Vol. 141, No. 26 — December 26, 2007

Registration
SOR/2007-292 December 13, 2007

PROCEEDS OF CRIME (MONEY LAUNDERING) AND TERRORIST FINANCING ACT

Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations

P.C. 2007-1921 December 13, 2007

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 73.1(1) (see footnote a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (see footnote b), hereby makes the annexed Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations.

PROCEEDS OF CRIME (MONEY LAUNDERING) AND
TERRORIST FINANCING ADMINISTRATIVE
MONETARY PENALTIES REGULATIONS

INTERPRETATION

1. In these Regulations, "Act" means the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

2. The short-form descriptions that are set out in column 2 of Part 1 of the schedule, and column 3 of Parts 2 and 3 of the schedule, form no part of these Regulations and are inserted for convenience of reference only.

VIOLATIONS

3. The contravention of any of the following provisions is a violation that may be proceeded with under sections 73.11 to 73.5 of the Act:

(a) a provision of the Act set out in Column 1 of Part 1 of the schedule;

(b) a provision of the Act and a provision of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations set out in Columns 1 and 2 of Part 2 of the schedule; and

(c) a provision of the Act and a provision of the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations set out in Columns 1 and 2 of Part 3 of the schedule.

CLASSIFICATION

4. (1) Each violation is classified as a minor, serious or very serious violation, as set out in column 3 of Part 1 of the schedule and column 4 of Parts 2 and 3 of the schedule.

(2) A series of minor violations identified on a notice of violation shall be considered to be a serious violation for the purpose of section 73.21 of the Act if the total of the penalties for the violations set out in the notice is equal to or greater than $10,000.

PENALTIES

5. Subject to subsection 73.1(2) of the Act, the range of penalties in respect of a violation is

(a) $1 to $1,000 in the case of a minor violation;

(b) $1 to $100,000 in the case of a serious violation; and

(c) $1 to $500,000 in the case of a very serious violation.

ADDITIONAL CRITERIA

6. For the purposes of section 73.11 of the Act, the history of compliance by the person or entity with the Act, other than Part 2 of the Act, the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations, are prescribed as criteria that are to be taken into account in determining the amount of a penalty.

SERVICE OF DOCUMENTS

7. (1) Service of any document under Part 4.1 of the Act may be made

(a) in the case of a person, by

(b) in the case of an entity, by

(2) If a document is sent by fax or other electronic means, a copy of it shall also be sent by registered mail to the person's last known address or usual place of residence, or, in the case of an entity, to the entity's head office or place of business.

8. In the absence of proof to the contrary, a document — other than a document that is personally served — is deemed to be served

(a) in the case of a document that is left with an adult referred to in subparagraph 7(1)(a)(ii), on the day the document is left with the adult;

(b) in the case of a document that is sent by registered mail or courier, on the tenth day after the date indicated in the receipt issued by the postal or courier service; and

(c) in the case of a document sent by fax or other electronic means, on the day of transmission.

INTEREST RATE DETERMINATION

9. (1) For the purposes of section 73.28 of the Act, the prescribed rate of interest at any time in a particular quarter is the total of:

(a) the rate that is the simple arithmetic mean, expressed as a percentage per year and rounded to the next higher whole percentage where the mean is not a whole percentage, of all amounts each of which is the average equivalent yield, expressed as a percentage per year, of Government of Canada Treasury Bills that mature approximately three months after their date of issue and that are sold at auctions of Government of Canada Treasury Bills during the first month of the quarter preceding the particular quarter; and

(b) four per cent.

(2) The interest referred to in subsection (1) is calculated and compounded monthly.

(3) For the purposes of subsection (1) "quarter" means a period of three consecutive months ending on March 31, June 30, September 30 or December 31.

