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Registration

SOR/2008-194 June 11, 2008

PROCEEDS OF CRIME (MONEY LAUNDERING) AND TERRORIST FINANCING ACT

P.C. 2008-1031 June 11, 2008

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

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

AMENDMENTS

1. Section 2 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations (see footnote 1) is replaced by the following:

2. The short-form descriptions that are set out in column 2 of Part 1 of the schedule, and column 3 of Parts 2, 3 and 4 of the schedule, form no part of these Regulations and are inserted for convenience of reference only.

2. Section 3 of the Regulations is amended by striking out “and” at the end of paragraph (b), by adding “and” at the end of paragraph ( c ) and by adding the following after paragraph (c):

(d) a provision of the Act and a provision of the Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations set out in Columns 1 and 2 of Part 4 of the schedule.

3. Subsection 4(1) of the Regulations is replaced by the following:

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 to 4 of the schedule.

4. Section 6 of the Regulations is replaced by the following:

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, the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations are prescribed as criteria that are to be taken into account in determining the amount of a penalty.

5. Part 1 of the schedule to the Regulations is amended by renumbering items 1 and 2 as items 6 and 7 and by adding the following before item 6:

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.

9.4(2)

Entering into a correspondent banking relationship with a shell bank

serious

2.

9.7(1)

Failure of a prescribed person or entity to ensure that their prescribed wholly owned subsidiaries develop and apply policies and procedures that are consistent with the requirements of sections 6, 6.1 and 9.6 of the Act

serious

3.

9.7(2)

Failure of a prescribed person or entity to keep a record of a policy or procedure that contravenes the laws of the country in which a prescribed wholly owned subsidiary is located

minor

4.

9.8

Failure of a prescribed entity to ensure that its prescribed branches develop and apply policies and procedures that are consistent with the requirements of sections 6, 6.1 and 9.6 of the Act

serious

5.

11.1

Failure of a prescribed person or entity to be registered with the Centre

serious

6. The portion of item 5 of Part 2 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item

Column 2

Provision of Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations

Column 3




Short-form Description

5.

5(2)

Failure to report a large casino disbursement or a transaction for which a large transaction record must be kept within 15 days after the disbursement or transaction

7. Part 2 of the schedule to the Regulations is amended by adding the following after item 15:

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

15.1

6

11.1(1)

Failure of a specified person or entity to take reasonable measures to obtain and, if obtained, keep a record of prescribed information

minor

15.2

6

11.1(2)

Failure of a specified person or entity to keep a record that indicates the reason why prescribed information could not be obtained

minor

15.3

6

11.1(3)

Failure of a specified person or entity to determine whether a not-for-profit organization is a prescribed entity and to keep a record of the determination

minor

8. Part 2 of the schedule to the Regulations is amended by adding the following after item 20:

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

20.1

6

14.1

Failure of a financial entity to keep a prescribed record in respect of every credit card account that it opens

minor

9. Part 2 of the schedule to the Regulations is amended by adding the following after item 21:

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

21.1

9.4(1)(a)

15.1(1) and (2)

Failure of a specified entity entering into a correspondent banking relationship with a prescribed foreign entity to keep a prescribed record

minor

21.2

9.4(1)(c)

15.1(1)

Failure of a specified entity entering into a correspondent banking relationship with a prescribed foreign entity to obtain the approval of senior management

minor

21.3

9.4(1)(d)

15.1(1)

Failure of a specified entity entering into a correspondent banking relationship with a prescribed foreign entity to set out in writing their obligations and those of the foreign entity in respect of the correspondent banking services

minor

21.4

9.4(1)(e)

15.1(1) and (3)

Failure of a specified entity to take reasonable measures to ascertain whether a prescribed foreign entity with whom it has entered into a correspondent banking relationship has in place prescribed policies and procedures and, if they are not in place, to take prescribed measures

minor

10. Part 2 of the schedule to the Regulations is amended by adding the following after item 25:

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

25.1

6

20.1

Failure of a life insurance company or life insurance broker or agent to keep a record of prescribed information when a transaction is reviewed

minor

11. Part 2 of the schedule to the Regulations is amended by adding the following after item 33:

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

33.1

6

31

Failure of a specified money services business to keep a record of prescribed information when a transaction is reviewed

minor

33.2

6

32

Failure of a specified money services business to keep a record of prescribed information

minor

33.3

9

33.1

Failure of a British Columbia notary public or notary corporation 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

