MONEY LAUNDERING

ANTI-MONEY LAUNDERING TRAINING IS A REQUIREMENT

Chris Walker

Don’t Ignore the Penalties

In 2021, educating a BC Notary includes a graduate degree

• Simon Fraser University’s Master of Arts in Applied Legal Studies; • the BC Notary Practical Training

Course; • 105-hours of mentoring with a commissioned BC Notary; and • success in all associated statutory examinations.

All those steps must be completed for eligibility for membership in The Society of Notaries as a commissioned BC Notary.

Once commissioned, BC Notaries must remain in good standing through continuing education opportunities within a designated cycle.

Once a BC Notary starts to practise, “other” training requirements emerge including those regulated under Canada’s Proceeds of Crime (Money Laundering) And Terrorist Financing Act and its associated Regulations. Those education and training requirements are defined and monitored by FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) through its regulatory Guidance and examination/audit functions.

Once a BC Notary starts to practise, “other” training requirements emerge including those regulated under Canada’s Proceeds of Crime (Money Laundering) And Terrorist Financing Act and its associated Regulations.

What Must Training Include? FINTRAC in its Compliance Program Requirements Guidance requires each reporting entity, in this case a Notary practice, to “develop, implement, and maintain an ongoing compliance training program if you have employees, agents, or other individuals authorized to act on the practice’s behalf. All individuals who deal with clients and/or transactions must be trained in relation to their function/ duties within the Notary practice.”

The practice training program must be in writing, must be reviewed regularly, and kept

©iStockphoto.com/chrisboy2004

current with all new enhancements, updates, and changes. At a minimum, FINTRAC expects that a Notary practice training program will include the following: ML/TF concepts and some background information on ML/TF in relation to your practice, for example, definitions of ML/TF, why criminals choose to launder money and how the process for ML/TF usually works. 1. Your practice compliance policies and procedures for preventing and detecting

ML/TF, including your reporting, client identification, knowyour-client, and record-keeping obligations 2. The responsibilities of your employees, agents, or anyone else acting on your behalf when dealing with suspicious activities or transactions

The training materials should include examples of how your particular practice could be used to launder illicit funds or fund terrorist activity. That information should help with the identification of suspicious transactions and may provide some assurance that your services are not being abused for ML/TF purposes.

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During a FINTRAC examination, or as part of your Biennial Effectiveness Review, the examiner and/or review consultant will review the documentation you have in relation to your training program and could conduct interviews with the Notaries and employees in the practice to assess the effectiveness of your training program, through questions on the interviewees’ understanding of the practice policies and procedures, their knowledge about ML/TF activities in relation to the practice, and so on. Sanctioning the Failure to Train FINTRAC takes its monitoring responsibilities very seriously and has been provided with the legislative authority to sanction a reporting entity, including a BC Notary practice that fails to put in place and maintain training programs relative to the sector requirements. FINTRAC sanctions for such failures can range from deficiency citations in an Examination Findings Letter—to Administrative Monetary Penalties/ fines (AMPS)—to noncompliance disclosures to police.

Noncompliance disclosures are rare, but the latest FINTRAC Annual Report for 2019–2020 noted that seven such cases had been referred to law enforcement. According to that Report, police have increasingly looked to utilize the Non-Compliance Disclosure tool to pursue criminal charges under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act—a criminal Act that carries various penalties if convicted, including fines and prison terms.

Administrative Monetary Penalties, or AMPs as most reporting entities know them, can be very impactful on the pocketbook of a business on the receiving end. AMPs over the years have ranged from 4-figures to 7-figures depending on the seriousness of the deficiency(s) and the ability of the business to pay the fine. FINTRAC re-wrote its AMP Guidance recently and what we are seeing now is a more specific approach to calculating the level of harm and the penalty associated with each deficiency cited after a FINTRAC examination. Measuring the Harm Caused by Deficient Compliance Training Programs Since we are talking about training in this article, let’s focus on the different degrees of harm that FINTRAC associates with the regulated requirement to have and deliver ongoing training across a Notary practice here in BC. FINTRAC’s AMP Guide identifies the following general description for a deficiency associated with ongoing training: Failure of a person or entity that has employees, agents, or mandataries or other persons authorized to act on their behalf to develop and maintain a written ongoing compliance training program for those employees, agents, or mandataries or persons.