COMING INTO FORCE

10. These Regulations come into force on December 30, 2008.

SCHEDULE
(Sections 2, 3 and 4)

PART 1

PROCEEDS OF CRIME (MONEY LAUNDERING)
AND TERRORIST FINANCING ACT

Item	Column 1 Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Act	Column 2 Short-form Description	Column 3 Classification of Violation
1.	62(2)	Failure to give reasonable assistance and information reasonably required to an authorized person	serious
2.	63.1(2)	Failure to provide, in accordance with a notice, documents or other information reasonably required by an authorized person	serious

PART 2

PROCEEDS OF CRIME (MONEY LAUNDERING) AND
TERRORIST FINANCING ACT AND PROCEEDS OF
CRIME (MONEY LAUNDERING) AND TERRORIST
FINANCING REGULATIONS

Item	Column 1 Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Act	Column 2 Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations	Column 3 Short-form Description	Column 4 Classification of Violation
1.	9(1)	2	Failure to convert foreign currency transactions into Canadian dollars based on the prescribed rate	minor
2.	9(1)	4(1)	Failure to send a report electronically, if the sender has the technical capabilities, in accordance with the guidelines prepared by the Centre	minor
3.	9(1)	4(2)	Failure to send a report in paper format, if the sender does not have the technical capabilities to send electronically, in accordance with guidelines prepared by the Centre	minor
4.	9(1)	5(1)	Failure to report an electronic funds transfer no later than five working days after the transfer	minor
5.	9(1)	5(2)(b)	Failure to report a transaction for which a large cash transaction record must be kept within 15 days after the transaction	minor
6.	6	8(1)	Failure to take reasonable measures to determine if an individual giving cash is acting on behalf of a third party	minor
7.	6	8(2)	Failure to keep a record of prescribed information respecting third parties	minor
8.	6	8(3)	Failure to keep a record of prescribed information respecting suspected third parties	minor
9.	6	9(1)	Failure to take reasonable measures when opening an account to determine if the account is to be used by or on behalf of a third party	minor
10.	6	9(2)	Failure to keep a record of prescribed information respecting third parties	minor
11.	6	9(3)	Failure to keep a record of prescribed information in respect of suspected third parties	minor
12.	6	10(1)	Failure to take reasonable measures when client information record is created to determine whether the client is acting on behalf of a third party.	minor
13.	6	10(2)	Failure to keep a record of prescribed information when it is determined that the client is acting on behalf of a third party	minor
14.	6	10(3)	Failure to keep a record of prescribed information when there are reasonable grounds to suspect that the client is acting on behalf of a third party	minor
15.	6	11	Failure of a trust company to keep a record of prescribed information concerning inter vivos trusts	minor
16.	9(1)	12(1)(a)	Failure of a financial entity to report the receipt of an amount in cash of $10,000 or more in the course of a single transaction, together with the prescribed information	minor
17.	9(1)	12(1)(b)	Failure of a financial entity to report the sending out of Canada of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the prescribed information	minor
18.	9(1)	12(1)(c)	Failure of a financial entity to report the receipt from outside Canada of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the prescribed information	minor
19.	6	13	Failure of a financial entity to keep a large cash transaction record in respect of every amount in cash of $10,000 or more that is received from a client in the course of a single transaction	minor
20.	6	14	Failure of a financial entity to keep prescribed records	minor
21.	6	15	Failure of a trust company to keep prescribed records in respect of a trust for which it is trustee	minor
22.	9(1)	17	Failure of a life insurance company or life insurance broker or agent who receives from a client an amount in cash of $10,000 or more in the course of a single transaction to report the transaction together with the prescribed information	minor
23.	6	18	Failure of a life insurance company or life insurance broker or agent to keep a large cash transaction record in respect of every amount in cash of $10,000 or more that is received from a client in the course of a single transaction	minor
24.	6	19(1)	Failure of a life insurance company or life insurance broker or agent to keep a client information record in respect of every annuity or policy for which $10,000 or more is paid	minor
25.	6	20	Failure of a life insurance company or life insurance broker or agent to keep prescribed records of a corporate client	minor
26.	9(1)	21	Failure of a securities dealer who receives from a client an amount in cash of $10,000 or more in the course of a single transaction to report the transaction together with the prescribed information	minor
27.	6	22	Failure of a securities dealer to keep a large cash transaction record in respect of every amount in cash of $10,000 or more that is received from a client in the course of a single transaction	minor
