title
stringclasses 8
values | section
stringlengths 7
102
| text
stringlengths 234
17.4k
| comments
stringclasses 1
value |
|---|---|---|---|
Overview
|
Money laundering and terrorist financing indicators—overview and red flags
|
ML/TF indicators are potential red flags that could initiate suspicion or indicate that something may be unusual in the absence of a reasonable explanation. Red flags typically stem from one or more factual characteristics, behaviours, patterns or other contextual factors that identify irregularities related to financial transactions or attempted transactions. These often present inconsistencies with what is expected of your client based on what you know about them.
The ML/TF indicators in this guidance were developed by FINTRAC through a three-year review of ML/TF cases, a review of high quality STRs, published literature by international organizations such as the Financial Action Task Force (FATF) and the Egmont Group, and consultation with reporting entity sectors. These ML/TF indicators do not cover every possible situation but were developed to provide you with a general understanding of what is or could be unusual or suspicious. On its own, a single ML/TF indicator may not appear suspicious. However, observing an ML/TF indicator could lead you to conduct an assessment of the transaction(s) to determine whether there are further facts, contextual elements or additional ML/TF indicators that assist in establishing reasonable grounds to suspect the commission or attempted commission of an ML/TF offence which requires the submission of an STR.
Criminal organizations often combine various methods in different ways in order to avoid the detection of ML/TF. If you detect unusual or suspicious behaviour or a transaction that prompts the need for an assessment, ML/TF indicators combined with facts and context can help you determine if there are reasonable grounds to suspect that the transaction is related to the commission or attempted commission of an ML/TF offence. These ML/TF indicators may also be used to explain or articulate the rationale for your reasonable grounds to suspect in the narrative portion of an STR, as they provide valuable information from a financial intelligence perspective.
|
Audience is Financial entities
|
Important consideration
|
Pretext
|
One piece of the puzzle
The ML/TF indicators in this guidance are not an exhaustive list of ML/TF indicators to support all suspicious scenarios. These ML/TF indicators should be considered as examples to guide the development of your own process to determine when you have reasonable grounds to suspect that the transaction or attempted transaction is related to the commission or attempted commission of an ML/TF offence. These ML/TF indicators are one piece of the puzzle and are designed to complement your own STR process and can be used in conjunction with other publicly available ML/TF indicators.
During an assessment, FINTRAC will review your compliance policies and procedures to see how you use ML/TF indicators within your STR process. Part of the assessment will include evaluating how the actual policies follow your documented approach and determining its effectiveness with respect to the use of ML/TF indicators. This can include a review of transactions to determine how your STR process identifies potential STRs and assesses them using facts, context and ML/TF indicators. For example, you may be asked to provide an explanation if you have not reported an STR for a client you have assessed as high risk and that client's activity also matches against multiple ML/TF indicators.
Combination of facts, context and ML/TF indicators
If the context surrounding a transaction is suspicious, it could lead you to assess a client's financial transactions. Facts, context and ML/TF indicators need to be assessed to determine whether there are reasonable grounds to suspect that the transaction is related to the commission or attempted commission of an ML/TF offence. On its own, a single financial transaction or ML/TF indicator may not appear suspicious. However, this does not mean you should stop your assessment. Additional facts or context about the client or their actions may help you reach the reasonable grounds to suspect threshold.
Alert or triggering system
FINTRAC acknowledges that a reporting entity may have developed a system that relies on specific alerts or triggering events to signal when to assess a transaction to determine if an STR should be submitted to FINTRAC. If you rely on such a system, FINTRAC expects that you review the alerts in a timely manner in order to determine if an STR should be submitted. Regardless of how you choose to operationalize these ML/TF indicators, FINTRAC expects that you will be able to demonstrate that you have an effective process to identify, assess and submit STRs to FINTRAC.
| null |
ML Indicators (money laundering)
|
ML/TF indicators related to identifying the person or entity
|
The following are examples of ML/TF indicators that you may observe when identifying persons or entities.
There is an inability to properly identify the client or there are questions surrounding the client's identity.
When opening an account, the client refuses or tries to avoid providing information required by the financial institution, or provides information that is misleading, vague, or difficult to verify.
The client refuses to provide information regarding the beneficial owners of an account opened for an entity, or provides information that is false, conflicting, misleading or substantially incorrect.
The identification document presented by the client cannot be authenticated.
There are inconsistencies in the identification documents or different identifiers provided by the client, such as name, address, date of birth or phone number.
Client produces seemingly false information or identification that appears to be counterfeited, altered or inaccurate.
Client displays a pattern of name variations from one transaction to another or uses aliases.
Client alters the transaction after being asked for identity documents.
The client provides only a non-civic address or disguises a post office box as a civic address for the purpose of concealing their physical residence.
Common identifiers (e.g. addresses, phone numbers, etc.) are used by multiple clients that do not appear to be related.
Common identifiers (e.g. addresses, phone numbers, etc.) are used by multiple clients conducting similar transactions.
Use of the same hotel address by one or more clients.
Transactions involve persons or entities identified by the media, law enforcement and/or intelligence agencies as being linked to criminal activities.
Attempts to verify the information provided by a new or prospective client are difficult.
| null |
ML Indicators (money laundering)
|
ML/TF indicators related to client behaviour
|
The contextual information acquired through the know your client (KYC) requirements or the behaviour of a client, particularly surrounding a transaction or a pattern of transactions, may lead you to conduct an assessment in order to determine if you are required to submit an STR to FINTRAC. The following are some examples of ML/TF indicators that are linked to contextual behaviour and may be used in conjunction with your assessment and your risk-based approach.
Client makes statements about involvement in criminal activities.
Client conducts transactions at different physical locations, or approaches different tellers.
Evidence of untruthfulness on behalf of the client (e.g. providing false or misleading information).
Client exhibits nervous behaviour.
Client refuses to provide information when required, or is reluctant to provide information.
Client has a defensive stance to questioning.
Client presents confusing details about the transaction or knows few details about its purpose.
Client avoids contact with reporting entity employees.
Client refuses to identify a source of funds or provides information that is false, misleading, or substantially incorrect.
Client exhibits a lack of concern about higher than normal transaction costs or fees.
Client makes enquiries/statements indicating a desire to avoid reporting or tries to persuade the reporting entity not to file/maintain required reports.
Insufficient explanation for the source of funds.
Client closes account after an initial deposit is made without a reasonable explanation.
| null |
ML Indicators (money laundering)
|
ML/TF indicators surrounding the financial transactions in relation to the person/entity profile
|
Clearly understanding the expected activity of a person or entity will allow you to assess their financial activity with the proper lens. For example, an entity involved in an industry that is not normally cash-intensive receiving excessive cash deposits or a person conducting financial transactions atypical of their financial profile. The following are some examples of ML/TF indicators surrounding the financial transactions related to the person/entity profile.
The transactional activity far exceeds the projected activity at the time of the account opening or the beginning of the relationship.
The transactional activity (level or volume) is inconsistent with the client's apparent financial standing, their usual pattern of activities or occupational information (e.g. student, unemployed, social assistance, etc.).
The volume of transactional activity exceeds the norm for geographical area.
The transactional activity is inconsistent with what is expected from a declared business (e.g. business account has no normal business-related activities, such as the payment of payrolls or invoices).
Client appears to be living beyond their means.
Large and/or rapid movement of funds not commensurate with the client's financial profile.
Rounded sum transactions atypical of what would be expected from the client.
Size or type of transactions atypical of what is expected from the client.
Opening accounts when the client's address or employment address is outside the local service area without a reasonable explanation.
There is a sudden change in the client's financial profile, pattern of activity or transactions.
Client uses notes, monetary instruments, or products and/or services that are unusual for such a client.
| null |
ML Indicators (money laundering)
|
ML/TF indicators related to products and services
|
Accounts can take different forms (e.g. chequing, savings, investment, etc.) and for the purposes of this section, the ML/TF indicators below will aim to address the ML/TF risks linked to different types of accounts held by various reporting entities in Canada. There are many ML/TF indicators related to account activity. Your process to evaluate risk for accounts and any other products and services you provide should be documented as part of your KYC and risk assessment requirements. The following ML/TF indicators will focus on products or services that may be applicable within your business.
Holding multiple accounts at several financial institutions for no apparent reason.
Suspected use of a personal account for business purposes, or vice-versa.
Client appears to have recently established a series of new relationships with different financial entities.
A product and/or service opened on behalf of a person or entity that is inconsistent based on what you know about that client.
Frequent use of safety deposit box.
Accounts used for pass-through activities (e.g. to receive and subsequently send funds to beneficiaries).
Use of multiple foreign bank accounts for no apparent reason.
Credit card transactions and payments are exceptionally high for what is expected of the client including an excessive amount of cash advance usage, balance transfer requests or transactions involving luxury items.
Client frequently makes credit card overpayments and then requests a cash advance.
Frequent and/or atypical transfers between the client's products and accounts for no apparent reason.
The same person holds signing authority for accounts held by multiple entities where there is no legal reason or sufficient explanation for such an arrangement.
Accounts held by multiple entities either headquartered at the same location or having the same directors/signing authorities for no apparent reason.
| null |
ML Indicators (money laundering)
|
ML/TF indicators related to change in account activity
|
Certain changes regarding an account may be indicative of ML/TF for a multitude of reasons including, but not limited to, the use of an account to suddenly launder or transmit funds, an increase in volume, changes in ownership of an account, etc. Changes in account activity may trigger a need for further assessment of the person or entity holding the account and some examples to consider are listed below.
A business account has a change in ownership structure with increases in transactional activity and no apparent explanation.
An inactive account begins to see financial activity (e.g. deposits, wire transfers, withdrawals).
Accounts that receive relevant periodical deposits and are inactive at other periods without a logical explanation.
A sudden increase in credit card usage or applications for new credit.
Abrupt change in account activity.
| null |
ML Indicators (money laundering)
|
ML/TF indicators based on atypical transactional activity
|
There are certain transactions that are outside the normal conduct of your everyday business. These transactions may be indicative of a suspicious transaction, and would require additional assessment. Some examples of ML/TF indicators based on atypical transactional activity are listed below.
The client has multiple products, atypical of what would be expected.
A series of complicated transfers of funds that seems to be an attempt to hide the source and intended use of the funds.
Transactions displaying financial connections between persons or entities that are not usually connected (e.g. a food importer dealing with an automobile parts exporter).
Transaction is unnecessarily complex for its stated purpose.
Client presents notes or financial instruments that are packed, transported or wrapped in an uncommon way.
A client's transactions have no apparent business or economic purpose.
Transaction is consistent with a publicly known trend in criminal activity.
Client deposits musty, odd smelling or extremely dirty bills.
Transaction involves a suspected shell entity (an entity that does not have an economical or logical reason to exist).
Client frequently exchanges small bills for larger bills.
Suspicious pattern emerges from a client's transactions (e.g. transactions take place at the same time of day).
Atypical transfers by a client on an in-and-out basis, or other methods of moving funds quickly, such as a cash deposit followed immediately by a wire transfer of the funds out.
