to this RE for LCTR data quality issues therefore; no further reductions apply. The penalty is calculated as follows:

Table 3: Example penalty calculation for LCTRs with non-compliance in the information provided
Classification of the violation Maximum penalty per instance Description of the violation Level of harm Description of harm Penalty per instance Number of instances Total penalty (penalty x instances) CH and NP adjustment Adjustment description Subtotal
Minor $1000 Data quality Level 2 Prevents identification of parties to transactions $750 1 $750 n/a Third-time violation $750
Minor $1000 Data quality Level 4 Reduces efficiency of analysis $250 1 $250 n/a Third-time violation $250
Minor $1000 Data quality Level 3 Prevents identification of relationships $500 1 $500 n/a Third-time violation $500
Total penalty amount $1,500

Legend:

  • CH = compliance history
  • NP = non-punitive
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