Top AML rules and developments to keep on your watch list

It’s important that CPAs stay updated on AML developments as accounting firms play an important role in serving and protecting the public interest (Getty Images/Xsandra)

The rules for CPAs as they relate to anti-money laundering are changing. In fact, a number of new requirements for those engaged in activities covered by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act came into effect on June 1, 2021.

To help you understand what you need to know about these developments, CPA Canada has prepared two new papers, New “know your client” AML/ATF rules for CPAs and New AML/ATF requirements associated with record-keeping and reporting to FINTRAC. A third, Risky business: non-compliance with AML/ATF requirements, will be published shortly. An updated AML guide will also be published this winter.

“As reporting entities under the federal AML regime, professional accountants and accounting firms play an important role in serving and protecting the public interest,” says FCPA Michele Wood-Tweel, vice-president of regulatory affairs at CPA Canada.

“It’s important that CPAs learn about these new developments and others that are on the horizon, such as the expected conclusion of the Cullen commission.”

Here are three of the top items to keep on your watch list. [See A timeline of select developments in AML/ATF over the past 30-plus years.] 

THE CULLEN COMMISSION

Launched by the province of B.C. in May 2019, the Commission of Inquiry into Money Laundering in British Columbia (known as the Cullen commission) has a broad mandate to make findings of facts and recommendations to address the conditions that have enabled the continued growth of money laundering in B.C.

As part of its terms of reference, the commission is tasked with inquiring into and reporting on the extent of money laundering within certain sectors, including professional services, and determining the scope and effectiveness of their regulatory systems when it comes to combatting money laundering. 

CPA Canada and CPABC have Participant Status at the commission and appeared as witnesses during hearings in January 2021. 

The Commission will hold closing hearings from October 15 to 19, 2021 and is expected to submit its final report to the B.C. government by December 15, 2021.

RECORD-KEEPING AND REPORTING

Several changes to accountants’ and accounting firms’ obligations with regard to reporting and record-keeping came into effect on June 1, while others were already in place. 

The changes have implications for accountants and accounting firms involved in what are known as “triggering activities”–i.e., on behalf of a person or entity: receiving or paying funds or virtual currency; purchasing or selling real property, or immovables or business assets, or entities; transferring funds, virtual currency or securities by any means; or giving instructions on behalf of a person or entity in connection with any of these activities.

Record-keeping: In addition to keeping a copy of every report sent to FINTRAC, accountants affected by the rules must also keep records, when applicable, of large cash transactions (when they receive C$10,000 or more in cash); large virtual currency transactions (when they receive an amount equivalent to $10,000 or more); and receipt of funds (when they receive C$3,000 or more).

Where applicable, accountants must also keep records of other types of information, such as: the information required when verifying the identity of the client; their business relationship with the client (including whether the client is a politically exposed person, a head of an international organization, a family member or close associate); and beneficial ownership information (see item below as well as New rules make ‘knowing your client’ even more important for CPAs). 

“Record-keeping is important in facilitating law enforcement’s efforts to follow up on the money trail of suspected money-launderers or terrorist financiers, and to be compliant with regulatory requirements,” says CPA Marc Tassé, a professor who teaches anti-corruption at the MBA level at the University of Ottawa.

Reporting to FINTRAC: Under the previous reporting requirements, accountants and accounting firms covered by triggering activities in the AML/ATF legislation were already required to file three types of reports to FINTRAC: the Suspicious Transaction Report, the Terrorist Property Report and the Large Cash Transaction Report. But, as of June 1, 2021, they must also submit a Large Virtual Currency Transaction Report (LVCTR). 

“The reports accountants and accounting firms send to FINTRAC, especially the suspicious transactions reports, are crucial to FINTRAC’s financial intelligence analysis,” says Tassé. 

For more on the new requirements, see New AML/ATF requirements associated with record-keeping and reporting to FINTRAC. 

BENEFICIAL OWNERSHIP

For anyone involved in fighting money laundering and other financial crimes, having access to timely and accurate information on who owns, controls or ultimately benefits from a business can be a valuable resource. 

Requirements around beneficial ownership disclosure are evolving both at home and abroad and recent legislative changes by the federal government and certain provinces (B.C., Saskatchewan, Manitoba, Quebec, Nova Scotia, Prince Edward Island; with changes pending in New Brunswick) mean enhanced corporate transparency.

“The new corporate requirements related to beneficial ownership and transparency are entirely relevant to the work that our members do with private companies every day—whether it be as consultants or board members or CFOs,” says Wood-Tweel.

It’s worth noting that the 2021 federal budget also proposed to provide $2.1 million over two years to support the implementation of a publicly accessible corporate beneficial ownership registry by 2025.   

Also, under new AML/ATF “know your client” rules that came into effect on June 1, accountants and accounting firms involved in triggering activities are required to record beneficial ownership information in certain circumstances. 

REMEMBER KEY DATES

The new obligations with regard to record-keeping, reporting and knowing your client came into effect on June 1, 2021, and FINTRAC has published notices on its website explaining how it will manage the transition, including assessing compliance. 

“If you are affected by the new requirements, it’s important not to delay in implementing them, revising your compliance program and updating training,” says Wood-Tweel. 

KNOW YOUR AML

CPA Canada has a wealth of resources on anti-money laundering rules and developments, including the Cullen commission, the new “know your client” requirements and new requirements associated with record-keeping and Reporting to FINTRAC. 

Plus, advance your knowledge with our on-demand course, Anti-money laundering and ethics: A Canadian and global perspective, to get a high-level view of of the relevant information, tools and strategies you need to know to understand better the stakes and ethical challenges involved in addressing money laundering and terrorism financing risk.