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Canada to create AML task force to tackle key laundering portals, boost FIU, investigator budgets

Saturday, March 23, 2019   (0 Comments)
Posted by: Brian Monroe
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By Brian Monroe
March 23, 2019

Canada in its latest budget is proposing a special ops-style financial crime compliance and investigations task force to counter a growing array of money laundering loopholes allowing criminals to cleanse billions of dollars through real estate, casinos, international trade and more in the Great White North – a process watchdog groups call “Snow Washing.”

The new tactic by the federal government is just one of many ways Canada is attempting to improve its regulatory, compliance and investigative track record for countering large scale, complex and international money laundering operations.

The country, as is many of its ally regimes, is beset by criminal groups, corrupt oligarchs, cyber hackers and others.

In recent years, Canada has been accused of becoming a destination for billions of dollars in questionable funds from China, Russia and other risky regions, so much so, that one group even coined a money laundering tactic through casinos called the “Vancouver Method.”

To outside watchdog groups, these improvements to Canada’s anti-money laundering compliance (AML) and investigations regimes are desperately needed.

There appears to be a consensus at the federal level  that the only way to improve results from the various players in the counter-financial crime game – banks, regulators, law enforcement and watchdog groups – is to bolster resources, communication, coordination, oversight and AML exam and penalty powers, as one of the changes is making the names and failures of fined firms public.

One of the main ways Canada will counter this illicit rising tide will be doling out more dollars to counter-crime agencies and restructuring intelligence, investigative and oversight agencies to boost cooperation, coordination and public and private sector information sharing.

“Money laundering, terrorist financing and tax evasion are a threat to Canadians’ safety, security and quality of life, and harm the integrity and stability of the financial sector and the broader economy,” according to budget report.

To read the full Canadian 2019 budget report, click here.

Canada states that the country overall “takes a comprehensive and coordinated approach to combatting money laundering, terrorist financing and organized crime,” according to the budget document.

However, criminal groups seeking to launder and cleanse the proceeds of crime – or increase, move and operationalize funds for the purposes of terrorism – are “finding new ways to exploit the complex global financial system and evade the considerable protections already in place in Canada,” including through opaque corporations, real estate and trade.

To counter this, Canada has a multi-tiered plan, with a first step shoring up the budgetary foundation of investigative agencies.  

 “A first phase of concerted action will give police the resources they need to tackle financial crime and address gaps in information sharing,” according to the budget document. Canada will also “dedicate new resources to identify and address complex money laundering operations in Canada.” 

The Government proposes to:

·       Investigative resources: Strengthen federal policing operational and investigative capacity by providing up to $68.9 million over five years, beginning in 2019–20, and $20.0 million per year ongoing, to the Royal Canadian Mounted Police.

·       AML special ops: Create the Anti-Money Laundering Action, Coordination and Enforcement (ACE) Team, which will bring together dedicated experts from across intelligence and law enforcement agencies to strengthen inter-agency coordination and cooperation and identify and address significant money laundering and financial crime threats. Budget 2019 proposes to invest $24 million over five years, beginning in 2019–20, for Public Safety Canada to implement the ACE Team as a pilot initiative.

·       Team TBML: Create a multi-disciplinary Trade Fraud and Trade-Based Money Laundering Centre of Expertise, which will complement the efforts of the ACE Team.

This initiative will strengthen capacity at the Canada Border Services Agency and the Financial Transactions and Reports Analysis Centre of Canada (Fintrac) to target these growing threats. Budget 2019 proposes to invest $28.6 million over four years, beginning in 2020–21, with $10.5 million per year ongoing to create a multi-disciplinary Trade Fraud and Trade-Based Money Laundering Centre of Expertise.

Fintrac focus: improving public information sharing, private sector oversight

Canada is also working to strengthen the country’s financial intelligence unit, Fintrac, through a bevy of avenues, including increased scrutiny of higher risk areas, such as virtual currencies, foreign money remitters and additional oversight of areas identified as major money laundering portals, such as casinos, real estate, trade and other areas.

Here are some of the key incoming changes:  

Fintrac flexing: Strengthen operational capacity at Fintrac, Canada’s AML/ATF regulator and financial intelligence unit, to:

           Virtual value: Improve oversight of modern financial practices related to virtual currencies, foreign money service businesses, pre-paid products and customer identification.

           Public-private partners: Expand public-private partnership projects to improve the overall efficiency and effectiveness of the AML/ATF Regime.

           AC/BC (anti-crime in British Columbia): Increase outreach and examinations in the real estate and casino sectors with a focus on the province of British Columbia. Budget 2019 proposes to invest $16.9 million over five years in Fintrac, beginning in 2019–20, and $1.9 million per year ongoing to advance these objectives.

Stronger legislation: Budget 2019 also proposes complementary legislative measures to strengthen Canada’s legal framework and support operational capacity.

With these measures, Canada will adopt international best practices, provide new tools for investigators and prosecutors, and support regulatory compliance by the private sector.

Budget 2019 proposes to make legislative amendments to:

           Professional launderers: Add an alternative requirement of recklessness to the offense of money laundering in the Criminal Code. This would criminalize the activity of moving money on behalf of another person or organization while being aware that there is a risk that this activity could be money laundering and continuing with that activity in spite of the risk. It would also provide law enforcement with an important, practical tool in the fight against professional money launderers in Canada.

           FIU funding bump: Add Revenu Québec and the Competition Bureau as disclosure recipients of Fintrac financial intelligence by amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), and provide $2.4 million over five years, beginning in 2019–20, and $0.5 million per year ongoing for Fintrac to develop additional expertise and capacity.

           Public AML penalties I: Modify the timing and the discretion of the Director of Fintrac to make public certain information related to an administrative monetary penalty, by amending the PCMLTFA.

           Public AML penalties II: Exclude the identity of a reporting entity, the nature of the violations and the amount of the penalty imposed from the scope of any confidentiality order that a court may issue in relation of the administrative monetary penalty, by amending the PCMLTFA.

New AML sheriff in town?

But these positive changes are only a piece of the puzzle and serve to re-solidify the foundation for a country attempting to better identify and crush longstanding criminal bastions and the professional mega launderers and gaps allowing illicit funds to get into the international financial system and find safe haven in Canada, conduits such as the use of anonymous shell companies.

For many institutions subject to sharpened AML rules, and those about to be added to the list, it is likely going to start feeling like there is a new sheriff in town.

Fintrac in the coming months is likely going to be more aggressive and through in reviewing financial crime compliance programs and will be more willing to use its increased authority to levy more and larger penalties for failures now that it has the broad support of government. 

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