33.4

6

33.2(1)

Failure of a British Columbia notary public or notary corporation to keep prescribed records

minor

33.5

6

33.2(2)

Failure of a British Columbia notary public or notary corporation 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

6

33.4

Failure of a legal counsel or legal firm to keep prescribed records

minor

33.7

6

33.5(a)

Failure of a legal counsel or legal firm to keep prescribed records

minor

12. Part 2 of the schedule to the Regulations is amended by adding the following after item 39:

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

39.1

9(1)

39.2

Failure of a dealer in precious metals and stones 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

39.2

6

39.3

Failure of a dealer in precious metals and stones 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

39.3

9(1)

39.6

Failure of a real estate developer to report the receipt of an amount of $10,000 or more in the course of a single transaction, together with the prescribed information

minor

39.4

6

39.7(1)

Failure of a real estate developer to keep prescribed records when engaging in a prescribed activity

minor

39.5

6

39.7(2)

Failure of a real estate developer when engaging in a prescribed activity to keep a large cash transaction record in respect of every amount of $10,000 or more that they receive in the course of a single transaction

minor

13. The portion of item 44 to Part 2 of the schedule to the Regulations in columns 1, 2 and 3 is replaced by the following:

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

44.

9(1)

42(1)

Failure of a casino to report the disbursement of $10,000 or more in the course of prescribed transactions, together with the prescribed information

14. Part 2 of the schedule to the Regulations is amended by adding the following after item 45:

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

45.1

6

44(1)

Failure of a casino to take reasonable measures to determine if a person who receives a prescribed disbursement is acting on behalf of a third party

minor

45.2

6

44(2)

Failure of a casino to keep a record of prescribed information when it is determined that the client is acting on behalf of a third party

minor

45.3

6

44(3)

Failure of a casino 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. Part 2 of the schedule to the Regulations is amended by adding the following after item 52:

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

52.1

6.1

53.1, 64(1) and 64(2)(b.1)

Failure of a specified person or entity to take reasonable measures to ascertain in the prescribed manner and within the prescribed period the identity of every person with whom the person or entity conducts a transaction that is required to be reported to the Centre

minor

52.2

9.2

53.2, 64, 65 and 66

Opening an account for a client by a specified person or entity in the prescribed circumstances when the identity of the client cannot be established in accordance with prescribed measures

serious

16. Part 2 of the schedule to the Regulations is amended by adding the following after item 56:

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

56.1

6.1

54.1(a), 64(1.1) and 64(2)(b.2)

Failure of a financial entity to ascertain in the prescribed manner and within the prescribed period the identity of every person for whom the financial entity opens a credit card account

minor

56.2

6.1

54.1(b), 65(1) and 65(2)(a.1)

Failure of a financial entity to ascertain in the prescribed manner and within the prescribed period the existence of, and prescribed information in respect of, a corporation for which the financial entity opens a credit card account

minor

56.3

6.1

54.1(c), 66(1) and 66(2)(a.1)

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 a credit card account

minor

56.4

9.3(1)

54.2(a) and 67.1(2)

Failure of a financial entity to take reasonable measures within the prescribed period to determine whether a person for whom the financial entity opens an account is a politically exposed foreign person

minor

56.5

9.3(1)

54.2(b) and 67.1(3)

Failure of a financial entity to take reasonable measures within the prescribed period to determine whether a person who is an existing account holder is a politically exposed foreign person

minor

56.6

9.3(1)

54.2(c) and 67.2(3)

Failure of a financial entity to take reasonable measures within the prescribed period to determine whether a person who initiates an electronic funds transfer of $100,000 or more is a politically exposed foreign person

minor

56.7

9.3(1)

54.2(d) and 67.2(3)

Failure of a financial entity to take reasonable measures within the prescribed period to determine whether a person who is the beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign person

minor

17. Part 2 of the schedule to the Regulations is amended by adding the following after item 62:

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

62.1

9.4(1)(a)

55.1(a)

Failure of a financial entity that enters into a correspondent banking relationship with a foreign financial institution to ascertain, in the prescribed manner, prescribed information in respect of the foreign financial institution

minor

62.2

9.4(1)(a)

55.1(b)

