FINTRAC

In Canada, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is the regulatory body responsible for combating financial crimes, such as money laundering, terrorist financing, and corruption. FINTRAC assesses and monitors compliance with obligations issued by the Minister of Finance and enforces penalties in case of breaching. 

What is FINTRAC?

FINTRAC is a financial intelligence unit (FIU) founded in 2000 in Canada that screens financial transactions to achieve transparency and prevent illicit funding. The headquarters of FINTRAC is located in Ottawa, with additional offices in Toronto, Montreal, and Vancouver. The primary task of this center is to collect, analyze, and disclose information to relevant agencies and law enforcement bodies. This center identifies money laundering, terrorist financing, and other crimes in funding and directly reports to the Minister of Finance, who is accountable to Parliament. 

Furthermore, FINTRAC ensures compliance with regulations such as anti-money laundering and terrorist financing, as recommended by international bodies. This center conducts assessments, provides guidance, and imposes penalties for non-compliance with regulations. 

How does FINTRAC Work?

FINTRAC plays an effective role in enhancing Canada’s financial security and improving its economic ecosystem. It collects data from individuals and entities to ensure safe transactions and reports suspicious activities to the relevant authority. The main tasks of the FINTRAC are discussed below:

• Receiving Reports

It receives reports of financial transactions consisting of various fund transfers and suspicious transactions. It collects information from banks, credit unions, money services businesses, and casinos, as well as other financial institutions.

• Analyzing Financial Intelligence 

FINTRAC analyzes the collected reports and scrutinizes them with the help of other intelligence sources. It identifies irregularities that could suggest money laundering, terrorist financing, and other potential financial offenses.

• Disclosure of Intelligence 

If required, FINTRAC has a responsibility to share financial intelligence with law enforcement agencies, intelligence agencies, tax authorities, and other partners. This helps in the investigation of financial crimes and enforcing penalties. 

• Ensure Compliance with Regulations

One critical task of FINTRAC is ensuring compliance with obligations, including anti-money laundering (AML) and counter-terrorist financing (CTF). This center assesses and assists in compliance with regulations and declares punishments for breaching.    

Additionally, FINTRAC is an independent center that shares information with other legal authorities. If an individual or entity is suspected of illegal activity, FINTRAC must report to the Access to Information Act.  Reporting entities (REs) in Canada must comply with AML regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

FINTRAC Methods to Verify Entities

Reporting entities (REs) not only verify customer identity but must also identify corporations, funds, trusts, partnerships, unincorporated associations, and other entities. In Canada, there are three methods for identifying an entity.

1. Confirmation of existence method

To verify the authenticity and existence of the corporation, one of the following documents is required: 

• Annual filing record under provincial securities legislation
• Article of incorporation
• The most recent version of any record confirms the names of its directors, the corporation’s name, and address. If it’s not a corporation, one of the following is required:

If it’s not a corporation, one of the following is required:

• Articles of association
• Partnership agreement
• The most recent record confirms its existence and includes the name and address.

2. Reliance method

To identify an entity, rely on the person or entity referred to in section 5 of the PCMLTFA. The affiliated foreign entity must consider policies similar to record-keeping in which it carries out its activities. Assess the risk of money laundering or financing terrorist activities in a foreign country.

3. Simplified identification method

If an entity is proven as low risk after the risk assessment process, the simplified identification method is best to rely on. FINTRAC identifies seven specific types of entities eligible for this method. The signs indicating that the entity is low risk are as follows: 

• There is a low risk of money laundering or terrorist financing crimes
• Persons behind the entity assure that it exists or is authorized for this purpose  

FINTRAC Feb 2023 Changes

FINTRAC introduced a new process for organizations to open retail deposit accounts for individuals without identity verification information or documentation. This allows vulnerable people to access basic retail deposit accounts until they obtain proper identification. Some requirements include documenting procedures, identifying people within a reasonable timeframe (6 to 12 months or as described in the risk-based approach), and monitoring the progress of customer identification.