28.	6	23	Failure of a securities dealer to keep prescribed records	minor
29.	9(1)	28(1)(a)	Failure of a money services business to report the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the prescribed information	minor
30.	9(1)	28(1)(b)	Failure of a money services business to report the sending out of Canada of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the prescribed information	minor
31.	9(1)	28(1)(c)	Failure of a money services business to report the receipt from outside Canada of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the prescribed information	minor
32.	6	29	Failure of a money services business to keep a large cash transaction record in respect of every amount in cash of $10,000 or more that is received from a client in the course of a single transaction	minor
33.	6	30	Failure of a money services business to keep prescribed records	minor
34.	9(1)	35	Failure of an accountant or accounting firm to report the receipt of an amount in cash of $10,000 or more in the course of a single transaction, together with the prescribed information	minor
35.	6	36(1)	Failure of an accountant or accounting firm to keep prescribed records	minor
36.	6	36(2)	Failure of an accountant or accounting firm to keep a large cash transaction record in respect of every amount in cash of $10,000 or more that they receive in the course of a single transaction	minor
37.	9(1)	38	Failure of a real estate broker or sales representative to report the receipt of an amount in cash of $10,000 or more in the course of a single transaction, together with the prescribed information	minor
38.	6	39(1)	Failure of a real estate broker or sales representative to keep prescribed records	minor
39.	6	39(2)	Failure of a real estate broker or sales representative to keep a large cash transaction record in respect of every amount in cash of $10,000 or more that they receive in the course of a single transaction	minor
40.	9(1)	40(1)(a)	Failure of a casino to report the receipt of an amount in cash of $10,000 or more in the course of a single transaction, together with the prescribed information	minor
41.	9(1)	40(1)(b)	Failure of a casino to report the sending out of Canada of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the prescribed information	minor
42.	9(1)	40(1)(c)	Failure of a casino to report the receipt from outside Canada of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the prescribed information	minor
43.	6	41(1)	Failure of a casino to keep a large cash transaction record in respect of every amount in cash of $10,000 or more that they receive in the course of a single transaction	minor
44.	6	42(1)	Failure of a casino to keep a large cash disbursement record in respect of prescribed transactions in the course of which the total amount of cash disbursed is $10,000 or more	minor
45.	6	43	Failure of a casino to keep prescribed records	minor
46.	9(1)	47	Failure of a department or agent of Her Majesty in right of Canada or of a province to report the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the prescribed information	minor
47.	6	48	Failure of a department or agent of Her Majesty in right of Canada or of a province to keep a large cash transaction record in respect of every amount in cash of $10,000 or more that it receives from a client in the course of a single transaction	minor
48.	6	49	Failure of a department or agent of Her Majesty in right of Canada or of a province to keep prescribed records	minor
49.	9(1)	50(3)	Failure of a specified financial entity to report changes in prescribed information within 15 days of the change	minor
50.	9(1)	50(4)(a)	Failure of a specified financial entity to verify at least once every 12 months that prescribed conditions are still met in respect of each client	minor
51.	9(1)	50(4)(b)	Failure of a specified financial entity to report prescribed information at least once every 12 months	minor
52.	6.1	53, 64(1) and 64(2)(b)	Failure of a specified person or entity to ascertain in the prescribed manner and within the prescribed period the identity of every individual with whom the person or entity conducts a transaction in respect of which a record must be kept	minor
53.	6.1	54(1)(a), 64(1) and 64(2)(a)	Failure of a financial entity to ascertain in the prescribed manner and within the prescribed period the identity of every person who signs a signature card	minor
54.	6.1	54(1)(b), 64(1) and 64(2)(b)	Failure of a financial entity to ascertain in the prescribed manner and within the prescribed period the identity of every person who conducts a prescribed transaction or transfer	minor
55.	6.1	54(1)(d), 65(1) and 65(2)(a)	Failure of a financial entity to confirm in the prescribed manner and within the prescribed period the existence of, and the prescribed information in respect of, corporations for which the financial entity opens an account	minor