Failure of a financial entity that enters into a correspondent banking relationship with a foreign financial institution to take reasonable measures to ascertain, in the prescribed manner, prescribed information in respect of the foreign financial institution and to conduct prescribed monitoring

minor

62.3

9.4(1)(a)

55.2(a)

Failure of a financial entity that enters into a correspondent banking relationship with a foreign financial institution to take reasonable measures to ascertain whether the institution has met the prescribed requirements

minor

62.4

9.4(1)(a)

55.2(b)

Failure of a financial entity that enters into a correspondent banking relationship with a foreign financial institution to take reasonable measures to ascertain whether the institution has agreed to provide customer identification data

minor

18. Part 2 of the schedule to the Regulations is amended by adding the following after item 65:

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

65.1

9.3(1)

56.1 and 67.2(3)

Failure of a life insurance company or life insurance broker or agent to take reasonable measures to determine within the prescribed period if a prescribed person is a politically exposed foreign person

minor

19. Part 2 of the schedule to the Regulations is amended by adding the following after item 68:

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

68.1

9.3(1)

57.1(1) and 67.1(2)

Failure of a securities dealer to take reasonable measures within the prescribed period to determine whether a person for whom the dealer opens an account is a politically exposed foreign person

minor

68.2

9.3(1)

57.1(2) and 67.1(3)

Failure of a securities dealer to take reasonable measures within the prescribed period to determine whether a person who is an existing account holder is a politically exposed foreign person

minor

20. Part 2 of the schedule to the Regulations is amended by adding the following after item 73:

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

73.1

9.3(1)

59(5)(a) and 67.2(3)

Failure of a money services business to take reasonable measures within the prescribed period to determine whether a person who initiates an electronic funds transfer of $100,000 or more is a politically exposed foreign person

minor

73.11

9.3(1)

59(5)(b) and 67.2(3)

Failure of a money services business to take reasonable measures within the prescribed period to determine whether a person who is the beneficiary of an electronic funds transfer of $100,000 or more is a politically exposed foreign person

minor

73.12

6.1

59.1(a), 64(1) and 64(2)(e)

Failure of an accountant or accounting firm to ascertain in the prescribed manner and within the prescribed period the identity of every person who conducts a prescribed transaction

minor

73.13

6.1

59.1(b), 65(1) and 65(2)(e)

Failure of an accountant or accounting firm to confirm in the prescribed manner and within the prescribed period the existence of, and prescribed information in respect of, every corporation on whose behalf a prescribed transaction is conducted

minor

73.14

6.1

59.1(c), 66(1) and 66(2)(e)

Failure of an accountant or accounting firm to confirm in the prescribed manner and within the prescribed period the existence of every entity, other than a corporation, on whose behalf a prescribed transaction is conducted

minor

73.15

6.1

59.2(1)(a), 64(1) and 64(2)(e)

Failure of a real estate broker or sales representative to ascertain in the prescribed manner and within the prescribed period the identity of every person who conducts a prescribed transaction

minor

73.16

6.1

59.2(1)(b), 65(1) and 65(2)(e)

Failure of a real estate broker or sales representative to confirm in the prescribed manner and within the prescribed period the existence of, and prescribed information in respect of, every corporation on whose behalf a prescribed transaction is conducted

minor

73.17

6.1

59.2(1)(c), 66(1) and 66(2)(e)

Failure of a real estate broker or sales representative to confirm in the prescribed manner and within the prescribed period the existence of every entity, other than a corporation, on whose behalf a prescribed transaction is conducted

minor

73.18

6.1

59.2(3)

Failure of a real estate broker or sales representative that represents a party to a prescribed transaction to ascertain the identity or confirm the existence of parties that are not represented by a real estate broker or sales representative

minor

73.19

6.1

59.3(a), 64(1) and 64(2)(b)

Failure of a British Columbia notary public or notary corporation to ascertain in the prescribed manner and within the prescribed period the identity of every person who conducts a prescribed transaction

minor

73.2

6.1

59.3(b), 65(1) and 65(2)(e)

Failure of a British Columbia notary public or notary corporation to confirm in the prescribed manner and within the prescribed period the existence of, and prescribed information in respect of, every corporation on whose behalf a prescribed transaction is conducted

minor

73.21

6.1

59.3(c), 66(1) and 66(2)(e)

