What do you need to prepare for your next FINTRAC audit?

The world of foreign exchange is a competitive one right? And with that, comes regulations, rules and audits to ensure that any Money Service Business (MSB) is complying to the new government Anti-Money Laundering AML regulations.  “Compliance” is a term used to encompass all systematic methodologies used to conform with these regulations.

What is the definition of a Money Service Business?

Money Service Businesses (MSBs) are businesses offering check cashing, money orders, travellers checks, money transfer and remittance services, currency dealing or exchange, and pre-paid access (formerly stored value) products. In Canada, the regulatory body is called FINTRAC, which stands for Financial Transactions and Reports Analysis Centre of Canada.

It is therefore more important than ever that your financial institution has a robust and comprehensive AML audit process to measure and govern your AML program’s compliance with applicable AML and BSA laws and regulations.

FINTRAC AuditHow does the AML audit differ from regular audits?

Auditing is a normal process completed by all financial institutions in some capacity. It can be done by internal staff and self-governing third parties, and typically it is approached from a financial viewpoint.

Distinct from the usual financial audit, which concentrates more on the number of reconciliations and number crunching, AML audits look at program compliance and the operative, timely completion of daily tasks.

AML audits need to identify shortages, breaches, and weaknesses that may exist in the content, controls, and operations of the AML program. In this context, content is defined as having a written policy, procedures, training, monitoring, and reporting.

A consequence of ineffective auditing may lead to potential AML violations, such as failing to report suspicious activity or collecting the proper customer identification documents. An AML enforcement action by a regulator can cost a financial institution a fortune – both in standings of reputational damage and monetary penalties.

So how can you ensure you pass your AML audit with flying colours?

Compliance RegulationsAML exams can be nerve-wracking. You’re working around the clock to ensure that your Money Service Business is doing an outstanding job of catching suspicious activity at your institution. However, when the audit rolls around, you are still nervous because it’s hard to know exactly what the regulators are expecting.

Fortunately, we are here to help. Use these tips to help prepare for your next AML audit.

If you can get these basics in place, you will be well on your way to passing your AML audit with flying colours.

For your next AML Compliance audit make sure you have the following documents in order:

  • Your comprehensive risk assessment document will be required in the audit
  • Method of risk assessments, especially how to determine high risk customers, PEPs and MSBs
  • Solutions for generated audit reports
  • Proof of AML training for you and your staff – a training log book should be sufficient
  • Written policies and procedures, which includes the compliance manual (Compliance Regiment)
  • FINTRAC outline that corporate customer’s documents should be fully complete, including their registration and shareholder structure.
  • KYC due diligence – so all customer information should be entered electronically into your record-keeping system, including their occupation, date of birth, address etc.
  • Prepare the selected queries as requested in the auditor’s letter well in advance
  • Ask all your staff members to review their documents and materials and prepare them for interviews
  • Note the methods of determining high risk customers
  • Proof of Enhanced Customer Due Diligence (ECDD, or EDD) for high risk transactions and customers. The EDD include such Proof of Address, Source of Funds, Purpose of Transaction, Third party determination, PEP determination.
  • Proof that your software checks the name of your regular customers against the sanction lists. You can obtain this proof by asking your software provider.
  • Have your F2R reports available on request and ensure all confirmation numbers have been entered into your electronic system

For further help and advice on your AML audit, contact us for a chat.


Saima Omar


Opening remarks by Director Gérald Cossette Financial Transactions and Reports Analysis Centre of Canada to ACAMS Montréal Chapter

Montréal, February 11, 2014

Good morning ladies and gentlemen.

I would first like to thank Mr. Jean-François Lefebvre for the opportunity to speak to you today. I would also like to congratulate your president, Mr. Sylvain Perrault, and the entire management team on the opening of the first francophone ACAMS chapter in North America.

ACAMS brings together compliance specialists from various business sectors and provides them with a forum for sharing information and best practices. This dialogue and these interactions are essential because the challenges of combating money laundering and terrorist financing are complex and constantly changing. Moreover, the fight against money laundering and terrorist financing constitutes a relatively new and developing field of expertise as we all observe and try to better understand the techniques and methods used by criminals and terrorists to achieve their goals.

