Legal Obligations Under FINTRAC and FINCEN

Compliance Requirements

Money services businesses (MSBs) must fulfill specific obligations as required by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) in Canada. These obligations include:

• Keeping records
• Verifying their clients’ identity
• Implementing a compliance regime
• Reporting certain types of financial transactions to FINTRAC
• Registering their business with FINTRAC

In the United States, MSBs must comply with the Bank Secrecy Act (BSA) and related regulations enforced by FINCEN. This includes:

• Establishing an anti-money laundering (AML) program
• Filing Suspicious Activity Reports (SARs)
• Maintaining certain records
• Registering with FINCEN

Reporting Standards

Both FINTRAC and FINCEN have stringent reporting standards to ensure transparency and prevent financial crimes. FINTRAC requires MSBs to submit reports on large cash transactions, electronic funds transfers, and suspicious transactions. Similarly, FINCEN mandates the filing of Currency Transaction Reports (CTRs) and SARs.

Penalties for Non-Compliance

FINTRAC has the legislative authority to issue administrative monetary penalties (AMPs) to reporting entities that are found to be non-compliant with the PCMLTFA and associated Regulations. For more information, see Penalties for non-compliance. FINCEN also imposes significant penalties for non-compliance, including fines and potential criminal charges.

Substance Law can assist your business in navigating these complex regulatory landscapes, ensuring that you meet all compliance requirements and avoid severe penalties.

Registration Process for Money Services Businesses

Steps to Register with FINTRAC

Before beginning to operate in Canada, you must register your MSB with FINTRAC. Even if you are registered as an MSB with a province or territory, you still have to register with FINTRAC. FINTRAC does not charge registration fees. Certain persons or entities are not eligible to register and therefore cannot operate an MSB or FMSB.

1. Submit a registration application via the FINTRAC website.
2. Provide all required documentation, including proof of identity and business details.
3. Await confirmation of registration from FINTRAC.

Steps to Register with FINCEN

To operate as a money services business in the United States, you must register with FINCEN. The process involves several steps:

1. Complete the FINCEN Registration of Money Services Business (RMSB) form.
2. Submit the form electronically through the BSA E-Filing System.
3. Provide additional documentation as required.
4. Receive confirmation of registration from FINCEN.

Common Challenges in Registration

Registering with FINTRAC and FINCEN can present several challenges, including:

• Navigating complex regulatory requirements.
• Ensuring all documentation is accurate and complete.
• Understanding the specific obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and other relevant laws.

Refusal of Registration

Grounds for Refusal by FINTRAC

FINTRAC verifies the compliance of businesses subject to the Act and has the legislative authority to refuse a money services business’ registration. FINTRAC can deny a registration if a money services business or a foreign money services business:

• does not answer a clarification request
• is not eligible for registration

Grounds for Revocation by FINCEN

FINCEN, similar to FINTRAC, has the authority to revoke the registration of a money services business. Grounds for revocation include:

• Failure to maintain required records
• Non-compliance with reporting standards
• Engaging in fraudulent activities

Conclusion

In conclusion, understanding the distinctions and requirements between FINTRAC and FINCEN registration is crucial for businesses operating in the financial sector. Both entities play pivotal roles in the global fight against financial crimes, including money laundering and terrorist financing. While FINTRAC focuses on Canadian regulations and compliance, FINCEN oversees similar responsibilities within the United States. Businesses must ensure they meet the specific registration and reporting requirements of each entity to remain compliant and avoid severe penalties. Staying informed and adhering to these regulations not only safeguards the business but also contributes to the broader effort of maintaining financial integrity and security on a global scale.

Frequently Asked Questions

What is the primary role of FINTRAC?

FINTRAC’s primary role is to receive, analyze, assess, and disclose financial intelligence on suspected money laundering, terrorist activity financing, and other threats to the security of Canada. It ensures compliance with the Proceeds of Crime Act and other related regulations.

Does registration with FINTRAC mean that the business is endorsed or licensed?

No, registration with FINTRAC does not indicate endorsement or licensing. It simply means that the business has met the legal requirements to register.

What are the key reporting requirements for businesses registered with FINTRAC?

Businesses registered with FINTRAC must report suspicious transactions, suspected terrorist property, large cash transactions, and international electronic funds transfers over $10,000 CAD within a 24-hour period.