56.	6.1	54(1)(e), 66(1) and 66(2)(a)	Failure of a financial entity to confirm in the prescribed manner and within the prescribed period the existence of every entity, other than a corporation, for which the financial entity opens an account.	minor
57.	6.1	55(a), 64(1) and 64(2)(c)	Failure of a trust company to ascertain in the prescribed manner and within the prescribed period the identity of every person who is the settlor of an inter vivos trust	minor
58.	6.1	55(b), 65(1) and 65(2)(b)	Failure of a trust company to confirm in the prescribed manner and within the prescribed period the existence of, and prescribed information in respect of, every corporation that is the settlor of an institutional trust	minor
59.	6.1	55(c), 66(1) and 66(2)(b)	Failure of a trust company to confirm in the prescribed manner and within the prescribed period the existence of every entity, other than a corporation, that is the settlor of an institutional trust	minor
60.	6.1	55(d)(i), 65(1), 65(2)(b) or 55(d)(i), 66(1) and 66(2)(b)	Failure of a trust company to confirm in the prescribed manner and within the prescribed period the existence of — and, in the case of a corporation, the prescribed information in respect of — an entity that is authorized to act as a co-trustee of any trust	minor
61.	6.1	55(d)(ii), 64(1) and 64(2)(c)	Failure of a trust company to ascertain in the prescribed manner and within the prescribed period the identity of persons who are authorized to give instructions with respect to an entity's activities as co-trustee	minor
62.	6.1	55(e), 64(1) and 64(2)(c)	Failure of a trust company to ascertain in the prescribed manner and within the prescribed period the identity of each person who is authorized to act as co-trustee of any trust	minor
63.	6.1	56(1), 64(1) and 64(2)(d)	Failure of a life insurance company or life insurance broker or agent to ascertain in the prescribed manner and within the prescribed period the identity of every person who conducts a transaction for which a client information record is required to be kept	minor
64.	6.1	56(3), 65(1) and 65(2)(c)	Failure of a life insurance company or life insurance broker or agent to confirm in the prescribed manner and within the prescribed period the existence of, and the prescribed information in respect of, every corporation in respect of which they are required to keep a client information record	minor
65.	6.1	56(4), 66(1) and 66(2)(c)	Failure of a life insurance company or life insurance broker or agent to confirm in the prescribed manner and within the prescribed period the existence of every entity, other than a corporation, in respect of which they are required to keep a client information record	minor
66.	6.1	57(1), 64(1) and 64(2)(a)	Failure of a securities dealer to ascertain in the prescribed manner and within the prescribed period the identity of every person who is authorized to give instructions in respect of an account for which a record must be kept	minor
67.	6.1	57(3), 65(1) and 65(2)(d)	Failure of a securities dealer to confirm in the prescribed manner and within the prescribed period the existence of, and prescribed information in respect of, every corporation for which it opens an account	minor
68.	6.1	57(4), 66(1) and 66(2)(d)	Failure of a securities dealer to confirm in the prescribed manner and within the prescribed period the existence of every entity, other than a corporation, for which it opens an account	minor
69.	6.1	59(1)(a), 64(1) and 64(2)(b)	Failure of a money services business to ascertain in the prescribed manner and within the prescribed period the identity of every person who conducts a transaction of $3,000 or more for the issuance or redemption of money orders, traveller's cheques or other similar negotiable instruments	minor
70.	6.1	59(1)(b), 64(1) and 64(2)(b)	Failure of a money services business to ascertain in the prescribed manner and within the prescribed period the identity of every person who conducts a transaction for the remittance or transmission of $1,000 or more	minor
71.	6.1	59(1)(c), 64(1) and 64(2)(b)	Failure of a money services business to ascertain in the prescribed manner and within the prescribed period the identity of every person who conducts a foreign currency exchange transaction of $3,000 or more	minor
72.	6.1	59(2), 65(1) and 65(2)(c)	Failure of a money services business to confirm in the prescribed manner and within the prescribed period the existence of, and prescribed information in respect of, every corporation in respect of which a client information record is required to be kept	minor
73.	6.1	59(3), 66(1) and 66(2)(c)	Failure of a money services business to confirm in the prescribed manner and within the prescribed period the existence of every entity, other than a corporation, in respect of which a client information record is required to be kept	minor
74.	6.1	60(a), 64(1) and 64(2)(a)	Failure of a casino to ascertain in the prescribed manner and within the prescribed period the identity of every person who signs a signature card in respect of an account that the casino opens	minor
