What’s Old is New Again, Well Updated

This article should not be considered advice (legal, tax or otherwise). That said, any of the content shared here may be used and shared freely – you don’t need our permission. While we’d love for content that we’ve written to be attributed to us, we believe that it’s more important to get reliable information into the hands of community members (meaning that if you punk content that we wrote, we may think you’re a jerk but we’re not sending an army of lawyers).

Finally, we want to encourage the community to discuss the proposed changes and submit meaningful feedback for policy makers. The comment period for this draft is 90 days. After this, the Department of Finance takes the feedback to the bat cave and drafts a final version of the amendments. From the time that the final version is published, the draft indicates that there will be 12 months of transition to comply with the new requirements.

♬The Times Regulations Are Changing♬

Foreign MSBs

Currently, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has issued a policy interpretation (PI-5594) in August of 2013, which states that a “real and substantial connection” to Canada must be present for an entity to be required to register as an MSB with FINTRAC. A “real and substantial connection” was defined in the interpretation as having one or more of the following:

Whether the business is incorporated in Canada;
Whether the business has agents in Canada;
Whether the business has physical locations in Canada; and/ or
Whether the business maintains a bank account or a server in Canada.

The draft amendments introduce a new definition, which is “Foreign Money Services Business” that means anyone serving Canadian customers or entities in Canada is now subject to all Canadian requirements no matter where they are located. Throughout the proposed changes, where there is a reference to money services businesses, there is also a reference to foreign money services businesses. This will be significant to MSBs who operate non-face-to-face in the online marketplace and do not reside in Canada.

Non-Face-To-Face Customer Identification

Currently, there is a requirement that when customers are identified using the dual process method, the document and/or data that you collect is in its “original” format. This has been interpreted to mean that if the customer receives a utility bill in the mail, they must send you the original paper (not scanned or copied) document. The word “original” will be replaced with “authentic” (meaning that so long as you believe that the utility bill is a real utility bill for that person, it doesn’t need to be the same piece of paper that they received in the mail).

In addition, there are provisions that would allow reporting entities to rely on the identification conducted previously by other reporting entities. If this method is used to identify a customer, the reporting entity must immediately obtain the identification information from the other reporting entity and have a written agreement in place requiring the entity doing the identification to provide the identification verification within 3 days of the request.

Reporting EFTs of $10,000 or More

If you conduct international remittance transactions at the request of your customers, the requirement to report transactions of $10,000 or more will now be your responsibility, not your financial services provider.

The proposed change removes the language commonly known as the “first in, last out” rule. This means that the first person/entity to ‘touch’ the funds for transactions incoming to Canada or the last person/entity to ‘touch’ the funds for a transaction outgoing from Canada had the reporting obligation (as long as the prescribed information was provided to them).

The update will change the reporting obligation to whoever maintains the customer relationship. So if you initiate a transaction at your customer’s request (outgoing transaction) or provide final receipt of payment to your customer (incoming transaction), it will be your obligation to report that transaction to FINTRAC.

For example, if the flow of the instructions for payment were as follows:

Currently, the reporting obligation of the outgoing EFT would fall to the bank in Canada. With the draft updates, the reporting obligation would now fall to the MSB in Canada, because they have the relationship with the customer initiating the transaction.

Third Party Determination

Currently, the obligation to determine whether a third party is involved in a transaction relates to Large Cash Transactions. The proposed changes would include the obligation to make a third party determination for all EFTs of $10,000 or more. This would also require similar record keeping obligations as a third party determination under the current Large Cash Transaction records.

Suspicious Transaction Reporting

Currently, if a reporting entity has reasonable grounds to suspect that a transaction or attempted transaction is related to money laundering or terrorist financing, a report must be submitted to FINTRAC within 30 days of the date that a fact was discovered that caused the suspicion. This change appeared in the last round of amendments that came into force last year, and the proposed new wording would be another significant change:

The person or entity shall send the report to the Centre within three days after the day on which measures taken by them enable them to establish that there are reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering offence or a terrorist activity financing offence.

This means that a report would be due three days after the reporting entity conducts an investigation or does something that allows them to reach the conclusion that there are reasonable grounds to suspect.

Information Included In Reports to FINTRAC

Certain information is required in reports to FINTRAC. Even where information is marked as being optional, if a reporting entity has the information, it becomes mandatory to include it. Some of the additional proposed data fields are:

every reference number that is connected to the transaction,
type of device used by person who makes request online,
number that identifies device,
internet protocol address (IP address) used by device,
person’s user name, and
date and time of person’s online session in which request is made.

