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November 04, 2013 – November 4, 2013 – FINTRAC Advisory – Financial transactions related to countries identified by the Financial Action Task Force (FATF)
In order to protect the international financial system from money laundering and terrorist financing risks, the Financial Action Task Force (FATF) issued two statements on October 18, 2013.
Islamic Republic of Iran and the Democratic People’s Republic of Korea
In its October 18, 2013 public statement, FATF reaffirmed its particular and exceptional concerns about Iran’s failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system. FATF also reaffirmed its concerns about the Democratic People’s Republic of Korea’s (DPRK) failure to address the significant deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime and the serious threat this poses to the integrity of the international financial system. FATF reaffirmed the call on its members to strengthen preventive measures to protect their financial sectors from such risks.
Accordingly, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is reiterating to all reporting entities subject to the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act the risks of doing business with individuals and entities based in, or connected to, Iran and the DPRK.
FINTRAC is advising that reporting entities should consider the above when deciding whether to file a suspicious transaction report in respect of financial transactions emanating from, or destined to, Iran or the DPRK. Reporting entities are also encouraged to undertake enhanced customer due diligence with respect to clients and beneficiaries involved in such transactions.
Jurisdictions Representing a Risk Arising from Deficiencies
In its October 18, 2013 public statement, FATF calls on its members to consider the risks arising from the strategic AML/CFT deficiencies associated with the following jurisdictions that have not made sufficient progress in addressing the deficiencies, or that have not committed to an action plan developed with FATF to address the deficiencies: Algeria, Burma (Myanmar), Ecuador, Ethiopia, Indonesia, Kenya, Pakistan, Syria, Tanzania, Turkey, and Yemen.Footnote 1
FINTRAC is advising that reporting entities should consider giving special attention to transactions related to Algeria, Burma (Myanmar), Ecuador, Ethiopia, Indonesia, Kenya, Pakistan, Syria, Tanzania, Turkey, and Yemen.
In its October 18, 2013 Compliance Document, FATF brought to the attention of its members several jurisdictions that have strategic AML/CFT deficiencies. The following jurisdictions have developed an action plan with FATF to address identified deficiencies and demonstrated some progress with the execution of their plans: Afghanistan, Albania, Angola, Antigua and Barbuda, Argentina, Bangladesh, Cambodia, Cuba, Iraq, Kuwait, Kyrgyzstan, Lao PDR, Namibia, Nepal, Nicaragua, Sudan, Tajikistan, Vietnam, and Zimbabwe.
FATF is not yet satisfied that Mongolia has made sufficient progress on its action plan agreed upon with FATF. If this jurisdiction does not take sufficient action to implement significant components of its action plan by February 2014, then FATF will identify this jurisdiction as being out of compliance with its agreed action plan and will take the additional step of calling upon its members to consider the risks arising from the deficiencies associated with the jurisdiction.
Morocco and Nigeria No Longer Subject to FATF Monitoring Process
FATF welcomed Morocco’s and Nigeria’s significant progress in improving their AML/CFT regime. Both Morocco and Nigeria have met their commitments in their action plan regarding the strategic deficiencies that FATF had identified. Morocco and Nigeria are therefore no longer subject to FATF’s monitoring process.
CFATF Public Statement
Reporting entities should be reminded that on May 29, 2013, the Caribbean Financial Action Task Force (CFATF), under a process that is separate and distinct from the FATF monitoring process, issued for the first time a public statement regarding the strategic AML/CFT deficiencies of Belize, Guyana, and Dominica.
Belize and Guyana have not made sufficient progress in addressing their significant AML/CFT deficiencies, including making certain legislative reforms. If this lack of progress persists, CFATF will consider in November 2013 whether to formally refer these jurisdictions to FATF for inclusion in its monitoring process.
Dominica has developed an action plan with CFATF and has made progress in addressing its deficiencies. CFATF, however, encourages Dominica to take further action to address its deficiencies. If it does not make sufficient progress, CFATF will again identify Dominica in its public statement in November 2013.
The FATF October 18, 2013 statements can be found at the following website: http://www.fatf-gafi.org/
The CFATF statement can be found at the website
Canada is a member of FATF and strongly supports its efforts to combat money laundering and terrorist financing.
The Office of the Superintendent of Financial Institutions (OSFI) has also issued a Notice to all federally regulated financial institutions. For a copy of the Notice
February 16, 2013 – New regulation under PCMLTFA – These amendments will come into force one year after their publication (i.e., in February 2014).
The amendments to the Regulations make the following clarifications to the CDD provisions of the Regulations:
- The term “business relationship” will now be defined in the Regulations. The Regulations will also be amended to clarify that, in order to meet their obligations to identify and report suspicious transactions, reporting entities should conduct ongoing monitoring of business relationships with clients, using a risk-based approach, and should obtain information concerning the purpose of a business relationship when entering into a business relationship with a client.