The AMP-range that can be assessed for this deficiency can range from $1 to $100,000, with the specific amount determined by the level of noncompliance harm calculated by FINTRAC on its findings from an examination. Level 1 Harm occurs when the training requirement is not met to any degree, or what is in place is not functional, causing widespread noncompliance. The value of the penalty at this level is $100,000. For example, a documented training program has not been developed or maintained to cover all, or most, of the elements required to comply with the Act and its regulations. Simply put, if your Notary practice does not have a detailed, written AML training program in place today, you could be assessed up to a $100K penalty for this deficiency.

• Level 2 Harm occurs when an element that is a priority for achieving the objectives of the Act or FINTRAC’s mandate is not met, that is, partial noncompliance with important weaknesses. The value of the penalty at this level is $75,000. • For example, the training program is missing priority elements, such as maintaining training on the Notary practice compliance policies and procedures; the responsibilities of employees, agents and those acting on behalf of the Notary practice, when dealing with suspicious transactions; and key ML/TF concepts including background information on how ML/TF can impact a Notary practice.

Simply put, if your Notary practice does not cover as part of its regular training the detail of your Policy Manual or what to do if a suspicious transaction occurs or how money laundering could impact your practice, you could be assessed up to a $75K penalty for this deficiency. • Level 3 Harm occurs when an element that forms the basis for achieving the objectives of the Act or FINTRAC’s mandate is not met, that is, partial noncompliance with moderate weaknesses. The value of the penalty at this level is $50,000, for example, a plan that addresses the timing and frequency of delivery of the training program is missing; or the plan does not identify in detail who will receive the training; or does not include content that is relevant and specific to different employee roles in the practice. • Level 4 Harm occurs when an element that enables the efficient achievement of the objectives of the Act or FINTRAC’s mandate is not met, that is, partial noncompliance with lesser weaknesses. The value of the penalty at this level is $25,000, for example, the training program is not maintained on an ongoing basis. Failing to establish clear guidelines for ongoing compliance training may result in program weaknesses over time, for example, due to changes to regulatory requirements, or changes in staff or organizational structure. That may lead to the Notary practice not meeting its requirements to report, identify clients, and keep records.

The development, delivery, and maintenance of an AML/ CTF training program is 1 of the 5 pillars set down by Canada’s Money Laundering legislation to manage the risks associated with money laundering and/or terrorist financing that can impact on a Notary practice.

The specifics of such a training program, its content, delivery, and maintenance make up the details assessed in either a Biennial Review or a FINTRAC Examination. Reported deficiencies in those details by way of a FINTRAC Examination Letter could result in the administration of different possible sanctions—including heavy monetary penalties. Taking a pro-active approach to managing your practice training requirements on an annual basis will help ensure such sanctions can be avoided. s References 1. FINTRAC’s “Guide on

Harm Done Assessment for Compliance Program

Violations”

2. FINTRAC’s “Compliance

Program Requirements”

Chris Walker is a Criminologist and President of About Business Crime Solutions, Inc. (ABC) a consulting firm providing among other services web-based training programs for all of Canada’s regulated reporting sectors, including British Columbia Notaries.

Seeking a Career as a British Columbia Notary Public?

There are business opportunities for Notaries in various communities throughout British Columbia. Some of the Requisites for Becoming a BC Notary

• Undergrad degree with a CGPA not less than 3.0 • Interest in the practice of law • Strong entrepreneurial spirit • Strong communication and people skills • Dedication to community and serving the public • High degree of honesty and integrity

For more information, please contact The Society of Notaries Public of BC 1-800-663-0343 or visit our website, www.snpbc.ca.