Making sure the money’s clean
December 27th, 2007 by moniesFighting Organized Crime
Not only does organized crime have a negative social impact on our communities and in our lives, it poses a major threat to international financial networks and national economies. As the world economies become increasingly interdependent, financial markets become ever more vulnerable to the organized crime groups who seek to exploit their weaknesses.
Representing the world’s largest economies, the Group of Seven founded a Financial Action Task Force (FATF) in 1989 to combat organized crime on a global basis. Part of the plan included fostering the establishment of international money laundering controls.
Today FATF includes 26 member nations, the European Commission, and the Gulf Co-operation Council. FATF’s mandate is based on 40 recommendations first put in place in 1990 and later revised in 1996. These recommendations serve as the task force’s blueprint for establishing domestic money laundering controls and fostering international cooperation between countries.
In response to the FATF initiative, the Canadian government, a member of the G-7, passed into law the Proceeds of Crime (Money Laundering) Act (the Act”) on June 29, 2000. The passage of this Act was followed by the posting of the Proceeds of Crime (Money Laundering) Regulations (the “egulations’) on February 17, 2001. Immediately following this posting, a 90-day consultation period ensued.
Complying with New Rules
Entitled “Proceeds of Crime (Money Laundering) Suspicious Transaction Reporting Regulations,” the first set of finalized regulations under the Act were posted in the Canada Gazette on September 12, 2001, and came into force on November 8, 2001.
Where there are reasonable grounds to suspect a transaction is related to money laundering, the finalized regulations require accountants to report the transaction to a newly created regulatory agency, the Financial
Transaction and Reports Analysis Centre (FinTRAC). The same regulations apply to banks, credit unions, securities dealers, lawyers, foreign exchange dealers, life companies, trust and loan companies, certain government agencies, and casinos.
When the remaining regulations come into full force, accountants and other entities will have to become fully compliant. To do this, they will be required to develop policies and procedures in the following areas:
* Ascertaining identity
* Maintaining certain records relating to financial activities
* Taking declarations of financial transactions for amounts in excess of a prescribed amount as set out in the Regulations and reporting these transactions to (FinTRAC)
Establishing a system for the reporting of cross-border movements of cash and monetary instruments in excess of a prescribed amount as set out in the Regulations
It will be mandatory for accountants to positively identify individuals and companies who conduct financial transactions pursuant to the Act and keep and retain certain records, yet to be set out in the regulations, for at least five years. In addition, the proposed regulations will require accountants to file to FinTRAC and keep a “large cash transaction record” of a cash transaction in the amount of $10,000 or more “in the course of a single transaction.” A single transaction is defined as two or more cash transactions or electronic funds transfers of less than $10,000 each that are done within 24 consecutive hours and that total $10,000 or more. Accountants will also have to report to FinTRAC any movement of cash and monetary instruments cross– border that total $10,000 or more.
Also, the pending Regulations require accountants to implement a compliance regime that, in addition to developing policies and procedures, includes the appointment of a compliance officer, the implementation of compliance reviews and an ongoing training and awareness program.
To ensure compliance, the Act gives FinTRAC the power to enter any accountant’s business premise at a reasonable time, without a search warrant, and examine records and inquire into the accountant’s business and affairs as it relates to the Act and Regulations.
Penalties for non-compliance can be severe. They can damage an accountant’s (or firm’s) reputation in the community-with clients, suppliers, partners, and associates-as well as bringing significant court costs and the disruptions resulting from an investigation. Fines range from $500,000 to $2,000,000 or to a term of imprisonment of not more than five years, or both. Reporting Suspicious Transactions The law requires that accountants
report certain financial transactions when there are “reasonable grounds” to suspect the transactions are related to money laundering. According to Section 7 of the Act
Author: Beck, Bernie
Posted in Uncategorized |