As we previously discussed here, the Financial Transactions and Reports Analysis Centre of Canada ("FINTRAC" or the "Centre") plays a crucial role in combating illegal activities like money laundering and terrorism financing.
The Centre operates under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the "Act"), which lays out a complex web of reporting, record-keeping, and identity verification requirements. When these requirements are not met, enforcement measures, including Administrative Monetary Penalties ("AMPs"), come into play.
Background on AMPs
AMPs are financial penalties issued by FINTRAC to non-compliant persons or entities. They are imposed through the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations (the "AMP Regulations").
FINTRAC has discretion in deciding when to impose an AMPs and in what amounts, subject to certain ranges.
According to s.73.13(2) of the Act, AMPs can be imposed whenever the Centre has "reasonable grounds to believe" a person or entity has committed a violation.
Penalty ranges for each violation are set in the AMP Regulations and vary according to severity, with maximums ranging from $1,000 to $500,000 per violation. In 2023-24, FINTRAC issued 12 Notices of Violation to businesses, with penalties totaling over $26 million. Many of these included aggregate penalties in the $100,000 - $200,000 range as we have previously discussed examples of here.
Why Do I Care?
Surprisingly, AMPs can also apply whether or not the recipient is registered with FINTRAC. Registration is mandatory for persons and entities under s.11 of the Act, and non-registration is itself considered a "serious" violation subject to a maximum penalty of $100,000.
Moreover, FINTRAC requires compliance from "Reporting Entities", but knowing who is captured by this designation isn't always straightforward. This question can be particularly challenging for Money Service Businesses ("MSBs").
For example, if you conduct 2 or more transactions related to a foreign exchange transaction within 24 hours with the same person or entity, and these transactions collectively total more than $1000, you would be considered an MSB – even if you don't advertise any MSB services. Consequently, non-compliance with duties imposed by the Act could expose you to costly AMPs.
Can You Appeal AMPs?
Yes - AMPs can be appealed but it is crucial to act fast! Written representations must be made to FINTRAC's Director and Chief Executive Officer within 30 days of receiving a Notice of Violation, and further deadlines for appeal to court may follow.
Importantly, once an AMP is paid, the person or entity is deemed to have committed the violation, and appeal is no longer possible.
Takeaways
Individuals or entities facing AMPs should seek specialized legal assistance quickly to ensure they understand all of their options.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.