Canada’s anti-money-laundering and anti-terrorist-financing regulator – FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) has imposed a C$7.5m ($5.5m) monetary penalty on the Royal Bank of Canada (RBC) for failure to submit suspicious transaction reports.
FINTRAC said the fine was imposed on November 3, 2023 following a compliance examination in 2022. RBC was found to have not been in compliance with with Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations (the AML/ATF Regulations). The regulator identified RBC as having committed the following three administrative violations:
- Failure to submit 16 suspicious transaction reports (out of 130 case files reviewed) where there were reasonable grounds to suspect that transactions were related to a money laundering offence. Instances included failure to escalate referrals where there were indicators to support escalation, and where investigations were closed without adequate reviews.
- Failure to provide information in the prescribed form and manner in suspicious transactions reports.
- Failure to keep written policies and procedures up to date. FINTRAC determined that the Bank lacked appropriate and documented governance for developing, updating, and effectively implementing AML/ATF policies and procedures.
FINTRAC said this penalty was imposed for administrative violations committed by RBC under the AML Regulations, and not for criminal offences for money laundering or terrorist activity financing. It also said that administrative monetary penalties are non-punitive and are issued to encourage change in the non-compliant behavior of businesses.
Bank denies AML connection
RBC has stated it will not appeal FINTRAC’s charges.
In a statement to CBC News, the bank said: “We chose not to appeal but believe the fine is not at all commensurate with an administrative matter where there is no connection to money laundering or terrorist financing offences.”
“Equally important, there is no finding that anyone exercised judgment in bad faith or knowingly contributed to violations.”
Sarah Paquet, Director and Chief Executive Officer at FINTRAC, said: “Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime is in place to protect the safety of Canadians and the security of Canada’s economy.
“FINTRAC will continue to work with businesses to help them understand and comply with their obligations under the Act. We will also be firm in ensuring that businesses continue to do their part and we will take appropriate actions when they are needed.”
GRIP Comment
The financial penalty imposed on the Royal Bank of Canada (RBC) for administrative errors filing suspicious transaction reports (STRs) suggests that FINTRAC is becoming more vigilant in enforcing its anti-money-laundering (AML) and anti-terrorist-financing (ATF) regulations. This is a positive development, as it shows that FINTRAC is taking its mandate seriously and is committed to protecting the Canadian financial system from illicit activities and promoting global financial integrity.
Penalties imposed to date (not including RBC fine):
- In 2022–23, FINTRAC issued 6 Notices of Violation of non-compliance to businesses for a total of C$1,113,569 ($819,425).
- FINTRAC has imposed more than 125 penalties across most business sectors since it received the legislative authority to do so in 2008.
The penalty of C$7.5m ($5.5m) is significant, especially given that it is the first time that FINTRAC has fined a major Canadian bank for AML/ATF compliance violations. This suggests that FINTRAC is sending a clear message to all financial institutions that they need to take their AML/ATF obligations seriously.
In addition to the penalty, FINTRAC has also required RBC to take a number of corrective actions including strength.