75.	6.1	60(b)(i), 64(1) and 64(2)(b)	Failure of a casino to ascertain in the prescribed manner and within the prescribed period the identity of every person who conducts a transaction with the casino for which a large cash disbursement record is required to be kept	minor
76.	6.1	60(b)(ii), 64(1) and 64(2)(b)	Failure of a casino to ascertain in the prescribed manner and within the prescribed period the identity of every person who conducts a transaction of $3,000 or more with the casino for which an extension of credit record is required	minor
77.	6.1	60(b)(iii), 64(1) and 64(2)(b)	Failure of a casino to ascertain in the prescribed manner and within the prescribed period the identity of every person who conducts a foreign currency exchange transaction of $3,000 or more with the casino for which a transaction ticket is required to be kept	minor
78.	6.1	60(b)(iv), 64(1) and 64(2)(b)	Failure of a casino to ascertain in the prescribed manner and within the prescribed period the identity of every person who requests that an amount of $1,000 or more be remitted or transmitted	minor
79.	6.1	60(e), 65(1) and 65(2)(a)	Failure of a casino to confirm in the prescribed manner and within the prescribed period the existence of, and prescribed information in respect of, every corporation for which the casino opens an account	minor
80.	6.1	60(f), 66(1) and 66(2)(a)	Failure of a casino to confirm in the prescribed manner and within the prescribed period the existence of every entity, other than a corporation, for which the casino opens an account	minor
81.	6.1	61(a), 64(1) and 64(2)(d)	Failure of a department or agent of Her Majesty in right of Canada or of a province to ascertain in the prescribed manner and within the prescribed period the identity of every person in respect of whom a client information record is required to be kept	minor
82.	6.1	61(b), 64(1) and 64(2)(b)	Failure of a department or agent of Her Majesty in right of Canada or of a province to ascertain in the prescribed manner and within the prescribed period the identity of every person in respect of whom no client information record is required to be kept and who conducts a transaction that involves an amount of $3,000 or more for the issuance or redemption of money orders or other similar negotiable instruments	minor
83.	6.1	61(c), 65(1) and 65(2)(c)	Failure of a department or agent of Her Majesty in right of Canada or of a province to confirm in the prescribed manner and within the prescribed period the existence of, and prescribed information in respect of, every corporation in respect of which a client information record is kept	minor
84.	6.1	61(d), 66(1) and 66(2)(c)	Failure of a department or agent of Her Majesty in right of Canada or of a province to confirm in the prescribed manner and within the prescribed period the existence of every entity, other than a corporation, in respect of which a client information record is kept	minor
85.	6	65(3)	Failure of a person or entity who ascertains information in respect of a corporation by referring to an electronic version of a record to keep a prescribed record	minor
86.	6	65(4)	Failure of a person or entity who ascertains information in respect of a corporation by referring to a paper copy of a record to retain the record or a copy of it	minor
87.	6	66(3)	Failure of a person or entity who ascertains information in respect of an entity by referring to an electronic version of a record to keep a prescribed record	minor
88.	6	66(4)	Failure of a person or entity who ascertains information in respect of an entity by referring to a paper copy of a record to retain the record or a copy of it	minor
89.	6	67	Failure of a person or entity that is required to ascertain the identity of a person to keep prescribed records in respect of the person	minor
90.	6	69(1)	Failure of a person or entity that is required to obtain, keep or create records to retain those records for a period of at least five years	minor
91.	6	70	Failure to retain records in such a way that they can be provided to an authorized person within 30 days after their request	minor
92.	9.6(1)	71(1)(a)	Failure of a person or entity to appoint a person to be responsible for the implementation of a compliance program	serious
93.	9.6(1)	71(1)(b)	Failure of a person or entity to develop and apply written compliance policies and procedures that are kept up to date and, in the case of an entity, are approved by a senior officer	serious
94.	9.6(1)	71(1)(c)	Failure of a person or entity to assess and document the risk referred to in subsection 9.6(2) of the Act, taking into consideration prescribed factors	serious
95.	9.6(1)	71(1)(d)	Failure of a person or entity that has employees, agents or other persons authorized to act on their behalf to develop and maintain a written ongoing compliance training program for those employees, agents or persons	serious
96.	9.6(1)	71(1)(e)	Failure of a person or entity to institute and document the prescribed review	serious
97.	9.6(1)	71(2)	Failure of a person or entity to report prescribed information within 30 days after assessment	serious

