Guide on harm done assessment for large cash transaction reports, electronic funds transfer reports, and casino disbursement reports violations

Table of contents

  1. Introduction
  2. Violations related to the requirement to submit LCTRs, EFTRs, and CDRs
  3. Violations relating to reporting timelines for LCTRs, EFTRs and CDRs
  4. Violations related to form and manner of submitting LCTRs, EFTRs and CDRs
  5. Violation related to foreign currency conversion
  6. Violation related to verifying prescribed conditions (alternative to large cash transaction reporting)
  7. Violation related to reporting prescribed information in the case of the exception to submitting LCTRs
  8. Violation related to reporting changes to prescribed information in the case of the exception to submitting LCTRs
  9. Repeated instances of a given violation

1. Introduction

This page presents how we assess the harm done and calculate the base penalty amount applied to large cash transactions reporting, electronic funds transfers reporting, and casino disbursement reporting violations.

1.1 Purpose of this guide

This guide presents how FINTRAC approaches the harm done criterion and the base penalty amount for violations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) and its regulations. According to section 73.11 of the Act, FINTRAC must consider the harm done by a violation, that the purpose of an administrative monetary penalty (AMP) is to encourage compliance rather than to punish, and all other criteria prescribed in the regulations, including a reporting entity's (RE) history of compliance, when determining the amount of a penalty. Considerations for the non-punitive nature of an AMP and an REs' compliance history are assessed in another step in the penalty calculation and are outlined separately in FINTRAC's AMP policy.

1.2 Definition of harm

FINTRAC defines "harm" as the degree to which a violation interferes with achieving the objectives of the ActFootnote 1 or with FINTRAC's ability to carry out its mandateFootnote 2. Therefore, the consequences of non-compliance, when an AMP is imposed, are linked to its effects on Canada's efforts to combat money laundering and terrorist activity financing (ML/TF).

Compliance enforcement activities are undertaken to prevent and correct the harm that comes from non-compliance with the Act and regulations. REs' adherence to requirements such as record keeping and verifying client identity assists in the deterrence of ML/TF and supports investigations and criminal prosecutions. The requirements related to reporting ensure that FINTRAC is supplied with the high-quality, timely financial transaction reports it needs to produce the financial intelligence that helps with the investigation and prosecution of ML/TF offences.

1.3 Considering harm in AMP calculations

When determining a penalty, FINTRAC considers the harm caused, that is, the degree to which the non-compliance interferes with the purpose of the Act and/or with FINTRAC's mandate. Non-compliance and harm are measured using the standards described in this guide, which outline the benchmark amounts for the corresponding levels of harm for a specific violation. FINTRAC considers the specific circumstances of each case, including the extent of the non-compliance and mitigating factors, which may further reduce the actual amounts applied.

2. Violations related to the requirement to submit LCTRs, EFTRs, and CDRs

Large Cash Transaction Reports (LCTRs), Electronic Funds Transfers Reports (EFTRs), and Casino Disbursement Reports (CDRs) must be submitted to FINTRAC. They are critical to our ability to produce the financial intelligence that assists in the investigation and prosecution of ML/TF offences. We use these reports to create a picture of financial relations between individuals and businesses; and to identify high-risk transactions and ML/TF trends, which in turn help us identify vulnerabilities in Canada's financial system. Reports not submitted to FINTRAC, or submitted with missing, incomplete or inadequate information harm FINTRAC's ability to analyze, assess and disclose financial intelligence.

Therefore, failing to report a large cash transaction, an electronic funds transfer or a casino disbursement will directly impact FINTRAC's ability to carry out its mandate, and may interfere with the purpose of the Act as set out in subparagraph 3 (a) (iii).

2.1 Violations related to reporting prescribed transactions and information

This section outlines FINTRAC's approach to the violations related to the requirement to submit LCTRs, EFTRs and CDRs, including the harm assessment and penalty calculation.

