The Financial Transactions and Reports Analysis Centre of Canada has ramped up the use and amount of fines for anti-money laundering violations. Such a strong step is a clear indication of their new dedication to forcing businesses to comply. This shift comes as more firms are becoming subject to Fintrac rules, coinciding with heightened scrutiny from international regulatory bodies. The most recent statistics reveal that Fintrac levied more than $26 million in penalties in the 2023-24 fiscal year. This is the highest rate ever recorded across 12 separate violations.
Jessica Davis, president and principal consultant at Insight Threat Intelligence, spoke to the tremendous deterrent effect of higher fines. Now, companies are beginning to take anti-money laundering rules seriously. This combined enforcement action is intended to contribute to a more robust culture of compliance across the financial services industry.
Fintrac’s recent enforcement actions follow a tumultuous history of legal challenges, including a pivotal 2016 Supreme Court ruling that halted penalties for several years. The ruling forced Fintrac to re-evaluate its policies and be more transparent about how it derives its penalties. The agency has, in the intervening years, become more modernized in its systems and processes to more efficiently meet its important mandate despite increasing submission numbers.
Chief Executive Sarah Paquet underscored that Fintrac is using new technologies, like artificial intelligence. This technology increases their efficiency in sorting through submissions and enables them to identify potential violations with greater efficacy. The last thing I would say is just that we are really, really increasing our enforcement action,” Paquet said. She showed that Fintrac is committed to taking on those businesses that shirk their moral and social obligations.
In the last fiscal year, Fintrac broke its own record by issuing only 23 notices of violation. This is a sharp rise from recent years where the combined fines totaled more than $25 million. In total, authorities issued a fine of $177 million on Xeltox Enterprises Ltd., which acts as the parent company for Cryptomus. Peken Global Ltd., also called KuCoin, incurred a $20 million fine. This year, seven of these firms are ascending to the penalty box. Other big names are Spence Diamonds Ltd., the Canadian National Exhibition Association, Canaccord Genuity Corp., and numerous casinos, credit unions and real estate brokers.
In comparison, historically, Fintrac levied significantly lower penalties. In fiscal year 2020-21, the agency only issued $538,000 in fines on nine counts. As a result, this amount increased to $3.5 million in the subsequent year and $1.1 million the year after that. This recent spike in penalties speaks to a country-wide increase in regulatory vigilance and to a more assertive posture from Fintrac itself.
The need for stricter enforcement is underscored by the ongoing review of Canada’s anti-money laundering controls by the G7-backed Financial Action Task Force. As regulatory pressures continue to increase, businesses have heightened responsibilities to meet AML standards.
Industry experts warn that though these measures could improve awareness of compliance requirements, they might produce unintended negative consequences. Jeffrey Simser emphasized a danger of adding more noise into the system. In his view, companies may be incentivizing the excessive overreporting of suspicious transactions simply to avoid the risk of facing penalties. That’s because while over-reporting is never punished, under-reporting is, most definitely,” he continued.
The legislative landscape around anti-money laundering enforcement is changing as well. Vladimir Shatiryan added that the proposed legislation has the potential to dramatically change the enforcement framework in Canada. He remarked on the shift in corporate attitudes towards compliance: “The good part of the fines is you can then say to your boss, yeah, I know it costs money, but guess what? If we don’t do this, we’re going to get a fine.”
