Registration
SOR/2002-185 9 May, 2002

PROCEEDS OF CRIME (MONEY LAUNDERING) AND TERRORIST FINANCING ACT

Regulations Amending the Proceeds of Crime (Money Laundering) Suspicious Transaction Reporting Regulations

P.C. 2002-782 9 May, 2002

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 73(1) (see footnote a)  of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (see footnote b) , hereby makes the annexed Regulations Amending the Proceeds of Crime (Money Laundering) Suspicious Transaction Reporting Regulations.

REGULATIONS AMENDING THE PROCEEDS OF CRIME (MONEY LAUNDERING) SUSPICIOUS TRANSACTION REPORTING REGULATIONS

AMENDMENTS

1. The title of the Proceeds of Crime (Money Laundering) Suspicious Transaction Reporting Regulations (see footnote 1)  is replaced by the following:

PROCEEDS OF CRIME (MONEY LAUNDERING) AND TERRORIST FINANCING SUSPICIOUS TRANSACTION REPORTING REGULATIONS

2. (1) Subsection 1(1) of the Regulations is replaced by the following:

1. (1) For the purposes of the Act and these Regulations, "casino" means a person or entity that is licensed, registered, permitted or otherwise authorized to do business under any of paragraphs 207(1)(a) to (g) of the Criminal Code and that has an establishment

(a) that the person or entity holds out to be a casino and in which roulette or card games are carried on; or

(b) where there is a slot machine, which, for the purposes of this definition, does not include a video lottery terminal.

It does not include a person or entity that is a registered charity as defined in subsection 248(1) of the Income Tax Act and is licensed, registered, permitted or otherwise authorized to carry on business temporarily for charitable purposes, if the business is carried out in the establishment of a casino for not more than two consecutive days at a time under the supervision of an employee of the establishment.

(2) The definition "cash" or "currency" in subsection 1(2) of the Regulations is repealed.

(3) The definitions "Act", "financial entity", "funds", "life insurance broker or agent", "money services business" and "real estate broker or sales representative" in subsection 1(2) of the Regulations are replaced by the following:

"Act" means the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. (Loi)

"financial entity" means an authorized foreign bank within the meaning of section 2 of the Bank Act in respect of its business in Canada or a bank to which that Act applies, a cooperative credit society, savings and credit union or caisse populaire that is regulated by a provincial Act, an association that is regulated by the Cooperative Credit Associations Act, a company to which the Trust and Loan Companies Act applies and a trust company and loan company regulated by a provincial Act. It includes a department or agent of Her Majesty in right of Canada or of a province where the department or agent is carrying out an activity referred to in section 8. (entité financière)

"funds" means cash, currency or securities, or negotiable instruments or other financial instruments, in any form, that indicate a person's or an entity's title or interest in them. (fonds)

"life insurance broker or agent" means a person or entity that is registered or licensed under provincial legislation to carry on the business of arranging contracts of life insurance. (représentant d'assurance-vie)

"money services business" means a person or entity that is engaged in the business of remitting funds or transmitting funds by any means or through any person, entity or electronic funds transfer network, or of issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments. It includes a financial entity when it carries out one of those activities with a person or entity that is not an account holder. (entreprise de transfert de fonds ou de vente de titres négociables)

"real estate broker or sales representative" means a person or entity that is registered or licensed under provincial legislation in respect of the sale or purchase of real estate. (courtier ou agent immobilier)

(4) Subsection 1(2) of the Regulations is amended by adding the following in alphabetical order:

"accounting firm" means an entity that is engaged in the business of providing accounting services to the public and has at least one partner, employee or administrator that is an accountant. (cabinet d'expertise comptable)

"cash" means coins referred to in section 7 of the Currency Act, notes issued by the Bank of Canada pursuant to the Bank of Canada Act that are intended for circulation in Canada and coins or bank notes of countries other than Canada. (espèces)

"electronic funds transfer" means the transmission — through any electronic, magnetic or optical device, telephone instrument or computer — of instructions for the transfer of funds, including a SWIFT MT 100 or MT 103 message. (télévirement)

"legal firm" means an entity that is engaged in the business of providing legal services to the public. (cabinet juridique)

"SWIFT" means the Society for Worldwide Interbank Financial Telecommunication. (SWIFT)

3. Sections 2 to 6 of the Regulations are replaced by the following:

2. For the purposes of these Regulations, a person acting on behalf of their employer is considered to be acting on behalf of another person or entity except when the person is depositing cash into the employer's account.

