A recent CBC News article titled, “Ottawa’s secret report on money-laundering points finger at Canada’s banks” highlights the findings of a confidential annual report which looked at Fintrac’s probe of nine banks in 2016-2017. In examining the banking sector, the report found that “67% were found to have significant levels of non-compliance” in regard to suspicious transaction reports (STRs), risk assessment, and policies and procedures.
While the banking sector has significantly stepped up to combat human trafficking by increasing STRs through Project Protect, there is still much work to be done to ensure full compliance with Fintrac regulations.
In April 2016, Fintrac announced it had fined a Canadian bank $1.15 million for breaking money laundering rules with the intention of sending a strong message to all banks about the consequences of non-compliance. As of right now, Fintrac has suspended all penalties (AMPs) under its Administrative Penalty Program until sanctions are more transparent as per several court rulings. The agency plans to release the updated regime later this year, after which it can (and likely will) begin imposing fines again. Speculation would indicate that once released, Fintrac will be back with a renewed strength to enforce the newly-revised sanctions, and ultimately impose fines for violations.
What can banks do to enhance regulatory compliance?
The first step in regulatory compliance is to know your customer and ensure a thorough due diligence program is in place to help assess the level of risk associated with a customer, whether they’re an individual or a business. While the process has traditionally been labour-intensive, RegTech companies have created solutions that simplify the process of digitally verifying a customer’s identity in a matter of seconds. When added to your existing processes, Securefact’s products for individual verification, business-entity verification and business beneficial ownership can help you to enhance compliance and risk assessment while reducing paperwork and customer wait times. Digital KYC products also simplify the process of monitoring changes and storing documents which in turn makes it easier for your company to detect and report any suspicious activity.
Although the threat of being hit with AMPs should be incentive enough to comply with regulations, it’s not just the cost of such fines that should be pushing banks and lenders toward regulatory compliance; there are irreparable reputational damages, not to mention the implied facilitation of criminal activity. When you report suspicious activity, you gain the satisfaction of contributing to the take-down of money launderers, drug dealers, human traffickers, and many other types of criminals who are often able to operate under the radar.