FINTRAC Advisory: Financial Transactions Related to Countries Identified by the Financial Action Task Force (FATF)

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Financial Transactions and Reports Analysis Centre of Canada

FINTRAC Advisory: Financial Transactions Related to Countries Identified by the Financial Action Task Force (FATF)

November 25, 2018

Financial Transactions and Reports Analysis Centre of CanadaFinancial 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 19, 2018.

In its October 19, 2018 Public Statement, FATF remained concerned by the Democratic People’s Republic of Korea’s (DPRK) failure to address the significant deficiencies in its anti-money laundering and combatting the financing of terrorism (AML/CFT) regime and the serious threat this poses to the integrity of the international financial system.Footnote1 Further, FATF has serious concerns with the threat posed by the DPRK’s illicit activities related to the proliferation of weapons of mass destruction (WMDs) and its financing.

FATF has reaffirmed its call on its members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies, financial institutions and those acting on their behalf. In addition to enhanced scrutiny, FATF further calls on its members and urges all jurisdictions to apply effective counter-measures, and targeted financial sanctions in accordance with applicable United Nations Security Council Resolutions, to protect their financial sectors from money laundering, financing of terrorism and WMD proliferation financing (ML/FT/PF) risks emanating from the DPRK. Jurisdictions should take necessary measures to close existing branches, subsidiaries and representative offices of DPRK banks within their territories and terminate correspondent relationships with DPRK banks, where required by relevant UNSC Resolutions.

Ministerial directive on the DPRK

Accordingly, in order to safeguard the integrity of Canada’s financial system, and in accordance with section 11.42 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), the Minister of Finance has issued the following directive as published in the Canada Gazette on December 9, 2017:

“Every person or entity referred to in section 5 of the PCMLTFA shall treat all transactions originating from, or destined to, North Korea (Democratic People’s Republic of Korea) as high risk for the purposes of subsection 9.6(3) of the Act.”

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) will assess compliance with the Ministerial Directive. Guidance can be found on FINTRAC’s website: FINTRAC guidance relating to the Ministerial Directive on the Democratic People’s Republic of Korea (DPRK).

The Department of Finance provides additional information on its website: General Information on Part 1.1 of the PCMLTFA.

On December 12, 2017, FINTRAC also published an Operational Alert on the DPRK’s use of the international financial system for money laundering and terrorist financing. The purpose of this Operational Alert is to inform Canadian reporting entities of money laundering and terrorist financing patterns and risk areas related to the DPRK’s suspected money laundering and terrorist activity financing.

Iran

In June 2016, FATF welcomed Iran’s high-level political commitment to address its strategic AML/CFT deficiencies. However, until Iran implements the measures required to address the deficiencies identified in the action plan, FATF will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system.

FATF, therefore, calls on its members and urges all jurisdictions to continue to advise their financial institutions to apply enhanced due diligence, including obtaining information on the reasons for intended transactions, to business relationships and transactions with natural and legal persons from Iran.

Accordingly, FINTRAC is reiterating to all reporting entities subject to the requirements of the PCMLTFA, the risks of doing business with individuals and entities based in, or connected to, Iran.

FINTRAC is advising that reporting entities should consider the above in determining whether they are required to file a suspicious transaction report in respect of one or more financial transaction(s) or attempted financial transaction(s) emanating from, or destined to, Iran. Reporting entities are required to consider the geographic location of a person’s or entity’s activities as part of their risk assessment and to undertake mitigating measures, as applicable, and are encouraged to undertake enhanced customer due diligence, including obtaining information on the reasons for intended transactions, with respect to clients and beneficiaries involved in such financial transactions or attempted financial transactions.

Other jurisdictions

In its October 19, 2018 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 have demonstrated some progress with the execution of their plans: the Bahamas, Botswana, Ethiopia, Ghana, Pakistan, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, and Yemen.

FATF action on the terrorist group Islamic StateFootnote2

FINTRAC would like to reiterate the preceding statements issued by FATF, expressing its deep concern with the financing generated by, and provided to, the terrorist group the Islamic State (IS).

On September 22, 2014, the Government of Canada updated the Criminal Code list of terrorist entities to include the IS, which was previously listed as Al Qaeda in Iraq.

Accordingly, FINTRAC is reminding all reporting entities subject to the requirements of the PCMLTFA of their obligationsFootnote3 to submit a terrorist property report if they:

  • know of the existence of property in their possession or control that is owned or controlled by or on behalf of a terrorist or terrorist group; and
  • have information about a transaction or attempted transaction in respect of property referred to above.

In this context, property includes any type of real or personal property. This also includes any deed or instrument giving title or right to property, or giving right to money or goods. A terrorist property report includes information about the property as well as any transaction or attempted transaction relating to that property.

FINTRAC is advising that reporting entities should consider the above in determining whether to file a suspicious transaction report in respect of one or more financial transaction(s) emanating from, or destined to, a jurisdiction under IS control or a surrounding jurisdiction where there are reasonable grounds to suspect that the transactions or attempted transactions are related to the commission or attempted commission of a money laundering offence or a terrorist activity financing offence. Reporting entities are also encouraged to undertake enhanced customer due diligence with respect to clients and beneficiaries involved in such financial transactions or attempted financial transactions.Footnote

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