These fields may require significantly more data to be included in reports, especially for transactions that are conducted online.

Ongoing Compliance Training

Currently, there are five required elements of a Canadian AML compliance program, but there is soon to be a sixth. Before you get too worried, it’s not that major. The change is specific to your ongoing compliance training obligations, which says you must institute and document a plan for your ongoing compliance training program and the delivery of the training. Basically, in your AML compliance program documentation, you need to provide a description of your training program for at least the next year and how the training will be delivered. Many MSBs have already implemented this best practice.

Risk Assessment Obligations

With the recent addition of the “New Technologies and Developments” category to the Risk-Based Approach requirements, the next logical progression has be added. The updates include the obligation to assess the money laundering and terrorist financing risk of any new technology before implementation. Meaning, if you are looking to take your business online and are going to use this fancy, new non-face-to-face ID system, you had better take careful inventory of where your risks are and be sure the appropriate controls have been put in place before going live. Much like the training plan, many MSBs have already implemented this best practice.

Virtual Currency

The draft updates also include major changes related to virtual currency. “Dealers in virtual currencies’ would be regulated as MSBs. New record keeping and reporting obligations would apply to all reporting entities that accept payment in virtual currency, or send virtual currency on behalf of their customers.

For more information on updates specific to virtual currency, please check out our full article.

What Next

If you’ve read this far, congratulations and thank you!

We hope that you will contribute your thoughts and comments. You can do this by contacting the Department of Finance directly. Their representative on this file is:

Lynn Hemmings

Acting Director General

Financial Systems Division

Financial Sector Policy Branch

Department of Finance

90 Elgin Street

Ottawa, Ontario

K1A 0G5

Email: fin.fc-cf.fin@canada.ca

If you would like assistance drafting a submission, or have questions that you would like Outlier to answer, please get in touch!

If you are interested in sharing your comments with the Canadian MSB Association (and we highly encourage you to do so) please email luisa@global-currency.com. She will have more information on the industry group’s submission and consultation process.

As you may have heard, in 2018 the Department of Finance released draft updates to Canada’s anti-money laundering (AML) and anti-terrorist financing (ATF) legislation. If you’re the type that likes to read the original legislative text, you can find it here.

For the rest of us, we’ve summarized the proposed updates and what they might mean for your business below.

Why is it a draft?

Publishing proposed amendments as a draft provides reporting entities like dealers in precious metals and stones (DPMSs), our industry associations like the Canadian Jewellers Association (CJA) and members of the general public, the opportunity to read the draft and suggest changes. There is a 90-day window from the original June 9^th, 2018 publication date during which comments are accepted (meaning that comments should be submitted to the Department of Finance by early September).

After this, the Department of Finance will take the comments, synthesize them, request additional clarification where needed, and draft a final version of the amendments. The final version is likely to look fairly similar to the draft, with some changes. From the date that the final version is published, we expect that reporting entities will have 12 months to adjust their compliance programs and operations.

Practically speaking, this means that you should start thinking about what this means to you and your business now. However, while it can be useful to start teeing up resources (especially if you think that your IT systems need to be updated), it often makes sense to wait until the final version has been published to make changes. If you have thoughts on the proposed changes, it also means that you should consider submitting these, either independently or through an industry association. CJA members should contact Carla Adams (carla@canadianjewellers.com).

What does it mean for my business?

While there are quite a number of proposed changes (the draft is about 200 pages in length), some are likely to have more of an impact on DPMSs than others. We’ve summarized the changes that we expect to have the most impact here.

Large Virtual Currency Transaction Reporting

If you accept payments using virtual currencies like bitcoin, these will be treated similarly to cash payments. For any payments valued at CAD 10,000 or more made by or on behalf of the same person or entity in a 24-hour period, you will need to identify the customer and submit a report to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

Non-Face-To-Face Customer Identification

Suspicious Transaction Reporting

Currently, if a reporting entity has reasonable grounds to suspect that a transaction or requested transaction is related to money laundering or terrorist financing, a report must be submitted to FINTRAC within 30 days of the date that a fact was discovered that caused the suspicion. This was changed in the last round of amendments that came into force last year, and the proposed new wording would be another significant change:

This means that a report would be due three days after the reporting entity conducts an investigation or does something else that allows them to reach the conclusion that there are reasonable grounds to suspect.

Information Included In Reports to FINTRAC

every reference number that is connected to the transaction,
every other known detail that identifies the receipt (of cash for large cash transactions),
type of device used by person who makes request online,
number that identifies device,
internet protocol address (IP address) used by device,
person’s user name, and
date and time of person’s online session in which request is made.

