PROCESSING...

Anti-Money Laundering
Consulting Services & Strategies

0 Items - Total: $0.00 CAD

We’re Hiring!

We’re looking for an AML compliance person. Initially, this is going to be a part-time / backfill role, but we’d love for it to be a permanent role (either part time or full time, depending on the need and fit). We have a team member that will be taking some time off shortly, and we were at the point that we were talking about bringing on another compliance ninja before that. We take bringing on new team members very seriously. We’re a small group, and we work very well together. We’d be lying if we said that “can we just handle the work ourselves?” isn’t something that was brought up (multiple times). You’re reading this posting because we need a very capable human, and maybe that’s you.

While we know many great folks, we’ve chosen to post this role publicly in the interest of widening the possible field to include candidates that we might not know personally.

What does the job actually entail?
We’re compliance consultants. Our practice includes anti-money laundering (AML), privacy, and regulatory compliance. Most of the companies that we work with are AML reporting entities (banks, credit unions, money services businesses, securities dealers, dealers in precious metals and stones, etc.). Our work is project based. Those projects include:

  • Developing and updating policies, procedures and risk assessments;
  • Designing and delivering training;
  • Conducting effectiveness reviews;
  • Helping clients to prepare for reviews and regulatory examinations;
  • Helping clients to remediate review and regulatory examination findings; and
  • Helping clients with compliance related questions.

In order to do this effectively, we believe that you need to have deep, hands-on experience in these areas. This is why all of our team members have over 10,000 hours of in-house compliance experience. This is non-negotiable.

What you’ll love about working at Outlier
We think that our team is pretty great: we’re all professional, friendly, and incredibly nerdy.

No two days are the same: we work on different projects that move at different paces. As long as the desired outcome is delivered on time, you can work at your pace from your location. Occasionally we may need to be onsite with our clients but most work is done remotely.

Our clients are professionals, entrepreneurs and thought leaders: we learn as much from our clients as they learn from us. It is often an absolutely incredible journey.

The compensation model is radically transparent and tied to individual performance: our consultants earn a share of the revenue related to each project in which they participate. These are democratic decisions that are visible to the whole team, ensuring fairness.

What might terrify you, but shouldn’t stop you
We think that our team is pretty great: at first, we’re going to seem intimidating and cliquey. We’ll do everything that we can to bring you into the fold, but you’re going to have to identify and ask for what you need.

No two days are the same: sometimes things get hectic and it can be stressful. You’ll need to be able to provide your own structure and manage your own schedule.

Our clients are professionals, entrepreneurs and thought leaders: they will push boundaries and ways of thinking, and they won’t always be compliance-minded.

The compensation model is radically transparent and tied to individual performance: openly discussing compensation can be awkward at first. We’ll try to remember that and be empathetic.

Some things that we think are probably true about the right candidate

  • You’re really good at what you do, but you are never satisfied.
  • Every time you’ve left a job, they’ve had to hire several people to replace you. You try not to gloat about this too much, but sometimes you can’t help it.
  • When put in charge of a well-functioning system, you’re likely to test “process improvements” until something breaks.
  • You’re at your very best when you’re fixing something broken or building something new – those challenges invigorate you.
  • When a business person tells you what they want to build, you immediately start thinking about how to execute their ideas within the parameters of existing law and regulation.
  • The phrase “that’s the way we’ve always done it” makes you either shudder or clench your jaw.
  • In your spare time, you probably also make or build something.

Want to apply?
Send an email with your resume attached in PDF format to: ninjas@outliercanada.com by May 13, 2022.
The subject line should read: Compliance Ninja, 2022
In the body of the email, please indicate why you believe that you would be a good fit, referencing this posting, as well as where you clocked your 10,000 hours of in-house compliance practice. Please feel free to include any questions that you have for us at the outset as well.
Please note that messages submitted in any other formats via any other channels will not be considered. Only applicants selected for an interview will be contacted.