APPLICATION OF PART 1 OF THE ACT

3. Part 1 of the Act applies to life insurance brokers or agents.

4. (1) Every money services business is subject to Part 1 of the Act when it engages in any of the following activities:

(a) remitting funds or transmitting funds by any means or through any person, entity or electronic funds transfer network; or

(b) issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments.

(2) For greater certainty, paragraph (1)(b) does not apply in respect of the redemption of any cheque payable to a named person or entity.

5. (1) Subject to subsection (2), every legal counsel and every legal firm is subject to Part 1 of the Act when they engage in any of the following activities on behalf of any person or entity, including the giving of instructions on behalf of any person or entity in respect of those activities:

(a) receiving or paying funds, other than those received or paid in respect of professional fees, disbursements, expenses or bail;

(b) purchasing or selling securities, real property or business assets or entities; or

(c) transferring funds or securities by any means.

(2) Subsection (1) does not apply in respect of a legal counsel when they engage in any of the activities referred to in that subsection on behalf of their employer.

6. (1) Subject to subsection (2), every accountant and every accounting firm is subject to Part 1 of the Act when they

(a) engage in any of the following activities on behalf of any person or entity, namely,

(i) receiving or paying funds,
(ii) purchasing or selling securities, real property or business assets or entities, or
(iii) transferring funds or securities by any means;

(b) give instructions on behalf of any person or entity in respect of any activity referred to in paragraph (a); or

(c) receive professional fees in respect of any activity referred to in paragraph (a) or in respect of any instructions referred to in paragraph (b).

(2) Subsection (1) does not apply in respect of an accountant when they engage in any of the activities referred to in paragraph (1)(a), (b) or (c) on behalf of their employer.

(3) For greater certainty, subsection (1) does not apply in respect of audit, review or compilation engagements carried out in accordance with the recommendations set out in the CICA Handbook.

4. Sections 8 to 13 of the Regulations are replaced by the following:

8. Every department and agent of Her Majesty in right of Canada or of a province is subject to Part 1 of the Act when, in the course of providing financial services to the public, it

(a) accepts deposit liabilities; or

(b) sells or redeems money orders.

9. (1) Subject to section 11, a report under section 7 of the Act concerning a financial transaction in respect of which there are reasonable grounds to suspect that the transaction is related to the commission of a money laundering offence or a terrorist activity financing offence shall contain the information set out in Schedule 1.

(2) The report shall be sent to the Centre within 30 days after the person or entity or any of its employees or officers first detects a fact respecting a transaction that constitutes reasonable grounds to suspect that the transaction is related to the commission of a money laundering offence or a terrorist activity financing offence.

REPORT MADE UNDER SECTION 83.1 OF THE CRIMINAL CODE

10. Subject to section 11, a report made under section 7.1 of the Act shall be sent without delay to the Centre and shall contain the information set out in Schedule 2.

EXEMPTION

11. The requirement to report information set out in Schedule 1 or 2 does not apply to a person or entity in respect of information set out in an item of that Schedule that is not marked with an asterisk if, after taking reasonable measures to do so, the person or entity is unable to obtain the information.

SENDING

12. (1) The report referred to in section 9 shall be sent electronically in accordance with guidelines for report submissions that are prepared by the Centre if the sender has the technical capabilities to do so.

(2) The report referred to in section 9 shall be sent in paper format in accordance with guidelines for report submissions that are prepared by the Centre if the sender does not have the technical capabilities to send the report electronically.

(3) The report referred to in section 10 shall be sent in paper format in accordance with guidelines for report submissions that are prepared by the Centre.