Funds transferred in and out of an account on the same day or within a relatively short period of time.
| null |
ML Indicators (money laundering)
|
ML/TF indicators related to transactions structured below the reporting or identification requirements
|
Structuring of transactions to avoid reporting or identification requirements is a common method for committing or attempting to commit an ML/TF offence. There are multiple thresholds which trigger reporting/identification requirements by a reporting entity. Some examples of ML/TF indicators which may be indicative of a person or entity attempting to evade identification and/or reporting thresholds are listed below.
You become aware of the structuring of deposits at multiple branches or institutions.
Client appears to be structuring amounts to avoid client identification or reporting thresholds.
Client appears to be collaborating with others to avoid client identification or reporting thresholds.
The structuring of deposits through multiple branches of the same financial institution or by groups of persons who enter a single branch at the same time.
Multiple transactions conducted below the reporting threshold within a short period.
Client makes enquiries that would indicate a desire to avoid reporting.
Client conducts transactions at different physical locations or with different representatives in an apparent attempt to avoid detection.
Client exhibits knowledge of reporting thresholds.
| null |
ML Indicators (money laundering)
|
ML/TF indicators involving wire transfers (including electronic funds transfers)
|
In our current global environment, it is increasingly easier to transfer funds to, from or through multiple jurisdictions (municipal, national or international) in a rapid fashion. This presents an increased ML/TF risk as transactions passing through multiple accounts and/or jurisdictions increase the difficulty for reporting entities and law enforcement to trace illicit funds. Examples of these types of transactions which may require further assessment include the following.
Client is unaware of details surrounding incoming wire transfers, such as the ordering client details, amounts or reasons.
Client does not appear to know the sender of the wire transfer from whom the wire transfer was received, or the recipient to whom they are sending the wire transfer.
Client frequents multiple locations utilizing cash, prepaid credit cards or money orders/cheques/drafts to send wire transfers overseas.
The client sends wire transfers or receives wire transfers to or from multiple beneficiaries that do not correspond to the expected use of the account type or business account.
Client is accompanied by persons who appear to be instructing the sending or receiving of wire transfers on their behalf.
Multiple persons are sending wire transfers that are similar in amounts, receiver names, security questions, addresses or destination country.
Client attempts to specify the routing of an international wire transfer.
Client conducts wire transfers that do not include theirs or the beneficiary's requisite information.
Client utilizes structured cash transactions to send wire transfers in an effort to avoid record keeping requirements.
Funds are deposited or received into several accounts and then consolidated into one before transferring the funds outside the country.
Immediately after transferred funds have cleared, the client moves funds, to another account or to another person or entity.
Multiple clients have sent wire transfers over a short period of time to the same recipient.
Large wire transfers or high volume of wire transfers are conducted or received through the account that does not fit the expected pattern of that account.
Large and/or frequent wire transfers between senders and receivers with no apparent relationship.
Client sending to, or receiving wire transfers from, multiple clients.
| null |
ML Indicators (money laundering)
|
ML/TF indicators related to transactions that involve non-Canadian jurisdictions
|
There are certain types of transactions that may be sent or received from jurisdictions outside of Canada where there is higher ML/TF risk due to more permissible laws or the local ML/TF threat environment. The following are examples to consider when making an assessment of the financial transaction conducted by a person/entity through your business.
Transactions with jurisdictions that are known to produce or transit drugs or precursor chemicals, or are sources of other types of criminality.
Transactions with jurisdictions that are known to be at a higher risk of ML/TF.
Transaction/business activity involving locations of concern, which can include jurisdictions where there are ongoing conflicts (and periphery areas), countries with weak ML/TF controls, or countries with highly secretive banking or other transactional laws.
Transactions involving any countries deemed high risk or non-cooperative by the FATF.
Client makes frequent overseas transfers, not in line with their financial profile.
Due to the ever-evolving nature of the ML/TF environment, high risk jurisdictions and trends are often subject to change. To ensure that you are referencing accurate information, FINTRAC encourages you to research publicly available sources on a regular basis to support these ML/TF indicators as part of your STR process. There are multiple sources that identify jurisdictions of concern, including the FATF, which publishes contextual information on high-risk jurisdictions in relation to their risk of ML and TF. You may also observe funds coming from or going to jurisdictions that are reported in the media as locations where terrorists operate/carry out attacks and/or where terrorists have a large support base (state sponsors or private citizens). Identifying high-risk jurisdictions or known trends can also be included as part of your risk-based approach and internal STR process.
| null |
ML Indicators (money laundering)
|
ML/TF indicators related to the use of other parties
|
In the course of a "normal" financial transaction, there are a "normal" number of parties who engage in the transaction, depending on the nature of the transaction at hand. For example, in the instance of depositing cash to a personal bank account, there is generally one party to the transaction: the person who holds the account is depositing into their own account. By contrast, with the deposit of cash to a business account, you can have many different parties, including: persons associated with the business's finance function who hold authority over the account, or an employee who may be charged with depositing the cash.
Transactions that involve parties not typically associated with a transaction can present an elevated risk of ML and/or TF. These additional parties can be used to allow a criminal to avoid being identified or being linked to an asset or account. This section includes examples of how the involvement of other parties may be indicative of the structure of a criminal enterprise. Some examples of such other parties include the use of a third party, nominee or gatekeeper.
Use of third party
A third party is any person or entity that instructs someone to act on their behalf for a financial activity or transaction. There are some situations where there is an apparent and discernable rationale for the inclusion of the third party in a transaction and this may not be suspicious. However, you may become suspicious in a situation where the reason for a person or entity acting on behalf of another person or entity does not make sense based on what you know about the client or the third party. Use of third parties is one method that money launderers and terrorist activity financiers use to distance themselves from the proceeds of crime or source of criminally obtained funds. By relying on other parties to conduct transactions they can distance themselves from the transactions that can be directly linked to the suspected ML/TF offence. Some examples of ML/TF indicators related to the use of a third party can be found below.
Multiple deposits which are made to an account by non-account holders.
Unrelated parties sending email money transfers or other forms of electronic transfers to the same beneficiary with no apparent relation to the recipient.
A client conducts a transaction while accompanied, overseen or directed by another party.
A client makes numerous outgoing payments to unrelated parties shortly after they receive incoming funds.
Wire transfers, deposits or payments to or from unrelated parties (foreign or domestic).
Client appears to be or states they are acting on behalf of another party.
Account is linked to seemingly unconnected parties.
Use of nominee
A nominee is a particular type of other party that is authorized to open accounts and conduct transactions on behalf of a person or entity. There are legitimate reasons for relying on a nominee to conduct financial activity of behalf of someone else. However, this type of activity is particularly vulnerable to ML/TF as it is a common method used by criminals to distance themselves from the transactions that could be linked to suspected ML/TF offences. These are some examples of ML/TF indicators relating to the misuse of nominees.
A person maintains multiple accounts, or maintains accounts in the names of family members or corporate entities with no apparent business or other purpose.
A person or entity other than the stated account holder conducts the majority of the transaction activity, which seems unnecessary or excessive.
Client is involved in transactions or account activities that are suspicious, but refuses or is unable to answer questions related to the account or transactions.
Use of gatekeeper
A gatekeeper is a person who controls access to the financial system and can act on behalf of a client. Such services can be abused so that criminals have access to the financial system without being identified. Gatekeepers may include lawyers, accountants and other professions which can access the financial system on behalf of a client. While there are many transactions where it is "normal" to have a gatekeeper represent the interests of a client, such an appearance of normalcy can also be utilized to the advantage of criminals to provide the veneer of legitimacy to their transactions. The use of gatekeepers themselves is not an indicator of an ML/TF offence. However, entities should consider the following examples which can indicate misuse of the financial system access provided to gatekeepers.
Gatekeeper avoids identifying their client or disclosing their client's identity when such identification would be normal during the course of a transaction.
Gatekeeper is willing to pay higher fees and seeks to conduct the transaction quickly when there is no apparent need for such expediency.
Gatekeeper is utilizing their account for transactions not typical of their business (e.g. pass through account, excessive amount of cash, payment to non-clients or parties of transactions).
Apparent misuse of correspondent accounts by gatekeeper to obscure the origin and/or destination of funds.
| null |
TF Indicators (Terrorist Financing)
|
TF Indicators
|
In Canada, TF offences make it a crime to knowingly collect or provide property, which can include financial or other related services, for terrorist purposes. This section is focused on examples that are specific to the possible commission of a TF offence. However, please note that the other ML/TF indicators in this guidance may also prove relevant in determining when you have reasonable grounds to suspect the commission of TF, as the methods used by criminals to evade detection of ML are similar.
| null |
TF Indicators (Terrorist Financing)
|
Indicators specifically related to TF
|
The indicators below are some examples of indicators relating to TF.
Transactions involving certain high-risk jurisdictions such as locations in the midst of or in proximity to, armed conflict where terrorist groups operate or locations which are subject to weaker ML/TF controls.
An account opened in the name of an entity, a foundation or association, which may be linked or involved with a suspected terrorist organization.
The use of funds by a non-profit organization is not consistent with the purpose for which it was established.
Raising donations in an unofficial or unregistered manner.
Client identified by media or law enforcement as having travelled, attempted or intended to travel to high-risk jurisdictions (including cities or districts of concern), specifically countries (and adjacent countries) under conflict and/or political instability or known to support terrorist activities and organizations.
Transactions involve persons or entities identified by media and/or sanctions lists as being linked to a terrorist organization or terrorist activities.
Law enforcement information provided which indicates persons or entities may be linked to a terrorist organization or terrorist activities.
Client conducted travel-related purchases (e.g. purchase of airline tickets, travel visa, passport, etc.) linked to high-risk jurisdictions (including cities or districts of concern), specifically countries (and adjacent countries) under conflict and/or political instability or known to support terrorist activities and organizations.
Person or entity's online presence supports violent extremism or radicalization.
Client donates to a cause that is subject to derogatory information that is publicly available (e.g. crowdfunding initiative, charity, non-profit organization, non-government organization, etc.).
| null |
Sexual Exploitation Indicators
|
Updated Indicators: Laundering of proceeds from human trafficking for sexual exploitation
|
Purpose
This Operational Alert updates FINTRAC's 2016 Operational Alert "Indicators: The laundering of illicit proceeds from human trafficking for sexual exploitation" with additional indicators in support of Project Protect to assist reporting entities in recognizing financial transactions suspected of being related to the laundering of proceeds associated to human trafficking for sexual exploitation. Through financial transaction reports, FINTRAC is able to facilitate the detection, prevention and deterrence of all stages of money laundering (placement, layering and integration) and the financing of terrorist activities by providing actionable financial intelligence disclosures to law enforcement and national security agencies.
Background
Human trafficking is often confused with human smuggling, although these crimes can overlap. Human smuggling involves individuals who voluntarily consent to be illegally moved across an international border by other individuals for an agreed-upon fee. Human smuggling always involves an international border, is consensual, and the relationship between the smuggler and smuggled person usually ends once the smuggled person arrives at their destination country. Conversely, human trafficking can occur both within a country's own borders and through international movement, is not consensual (the trafficked person does not consent to being exploited), does not end upon crossing a border, and involves forcing or coercing the trafficked person to provide their services (typically through sexual exploitation or forced labour). In some cases, a smuggled person can become a victim of human trafficking when they arrive at their destination.