Outlier Masking Policy

We’ve missed you and we’re looking forward to welcoming you back in person!

As mask mandates lift in Canada and we have face-to-face meetings again, it’s important that we treat one another with dignity and respect. At Outlier, we’re experts in compliance risk management, but we are not medical experts. We respect your right to set your risk tolerance and believe that we should all have the freedom to do so without the need for detailed explanations. Our masking policy reflects this philosophy.

In Person Meetings

If you wish to be masked, wear a mask. You don’t owe us an explanation. We will not question your decision.

If you want the Outlier consultant with whom you are meeting to wear a mask, simply let us know. Again, you don’t owe us an explanation. We will not question your decision.

If an Outlier consultant asks you to wear a mask, please do so. We ask that you show our people the same respect that we extend to you. They may have a sick relative at home, be visiting an elder care center, or simply feel more comfortable masking in that moment. No detailed explanations of rationale need be provided in these instances.

Finally, we ask that if you are feeling ill to please let us know and we will reschedule for a later date, or to meet virtually rather than in person.

Meetups and Events

We will be re-launching in-person events soon. As is the case where there are speakers, snacks and beverages, it is not practical to enforce masking. As such, we will (as always) be offering virtual options for those that are not yet ready to join us in person.

If you wish to remain masked at an event, this is absolutely fine. Our zero tolerance policy in relation to harassment extends to your health risk management decisions. Individuals that do not respect this policy will be ejected from the event and prohibited from attending future events.

Finally, if you are feeling ill, we ask that you join us virtually rather than in person.

General

Thank you for taking the time to review this policy. We hope that it’s helpful in navigating these strange times.

If you have any questions or concerns, please let us know.

Fraud & Reasonable Grounds to Suspect

One of the themes that was prevalent in Canadian AML for 2021 was the relatively low bar represented by “reasonable grounds to suspect” (RGS) and the types of transactions for which FINTRAC expected suspicious transaction reports (STRs) to be filed. One of our astute colleagues worked with us to craft some specific scenarios (the full version, including FINTRAC’s response, can be viewed here), and FINTRAC’s response seems to confirm a significant shift in position from previous discussions. Specifically, STRs are expected in cases of fraud, including cases in which the reporting entity’s client is believed to be the victim of fraud.

Here is a scenario that we asked about:

Scenario 2

A client reaches out to notify us that they sent the virtual currency to another party who promised them a generous short-term return. The client never received the promised funds and believes they have been defrauded. We review the customer account activity and do not find any anomalous activity either prior to or after the client sent the virtual currency to the wallet provided by the fraudster. The client appears to have sent their own funds to the fraudster and there is no account activity corresponding to any irregular transactions, including money mule indicators. Our client is simply a victim of fraud.

Based on strictly these facts, context and indicators, we have not reached reasonable grounds to suspect any money laundering or terrorist financing offences by our client. There may be downstream suspicion related to the wallet where the fraudulently obtained funds were sent but we do not have any suspicion based solely on our client’s transactions which include the transmission of virtual currency to that other wallet. We do not have any information or suspicion related to the other wallet except for the knowledge that our client’s virtual currency was sent to it.

Given the above, we believe no STR would be required. Could you please confirm our position? If the position taken here does not seem correct, please provide an underlying rationale.

And an excerpt from FINTRAC’s response:

In scenario 2, an STR should be submitted if the reporting entity reached reasonable grounds to suspect that the transaction or attempted transaction is related to fraud.

Not Just for Virtual Currency

While the scenario that we’ve provided is specific to virtual currency, the implications of this policy interpretation are not limited to transactions that involve virtual currencies. Every reporting entity type will deal with suspected and confirmed cases of fraud that touch their business models.

Why Does It Matter

To really get to why this matters so much, we need to first look at the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), which is where the requirement is first defined in Section 7:

Transactions if reasonable grounds to suspect

7 Subject to section 10.1, every person or entity referred to in section 5 shall, in accordance with the regulations, report to the Centre every financial transaction that occurs or that is attempted in the course of their activities and in respect of which there are reasonable grounds to suspect that

(a) the transaction is related to the commission or the attempted commission of a money laundering offence; or

(b) the transaction is related to the commission or the attempted commission of a terrorist activity financing offence.