Failure of a British Columbia notary public or notary corporation to confirm in the prescribed manner and within the prescribed period the existence of every entity, other than a corporation, on whose behalf a prescribed transaction is conducted

minor

73.22

6.1

59.4(1)(a), 64(1) and 64(2)(b)

Failure of a legal counsel or a legal firm to ascertain in the prescribed manner and within the prescribed period the identity of every person who conducts a prescribed transaction

minor

73.23

6.1

59.4(1)(b), 65(1) and 65(2)(e)

Failure of a legal counsel or a legal firm to confirm in the prescribed manner and within the prescribed period the existence of, and prescribed information in respect of, every corporation on whose behalf a prescribed transaction is conducted

minor

73.24

6.1

59.4(1)(c), 66(1) and 66(2)(e)

Failure of a legal counsel or a legal firm to confirm in the prescribed manner and within the prescribed period the existence of every entity, other than a corporation, on whose behalf a prescribed transaction is conducted

minor

73.25

6.1

59.5(a), 64(1) and 64(2)(b)

Failure of a real estate developer to ascertain in the prescribed manner and within the prescribed period the identity of a person who conducts a prescribed transaction

minor

73.26

6.1

59.5(b), 65(1) and 65(2)(e)

Failure of a real estate developer to confirm in the prescribed manner and within the prescribed period the existence of, and the prescribed information in respect of, corporations on whose behalf a prescribed transaction is conducted

minor

73.27

6.1

59.5(c), 66(1) and 66(2)(e)

Failure of a real estate developer to confirm in the prescribed manner and within the prescribed period the existence of every entity, other than a corporation, on whose behalf a prescribed transaction is conducted

minor

21. The portion of item 75 of Part 2 of the schedule to the Regulations in column 3 is replaced by the following:

Item

Column 3

Short-form Description

75.

Failure of a casino to confirm in the prescribed manner and within the prescribed time the identity of every person who receives a prescribed amount from the casino

22. Part 2 of the schedule to the Regulations is amended by adding the following after item 84:

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

84.1

6.1

64.1(1)

Failure of a person or entity who relies on an agent or mandatary to take identification measures to enter into an agreement or arrangement with the agent or mandatary for the purposes of ascertaining identity

minor

84.2

6.1

64.1(2)

Failure of a person or entity who enters into an agreement or arrangement with an agent or mandatary for the purposes of ascertaining identity to obtain from the agent or mandatory the prescribed information

minor

23. Part 2 of the schedule to the Regulations is amended by adding the following after item 88:

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

88.1

9.5(a)

66.1(1) and (2)

Failure of a prescribed person or entity to include prescribed information in prescribed electronic funds transfers

minor

88.2

9.5(b)

66.1(1) and (2)

Failure of a prescribed person or entity to take reasonable measures to ensure that any transfer that the person or entity receives includes prescribed information

minor

24. Part 2 of the schedule to the Regulations is amended by adding the following after item 89:

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

89.1

9.3(2)

67.1(1)(a)

Failure of a prescribed financial entity or securities dealer to take reasonable measures to establish the source of funds that have been, will be or are expected to be deposited

minor

89.2

9.3(2)

67.1(1)(b)

Failure of a prescribed financial entity or securities dealer to obtain the approval of senior management to keep an account open

minor

89.3

9.3(2)

67.1(1)(c)

Failure of a prescribed financial entity or securities dealer to conduct enhanced ongoing monitoring in respect of an account

minor

89.4

9.3(2)

67.2(1)

Failure of a financial entity, life insurance company, life insurance broker or agent or money services business to take reasonable measures to establish the source of funds for a prescribed transaction

minor

89.5

9.3(2)

67.2(2) and (3)

Failure of a member of senior management of a financial entity, life insurance company, life insurance broker or agent or money services business to review a prescribed transaction within the prescribed period

minor

25. Part 2 of the schedule to the Regulations is amended by adding the following after item 97:

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

98.

9.6(3)

71.1

Failure of a prescribed person or entity to take prescribed special measures

serious

26. Part 3 of the schedule to the Regulations is amended by adding the following after item 6:

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

7.

6

12.1

Failure of a person or entity to keep a copy of a report submitted to the Centre

minor

8.

