Obligations of reporting entities under FINTRAC guidance

The critical role of financial institutions demands stringent rules to guarantee economic stability. From the establishment of financial organizations to operation and even closure, separate governments agencies play a role in how they are managed. For purposes of preventing money laundering and terrorist financing, the primary agency is FINTRAC. 

FINTRAC stands for Financial Transactions and Reports Analysis Centre of Canada. It’s the primary implementing agency of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). But what extent of control does FINTRAC have on financial institutions? This article should answer that question. 

What are the priorities of FINTRAC? 

FINTRAC works by detecting, preventing, and deterring money laundering (AML) or financing of terrorist activities (TF). Simply put, its function is to prevent the unlawful use of money, or the use of money generated through unlawful means. To comply with their mandate, FINTRAC has the following powers and functions: 

• ensure that organizations under its report are following guidelines on the collection and use of personal information of clients 
• receive financial transactions in accord with its governing law 
• keep personal information submitted to it safe, private, and used only for the purpose intended 
• ensure that reporting entities are complying with PCMLTFA and other regulations 
• publish FINTRAC guidance issuances to update reporting entities about their obligations 
• maintain a register of money service businesses 
• research and analyze data using information derived from reporting entities and other concerns to generate data about AML and TF activities in Canada 
• produce financial intelligence that could help investigations on money laundering and terrorist activity financing 
• enhance public awareness about money laundering and terrorist activity financing 

On top of these functions, FINTRAC coordinates with different organizations to improve and streamline their functions. This includes working with the Office of the Superintendent of Financial Institutions (OSFI), the Egmont Group, Financial Action Task Force, and more. 

Which three reports must be submitted to FINTRAC? 

Multiple transactions should be submitted to FINTRAC on a routine basis. However, three reports are the most critical. These are: 

1. Suspicious transaction reports 

A suspicious transaction report (STR) is submitted if there are reasonable grounds to suspect that a transaction is in aid of ML or TF. Reasonable grounds to suspect is a legal threshold which means that there must be an assessment of facts, context, and other indicators. These indicators must add up to the possibility of ML or TF. 

An STR must also be made in case of reasonable grounds to believe. This is a higher threshold than “suspect” and is better explained side by side with each other: 

Notably, reports on suspicious activity STR’s may be filed by an individual employee in case their employer is not reporting the same. Hence, an accountant in an accounting firm can file an STR if they reasonably believe failure on the part of the corporation. By this logic, corporations can actually delegate reports to employees. 

Here’s a more detailed explainer about thresholds for reporting: 

Want more information about how unlawful activities are proven? Look at the Legal FAQs page to find out the distinctions between legal concepts. 

2. Large cash transaction reports 

For purposes of FINTRAC, “large cash transactions” are any amount of $10,000 or more in a single transaction. FINTRAC guidance imposes a 24-hour rule that aggregates small transactions within a 24-hour period. For example, if a person transfers $5,000 twice within the same day, this adds up to $10,000, which is a “large” transaction already. 

The report must be made within 15 calendar days of receipt of the $10,000 cash transaction. 

3. Electronic funds transfer reports 

The specifics of reporting requirements vary according to the reporting entity. However, the common rule is that the report should contain the parties to the transfer. These are: 

• requester who initiates the fund transfer 
• beneficiary or the one who receives the funds 
• third party or the person who instructs the requester or beneficiary in the transaction 
• account holder in case when the source of the fund is not the account of the requester 

Other reports often required include Large Virtual Currency Transaction Reports and Casino Disbursement Reports. Most of these can be reported electronically. Here’s a more detailed overview of reporting obligations under FINTRAC: 

Reporting entities under FINTRAC guidance 

A common misconception is that FINTRAC guidance only covers banks. However, banks aren’t the only entities that have firsthand experience with money transfer. For this reason, the following entities are also under obligation to file reports with FINTRAC: 

Accountants 

Accountants and accounting firms must report to FINTRAC in case they do any of the following activities on behalf of clients or through their accounting firm: 

• paying or receiving funds or virtual currency 
• buying or selling securities, immovables, real properties, or business assets 
• transferring funds, securities, or virtual currency through any means 

Agents of the Crown 

Agents of the Crown are engaged in deposit liabilities, issuance, redemption, or sale of money orders in the course of their official capacity to offer financial services. For purposes of the law, an agent of the Crown is defined as any department or agent of His Majesty in right of Canada or in right of a province.  

Note that agents of the Crown involved in the sale of precious metals are also subject to PCMLTFA, but their obligations are slightly different. 

