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Overview_Money laundering and terrorist financing indicators—overview and red flags_chunk1
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Overview
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Money laundering and terrorist financing indicators—overview and red flags
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Audience is Financial entities
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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
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Overview_Money laundering and terrorist financing indicators—overview and red flags_chunk2
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Overview
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Money laundering and terrorist financing indicators—overview and red flags
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Audience is Financial entities
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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
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Overview_Money laundering and terrorist financing indicators—overview and red flags_chunk3
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Overview
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Money laundering and terrorist financing indicators—overview and red flags
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Audience is Financial entities
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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
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Overview_Money laundering and terrorist financing indicators—overview and red flags_chunk4
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Overview
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Money laundering and terrorist financing indicators—overview and red flags
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Audience is Financial entities
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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.
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Overview_Money laundering and terrorist financing indicators—overview and red flags_chunk5
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Overview
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Money laundering and terrorist financing indicators—overview and red flags
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Audience is Financial entities
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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.
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Important consideration_Pretext_chunk1
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Important consideration
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Pretext
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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
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Important consideration_Pretext_chunk2
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Important consideration
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Pretext
| null |
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
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Important consideration_Pretext_chunk3
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Important consideration
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Pretext
| null |
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
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Important consideration_Pretext_chunk4
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Important consideration
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Pretext
| null |
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
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Important consideration_Pretext_chunk5
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Important consideration
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Pretext
| null |
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
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Important consideration_Pretext_chunk6
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Important consideration
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Pretext
| null |
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.
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Important consideration_Pretext_chunk7
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Important consideration
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Pretext
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators related to identifying the person or entity_chunk1
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ML Indicators (money laundering)
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ML/TF indicators related to identifying the person or entity
| null |
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
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ML Indicators (money laundering)_ML/TF indicators related to identifying the person or entity_chunk2
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ML Indicators (money laundering)
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ML/TF indicators related to identifying the person or entity
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators related to identifying the person or entity_chunk3
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ML Indicators (money laundering)
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ML/TF indicators related to identifying the person or entity
| null |
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
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ML Indicators (money laundering)_ML/TF indicators related to identifying the person or entity_chunk4
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ML Indicators (money laundering)
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ML/TF indicators related to identifying the person or entity
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators related to identifying the person or entity_chunk5
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ML Indicators (money laundering)
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ML/TF indicators related to identifying the person or entity
| null |
verify the information provided by a new or prospective client are difficult.
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ML Indicators (money laundering)_ML/TF indicators related to client behaviour_chunk1
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ML Indicators (money laundering)
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ML/TF indicators related to client behaviour
| null |
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
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ML Indicators (money laundering)_ML/TF indicators related to client behaviour_chunk2
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ML Indicators (money laundering)
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ML/TF indicators related to client behaviour
| null |
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
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ML Indicators (money laundering)_ML/TF indicators related to client behaviour_chunk3
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ML Indicators (money laundering)
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ML/TF indicators related to client behaviour
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators related to client behaviour_chunk4
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ML Indicators (money laundering)
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ML/TF indicators related to client behaviour
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators surrounding the financial transactions in relation to the person/entity profile_chunk1
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ML Indicators (money laundering)
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ML/TF indicators surrounding the financial transactions in relation to the person/entity profile
| null |
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
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ML Indicators (money laundering)_ML/TF indicators surrounding the financial transactions in relation to the person/entity profile_chunk2
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ML Indicators (money laundering)
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ML/TF indicators surrounding the financial transactions in relation to the person/entity profile
| null |
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
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ML Indicators (money laundering)_ML/TF indicators surrounding the financial transactions in relation to the person/entity profile_chunk3
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ML Indicators (money laundering)
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ML/TF indicators surrounding the financial transactions in relation to the person/entity profile
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators surrounding the financial transactions in relation to the person/entity profile_chunk4
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ML Indicators (money laundering)
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ML/TF indicators surrounding the financial transactions in relation to the person/entity profile
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators related to products and services_chunk1
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ML Indicators (money laundering)
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ML/TF indicators related to products and services
| null |
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
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ML Indicators (money laundering)_ML/TF indicators related to products and services_chunk2
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ML Indicators (money laundering)
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ML/TF indicators related to products and services
| null |
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
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ML Indicators (money laundering)_ML/TF indicators related to products and services_chunk3
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ML Indicators (money laundering)
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ML/TF indicators related to products and services
| null |
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
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ML Indicators (money laundering)_ML/TF indicators related to products and services_chunk4
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ML Indicators (money laundering)
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ML/TF indicators related to products and services
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators related to products and services_chunk5
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ML Indicators (money laundering)
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ML/TF indicators related to products and services
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators related to change in account activity_chunk1
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ML Indicators (money laundering)
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ML/TF indicators related to change in account activity
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators related to change in account activity_chunk2
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ML Indicators (money laundering)
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ML/TF indicators related to change in account activity
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators related to change in account activity_chunk3
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ML Indicators (money laundering)
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ML/TF indicators related to change in account activity
| null |
Abrupt change in account activity.