Project Protect
is a public-private partnership initiative led by the Bank of Montreal, supported by Canadian law enforcement agencies and FINTRAC. First launched in 2016, Project Protect targets human trafficking for sexual exploitation by focusing on the money laundering aspect of the crime. The objective of the project is to improve the collective understanding of the crime, and to improve the detection of the laundering of proceeds from human trafficking for sexual exploitation.
Human trafficking for sexual exploitation is reported to be more prevalent than forced labour. Canada is a source, transit and destination country for men, women and children trafficked for the purposes of sexual exploitation. Traffickers exploit their victims primarily for financial gain. The money laundering indicators in this Operational Alert apply equally to victims trafficked in Canada regardless of their origin.
Research suggests that human trafficking for sexual exploitation, like drugs and weapons trafficking, is just another commodity in a range of criminal activities perpetrated mostly by organized crime groups who often collaborate with each other to maximize illicit financial gain. Sexual exploitation is a high-value business for criminals because, unlike a drug that can only be sold once, a human being can be sold repeatedly over an extended period of time. This type of crime is also attractive to criminals because the risk of losing business due to detection and successful prosecution is kept low through coercion of their victims in combination with the use of well-known money laundering methods. As a result, the perpetration of this crime is reinforced because criminals are able to benefit from the illicit proceeds. The International Labour Organisation (ILO) estimates that global proceeds from human trafficking amount to USD 150 billion per year with USD 99 billion sourced specifically from forced sexual exploitation.
In Canada, the number of police-reported incidents of human trafficking has been on an upward trend since 2011 with the highest number to date reported in 2019.
Footnote
1 Yet, most cases of human trafficking are not reported to police due to the reluctance or inability of victims and witnesses to come forward.
Footnote
2 The Covid-19 pandemic has not curtailed human trafficking in Canada and has caused many individuals to be more vulnerable to this crime.
A recent study
Footnote
3 by the Canadian Centre to End Human Trafficking (CCEHT) found that exploitation through escort services distantly followed by illicit massage businesses were the most common forms of human trafficking for sexual exploitation in Canada. Further, the CCEHT identified several human trafficking corridors in Canada connecting commercial sex markets within and across Canadian provinces.
Overview of FINTRAC's analysis of disclosures related to human trafficking for sexual exploitation
Footnote
*
FINTRAC analyzed a sample of approximately 100,000 transactions disclosed from 2018 to 2020 in FINTRAC disclosures related to human trafficking for sexual exploitation. The majority of human trafficking for sexual exploitation-related FINTRAC disclosures primarily concerned victims providing sexual services at short-stay locations (e.g., hotels). Nearly all victims in FINTRAC's sample were in this category. However, FINTRAC identified two other business models of where sexual exploitation occurred: exploitation at illicit storefront businesses offering sexual services (e.g., spas, massage parlours, private clubs), and at private residences (e.g., apartments) with some crossover between these three categories. All used advertisements of escort services to obtain clients and some traffickers operated their own escort agencies.
Overall, victims were nearly all females and 60% were under 25 years old at the time of their transactions and some were minors. Traffickers were mostly males aged between 24 and 36 years old. Female traffickers were mostly aged between 27 and 32 years old, albeit most were also victims and connected to male traffickers.
Traffickers who exploited their victims out of private residences or in illicit storefront businesses offering sexual services, however, were mostly older females (usually over 40 years old) and many operated with their spouses. Some traffickers in these categories also trafficked victims in short-stay locations and/or were associated to traffickers in those networks.
Overall, email money transfers and cash deposits were the primary transactions in human trafficking for sexual exploitation-related disclosures. Additionally, FINTRAC observed several money laundering methods in the disclosures. These included the use of online casinos, casinos, virtual currencies, prepaid credit cards, gift cards, nominees, front companies owned by traffickers or their associates, funds layered between related accounts, and investment accounts.
In addition to human trafficking, many traffickers were also involved in or suspected to be involved in other criminal activities (e.g., drug trafficking, fraud) and were members or associates of criminal groups. Many traffickers used their victims to conduct other crimes. Therefore, the money laundering methods observed were likely also used to launder proceeds generated from other criminal activities and are not necessarily specific to human trafficking.
Traffickers frequently used nominees to funnel proceeds of crime, pay for human trafficking running costs, launder funds, or conceal beneficial ownership. These nominees were often victims and family members of traffickers. Victims were used as intermediaries to funnel funds to traffickers and other victims. Some victims had roles within human trafficking rings to collect funds from other victims. Some traffickers also had access to their victims' accounts or held joint accounts with victims. The family members in FINTRAC's sample were usually traffickers' parents and spouses but also included their siblings, and adult and minor children.
Traffickers and victims often purchased virtual currencies with funds sent directly to virtual currency exchange businesses sometimes doing so immediately after receiving several email money transfers from third parties. However, several traffickers and victims also sent email money transfers to individuals who purchased virtual currencies on behalf of others. One such individual advertised their intermediary virtual currency services on escort websites.
Prepaid credit cards was another method traffickers and victims used to launder funds and to pay for human trafficking-running costs (e.g., escort ads, hotel bookings). Indeed, EUROPOL detected an increased use of prepaid credit cards among human trafficking organized crime groups for money laundering purposes.
Footnote
4 FINTRAC also observed that some traffickers used prepaid credit cards as a means to provide funds to their victims. These traffickers transferred funds from their prepaid credit card to their victim's prepaid credit card.
Traffickers and victims conducted transactions at casinos. In-person casino transactions were not observed beyond early 2020, highly likely a result of government restrictions imposed on businesses in response to the Covid-19 pandemic. Additionally, FINTRAC observed a significant increase in transactions involving online casinos in 2019 and 2020 indicating that this is an upward trending money laundering method.
Front businesses were used to illicitly offer sexual services, to launder proceeds, and/or to manage the running costs associated with human trafficking. For example, illicit proceeds were used to pay the rent and utilities for residential properties where sexual services are rendered or used as safe houses. Front companies in FINTRAC's sample were diverse and included industries such as, music, spas, salons, restaurants, motels, farming, IT services, clothing, vehicle- and construction-related businesses, and transport businesses among others. Front companies co-mingled legitimate with illicit funds and/or had limited business-related transactions. They were owned by traffickers, their associates and other members of their human trafficking networks including some victims. Businesses owned by victims also transferred funds to traffickers and their businesses.
FINTRAC observed that some money laundering methods and particular types of transactions were more specific to certain business models of human trafficking for sexual exploitation over others. Some of these are highlighted below:
Trafficking out of short-stay locations
Disclosures where the sexual exploitation occurred at short-stay locations (e.g., hotels) included purchases for parking and at online casinos–which were either not observed or not significant in the other categories. Online casino purchases tended to occur in the late evening/early morning hours. Purchases of prepaid credit cards and gift cards were also more prevalent in this category in addition to purchases at short-stay locations (which would be expected). Several merchant refund transactions were observed from short-stay accommodations or vehicle rental entities with suspicions that these merchants were paid or partially paid in cash instead. Several victims also sent funds to entities offering collect calls from jail which were also unique to this category.
Further, traffickers in this category had transactions indicating a lavish lifestyle such as purchases at higher-end restaurants, higher-end clothing and accessories retailers, luxury car dealerships, jewellery retailers, entertainment venues, gyms or fitness facilities, limousine entities, cosmetic surgery entities, and spa retreats. FINTRAC did not observe these types of transactions among victims and were very few among the other categories of venues where sexual exploitation occurred.
Trafficking out of private residences
Disclosures involving traffickers who exploited their victims out of private residences (e.g., apartments) included expenses associated to multiple properties. For example, rent paid by the same party for multiple apartments in the same month or property taxes paid to multiple municipalities. Some of these traffickers operated escort agencies and had purchases associated to website hosting and online marketing in addition to purchases of advertisements for escort services. This category had the most overlap with the others. Several transactions in this category indicate that some traffickers also trafficked victims out of short-stay locations and may have also offered massage services in private residences similar to those offered in illicit storefront businesses offering sexual services.
Traffickers operating or suspected to operate illicit storefront businesses offering sexual services
Illicit storefront businesses offering sexual services included spas, massage/body rub centres and private clubs. In-person casino cash transactions were more common in these disclosures compared to the other categories. Casino transactions included cash purchases of casino chips, cash advances from player gaming accounts, and casino disbursements in cash and cheques. Also particular to these businesses was the high volume of funds they received from payment processors likely indicating this is a method in which they received payments from clients for sexual services.
Many traffickers in this category operated multiple illicit sexual services businesses, sometimes in multiple cities. They were also associated to several front companies (e.g., restaurants, vehicle-related entities) used to launder funds and often transferred funds between their business and personal accounts and those of their associates. Some of the traffickers had financial connectivity with other trafficking networks.
Some traffickers in this category and those trafficking out of private residences had transactions to and from their investment accounts or to and from online investment entities– yet some transactions did not involve investment purchases. FINTRAC suspects that traffickers used their investment/trading accounts to launder funds.
Trafficking foreign nationals
Foreign nationals who were victims of human trafficking for sexual exploitation were observed in all above business models of sexual exploitation venues but were mostly concentrated among traffickers operating illicit storefront businesses offering sexual services. Some traffickers of foreign nationals were also involved in human smuggling. Among foreign nationalities that could be identified in FINTRAC's sample, traffickers trafficked foreign nationals who originated mostly from China and South Korea but others originated from the Philippines, Thailand, Indonesia, Portugal and unspecified countries in Eastern Europe. These traffickers and their associates often had international aspects to their transactions such as transferring funds to multiple countries including some that transferred funds to themselves or to criminal associates in another country, being associated to foreign businesses also involved in human trafficking for sexual exploitation, or had online advertisements for escort services or recruitment of escorts posted in another country.
International funds transfers among these disclosures were primarily outgoing from Canada to countries such as the Philippines, Brazil, Russia, Portugal, China, Australia, Colombia, Taiwan, United States, Kazakhstan, United Arab Emirates, Hong Kong, South Korea, and Uzbekistan with reasons for transfers usually not provided. However some outgoing transfers cited reasons mostly related to family, gift, loan repayments, or tuition. Some funds transferred (totalling CAN$1.5 million) to the United States were cited as purchases of a hotel franchise – the sender of these transfers was a sex trade worker closely associated to traffickers. Indeed, a different trafficker owned motel franchises in Canada as well. Incoming funds transfers to Canada originated mostly from China but also from Hong Kong and South Korea and cited reasons such as living expenses, consulting, training, education and travel.
Reasonable grounds to suspect and how to use indicators
How reporting entities determine if they submit a suspicious transaction report to FINTRAC (for either a completed or attempted financial transaction) requires more than a "gut feel" or "hunch," although proof of money laundering is not required. Reporting entities are to consider the facts, context and money laundering indicators of a transaction. When these elements are viewed together, they create a picture that is essential to differentiate between what may be suspicious and what may be reasonable in a given scenario. Reporting entities must reach reasonable grounds to suspect that a transaction is related to the laundering or attempted laundering of proceeds of crime before they can submit a suspicious transaction report to FINTRAC.