PRESCRIBED INFORMATION

13. The prescribed information for the purposes of paragraphs 55(7)(e), 55.1(3)(e) and 56.1(5)(e) of the Act is

(a) the following information concerning the client, importer or exporter, or any person acting on their behalf, namely,

(i) their alias, if any,
(ii) their date of birth,
(iii) their address,
(iv) their citizenship,
(v) their Record of Landing number, passport number or permanent resident card number, or all three numbers if applicable,
(vi) if the client, importer or exporter is a corporation, the date and jurisdiction of its incorporation, and
(vii) the name and address of any person or entity on whose behalf the financial transaction, importation or exportation is conducted; and

(b) in the case of a financial transaction, the following information, namely,

(i) the transit and account numbers,
(ii) the full name of every account holder,
(iii) the transaction number, if any,
(iv) the time of the transaction,
(v) the type of transaction, and
(vi) the names of the parties to the transaction.

5. The schedule to the Regulations is replaced by the following:

SCHEDULE 1
(Subsection 9(1) and section 11)

SUSPICIOUS TRANSACTION REPORT

PART A — Information on Place of Business where Transaction Occurred

1.^* Type of reporting person or entity, as described in paragraphs 5(a) to (h) and (k) to (m) of the Act, and, if reporting person or entity is referred to in paragraph (5)(i) or (j) of the Act, type of business, profession or activity of reporting person or entity, as described in sections 3 to 8 of these Regulations

2.^* Identification number of place of business where transaction occurred (e.g., institution's identification number, licence number or registration number), if applicable

3.^* Full name of reporting person or entity

4.^* Full address of place of business where transaction occurred

5.^* Name and telephone number of contact person

PART B — Information on Transaction

1.^* Date of transaction or night deposit indicator

2. Time of transaction

3. Posting date (if different from above)

4.^* Purpose and details of the transaction, including type of funds, amount of transaction, currency of transaction, and, if applicable, name and number of each other institution and name and account number of each other person or entity

5.^* Disposition of funds, amount of disposition, currency of disposition, and, if applicable, name and number of each other institution and name, account number and policy number of each other person or entity

6.^* Method by which the transaction was conducted (in branch or office, ABM, armoured car, mail deposit, courier, telephone or other)

7. Identification number of person who first detected a fact respecting a suspicious transaction

PART C — Account Information (if applicable)

1.^* Account number

2.^* Branch number or transit number

3.^* Type of account (personal, business, trust or other)

4.^* Full name of each account holder

5.^* Type of currency of the account

6. Date account opened

7. Date account closed, if applicable

8.^* Status of account (active, inactive or dormant)

PART D — Information on Person Conducting Transaction

1. Person's full name

2.^* Client number provided by reporting person or entity, if applicable

3. Person's full address

4. Person's country of residence

5. Person's personal telephone number

6. Person's citizenship

7. Person's type of identifier (e.g., driver's licence, birth certificate, provincial health insurance card — if such use of the card is not prohibited by the applicable provincial law —, passport, Record of Landing or permanent resident card) and identifier number

8. Place of issue of person's identifier (province or state, country)

9. Person's date of birth

10. Person's occupation

11. Person's business telephone number

12. Person's employer

13. Employer's full business address

14. Employer's business telephone number

PART E — Information on Entity on Whose Behalf Transaction is Conducted (if applicable)

1. Entity's full name

2. Full name of each person — up to three — who is authorized to bind the entity or act with respect to the account

3. Entity's type of business

4. Entity's full address

5. Entity's telephone number

6. Entity's incorporation number and place of issue, if applicable

PART F — Information on Person on Whose Behalf Transaction is Conducted (if applicable)

1. Person's full name

2. Person's full address

3. Person's personal telephone number

4. Person's business telephone number

5. Person's citizenship

6. Person's type of identifier (e.g., driver's licence, birth certificate, provincial health insurance card — if such use of the card is not prohibited by the applicable provincial law —, passport, Record of Landing or permanent resident card) and identifier number

7. Place of issue of person's identifier (province or state, country)

8. Person's date of birth

9. Person's country of residence

10. Person's occupation

11. Person's employer

12. Employer's full business address

13. Employer's business telephone number

14. Relationship of person conducting the transaction to the person on whose behalf the transaction is conducted

PART G — Description of Suspicious Activity

1.^* Detailed description of the grounds to suspect that the transaction is related to the commission of a money laundering offence or terrorist activity financing offence