These fields may require significantly more data to be included in reports, especially for transactions that are conducted online.

New Products & Delivery Channels

One of the deficiencies identified in the Financial Action Task Force (FATF) review of Canada was not having a requirement to assess new technologies before their launch. A proposed amendment would require all reporting entities to assess the risk related to assess the risk of products and their delivery channels, as well as the risk associated with the use of new technologies, prior to their launch.

This has been a best practice since the requirement to conduct a risk assessment came into force, but this change would make this a formal requirement.

Defining a DPMS

The proposed amendments would change the definition of a DPMS slightly to read:

(1) A dealer in precious metals and precious stones, other than a department or an agent or mandatary of Her Majesty in right of Canada or of a province, that buys or sells precious metals, precious stones or jewellery for an amount of $10,000 or more is engaged in an activity for the purposes of paragraph 5(i) of the Act. A department or an agent or mandatary of Her Majesty in right of Canada or of a province carries out an activity for the purposes of paragraph 5(l) of the Act when they sell precious metals to the public for an amount of $10,000 or more.

(2) The activities referred to in subsection (1) do not include a purchase or sale that is carried out in the course of or in connection with manufacturing a product that contains precious metals or precious stones, extracting precious metals or precious stones from a mine or polishing or cutting precious stones.

(3) For greater certainty, the activities referred to in subsection (1) include the sale of precious metals, precious stones or jewellery that are left on consignment with a dealer in precious metals and precious stones. Goods left with an auctioneer for sale at auction are not considered to be left on consignment.

Neither the PCMLTFA nor the Regulations define consignment. This may need to be addressed, as the understanding of the term can vary.

Exempt Low Risk Activities

Certain activities are currently exempt from the DPMS designation, including manufacturing jewellery, extracting precious metals or precious stones from a mine, and cutting or polishing precious stones. The exempt activities would be expanded to capture other types of manufacturing processes that may also involve the use or consumption of precious metals and stones (e.g. diamonds used to manufacture drill bits). This is described as being consistent with the original policy intent.

What’s next?

If you would like to make a comment about the proposed changes to the Department of Finance during the comment period (which closes in early September), the contact person is:

Lynn Hemmings

Acting Director General

Financial Systems Division

Financial Sector Policy Branch

Department of Finance

90 Elgin Street

Ottawa, Ontario

K1A 0G5

Email: fin.fc-cf.fin@canada.ca

If you would like to submit comments via an industry association, and you are a member of CJA, please contact carla@canadianjewellers.com.

If you have questions about AML & ATF compliance generally, please feel free to contact us.

On June 9^th, 2018, draft amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its enacted regulations (there are five separate regulations, that we’re going to collectively call regulations here for simplicity’s sake). While not all of the proposed amendments are related to virtual currency, many are (the term virtual currency comes up 304 times in about 200 pages). This article is intended to give a high-level summary of the proposed amendments as they relate to virtual currency for businesses in that industry (exchanges, brokerages, etc.).

Finally, we want to encourage the community to discuss the draft and submit meaningful feedback for policymakers. To this end, we’re going to be posting, hosting and attending community events. We’ve also set up a survey that can be completed without submitting any personal information (though you may choose to do so). If you would like one of our compliance nerds at your event, please get in touch. If you’re already having a related event that benefits the community, let us know or post it in the comments.

The comment period for this draft is 90 days. After this, the Department of Finance takes the feedback to the bat cave and drafts a final version of the amendments. From the time that the final version is published, the draft indicates that there will be 12 months of transition to comply with the new requirements.

What to expect when you’re expecting (to be regulated)?

While we acknowledge that our sample is biased (people that talk to compliance geeks), we know that many businesses such as brokerages and exchanges have expected to be regulated as money services businesses (MSBs) since Bill C-31 was passed in 2014. Many of these businesses already have in place the required elements of an anti-money laundering (AML) compliance regime, including:

The appointment of a Compliance Officer;
Written policies and procedures;
A documented risk assessment;
Training; and
Effectiveness testing (like an audit, but for compliance).

In addition, many have been voluntarily reporting suspicious activity to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the body under which they expect to be regulated for AML.

The proposed amendments would formalize compliance program requirements, as well as create new requirements specific to businesses “dealing in virtual currency” (which would now be considered MSBs). While “dealing in virtual currency” itself is not defined, the text of the regulations implies that it will include exchanging, sending, and receiving virtual currency on behalf of other people or entities. Such entities would be required to register as MSBs if they are serving Canadian customers (whether or not they are located in Canada).