This is important as the provision of the PCMLTFA (the section number) is what’s listed in the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations, where potential penalties are defined. Violations of Section 7 of the PCMLTFA are considered “very serious”. In turn, a “very serious” violation can lead to a penalty of up to $500,000 – for each instance.

If you’re a quantitative type quietly working out the rough number of fraud cases that your reporting entity has had recently, multiplying by $500,000, and feeling a bit nervous, you are not alone.

What’s Next?

While guidance and policy interpretations do not carry the force of law, this is often a distinction without a difference. Might a reporting entity take an appeal to federal court and win? Perhaps…though under the existing rules, that reporting entity’s name will be published (required where the violation is considered to be “very serious”), which for some reporting entities would have significant consequences, including the loss of vital banking partner relationships. Further, the cost of competent representation in a federal appeal process is well beyond the means of most small and mid-sized reporting entities.

Industry associations will, no doubt, continue to lead important conversations with FINTRAC and seek clarification for their members.

In the meantime, for most Canadian reporting entities, the most pragmatic decision will likely be to devise internal guidelines that include reporting STRs related to fraud cases.

Need a Hand?

If you want to make updates to your compliance program to reflect this new policy interpretation, or assistance with Canadian AML generally, please contact us.

Proliferation Financing

 

 

 

 

What is it, and why should AML compliance professionals be paying attention?

If you’ve looked at the Financial Action Task Force (FATF)’s recommendations recently, you’ve no doubt noticed that there are now three big topics on the covering page:

  • Money laundering,
  • Terrorist financing, and
  • Proliferation.

The last of these has received considerably less attention until recently, and in many cases, it may not be explicitly included in either jurisdiction-specific legislation or compliance programs. While some elements of proliferation are generally included (for instance, it is rare to see a compliance program that does not address sanctions-related list screening), there is often little if any consideration given to risks such as sanctions evasion or the non-implementation of sanctions.

According to the FATF, weapons of mass destruction (WMD) proliferation refers to the manufacture, acquisition, possession, development, export, trans-shipment, brokering, transport, transfer, stockpiling or use of nuclear, chemical or biological weapons and their means of delivery and related materials (including both dual-use technologies and dual use goods used for non-legitimate purposes). The financing of proliferation refers to the risk of raising, moving, or making available funds, other assets or other economic resources, or financing, in whole or in part, to persons or entities for purposes of WMD proliferation, including the proliferation of their means of delivery or related materials (including both dual-use technologies and dual-use goods for non-legitimate purposes). There are targeted financial sanctions intended to prevent specific jurisdictions, organizations, and persons from participating in any proliferation-related activities.

In Canada, reporting entities have strict obligations to comply with sanctions requirements.

Similarly, terrorists and terrorist groups are often subject to financial sanctions and prohibitions. All accounts and transactions are scanned against listed persons and entities. In the case that we have property (including money and investments) in our possession that belongs to a listed person or entity, it must be frozen and reported immediately.

Recommendation 1 requires countries and private sector entities to identify, assess, and understand “proliferation financing risks”. In the context of Recommendation 1, “proliferation financing risk” refers strictly and only to the potential breach, non-implementation or evasion of the targeted financial obligations referred to in Recommendation 7. These R.7 obligations apply to two country-specific regimes for the Democratic People’s Republic of Korea (DPRK) and Iran, require countries to freeze without delay the funds or other assets of, and to ensure that no funds and other assets are made available, directly or indirectly to or for the benefit of (a) any person or entity designated by the United Nations (UN), (b) persons and entities acting on their behalf or at their direction, (c) those owned or controlled by them. The full text of Recommendations 1 and 7 is set out at Annex A.

