FINTRAC's New AMP Policy: Does It Solve Issues Only To Create Others?

FINTRAC has completed a comprehensive review of its policies for issuing administrative monetary penalties (AMP) for violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and Regulations (PCMLTFA). With the updated policies in place, financial institutions, securities dealers, money services businesses and other reporting entities should expect FINTRAC to step up its enforcement of the PCMLTFA and to resume issuing AMPs. However, it remains to be seen whether the revised policies have given FINTRAC too much, or too little, discretion in calculating penalty amounts and publically naming offenders.

What you need to know

FINTRAC's review has resulted in five documents: (a) the Compliance Framework; (b) the Assessment Manual; (c) the AMP policy; (d) sample penalty calculations; and (e) a voluntary declaration of non-compliance policy. The AMP policy includes a two-step process for calculating AMP amounts for violations of the PCMLTFA when FINTRAC determines, in its discretion, to issue an AMP: First, classifying the violation and assessing the harm done. Harm is defined as the degree to which a violation interferes with achieving the objectives of the PCMLTFA or FINTRAC's ability to carry out its mandate. Second, assess the reporting entity's compliance history. Penalties for first-time violations will generally be reduced by two-thirds the base amount, second-time violations (meaning the reporting entity has previously been penalized for a violation of the same type) will generally be reduced by one-third the base amount, and penalties for third time violations will be at the full base amount. The voluntary declaration of non-compliance policy provides that where (a) the declared non-compliance issue is not a repeated instance of a previously voluntarily disclosed issue; and (b) the declaration has not been made after the reporting entity has been notified of an upcoming examination, FINTRAC will not issue an AMP. FINTRAC has also provided new guidance on when it "may" publically "name" AMP recipients. It may do so under any of the following circumstances: (a) the person or entity has committed a very serious violation; (b) the final penalty amount is equal to or greater than $100,000; or (c) the person or entity has previously been subjected to an AMP. The court decisions

The impetus for FINTRAC's policy review was the decisions of the Federal Court and the Federal Court of Appeal in Max Realty Solutions v...