Indicators of money laundering can be thought of as red flags indicating that something may very well be wrong. Red flags typically stem from one or more characteristics, behaviours, patterns and other contextual factors related to financial transactions that make them appear inconsistent with what is expected or considered normal. On its own, an indicator may not initially appear suspicious. However, it could lead you to question the legitimacy of a transaction, which may prompt you to assess the transaction to determine whether there are further facts, contextual elements or additional ML/TF indicators that would increase your suspicion to the point where submitting an STR to FINTRAC would be required (see Reporting suspicious transactions to FINTRAC).
| null |
Sexual Exploitation Indicators
|
What is human trafficking?
|
Human trafficking, also referred to as trafficking in persons, involves recruiting, transporting, transferring, receiving, holding, concealing, harbouring, or exercising control, direction or influence over that person, for the purpose of exploitation, generally for sexual exploitation or forced labour.
| null |
Sexual Exploitation Indicators
|
Sexual Exploitation Money Laundering Indicators
|
elow are additional money laundering indicators related to human trafficking for sexual exploitation derived from FINTRAC's analysis and reflect the types and patterns of transactions, contextual factors and those that emphasize the importance of knowing your client. All indicators from FINTRAC's 2016 Operational Alert on the laundering of proceeds from human trafficking for sexual exploitation remain relevant (see Appendix). The additional indicators should be considered along with those in the 2016 Operational Alert.
These indicators should not be treated in isolation; on their own, these indicators may not be indicative of money laundering or other suspicious activity. They should be assessed by reporting entities in combination with what they know about their client and other factors surrounding the transactions to determine if there are reasonable grounds to suspect that a transaction or attempted transaction is related to the commission or attempted commission of a money laundering offence. Several indicators may reveal otherwise unknown links that, taken together, could lead to reasonable grounds to suspect that the transaction is related to the laundering of proceeds derived from human trafficking activities. It is a constellation of factors that strengthen the determination of suspicion. These indicators aim to help reporting entities in their analysis and assessment of suspicious financial transactions.
General contextual and money laundering indicators possibly related to human trafficking for sexual exploitation
FINTRAC found that females were the majority of victims and males were the majority of traffickers in human trafficking for sexual exploitation, based on its analysis of sample transactions related to this crime. This finding is consistent with numerous external sources. With this in mind, some indicators below reference specific genders to help provide context and to potentially characterize individuals' roles within human trafficking. However, anyone can be a trafficking victim - males and other gender identities are victims of this crime too. Additionally, some females may have dual roles as traffickers and victims, or have other functions in human trafficking operations.
Rounded sum purchases at grocery stores and/or other retailers that sell gift cards and/or prepaid credit cards.
Atypical high-value purchases at convenience stores, particularly those that sell gift cards, prepaid credit cards, or offer money transfer services.
Purchases at online merchants that specialize in selling gift cards.
Purchases and/or payments at luxury vehicle dealerships or for limousine services.
Purchases and/or payments at higher-end restaurants.
Purchases and/or payments at higher-end clothing, footwear, or accessories retailers.
Purchases and/or payments at entities offering cosmetic surgery or other medical procedures to enhance one's physical appearance.
Purchases at higher-end nightclubs.
Purchases at jewellery retailers.
Frequent low-value payments for parking.
Frequent purchases for food delivery services, often on the same day. (This may indicate the food is for multiple people or the account is used by multiple people to purchase food.)
Purchases and/or payments to entities associated with jail collect calls.
Frequent transfers to virtual currency exchangers, particularly if these funds were sourced from incoming email money transfers from multiple individuals.
Frequent transfers to individuals who conduct virtual currency exchanges on behalf of third parties, particularly if these funds were sourced from incoming email money transfers from multiple individuals.
Transfers to individuals or entities that advertise their virtual currency services on escort websites.
Frequent purchases and/or payments to online gambling/online casino platforms, particularly if these funds were sourced from incoming email money transfers from multiple individuals.
Frequent funds transferred to a reloadable prepaid credit card, particularly to multiple prepaid cards.
Use of reloadable prepaid cards to do card-to-card transfers. Where one card has no reloads and only receives transfers from another reloadable card user. (For example, a female's reloadable prepaid credit card has no reloads and only receives transfers from another reloadable prepaid card.)
Female's reloadable prepaid credit card is funded by reloads or transfers from a male, usually the same male.
Excessive payments to multiple telephone or internet service providers.
Multiple phone numbers attempting to access a female's bank account.
Location(s) of accommodation bookings correspond to location(s) of cash deposits, particularly when multiple cities are observed in transactions.
Use of automatic banking machine(s) located in or near location(s) of accommodation booking(s), particularly if the transaction(s) occurred following the payment for that accommodation booking(s).
Frequent cash withdrawals from automated banking machines not owned by a financial institution (i.e., white-label ATMs), often located in convenience stores, gas stations, casinos, hotels.
Payments to online third party accommodations- or travel-booking websites.
Transactions involving payment processors associated to escort websites or online gambling.
Personal account received multiple funds transfers from payment processors.
Female's account is primarily funded by transfers from another female and account activities of both females indicate they may be escorts.
Individual received numerous email money transfers with escort-related references from several parties, usually males, followed by outgoing email money transfers to female(s) or male(s) who also received similar email money transfers from other parties. The individual had very few or no other transactions related to escorts or human trafficking. (The individual may be a financial intermediary/nominee in a human trafficking network and may be a collector of human trafficking-related funds.)
Individual or entity received multiple email money transfers referencing the name or partial name of an escort agency/escort services business.
Individual or entity's phone number is associated to an escort agency/escort services business.
Funds deposited to or withdrawn from a casino player's gaming account with limited or no gambling involved.
Funds deposited to or withdrawn from an investment account with limited or no purchases of investments.
Frequent funds transfers to an online investment entity.
Frequent payments of premium fees for online escort advertisements.
An individual is the owner, operator or employee of an entity in an industry that could be used as a venue for human trafficking for sexual purposes (e.g., spa, body-rub centre, strip club, motel, real estate rentals, property management).
An entity is in an industry that could be used as a venue for human trafficking for sexual purposes (e.g., spa, body-rub centre, strip club, motel, real estate rentals, property management).
Use of separate accounts and/or separate credit cards to separate non-human trafficking related transactions from human trafficking-related transactions.
Incoming funds (cash deposits and incoming email money transfers) are immediately transferred to a business account and from the business account, funds are depleted by outgoing email money transfers and cash withdrawals.
Individual frequently transfers funds between business accounts of entities owned by the same individual.
Credit card receives payments from multiple financial institutions followed by cash advances on the credit card.
Excessive and/or large cash advances on a credit card.
Contextual and money laundering indicators possibly related to human trafficking for sexual exploitation out of private residences
Payments, usually monthly, to multiple individuals or entities involved in residential rentals (e.g., landlords, property management, real estate agencies) or that reference rent or specific addresses.
Payments of property taxes to different municipalities.
Payment of utility bill for a utility service provider not servicing the area where the individual or business has an address.
Purchases/payments/or transfers associated to multiple purchases of real estate.
Escort services business/escort agency is associated to a residential address.
Contextual and money laundering indicators possibly related to human trafficking for sexual exploitation out of illicit storefront businesses offering sexual services
Business appears to maintain unusually long and extended business hours into the late night or early morning.
Merchant point-of-sale transactions occur after the establishment's normal business hours.
Storefront business is associated to escort advertisements or escort services websites.
Storefront business or its owner(s) received multiple funds transfers from payment processors, particularly from payment processors associated to escort services or adult entertainment.
Contextual indicators possibly related to trafficking foreign nationals for sexual exploitation
Individual or entity is associated to advertisements recruiting escorts from foreign countries.
Individual or entity is associated to escort advertisements in another country and/or in a foreign language.
Individual or entity is associated to an illicit storefront business offering sexual services in another country.
Individual or entity is associated to an escort agency/escort services business in another country.
Individual or entity is associated to job recruitment advertisements posted in another country.
Escort advertisement, escort agency, or escort services business indicates the escort(s) has had training in a foreign country.
Large and/or multiple international travel-related purchases (e.g., airfare) for self or other individuals to or from jurisdictions that are sources of victims associated with trafficking foreigners in Canada for sexual exploitation (e.g., China, South Korea).
| null |
Contact FINTRAC
|
Reporting to FINTRAC
|
To facilitate FINTRAC's disclosure process, please include the term #Project PROTECT or #PROTECT in Part G-Description of suspicious activity on the Suspicious Transaction Report. See also,Reporting suspicious transactions to FINTRAC.
| null |
Contact FINTRAC
|
Contact FINTRAC
|
Email: guidelines-lignesdirectrices@fintrac-canafe.gc.ca
Telephone: 1-866-346-8722 (toll-free)
Mail: FINTRAC, 24th Floor, 234 Laurier Avenue West, Ottawa ON K1P 1H7, Canada
© Her Majesty the Queen in Right of Canada, 2021.