Canadian reporting entities will be familiar with Ministerial Directives related to North Korea and Iran that impose additional requirements, as well as providing indicators of activity related to these jurisdictions. While we may not be used to thinking about these requirements as being controls related to proliferation financing risk, this is exactly what they are. We may also fail to consider how they fit into our overall compliance regimes.

Proliferation Financing Trends and Typologies

It is not enough to simply say that your business does not deal with these jurisdictions directly. In many cases, funds are not actually repatriated to these jurisdictions but are held in other countries. For instance, identified state-sponsored North Korean hacking groups have moved stolen funds and virtual currencies through the Philippines, Macau, and China. In addition, actors intending to circumvent sanctions are known to be relatively proficient in using false and manufactured identities, as well as well as organizational structures intended to obfuscate true beneficial ownership. In the FATF’s webinar on proliferation financing, the global watchdog noted that proliferation financing may be one of the most challenging threats to detect in action, due to its complex nature.

Helpful Resources

Late in 2021, the FATF conducted an excellent webinar on proliferation financing risk assessment and mitigation, which has now been posted publicly. This presentation includes an excellent high-level overview, as well as detailed discussions of the trends and typologies that are relevant today.

It can be useful to review the aspects of the FATF’s recommendations that refer to proliferation.

There is additional guidance from the FATF on proliferation financing risk assessment and mitigation. This is a detailed document focused entirely on proliferation financing, and the FATF’s expectations.

The UK has conducted a national level assessment of proliferation financing risk. This includes a number of relevant case studies and typologies. If you want the sense of it, but are short on time, our friend Dev Odedra has published a summary.

Manchester CF has launched a proliferation financing training module as part of the Financial Intelligence Specialist (FIS) designation, offered in conjunction with the University of Newhaven.

Need a Hand?

If you want to get ahead of the curve by having a conversation about proliferation financing risk and potential impacts to your compliance program, please contact us.

888 – Reflecting 8 Great Years!

On August 8th (the 8th day of the 8th month) this year, Outlier Compliance Group turned 8 years old. It seems like a good time to stop and reflect on the company’s journey to this point, and where we’re going next…

  1. The Rule of Two Feet

This one keeps hitting me in big ways. In essence, every time I ask myself “why doesn’t someone…” it’s an indicator that instead of lamenting, I could be solving a problem (or finding the right person to solve said problem, if it’s not me).

For those who, like me, struggle with idioms sometimes, here’s where the name of this rule comes from.

Problem: I need to get from point A to point B.

Solution: I already have 2 feet, which I can use to walk from point A to point B.

  1. Say No

In the early days, when I was worried about building the business and struggling to turn a tiny profit, I said yes when I should have said no. Sometimes there were short term gains, but these decisions were always to my detriment in the long term. There are many examples, but here are a few:

  • Hiring someone because they are inexpensive,
  • Taking on a client that is difficult to work with or does not value compliance (which is the service that I offer), and
  • Speaking at an event that is not really part of a market that I want to pursue.

In each of these cases, I ended up spending more time and energy trying to resolve issues than I would have spent making a better decision in the first place – but I had to learn the hard way.

These days I am much more comfortable saying no. This frees me up to focus on things that are the right fit for me and the business.

  1. Be Excellent to Everyone

I do say no a lot, but I try not to be a jerk about it. Just because something isn’t a good fit for my business doesn’t mean that it’s somehow objectively bad.

When I turn down a speaking engagement, for instance, I always try to suggest others that may be a better fit for the engagement.

  1. Don’t Take Any Sh**!

Being good to other people doesn’t mean being a pushover, though there are always going to be folks that mistake a smile for weakness and try to take advantage.

We have a policy at Outlier that includes zero tolerance for bad behaviour, including discrimination and harassment. Unfortunately, there are some individuals with long histories of misconduct hiding in plain sight in the Canadian AML/compliance industry. While we try not to interact with them, we are also vocal about concerns where it cannot be avoided. It’s stressful sometimes, but worthwhile. While I’d rather not have to bring these concerns to conference organizers, it always makes me feel better knowing that there are measures in place to keep attendees safe.

