December 5th - 2004

Audits for money laundering compliance loom

Federal agents want to know if your firm has a policy in place for handling large cash transactions. To find out, they may do an audit.

Federal agents want to know if your firm has a policy in place for handling large cash transactions. To find out, they may do an audit.

Phase three of the federal Proceeds of Crime (money laundering) and Terrorist Financing Act was launched by FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) in late October.

This latest phase will include a survey and audit of selected broker offices across Canada to assess their level of compliance. The survey will be sent by FINTRAC to a random list of broker offices in all provinces. The offices receiving the survey will have 30 days to complete it and, depending on their responses, an office examination could follow.

FINTRAC’s Manager of Compliance Jim Butcher outlined the process to delegates at CREA’s recent Special Assembly in Montreal. “This won’t be a surprise audit– it will start with a call to the broker or designated compliance officer. We’ll set up a time for the visit by FINTRAC officials. The visit will take about two hours and we’ll want to talk to the compliance officer and one or two agents.”

During the audit, Butcher explained, FINTRAC representatives will go through the office policies and procedures to make sure the office has the policies and mechanism in place to deal with large cash transactions. “The compliance officer will know immediately what our findings are. There will be no surprises,” said Butcher.

The broker office would then have 30 days to file an action plan to meet FINTRAC compliance requirements and FINTRAC representatives may visit again to make sure the corrective actions identified are completed.

As part of the FINTRAC inspection program, officials will also ensure brokers have an internal review process to monitor changes in legislation and regulations.

Phase one required all REALTORS, lawyers, bankers and accountants to report suspicious transactions to FINTRAC. Under phase two, all salespeople and brokers must also report terrorist property and brokers have the added responsibility of record keeping and client identification for large transactions.

For more information visit CREA’s Money Laundering Compliance Centre at www.realtorlink.ca or FINTRAC’s web site at www.fintrac.gc.ca. You can also sign up for OREA’s course teaching you how to ensure compliance with the Money Laundering Act. For course registration and information, please contact your local real estate board.

Money laundering on the rise in Canada
According to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) almost 200 cases involving $700 million in dubious financial transactions were investigated in Canada over the past fiscal year (2003-2004). By comparison, FINTRAC says $460 million in suspicious transactions were tracked the previous year (2002-2003).

Of the $700 million tracked over the past year, about 10 per cent of transactions are thought to be linked to terrorist activity financing “and threats to the security of Canada,” the agency said in its annual report.

In 2003-2004, a total of 44 specific cases were related to suspected terrorist activity, while another four involved both suspected money laundering and terrorist financing activity. Another 149 cases involved money laundering alone. The agency did not report on specific cases involving money laundering and real estate transactions.

The money laundering and terrorist financing regulations were designed to enlist the help of REALTORS and prevent Canadian real estate from becoming a haven for money laundering.

Under this money laundering legislation, all lawyers, bankers, accountants and REALTORS are required to report suspicious transactions to FINTRAC. In addition, all salespeople and brokers must report terrorist property and brokers have the added responsibility of record keeping and client identification for large transactions. The penalty for not reporting these transactions is steep – up to five years in jail and/or a fine of up to $2 million.

The Real Estate and Business Brokers Act already requires brokers to keep records of much of the information covered by the money laundering and terrorist financing laws. However, when the money laundering laws took effect, brokers were also required to appoint a compliance officer and implement a compliance program for their office.

For more information about reporting suspicious transactions, contact your real estate brokerage’s compliance officer or contact FINTRAC through their secure website at www.fintrac.gc.ca.

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