Recent developments in anti-money laundering and terrorist financing regulations strengthens fight against financial crimes

The United Nations Office on Drugs and Crime estimates that the amount of money laundered in one year could be anywhere between two to five per cent of the global GDP—or between US$800 billion and $2 trillion.

As governments and regulators around the world try to grapple with this problem and advancing technologies that increasingly enable money laundering and corruption, the International Federation of Accountants (IFAC) and the International Bar Association (IBA) have committed to combatting corruption in its various forms.

Here in Canada, accountants and accounting firms have to fulfill requirements as provided in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), and associated regulations. That means CPAs have an important role to play in helping to protect Canada’s financial system and economy from money laundering and terrorist financing threats, both by understanding risks when providing certain types of services and by submitting required reports.

RECENT DEVELOPMENTS 

Many countries have been reviewing and revising their regimes, in the face of present and developing dangers. Recently, the European Union updated its laws on anti-money laundering and countering the financing of terrorism in an effort to crack down on financial crimes. 

Responding to this, Accountancy Europe—which represents one million accountants, auditors and advisors across 51 organizations from 37 countries—released updated guidelines on how these changes will impact accountants, especially small and medium-sized practitioners (SMPs).

In Canada, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is the national regulator in charge of anti-money laundering and anti-terrorism financing. It provides information and interpretations relevant to accountants, including reporting requirements related to suspicious transactions, terrorist property and large cash transactions. For example, if you receive more than $10,000 in a single transaction or in multiple transactions within 24 hours, you must submit a report within 15 days.

There is also guidance on knowing your client and their assets, such as methods to identify individuals and confirm the existence of entities, and third party determination requirements.

Canada is a founding member of the Financial Action Task Force (FATF), the inter-governmental body that issues international anti-money laundering and terrorism funding standards. FATF released an evaluation report in 2016 on Canada’s efforts to combat these issues and stated: “Canada has a strong anti-money laundering and combating the financing of terrorism (AML/CFT) regime which achieves good results in some areas but requires further improvements to be fully effective.”

In response to the FATF review and other initiatives to further develop and enhance the Canadian regime, the federal government issued a discussion paper in February 2018 for public consultation and proposed revisions to regulations in June 2018. Results of a parliamentary study of Canada’s PCMLTFA are soon expected and changes to corporate registry requirements are anticipated by July 2019 with regards to beneficial ownership reporting.

LOOKING FORWARD

In its 2017 annual report, FINTRAC highlighted that it saw 2,015 disclosures of actionable financial intelligence, representing a 10 per cent increase in suspicious transaction reporting from the previous year. Among those disclosures, 1,366 were related to money laundering and 462 were related to terrorism financing and threats to the security of Canada.

With increased disclosures to FINTRAC, Canada’s reporting sectors are demonstrating they are on guard. CPAs have an important role within this regime in continuing the fight against money laundering and terrorist financing.