Cat. No. FD4-13/2021E-PDF
ISBN 978-0-660-39271-4
| null |
Red Flags and Indicators Applicable to Sex Trafficking & Forced Labor
|
In-Person / Behavioral Red Flags
|
Indicators of a potential trafficker: • The potential trafficker could be speaking on behalf of the individual • Insistence on being present for every aspect of engagement • Keeps possession of identification documents or money • Attempts to fill out paperwork or answer questions without consulting the individual • Forms are completed with different handwriting • Claims to be related, but does not know critical details • Provides contradictory explanations over a transaction • Avoids having face to face contact • Unusual in-branch behavior, such as individuals avoiding cashiers, even when there are no queues Indicators of a potential victim of human trafficking: Victims are generally exploited through a variety of means over an extended period of time (i.e., rarely is a victim subject to one instance of sexual exploitation). Therefore, offenders are required to meet the essential needs of the victims throughout the duration of their, generally long-term, exploitation. This care includes basic housing, personal products and nourishment, as well as logistical items so that they may engage in the sexual exploitation such as transportation around a city or larger area, lodging expenses (a flat or hotel) and maintenance of a location for the purpose of commercial sex. The financial transactions for these expenditures may be conducted directly by the victim or by the perpetrator or launderer involved in the human trafficking offense. • The individual shows poor hygiene • There are bruises or other signs of physical abuse • Signs of malnourishment • Signs of confusion • Branding or tattoos • Inability to make eye contact • Appears to be dating a much older individual • The individual reads their personal details from a script • Client makes deposits or withdrawals accompanied or watched by a third party who may, on separate occasions, accompany or watch clients who are making deposits: the third party may be handing over to the client what is subsequently confirmed to be the client’s identification • Behavioral indicators at branch: female customer receiving instructions by phone, or female customer accompanied by another person who interacts on behalf of the custom
| null |
Red Flags and Indicators Applicable to Sex Trafficking & Forced Labor
|
KYC (Know Your Customer) Red Flags
|
The individual does not have a physical address (i.e.: PO Box address) • False identification documents are provided • Inexplicable lifestyle compared to the customer’s profile • The individual’s email address corresponds to online classified ads known to cater to the sex industry • Multiple individuals with the same address with different last names • Common mobile number, address and employment reference being used to open multiple bank accounts in different names • Addition of an unusual number of unrelated individuals as joint account holders, or authorized users of products such as credit cards • Media coverage of account holder’s activities relating to human trafficking in the sex trade and/ or prostitution rings • Use of addresses where prostitution is reported to occur by media, law enforcement, or classified ads • Use of aliases for the purpose of opening multiple accounts in different banks, or in different branches of the same bank • Use of someone else’s identification or opening an account in the name of an unqualified minor • Passports on file that were used to open the multiple customer accounts were temporary and issued in the same month. The same home town could also be listed in the passports. • Use of addresses in known red-light districts or buildings where commercial sex work is known to occur • A high number of individual accounts opened and closed simultaneously • Use of a third party to execute transactions (for example, under the pretext of requiring an interpreter)
| null |
Red Flags and Indicators Applicable to Sex Trafficking & Forced Labor
|
Transactional Red Flags
|
High and/or frequent expenditure at airports, ports, other transport hubs or overseas, inconsistent with customer’s personal use or stated business activity • Income received and immediately withdrawn in cash • Account is funded primarily via cash deposits and funds transfers from other individuals • Payments to logistics, airlines, coach companies, car rental, taxis, Uber, Lyft or travel agents inconsistent with customer’s personal use or stated business activity • Relatively high or recurrent expenditure on items inconsistent with customer’s personal use or stated business activity, such as food, necessities, or accommodation for workers. • Payments to employment or student recruitment agencies that are not licensed/registered or that have labor violations • Accounts of foreign workers or students where the employer or employment agency serves as a custodian • Cash deposits conducted at different cities across the country • Credit card payments for purchases made after the establishments’ normal hours of business (e.g. strip clubs, massage parlors, beauty salons, model agencies) • Deposits conducted in one city followed by same-day or next-day withdrawal and/or purchases conducted in another city • Frequent cash deposits made via an ATM rather than with a cashier, sometimes followed by ATM withdrawals in a different location • Analysis of ATM activity shows that their ATM usage often occurred at the same machine at the same time suggesting that a third party is in control of their cards • Frequent low-value payments to advertisers, classified services involved in the sex industry or to escort agencies • Funds transfers involving third parties with alternative names provided in brackets • Hotel transactions by the same individual for two separate rooms for the same dates • Multiple accounts making repeated transfers to the same third party, or multiple individuals reporting similar information (i.e. address, phone number etc.) • Multiple low value remittances to jurisdictions known to be of a higher risk for HTSE • Outbound international funds transfers directed to countries at higher risk for human trafficking or between two countries/areas on a known trafficking route. • Outbound international wire transfer in an amount commonly associated with a subscription or payment fee (i.e. 9.99 or 29.95) to a jurisdiction of concern for human trafficking, to a company with a name denoting its involvement in the provision of sexual services, or to a company with a name denoting involvement in the video industry between the hours of 10pm – 4am local time • Payments to hotels, serviced apartments and other accommodation inconsistent with customer’s personal use or stated business activity • Personal account activity inconsistent with expectations involving frequent deposits and payments through an online payment service in small amounts typically under USD 100; account funds may then be used for virtual currency deposits/redemptions, or payment of bills, such as personal or third-party credit cards • Recurring payment for transportation or logistics services in the late night or early morning • The use of cash intensive legitimate businesses (bars, restaurants, guest houses, etc.) for apparent daily sustenance • Transactions conducted in an area suspected to be a sex trafficking location (possible ‘hot spot’) • Transactions with classified advertising services involved in the sex industry or to escort agencies • A high percentage of income withdrawn quickly after receipt in the accounts • A property, when looked at on Google Street View, could only comfortably accommodate two or three people at the most, but seems to have more people living there • Lack of living expenses such as food, petrol, utilities and rent (one utility may be set up for the purposes of confirming ID for account opening) • No evidence of payment of taxes or of other payments to a tax authority or other government or regulatory body typically associated with legitimate full-time employment of workers • One-way flight purchase from high-risk country by non-family member • Payment for visa by non-family member • Payments to labor agencies, recruiters or employment websites, especially if those entities are based overseas • Personnel numbers and costs, if known through the provision of information by the entity, is not in line with wages paid out, or what you know of the entity • Repeated (at least weekly) transfers of funds to the same third party (where known), often in round amounts. • Reports or indication of cheap labor or unfair business practices towards an entity. • The customers receive weekly incomes from an agency • Use of an interpreter at account opening or for conducting transactions • Account appears to function as a funnel account • Cash-intensive business with unclear source of cash or capital • Commercial entity’s capital consists of no-term deposits • Cross-border transfers of funds to the same individual, financial institution or to an overseas location that are inconsistent with customers’ personal profile or stated business activity • Customer accounts which display unusual withdrawal patterns, such as lump sum withdrawals • Customer requesting direct payment in a branch, as they have not been receiving their wages • Customer’s accounts display unusual deposit or withdrawal patterns, in other regions and overseas • Deposits and/or other transactions inconsistent with what could be reasonably expected for the customer’s personal profile and/or stated occupation • Deposits much larger than are usual or reasonably expected for the customer’s personal profile and/or stated occupation • Frequent low-value/below threshold cash deposits in low-denomination bank notes • Funds transfers received from or to the benefit of unrelated third parties • Inability to contact client at their reported phone number, or the phone number changes very frequently • Income received and immediately withdrawn in cash • Incurring and payment of credit facilities or credit card charges not commensurate with the client’s confirmed wealth • Large cash deposits into an account quickly followed by electronic funds transfers, bank draft pur chases and/or the issuance of checks • Large cash or checks deposits followed by domestic wire transfers or cash withdrawals • Loans provided by a shareholder to the related legal person and subsequent transfer back of funds • Media or other reliable sources suggest that a client may be linked to criminal activity which could generate proceeds of crime. Multiple deposits from varying geographies and apparent different individuals, consistent with smurfing • Numerous personal checks deposited into business accounts for no apparent purpose • Numerous transfers into business accounts from personal accounts • Profits or deposits much larger than are usual or reasonably expected for the customer’s size or type of business, or where financial turnover is incommensurate with the commercial turnover usual for a business of that size or type • Purchase of commodities in manners inconsistent with normal business practice • Rapid transfers of funds through accounts • Small irregular payments from the same account • Structuring via commercial entities and transfer of money using loan contracts • Transactions with apparent front, shell or shelf companies • Use of a third party, with no apparent relationship to client, to conduct financial transactions • Use of third-party accounts • Transfers to or From Robinhood or Square Cash, which provide cryptocurrency purchases and withdrawals • Numerous purchases on flight, bus, or hotel websites • Additionally, debit or credit card purchases at hotel bars • Inconsistent retail purchases such as consistent female clothing or lingerie purchases by a male customer • Late-night cash deposits with no known professional reason (i.e waiter, bartender, etc.) • Large purchases of VISA gift cards or large debit card purchases at convenience stores • High frequency or large transactions at pharmacies (Shoppers Drug Mart, Walgreens) • Cash deposits made at different branches by various individuals to the same account • A large number of transactions at or near casinos • A large number of transactions at truck stops with no known professional reason • Cash deposits occurring in numerous states into bank account
| null |
Red Flags and Indicators Applicable to Sex Trafficking & Forced Labor
|
Red Flags For Traditional Financial Institutions
|
Although this document is intended to identify known red flags related cryptocurrency transactions, as traditional financial institutions are seeing more crypto-related transactions occur in their customer’s accounts, please note the presence of cryptocurrency transactions (typically consistent small transfers on a schedule to exchanges or large transfers from exchanges with no known purchase of crypto as an investment) in addition to the red flags below may indicate a need for further investigation. • Transfers to or From Robinhood or Square Cash, which provide cryptocurrency purchases and withdrawals • Numerous purchases on flight, bus, or hotel websites • Debit or credit card purchases at hotel bars • Inconsistent retail purchases such as consistent female clothing or lingerie purchases by a male customer • Inconsistencies between customer information and account activity • Late-night cash deposits with no known professional reason (i.e waiter, bartender, etc.) • Large purchases of VISA gift cards or large debit card purchases at convenience stores • High frequency or large transactions at pharmacies (Shoppers Drug Mart, Walgreens) • High frequency of uber, Lyft, or taxi transactions • Cash deposits made at different branches by various individuals to the same account • Behavioral indicators at branch: female customer receiving instructions by phone, or female customer accompanied by another person who interacts on behalf of the customer • A large number of transactions at or near casinos • A large number of transactions at truck stops with no known professional reason • Cash deposits occurring in numerous states into bank account • Large cash deposits followed by cash withdrawals at ATMs or other branches
| null |
Red Flags and Indicators Applicable to Sex Trafficking & Forced Labor
|
Red Flags Specific to Cryptocurrency Exchange
|
The following are indicators/red flags to help detect potential money laundering on cryptocurrency exchange platforms. Human trafficking is one of the most profitable crimes in the world, often a predicate crime to money laundering. Below points are useful to consider in investigating financial flows related to human trafficking. • Funds deposited from or withdrawn to cryptocurrency address with links to known suspicious sources: Darknet Marketplaces or Wallets known to be involved in illegal activities and/or theft reports • Significant exposure to clusters identified as Mixing Services • Deposit and withdrawal of funds in the same currency without utilizing cryptocurrency exchange platform services (i.e., trading, margin funding); or quick trades conducted by the client that make no economic sense • Account is abandoned with a balance once supporting documents are requested from the client • Client fails to provide information or documentation regarding source of funds and/or destination of funds • Misleading or inaccurate information are provided regarding source of funds and/or destination of funds • High number of deposit addresses generated by the user (user generates single user deposit addresses to avoid being traced) • Frequent requests to change email address on profile or 2FA rests • Identification documents provided do not align with the account activity or other details of the profile (e.g employment, age, net worth, location & IP) • Use of anonymizing features/tools such as privacy coins, privacy-centric email service provider (e.g., protonmail), and/or Virtual Private Network (VPN) • Frequent deposits from gambling sites/cryptocurrency addresses followed by immediate withdrawals • Change in pattern of client’s transactions (significant increase in deposits without using the plat form’s intended features such as trading). Negative media or Open Source Research reveals that User is believed to be involved in illicit activity • Open source search for the cryptocurrency address linked to the customer generates reviews, comments or chat conversations discussing escort related services or has sexual content • User requests to delete information/data • User threatens to take legal action/makes threats to the exchange/service provider • User is impatient and tries to rush the information request from the exchange • Account appears to be operated by a male individual based on signature on email communications, email address or other indicators, while ID documents for a female is provided • Potential stolen, false or fake ID/selfie is provided. The photo identification and/or selfie appear to belong to an individual in poor socioeconomic condition which may not align with the value of the account
| null |
Red Flags and Indicators Applicable to Sex Trafficking & Forced Labor
|
Red Flags For Bitcoin Point of Sale Companies
|
The following section represents red flags that are known to be associated with human trafficking that may be seen by compliance employees at a Bitcoin point of sale company (i.e BTMs). Although, often BTM companies only exchange FIAT and cryptocurrency, with no remittance services provided, the transaction patterns and visual red flags below, in tandem with comparison to known customer information and information on the general transaction patterns of the company’s customers, may indicate a need for further investigation. Please note, as BTMs are often in locations that provide other money services (i.e MoneyGram, check cashing, etc) and often have tellers or employees that interact with customers. Due to this, a portion of the red flags below are not associated with the transaction itself and may be identified by employees in the store. • Numerous small-dollar transactions • Transactions may be made on a schedule (typically weekly or monthly) between $20-$100 may suggest payment for ads on adult classified sites • Transactions made late at night without a professional reason for late night transactions • Bartenders, waiters, caterers, etc., often receive cash payments late at night and, therefore, purchases at BTMs may occur after their late night shift • A female in the security camera making the transaction with a male in the footage with her • Female may be dressed in provocative clothing • Transactions that are immediately converted to a different cryptocurrency using shapeshift or a similar service • Customer repeatedly makes new accounts or profiles using VOIP or disposable phone numbers • Customer funds bitcoin purchases using funds from MoneyGram, Western Union, or Ria • Customer sells bitcoin and blockchain forensics tool shows that funding wallet was used as a concentration wallet (i.e received numerous remittances from different exchanges and wallets) • Numerous customers, in different locations, send BTC to the same wallet • Numerous customers, sometimes in different locations, attempt to use the same profile to purchase BTC Credit: FinCEN Advisory, Guidance on Recognizing Activity that May be Associated with Human Smuggling and Human Trafficking – Financial Red Flags, September 11, 2014
| null |
FINTRAC's compliance guidance
|
Reporting suspicious transactions to FINTRAC
|
This guidance explains the requirement to report suspicious transactions to FINTRAC.
