The Financial Transaction and Reports Analysis Centre of Canada (FINTRAC) has recently updated its industry guidance (Revised Guidance) in relation to the filing of suspicious transaction reports (STRs). The Revised Guidance reflects FINTRAC’s increased expectations as to certain key requirements for filing STRs. Reporting entities, including financial entities, are encouraged to revisit their current approach to filing STRs and ensure their internal processes adhere to the Revised Guidance.
Some highlights of the Revised Guidance are as follows:
- Threshold of suspicion: An STR must be filed with FINTRAC where there are “reasonable grounds to suspect” that a transaction is related to a money laundering or terrorist financing (ML/TF) offence. This is a lower threshold than “reasonable grounds to believe”. Although an STR must still be filed on the basis of “reasonable grounds to believe”, this threshold is more than what FINTRAC requires. Reporting entities can therefore no longer wait until a transaction has hit that higher threshold before filing an STR.
- Identifying a suspicious transaction: FINTRAC sheds some light on how suspicious transactions can be identified. This includes an assessment of facts, context, and any ML/TF indicators associated with the transaction. Based on these factors, the reporting entity must consider whether there are reasonable grounds to suspect that the transaction is related to a ML/TF offence. In addition to the risk-based approach expected to be followed in each case, identifying a suspicious transaction also requires great care and attention. FINTRAC recognizes that the AML regime is one that constantly evolves. Reporting entities are required to ensure that their compliance programs always reflect the evolving nature of the AML regime.
- Effectiveness of client onboarding, on-going monitoring and record keeping processes: The effectiveness of the STR filing process is premised on an equally effective compliance regime. FINTRAC recognizes this fact and emphasizes the need for reporting entities to have in place robust compliance regimes in order to ensure the quality of their STRs. The Revised Guidance is complementary to other anti-money laundering and anti-terrorist financing processes including those related to client onboarding, on-going monitoring and record keeping. If these processes are effective, a reporting entity is likely to easily fulfil its STR obligations.