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Canadian bank fined $1.1-million for failing to report suspicious transaction

Canadian currency

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The federal agency responsible for monitoring money laundering across the country said that it has fined a Canadian bank more than $1.1-million for failing to report a suspicious transaction, a hefty penalty that is designed to send a message of deterrence in the financial sector.

Financial Transactions and Reports Analysis Centre of Canada, or FinTRAC, called the fine an "administrative monitoring penalty" that is a first for a Canadian bank.

It would not divulge details about the offence, other than state that it related to an electronic transfer of $10,000 or more to a destination outside Canada.

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The agency also wouldn't name the bank involved, raising speculation over which bank has found itself at the centre of this controversy.

A spokesman from FinTRAC, which collects and analyzes transaction reports for about 31,000 businesses in an effort to combat money laundering and the financing of terrorist activities, stressed that the offender was a Canadian bank rather than the branch of a foreign entity.

"As the result of an examination of a Canadian bank, we have determined that violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act have occurred, and we have levied a penalty," Darren Gibb said.

He added that the bank paid the fine within the past couple of weeks, but that an appeals process can always uphold, reduce or eliminate the penalty.

"In this case, the entity paid the penalty. We decided not to name the entity, so that we could send a message of deterrence now, as quickly as possible," the spokesman said.

"Generally, Canadian financial institutions have a positive history of compliance. But we wanted to send a message of deterrence right across all sectors, to all entities that have obligations," he said.

News of the penalty follows leaked documents from a Panama-based law firm that have exposed bank involvement in the creation of offshore tax havens, potentially raising further scrutiny of large global financial institutions that assist wealthy clients in shuttling money out of the country.

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While these offshore activities are not necessarily illegal, they have cast some firms in a harsh light if they have helped clients hide wealth overseas.

A Canadian anti-money-laundering expert, however, believes that the bank involved in the FinTRAC levy may be a small player rather than a global behemoth.

Matthew McGuire, a financial crimes risk-management expert at Toronto-based Securefact, said that the immense volume of transactions conducted by Canada's big banks make them vulnerable to massive fines if they relaxed their reporting standards. This, he believes, gives the big banks a stronger incentive to follow disclosure regulations than smaller financial firms.

"You can bet that it was a very small financial institution," Mr. McGuire said.

However, he said that FinTRAC has been pursuing larger cases – and fines – in recent years, although many are reversed during the appeals process. "FinTRAC started with very small penalties," he said. "They were going after smaller entities, like money services businesses and small real estate brokerages, but there has been a progressive increase in the penalties."

FinTRAC was formed in 2000 as Canada's financial intelligence unit, and it reports to the Minister of Finance.

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In its 2015 annual report, FinTRAC said that it had contributed to hundreds of investigations of money laundering and had developed deterrence across Canada's financial system through its compliance program.

During the year, it also issued 16 monetary penalties to "encourage change in the non-compliant behaviour of reporting entities."

In fiscal 2015, it received a total of 92,531 suspicious transaction reports – generally defined as transfers of $10,000 or more into or out of Canada. That marked an increase of more than 13 per cent from the previous year.

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