Banks in Canada have a long history in the fight against money laundering. The banking industry was the first industry to voluntarily report suspicious financial transactions to the Royal Canadian Mounted Police (RCMP) long before they were required to do so.
Banks’ efforts to combat money laundering and terrorist financing
The banking industry’s main goal is to help deter, detect and report criminal and terrorist activity, while protecting the privacy of law-abiding customers, and ensuring the integrity of the banking system in Canada.
Banks are compliant with federal regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. This requires banks and other reporting entities, such as real estate brokers, casinos and money service business, to implement client identification, record keeping and compliance regime requirements and report suspicious transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), an independent agency that reports to Canada’s Minister of Finance. FINTRAC analyses the data reported by banks and other entities and, where appropriate, discloses their findings to the RCMP for investigation.
Banks have significantly increased their anti-money laundering controls and expanded their compliance departments in the past decade to meet increasingly stringent requirements from Canadian and international standards and to ensure that the products and services they offer are not used for illegal purposes.
If a bank suspects an account is being used for criminal purposes of any kind it will report the activity to FINTRAC and close the account.
Compliance regimes are supervised by senior management at the banks as well as by committees of the banks’ Boards of Directors, which are appointed to oversee risk management and regulatory compliance with tax laws, securities laws, and other rules imposed by banking supervisors.
Banks have been recognized for these increased efforts. In a September 2016 assessment of Canada’s anti-money laundering (AML) regime by the Financial Action Task Force, an international AML standards setting body, the report found that [Canada’s] “financial institutions, including the six domestic systemically important banks, have a good understanding of their risks and obligations, and generally apply adequate mitigating measures.”
Canadian bank practices in other countries
Canadian banks that operate foreign branches or foreign subsidiaries in other countries must implement a compliance program to detect money laundering and terrorist financing similar to what is required in Canada. Banks use their Canadian anti-money laundering regime as a baseline and then overlay local regulations, policies, and procedures to ensure they are compliant with the laws of the countries in which they operate.
More information about Canada’s AML regime can be found on the FINTRAC website at www.fintrac.gc.ca.