6

12.3(1)

Failure of a person or entity to keep a copy of a prescribed report for the prescribed period

minor

27.The schedule to the Regulations is amended by adding the following after Part 3:

PART 4

PROCEEDS OF CRIME (MONEY LAUNDERING) AND TERRORIST FINANCING ACT AND PROCEEDS OF CRIME (MONEY LAUNDERING) AND TERRORIST FINANCING REGISTRATION 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 Registration Regulations

Column 3








Short-form Description

Column 4







Classification of Violation

1.

11.12(1)

4(a) and 5

Failure of an applicant or a registered person or entity to submit an application for registration in the prescribed manner and with the prescribed information

serious

2.

11.13

4(b) and 5

Failure of an applicant or a registered person or entity to submit a notification of a change to the information provided in a prescribed application in the prescribed manner and with the prescribed information

serious

3.

11.13

4(c) and 5

Failure of an applicant or a registered person or entity to submit a notification of newly obtained information in the prescribed manner and with the prescribed information

serious

4.

11.14(1)

4(d) and 5

Failure of an applicant to submit a requested clarification within the prescribed time, in the prescribed manner and with the prescribed information

serious

5.

11.17(1)

4(d) and 5

Failure of a registered person or entity to submit a requested clarification within the prescribed period, in the prescribed manner and with the prescribed information

serious

6.

11.19

4(e), 5 and 6.1

Failure of a registered person or entity to submit an application to renew their registration within the prescribed period, in the prescribed manner and with the prescribed information

serious

7.

11.2

4(f) and 6

Failure of a registered person or entity that ceases an activity for which they are registered to submit notification of the cessation within the prescribed period, in the prescribed manner and with the prescribed information

serious

COMING INTO FORCE

28. (1) Subject to subsections (2) to (4), these Regulations come into force on December 30, 2008.

(2) Items 39.3 to 39.5 of Part 2 of the schedule to the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations , as enacted by section 12 of these Regulations, come into force on February 20, 2009.

(3) Items 73.25 to 73.27 of Part 2 of the schedule to the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations, as enacted by section 20 of these Regulations, come into force on February 20, 2009.

(4) Sections 6, 13, 14 and 21 of these Regulations come into force on September 28, 2009.

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 this 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 2) 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 C$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. 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 Inc.

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 mandates. 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. Various groups and organizations have made representations on the proposed changes to the Regime. The Department of Finance undertook 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 the necessary legislative amendments to implement the proposals set out in the consultation paper. Bill C-25 received Royal Assent in December 2006, but new regulations were required to make the provisions fully effective. On June 27, 2007 the final version of the first set of amendments to the existing regulations that introduce new client identification, record-keeping and transaction reporting requirements for all persons and entities that are subject to the Act was published. The new Regulations, Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations (PCMLTF Registration Regulations), which set out the details of a new registration scheme for money services businesses, were also published on that date. On December 26, 2007, the Department of Finance published the final version of a second set of regulatory amendments that brings the legal profession, British Columbia notaries public and dealers in precious metals and stones under the Act. The new Regulations, Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations (PCMLTF Administrative Monetary Penalties Regulations), were also published on that date. On February 20, 2008, the final version of the third set of regulatory amendments that brings real estate developers under the Act and introduces a new requirement for casinos to report large disbursements was published.

Although these three sets of regulations implement most of the proposals made in the consultation paper and the new provisions introduced in Bill C-25, further amendments to the regulations are required. These amendments complete the schedule of violations under the PCMLTF Administrative Monetary Penalties Regulations and make some amendments, largely technical, to the other three sets of regulations under the Act. These regulations were pre-published for public comment on March 15, 2008. The amendments are outlined below.

1. 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 complete the schedule of violations to include the recent amendments to the PCMLTF Regulations and the PCMLTF Suspicious Transaction Reporting Regulations, including changes to customer due diligence measures and reporting requirements and the application of those requirements to the legal profession, British Columbia notaries public, and real estate developers.