Your vigilance and knowledge of the risks associated with your own activities and with the overall financial system’s operations are Canada’s and Quebec’s best defence against those who attempt to use legitimate channels to conceal the proceeds of their illegal activities.

During my visit to Le Cercle de la finance internationale de Montréal two months ago, I discussed the very real threat posed by organized crime and money laundering.

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Terrorist financing laws can affect us all

OTTAWA — One of the main objectives for most criminal organizations is the accumulation of wealth. Such is the case with drug cartels, international fraud rings and foreign corruption schemes. Terrorist groups, however, sit in stark contrast to conventional criminal organizations — they are not motivated by financial gain. Their mission, in most cases, is to advance an extremist ideological agenda by committing sudden and deadly acts of violence that are meant to strike terror in the hearts and minds of innocent people.

This Right to Know column continues the four-part series on anti-terrorism and national security law, and examines measures designed to incapacitate terrorist financing. Although Canada’s terrorist financing laws are relatively unknown to the general public, they have in fact altered the way in which many businesses and financial institutions operate.

After 9/11, there was a renewed and intensified interest in the underpinnings of terrorist financing. Several governments around the world, including our own, signaled that part of the war on terror would be waged on a “financial front.” Large-scale acts of terrorism require extensive monetary backing and a financial framework within which to transfer funds earmarked for such activities. Consequently, one of the purposes of Canada’s terrorist financing law is to track and monitor the transfer of suspicious funds within Canada and abroad.

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Canada announces Amendments to Special Economic Measures (Iran) Regulations

Taken from http://www.fintrac-canafe.gc.ca/

On May 29, 2013, Canada imposed further sanctions against Iran, enacting the Regulations Amending the Special Economic Measures (Iran) Regulations under the Special Economic Measures Act (SEMA).

The announced measures expand the sanctions that were previously in force against Iran, including the provision of financial services and transactions destined to or from Iran. The measures also prohibit imports from Iran and exports to Iran, and any investment in an entity in Iran. The new measures add 82 newly designated entities and 30 newly designated persons to the lists of designated entities and individuals subject to an assets freeze and dealings prohibition.

An exemption to most of the prohibitions has been introduced with respect to both communications related goods and software (which is aimed at increasing the availability of consumer communication technologies that contribute to Internet freedom), and goods used to purify water for civilian and public health purposes. Existing exemptions for activities that have as their purpose the safeguarding of human life, disaster relief, or the providing of medicine are maintained, and activities that have as their purpose the provision of medical supplies have been added to the exemptions.

The Department of Foreign Affairs and International Trade is responsible for SEMA and the associated regulations. For more information concerning these new restrictions, consult the website of Foreign Affairs and International Trade Canada:


FINTRAC encourages all reporting entities to be aware of the obligations on all persons in Canada and any Canadians outside of Canada under the new sanctions, particularly in respect of dealings with designated entities and persons and the prohibition on the provision or acquisition of financial services to or from Iran.

The Office of the Superintendent of Financial Institutions (OSFI) has issued a Notice to all federally regulated financial institutions to be aware of the Special Economic Measures (Iran) Regulations and to take a number of actions in relation to them.

For a copy of the Notice, visit:

Recent statutory and case law developments in anti-money laundering compliance

According to the Government of Canada, the new Regulations are intended to clarify existing ambiguities in the governing anti-money Money launderinglaundering legislation, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “Act”), and are not intended to introduce any new administrative burden on reporting entities.  In general, the substance of the new Regulations focus on the risk-based approach (“RBA”) underlying the FATF Recommendations.  The new Regulations implement the following changes to Canada’s AML regime:

The full article by Tyler Hodgson at Borden Ladner Gervais LLP  can be fund at Lexology.

Keynote address by Director Gérald Cossette Financial Transactions and Reports Analysis Centre of Canada to the Canadian Institute’s Annual Anti-Money Laundering Forum


Good morning. I would like to begin by thanking the Canadian Institute for the invitation to speak to you today. I know the important role this conference plays in the anti-money laundering community and I am pleased to be here.

We all have an important stake in Canada’s anti-money laundering and anti-terrorist financing efforts. For most of you, it is the focus of your daily work, as it is mine. As government officials, compliance anti-money laundering officers, lawyers, regulators or supervisors, we have a shared responsibility when it comes to the effectiveness of the larger regime in place to protect Canada and Canadians.