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ML Indicators (money laundering)_ML/TF indicators based on atypical transactional activity_chunk1
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ML Indicators (money laundering)
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ML/TF indicators based on atypical transactional activity
| null |
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
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ML Indicators (money laundering)_ML/TF indicators based on atypical transactional activity_chunk2
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ML Indicators (money laundering)
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ML/TF indicators based on atypical transactional activity
| null |
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
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ML Indicators (money laundering)_ML/TF indicators based on atypical transactional activity_chunk3
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ML Indicators (money laundering)
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ML/TF indicators based on atypical transactional activity
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators based on atypical transactional activity_chunk4
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ML Indicators (money laundering)
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ML/TF indicators based on atypical transactional activity
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators related to transactions structured below the reporting or identification requirements_chunk1
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ML Indicators (money laundering)
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ML/TF indicators related to transactions structured below the reporting or identification requirements
| null |
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
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ML Indicators (money laundering)_ML/TF indicators related to transactions structured below the reporting or identification requirements_chunk2
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ML Indicators (money laundering)
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ML/TF indicators related to transactions structured below the reporting or identification requirements
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators related to transactions structured below the reporting or identification requirements_chunk3
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ML Indicators (money laundering)
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ML/TF indicators related to transactions structured below the reporting or identification requirements
| null |
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.
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ML Indicators (money laundering)_ML/TF indicators involving wire transfers (including electronic funds transfers)_chunk1
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ML Indicators (money laundering)
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ML/TF indicators involving wire transfers (including electronic funds transfers)
| null |
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
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ML Indicators (money laundering)_ML/TF indicators involving wire transfers (including electronic funds transfers)_chunk2
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ML Indicators (money laundering)
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ML/TF indicators involving wire transfers (including electronic funds transfers)
| null |
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,
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ML Indicators (money laundering)_ML/TF indicators involving wire transfers (including electronic funds transfers)_chunk3
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ML Indicators (money laundering)
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ML/TF indicators involving wire transfers (including electronic funds transfers)
| null |
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
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ML Indicators (money laundering)_ML/TF indicators involving wire transfers (including electronic funds transfers)_chunk4
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ML Indicators (money laundering)
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ML/TF indicators involving wire transfers (including electronic funds transfers)
| null |
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
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ML Indicators (money laundering)_ML/TF indicators involving wire transfers (including electronic funds transfers)_chunk5
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ML Indicators (money laundering)
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ML/TF indicators involving wire transfers (including electronic funds transfers)
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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.
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ML Indicators (money laundering)
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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.
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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
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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
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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
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ML/TF indicators related to transactions that involve non-Canadian jurisdictions
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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.
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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.
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ML/TF indicators related to the use of other parties
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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
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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
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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
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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
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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
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ML Indicators (money laundering)
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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
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ML Indicators (money laundering)
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ML/TF indicators related to the use of other parties
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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
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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,
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ML Indicators (money laundering)
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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
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ML Indicators (money laundering)
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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
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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
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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.
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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.
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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.
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to suspect the commission of TF, as the methods used by criminals to evade detection of ML are similar.
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Indicators specifically related to TF
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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
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Indicators specifically related to TF
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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
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TF Indicators (Terrorist Financing)
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Indicators specifically related to TF
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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.).
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TF Indicators (Terrorist Financing)
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Indicators specifically related to TF
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(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.).
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Sexual Exploitation Indicators
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Updated Indicators: Laundering of proceeds from human trafficking for sexual exploitation
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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
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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
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Sexual Exploitation Indicators
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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
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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.
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Sexual Exploitation Indicators
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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,
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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
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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
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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
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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
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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
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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
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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
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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
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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
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