  1. Perfect is the Enemy of Shipped

I’m very much a type-A personality. I am a perfectionist. I like to win… and while these are all great attributes, I also know that compliance is never perfect. It’s important to be able to get clients what they need expediently.

There is a second layer to this equation, which is that you need to hit a baseline before you can go “above and beyond.” Finding this balance is a delicate mission but a tremendous advantage.

  1. Always Improve on Everything

Having finished a project, and even having the work product reviewed successfully by an auditor or regulator doesn’t mean that we’re done improving. There is always room to do better, and every criticism is an opportunity to do just that.

  1. Hire People That You Admire

One of the best things for me at Outlier right now is the fact that I can take “orders” from everyone on my team at various points in time. Yes, I’m still the CEO, and yes, it thrills me that every single member of the team can run circles around me in some way!

  1. Reflect on Success

It’s easy to get into a mode where it’s full speed ahead all the time. I’m more than a bit this way myself! It’s also important to take a step back to appreciate the fruits of all of that hard work, and to be proud of what we’ve built.

As 2021 draws to a close, writing this article has given me the opportunity to do just that.

Thank you to everyone that has contributed to Outlier’s success, and given us the opportunity to contribute to your success!

What’s Next?

I’m incredibly proud of what I – along with incredible teammates, clients and supporters – have built over the last eight years. In the next eight years, I see us working on more large-scale international projects (though our focus will remain Canadian) in collaboration with some of the excellent firms that we’ve met along the way, and new colleagues that we’ve yet to meet. We’ve gained a lot of insight from FATF working groups, as well as from working with technology firms. Moving in the direction of solutions that are global and interoperable in nature is, in my estimation, the most meaningful and productive compliance work to be done in the coming years.

Stay in Touch!

You can follow both Outlier and me on LinkedIn (Amber, Outlier) and Twitter (Amber, Outlier) or reach out directly.

Changes to PIPEDA, Canada’s Private-Sector Privacy Law

Background

On November 17, 2020, Bill C-11, the Digital Charter Implementation Act, 2020 was introduced. If passed, the proposed Act would repeal part 1 of the Personal Information Protection and Electronic Documents Act (PIPEDA) and a new Consumer Privacy Protection Act (CPPA) would regulate the way in which personal information is collected, used and disclosed by private sector organizations in the course of their commercial activity.

The bill would also create an administrative tribunal to hear appeals of decisions made by the Privacy Commissioner of Canada and impose penalties. Currently, such appeals are heard in federal court.

As technology continues to evolve, the proposed Act is meant to protect Canadians by creating and enhancing current obligations, including:

  • Increasing control and transparency when Canadians’ personal information is handled by companies;
  • Giving Canadians the freedom to move their personal information from one organization to another;
  • Ensuring that Canadians have the ability to request that their personal information be destroyed;
  • Providing the Privacy Commissioner with broad order-making powers, including the ability to force an organization to comply; and
  • Fines of up to 5% of revenue or $25 million.

What Will Change?

The proposed Act brings about many changes. Highlighted below are what we feel are some of the most significant:

Privacy Program: Organizations would be required to maintain a privacy management program setting out policies and procedures the organization takes to protect and deal with personal information. The Office of the Privacy Commissioner (OPC) could request these procedures at any time.

Consent: The Act adopts elements of the OPCs Guidelines for obtaining meaningful consent, creating transparency requirements.

Exceptions: The Act defines a list of “business activities” for which an organization can process personal information without consent.

Transfers to Service Providers: The Act would establish that consent is not required to transfer personal information to a service provider.

Automated Decision-Making: If an organization uses an “automated decision system”, under the Act, they must ensure how a prediction, recommendation or decision about a person is made is documented.

Data Mobility: The Act would allow that on the request of an individual, an organization must, as soon as feasible, disclose the personal information it has on file of the individual to another organization if those organizations are subject to a “data mobility framework”.