Note:
Throughout this guidance, references to dollar amounts (such as $10,000) are in Canadian dollars unless otherwise specified.
All references to transactions should be read to include both attempted transactions and completed transactions.
All references to the commission of a money laundering or terrorist activity financing offence also include the attempted commission of a money laundering or terrorist activity financing offence.
The examples and scenarios in this guidance are meant to help explain reporting requirements.
The details used in these examples and scenarios such as names of persons, names of entities, addresses, phone numbers and email addresses are fictitious.
| null |
FINTRAC's compliance guidance
|
FINTRAC REPORTING 1. Who must comply
|
All reporting entities and their employees must report suspicious transactions.
If you are a person who is an employee of a reporting entity and your employer is actively reporting suspicious transactions, we do not require duplicate reporting. An employee is only expected to report suspicious transactions to FINTRAC in the rare instances where they believe that their employer has not submitted a Suspicious Transaction Report as required by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) and associated Regulations. To submit a Suspicious Transaction Report in this scenario, the employee may use the paper report form as explained in section 4 below.
A service provider can submit and correct a Suspicious Transaction Report on your behalf. However, as the reporting entity, you are ultimately responsible for meeting the requirements under the Act and associated Regulations, even if a service provider is reporting on your behalf. This legal responsibility cannot be delegated.
No person or entity will be prosecuted for sending a Suspicious Transaction Report in good faith or for providing FINTRAC with information about suspicions of money laundering or terrorist financing.
| null |
FINTRAC's compliance guidance
|
FINTRAC REPORTING 2. What is a Suspicious Transaction Report
|
A suspicious transaction report is a type of report that you must submit to FINTRAC when a financial transaction occurs, or is attempted, in the course of your activities and there are reasonable grounds to suspect that the transaction is related to the commission or the attempted commission of a money laundering or terrorist activity financing offence.
Note: You are not allowed to inform anyone, including the client, of the contents of a Suspicious Transaction Report, or that you have made or will make such a report, if the intent is to prejudice a criminal investigation. This applies whether such an investigation has begun or not. It is important to not tip off your client about the fact that you are filing a Suspicious Transaction Report—therefore, you should not be requesting information that you would not normally request during a transaction if you believe this would tip off the client.
It is recommended that this guidance be read in conjunction with the following indicators, characteristics and guidance:
Suspicious Transaction Indicators
Report suspected sanctions evasion
The Suspicious Transaction Report is one of the most valuable and unique report types submitted to FINTRAC. In addition to the prescribed information, Suspicious Transaction Reports allow you to expand the descriptive details surrounding a transaction that is derived from your assessment of what you are seeing through your business interactions and activities.
FINTRAC uses the following types of information in its analysis and production of financial disclosures:
aliases
nicknames
other names and initials
beneficial ownership information
IP addresses
account numbers
email addresses
virtual currency transaction addresses and their details
email money transfers (EMTs)
mobile money transfers
details of purchases
locations
relationships
background information
Because of the importance of FINTRAC's financial intelligence to the overall safety and security of Canadians and Canada's financial system, FINTRAC reviews and assesses every Suspicious Transaction Report it receives. When warranted, such as in the case of Suspicious Transaction Reports related to threats to the security of Canada, FINTRAC expedites its analysis in order to disclose financial intelligence to law enforcement and other intelligence partners within 24 hours.
| null |
FINTRAC's compliance guidance
|
FINTRAC REPORTING 3. What are reasonable grounds to suspect
|
Reasonable grounds to suspect is the required threshold to submit a Suspicious Transaction Report to FINTRAC and is a step above simple suspicion, meaning that there is a possibility that a money laundering or terrorist activity financing offence has occurred.
You do not have to verify the facts, context or money laundering or terrorist activity financing indicators that led to your suspicion, nor do you have to prove that a money laundering or terrorist activity financing offence has occurred in order to reach this threshold. Your suspicion must be reasonable and therefore, not biased or prejudiced.
Reaching this threshold means that you considered:
the facts
the context
the money laundering or terrorist activity financing indicators
the sanctions evasion characteristics related to a financial transaction
After having reviewed this information, you concluded that there are reasonable grounds to suspect that this particular financial transaction is related to the commission of a money laundering or terrorist activity financing offence. It also means that you are able to demonstrate and articulate your suspicion of money laundering or terrorist activity financing in such a way that another individual with similar knowledge, experience, or training would likely reach the same conclusion based on a review of the same information.
Many factors will support your assessment and conclusion that a money laundering or terrorist activity financing offence has possibly occurred. These factors, along with an explanation of your assessment, should be included in the narrative section of the Suspicious Transaction Report, specifically, the Details of suspicion section.
The reasonable grounds to suspect threshold may be better understood when you have an understanding of other thresholds:
simple suspicion
reasonable grounds to believe
Simple suspicion is a lower threshold than reasonable grounds to suspect and is synonymous with a "gut feeling" or "hunch". In other words, simple suspicion means that you have a feeling that something is unusual or suspicious, but do not have any facts, context or money laundering or terrorist activity financing indicators to support that feeling or to reasonably conclude that a money laundering or terrorist activity financing offence has occurred. Simple suspicion could prompt you to assess related transactions to see if there is any additional information that would support or confirm your suspicion.
Reasonable grounds to believe is a higher threshold than reasonable grounds to suspect and is beyond what is required to submit a Suspicious Transaction Report. Reasonable grounds to believe means that there are verified facts that support the probability that a money laundering or terrorist activity financing offence has occurred. In other words, there is enough evidence to support a reasonable and trained person to believe, not just suspect, that a money laundering or terrorist activity financing offence has occurred. For example, law enforcement must reach reasonable grounds to believe that criminal activity has occurred before they can obtain judicial authorizations, such as a production order.
If you are in receipt of a production order from law enforcement related to a predicate offence, you must perform an assessment of the facts, context, and money laundering or terrorist activity financing indicators to determine whether you have reasonable grounds to suspect that a particular transaction is related to the commission of a money laundering or terrorist activity financing offence.
| null |
FINTRAC's compliance guidance
|
FINTRAC REPORTING 4. When to submit a Suspicious Transaction Report
|
You must submit the Suspicious Transaction Report to FINTRAC as soon as practicable after you have completed measures that enable you to establish that there are reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering or terrorist activity financing offence.
Note: There is no monetary threshold associated with the reporting of a suspicious transaction.
Measures you can take to establish the reasonable grounds to suspect threshold
The measures you can take to establish that there are reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering or terrorist activity financing offence include the following:
screening for and identifying suspicious transactions
assessing the facts and context surrounding the suspicious transaction
linking money laundering or terrorist activity financing indicators to your assessment of the facts and context
explaining your grounds for suspicion in a Suspicious Transaction Report, where you articulate how the facts, context and money laundering and terrorist activity financing indicators allowed you to reach your grounds for suspicion
Your measures must be described in your compliance policies and procedures.
What is a fact
A fact, for the purpose of completing a suspicious Transaction Report, is defined as an event, action, occurrence or element that exists or is known to have happened or existed. It cannot be an opinion.
For example:
Facts about a transaction could include the date, time, location, amount or type.
Facts known to a reporting entity could include account details, particular business lines, a client's financial history or information about a person or entity (for example, that the person has been convicted of a designated offence or is the subject of a production order, or that an entity is being investigated for fraud or any other indictable offence).
What is context
Context, for the purpose of completing a Suspicious Transaction Report, is defined as information that clarifies the circumstances or explains a situation or transaction. This type of information is essential to differentiate between what may be suspicious and what may be reasonable in a given scenario.
You may observe or understand the context of a transaction through:
a general awareness of the events occurring in a person or entity's business environment or community
your knowledge of the typical financial activities found within your business
regular know your client activities (for example, verifying the identity of persons and entities, their occupation or business, how they generate their wealth, their typical or expected transactional behaviours)
the information obtained through the application of your risk assessment
illustrative client details (for example, the financial background, behaviour and actions of your client)
A transaction may not appear suspicious in and of itself. However, a review of additional contextual elements surrounding the transaction may create suspicion. Conversely, the context of a particular transaction, which may have seemed unusual or suspicious from the onset, could lead you to reassess your client's current and past transactions and conclude that they are reasonable in that circumstance.
Your suspicion of money laundering or terrorist activity financing will likely materialize from your assessment of multiple elements (transactions, facts, context, and any other related information that may or may not be an indicator of money laundering or terrorist activity financing. When these elements are viewed together, they create a picture that will either support or negate your suspicion of the commission of a money laundering or terrorist activity financing offence.
What is a money laundering or terrorist activity financing indicator, or sanctions evasion characteristic
Money laundering and terrorist activity financing indicators, and sanctions evasion characteristics are potential red flags that can initiate suspicion and indicate that something may be unusual without a reasonable explanation. Red flags typically stem from one or more facts, behaviours, patterns or other contextual factors that identify irregularities related to a client's transactions. These often present inconsistencies with what is expected or considered normal based on the facts and context you know about your client and their transactional activities.
Criminal organizations often try to avoid the detection of money laundering or terrorist activity financing by using multiple concealment methods. Indicators of money laundering and terrorist activity financing can bring to light suspicious transactional activity, but it is your holistic assessment of facts, context and money laundering and terrorist activity financing indicators that will enable you to determine whether you have reached reasonable grounds to suspect that a transaction is related to the commission of a money laundering or terrorist activity financing offence. Indicators are also helpful to articulate your rationale for reaching the reasonable grounds to suspect threshold in a Suspicious Transaction Report. The explanation of how you reached your grounds for suspicion is extremely important for FINTRAC's development and disclosure of financial intelligence.
