Getting to the Bottom of FINTRAC Compliance
TAGS: Anti-Money Laundering BCREA Managing Brokers’ Conference Compliance FINTRAC Managing Brokers Proceeds of Crime (Money Laundering) and Terrorist Financing Act
Answers to your burning questions
The wait for responses from the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to managing brokers' top questions submitted at the Conference for Managing Brokers is over! During the conference, attendees submitted questions to the presenters and voted for the questions they most wanted answered. Responses to three burning questions submitted to FINTRAC are given below. The rest of the responses from FINTRAC can be found here.
- Why all the FINTRAC pressure on our industry when banks control the flow, not REALTORS®?
FINTRAC administers the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations, to which a number of sectors are subject. We provide outreach and assistance to all of these sectors and have developed guidance on each sectors' obligations with respect to the implementation of a compliance program, ascertaining identification, record-keeping, and, as applicable, reporting to FINTRAC.
That said, the exploitation of real estate by criminals for money laundering purposes is well recognized internationally and underscores the importance of quality reporting on relevant suspicious transactions. Many countries are increasing their efforts to implement counter measures following the Financial Action Task Force (FATF)'s work on this topic indicating that the real estate sector is highly susceptible for many reasons: for example, easy price manipulation and a variety of complex options for selling/purchasing/financing with anonymity.
It is important to recognize that the real estate brokers and sales representatives are uniquely positioned to be able to assess aspects of the transaction that other entities involved may not be aware of. While the actual flow of funds for the purchase of real estate may involve financial entities, it is the real estate brokers and sales representatives that have a relationship with the participants to the transactions. Furthermore, financial institutions may under-report because of an erroneous belief that brokers/agents/developers have already submitted suspicious transaction reports. For example, the suspicions surrounding deposits for a purchase may be primarily visible to and reported by real estate agents, brokers and developers, whereas those related to loans may be more visible to and reported by financial institutions.
- How can we build a proper FINTRAC compliance program if each auditor has a different perspective on many of the grey areas?
To ensure that we exercise professional judgement in a consistent manner, we rely on our collective knowledge, experience, training, and standardized assessment approach, while taking into account the nature, size, and complexity of different businesses. Compliance officers strive to provide clear and consistent explanations of the examination findings, and guidance to facilitate your understanding of your legislative obligations, as well as of FINTRAC guidelines, policies, and procedures. Finally, all examination findings go through a peer review and managerial approval process to further ensure consistency.
As such, what might appear to be different perspectives on grey areas may actually be a result of the different considerations used - e.g., compliance history, the size of the reporting entity, the way a particular reporting entity sets out responsibilities in its policies and procedures.
- How can FINTRAC tell us to not rely on the CREA FINTRAC compliance guidelines and related FINTRAC content? Are they incorrect?
FINTRAC encourages industries and industry associations to develop products on which the reporting entities within a sector may base their compliance program. However, these products may be intentionally general so as to be applicable, at a high-level, across the industry. As such, a real estate broker or sales representative may be able to use CREA's guidelines and content, but must consider whether it is specific enough for its purposes, and applicable given how its entity functions on a day-to-day basis.
Please click here for the rest of the responses from FINTRAC. Thank you to FINTRAC for presenting at the Conference for Managing Brokers and for providing these great responses!
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