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FINTRAC EFT Reporting Clarification

We’ve recently had quite a few conversations with our clients and friends about electronic fund transfer (EFT) reporting.

For entities that EFT 10Kare required to report EFTs, any amount valued at CAD 10,000 or more that is sent out of Canada or received from outside of Canada on behalf of a customer is reportable to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) within 5 business days.  The question that keeps coming up relates to situations that have multiple senders or beneficiaries.

For example:

When Jaques (your customer in Canada) sends the equivalent of CAD 12,000 to his aunt Sally in Europe, this is clearly reportable as an EFT.

But

What if instead of sending the whole amount to his aunt Sally, Jacques instead send three transactions, each equivalent to CAD 4,000 to each of his nephews, Ralph, Jean and Morty?

After hearing different answers from different people, we thought it best to get a policy clarification from FINTRAC.  You can see the full text of that question, and FINTRAC’s answer below.

Outgoing EFTs With Multiple Beneficiaries Are Reportable

In the case that we mentioned above, Jacques’ transactions would be reportable EFTs, provided that all of the transactions happened within the same 24 hour period.  In this case, 3 reports would be sent, adding up to the total amount (which is over CAD 10,000).

Incoming EFTs From Multiple Senders Are Reportable

It stands to reason that if you receive multiple EFTs of behalf of the same beneficiary, the same rules would apply.

In the example above, for instance, let’s say that the money sent to Jacques’ nephews was a loan.  All of the nephews pay pack the loan at the same time, and you receive 3 EFTs for Jacques, each from a different sender, with a value of CAD 4,000 each (CAD 12,000 in total for the three EFTs).  These are also reportable, provided that the transactions all occurred within the same 24-hour period.

What Does It Mean If You’ve Interpreted the Reporting Requirements Differently?

In some cases, this may mean updates to your IT systems, to allow you to detect transactions that are received on behalf of the same beneficiary, or sent on behalf of the same sender.

It may also mean looking back at your transaction data, in order to figure out whether or not there are any EFTs that should have been reported to FINTRAC that were missed.  If this is the case, we recommend that you consider filing a voluntary disclosure with FINTRAC to proactively let them know about the issue, and what you’re doing to fix it.  If this is the case, we’ve created some free resources to help make this process as simple as possible.

Need a Hand?

If you’re not sure what to do next or you need extra hands to review your IT system updates or a package that you’re submitting to FINTRAC, please contact us.

 

Full Text of FINTRAC’s Response

Amber, 

     I am writing further to your e-mail of May 13, 2014, concerning how to report an electronic funds transfer sent by one client but to

multiple beneficiaries.

     As you know, pursuant to the /Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations/ (PCMLTFR),  reporting entities are required to report to FINTRAC electronic funds transfers valued at $10,000 or more (in the course of a single transaction) at the request of a client, along with the information referred to in Schedule 2 or 5, as the case may be; and the receipt from outside Canada of electronic funds transfers, sent at the request of a client, of $10,000 or more in the course of a single transaction, along with the information referred to in Schedule 3 or 6, as the case may be.

     When a client requesting an EFT conducts a transaction with the initial amount of $10,000 or more and instructs that it be divided between multiple beneficiaries, the EFT is still being carried out by one client, and the EFT must be reported using multiple reports (one per beneficiary).  The key to determining the reporting requirement is the instruction given by the client. To better explain this, I have provided two examples below:

     1)  A client instructs that $15,000 be sent via EFT to different beneficiaries, $5000 each. In this instance, the reporting entity would be required to send three different reports, one for each beneficiary, for a total of the $15,000 that the client requested be sent via EFT. When submitting the reports, the 24-hour-rule indicator must be selected, although this is not considered to be a single transaction of $10,000 or more as defined under section 3 of the PCMLTFR.

     OR

     2)  A client instructs that $5000 be sent to beneficiary subsequent $5000 be sent to beneficiary B and a third $5000 be sent to beneficiary C. In this instance, the 24- hour rule must be considered.

The 24-hour rule applies if the reporting entity knows, or an employee or senior officer knows, that the transactions were made within 24 consecutive hours of each other, by or on behalf of the same individual or entity. It applies only to transactions that are under $10,000. If a transaction is for $10,000 or more, it is reportable as one transaction.  As such, if the reporting entity knows that the first two EFTs of $5000 each were made by, or on behalf of, the same person, then the reporting entity would be required to submit two reports under the 24-hour rule, as these two EFTs total $10,000.    

I trust this information will be of assistance.

Best regards

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