Canada’s history
with the Financial
Action Task Force
The Financial Action Task Force (FATF)
is an international standard-setting AML/
CTF organization. It was established in
1989 at the G7 Summit in Paris with
the purpose of maintaining integrity in
the global financial system by working
to ensure member firms implement
regulatory infrastructures to impede
abuse by money launderers and terrorist
financiers. Canada has been a member
of The FATF since its creation and
enacted proceeds of crime legislation
that same year.
As a member of The FATF, Canada
undergoes peer evaluations to assess
the effectiveness of its anti-money
laundering and anti-terrorist financing
measures. In its second mutual
evaluation report on Canada in 1997,
FATF noted Canada’s lack of a Financial
Intelligence Unit (FIU) and that its
reliance on voluntary (rather than
mandatory) suspicious transactions
reporting had not proven effective. In
response to this evaluation, Canada
introduced the National Initiative to
Combat Money Laundering.
In 2000, the Parliament of Canada
passed legislation that established
a system of mandatory reporting
of suspicious and other prescribed
transactions and created its own FIU,
FINTRAC. With this, Canadian federally
regulated financial institutions (FRFIs)
operate under the supervision of
the Office of the Superintendent of
Financial Institutions (OSFI) as the main
regulatory body, but all market players
also answer to FINTRAC with respect to
complying with reporting requirements
aimed at facilitating the detection and
deterrence of money laundering and
terrorist financing. Canada operates
a regulatory framework where OSFI
works closely with FINTRAC in order to
ensure FRFIs implement policies and
procedures to ensure compliance with
the local necessary regulations.
In the FATF’s 2008 AML regime
evaluation of Canada, its AML legislation
was found to be inconsistent with
the international standard for dealing
with customer identification (FATF
Recommendation 10). FATF criticized
Canada for not implementing sufficient
measures to ensure market participants
were able to identify their customers,
understand their operations and conduct
ongoing monitoring of their behaviour.
This continued criticism places Canada
in a difficult position. If notable and
continuous improvements are not made,
Canada could face increased scrutiny
from FATF and more burdensome
reporting obligations and other
restrictive measures.
Since 2008, Canada has responded
with changes to The Proceeds of
Crime (Money Laundering) and
Terrorist Financing Act (PCMLTFA) and
associated regulations. For example, in
December 2008 changes were made
to monetary penalties, requirements for
new sectors (e.g., dealers in precious
metals and stones) and June 2008
saw changes which mandated every
organization subject to the act to
conduct a bi-annual review of their
AML/CTF compliance program.
Canadian-based
organizations are
operating in an
environment
where
increasingly
non-compliance
will not
be tolerated.
© 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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At Risk
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Volume 7, No. 1