There are a number of thresholds that are proposed, including identification (at CAD 1,000) and reporting (at CAD 10,000). In each case, specific information must be collected and recorded. The identification methods that are available in these circumstances are relatively prescriptive, although the proposed amendments do make some headway towards supporting a broader array of identification methods by requiring that documents be considered “authentic” rather than requiring documents in their original format. Of course, as with any complex issue, guidance from FINTRAC will be required before we’re certain how this will be interpreted by the regulator (It’s good news; we’re just not sure how good, yet).

As always in compliance, the devil is in the details. What follows is a few of those key details, as well as some of the issues that we anticipate. We encourage you to conduct your own analysis and to join the conversation.

What’s In A Definition?

Definitions are generally not very interesting. When was the last time that you read the dictionary? (Sidenote: if you are a serious scrabble geek and do this on the regular, you will enjoy this section more than most)… In this case though, definitions matter. Definitions will make a difference in terms of the businesses and activities that are regulated, and how they are regulated. Fortunately, our community includes a number of engineers, debaters, and other individuals with a penchant for the precise – and your skills are needed here. We encourage you to carefully consider the following and to submit feedback on how they can be improved.

authorized user means a person who is authorized by a holder of a prepaid payment product account to have electronic access to funds or virtual currency available in the account by means of a prepaid payment product that is connected to it.

funds means

(a) cash and other fiat currencies, and securities, negotiable instruments or other financial instruments that indicate a title or right to or interest in them; or

(b) information that enables a person or entity to have access to a fiat currency other than cash.

For greater certainty, it does not include virtual currency. (fonds)

fiat currency means a currency that is issued by a country and is designated as legal tender in that country.

large virtual currency transaction record means a record that indicates the receipt of an amount of $10,000 or more in virtual currency in a single transaction and that contains the following information:

(a) the date of the receipt;

(b) if the amount is received for deposit into an account, the name of each account holder;

(c) the name, address and telephone number of every other person or entity that is involved in the transaction, the nature of their principal business or their occupation and, in the case of a person, their date of birth;

(d) the type and amount of each virtual currency involved in the receipt;

(e) the exchange rate used and the source of the exchange rate;

(f) the number of every other account that is affected by the transaction, the type of account and the name of each account holder;

(g) every reference number that is connected to the transaction;

(h) every other known detail that identifies the receipt; and

(i) if the amount is received by a dealer in precious metals and precious stones for the sale of precious metals, precious stones or jewellery,

(i) the type of precious metals, precious stones or jewellery,

(ii) the value of the precious metals, precious stones or jewellery, if different from the amount of virtual currency received, and

(iii) the wholesale value of the precious metals, precious stones or jewellery.

prepaid payment product means a product that is issued by a financial entity and that enables a person or entity to engage in a transaction by giving them electronic access to funds or virtual currency paid to a prepaid payment product account held with the financial entity in advance of the transaction. It excludes a product that enables a person or entity to access a credit or debit account or one that is issued for use only with particular merchants.

prepaid payment product account means an account that is connected to a prepaid payment product and that permits

(a) one or more transactions that total $1,000 or more to be conducted within a 24-hour period; or

(b) a balance of funds or virtual currency available of $1,000 or more to be maintained.

virtual currency means

(a) a digital currency that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds; or

(b) information that enables a person or entity to have access to a digital currency referred to in paragraph (a).

virtual currency exchange transaction means an exchange, at the request of another person or entity, of virtual currency for funds, funds for virtual currency or one virtual currency for another.

virtual currency exchange transaction ticket means a record respecting a virtual currency exchange transaction — including an entry in a transaction register — that sets out

(a) the date of the transaction;

(b) in the case of a transaction of $1,000 or more, the name, address and telephone number of the person or entity that requests the exchange, the nature of their principal business or their occupation and, in the case of a person, their date of birth;

(c) the type and amount of each of the funds and virtual currencies involved in the payment made and received by the person or entity that requests the exchange;

(d) the method by which the payment is made and received;

(e) the exchange rate used and the source of the exchange rate;

(f) the number of every account that is affected by the transaction, the type of account and the name of each account holder;

(g) every reference number that is connected to the transaction; and

(h) every other known detail that identifies the transaction.

Diving Deeper – Obligations and Potential Issues

1 – Do the definitions capture unintended parties?

We were surprised to see that there were not specific carve-outs for certain types of tokens, including securities, and tokens intended specifically for gaming. The definition, as it’s currently written seems capable of encompassing both tokenized security offerings and gaming tokens.