PART 3

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

Item	Column 1 Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Act	Column 2 Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations	Column 3 Short-form Description	Column 4 Classification of Violation
1.	7	9(1)	Failure of a person or entity to include prescribed information in a report	very serious
2.	7	9(2)	Failure of a person or entity to send a report within the prescribed period	serious
3.	7.1	10	Failure of a person or entity to send a report containing the prescribed information without delay	very serious
4.	7	12(1)	Failure to send report electronically, if the sender has the technical capabilities, in accordance with the guidelines prepared by the Centre	serious
5.	7	12(2)	Failure to send report in paper format, if the sender does not have the technical capabilities to send electronically, in accordance with the guidelines prepared by the Centre	serious
6.	7	12(3)	Failure to submit a report in paper format in accordance with the guidelines prepared by the Centre	serious

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

The National Initiative to Combat Money Laundering was launched in 1999 as part of the government's ongoing effort to combat money laundering in Canada. Following the events of September 11, 2001, the mandate of the initiative was enlarged to include the fight against terrorist financing activities and, since then, it has been referred to as the Anti-Money Laundering and Anti-Terrorist Financing Regime (the Regime). One of the key elements of the Regime is the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) and its three sets of regulations, which were brought into force between 2001 and 2003.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTF Regulations) implement a portion of Part 1 of the Act by requiring the financial institutions and financial intermediaries that are subject to the Act (see footnote 1) to identify their customers, keep certain records, report large cash transactions and international electronic fund transfers of $10,000 or more to the Financial Transactions and Reports Analysis Centre of Canada (the Centre) and develop an internal compliance regime.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations (PCMLTF Suspicious Transaction Reporting Regulations) implement the remainder of Part 1 of the Act by requiring financial institutions and financial intermediaries to report financial transactions where there are reasonable grounds to suspect that they are related to money laundering or terrorist financing activities.

The Cross-Border Currency and Monetary Instruments Reporting Regulations implement Part 2 of the Act by requiring any person or entity to report to the Canada Border Services Agency importations and exportations of currency or monetary instruments of a value of CAN $10,000 or more.

Since the coming into force of these Regulations, the domestic and international environment has changed. First, the international standards of the Financial Action Task Force (the Task Force), on which the Canadian anti-money laundering and anti-terrorist financing Regime was based in 2000, were revised in 2003 to keep up with new money-laundering and terrorist financing trends and techniques. Canada is currently undergoing an evaluation by the Task Force on the extent to which these standards have been implemented. Chapter 2 of the 2004 Report of the Auditor General also outlined several recommendations to improve the Regime, such as the need to review the information the Centre can include in its disclosures to law enforcement agencies and security agencies in order to increase their usefulness. Similar findings were also outlined in the Treasury Board mandated program evaluation report prepared by Ekos Research Associates.

Several of the federal partners to the Regime, such as the Royal Canadian Mounted Police, the Canada Border Services Agency, the Canada Revenue Agency and the Centre have proposed amendments to help them better fulfill their mandate. A few financial institutions and intermediaries have also requested changes to the Regime to allow them to concentrate their efforts in areas where the risk of money laundering or terrorist financing is higher.

In response to these developments, the Department of Finance issued a consultation paper in June 2005 outlining policy proposals to enhance the Regime. Some of the proposals identified gaps in the current Regime and as a result proposed requirements for three new sectors: the legal profession, dealers in precious metals and stones and notaries in British Columbia. The requirements pertain to client identification, record-keeping and, with the exception of the legal profession, filing reports with the Centre. Furthermore, the consultation paper also proposed creating an administrative monetary penalties scheme. The purpose of this scheme is to facilitate compliance with the Act and its regulations. Various groups and organizations have made representations on the proposed changes to the Regime. Since then, the Department of Finance has been in consultations with stakeholders to tailor the requirements to existing business practices in an effort to minimize, to the extent possible, their compliance burden.

In October 2006, the Minister of Finance tabled Bill C-25, which proposed, among other things, amendments to the Act to provide an exemption for the legal profession from reporting to the Centre and to introduce an administrative monetary penalties scheme. This scheme would be used as a complementary compliance tool to the criminal sanctions in Part 5 of the Act, which will continue to be available to deal with the most severe cases of non-compliance. The administrative monetary penalties scheme is modeled on the administrative monetary penalty schemes of the Office of the Superintendent of Financial Institutions Act and the Financial Consumer Agency of Canada Act in order to create consistency with other statutes governing federally regulated financial institutions. Bill C-25 received Royal Assent in December 2006, but will require the implementation of new regulations to become fully effective.

