On April 5th, newspapers in Canada began reporting that the Financial Transactions Reports and Analysis Centre of Canada (FINTRAC) had imposed its first ever penalty on a bank. FINTRAC is the government agency created by the Proceeds of Crime (Money Laundering) and Terrorist Finance Act (PCMLTFA) to receive reports from banks and other reporting entities regarding large cash and suspicious transactions and to provide information to law enforcement agencies discerned from those reports. It also has the authority to issue administrative money penalties on reporting entities that fail to meet their obligations under the Act. While it is not unusual for FINTRAC to impose a penalty on a reporting entity, a number of aspects of this particular case are noteworthy.
As noted above, the case was first reported in the press and not as a result of any communication from FINTRAC, although it appears that FINTRAC has confirmed the newspaper reports. While FINTRAC routinely issues press releases when it imposes penalties, to date, FINTRAC has not issued its own press release or made any reference on its website to a case involving a bank.
While FINTRAC has not provided any official notice of the particular case, it does publish a breakdown of the aggregate penalties imposed by type of reporting entity. The current list shows only one penalty involving a bank. Perhaps an enterprising reporter noticed the addition of a penalty involving a bank and investigated further.
FINTRAC also publishes a cumulative list of penalties that it has imposed, including both the name of the entity and the dollar amount of the penalty. Twenty-four cases are listed, each one mentioning the name of the person that committed the offence. The latest case involving a bank does not appear in this list.
Much has been made in the press about the apparent favourable treatment that the bank received by being spared from public disclosure. The PCMLTFA gives FINTRAC the authority to publish the name of a person who committed an offence, the nature of the offence and the amount of the penalty, but, only if the proceedings in respect of the violation have been completed. At least one press report quotes FINTRAC as having decided to exercise its discretion not to publish the name of the bank or, presumably, any details of the case.
FINTRAC provides information on its website on the criteria it uses to determine whether to name a person. Three criteria are mentioned: (i) the person or entity has committed a very serious violation; (ii) the base penalty amount is equal to or greater than $250,000, before adjustments are made in consideration of the person or entity's compliance history and ability to pay; or (iii) repeat significant non-compliance on the part of the person or entity. Given that the penalty is over $1 million, at least two of these criteria appear to have been met. It is not clear if FINTRAC has previously exercised its discretion not to publish. On its website, FINTRAC states that the list of prior penalties incudes "details on administrative monetary penalties imposed, from the start of the program in 2009". This appears to reinforce the impression that this case was treated differently from other cases.
The case is also noteworthy because of the size of the penalty that was imposed. While penalties in the hundreds of millions of dollars appear to be routinely imposed in other jurisdictions, prior to this case, the largest penalty imposed by FINTRAC was just under $350,000, or roughly a third of the penalty imposed on the bank. In the prior case, FINTRAC found that the reporting entity had committed nine violations covering almost the complete range of the obligations imposed on reporting entities under the PCMLTFA. In other words, a complete compliance failure. In order to understand the message that FINTRAC is sending from the new high water mark, it would be helpful to compare the violations committed in the two cases. Of course, as result of FINTRAC's decision not to publish information about the case, it is not possible to do that comparison.
The press has argued that FINTRAC's decision not to publish the name of the bank is unfair, particularly since it appears that it has published the name of the entity in every previous case. It is easy to see that by not having its name published, the bank has been spared some damage to its reputation. However, since we do not know which bank was involved, suspicion has instead been cast on the entire industry. It will be interesting to see whether the controversy surrounding this case will lead FINTRAC to reconsider its approach to naming in future cases.
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