In addition, the second part of the definition that includes “information that enables a person or entity to have access to a digital currency referred to in paragraph (a).” has the potential to open the definition even more broadly. For instance, if I have stored a copy of a seed phrase or a hardware device with a vault service – have they received virtual currency? Are they sending virtual currency to me if the contents of my vault are couriered to me?

2 – What about peer-to-peer, decentralized applications, and smart contracts?

The amendments as they are presented appear to take the view that transactions have intermediaries. There are no specific carve-outs for peer-to-peer transactions (though we expect that previous guidance could be applied here), decentralized applications, and smart contracts. This may be a particularly contentious issue in the case of an exchange from one “virtual currency” to another – especially where such an exchange is initiated or completed without any human intervention. Similarly, questions arise for wallet service providers. For instance, what if a wallet provider does not have access to private keys, but connects to applications that permit users to initiate transactions that would be considered to be exchange transactions under the current definition?

That said, there are some astute exclusions, including the following activities which are explicitly not covered:

(a) a transfer or receipt of virtual currency as compensation for the validation of a transaction that is recorded in a distributed ledger; or

(b) an exchange, transfer or receipt of a nominal amount of virtual currency for the sole purpose of validating another transaction or a transfer of information.

Nonetheless, it is difficult to determine where the policymakers intended to draw the line, and where the regulator will later enforce it…

3 – Jurisdiction doesn’t matter; foreign money services businesses (MSBs) are covered.

While not specific to virtual currency, it is noteworthy that the proposed amendments expand the definition of an MSB to include any business that is providing prescribed services in Canada. As we’ve seen in the case of the NY BitLicense, badly drafted legislation can drive away business and lead to a lack of service providers willing to do business in a region.

While we’re not suggesting that the proposed amendments are nearly as ill-conceived as the NY BitLicense, it is important to consider whether or not these will affect Canadians’ ability to access services, and the attractiveness of the Canadian market generally for innovative international businesses. While we do not expect this particular amendment to be altered, we would encourage businesses located outside of Canada that serve Canadians to comment.

What Next?

If you’ve read this far, congratulations and thank you!

We hope that you will contribute your thoughts and comments. You can do this by contacting the Department of Finance directly. Their representative on this file is:

Lynn Hemmings

Acting Director General

Financial Systems Division

Financial Sector Policy Branch

Department of Finance

90 Elgin Street

Ottawa, Ontario

K1A 0G5

Email: fin.fc-cf.fin@canada.ca

If you would like assistance drafting a submission, or have questions that you would like Outlier to answer, please get in touch!

You can also answer specific questions in our survey, or join us at a community event.

Quick Overview

A little over a month ago, FINTRAC published an operational brief for the Canadian real estate industry. The brief was intended to assist reporting entities in meeting the obligations to report suspicious transactions or attempted suspicious transactions that related to potential money laundering or terrorist financing. The publication provided some common indicators that may be present in a transaction that suggest money laundering or terrorist financing could be involved.

What Does it Mean?

The suspicious indicators provided by FINTRAC list circumstances or activities that might signal potentially illicit activity. This does not mean that if one or more of the indicators are present that the transaction is definitely suspicious and must be reported to FINTRAC, it is meant to ensure that you are aware of the potential that suspicious activity may be taking place. In that context, if you are involved in real estate transactions, you must be aware of the indicators in the brief. If you do encounter a transaction that may be considered suspicious, you will need to collect additional information that will aid in your decision to report it or document why it was not considered suspicious.

What Now?

In order to ensure familiarity for anyone who interacts with customers and their transactions, the list of FINTRAC’s indicators should be included in your ongoing AML compliance training program. Furthermore, the indicators should also be included in your procedure manuals, allowing easy access to the information. Finally, the indicators should be incorporated into your Risk Assessment documentation. Specifically, when determining customer risk and the controls used to effectively mitigate potential risks.

We’ve made it easier for you to integrate this content into your program by putting the indicators in a Word document for you.

Need a Hand?

Outlier has taken the list of indicators provided by FINTRAC and formatted them into an easy to use Microsoft Word document, which can be downloaded here: FINTRAC Indicators Specific to Real Estate Transactions. This should allow companies within the real estate sector to easily update their documentation and ensure they are sufficiently monitoring for potentially suspicious activity. If you aren’t sure what to do with this information and would like some assistance, please feel free to contact us.

On November 14^th, 2016 FINTRAC released a brief for all reporting entities who may be involved in real estate transactions. The briefing is intended as guidance to provide some examples of indicators that may be present in transactions that may suggest they are linked to money laundering or terrorist financing. The indicators described have been taken from transactions suspected of being related to money laundering or terrorist financing reported internationally. The briefing focuses on the potential risks and vulnerabilities within the real estate industry and provides suggestions on how to ensure reporting entities are sufficiently meeting suspicious transaction reporting obligations.