In order to implement part of the requirements set out in Bill C-25, comply with the new international standards and address the recommendations and comments made by the Auditor General, the Ekos report, the partners to the Regime and stakeholders, amendments to the PCMLTF Regulations are being proposed in order to extend new and existing client identification and record keeping requirements and, where applicable, reporting requirements to three new sectors. New regulations, the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations (PCMLTF Administrative Monetary Penalties Regulations) are also being proposed to set out the modalities of the administrative monetary penalties scheme.

1. Amendments to the PCMLTF Regulations and the PCMLTF Suspicious Transaction Reporting Regulations

The amendments extend coverage of the Act to three new sectors with the goal of closing gaps in Canada's anti-money laundering and anti-terrorist financing regime. The three sectors are the legal profession, dealers in precious metals and stones, and notaries in British Columbia. These sectors have been identified as posing a risk as potential conduits for money laundering and terrorist activity financing. By including them as part of the Regime, they will be required to meet the client identification and record-keeping requirements under Part 1 of the Act. In addition, dealers in precious metals and stones and notaries in British Columbia will also be required to meet the reporting requirements under Part 1 of the Act. These new sectors will be subject to the existing as well as the recently introduced requirements under the Act. The recently introduced requirements include methods for identifying clients in a non face-to-face environment, undertaking risk assessments to identify and assess the risk of being used by clients for money laundering or terrorist activity financing, and ascertaining the identity of a client whenever there are reasonable grounds to suspect that a transaction or suspicious attempted transaction is linked to money laundering or terrorist financing activities.

2. PCMLTF Administrative Monetary Penalties Regulations

The recent amendments to the Act created Part 4.1, which sets out a framework for an administrative monetary penalties scheme. The creation of this scheme is intended to assist the Centre in ensuring compliance with the Act and its regulations by providing the Centre with a broader spectrum of compliance tools. Currently, the Centre can only refer cases of non-compliance to law enforcement for investigation and possible criminal charges. While the Centre will continue to take a cooperative approach to compliance, it will now be able to levy penalties proportionate to the instances of non-compliance with respect to, for example, client identification or record-keeping requirements. The PCMLTF Administrative Monetary Penalties Regulations primarily set out the specific violations and the classification of those violations as minor, serious or very serious. These Regulations also serve to operationalize the requirements of the scheme notably by setting out additional criteria that may be used in assessing a penalty amount and the method for determining interest rates to be applied for late payments.

3. Technical changes

On June 27, 2007, the Department of Finance published in the Canada Gazette, Part II, the Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (2007-1). The Regulations appearing here in final form include some minor technical changes to the regulations that were finalized in June 2007, such as clarification that the client identification and record-keeping exemptions contained in section 62 of the PCMLTF Regulations are applicable to all sectors subject to the Act and removing the requirement to obtain and record the date of birth of a client that is an entity. New provisions are also being added to confirm that a suspicious transaction or attempted transaction report must be kept for a period of 5 years, similar to any other record that has to be kept under the Act. Moreover, the reports can be kept in a machine-readable form or electronic form, provided that a paper copy can be readily produced. Finally, a requirement has been added to include the date of birth of the client when a transaction ticket is required.

Alternatives

As a member of the Task Force, Canada is expected to comply with the 49 revised recommendations of that organization, which is the international anti-money laundering and anti-terrorist financing standards setting body. Implementing measures around these international standards serve to ensure the security and integrity of Canada's financial system and economy in addition to sending a signal to the international community on Canada's commitment to fight financial crimes.

Like all members of the Task Force, Canada has adapted the recommendations to its constitutional and legal framework, including in the area of privacy rights. Moreover, to close gaps without diminishing competition in the financial sector or imposing excessive compliance costs, the proposed requirements are aligned with an assessment of domestic risks while also being responsive to existing business practices.

Benefits and costs

The amendments will have implications for the new sectors. For instance, each entity within these sectors will be required to put in place policies and procedures to ensure that they fulfil their requirements under the Act. This includes policies and procedures to address client identification, record keeping and, where applicable, reporting requirements. In addition, employees will require training on the implementation of these policies and procedures. Entities will also be required to undertake a risk assessment to determine whether their business has vulnerabilities that could be used for money laundering or terrorist activity financing.

