Anti-Money Laundering & Terrorist Financing (AMLTF)

Training Course

Module: Introduction

About this Anti-Money Laundering & Terrorist Financing Training Course (AMLTF):

The AMLTF course is designed to assist CREA members to comply in part with the training component under Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and supporting Regulations.

The following pages detail information regarding the AMLTF course, such as:

• Learning objectives• Course modules• How to complete the AMLTF course• Background• Five elements of a Compliance Regime

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Upon completion of the AMLTF course, you will be able to:

• Define money laundering and terrorist financing and recognize how each are typically carried out.

• Identify the criminal elements commonly involved in money laundering and terrorist financing as well as government bodies involved in fighting these elements.

• Identify the main reports and associated reporting procedures set out in the Regulations and the instances that require them to be completed.

• Identify the record keeping and client identification requirements.

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Learning Objectives:

Upon completion of the AMLTF course, you will be able to:

• Identify suspicious or attempted transactions and behaviours, and recognize the importance of “Know Your Client” rules.

• State the various penalties for non-compliance.

• State the range of Administrative Monetary Penalties in respect of a violation.

• Identify the main components of a Compliance Regime and the main areas of a risk assessment approach.

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Learning Objectives continued:

Course Modules:The AMLTF course consists of this Introduction module, and an additional five mandatory modules:

Module 1 About Money Laundering and Terrorist Financing

Module 2 The Players

Module 3 Reporting Requirements

Module 4 Record Keeping and Client Identification

Module 5 Identifying indicators of Suspicious or AttemptedTransactions

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Progress through the course by completing

all modules in sequence.

“Money laundering and terrorist financing are two types of financial crime with devastating effects that go beyond seemingly innocuous financial transactions. From the profits of the low-level narcotics officer to the assets looted from State coffers by dishonest government officials, criminal proceeds have the power to corrupt and ultimately destabilize communities or whole national economies.”

Financial Action Task Force on Money LaunderingReport on Money Laundering and Terrorist Financing Typologies

2003 - 2004

Background:

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In 1999, it was estimated that Canada laundered approximately $17 billion in illegal funds, which represented 2.5% of the GDP. As such, Canada was put on the US State Department’s list of “primary concern” for money laundering and faced global pressure from international money laundering control organizations to amend its legislation on anti-money laundering.

In 2000, Canada introduced comprehensive legislative changes to the Proceeds of Crime (Money Laundering) Act. In 2001, it was amended again to include terrorist financing, thereby changing the name of the Act to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). In December 2006, the ACT was amended again to include new and enhanced reporting, record keeping, compliance, registration, penalties, and risk assessment requirements.

Canada is now considered a leading country in anti-money laundering legislation and regulation, and complies with recognized global standards.

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Real estate brokers and sales representatives must comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PC(ML)TFA) and its supporting Regulations. They must ensure that they have an internal Compliance Regime in place. The Compliance Regime comprises the following five main components:

1. Policies & Procedures

Creation of policies and procedures regarding anti-money laundering and terrorist financing initiatives.

2. Compliance Officer

Accountable to oversee the Compliance Regime.

Compliance Regime:

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Components

3. Training Program

Ensures that brokers and sales representatives are continuously trained on the requirements set out in the PC(ML)TFA and their respective agency/company Compliance Regime.

4. Review Process

Regular internal review of the company's Compliance Regime to ensure its on-going applicability and effectiveness.

5. Risk Assessment & Documentation

In a manner appropriate for the client and the company, including: client and business relationships; products and delivery channels of the person or entity; the geographic location of the activities; and any other relevant factors.

Compliance Regime continued:

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Components

Every real estate brokerage compliance officer shall report on their ‘Compliance Regime’ in writing to a senior brokerage official within 30 days after a full assessment of their Regime. That report includes:

• the findings of the review;

• any updates made to the policies and procedures within the reporting period, including:

(a) reasonable measures to keep client identification information up-to-date, (b) detecting transactions for reporting to FINTRAC, and (c) mitigating risks, and;

• the status of the implementation of the updates to those policies and procedures.

Compliance Regime continued:

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On December 26, 2007 the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations were published in the Canada Gazette. These penalties come into effect on December 30, 2008.

Each violation is classified as a minor, serious or very serious violation. The history of compliance by the realtor or brokerage with the PC(ML)TFA will be taken into account in determining the amount of a penalty.

The Regulations list 105 penalties of which: 87% (91) are ‘minor’, 11% (12) are ‘serious’ and 2% (2) are ‘very serious’.

Range:

Subject to the Act, the range of penalties in respect of a violation is:

(a) $1 to $1,000 in the case of a ‘minor’ violation;

(b) $1 to $100,000 in the case of a ‘serious’ violation; and

(c) $1 to $500,000 in the case of a ‘very serious’ violation.

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Civil Penalties:

The Compliance Regime establishes two distinct mandates for realtors/ brokerages:

1. That an operational framework is in place.

2. That realtors/employees are able to demonstrate an understanding of money laundering and terrorist financing and their company’s policies and procedures.

By ensuring these measures are carried out effectively, realtors/brokerages are able to mitigate the following risks:

Legal Risk Financial loss due to adverse financial contracts that turn out to be unenforceable and/or incurring criminal penalties for non-compliance

Reputational Risk Financial loss resulting from a lack of consumer trust due to negative publicity regarding an organization’s business

Operational Risk Direct or indirect financial loss due to inefficient internal procedures, people or systems

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Anti-Money Laundering:Risk Based Approach

So What Is Involved?

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Compliance Regime continued:

This is New!!

What is a Key Driving Force Behind Canada’s Move to Risk Assessments?

• Recommendation 5 of the FATF proposes that reporting entities:

• Implement (a) Corporate and (b) Customer Due Diligence [CDD] measures that assess the degree of risk for money laundering and/or terrorist financing based on the type of customer, ongoing business relationship, and/or financial transaction.

There is no definitive, single model for a risk-based approach – the following slides

will help to provide a framework.

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It all starts with a risk assessment of the Brokerage itself 15

Then a risk assessment of each client 16

Policies

Three Principal Components in Model

Internal Controls

Risk Management Program

Controls

Risk Assessment

ProceduresSystems

Training

Services

Compliance Officer

Products

GeographiesClients/Brokerage

AuditsInternal Controls

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TransactionsGeographic Locations

Clients & Brokerage

Products & Services

Four Key Areas of Risk Assessment

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High Low

Medium

usually generated by weighted criteria

Risk Categories

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Usually combined into a single

static customer risk score20

GeographicLocations

Clientsand Brokerage

Productsand Services

Clients & Brokerage

Transaction Risk

Geographic Locations

(Dynamic Process)

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Client Risk Stratification

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Risk Mitigation

Risk Assessment

When your risk assessment determines that risk is high, you have to develop written risk-mitigation strategies (policies and procedures to

mitigate high risks) and apply them for high risk situations.24

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I’m done the Introduction Module: What do I do now?

Congratulations! You are now ready to move on to Module 1: About Money Laundering and Terrorist Financing.

Good Luck!