Table 1—Violations related to reporting prescribed transactions and information
Provision of the Act Provision of the PCMLTFR Description Classification of violation
9 (1) 12 (1) (a) Failure to report the receipt of an amount in cash of $10,000 or more in the course of a single transaction, together with the prescribed information Minor $1-$1,000
9 (1) 17
9 (1) 21
9 (1) 28 (1) (a)
9 33.1
9 (1) 35
9 (1) 38
9 (1) 39.6
9 (1) 40 (1) (a)
9 (1) 47
9 (1) 12 (1) (b) Failure to report the sending out of Canada of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the prescribed information Minor $1-$1,000
9 (1) 28 (1) (b)
9 (1) 40 (1) (b)
9 (1) 12 (1) (c) Failure to report the receipt from outside Canada of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the prescribed information Minor $1-$1,000
9 (1) 28 (1) (c)
9 (1) 40 (1) (c)
9 (1) 42 (1) Failure of a casino to report the disbursement of $10,000 or more in the course of prescribed transactions, together with the prescribed information Minor $1-$1,000

2.2 Harm done in the case of violations related to reporting prescribed transactions and information

Unreported transactions have a different impact than reports with data quality issues. This section explains the harm done by failing to report prescribed transactions, namely large cash transactions, electronic funds transfers and casino disbursements as defined in the Act, and by failing to provide prescribed information in a report.

2.2.1 Unreported prescribed transactions

An RE's failure to submit a prescribed report results in a loss of intelligence for FINTRAC which may prevent it from using that information to carry out its mandate per paragraphs 40 (b) and 40 (d) of the Act. It also hinders the achievement of one of the objectives of the Act: to support the investigation and prosecution of ML and TF offences, as per paragraph 3 (a). 

2.2.2 Reports with missing, incomplete, inaccurate or insufficiently detailed information (data quality)

To meet the purpose of the Act and its mandate, FINTRAC is authorized to receive all of the information prescribed in Schedules 1, 2, 3, 5, 6 and 8 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR). We use this information to create a picture of financial relations between individuals and entities; and to identify high-risk transactions and ML/TF trends, which in turn help us identify vulnerabilities in Canada's financial system. When prescribed information is not included, complete, accurate, or sufficiently detailed, we will consider which of these purposes would be hindered and to which extent in our determination of the penalty amount. 

2.3 Penalty determination for violations related to reporting prescribed transactions and information

The Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations (AMP Regulations) allow for a penalty ranging from $1 to $1,000 for violations of the requirement to submit LCTRs, EFTRs and CDRs.

For these violations, FINTRAC has identified four levels of harm by considering their impact on its ability to assess and analyze the information in the reports in order to produce financial intelligence. Each level of harm incurs a penalty of either: $1,000, $750, $500 or $250.

The highest level of harm (Level 1) is for a violation that would have the greatest impact on our ability to assess and analyze information in order to produce financial intelligence, and incurs the maximum penalty, $1,000. The lowest of the four levels of harm (Level 4) incurs a penalty of $250.

Penalties may be reduced if there are mitigating factors. For example, an RE that has failed to report an LCTR for the receipt of cash of $10,000 or more would typically receive a penalty of $1,000 for that instance, which is Level 1 harm. However, if the disposition of that receipt of cash was to wire the funds outside of Canada and the RE did submit the required EFTR, then this could be a mitigating factor that reduces the penalty for failing to report the LCTR to an amount that is lower than the benchmark of $1,000.

All factors that may reduce a penalty will be considered, potentially lowering the penalty to the $1 minimum set out in the AMP Regulations.

The table below lists the levels of harm, the types of non-compliance and the descriptions of harm along with their corresponding penalty.

Table 2—Levels of harm and penalties for violations related to reporting prescribed transactions and information
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. $1,000
Level 2 Report submitted but information that identifies parties (individuals and entities) to the transaction is non-compliant Prevents FINTRAC from identifying all parties to a transaction $750
Level 3 Report 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 Report submitted but information that enhances the efficiency of FINTRAC's analysis is non-compliant Reduces FINTRAC's ability to analyze information and to identify high-risk transactions, ML/TF trends, and vulnerabilities in the financial system $250

When determining the level of harm and determining a penalty, FINTRAC takes the entire report into consideration. For example, if two LCTRs do not include the date of birth of the conductor of the transaction, this violation may not pose the same level of harm in different situations, as shown in the example below.

LCTR 1: does not include the conductor's date of birth, address, telephone number, and identification information for that individual. In this situation, it is impossible for FINTRAC to establish the identity of the individual with certainty for its analysis because it can only rely on the individual's name. In this case, the violation would be assessed as posing harm at the second level "Information that identifies parties (individuals and entities) to the transaction is non-compliant" (Level 2).

LCTR 2: does not include the conductor's date of birth, but provides the address, telephone number and identification information of the individual. In this case, the missing date of birth does not prevent FINTRAC from identifying the individual, but it does reduce the efficiency of our analysis because we cannot confirm the person's identity in an automated way. The violation would be assessed as posing harm at the fourth level "Information that enhances the efficiency of FINTRAC's analysis is non-compliant" (Level 4).