For more information and examples of money laundering and terrorist activity financing indicators applicable to your business sector:
Consult money laundering and terrorist financing indicators under All FINTRAC guidance – Transaction reporting
FINTRAC also publishes strategic intelligence products (for example, operational alerts and briefs) that focus on the identification of money laundering or terrorist activity financing related methods, techniques, and vulnerabilities
For information on the characteristics of financial transactions related to suspected sanctions evasion, consult FINTRAC’s Special Bulletin on financial activity associated with suspected sanctions evasion.
What is "as soon as practicable"
As soon as practicable means that you have completed the measures that have allowed you to determine that you reached the reasonable grounds to suspect threshold and as such the development and submission of that Suspicious Transaction Report must be treated as a priority. The greater the delay to submit a Suspicious Transaction Report, the greater the need for a suitable explanation. Suspicious Transaction Reports can be complex, yet you must treat them as a priority and ensure they are timely. You must also complete the measures that allowed you to conclude that you have reasonable grounds to suspect the transaction is related to the commission of a money laundering or terrorist activity financing offence before you submit the report to FINTRAC.
Failure to submit a Suspicious Transaction Report, or not submitting one in a timely manner, may impede FINTRAC's ability to carry out its mandate. FINTRAC expects that when you have completed your measures and determined that you have reasonable grounds to suspect that a transaction is related to the commission of a money laundering or terrorist activity financing offence, you will prioritize the submission of that Suspicious Transaction Report.
Note: In situations involving time-sensitive information, such as suspected terrorist financing and threats to national security, you are encouraged, as a best practice, to expedite the submission of your Suspicious Transaction Reports. We recommend that this be included in your compliance policies and procedures.
| null |
FINTRAC's compliance guidance
|
FINTRAC REPORTING 5. How to submit a report to FINTRAC
|
You must submit a suspicious transaction report to FINTRAC electronically using the following options:
FINTRAC Web Reporting System (FWR) (geared towards reporting entities with lower reporting volumes)
FINTRAC API report submission (secure system-to-system transfer of report information)
Paper reporting
If you do not have the technical capability to submit reports electronically, you must submit reports in paper form to FINTRAC. You can access and print the Suspicious Transaction Report in paper form on the Paper reporting forms web page, or request to have one faxed or mailed to you by calling 1-866-346-8722.
You can submit a Suspicious Transaction Report in paper form to FINTRAC either by:
Fax: 1-866-226-2346
Mail:Financial Transactions and Reports Analysis Centre of Canada
Section A
234 Laurier Avenue West, 24th floor
Ottawa, ON K1P 1H7
Canada
Note: There is no official acknowledgement of receipt when you submit a paper form to FINTRAC.
Changes to a Suspicious Transaction Report
Once you have submitted a Suspicious Transaction Report, it is possible to modify the report, for instance to add missing information or make corrections, but you must provide an explanation for the change.
If you submitted a Suspicious Transaction Report to FINTRAC and need to make a subsequent change to the report, you must make the change and submit the revised report to FINTRAC within 20 days of the date in which you made the request for change, based on system requirements
| null |
FINTRAC's compliance guidance
|
FINTRAC REPORTING 6. The form for reporting suspicious transactions
|
Form structure
The form for reporting suspicious transactions has 6 sections:
General information
Transaction information
Starting action
Completing action
Details of suspicion
Action taken
Structure of the Suspicious Transaction Report form: Main sections and types of information for each section
Main sections of the form
Type of information for each section
General information
Reporting entity report reference number
Information about your business including contact details
Ministerial Directives
Transaction information
Transaction status (completed or attempted)
Reason transaction was not completed (if applicable)
Date and time of transaction
Method of transaction
Location where transaction was conducted or attempted
Purpose of the transaction
Reporting entity transaction reference number
Starting action
Direction of starting action (in or out)
Amount and type of funds, assets or virtual currency (in or out)
Currency or virtual currency type
Information about the source of funds, assets or virtual currency
Virtual currency address reference and/or account information
Information about how the funds or virtual currency were obtained
Conductor (person or entity that conducted or attempted the transaction and their associated information)
Third party (person or entity on whose behalf the transaction is conducted or attempted and their associated information)
Completing action
Details of disposition
Amount and currency or virtual currency type
Virtual currency address, reference and/or account information
Any other person or entity involved in the completing action and their associated information
Beneficiary (any person or entity that was the beneficiary of the transaction and their associated information)
Details of suspicion
This is a free form text section where you can describe in clear, simple and concise language your grounds for suspicion of a money laundering, terrorist activity financing or sanctions evasion offence including the facts, context, and indicators that allowed you to reach reasonable grounds for suspicion.
In this section, you can indicate:
whether the suspicious activity is related to a money laundering, terrorist activity financing or sanctions evasion offence.
the public-private partnership project name(s)
whether the report includes information about an individual who has been determined to be a politically exposed person
Report reference numbers of previously submitted reports that may relate to the suspicious activity mention in this report
Action taken
This is a free form text section where you can describe what action, if any, was or will be taken as a result of the suspicious transaction(s)
Form highlights
The structure of the form allows you to include 1 or more transactions in a report.
When entering multiple transactions into a report, you can enter transactions that have:
the same or different transaction status (for example, a report can include completed transactions and attempted transactions), and
have taken place at the same or different locations
For each completed or attempted transaction, you must provide all of these details:
information obtained about that transaction
the details of suspicion
the action you have taken in the fields provided in the Suspicious Transaction Report
For example, if you know or obtained the following information, you must provide it in the Suspicious Transaction Report:
name of the person or entity who completed or attempted to complete the transaction
type and amount of funds, assets or virtual currency involved in the completed transaction or attempted transaction
how the funds, assets or virtual currency were used (details of disposition) for a completed transaction or going to be used in an attempted transaction
whether the person or entity who conducted or attempted the transaction did so on anyone else's behalf
account details of an account involved in a completed transaction or was going to be involved in an attempted transaction
For a completed transaction, there should be at least 1 starting action and 1 completing action.
You must also provide the name of the beneficiary to the transaction if you know or obtained this information.
For instance, if this transaction had also been submitted to FINTRAC in a different report (LVCTR, LCTR, EFTR, CDR), you may have obtained beneficiary name at that time.
A transaction can have multiple starting actions and/or completing actions—depending on the client's instructions.
Within each starting action, you can include multiple conductors, account holders, sources of funds or virtual currency, and third parties.
If the conductor or third party is an entity, you can also include information about the entity's director(s), beneficial owner(s), trustee(s), settlor(s), and beneficiary(s) as applicable.
Within each completing action, you can include multiple account holders, beneficiaries and other persons or entities involved in the completing action.
For each starting action, you will need to indicate the direction of the funds, asset or virtual currency used to start the transaction as either in or out.
The direction of the starting action is in when a client physically brings in or electronically transfers in funds, assets or virtual currency to your business to start a transaction.
The direction of the starting action is out when your client requests to start a transaction with client funds, assets or virtual currency already held by or deposited at your business.
For example:
The direction of the starting action is in, if a client brings cash to your business to purchase a bank draft.
The direction of the funds is out for the starting action, if a client does not bring in any funds but requests to purchase a bank draft with the client's funds already held by or deposited at your business.
Important information about the number of transactions, starting actions and completing actions in a report
You must complete the General Information section of the report and provide information for each transaction.
Every transaction must have at least:
1 starting action, and
1 completing action (if available)
A report can have multiple transactions and within each transaction, you can include multiple starting and completing actions.
When completing the report, you must ensure that the information you provide reflects your client's instructions and is consistent with your policies and procedures.
| null |
FINTRAC's compliance guidance
|
FINTRAC REPORTING 7. Other requirements associated with suspicious transactions
|
Compliance program
Your compliance policies and procedures must outline your process and criteria on:
how you identify and assess Suspicious Transactions Reports
submitting reports to FINTRAC
If you have an automated or triggering system in place to detect suspicious transactions, a person may still assess the transaction(s), as a best practice, to determine whether there are reasonable grounds to suspect that a transaction is related to the commission of a money laundering or terrorist activity financing offence, and to ensure that, in these cases, the submission of a Suspicious Transaction Report.
Your compliance program must also include training on suspected money laundering and terrorist financing activities in relation to your business.
You must also assess the effectiveness of your compliance program as a part of your two-year effectiveness review. This includes assessing how effective you are in detecting, assessing and submitting Suspicious Transaction Reports. The following are examples of how this can be done:
Review previously submitted Suspicious Transaction Reports to ensure that you are consistent in the detection, assessment and submission of these reports.
If certain money laundering or terrorist activity financing indicators have supported your suspicions of money laundering or terrorist activity financing, you can assess whether these indicators apply to other situations to ensure that you are not missing suspicious transactions that should be or should have been reported to FINTRAC. This approach can help you build consistency within your organization.
Work with others in your business sector to learn how they are detecting, assessing and reaching the reasonable grounds to suspect threshold and to establish common ideas of what could be considered unusual or suspicious.
For more information, consult FINTRAC's strategic intelligence products:
Strategic intelligence
Review a sample of your Suspicious Transaction Reports to assess the timeliness of your reporting of suspicious transactions.
Specifically, you can review your business processes to ensure that you are submitting Suspicious Transaction Reports to FINTRAC as soon as practicable after you have completed measures that enable you to determine that there are reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering or terrorist activity financing offence.
Review a sample of your Suspicious Transaction Reports to assess the quality of information reported.
This can include reviewing the integrity and consistency of know your client information held by your business and ensuring that all know your client information was included in the Suspicious Transaction Reports.
For more information:
Compliance program requirements
Large cash transactions
If the suspicious transaction involves a reportable large cash transaction, then you must submit a Large Cash Transaction Reports to FINTRAC in addition to a Suspicious Transaction Report.
For more information:
Reporting large cash transactions to FINTRAC
Electronic funds transfers
If the suspicious transaction involved a reportable electronic funds transfer, then you must submit an Electronic Funds Transfer Report to FINTRAC in addition to a Suspicious Transaction Report.
For more information:
Reporting electronic funds transfers to FINTRAC
Large virtual currency transactions
If the suspicious transaction involved a reportable large virtual currency transaction, then you must submit a Large Virtual Currency Transaction Report to FINTRAC in addition to a Suspicious Transaction Report.
For more information:
Reporting large virtual currency transactions to FINTRAC
Casino disbursements
If the suspicious transaction involved a reportable casino disbursement, then you must submit a Casino Disbursement Report to FINTRAC in addition to a Suspicious Transaction Report.
For more information:
Reporting casino disbursements to FINTRAC
Listed person or entity property
In addition to reporting a suspicious transaction, you may also be required to submit a Listed Person or Entity Property Report to FINTRAC if a transaction was attempted or completed, and it involved property that is owned or controlled by or on behalf of a terrorist group, listed person or listed entity.
For more information:
Reporting listed person or entity property to FINTRAC
Record keeping requirements
When you submit a Suspicious Transaction Report to FINTRAC, you must keep a copy of it for at least 5 years after the day the report is sent.
For more information:
Consult your sector-specific guidance under All FINTRAC guidance – Record Keeping
Verifying the identity of persons and entities
You are required to take reasonable measures to verify the identity of every person or entity that conducts or attempts to conduct a suspicious transaction. This means that you are expected to ask the client for this information unless you think doing so will tip them off to your suspicion.
