FINTRAC penalties set to jump

New legislation that aims to enhance national security will massively boost the maximum penalties that federal anti-money laundering (AML) authorities can impose for compliance violations.

The scale of administrative monetary penalties that can be imposed by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is set to shift dramatically, with the maximum penalties jumping by a factor 40.

For instance, the maximum penalty for a “very serious” violation of the AML rules will jump to $20 million from $500,000. Similarly, the cap on penalties for “serious” violations will jump to $4 million from $100,000; and the limit on “minor” breaches will go to $40,000 from $1,000.

Along with the jump in FINTRAC’s maximum penalties, the new legislation also boosts the maximum punishments for criminal violations, requires that firms that are hit with penalties enter a compliance agreement with FINTRAC, and enables the agency to use compliance orders as part of its enforcement efforts; among other changes.

The new regime will apply to violations that are determined to have occurred after March 26, which is when the legislation received royal assent. For violations that happened before that date, the existing approach to penalties will continue to apply.

FINTRAC said it will calibrate compliance exam review periods, so that they fall entirely within one legislative framework or the other.

The agency said it’s currently developing new guidance to reflect the changes, and that it’s updating its penalties policy to introduce guidance on the use of compliance agreements and compliance orders, along with a revised methodology for calculating penalties.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.