Anti-cash laundering problems for cash provider enterprises (MSBs)

In our prior write-up in our series on income service firms (“MSBs”), we recognized the demands to sign-up as a federal income support enterprise for certain organizations. In this piece, we explore the compliance reporting obligations for MSBs.

Folks and firms included in MSB activities are controlled beneath Canada’s Proceeds of Criminal offense (Funds Laundering) and Terrorist Financing Act (the “PCMLTFA”) and similar laws and are subject matter to the regulatory authority of the Money Transactions and Reports Examination Centre of Canada (“FINTRAC”). The PCMLTFA and its rules have to have that MSBs have a extensive and sturdy compliance software with respect to anti-funds laundering (“AML”) procedures. An MSB’s compliance plan is guided by the tips of FINTRAC. A compliance method is essential to have the adhering to:

  1. A “Compliance Officer”, liable for implementing the system
  2. Written compliance procedures and processes that are retained up to date
  3. A chance evaluation of the organization that documents the danger of a revenue laundering offence or a terrorist activity financing offence taking place in the course business enterprise pursuits
  4. A penned compliance schooling system for the business’ personnel, brokers or mandataries, or other approved people
  5. An ongoing compliance instruction application and
  6. A program for how the compliance system will be reviewed and tested for its success, which should be reviewed and tested at minimum every single two a long time.

In addition, the polices to the PCMLTFA impose certain obligations on registered MSBs in regards to their compliance guidelines and strategies, demanding they be:

  1. Created and in a type that is obtainable to its supposed viewers
  2. Updated (to replicate adjustments in legislation or a business’ internal course of action) and
  3. If an entity, accredited by a senior officer (director, CEO, etc.).

In addition, the compliance procedures and methods should really include “know your client” needs, document trying to keep, and reporting requirements.

An MSB’s failure to comply with the PCMLTFA and connected rules threats prison and administrative financial penalties (“AMPs”) for non-compliance. A summary conviction can array from imprisonment for a term of not more than two many years a lot less a working day or a high-quality of $250,000 to $1,000,000. An indictable offence can vary from imprisonment for a term of not much more than 5 yrs or a great of $500,000 to $2,000,000. FINTRAC is the authoritative overall body that is liable for administrating AMPs and will article a detect to the public concerning particulars of the violation.

The penalty quantities are identified by looking at the adhering to standards:

  1. The function of AMPs, which is to motivate compliance, not to punish (non-punitive)
  2. The harm finished by the violation and
  3. The MSB’s record of compliance.