In my first six months as Director of FINTRAC, I’ve had the opportunity to meet with a number of businesses and I have come to appreciate the efforts that are being made to file reports and to meet the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. This participation is the sine qua non of the whole regime.

It starts with you and the efforts you make to identify risks, train staff, keep records, identify clients and file high-quality transaction reports.

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KYC: Know Your Customer

KYC (Know Your Customer) compliance is a mandate that the world demands from financial institutions worldwide. KYC compliance is presented on the risk mitigation platform.

Though KYC had been introduced to many countries’ financial institutions, it was taken as best practise and not mandated until after the 9/11. It was then that governing bodies felt that it was best to enforce KYC to meet the increased risk associated with ongoing national security threats. Along with the increased security risks, corporate scandals were reaching new heights and it was clear that the role played by laundered monies were becoming more influential in local and global crime and terrorism. The need to discourage attempts at exploitations of worldwide financial services and systems became an urgent matter that needed immediate attention.

Many believe that KYC compliance originated with the USA Patriot Act, however, many financial services worldwide were already taking steps to implement “know your customer” compliance mandates. Most financial services felt the need  for due diligence and customer identifications checks were necessary  to mitigate operational risks and frauds, while ensuring they had consistent levels of service provision. The USA Patriot Act was simply an affirmation and extension of what was already in existence. The anti-terror laws developed helped to create the Anti-Money Laundering (AML) Act, which is now compulsory for all service providers and financial institutions.

Regulators in several countries hold financial institutions and money service businesses accountable to make sure that prospective account holders are identified and KYC compliance is upheld. Any accounts that are deemed suspicious must be sent to passportsRegulators, so that a more thorough and in depth KYC compliance can be conducted. All  KYC compliance documentation must be stored as evidence that due diligence was carried out by the firm.

Financial institutions and Money Service Businesses are advised to adopt a highly structured risk intelligence reporting system to meet regulatory requirements and KYC compliance. The choice of the system depends on the financial institution, however the documents required from applicants are very much the same.  Clients should be required to submit the following documents to maintain KYC compliance:

  • Identification documents,
  • banking history or statements from your bank or your guarantor,
  • letter of introduction,
  • evidence of income and
  • evidence of residence.

Financial institutions must verify the originality of these documents and ensure that the information provided is accurate and current.

KYC compliance is 100% necessary for all financial institutions and money service businesses to meet regulatory expectations and laws. If you need more information on the AML and compliance laws and regulations, do not hesitate to contact your local authorities who will be more than willing to provide you with all the information you need.



Your Money Services Business in Canada: What you need to know

This information is for money services businesses in Canada. It explains their legal obligations under Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

You are a money services business (MSB) if your business in Canada offers any of the following services to the public:

  • Foreign exchange dealing – conducting transactions where one type of money or cover-couverture-Lgcurrency (like US dollars, Canadian dollars, Euros and so on) is exchanged for another.
  • Money transfer service – transferring funds from one individual or entity to another using an electronic funds transfer network or any other transfer method such as hawala, hundi, fei ch’ien, and chiti.
  • Cashing or selling money orders, traveller’s cheques or anything similar – this does not include cashing cheques made out to a particular individual or entity.

To read more : Financial Transactions and Reports Analysis Centre of Canada


Why MSB’s are Going Out of Business

In Canada and around the world, a little-considered industry is dying a slow death.  The Canadian government can save and revitalize this industry, and perhaps spur a new technologies revolution in the Great White North.  What would require this change?  The Depositphotos_4019873_lCanadian government would simply need to ensure that the intentions of a well-meaning group of diverse government representatives are carried out and not distorted, at least in Canada.

In the last two decades governments and private entities around the world have funneled significant resources into the detection and prevention of money laundering and terrorist financing.  Like many other countries, Canada’s Department of Treasury established a national agency to combat money laundering and terrorist financing.  The Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) is Canada’s financial intelligence unit, created to collect, analyze and disclose financial intelligence on suspected money laundering and terrorist financing activities.  FINTRAC regulates life insurance companies, securities dealers, casinos, banks and others, including the lowliest of financial services providers, money services businesses (“MSBs”).  MSBs are usually providers of alternative financial services, such as currency exchangers, cheque cashers and money transmitters like Western Union.

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