For more information:
Methods to verify the identify of the persons and entities
Consult your sector-specific guidance on when to verify the identity of persons and entities under All FINTRAC guidance- Knowing your client
Third party determination
There are requirements to determine whether a person or entity is acting on behalf of another person or entity for a financial activity or transaction.
For more information:
Third party determination requirements
Ministerial directives
You must consider all requirements issued under a ministerial directive along with your suspicious transaction reporting requirements.
For more information:
Ministerial directives and transaction restrictions
Reporting non-compliance voluntarily
If you discover instances of non-compliance related to your suspicious transaction reporting requirements, FINTRAC strongly encourages you to report a voluntary self-declaration of non-compliance.
For more information:
Voluntary self-declaration of non-compliance
| null |
FINTRAC's compliance guidance
|
FINTRAC REPORTING 8. Reporting subsequent suspicious transactions
|
Once you have reached the reasonable grounds to suspect threshold, you must submit a Suspicious Transaction Report. If there are subsequent transactions, you must keep reporting the transactions as long as the suspicion remains.
You are expected to periodically re-assess the client to verify that the level of suspicion has not changed. This process may be part of your documented risk assessment or ongoing monitoring.
If you continue to report Suspicious Transaction Reports on the same person or entity, you can reference a previous Suspicious Transaction Report in the Related Report(s) section by providing all of the following information:
the reporting entity report reference number and the reporting entity transaction reference number
the reasonable grounds to suspect (facts, context and money laundering and terrorist financing indicators) that were included in the first Suspicious Transaction Report submission
any new additional information
If you are reporting Suspicious Transaction Reports due to new facts, context, or money laundering or terrorist activity financing indicators revealed during your assessment of the client, you are expected to detail this new information in the Suspicious Transaction Reports.
For example, through the course of your assessment, you may have identified new money laundering or terrorist activity financing indicators, or new people or entities transacting with your client. You may choose to include that information under a separate heading in the Details of suspicion section of the Suspicious Transaction Report so that it is properly labeled as new information.
| null |
FINTRAC's compliance guidance
|
FINTRAC REPORTING 9. FINTRAC's expectations for completing a Suspicious Transaction Report
|
It is your responsibility to ensure that the information provided in a Suspicious Transaction Report is complete and accurate. It is also important that you submit comprehensive and high quality Suspicious Transaction Report to facilitate FINTRAC's analysis process and disclosure to recipients.
In the narrative sections of the Suspicious Transaction Report: Details of suspicion and Action taken, it is important to avoid jargon or non-public references, such as terms and acronyms that are specific to your organization. Please use clear, simple and concise language so that an outsider can easily understand the information that you provide.
A variety of information is often collected as part of an assessment to determine if you are required to submit a Suspicious Transaction Report and this information is valuable to include in your report to FINTRAC.
A well-completed Suspicious Transaction Report should consider the following questions:
Who are the parties to the transaction?
Provide information on:
conductor(s)
third party(ies)
beneficiary(ies)
account holder(s)
source(s) of funds or virtual currency
any other person or entity involved in the transaction(s)
Provide identifying information on the parties involved in the transaction. This could include the information you recorded to identify the conductor, as well as any information you have on the other parties to the transaction or its recipients. See the Annexes of the Methods to verify the identity of persons and entities for a summary of information that must be recorded when verifying identity.
When possible, provide information on:
owner(s)
director(s)
officer(s)
trustee(s)
settlor(s)
those with signing authority
If the transaction involves an entity, you can include information on the ownership, control and structure of the business in the Suspicious Transaction Report.
Provide clear information about each person or entity's role in each of the financial transactions described. For example, it is important to know who is sending and receiving the funds and this can be elaborated in the Details of suspicion section of the Suspicious Transaction Report.
Provide the relationships between the parties (if known). This is very helpful to FINTRAC when trying to establish networks of persons or entities suspected of being involved in the commission or attempted commission of a money laundering, terrorist activity financing or sanctions evasion offence.
When was the transaction completed/attempted? If it was not completed, why not?
Provide the facts, context and money laundering and terrorist activity financing indicators, or sanctions evasion characteristics regarding the transaction
What are the financial instruments or mechanisms used to conduct the transaction?
Where did this transaction take place?
Why are the transaction(s) or attempted transaction(s) related to the commission or attempted commission of a money laundering, terrorist activity financing or sanctions evasion offence?
State the money laundering or terrorist activity financing indicators, or sanctions evasion characteristics used to support your suspicion.
State the suspected criminal offence related to money laundering, terrorist activity financing or sanctions evasion, if known.
How did the transaction take place?
Transactions and their details must be entered in the appropriate structured fields of the form.
Transactions may be referenced in the narrative section if there are additional facts or context.
Examples of structured fields where you can enter information include the following:
a person's alias
electronic transfers (such as email money transfers (EMTs) or wire transfers) including IP addresses and sender/recipient email addresses
location of automated teller machine (ATM) withdrawals
the ownership, control and structure of an entity
the source of funds or virtual currency
any related and previously submitted Suspicious Transaction Report report reference numbers and transaction reference numbers
credit card activity including details of purchases (dates, amounts, retailer (online or in-store) and details of payments (dates, amounts, conductor and source of payment)
If there are transaction details for which there is no structured field for this information, you can include this information in the narrative section of the Suspicious Transaction Report.
Information provided in the narrative section of the Suspicious Transaction Report can contribute greatly to FINTRAC's analysis. This includes the following types of information:
the history the client has with you
links made to other people, businesses and accounts
information on the ownership, control and structure of an entity that is not already captured in the fields provided in the Suspicious Transaction Report form, particularly for any business entities that have a complex structure
the intended or expected use of an account versus the activity you may have observed
any other information about your interactions with the client
relationships between parties to the transaction
the money laundering or terrorist activity financing indicators or factors that assisted in forming the basis of your suspicion
any information, including publicly available information and/or information from law enforcement, that made you suspect that the transaction might be related to terrorist financing, money laundering, or both
the location where a transaction was conducted, when this location does not belong to your business—for example, the location of a white label ATM that you do not own
information on any politically exposed persons, including their names, role and involvement in the transactions being reported
any details surrounding why an attempted transaction was not completed
any context or clarification about the information that was reported in the structured sections
If there are multiple details for a field, provide the detail that is specific to the transaction.
This may occur for some fields such as the following:
email address
telephone number
URL
Username
Device identifier number
Internet protocol address
For example:
Your client Billy Bird has three email addresses (Sky@example.ca, Sky22@example.ca and BlueSky@example.ca.); and sends email money transfers (EMTs) to Oscar Ocean who is also your client. Oscar has two email addresses (Starfish@example.ca and Whaleshark@example.ca).
A recipient, who is not your client, has the email address, FastCar@example.ca and goes by an alias name, "Smitty".
The email addresses that you report in a Suspicious Transaction Report will depend on the transaction details.
The table below provides some transaction details and the expected email address that should be reported.
Transaction details
Email address to be reported in the Suspicious Transaction Report
Billy Bird sends an outgoing email money transfer (EMT) for $500 using Sky@example.ca to Oscar Ocean at Starfish@example.ca
Sky@example.ca (conductor email address field)
Starfish@example.ca (beneficiary email address field).
Billy Bird sends an outgoing email money transfer (EMT) for $900 using Sky22@example.ca to Oscar Ocean at Whaleshark@example.ca.
Sky22@example.ca (conductor email address field)
Whaleshark@example.ca (beneficiary email address field).
Billy Bird sends an outgoing email money transfer (EMT) for $1,000 using Sky22@example.ca to "Smitty" at FastCar@example.ca
Sky22@example.ca (conductor email address field)
FastCar@example.ca (beneficiary email address field).
Any additional email addresses that you have on your client (and were not related to a specific transaction) can be reported in the Details of suspicion section of the Suspicious Transaction Report. In the example above, you can explain in this section that your client, Billy Bird, has a third email address (BlueSky@example.ca) that was not used in these transactions.
Note: If your client (conductor) is not sending an email money transfer (EMT), you should still report the client's email address that you have on file in the conductor email address field. If your client has more than one email address, the additional email addresses can be provided in the narrative section of the Suspicious Transaction Report (Details of suspicion).
FINTRAC has been able to identify networks of suspected money launderers and terrorist financiers through pieces of information such as email addresses and secondary identifiers (nicknames) or phone numbers. This type of information may seem insignificant but can be very important to FINTRAC, as it may identify connections among persons, entities or crimes when compared against other FINTRAC intelligence.
The Suspicious Transaction Report structure is intended to encourage reporting even in situations where you may not have information because the client did not provide any or asking for details might "tip off" the client to your suspicions. It is FINTRAC's expectation that if you have the information within your organization, that it be reported.
| null |
FINTRAC's compliance guidance
|
FINTRAC REPORTING 10. Common Suspicious Transaction Report deficiencies to avoid
|
The following are examples of deficiencies that FINTRAC has identified through its assessments and other compliance activities. FINTRAC is sharing these examples to illustrate common errors that you can avoid.
Using a higher threshold as your basis for reporting
You are required to submit a Suspicious Transaction Report when you have completed the measures that enable you to establish that there are reasonable grounds to suspect that a transaction is related to the commission of a money laundering or terrorist activity financing offence as explained in section 3. Reasonable grounds to believe is a higher threshold than reasonable grounds to suspect and is beyond what is required to submit a Suspicious Transaction Report.
Failing to list all the transactions and accounts relevant to your suspicion in the specified fields
You are required to report all the transactions and accounts that led to your determination that there are reasonable grounds to suspect that the transaction is related to the commission or attempted commission of a money laundering or terrorist activity financing offence in the specified fields of the report. Providing a summary of the transactions in the narrative section (Details of suspicion) is not enough.
Not providing or naming all parties to the transactions when the information is available
All parties to the transaction, including their associated information, must be provided in their corresponding structured fields if this information is available. This includes any conductors, third parties, beneficiaries, account holders, sources of funds or virtual currency, and any other persons or entities involved in the transaction.
If an entity is involved, then owners, directors, officers, trustees, settlors and those with signing authority should be provided as applicable. You should also specify whether the parties are known or unknown.
This has been observed in transactions such as wire transfers that involve multiple parties.
For example, if you are reporting a wire transfer, you should include any information you have on both the ordering client and beneficiary. This could include, but is not limited to, their names, their account number and institution, their relationship, and any known identifiers. FINTRAC acknowledges that this information may not always be at your disposal, but when you know it, you should provide it.
The information provided in the narrative section of the Suspicious Transaction Report (Details of suspicion) does not elaborate on your grounds for suspicion or link to the transaction(s) in the report
You must explain the reason(s) for your determination that there are reasonable grounds to suspect that the transaction(s) is/(are) related to the commission or attempted commission of a money laundering or terrorist financing offence. This includes providing,in the narrative section of the Suspicious Transaction Report,all of the relevant facts, context and money laundering and terrorist activity financing indicators that are related to the transaction(s) in the report and support your suspicion.
This deficiency has been observed when a reporting entity does not articulate the reasons for their suspicion or does not explain how or why certain information is relevant to their suspicion.
| null |
README.md exists but content is empty.
- Downloads last month
- 1