The implementation and operation of the administrative monetary penalties scheme will be the responsibility of the Centre. There are no costs for the sectors covered by the Act with regards to the implementation and administration of this scheme. However, in the event that entities do not comply with the Act and its regulations, they may be subject to penalties under this scheme. The Centre takes a cooperative approach to compliance and adequate lead-time will be allowed for educating all sectors on this new scheme.

These costs are reasonable, given the benefit of further deterring money laundering and terrorist financing activities, as they have been introduced with the intention of closing gaps in the current regime. The administrative monetary penalties scheme will play a broader role in ensuring the high quality and timeliness of the data the Centre receives from reporting entities, elements that are of the utmost importance in investigations undertaken by law enforcement and investigative agencies. These measures, which will bring Canada's regime in line with international standards, serve to maintain the credibility and soundness of our financial system in addition to sending a signal to the international community that Canada is an active participant in the fight against money laundering and terrorist financing.

Consultation

On June 30, 2007, the Department of Finance pre-published the proposed amendments to the Regulations in the Canada Gazette, Part I, for a 60-day consultation period. Numerous businesses within the dealers in precious metals and stones sector sent representations regarding the feasibility of the proposed regulations for this sector and similarly, two industry associations representing the legal profession sent representations regarding the proposed regulations for the legal profession. In addition, representations from one industry association and one financial institution were received in regards to the proposed Administrative Monetary Penalty scheme. Representatives from the Department of Finance met with some of these stakeholders to discuss their submissions and answer outstanding questions on the requirements.

The dealers in precious metals and stones sector was primarily concerned with some aspects of the client identification requirements. To ensure that this sector can remain competitive internationally and to maintain consistency with international standards, the identification and record keeping requirements have been limited to cash transactions of $10,000 or more, the only exception being for requirements in respect of suspicious transactions, which apply to any circumstances.

The legal profession was primarily concerned with ascertaining the identity of all persons involved in a transaction and obtaining the account number of all accounts involved in a transaction. To address this concern, an exemption has been introduced to exclude lawyer-to-lawyer transactions from this requirement.

Compliance and enforcement

The Centre is responsible for ensuring compliance with Part 1 of the Act and its related regulations. The Centre sends compliance questionnaires to persons or entities that are subject to the Act to better assess the compliance risks and conducts on-site examinations. It also has the capacity to enter into information-sharing agreements with industry regulators to reduce the number of compliance examinations to which entities are subjected.

The Regulations would impose compliance obligations on three new sectors. In recognition of these new responsibilities, Budget 2006 allocated additional funding to assist the Centre in implementing the new requirements.

Reporting entities that do not comply with the Act and its regulations are currently subject to criminal penalties and, depending on the offence, convictions that could result in up to five years imprisonment, a fine of up to $500,000 or both. However, the administrative monetary penalties scheme will allow for penalties that are in proportion to the violation, leading to improved compliance with the Act. Violations under this scheme are classified into one of three categories: minor, serious and very serious. The PCMLTF Administrative Monetary Penalties Regulations further specify maximum penalty amounts for each category of violation as it relates to persons or entities. The maximum penalty amount that can be imposed under the administrative monetary penalty scheme for violations classified as very serious is, in the case of an entity, $500,000 and in the case of a person, $100,000. The progressive approach to compliance and enforcement, as set out in the administrative monetary penalties scheme, will result in a more effective regime by ensuring high data quality and timeliness of reporting.

Contact

Diane Lafleur
Director
Financial Sector Division
Department of Finance
140 O'Connor Street
Ottawa, Ontario
K1A 0G5
Telephone: 613-992-5885
Fax: 613-943-8436
Email: fcs-scf@fin.gc.ca.

Footnote a

S.C. 2006, c. 12, s. 40

Footnote b

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

Footnote 1

The financial institutions and financial intermediaries that are subject to the Act include banks, cooperative credit societies, savings and credit unions, caisses populaires, life insurance companies, life insurance brokers or agents, trust and loans companies, securities dealers, money services businesses (including foreign exchange dealers), casinos, real estate brokers or sales representatives, accountants and accounting firms and certain departments and agents of Her Majesty in right of Canada or a province.

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