2.3.1 Level 1 harm: Failure to report an LCTR, EFTR, or CDR

Failing to submit a report poses significant harm because FINTRAC uses the information from the reports to produce financial intelligence. It completely prevents FINTRAC from identifying ML and TF risks, and from advancing our knowledge of ML/TF issues. Failing to submit an LCTR, EFTR, or CDR leads to the complete loss of intelligence and therefore is a violation that is assigned the highest level of harm, with a corresponding maximum penalty of $1,000 per instance.

Note: FINTRAC must have the name of at least one party to the transaction, information about at least one transaction (amount and type), and the RE's identifying information in order to be able to use a report for analysis. When this information is missing from a report, it cannot be used for analysis; therefore it has the same level of harm as the failure to report a transaction, thus incurring the maximum penalty of $1,000.

2.3.2 Level 2 harm: Information that identifies parties (individuals and entities) to the transaction is non-compliant

FINTRAC uses this information to confirm that the individuals and entities involved in a transaction are those that really should be the object of its analysis. When an individual or entity's identifying information is missing, incomplete or inaccurate, FINTRAC is unable to confirm that they are the correct parties involved. This prevents us from disclosing information that may support law enforcement investigations and prosecutions. Because missing information prevents us from completing analyses and producing financial intelligence, it poses the second-highest level of harm, and incurs the second-highest penalty, $750.

Note: This level of harm is found when at least one individual or entity has been named in the report. When no individual or entity is named in the report, the report is considered to be missing key information rendering it useless for analysis, thus qualifying as "Level 1" (Failure to report an LCTR, EFTR or CDR).

2.3.3 Level 3 harm: Information that identifies the relationships or describes the transaction/flow of funds is non-compliant

FINTRAC uses this information to understand the transactions that took place, follow the flow of funds and uncover relationships that may be important to ML/TF investigations and prosecutions. Not providing this information may prevent FINTRAC from assisting in the detection, prevention and deterrence of ML and TF because the information can uncover new leads and helps us better understand the transaction(s). While FINTRAC can use the report to identify the individuals directly involved, it would not be able to understand the transaction that took place, determine the flow of funds or whether other parties are also involved. The penalty for this type of non-compliance is set in the middle of the range at $500 to reflect its importance while recognizing it causes less harm than the two categories described above.

2.3.4 Level 4 harm: Information that enhances the efficiency of FINTRAC's analysis is non-compliant

Failing to provide complete, accurate and detailed information other than the information presented in the previous levels of harm affects FINTRAC's efficiency and effectiveness in the identification of high-risk transactions, and vulnerabilities in the financial system. For example, we can assess whether the type, frequency, quantity, and value of a client's transactions are consistent with their occupation when the fields describing the client's occupation or business type are complete, accurate and sufficiently detailed. FINTRAC's analytical system relies on information being reported in a structured manner in order to flag high-risk transactions and to identify individuals who appear in multiple reports. While the absence of this information does not entirely prevent FINTRAC from performing analysis, it does have an impact on its ability to carry out its mandate efficiently and effectively. Therefore, this type of non-compliance incurs a penalty of $250.

2.4 Non-compliance in the case of information that serves more than one purpose

Most of the information required in a report can be used for more than one of the purposes described above. For this reason, when determining the penalty for a non-compliant report that results in more than one level of harm, the penalty is determined at the amount corresponding to the highest level of harm. 

3. Violations relating to reporting timelines for LCTRs, EFTRs and CDRs

This section outlines FINTRAC's approach to reporting timeline violations for LCTRs, EFTRs and CDRs, including the harm assessment and penalty calculation.

Table 3—Violations related to reporting timelines for LCTRs, EFTRs, and CDRs
Provision of the Act Provision of the PCMLTFR Description Classification of violation
9 (1) 5 (1) Failure to report an electronic funds transfer no later than five working days after the transfer Minor
$1-$1,000
9 (1) 5 (2) Failure to report a large casino disbursement, or a transaction for which a large transaction record must be kept, within 15 days after the disbursement or transaction Minor
$1-$1,000

3.1 Harm done in the case of violations related to reporting timelines for LCTRs, EFTRs and CDRs

When a report is not submitted within the prescribed period, FINTRAC is unable to analyze, assess and disclose information in a timely manner. FINTRAC may need the information to provide intelligence to law enforcement, or to provide advice to the Minister on measures to put in place to protect Canada's financial system. In the case of terrorism financing in particular, late submissions can be detrimental to the safety of Canadians.