PART H — Action Taken (if applicable)

1.^* Any other action taken as a result of suspicion

SCHEDULE 2
(Sections 10 and 11)

TERRORIST GROUP PROPERTY REPORT

PART A — Information on the Person or Entity Filing this Report

1.^* Type of reporting person or entity

2.^* Reporting person or entity's identifier number (if applicable)

3.^* Full name of reporting person or entity

4.^* Full address of reporting person or entity

5.^* Name and telephone number of contact person

PART B — Reason for Filing this Report

1.^* Reason for filing the report

2. How the reporting person or entity came to know that the property in question is owned or controlled by or on behalf of a terrorist group

3. Full name of terrorist group that owns or controls the property or that the property is owned or controlled on behalf of

4. Full address of terrorist group referred to in item 3

5. Phone number of terrorist group referred to in item 3

6. Full name of person or entity that owns or controls the property on behalf of the terrorist group (if applicable)

7. Full address of person or entity referred to in item 6

8. Phone number of person or entity referred to in item 6

PART C — Information on the property

1.^* Type of property

2. Type of property identifier

3. Property identifier number

4.^* Approximate or actual value of property

5. Description of property

PART D — Account Information (if applicable)

1.^* Account number

2.^* Branch or transit number

3.^* Type of account (personal, business, trust or other)

4.^* Type of currency of the account

5.^* Full name of each account holder

6. Date account opened

7. Date account closed, if applicable

8.^* Status of account (active, inactive or dormant)

PART E — Information on the Transaction or Proposed Transaction (if applicable)

1.^* Date of transaction or night deposit indicator

2. Time of transaction

3. Posting date (if different from above)

4.^* Purpose and details of the transaction, including type of funds or assets involved, amount of transaction, currency of transaction, and, if applicable, name and number of each other institution and name and account number of each other person or entity

5.^* Disposition of funds, amount of disposition, currency of disposition, and, if applicable, name and number of each other institution and name, account number and policy number of each other person or entity

6.^* Method by which the transaction is conducted or proposed to be conducted (in branch or office, ABM, armoured car, mail deposit, courier, telephone or other)

7. Identification number of person who first detected a transaction with respect to property owned or controlled by or on behalf of a terrorist group

PART F — Information on Person Conducting or Proposing to Conduct the Transaction (if applicable)

1. Person's full name

2. Person's alias, if any

3. Client number provided by reporting person or entity, if applicable

4. Person's full address

5. Person's country of residence

6. Person's citizenship

7. Person's personal telephone number

8. Person's type of identifier (e.g., driver's licence, birth certificate, provincial health insurance card — if such use of the card is not prohibited by the applicable provincial law —, passport, Record of Landing or permanent resident card) and identifier number

9. Place of issue of person's identifier (province or state, country)

10. Person's date of birth

11. Person's occupation

12. Person's business telephone number

13. Person's employer

14. Employer's full business address

15. Employer's business phone number

PART G — Information on Entity on whose Behalf the Transaction is Conducted or Proposed to be Conducted (if applicable)

1. Full name of entity

2. Full name of each person — up to three — who is authorized to bind the entity or act with respect to the account

3. Full address of entity

4. Telephone number of entity

5. Incorporation number and place of issue, if applicable

6. Entity's type of business

PART H — Information on Person on whose Behalf Transaction is Conducted or Proposed to be Conducted (if applicable)

1. Person's full name

2. Person's alias, if any

3. Person's full address

4. Person's personal telephone number

5. Person's business telephone number

6. Person's type of identifier (e.g., driver's licence, birth certificate, provincial health insurance card — if such use of the card is not prohibited by the applicable provincial law —, passport, Record of Landing or permanent resident card) and identifier number

7. Place of issue of person's identifier (province or state, country)

8. Person's date of birth

9. Person's country of residence

10. Person's citizenship

11. Person's occupation

12. Person's employer

13. Employer's full business address

14. Employer's business telephone number

15. Relationship of person conducting or proposing to conduct the transaction to the person on whose behalf the transaction is conducted

COMING INTO FORCE

6. These Regulations come into force on June 12, 2002.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

To be successful, the fight against terrorism must be conducted on many fronts. An important objective of Canada's anti-terrorism plan is to deprive terrorists of the funds needed to finance their activities.