The briefing is meant to provide operational guidance given the small overall number of suspicious transactions that have been reported to FINTRAC by the Real Estate industry. The briefing states that these indicators will be used by FINTRAC to assess compliance with your reporting obligations. If you are a reporting entity that interacts with the real estate industry in one form or another, the indicators and scenarios outlined in this brief should be considered when updating your Risk Assessment and training materials.

To put things into perspective, though the actual size of the real estate market is difficult to determine precisely, CMHC has produced some statistics. CMHC suggests that between 2003 and 2013 over $9 trillion of mortgage credits were negotiated and roughly 5 million sales took place through Multiple Listing Services (MLS). In contrast, FINTRAC received only 127 Suspicious Transactions Reports (STRs) from real estate brokers, agents and developers and 152 by other types of reporting entities, such as banks and trust/loan companies. To go a step further, in FINTRAC’s 2015 Annual Report, between April 1, 2014 and March 31, 2015, a total of 92,531 STRs were filed across all reporting entities.

This evidence supports FINTRAC’s assertion that operational guidance for the real estate industry is needed.

The indicators and examples covered in the brief outline numerous scenarios that may suggest that a transaction is related to a money laundering or terrorist financing offense. It also speaks to how the appearance of legitimacy obfuscates the clarity of suspicious transactions and requires more than a just “gut feel”. What is required is the consideration of the facts related to the transaction and their context. Does the transaction with all the known factors, positive or negative, make sense?

What This Means to Your Business?

First off, FINTRAC will be using the indicators provided to assess your compliance with reporting obligations. This has a couple different applications. The first being, does your AML compliance program documentation make reference to the suspicious indicators that are provided. Basically, are staff aware of the elements that may be present in a transaction that would suggest money laundering or terrorist financing may be occurring?

Secondly, is there an oversight process to ensure if there are transactions that contain one or more of these indicators where an STR was not submitted, is reviewed? If so, does the process ensure supporting evidence that the Compliance Officer reviewed the transaction and determined there were not reasonable grounds to suspect its relation to money laundering or terrorist financing? When you encounter a transaction involving any of the indicators provided, it is very important that you collect as much information as possible to assist the Compliance Officer with their determination of whether there are reasonable grounds to suspect that a transaction, or attempted transaction, may be related to money laundering or terrorist financing. Alternatively, even if none of the indicators provided by FINTRAC are present but we still feel there is “something off” about our customer’s transaction, speak with your Compliance Officer. They will be able to provide some insight on additional information that may assist our decision. Once you have collected any additional information you may still not feel comfortable, but this does not mean you cannot complete the transaction, but that you must be sure your Compliance Officer is provided with all the information, which includes our reason for the escalation, so that they can decide whether there are reasonable grounds to suspect it may be related to a money laundering or terrorist financing offense. The Compliance Officer will document their decision and, if necessary, submit an STR to FINTRAC.

Need a Hand?

If you are a reporting entity that interacts with the real estate industry and would like assistance updating your AML compliance program documentation or simply have some questions, please contact us.

OSFI

There were no updates released from OSFI this week.

Go to the OSFI lists page.

OFAC

The U.S. Department of Treasury’s Branch, The Office of Foreign Asset Control (OFAC), released four updates last week. One update was related to the publication of Cuba-related Frequently Asked Questions (FAQ), covering some of the recent changes made to the sanctions that had previously been placed on Cuba. Other updates included the removal of 12 individuals from the Counter Terrorism Designations List, the issuance of a Finding of Violation and the publication of Iran General License J.

The update to the Cuba-related FAQs was for the issuance of a new FAQ (#38) and a revision of an existing FAQ (#39), relating to certain information collection and recordkeeping requirements for persons subject to U.S. jurisdiction who provide authorized carrier or travel services to or from Cuba for specifically licensed travelers.

The update to the Counter Terrorism Designations List included the removal of 12 individuals of Libyan origin who are currently residing in the UK.

The Finding of Violation was issued to Compass Bank, which uses the trade name BBVA Compass, for violations of the Foreign Narcotics Kingpin Sanctions Regulations. From June 12, 2013 to June 3, 2014, Compass maintained accounts on behalf of two individuals on OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”).

The final update of the week was related to OFAC issuing “General License J”, authorizing the re-exportation of certain civil aircraft to Iran on temporary sojourn and related transactions.

