The federal financial intelligence agency has fined Canadian Imperial Bank of Commerce CM-T more than $1.3-million for failing to flag transactions linked to money laundering and terrorist financing.
The Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) said Thursday that CIBC committed two administrative violations. The fine is the second that the watchdog announced for a major bank this week as it ramps up enforcement of compliance issues ahead of a coming review of Canada’s anti-money-laundering practices.
FinTRAC has been under pressure to crack down on financial crimes as Ottawa has become increasingly critical of the country’s anti-money-laundering and terrorist-financing practices. The heightened scrutiny comes ahead of an evaluation from global financial intelligence watchdog Financial Action Task Force (FATF).
Meanwhile, Toronto-Dominion Bank TD-T awaits monetary and non-monetary penalties from the U.S. Department of Justice related to issues with its anti-money-laundering procedures that led to the termination of its planned takeover of Tennessee-based First Horizon National Corp Corp.
FinTRAC said that CIBC failed to submit a suspicious-transaction report where one or more transactions were seemingly connected to money laundering or terrorist activity, according to a 2021 examination of the bank by FinTRAC. The incident stems from a client of the bank that had previously been arrested and charged with criminal offences.
CIBC was aware of the criminal charges and reviewed the transactions, but decided that they were not suspicious because the account activity appeared to be typical client behaviour despite the presence of money laundering and terrorist-financing information obtained by the bank, FinTRAC said.
FinTRAC also found that CIBC failed to submit required information on 1,003 inbound international electronic funds transfers in a sample of 20,000 transactions. It said the bank did not comply with submitting relevant reports to FinTRAC and that the name or address associated with the transfers was not properly recorded. It added that it identified a gap in CIBC’s reporting processes and its testing to ensure compliance reporting requirements.
“FinTRAC will continue to work with businesses to help them understand and comply with their obligations under the act,” the agency’s chief executive officer Sarah Paquet said in a statement on Thursday. “We will also be firm in ensuring that businesses continue to do their part and we will take appropriate actions when they are needed.”
The charge was levied on Oct. 23, and CIBC has already paid the fine.
In an e-mail statement, CIBC said its anti-money-laundering and anti-terrorist-financing procedures are robust, and that the administrative issues involved a “relatively small number of transactions which we have since addressed and resolved.”
“We work closely to co-operate with regulators and law enforcement, as we did in this case, and continually invest in our monitoring and detection capabilities amid an evolving landscape,” CIBC spokesperson Tom Wallis said.
On Tuesday, FinTRAC fined RBC $7.4-million for three administrative violations – the largest fine the agency has ever imposed. It was also the first monetary penalty FinTRAC had ever levied on any of the country’s six biggest banks.
In November, Ms. Paquet said in remarks to the Association of Certified Anti-Money Laundering Specialists in Toronto that she vowed to crack down on businesses that skimp on compliance.
FinTRAC has issued only six financial penalties, worth a combined $1.1-million in the past year, not including the fines to RBC RY-T and CIBC. Since it received its legislative mandate in 2008, the agency has issued 128 notices of violation since receiving legislative authority to do so in 2008, with fines totalling nearly $23.4-million, including the fine to RBC.
The agency is ramping up its enforcement measures ahead of the FATF planned evaluation in Canada in 2025. The Paris-based task force is a global money-laundering and terrorist-financing watchdog with 39 member countries, and the group reviews the effectiveness of each country’s anti-money-laundering policies every five years.
The FATF last assessed Canada in 2021. The task force said the country had progressed since its previous 2016 review, but it was compliant with only five of the task force’s 40 recommendations, and failed to comply with one.
The Liberal government has said it will enhance controls.
During the 2021 federal election campaign, it committed to creating the Canada Financial Crimes Agency by combining resources from FinTRAC, the RCMP and the Canada Revenue Agency. In the 2023 federal budget, it said it would include the government’s vision for the CFCA in the fall economic statement, but no details were revealed in its release last month.
Editor’s note: This article has been updated to clarify that the CIBC fine is the second one FinTRAC announced for a major bank this week.