Following the events of September 11, 2001 in the United States, the United Nations Security Council adopted, on September 28, 2001, Resolution 1373 which, among other things, calls on member states to freeze without delay the assets of all groups or individuals involved in terrorist activities and to prohibit the provision and collection of funds for terrorist activities. The Financial Action Task Force on Money Laundering (FATF), of which Canada is a member, also issued special recommendations to combat terrorist financing on October 30, 2001, and has called for its members to implement these by June 2002. These recommendations have been endorsed by the G-7 and G-20 Finance Ministers.

On October 2, 2001, the Government of Canada passed the United Nations Suppression of Terrorism Regulations to implement key measures in Resolution 1373. These Regulations expand the Government's ability to freeze terrorist assets and combat terrorist funding. Furthermore, the Anti-terrorism Act (ATA), which received Royal Assent on December 18, 2001, provides the Government with new tools to combat terrorism. Among other things, it provides the means to deter, detect, investigate and prosecute terrorist financing offences. In particular, the ATA expands the Proceeds of Crime (Money Laundering) Act (PCMLA), now re-named as the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the mandate of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to encompass terrorist financing.

The PCMLA established a framework for mandatory reporting of suspicious and prescribed transactions and the cross-border movement of large amounts of currency and monetary instruments. It also provided for the establishment of a new anti-money-laundering agency, FINTRAC, which became operational on October 28, 2001. FINTRAC is responsible for collecting, analysing and, under certain conditions, disclosing certain information to law enforcement agencies and other agencies. In addition, the legislation provided regulation-making authority for carrying out the purposes and provisions of the PCMLA, including the implementation of the reporting, record-keeping and client identification requirements.

The ATA amended the PCMLA to require financial institutions and other intermediaries to report financial transactions to FINTRAC where there are reasonable grounds to suspect that they are related to terrorist financing. Financial intermediaries are also required to make a report to FINTRAC if they know they are in possession of terrorist assets or have knowledge of a proposed financial transaction involving such assets.

The provisions of the ATA that were brought into force on December 24, 2001, include amendments to the Criminal Code requiring the reporting of terrorist assets to the Royal Canadian Mounted Police (RCMP) and the Canadian Security Intelligence Service (CSIS). Also brought into force were provisions of the PCMLTFA extending FINTRAC's role in the collection, analysis and disclosure of information pertaining to suspicions of terrorist financing and threats to the security of Canada. The regulations implement the remaining provisions of the ATA, that is, the new requirements to report terrorist-related transactions and property to FINTRAC.

The Regulations Amending the Proceeds of Crime (Money Laundering) Suspicious Transaction Reporting Regulations (amended regulations) expand the scope of the existing Proceeds of Crime (Money Laundering) Suspicious Transaction Reporting Regulations (brought into force on November 8, 2001) to include the reporting of suspicions of terrorist financing, as well as terrorist property. The amended regulations, which are re-named the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations, prescribe a specific time limit for reporting (sections 9 and 10) and the form and manner for doing so (sections 9, 10 and 12). Under the amended regulations, Suspicious Transaction Reports must be submitted to FINTRAC within 30 days after a reporting entity first detects a fact that constitutes reasonable grounds to suspect that the transaction is related to terrorist financing. Terrorist Group Property Reports must also be submitted to FINTRAC without delay, which is consistent with new provisions in the Criminal Code that require financial entities to report forthwith terrorist property and transactions to the RCMP and CSIS. The regulations also prescribe the type of information that FINTRAC must disclose to law enforcement agencies and CSIS.

Upon coming into force of the amendments on June 12, 2002, transactions that are suspected of being linked to terrorist financing are to be reported using the modified Suspicious Transaction Report form. The Terrorist Group Property Reports are to be submitted to FINTRAC in paper format.

