The federal agency responsible for combatting money laundering and terrorist financing imposed its largest-ever fine Tuesday, on Royal Bank of Canada.
The $7.475-million penalty was levied by the Financial Transactions and Reports Analysis Centre of Canada, or FinTRAC, after it found RBC had committed three violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
FinTRAC issued just six financial penalties, worth a combined $1.1-million, during the past fiscal year. The RBC fine is “by far the largest penalty we’ve ever levied,” FinTRAC spokesperson Darren Gibb said.
It is also the first monetary penalty FinTRAC has ever imposed on any of Canada’s six largest banks. The agency has issued 128 notices of violation since receiving legislative authority to do so in 2008, with fines totalling nearly $23.4-million. That figure includes the penalty levied on RBC RY-T.
The penalty was imposed for administrative violations committed by RBC, FinTRAC said, and not for criminal offences related to money laundering or terrorist activity financing.
RBC will not appeal, bank spokesperson Gillian McArdle said in an e-mailed statement, though the lender “believes the fine is not at all commensurate with an administrative matter where there is no connection to money laundering or terrorist financing offences.”
“Equally important, there is no finding that anyone exercised judgment in bad faith or knowingly contributed to violations,” Ms. McArdle said.
According to a public notice on the FinTRAC website that describes the violations, they were discovered during the course of a compliance examination in 2022. RBC “failed to submit 16 suspicious transaction reports, out of 130 case files reviewed, where there were reasonable grounds to suspect that transactions were related to the commission or attempted commission of a money laundering or terrorist activity financing offence,” FinTRAC said.
RBC also failed to follow proper procedures in the way it submitted some of its reports, FinTRAC added. The third and final violation was a failure to keep written policies and procedures up to date, FinTRAC said, noting that these documents “provided inconsistent guidance” on when a suspicious transaction report should be submitted.
Last month, FinTRAC chief executive officer Sarah Paquet gave a speech to the Association of Certified Anti-Money Laundering Specialists in Toronto in which she vowed to crack down on businesses that cut corners on compliance.
“This is not acceptable and we are actively stepping up our enforcement action in these cases and all cases that go to the heart of protecting Canada and Canadians,” Ms. Paquet said. “We will confront those businesses that are not meeting their moral and social responsibilities. And, when we do so, we will be more open and transparent about the nature of their violations.”
Peter Aziz, senior counsel at the law firm Torys LLP, who specializes in financial institutions regulatory law, said a coming evaluation of Canada by the Financial Action Task Force is part of the reason FinTRAC is becoming more active. The task force is a global money laundering and terrorist financing watchdog group based in Paris, with 39 member countries, including Canada.
Member countries have the effectiveness of their anti-money-laundering policies assessed by the task force every five years. Canada’s next evaluation is tentatively scheduled for December, 2025.
In its 2021 review, the task force found that Canada had made progress since its 2016 assessment, but that the country remained only partly compliant with five of the task force’s 40 recommendations, and non-compliant with one of them.
“We do see a recurring pattern where in the lead-up to an FATF review, FinTRAC and the government of Canada need to both enforce compliance with anti-money-laundering laws and be seen to be enforcing compliance,” Mr. Aziz said.
“This issuing of significant administrative monetary penalties is a way for FinTRAC to be seen to be administering the act. They may be of the view that FATF would expect this to be a measure of FinTRAC’s effectiveness.”
While Canada’s banks set “the gold standard” globally for compliance with anti-money-laundering and anti-terrorist financing protocols, Mr. Aziz said, “to achieve a stellar compliance rating is important for the country and for all of Canada’s banks.”
During the 2021 federal election campaign, the Liberal Party pledged to establish the Canada Financial Crimes Agency, which would combine resources from FinTRAC, the RCMP and the Canada Revenue Agency into a new law enforcement agency. The 2023 federal budget included a commitment to providing the government’s vision for the CFCA in the fall economic statement, though no details on the new agency were included in the statement Ottawa released last month.
In the meantime, Mr. Aziz is expecting FinTRAC to continue accelerating its enforcement activities as the task force review inches closer.
“We may see more administrative monetary penalties coming,” he said.
Jameson Berkow