New FINTRAC Compliance Guidance

On February 7, 2019, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) issued the following documents relating to its approach to compliance:

FINTRAC's Compliance Framework - This is a chart summarizing FINTRAC's compliance framework New FINTRAC Assessment Manual - This is a relatively detailed manual setting out the approach and methods FINTRAC uses in conducting examinations Revised Administrative Monetary Penalties (AMPs) policy Sample penalty calculation Notice on Voluntary Self-Declaration of Non-Compliance These documents are intended to increase transparency regarding FINTRAC's compliance regime, particularly in relation to AMPs, and provide helpful information and guidance to reporting entities. Of particular note are the revised Administrative Monetary Penalties (AMPs) policy (the AMPs Policy) and the notice on Voluntary Self-Declaration of Non-Compliance, each of which is discussed below.

Revised AMPs Policy

The revised AMPs Policy follows a comprehensive review of FINTRAC's administrative monetary penalties program. This review was aimed at addressing decisions of the Federal Courts in 2016, such as the decisions of the Federal Court and the Federal Court of Appeal in the case of Kabul Farms Inc. v. Her Majesty the Queen (Kabul Farms).

Kabul Farms involved an appeal under section 73.21 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) of a decision made by the Director of FINTRAC to impose $6,000 in administrative penalties on Kabul Farms Inc. for violations of the Act.1 One of the issues to be decided was whether the administrative penalties imposed were reasonable.2 The Federal Court held that they were not, and that it was "impossible to assess whether an intelligible, transparent and justifiable decision-making process preceded the imposition of the penalties".3

The Crown appealed the decision of the Federal Court, arguing that the Director's reasons were adequate and that therefore the administrative penalties imposed were reasonable.4 On May 5, 2016, the Federal Court of Appeal delivered its judgment, ultimately reaching the same conclusion as the Federal Court that the Director's assessment of penalties was unreasonable.5 In its judgment, the Federal Court of Appeal stated that it must be satisfied that the sorts of figures chosen by the Director are underpinned or justified by some reasoning or evidence in the record, and that in this case it was not so satisfied.6...