3.2 Penalty determination for violations related to reporting timelines for LCTRs, EFTRs and CDRs

The AMP Regulations allow for a penalty ranging from $1 to $1,000 for violations of the requirement to submit LCTRs, EFTRs and CDRs within the prescribed period. The range is divided into four even intervals to create a scale based on levels of harm.

The maximum penalty of $1,000 per report is assigned when an RE submits late reports after it has received notification that it will be examined by FINTRAC. This situation poses the highest level of risk as it is likely that procedures were not in place to ensure the timely reporting of transactions.

The longer the delay, the more it is possible that FINTRAC may have needed the information contained in the late reports to perform its analysis, which represents greater potential harm. Therefore, penalties of $250, $500 and $750 are imposed based on the number of days a report is late. Penalties may be reduced if there are mitigating factors, while remaining sufficient to encourage a change in compliance behaviour.

Table 4—Levels of harm and penalties for violations related to reporting timelines for LCTRs, EFTRs and CDRs
Level of harm Number of days late Penalty (not considering mitigating factors)
Level 1 After notification of a FINTRAC examination $1000
Level 2 30 or more days late $750
Level 3 15 - 29 days late $500
Level 4 1 - 14 days late $250

4. Violations related to form and manner of submitting LCTRs, EFTRs and CDRs

This section outlines FINTRAC's approach to violations related to submitting LCTRs, EFTRs and CDRs in the form and manner specified including the harm assessment and penalty calculation.

Table 5—Violations related to form and manner of submitting LCTRs, EFTRs and CDRs
Provision of the Act Provision of the PCMLTFR Description Classification of violation
9 (1) 4 (1) Failure to send a report electronically, if the sender has the technical capabilities, in accordance with the guidelines prepared by the Centre Minor
$1-$1,000
9 (1) 4 (2) Failure to send a report in paper format, if the sender does not have the technical capabilities to send electronically, in accordance with guidelines prepared by the Centre Minor
$1-$1,000

4.1 Harm done in the case of violations related to form and manner of submitting LCTRs, EFTRs and CDRs

FINTRAC's guidelines specify how to submit reports so that our systems can validate whether they are complete, identity individuals and entities for analysis, and flag high-risk transactions. Failing to submit reports through the specified means ("in accordance with guidelines prepared by the Centre") may prevent us from efficiently analyzing information and may even render the information unusable for analysis.

4.2 Penalty determination for violations related to form and manner of submitting LCTRs, EFTRs and CDRs

The levels of harm and corresponding penalties are the same as for non-compliance related to reporting prescribed information, as the harm done on FINTRAC's ability to carry out its mandate may also be the same. For example, should a report be submitted in paper format containing illegible information in certain fields, then FINTRAC may be unable to use the information. Refer to Table 2 – Levels of harm and penalties related to reporting prescribed transactions and information violations for more information.

5. Violation related to foreign currency conversion

This section outlines FINTRAC's approach to a foreign currency conversion violation, including the harm assessment and penalty calculation.

Table 6—Violation related to foreign currency conversion
Provision of the Act Provision of the PCMLTFR Description Classification of violation
9 (1) 2 Failure to convert foreign currency transactions into Canadian dollars using the prescribed rate Minor
$1-$1,000

5.1 Harm done in the case of a violation related to foreign currency conversion

Reporting entities must use the official exchange rate provided by the Bank of Canada that is in effect at the time of the transaction. If the Bank of Canada does not provide an exchange rate for a given currency, the RE must use the conversion rate it uses for that currency in the normal course of business to determine whether a transaction meets the reporting threshold of $10,000 or more Canadian dollars. By not using the prescribed conversion rates to determine whether a transaction meets the reporting threshold, reporting entities risk being found to have failed to submit a required report. 

5.2 Penalty determination for a violation related to foreign currency conversion

The penalty for a conversion rate violation that led to the failure to submit a prescribed report is the same as the penalty for failing to submit a report, which is $1,000. 

6. Violation related to verifying prescribed conditions (alternative to large cash transaction reporting)

This section outlines FINTRAC's approach to the violation related to verifying that prescribed conditions are met, in the case of alternative to large cash transaction reporting, including the harm assessment and the penalty calculation.