Disposal of PI: The Act would provide individuals with an explicit right to request the deletion of their personal information.

Revised OPC powers: The OPC would have the authority to issue enforcement orders and recommend penalties. Currently, the OPC only has the power to recommend measures after an investigation.

Private Right of Action: The Act would allow individuals to sue companies within two years following a regulatory investigation. The individual would have to prove loss in order to recover damages.

Codes of practice and certification: The Act would allow for the creation of codes of practice and certification programs to facilitate compliance with the Act, which would be subject to approval by the OPC.

What Do We Do?

For now, we wait but plan for changes to your privacy program in the years ahead. If the bill is passed, the draft legislation will be open for a comment period in which you are encouraged to submit comments. The OPC released a statement on November 19, 2020 related to the bill. Our guess is we will see amendments based on the OPCs statement.

We’re Here To Help

If you have questions related to this or privacy legislation in general, please contact us.

Amended AML Regulations June 10, 2020 – Redlined Versions

The following red-lined versions have been created to reflect final amendments to Canadian anti-money laundering (AML) laws & regulations published in the Canada Gazette on June 10, 2020.  Amendments to the Cross-border Currency and Monetary Instruments Reporting Regulations will come into force on June 1, 2020. All other amendments will come into force on June 1, 2021. We have created industry specific blogs to make understanding the changes easier, which are located here.

Redlined versions of all the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations are listed below for download.

These documents are not official versions of the regulations. Official versions can be found on the Government of Canada’s Justice Laws Website.

Regulations Amending the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Please click the link below for downloadable PDF file.

Regulations Amending the Regulations Amending Certain Regulations Made Under the Proceeds of Crime July 2019 – Redlined_June 2020

Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Please click the links below for downloadable pdf files.
PCMLTF_July_2019_Redlined_Full_July_2019 – Redlined_June 2020

Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations

Please click the links below for downloadable pdf files.
PCMLTF_Suspicious_Transaction_Reporting_Regulations_July_2019 – Redlined_June 2020

Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations

Please click the link below for a downloadable PDF file.
PCMLTF_Registration_Regulations_July_2019 – Redlined_June 2020

Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations

Please click the link below for a downloadable pdf file.
PCMLTF_Administrative_Monetary_Penalties_Regulations_July_2019 – Redlined_June 2020

Proceeds of Crime (Money Laundering) and Terrorist Financing Cross-Border Currency and Monetary Instruments Reporting Regulations

Please click the link below for a downloadable pdf file.
PCMLTF_Cross-Border_Currency_and_Monetary_Instruments_Reporting_Regulations_July_2019 – Redlined_June 2020

Need a Hand?

Whether you need to figure out if you’re a dealer in virtual currency, to put a compliance program in place, or to evaluate your existing compliance program, we can help. You can get in touch using our online form, by emailing info@outliercanada.com, or by calling us toll-free at 1-844-919-1623.

Outlier’s Response to COVID-19

In light of the threat currently posed by COVID-19, and related guidance issued by the government of Canada, we are taking steps to ensure that our staff, clients, and friends in compliance are safe. At present, this means that we are limiting in-person meetings and speaking engagements. Fortunately, we’ve always been a relatively tech-savvy team, and we anticipate only minimal disruptions to our regular levels of awesomeness as we move to provide services primarily online in the near term.

As many of you may already know, we have always had a liberal “work from anywhere” policy, and commensurate operational security protocols in place. If you’re concerned about having quality “face time” with our ninjas, don’t worry. We have several different video conferencing options available including Google Meet and Zoom.

While we’re minimizing our in-person presence, we will be aiming to release more online content including webinars. In keeping with our philosophy that information should be free, we’ll be posting as much of this information as possible on our YouTube channel. To keep up with the latest news, you can follow us on LinkedIn, Twitter and Facebook.

As always, if you have any questions or concerns, please feel free to contact us.

Stay safe out there friends in compliance!

