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Are you ready for a FINTRAC examination?

 

B Amber D. Scott

 

For most of us, audits and examinations are as much fun as they sound, but both serve a useful purpose—other than raising our blood pressure. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canada’s anti-money laundering (AML) regulator and financial intelligence unit (FIU) has been examining dealers in precious metals and stones (DPMSs) for compliance with Canada’s AML requirements since 2008. It may come as a surprise then that recent FINTRAC statistics for DPMSs examined in the last year indicated 40 per cent did not have policies and procedures, 58 per cent did not have a risk assessment or training, and 83 per cent had not completed an effectiveness review, which is similar to an audit for compliance.

 

Before the call: It’s never too early

 

The best time to get ready for a FINTRAC examination is long before the regulator calls to let you know you’ll be examined. This is because once you receive a call or letter, FINTRAC will only consider pre-existing documents and materials. If you’re feeling overwhelmed just thinking about a compliance program, remember it doesn’t have to be perfect; compliance is always
a work in progress.

Your compliance program should have five key elements:

 

  • Appoint a compliance officer: A person who oversees and acts as point person for the AML and Canadian Tax Foundation (CTF) compliance program.
  • Develop policies and procedures: A document or set of documents outlining what you do to comply with the law.
  • Complete your risk assessment: A document describing risks or vulnerabilities that would allow your business to be used to launder money or finance terrorism, and the controls/preventative measures in place.
  • Train your employees: All staff who interact with customers or transactions must be trained at least once per year.
  • Effectiveness reviews: A compliance audit testing your program (what you’ve documented) and operations (what you’re doing) must be completed at least once every two years.
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Each of these elements need to be documented. It is not enough to know or do something; you have to be able to show you have processes in place, and have followed them. A dusty binder on a shelf is not enough as your program needs to grow and change with your business.

 

When the call comes: Get organized

 

After an introductory phone call to confirm your examination date, which can be moved if you have prior commitments like travel, a marriage, a medical procedure, or the like. If this is necessary, do let FINTRAC know you need to change the date as soon as you can. After your call, FINTRAC will send you a letter detailing:

 

  • How they will examine you e.g. in person or by phone.
  • What documents and data they will need in advance and on the date of the examination.
  • The deadlines for each part of your submission.

 

Generally, you will have 30 days to pull everything together, and it can be tempting to put this aside until the last minute. This would be a mistake, as it can be challenging to pull together the many records FINTRAC requires.

You should also consider whether or not your materials need explanatory notes. It is often recommended, clients include a brief description of their business model in their introductory notes. This can help the examiner understand what they’re looking at. Remember, an examiner conducts many examinations in a year, and DPMSs can be very different from one another. A simple introduction to your business operations and the accompanying documentation will go a long way, as well as save time during the examination process.