Table 7—Violation related to verifying prescribed conditions (alternative to large cash transaction reporting)
Provision of the Act Provision of the PCMLTFR Description Classification of violation
9 (1) 50 (4) (a) Failure of a specified financial entity to verify at least once every 12 months that prescribed conditions are still met in respect of each client Minor
$1-$1,000

6.1 Harm done in the case of a violation related to verifying prescribed conditions

The PCMLTFR allow an exception to submitting LCTRs when financial entities deal with specified clients that make regular large cash deposits and prescribed conditions are met. The conditions aim to ensure that the exception is only applied to transactions that pose a low risk of ML/TF. Financial entities are required to verify that the client is a prescribed business, to take reasonable measures to ensure that cash deposits are normal business transactions, and to ensure that all the required information on these businesses and their cash deposits are provided to FINTRAC.

If a financial entity does not verify that these conditions are met every 12 months, its client due diligence processes may be lacking. Transactions that may no longer qualify for the exception may go unreported, resulting in FINTRAC losing financial intelligence.

6.2 Penalty determination for a violation related to verifying prescribed conditions

When an RE fails to verify every 12 months that prescribed conditions are met, a penalty of $1,000 will be applied for each unverified client. There may be additional penalties related to the failure to submit LCTRs to FINTRAC.

7. Violation related to reporting prescribed information in the case of the exception to submitting LCTRs

This section outlines FINTRAC's approach to the violations related to reporting prescribed information in the case of the exception to submitting LCTRs, including the harm assessment and penalty calculation.

Table 8—Violation related to reporting prescribed information in the case of the exception to submitting LCTRs
Provision of the Act Provision of the PCMLTFR Description Classification of violation
9 (1) 50 (4) (b) Failure of a specified financial entity to report prescribed information at least once every 12 months Minor
$1-$1,000

7.1 Harm done assessment and penalty determination for a violation related to reporting prescribed information in the case of the exception to submitting LCTRs

FINTRAC uses the prescribed information to verify that the criteria set out for the exception is still being met, and to accurately assign a risk rating to reporting entities for the purpose of our examination planning. FINTRAC must be aware of all the clients falling under the exception to ensure that low reporting rates are not mistaken for non-compliance. The failure to report this information at least once every 12 months prevents FINTRAC from using it for those purposes. A $1,000 penalty will be applied in each instance when the information is not reported.

8. Violation related to reporting changes to prescribed information in the case of the exception to submitting LCTRs

This section outlines FINTRAC's approach to the violations related to reporting changes to prescribed information in the case of the exception to submitting LCTRs, including the harm assessment and penalty calculation.

Table 9—Violation related to reporting changes to prescribed information in the case of the exception to reporting LCTRs
Provision of the Act Provision of the PCMLTFR Description Classification of violation
9 (1) 50 (3) Failure of a specified financial entity to report changes in prescribed information within 15 days of the change Minor
$1-$1,000

8.1 Harm done assessment and penalty determination for a violation related to reporting changes to prescribed information in the case of the exception to submitting LCTRs

When information is not submitted within the prescribed period, FINTRAC is unable to assess that information in a timely manner. We cannot ensure that clients still meet the criteria for the exception and include that information in our risk assessment for examination planning. Unreported changes in client information are assessed on a per client basis, and penalties are incurred according to the length of the delay, according to the scale below. The penalty increases according to the number of days the information is late, to reflect the increased risk posed by FINTRAC not having the information. The prescribed penalty range of $1 to $1,000 is divided into four even intervals, based on the levels of harm. The lowest penalty is $250. Penalty amounts may be reduced if there are mitigating factors, but the amount must be enough to encourage a change in compliance behaviour.

Table 10—Levels of harm and penalties for a violation related to reporting changes to prescribed information in the case of the exception to submitting LCTRs
Level of harm Number of days late Penalty (not considering mitigating factors)
Level 1 120 days or more $1000
Level 2 30 – 119 days $750
Level 3 15 - 29 days $500
Level 4 1 - 14 days $250

9. Repeated instances of a given violation

When a particular violation occurs multiple times, FINTRAC will consider its underlying cause, its type and other relevant facts to assess whether the level of harm should be reduced for the subsequent instances of that violation. For example, should repeated instances of a given violation affect only the efficiency of FINTRAC's analysis, it may be appropriate to assess its recurring instances at the penalty of $250 each (Level 4 harm), regardless of the level of harm of the first occurrence.

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