Kim Marsh Intervied by Payments Compliance | Originally Published May 18th, 2015
Canada must do more to tackle financial crime, experts claim, after another money services
business was fined for multiple violations of anti-money laundering legislation.
Foreign exchange business Québec Inc., based in Montreal, was fined C$20,780 by FINTRAC, Canada’s top anti-money laundering (AML) regulator last week.
The company was found to be in breach of seven anti-money laundering (AML) requirements, including the failure to report a cash transaction above the value of C$10,000.
More than half of the fines that FINTRAC has issued in the last seven years have been levelled at money service businesses (MSB).
Financial crime expert and former investigator Kim Marsh, now executive vice president at fraud intelligence firm IPSA International, said that although enforcement has improved in Canada, significant problems remain at the level of federal execution. He told PaymentsCompliance: “In some of the provinces, regulators appear to be more proactive in trying to deal with some of the financial crimes that are happening. “Historically, money service businesses were a high risk industry for illicit funds coming into the system. “FINTRAC have done a good job of cleaning up that industry.”
However, Marsh said that the funds, skill and time needed to investigate high-level money laundering are too often in short supply. He said: “The prosecutors seem to have a reluctance to pursue it, and I think they have a lack ofexpertise all the way up the line.
“It’s very onerous to get that type of case through the courts, and there are very few fiscal charges by law enforcement.
“I think the system’s broken at every level.”
Marsh’s comments echoed the findings of a recent U.S. Department of State report into global money laundering and financial crimes. That report states: “Canada has a rigorous detection and monitoring process in place to identify money laundering and terrorism financing activities, but should further enhance its enforcement and conviction capability.
“Obstacles to successful enforcement include privacy rules that prevent FINTRAC from freely sharing information with law enforcement; complex investigations that can take understaffed police agencies years to finish; and overworked Crown Prosecutors.”
Compliance and financial crime expert Bonny Murray, an associate at the Toronto practice of Blakes law firm, said that the issue is complicated in Canada because not all businesses involved in payments are necessarily subject to AML legislation. She said: “It’s a federal regime, and it applies first based on the type of entity you are, and then the type of activity you carry out.
“That’s different to other jurisdictions, where the first trigger would be the type of activity carried out. “So if you’re in Canada and you’re not a type of regulated entity that’s covered by the AML legislation, you’re just not covered, even if you’re doing an activity for which a different type of entity would be covered by the AML regime.” Murray added that businesses that are subject to the regime are required to put in place a compliance regime, which involves risk assessment of all products as well as identification, record keeping and reporting requirements.
The Financial Action Task Force (FATF) acknowledged last year that Canada has made “significant progress” in addressing AML deficiencies since 2008.
However, FATF expressed some concern that Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) is not entirely keeping its recommended controls. It stated: “Only those activities for which there is a proven ML/TF risk are covered by the PCMLTFA, whereas under the FATF Methodology a list of financial activities and operations must be covered by the AML/CFT regime unless there is a proven low risk of ML of TF.”
Canada was, however, removed from FATF’s follow-up process for non-compliant jurisdictions.
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