British Columbia notaries

This covers notaries and notary corporations in British Columbia. Specifically, these are members of the Society of Notaries Public of British Columbia in accordance with the Notaries Act. Compliance with FINTRAC guideline issuances is mandated in case of notaries that do any of the following: 

• the receipt or payment of virtual currency or funds, except if those funds as paid as professional fees, bail, expenses, or disbursements 

• when there is the purchase or selling of securities, immovables, real property, or business assets 

• when there is transfer of funds, securities, or virtual currency through any manner 

Similar to accountants, the notary corporation is responsible for the acts of the notary public who performs functions under their employ. For this reason, the corporation has an obligation to comply with FINTRAC guidance and issuances except in certain instances.  

For ensured compliance, notaries in British Columbia should get the help of local lawyers practicing in banking and financial institution laws. 

Dealers in precious metals and precious stones 

As mentioned, private businesses or agents of the Crown dealing in precious metals and precious stones are also subject to PCMLTFA. In these instances, “dealing” is a technical term. This means that the person or organization must be performing any of the following activities: 

• buying or selling of precious stones, precious metals, or jewellery during its business operations if the transaction is more than $10,000 

The wording of the law includes not just finished products but also raw materials before they are shaped into new items. But what about those who manufacture precious metals, stones, and jewellery? It depends on the structure of the business. 

As a rule, companies whose business comprises at least 90 percent manufacturing are exempt from FINTRAC guidance and requirements. Those who simply polish or mine precious metals and stones are also exempt. 

Casinos 

The nature of gambling makes it prone to be used for money laundering. This is why casinos fall within the coverage of FINTRAC to ensure that all money transactions are legitimate. Notably, “casinos” includes governments, organizations, or boards authorized to do business in the country and does any of the following: 

• a lottery scheme in a fixed place of business, including but not limited to car games or roulette 

• slot machine games or those operated through similar electronic gaming devices where there are more than 50 machines in the fixed establishment. This can include businesses that also offer other services like restaurants 

• lottery schemes that can be accessed through digital networks 

Note that the responsibility under PCMLTFA falls under the entity that conducts and manages these. Daily operations could be delegated to another organization but ultimately, FINTRAC guidance responsibility falls on primary management. 

Factors 

This reporting entity is a new addition to the list, having been added in April 2025. Factors are entities engaged in the business of factoring. Factoring happens when a business sells its accounts receivables to a factor at a discount. The factor will then collect the debt from the debtors and profit from the difference. 

Employees of factoring companies have the individual responsibility of reporting suspicious transactions. All other obligations under FINTRAC must be met by the company itself. 

Financial entities 

These are perhaps the most obvious. Financial entities typically refer to banks operating in and following the laws of Canada, whether domestic or foreign owned. This means that even authorized foreign banks may be subject to FINTRAC guidance. Banks offering both full service and lending are included in the coverage. 

Financial entities must also comply with the Travel Rule. This requires that for all electronic fund transfers and virtual currency transfers, specific information must be included with the sent or received funds. Information that must be included is information about the sender, information about the receiver, and reference number, if any. 

Of course, that’s just a small snapshot of all the reporting entities under FINTRAC. Others are much more common such as: 

• financial or leasing entities 
• those engaged in life insurance 
• money service businesses like Western Union or PayPal 
• securities dealers 

Violations of FINTRAC guidance 

The PCMLTFA allows FINTRAC to impose penalties in case of violation of the law. In fact, the Exchange Bank of Canada was hit with a $2.4 million administrative monetary penalty for three violations under the Act. Most recently, it imposed a $544,500 administrative monetary penalty on investment dealer Canaccord Genuity Corporation. 

Violations committed are typically published by FINTRAC, adding reputational damage to financial damage. Note though a violation under FINTRAC does not automatically mean that an entity participated in money laundering or terrorist financing. Instead, the violation could be in relation to reportorial requirements or KYC guidelines. 

Common violations associated with FINTRAC guidance violations include: 

• failure to follow the “Know Your Client” protocol 
• failure to or even lateness in filing critical reports to FINTRAC 
• failure to keep records of transactions that need to be kept or reported to FINTRAC 
• failure to develop internal compliance policies to support AML and TF efforts 

Monitoring changes in FINTRAC guidance 

FINTRAC guidance constantly evolves and is prone to the changing digital landscape of financial institutions. This is why reporting entities are encouraged to have a dedicated team to monitor changing compliance rules issued by FINTRAC and other regulatory agencies. By doing so, entities can avoid the exorbitant penalty fees and damage. 

To get more insight into FINTRAC guidance or obtain targeted help from experts, contacting the best banking lawyers in Canada is a great start!