- The circumstances in which reporting entities should take enhanced CDD measures in respect of high-risk customers, activities or transactions will be clarified to clearly indicate that enhanced measures should be taken in respect of all high-risk clients and activities, and a list of enhanced measures from which reporting entities can choose will be added. The measures include keeping client information up to date and conducting enhanced ongoing monitoring.
- The Regulations require certain reporting entities to obtain identification information, in designated circumstances, from all persons who own 25% or more of a corporation or entity. The amendments specifically clarify that those reporting entities should also obtain documentary evidence from the client that confirms the beneficial ownership information that they have obtained.
- The Regulations will be amended to clarify that no exceptions exist to reporting entities’ current obligations to conduct CDD measures in respect of any transaction or activity which gives rise to a suspicion of money laundering or terrorist financing.
Before these amendments to the Regulations come into force, the Financial Transactions and Reports Analysis Centre of Canada (Canada’s financial intelligence unit) and the Office of the Superintendent of Financial Institutions (responsible for administering the federal financial institutions statutes in Canada) will provide updated guidance in order to address the comments provided by stakeholders on the previous version of these amendments published in October 2012.
Countries or Groups that are Subject to Canadian Economic Sanctions
Canadian sanctions are imposed via:
- Regulations made under the United Nations Act
- Regulations made under the Special Economic Measures Act
- Countries on the Area Control List of the Export and Import Permits Act
The Special Economic Measures apply to any individual, body corporate, trust, partnership, fund, unincorporated association or organization in Canada and any Canadian citizen or Canadian corporation outside Canada. They impose significant restrictions (specified in the regulations) on transactions with designated individuals and entities.
Under the Regulations, persons in Canada and Canadians outside Canada are essentially prohibited from entering into any transaction with, or providing any service or benefit to, these designated persons. This includes assisting or otherwise causing a prohibited transaction.
More specifically, Canadians or persons in Canada are prohibited from dealing directly or indirectly with any property, wherever situated, that is owned or controlled by designated individuals or entities or their agents, or entering into or facilitating any transaction in respect of such property. In addition, Canadians or persons in Canada may not directly or indirectly provide any goods, wherever situated, to a designated person or entity or provide any financial or related service to or for the benefit of designated persons or entities. Anyone who willfully contravenes or fails to comply with the measures is guilty of an offence and is liable to a fine or imprisonment or both.
Every person in Canada and every Canadian outside Canada must disclose, without delay, to the Royal Canadian Mounted Police (RCMP) the existence of property in their possession or control that they have reason to believe is owned or controlled, directly or indirectly, by a designated person or by an entity owned or controlled by a designated person. Actual or proposed transactions related to such property must also be disclosed.
As with other economic measures of this sort, financial institutions have an additional and continuing duty to search, monitor, freeze, block, and disclose whether they are in possession or control of any property owned or controlled by or on behalf of a designated person. At a minimum it is expected that federally regulated deposittaking institutions search their records for designated persons on a weekly basis and more frequently if need be.
Canada increasingly uses trade controls and economic sanctions against failed or failing regimes as part of diplomatic efforts to change the conduct of those regimes. What this means to business is that an activity that was legal one day may become illegal or prohibited the next. As a result, it is critical to have well‐designed internal controls that are continuously monitored to ensure an ability to react effectively to such changes in the law.
Apart from reducing the risk of liability and penalties imposed by legislation, an effective internal compliance regime can minimize business interruptions, informing transactional due diligence, and upholding contractual representations and warranties.
Depending upon the nature of your business and clientele, as well as the comprehensiveness of your existing internal compliance protocols, the following steps may be appropriate:
- Development or revision of internal compliance strategies to ensure proper identification and screening of sanctioned individuals and entities among existing and future customers;
- Awareness training for employees, officers and directors who are responsible for business development, sales, and regulatory compliance in general;
- Review and possible revision of licences, standard sales agreements, supplier or service contracts, real estate leases and financial services and payment arrangements;
- Review of in‐process or contemplated M&A transactions, including asset purchases;
- Screening of property, including intellectual property, in the company’s possession or control which may be owned or controlled, directly or indirectly, by a sanctioned person or entity; and
- For financial institutions, deployment and continuous updating of systems for ongoing searching, monitoring and disclosure of suspect transactions so as to comply with the “duty to determine” imposed by sanctions legislation.
Canadian companies are also reminded that Canada’s imposition of new sanctions and controls on trade will generally supersede, or place new limits on, any import or export permits which may have been granted prior to the sanctions taking effect. Certain exceptions or special permits may be available, but access to these should not be taken for granted.
The Office of the Superintendent of Financial Institutions Canada (OSFI) maintains a list of individuals and a list of entities listed under Canadian law with available identifiers (DOB, POB, nationality, address, etc.). The lists are available in various formats on the OSFI website.
Pages in category “Canada Embargoed Countries”
The following 24 pages are in this category, out of 24 total.
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