The Canadian anti-money laundering regulatory body levied a C$7.4m penalty on the Royal Bank of Canada (RBC) for not reporting suspicious activities and failing to comply with AML measures.
The Financial Transactions and Reports Centre (FINTRAC) disclosed that RBC did not report suspicious transactions to the agency involved in money laundering and terrorist financing. It showed reasonable deficiencies in its alerting and real-time monitoring system. The regulatory body investigates by electronically shifting the bulk of information yearly from banks, insurance, financial service providers, etc. After verifying various data the bank did not report, the agency disclosed to the country’s police and legislative agencies the RBC’s inadequate business verification system and loopholes in their compliance measures. The agency’s $7.4m penalty is the largest fine ever imposed on any bank.
Moreover, the agency claimed they investigated 136 suspicious transactions, of which 16 indicated ties with money laundering and terrorist financing, which the bank did not report. These are the transactions in which the bank assists the clients but fails to report the significant amount they transact by breaching the AML policies. The regulatory body also revealed the deficiencies in the RBC risk assessment process, including noncompliance with the latest obligations to combat money laundering and terrorist financing. The FINTRAC director stated in a statement the agency will continue to work with businesses to comply with international standards and enhance their AML measures to secure the integrity of the global economy. The Director stated, “We will also be firm in ensuring that businesses continue to do their part, and we will take appropriate actions when they are needed.”
In a circular, Royal Bank Canada’s spokesperson, Gillian McArdle, asserted,” We chose not to appeal but believe the fine is not commensurate with an administrative matter where there is no connection to money laundering or terrorist financing offences. Equally important, no finding exists that anyone exercised judgment in bad faith or knowingly contributed to violations.” The financial crime prevention expert, Garry Clement, stated, “What we’re seeing is FINTRAC taking a different approach, and they have in the past… I don’t think there are going to be any more free passes.”
According to the FINTRAC, around May 2021, RBC was not reporting various suspicious transaction reports for each branch location, and the company lacked investor protections as well as compliance audits for putting AML procedures into place. Paquet had made public in a recent speech that Fintrac was concerned that certain companies were falling in compliance with user onboarding measures. The government also stated that administrative and financial penalties are not intended to penalize firms but rather to motivate them to alter their behaviour. The FINTRAC imposes 125 penalties across various sectors that are not complying with obligations to secure the country’s financial industry since it receives regulatory implementation authority to do so for 15 years.
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