See the Counter Terrorism Designations List update on OFAC’s website.

See the issuance of a Finding of Violation to Compass Bank on OFAC’s website.

See the Iran General License J details on OFAC’s website.

See OFAC’s recent actions page.

Need A Hand?

We would love to hear from you. If there are subjects in this post that you would like to know more about, or if you need assistance with your compliance program, please contact us.

OSFI

On July 18^th and 22^nd, 2016, the Office of the Superintendent of Financial Institutions (OSFI) released the United Nations Security Council’s (UNSC’s) Al’Qaida and Taliban regulations updates to the sanctions list, deleting one individual and amending another.

The individuals are subject to the assets freeze, travel ban and arms embargo set out in paragraph 2 of Security Council resolution 2253 (2015) adopted under Chapter VII of the Charter of the United Nations.

The review of the individual who was deleted from the list was triggered by regularly scheduled updates. However, no additional information was available regarding the justification.

The amendment of one individual’s information included the following:

A physical description;
The confirmation of the most recent position held within the Taliban, as of April 2015; and
That they are currently involved in drug trafficking and operate a heroin laboratory in Afghanistan.

See the July 18^th update on the United Nations (UN) website.

See the July 22^nd update on the United Nations (UN) website.

Go to the OSFI lists page.

OFAC

The U.S. Department of Treasury’s Branch, The Office of Foreign Asset Control (OFAC), released three updates last week. One update was related to the addition of three individuals to the Counter Terrorism Designations list. The second update was related to the addition of multiple individuals and entities to the Syria and Non-proliferation Designations lists. The final update last week was to the Kingpin Act and Panama-related Frequently Asked Questions (FAQs) regarding General Licenses.

The changes to the Counter Terrorism Designations list included three individuals of different nationalities, Saudi Arabia, Egypt and Algeria, though all have been linked to Al Qa’ida.

The update to the Syria Sanctions list included eight individuals, all of whom are Syrian. The seven entities, which range from construction, to finance to manufacturing industries and vary in location, which include:

Syria;
Saint Kitts and Nevis;
Cyprus;
UAE; and

The update to the Kingpin Act and Panama-related FAQs are specific General License 5B and 6B

See the Counter Terrorism Designations list update on OFAC’s website.

See the Syrian and Non-proliferation Designations lists update on OFAC’s website.

See the Kingpin Act and Panama-related General License FAQs update on OFAC’s website.

See OFAC’s recent actions page.

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OSFI

There were no updates released from OSFI this week.

Go to the OSFI lists page.

OFAC

The U.S. Department of Treasury’s Branch, The Office of Foreign Asset Control (OFAC), released one update last week. The update was related to the addition of two Russian individuals who were added to the Counter Terrorism Designations list.

No other information was available on the individuals who were added.

See the Counter Terrorism Designations list update on OFAC’s website.

See OFAC’s Recent Actions page.

Need A Hand?

We would love to hear from you. If there are subjects in this post that you would like to know more about, or if you need assistance with your compliance program, please contact us.

OSFI

On July 5^th, 2016, the Office of the Superintendent of Financial Institutions (OSFI) released the United Nations Security Council’s (UNSC’s) Al’Qaida and Taliban regulations update to the sanctions list, removing one individual.

Individuals who are included in the list are subject to the assets freeze, travel ban and arms embargo set out in paragraph 2 of Security Council resolution 2253 (2015) adopted under Chapter VII of the Charter of the United Nations. The individual delisted was decided following a review, initiated by a request that was submitted to the Ombudsperson. The individual is a German national and has been imprisoned in Germany since 2007.

See the update on the United Nations (UN) website.

Go to the OSFI lists page.

OFAC

The U.S. Department of Treasury’s Branch, The Office of Foreign Asset Control (OFAC), released three updates last week. The first update, released on July 5^th, 2016 was related to the settlement of a potential civil liability for apparent violations of the Iranian and Sudanese transactions and sanctions regulations. The second update was related to the addition of multiple North Korean individuals and entities to the North Korean Designations List. The final update was further clarification to the new Cuba-related Frequently Asked Questions (FAQ).

The settlement on July 5^th for apparent violations of the Iranian and Sudanese sanctions was levied against Alcon Laboratories, Inc., Alcon Pharmaceuticals Ltd., and Alcon Management SA. In the course of the investigations, Alcon produced documents and information where it appeared that from August 2008 to December 2011, Alcon violated Iranian sanctions on 452 occasions and Sudanese sanctions on 61 occasions. Alcon engaged in the sale and exportation of medical end-use surgical and pharmaceutical products from the United States to distributors located in Iran and Sudan without OFAC authorization. OFAC determined that Alcon did not make a voluntary self-disclosure and that the apparent violations were not egregious. The statutory maximum civil monetary penalty amount for the Apparent Violations was $138,982,584 USD and the base penalty amount was $16,927,000 USD. Ultimately, Alcon paid $1,317,150 USD.