Prior to the coming into force of these amendments, FINTRAC will make available revised suspicious transaction reporting guidelines to assist reporting entities in identifying the factors that should be considered in making a determination of whether or not there are reasonable grounds to suspect that a transaction is related to terrorist financing. Guidelines to assist reporting entities in reporting terrorist property will also be released, prior to the coming into force of the amendments.

Application and Use of Information

The persons and entities that must report to FINTRAC under the amended regulations are the same as those currently required to do so under the existing Proceeds of Crime (Money Laundering) Suspicious Transaction Reporting Regulations. These include regulated financial institutions, casinos, currency exchange businesses, money service businesses (e.g., businesses issuing or redeeming money orders or traveller's cheques or transferring funds), as well as other entities and individuals acting as financial intermediaries (such as lawyers and accountants).

Under its expanded mandate, FINTRAC receives and analyses reports of transactions suspected of being linked to a terrorist activity financing offence and Terrorist Group Property Reports. If FINTRAC has reasonable grounds to suspect that the information would be relevant to investigating a terrorist financing offence, it must disclose key identifying information to law enforcement authorities. FINTRAC must also disclose key identifying information to CSIS, if FINTRAC has reasonable grounds to suspect that the information would be relevant to threats to the security of Canada. FINTRAC can also share information with foreign financial intelligence units under certain circumstances.

Alternatives

In considering alternatives to these regulatory amendments, the business practices of reporting entities were carefully considered. As well, in designing the Suspicious Transaction Report and the Terrorist Group Property Report, the characteristics of reporting entities were taken into account. While some of the information to be included in the reports is mandatory, most reportable information is not. In the latter case, financial intermediaries are only required to take reasonable measures to obtain and provide the information.

The amended regulations effectively balance the interests of stakeholders in respect of compliance costs, the protection of individual privacy and the need to provide law enforcement and CSIS with the necessary information to detect and deter terrorist financing.

Benefits and Costs

The amended regulations will impose few compliance costs for financial intermediaries over and above the costs that these entities currently incur to comply with the suspicious transaction reporting requirements and the reporting of terrorist property to the RCMP and CSIS. The reporting requirements for suspicions of terrorist financing in large measure parallel the existing reporting requirements. The majority of the costs associated with terrorist financing transaction reporting are related to the development and implementation of procedures and employee training. Since these practices will vary from one firm to another, it is inherently difficult to measure the compliance costs with any precision.

Consultation

Extensive consultations were held with many stakeholders regarding the existing regulations. Stakeholders were also given the opportunity to comment on the amendments to the PCMLA included in the ATA.

Compliance and Enforcement

FINTRAC is responsible for ensuring compliance with the regulations. FINTRAC will develop and promote a compliance policy that favours a co-operative approach. The emphasis will be on working with entities to achieve compliance rather than immediately taking action against those entities that are not fully in compliance with the Act. Only in cases where this co-operative approach has failed, will FINTRAC consider referring such cases to the appropriate law enforcement agency. In those situations, the PCMLTFA provides for a maximum fine of $2,000,000 and a maximum jail term of five years for failure to report a suspicious transaction, and a maximum fine of $1,000,000 for failure to report a prescribed transaction.

The PCMLTFA allows FINTRAC to enter into arrangements with financial sector regulators, provincial governments and self-regulatory organizations for the purposes of carrying out compliance supervision. FINTRAC will work with other federal and provincial bodies and professional associations to identify areas of common interest and avenues for cost efficiencies, consistency of approach and sharing of information.

Contact

Chief
Financial Crimes Section
Financial Sector Division
Department of Finance
L'Esplanade Laurier
140 O'Connor Street
20th Floor, East Tower
Ottawa, Ontario
K1A 0G5
Telephone: (613) 995-1814
FAX: (613) 943-8436
E-mail: fcs-scf@fin.gc.ca

Footnote a 

S.C. 2001, c. 41, s. 73

Footnote b 

S.C. 2000, c. 17; 2001, c. 41, s. 48

Footnote 1 

SOR/2001-317

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