FCA 102 - AML Assignment 2

- Scenario

Submitted by: Viraj Joshi (ID: 148385206)

Course code: FCA 102

Due date: 26th November 2021

Professor: Daniel Bowering

securities (2) trading in new or outstanding securities on their proprietary account. They facilitate both

primary and secondary market activity in securities. The size of the organization is 100 employees who

include but not limited to – securities traders, sales traders, Legal and Compliance teams, and

Executive committee members.

A compliance program has to include written policies and procedures to assess the risks related to

money laundering and terrorist financing in the course of company’s activities. Non-compliance leaves

a company at risk for financial losses, security breaches, license revocations, business disruptions, and

a damaged reputation.

Criminal Penalties for Non-Compliance per FINTRAC:

 Failure to report a suspicious transaction or failure to make a terrorist property report —

conviction of this could lead to up to five years imprisonment, to a fine of $2,000,000, or both.

 Failure to report a large cash transaction or an electronic funds transfer — conviction of this

could lead to a fine of $500,000 for a first offence and $1,000,000 for each subsequent offence.

 Failure to retain records — conviction of this could lead to up to five years imprisonment, to a

fine of $500,000, or both.

 Failure to implement a compliance regime — conviction of this could lead to up to five years

imprisonment, to a fine of $500,000, or both.

Key Components of a Compliance Regime for ABC Securities Inc.:

1. Development and application of compliance policies and procedures.

2. Assessment and documentation of risks related to money laundering and terrorist financing.

3. An on-going compliance training program for employees. The training program has to be in

writing and updated as required.

Action plan and Recommendations for an AML Compliance Regime per FINTRAC guidelines:

1. Policies and Procedures Reviews and its ongoing effectiveness:

As an entity the policies and procedures need to be approved by an Executive committee

member or Board of Directors. The policies and procedures need to be in clear language and

communicated and adhered by all within the organization or anyone who is dealing with clients

on a daily basis. As a proactive member of the industry an entity should operate at a level of

caution when it comes to countries or territories that do not have adequate anti-money

laundering or anti-terrorist financing measures in place which are consistent to the PCMLTFA

guidelines.

A reporting entity should incorporate the below recommendations:

KYC:

 Screening of politically exposed persons (PEP) or families of PEPs as an important

requirement. As an entity, it should maintain a list of all account holders or families with PEP

designation and should have a software to alert the account manager of the instance thereby

increasing the level of scrutiny before any transaction is authorized.

 The screening should include large cash transactions ($10,000 and more), large virtual

currency transactions amounting to $10,000 or more, any suspicious transactions flagged

through the CRM software and details of the beneficial ownership and authorized personnel

(third party) validated through the system to carry out transactions on behalf of the account

owner.

Record Keeping Requirements:

 Large cash transaction records – All transactions of $10,000 or more in a single transaction

must be maintained and any transaction above the threshold must be reported within 24-hours

of the transaction taking place.

transaction must be maintained and any transaction above the threshold must be reported

within 24-hours of the transaction taking place.

 Account records account - For an individual or an entity all account information including

names, address, contact details, type of account, articles of incorporation and any bylaws

prescribed as a part of incorporation must be maintained.

**All records and reports must be maintained for a period of at least 5 years. Timely review of changing

regulations and scenarios every 2 years.

Reporting Standards:

The PCMLTFA requires that a report be filed with FINTRAC when there are reasonable

grounds to suspect that a transaction is related to a money laundering or a terrorist financing

offence. This applies whether the transaction in question was carried out or simply attempted.

 Any suspicious transactions should be reported to FINTRAC as soon as possible. Such

transactions must be reported within 1 business day.

 A detailed Suspicious Transaction Report (STR) must be filed keeping in mind the FINTRAC

guidelines of an STR. It must include Part G and H of the report.

2. Risk assessment and documentations:

 Develop a transaction monitoring tool and an escalation procedure which will have regulatory

requirements and internal thresholds for alerts to be triggered within set parameters.

 Create a risk assessment framework based on areas of human errors, regulatory requirements,

and the risk appetite of the entity to determine the level of scrutiny required such as High,

Medium, or Low. Document and report findings.

nature of transactions and also a yearly estimation of transaction amounts should be

documented.

3. Invest in Technology:

 Introduce an Audit Analytics software to monitor and report on possible failings of the AML

Regime. Form an independent internal controls team to perform audits every quarter on

operational standards.

 All findings must be submitted to the Steering Committee as a part of Management Information

Report along with a remediation plan.

4. Ongoing Compliance Training Programs:

 Develop online mandatory training programs for each employee for various scenario-based

instances and a quiz at the end of each training module to test one’s knowledge and

understanding. New trainings should be allocated every quarter.

 Training material should include information on regulatory changes, penalties, background

information on money laundering and terrorist financing. Review and updates of the training

plans needs to be done every 2 years to be in conjunction with the changing regulations

subject to PCMLTFA.
 Works Cited

Financial Transactions and Reports Analysis Centre of Canada. “Penalties for Non-Compliance.”

Financial Transactions and Reports Analysis Centre of Canada, 29 Aug. 2019, www.fintrac-

canafe.gc.ca/pen/1-eng

Financial Transactions and Reports Analysis Centre of Canada. “Record Keeping Requirements for

Securities Dealers.” Financial Transactions and Reports Analysis Centre of Canada, 13 July 2021,

www.fintrac-canafe.gc.ca/guidance-directives/recordkeeping-document/record/sec-eng

Financial Transactions and Reports Analysis Centre of Canada. “Suspicious Transactions.” Financial

Transactions and Reports Analysis Centre of Canada, 16 June 2020, www.fintrac-

canafe.gc.ca/reporting-declaration/info/rptstr-eng

Anti-Money Laundering in Canada: Securities Dealers.” Osler, Hoskin & Harcourt LLP,

www.osler.com/en/resources/regulations/2021/anti-money-laundering-in-canada-a-guide-to-the-june-1-

2021-changes/anti-money-laundering-in-canada-securities-dealers

Financial Transactions and Reports Analysis Centre of Canada. “When to Verify the Identity of Persons

and Entities-Securities Dealers.” Financial Transactions and Reports Analysis Centre of Canada, 4

Aug. 2021, www.fintrac-canafe.gc.ca/guidance-directives/client-clientele/client/sec-eng