Amending the Amendments!

Background

Back on July 10, 2019, the highly anticipated final version of the amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its enacted regulations were published. However, on February 15, 2020, further proposed amendments to those amended regulations was published in the Canada Gazette. To make reading these changes a little easier, we have created a redlined version of the regulations, with new content showing as tracked changes, which can be found here.

The Regulatory Impact Statement for this round of proposed changes states the following: “The proposed amendments to the regulations would strengthen Canada’s AML/ATF Regime, align measures with international standards and level the playing field across reporting entities by applying stronger customer due diligence requirements and beneficial ownership requirements to designated non-financial businesses and professions (DNFBPs); modifying the definition of business relationship for the real estate sector; aligning customer due diligence measures for casinos with international standards; aligning virtual currency record-keeping obligations with international standards; clarifying the cross-border currency reporting program; clarifying a number of existing requirements; and making minor technical amendments”. The proposed amendments are expected to come into force on June 1, 2021.

As with all proposed changes, there is a comment period. This comment period is much shorter than the last one, at only 30 days. For anyone interested in commenting on the proposed changes, comments are to be addressed to Lynn Hemmings, Director General, Financial Crimes and Security Division, Financial Sector Policy Branch, Department of Finance, 90 Elgin Street, Ottawa, Ontario K1A 0G5 or email: fin.fc-cf.fin@canada.ca.

While these are proposed changes, guidance from FINTRAC related to the amendments to regulation would hopefully be seen ahead of the coming into force dates of the final version.

We have summarized what this could mean for your business below.

Money Services Businesses

PEP

The most significant proposed change for Money Services Businesses (MSB)s is related to Politically exposed persons (PEP) determinations. Currently, a PEP determination must be made for international EFTs of CAD 100,000 or more. The proposed regulations will require MSBs to make a PEP determination when the MSB enters into a business relationship with a person.

If you currently conduct list screening, PEP screening could easily be added to that process.

Dealers in Virtual Currency

Travel Rule

For dealers in virtual currency, there is an additional proposed requirement on top of the requirements that were published in the last round of AML changes.  The proposed amendments add the requirement for records to be kept for virtual currency transfers of CAD 1,000 or more.

The record must contain the following:

  1. include with the transfer, the name, address and, if any, the account number or other reference number of both the person or entity that requested the transfer and the beneficiary; and
  2. take reasonable measures to ensure that any transfer received includes the information referred to in paragraph (a) above.

If the information required is not obtained, a determination of whether the transaction should be suspended or rejected will need to be made.

Given the nature of virtual currency transfers, it will be interesting to see how this requirement plays out, as currently, there are no technology solutions (that we are aware of) that would solve for this.

A reminder that dealers in virtual currency will be considered MSBs as of June 1, 2020. Check out our blog post for a full list of regulatory requirements related to dealers in virtual currency.

Real Estate

Business Relationship

One of the most significant proposed changes for real estate developers, brokers and sale representatives is related to the definition of a business relationship. Currently, a business relationship is defined as:

If a person or entity does not have an account with you, a business relationship is formed once you have conducted two transactions or activities for which you have to:

  • verify the identity of the individual; or
  • confirm the existence of the entity.

The proposed amendments will change that definition for real estate developers, brokers and sale representatives to only one transaction.

For business relationships, a reporting entity must:

  • keep a record of the purpose and intended nature of the business relationship;
  • conduct ongoing monitoring of your business relationship with your client to:
    • detect any transactions that need to be reported as suspicious;
    • keep client identification and beneficial ownership information, as well as the purpose and intended nature records, up-to-date;
    • reassess your clients risk level based on their transactions and activities; and
    • determine if the transactions and activities are consistent with what you know about your client;
  • keep a record of the measures you take to monitor your business relationships and the information you obtain as a result.

We will have to wait for guidance to see how ongoing monitoring obligations applies to the real estate sector if this change takes effect.

