FATF's Focus on Corruption

The Financial Action Task Force (FATF) attaches a great importance to the fight against corruption: corruption has the potential to bring catastrophic harm to economic development, the fight against organized crime, and respect for the law and effective governance. The G20 called upon the FATF to address the problem of corruption in the framework of its work on combating money laundering and terrorist financing.  Corruption and money laundering are linked.  Corruption offences, such as bribery or theft of public funds, are generally committed for the purpose of obtaining private gain.  Money laundering is the process of concealing illicit gains that were generated from criminal activity.  The FATF Recommendations were designed to combat money laundering and terrorist financing, but when effectively implemented they can also help combat corruption, by:

·       safeguarding the integrity of the public sector;

·       protecting designated private sector institutions from abuse;

·       increasing transparency of the financial system;

·       facilitating the detection, investigation and prosecution of corruption and money laundering, and the recovery of stolen assets.

Reference Guide and Information note on the use of the FATF Recommendations to support the fight against Corruption – This information note sets out why compliance with the FATF Recommendations creates an environment in which it is more difficult for corruption to thrive undetected and unpunished.

Money laundering involves more than just cash transactions

Banks and other financial institutions required to report to FINTRAC need more sophistication and variety in their reporting of suspicious transactions, FINTRAC Director Jeanne Flemming recently told an anti-money laundering conference. “...on the issue of communications, what struck me when I took over as Director was how little we showed reporting entities why effective reporting was crucial to our output of high-quality intelligence and therefore to the police who undertake investigations and the Crown prosecutors who take cases to court.”

“We told them but we didn't show them. There is a big difference and it is why I wanted us to conduct workshops to bring together compliance officers, police and prosecutors with us to show just how we analyze and disclose intelligence and what happens to it. In other words, show how good reporting is a crucial factor in a continuum that finally ends with convictions of criminals. We held two workshops, in Toronto and Montreal, in the last two years. We were pleasantly surprised at the positive feedback we received.”

(See the Keynote Address by Director Jeanne M. Flemming, Financial Transactions and Reports Analysis Centre of Canada to the Canadian Institute's Annual Anti-Money Laundering Forum –Toronto. May 10, 2011.)

Trends in Canadian Suspicious Transaction Reporting

Trends in Canadian Suspicious Transaction Reporting represents an ambitious undertaking—the first time FINTRAC has made an in-depth analysis of 300,000 suspicious transaction reports (STRs) received over the last ten years from across the country.  STRs provide valuable information allowing FINTRAC to assist partners in their investigations of money laundering (ML), terrorist financing (TF), and other threats to the security of Canada. They also feed into strategic intelligence which informs various stakeholders about current and emerging ML/TF trends and patterns, as well as support high-level policy decisions. Since new compliance obligations came into force in 2008, reporting entities are required to expend more effort in identifying their highest ML and TF risks. The purpose of FINTRAC Typologies and Trends Reports is to provide strategic financial intelligence feedback to help reporting entities conform to these new obligations.

Review of the FATF Standards

The Financial Action Task Force (FATF) develops and promotes global standards for combating money laundering and terrorist financing, which are set out in the FATF 40 Recommendations and the 9 Special Recommendations on Terrorist Financing. Now at the end of its 3rd Round of Mutual Evaluations, the FATF is conducting a review of the 40+9 Recommendations to ensure that they remain up-to-date and relevant and to benefit from lessons learned from implementing and evaluating the current standards. The current review is a focused and balanced exercise, aiming at maintaining the necessary stability in the standards while addressing any deficiencies or loopholes.

Between October 2010 and January 2011, the FATF undertook a public consultation on the first phase of its Review of the FATF Standards.  The responses received were published on the FATF website in February 2011. In summary, 51 written submissions were received from representatives of the financial sector (available as Part 1 and Part 2); 18 from representatives of the non-financial businesses and professions; and 6 from other respondents, including non-governmental organisations.

The FATF has begun to consider the issues raised during the initial consultation. In particular, it continues to review certain aspects of the proposals relating to the risk-based approach, customer due diligence, wire transfers and politically exposed persons, taking into account comments received during the consultation process.

Royalty fraud

Certain industries are more susceptible to royalty fraud, but investigating and proving it is a challenging process. Whether a client wants to call it a fraud investigation or just a review, the key to this kind of assignment is to know how payments are supposed to be recorded and every possible trick or mistake that can result in underpayments. In other words, give every file the royal treatment. Read the article “Royal Treatment” in CAmagazine online.

A steep price - taking bribery more seriously

With the OECD pressuring Canada to get tougher on improper payments, days of bribes to foreign public officials may be over. While it seems apparent that countries such as Canada and the UK are finally following the US’s lead and taking bribery more seriously, this comes at a time when companies that are affected by the legislation may not be ready. A survey of UK companies released by Grant Thornton LLP in June 2010 found that more than three-quarters of companies surveyed have not invested in anticorruption strategies to deal with the Bribery Act, leaving many UK companies at unnecessary risk of the act’s harsh penalties. In addition, results “from a recent survey performed by a global business consulting firm discovered that only 50% of senior corporate executives are ‘highly confident’ that their business control systems are managing their organizations’ business risks effectively,’ ” says William Olsen, a principal of Grant Thornton LLP in the US and author of The Anti-Corruption Handbook: How to Protect Your Business in the Global Marketplace. The survey also showed that fewer than 10% rated their control systems “excellent” in providing early warning signs to catastrophic risk. (Read the full article called "A steep price" in CAmagazine online.)

FINTRAC Presentations and Speeches - March 8, 2011

With the recent adoption of Bill C-9, FINTRAC is now permitted to use tax evasion as a predicate offence from which to build a case disclosure. The Criminal Code regulations were amended to make tax evasion a predicate offence to money laundering when determining whether to send a case to the Canada Revenue Agency (CRA). But equally important, pursuant to the coming into force of the regulations to the Bill, the threshold for disclosing information to CRA was lowered from "determining" to "reasonable grounds to suspect" that the information being disclosed is relevant to tax evasion. Read the full text of Notes for remarks by Denis Meunier, Assistant Director, Financial Analysis and Disclosures Directorate, before the House of Commons Finance Committee (Ottawa, March 8, 2011).