Anti-Money Laundering & Terrorist Financing (AMLTF) Training Course. Module: Introduction

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1 Anti-Money Laundering & Terrorist Financing (AMLTF) Training Course Module: Introduction

2 About this Anti-Money Laundering & Terrorist Financing Training Course (AMLTF): The AMLTF course is designed to assist CREA members to comply in part with the training component under Canada s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and supporting Regulations. The following pages detail information regarding the AMLTF course, such as: Learning objectives Course modules How to complete the AMLTF course Background Five elements of a Compliance Regime 2

3 Learning Objectives: Upon completion of the AMLTF course, you will be able to: Define money laundering and terrorist financing and recognize how each are typically carried out. Identify the criminal elements commonly involved in money laundering and terrorist financing as well as government bodies involved in fighting these elements. Identify the main reports and associated reporting procedures set out in the Regulations and the instances that require them to be completed. Identify the record keeping and client identification requirements. >>>>>>>> 3

4 Learning Objectives continued: Upon completion of the AMLTF course, you will be able to: Identify suspicious or attempted transactions and behaviours, and recognize the importance of Know Your Client rules. State the various penalties for non-compliance. State the range of Administrative Monetary Penalties in respect of a violation. Identify the main components of a Compliance Regime and the main areas of a risk assessment approach. 4

5 Course Modules: The AMLTF course consists of this Introduction module, and an additional five mandatory modules: Module 1 Module 2 Module 3 About Money Laundering and Terrorist Financing The Players Reporting Requirements Module 4 Record Keeping and Client Identification Module 5 Identifying indicators of Suspicious or Attempted Transactions Progress through the course by completing all modules in sequence. 5

6 Background: Money laundering and terrorist financing are two types of financial crime with devastating effects that go beyond seemingly innocuous financial transactions. From the profits of the low-level narcotics officer to the assets looted from State coffers by dishonest government officials, criminal proceeds have the power to corrupt and ultimately destabilize communities or whole national economies. Financial Action Task Force on Money Laundering Report on Money Laundering and Terrorist Financing Typologies

7 In 1999, it was estimated that Canada laundered approximately $17 billion in illegal funds, which represented 2.5% of the GDP. As such, Canada was put on the US State Department s list of primary concern for money laundering and faced global pressure from international money laundering control organizations to amend its legislation on anti-money laundering. In 2000, Canada introduced comprehensive legislative changes to the Proceeds of Crime (Money Laundering) Act. In 2001, it was amended again to include terrorist financing, thereby changing the name of the Act to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). In December 2006, the ACT was amended again to include new and enhanced reporting, record keeping, compliance, registration, penalties, and risk assessment requirements. Canada is now considered a leading country in anti-money laundering legislation and regulation, and complies with recognized global standards. 7

8 Compliance Regime: Real estate brokers and sales representatives must comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PC(ML)TFA) and its supporting Regulations. They must ensure that they have an internal Compliance Regime in place. The Compliance Regime comprises the following five main components: Components 1. Policies & Procedures 2. Compliance Officer Creation of policies and procedures regarding anti-money laundering and terrorist financing initiatives. Accountable to oversee the Compliance Regime. 8

9 Compliance Regime continued: Components 3. Training Program 4. Review Process Ensures that brokers and sales representatives are continuously trained on the requirements set out in the PC(ML)TFA and their respective agency/company Compliance Regime. Regular internal review of the company's Compliance Regime to ensure its on-going applicability and effectiveness. 5. Risk Assessment & Documentation In a manner appropriate for the client and the company, including: client and business relationships; products and delivery channels of the person or entity; the geographic location of the activities; and any other relevant factors. 9

10 Compliance Regime continued: Every real estate brokerage compliance officer shall report on their Compliance Regime in writing to a senior brokerage official within 30 days after a full assessment of their Regime. That report includes: the findings of the review; any updates made to the policies and procedures within the reporting period, including: (a) reasonable measures to keep client identification information up-todate, (b) detecting transactions for reporting to FINTRAC, and (c) mitigating risks, and; the status of the implementation of the updates to those policies and procedures. 10

11 Civil Penalties: On December 26, 2007 the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations were published in the Canada Gazette. These penalties come into effect on December 30, Each violation is classified as a minor, serious or very serious violation. The history of compliance by the realtor or brokerage with the PC(ML)TFA will be taken into account in determining the amount of a penalty. The Regulations list 105 penalties of which: 87% (91) are minor, 11% (12) are serious and 2% (2) are very serious. Range: Subject to the Act, the range of penalties in respect of a violation is: (a) $1 to $1,000 in the case of a minor violation; (b) $1 to $100,000 in the case of a serious violation; and (c) $1 to $500,000 in the case of a very serious violation. 11

12 The Compliance Regime establishes two distinct mandates for realtors/ brokerages: 1. That an operational framework is in place. 2. That realtors/employees are able to demonstrate an understanding of money laundering and terrorist financing and their company s policies and procedures. By ensuring these measures are carried out effectively, realtors/brokerages are able to mitigate the following risks: Legal Risk Reputational Risk Operational Risk Financial loss due to adverse financial contracts that turn out to be unenforceable and/or incurring criminal penalties for non-compliance Financial loss resulting from a lack of consumer trust due to negative publicity regarding an organization s business Direct or indirect financial loss due to inefficient internal procedures, people or systems 12

13 Anti-Money Laundering: Risk Based Approach So What Is Involved? This is New!! Compliance Regime continued: 13

14 What is a Key Driving Force Behind Canada s Move to Risk Assessments? Recommendation 5 of the FATF proposes that reporting entities: Implement (a) Corporate and (b) Customer Due Diligence [CDD] measures that assess the degree of risk for money laundering and/or terrorist financing based on the type of customer, ongoing business relationship, and/or financial transaction. There is no definitive, single model for a risk-based approach the following slides will help to provide a framework. 14

15 It all starts with a risk assessment of the Brokerage itself 15

16 Then a risk assessment of each client 16

17 Three Principal Components in Model Risk Assessment Internal Controls Products Policies Services Procedures Clients/Brokerage Systems Geographies Controls Internal Controls Audits Compliance Officer Training Risk Management Program 17

18 Four Key Areas of Risk Assessment Geographic Locations Products & Services Clients & Brokerage Transactions 18

19 Risk Categories Medium High Low usually generated by weighted criteria 19

20 Usually combined into a single static customer risk score Geographic Locations Products and Services Clients and Brokerage 20

21 Transaction Risk Geographic Locations (Dynamic Process) Clients & Brokerage 21

22 Client Risk Stratification 22

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24 Risk Assessment Risk Mitigation When your risk assessment determines that risk is high, you have to develop written risk-mitigation strategies (policies and procedures to mitigate high risks) and apply them for high risk situations. 24

25 I m done the Introduction Module: What do I do now? Congratulations! You are now ready to move on to Module 1: About Money Laundering and Terrorist Financing. Good Luck! 25