PEP

The proposed amendments will require real estate developers, brokers and sale representatives to make a Politically exposed persons (PEP) determination when they enter into a business relationship (as defined above) with a client. In addition, they will also be required to take reasonable measures to determine whether a client from whom they receive an amount of CAD 100,000 or more is a PEP.

Beneficial Ownership

The proposed amendments will require real estate developers, brokers and sale representatives to comply with existing beneficial ownership requirements that apply to other reporting entities.

This means when identifying an entity, a reporting entity needs to collect the following for all Directors and individuals who own or control, directly or indirectly, 25% or more of the organization:

  • Their full legal name;
  • Their full home address; and
  • Their role and/or ownership stake in the organization.

Given the obligation is to obtain, rather than verify, such information, we do not expect this requirement to be overly burdensome for the real estate sector.

Dealers in Precious Metals and Stones

PEP

Dealers in Precious Metals and Stones (DPMS)s will be required to make a PEP determination when they enter into a business relationship with a client. In addition, a DPMS will be required to take reasonable measures to determine whether a person from whom they receive an amount of CAD 100,000 or more is a PEP.

A reminder that a business relationship is defined as:

If a person or entity does not have an account with you, a business relationship is formed once you have conducted two transactions or activities for which you have to:

  • verify the identity of the individual; or
  • confirm the existence of the entity.

Given the definition of a business relationship, we do not expect this requirement to be overly burdensome. If you currently conduct list screening, PEP screening could easily be added to that process.

Beneficial Ownership

The proposed amendments will required DPMSs to comply with existing beneficial ownership requirements that apply to other reporting entities.

This means when identifying an entity, a reporting entity needs to collect the following for all Directors and individuals who own or control, directly or indirectly, 25% or more of the organization:

  • Their full legal name;
  • Their full home address; and
  • Their role and/or ownership stake in the organization.

Given the obligation is to obtain, rather than verify, such information, we do not expect this requirement to be overly burdensome for the DPMS sector.

We’re Here To Help

If you would like assistance in updating your compliance program and processes, or have any questions related to the changes, please get in touch!

Regulations Amending the Regulations February 15, 2020- Redlined Versions

The following red-lined versions have been created to reflect the amendments to Canadian anti-money laundering (AML) regulations published in the Canada Gazette on February 15, 2020. You can also read our article “Amending the Amendments!” for a summary of the proposed changes by industry.

Redlined versions of all the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations are listed below for download.

These documents are not official versions of the regulations. Official versions can be found on the Government of Canada’s Justice Laws Website.

Regulations Amending the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Please click the link below for downloadable PDF file.
Amending_the_Regulations_Amending_Certain_Regulations_Made_Under_the_Proceeds_of_Crime_July_2019 – Redlined_Feb_2020

Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Please click the links below for downloadable pdf files.
PCMLTF_July_2019_Redlined_Full_July_2019 – Redlined_Feb_2020

Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations

Please click the links below for downloadable pdf files.
PCMLTF_Suspicious_Transaction_Reporting_Regulations_July_2019 – Redlined_Feb_2020

Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations

Please click the link below for a downloadable PDF file.
PCMLTF_Registration_Regulations_July_2019 – Redlined_Feb_2020

Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations

Please click the link below for a downloadable pdf file.
PCMLTF_Administrative_Monetary_Penalties_Regulations_July_2019 – Redlined_Feb_2020

Proceeds of Crime (Money Laundering) and Terrorist Financing Cross-Border Currency and Monetary Instruments Reporting Regulations

Please click the link below for a downloadable pdf file.
PCMLTF_Cross-Border_Currency_and_Monetary_Instruments_Reporting_Regulations_July_2019 – Redlined_Feb_2020

Need a Hand?

Whether you need to figure out if you’re a dealer in virtual currency, to put a compliance program in place, or to evaluate your existing compliance program, we can help. You can get in touch using our online form, by emailing info@outliercanada.com, or by calling us toll-free at 1-844-919-1623.

Return to Blog Listing