2. Amendments to the PCMLTF Regulations, the PCMLTF Suspicious Transaction Reporting Regulations and the PCMLTF Registration Regulations

The amendments to the PCMLTF Regulations provide an exemption for ascertaining identity for accounts opened for the deposit of death benefits under life insurance policies and annuities to reduce the compliance burden on financial entities. The references to the Income Tax Regulations in paragraphs 62(2)(a) and (m) of the Regulations are being updated to reflect changes made to the Income Tax Act and its regulations. Amendments to section 69 specify how long reporting entities have to retain the new records that have to be kept under the Regulations published on June 27, 2007. In addition, a provision is being added to require financial institutions to keep a record of the measures they have taken to determine whether any civil or criminal penalties have been imposed on the foreign financial institutions with which they enter into correspondent banking agreements. Schedule 7 is amended to remove the method consisting of the use of a voters’ registry from the list of other prescribed acceptable identification methods. The remainder of the amendments are technical in nature and include an amendment to the PCMLTF Registration Regulations in order to enable the Centre to publish information regarding the relationship between registered money services businesses and their branches, agents and mandataries. This will provide more complete information to members of the public who consult the registration Web site. An amendment to the PCMLTF Suspicious Transaction Reporting Regulations expands the list of designated information that the Centre can disclose to law enforcement agencies. The amendment allows the Centre to disclose the country of origin or destination of an importation or exportation of currency or monetary instruments as well as the type of business in the case of transactions that involve entities. This measure will enhance the investigative and intelligence value of the Centre’s disclosures.

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 based on these international standards serves 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 requirements to its constitutional and legal framework, including as they may relate to privacy rights. Moreover, to close gaps without diminishing competition or imposing excessive compliance costs, the requirements reflect an assessment of the domestic risks while also being responsive to existing business practices.

Canada’s regime was recently evaluated by the Task Force and received a rating of fully or largely compliant with 30 recommendations, partially compliant with 8 recommendations, and non-compliant with 11 recommendations (see footnote 3). However, this report only considers measures in place as of June 2007. The current set of Regulations, as well as the previous two sets of regulations, are not reflected in the evaluation report and will bring Canada in line with the international standards, addressing the deficiencies cited in the report.

Benefits and costs

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 monetary penalties. 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. The administrative monetary penalties scheme will also play a 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

The Department of Finance released a consultation paper on June 30, 2005 entitled Enhancing Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime. This document presented a series of proposed changes to the Act and its regulations. Stakeholders and partners to the Regime were invited to submit their comments on the paper and more than 50 stakeholders provided written submissions. These submissions came from various groups including individuals, financial sector business associations, financial institutions, professional associations, law enforcement agencies and provincial ministries and agencies.

Since the publication of the consultation paper, the Department of Finance has consulted extensively with stakeholders to discuss their written comments and find ways to adapt the proposed amendments to their current business practices and to the risks of money laundering or terrorist financing activities within their sectors.

Overall, stakeholders responded positively to the proposal to introduce an administrative monetary penalties scheme so long as an appropriate appeals process is put in place. This process is provided for in Part 4.1 of the Act. Some concerns were also expressed regarding the publication of the name of the offender, the violation, and the amount of the penalty. Further context provided with respect to the use of this measure clarified that the scheme is designed to be progressive in that this measure will only be used in situations where an entity continues to be in non-compliance despite repeated attempts by the Centre to have the situation remedied.

Comments received from stakeholders during the 30-day pre-publication of these regulatory amendments were minimal. The life insurance sector was consulted on the use of accounts opened for the deposit of death benefits under life insurance policies or annuities and there was no objection to exempting these accounts from client identification requirements. The amendment relating to record-keeping for correspondent banking relationships does not appear in the pre-published version of the amendments. However, all financial institutions with correspondent banking relationships were consulted directly regarding this amendment and did not have any objections as it is already consistent with their existing practices. Comments from industry on the consultation of voters’ registries as a means of identifying clients in their absence revealed that while some provincial and municipal registries could be used for identification purposes, many could not. As a result, the option to use a voters’ registry to identify customers in their absence is being removed from the regulations.

The amendments relating to the Administrative Monetary Penalties scheme will come into force on December 30, 2008, which is consistent with the coming into force date established for these regulations when they were published on December 26, 2007. The amendment relating to record retention will come into force June 23, 2008. The requirement to retain records applies to measures that will come into force June 23, 2008; as such the coming into force dates must be consistent. All other amendments will come into force on registration given they amend measures that are already in force.

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.

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
SOR/2007-292

Footnote 2 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.

Footnote 3 A copy of Canada’s Mutual Evaluation Report is available on the Financial Action Task Force Web site at www.fatf-gafi.org.