The North Korean sanctions list update included numerous individuals and entities, some of whom are high-ranking officials with titles such as:

Director of the Fifth Bureau of the Reconnaissance;
Director of the Workers’ Party of Korea Propaganda and Agitation Department; and
Minister of People’s Security.

The update to the Cuba-related FAQs were specific to the issuance of two new questions added, #43 and #50, regarding the use of the U.S. dollar in certain transactions.

See the Enforcement Action update on OFAC’s website.

See the North Korea Designations List update on OFAC’s website.

See OFAC’s Recent Actions page.

Need A Hand?

We would love to hear from you. If there are subjects in this post that you would like to know more about, or if you need assistance with your compliance program, please contact us.

OSFI

On June 27^th, 2016, the Office of the Superintendent of Financial Institutions (OSFI) released two updates to the United Nations Security Council’s (UNSC’s) Al-Qaida and Taliban regulations sanctions list, amending 8 individuals and 1 entity.

All of the individuals are of different nationalities, but all have connections to Al-Qaida and French terrorist groups. Some of the individuals have been detained and are currently serving out sentences. Where others have arrest warrants issued by France, which are currently outstanding.

Go to the OSFI UNAQTR update on the OSFI page.

Go to the OSFI lists page.

OFAC

The U.S. Department of Treasury’s Branch, The Office of Foreign Asset Control (OFAC), released three updates last week. One update was related to the Counter Terrorist Designations list. The second update was the publication of new Panama-related and Kingpin Act General Licenses and related Frequently Asked Questions (FAQ). The FAQ update is related to recent adjustments made to the sanctions placed on Panama.

OFAC also released the details about the implementation of the Federal Civil Penalties Inflation Adjustment Act, where penalties related to AML failings have increased 150%, the allowable maximum. The adjustment to the base fine of USD 11,000, has now increased to USD 27,500. This is based off the Consumer Price Index, and if you are curious about the actual math, see the image below:

OFAC CMP Calculation

OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals. The sanctions target countries, regimes, terrorists, international narcotics traffickers, the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the U.S. The changes to the Counter Terrorism Designations list included the removal of 11 Somali and Djibouti nationals. The update also included the addition of one individual of Indian nationality with ties to the entity added, which is a section of Al-Qaida operating within India.

See the Counter Terrorism Designations List update on OFAC’s website.

See the Kingpin Act/Panama-related General Licenses and FAQs update on OFAC’s website.

See the Implementation of the Federal Civil Penalties Inflation Adjustment Act update on OFAC’s website.

See OFAC’s Recent Actions page.

Need A Hand?

We would love to hear from you. If there are subjects in this post that you would like to know more about, or if you need assistance with your compliance program, please contact us.

Canada’s Proposed AML Changes for MSBs

What’s Old is New Again, Well Updated

♬The Times Regulations Are Changing♬

Foreign MSBs

Non-Face-To-Face Customer Identification

Reporting EFTs of $10,000 or More

Third Party Determination

Suspicious Transaction Reporting

Information Included In Reports to FINTRAC

Ongoing Compliance Training

Risk Assessment Obligations

Virtual Currency

What Next

Don’t Panic: June 2018 AML Update for DPMSs

Why is it a draft?

What does it mean for my business?

Large Virtual Currency Transaction Reporting

Non-Face-To-Face Customer Identification

Suspicious Transaction Reporting

Information Included In Reports to FINTRAC

New Products & Delivery Channels

Defining a DPMS

Exempt Low Risk Activities

What’s next?

Canada’s AML Rules for “Virtual Currency”

What to expect when you’re expecting (to be regulated)?

What’s In A Definition?

Diving Deeper – Obligations and Potential Issues

What Next?

FINTRAC’s 2016 Real Estate Brief

Quick Overview

What Does it Mean?

What Now?

Need a Hand?

Would You Recognize Real Estate Red Flags?

What This Means to Your Business?

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Sanctions This Week: July 25th – 29th, 2016

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OFAC

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OFAC

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Sanctions This Week: July 11th – 15th, 2016

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OFAC

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Sanctions This Week: July 4th – 8th, 2016

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Sanctions This Week: June 27th – July 1st, 2016

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