Financial Firms Charged with Taking Out the Laundry - Summer 2005

Though the terrorist attacks that leveled the World Trade Centre in New York City occurred nearly four years ago, the reverberations are still being felt today.

Since learning the events of September 11 were the culmination of careful planning and financing from terrorist groups outside the US, the international community has sought to strengthen security and prevent similar attacks. In the financial sector, this means much tighter guidelines and reporting requirements for any suspicious financial activity.

In response to these tighter regulations, Rice Financial has stepped up its efforts – requiring additional identification for all individuals, including up to three signing officers on a business account.

Dan Steinkey, Rice Financial's Director of Investment Products encourages clients to view the new requirements as a necessary part of conducting business in the new millennium.

"People must recognize and accept that a small sacrifice, in terms of time and effort is nothing compared to the devastation we all felt after 9/11."

In Canada, where there is pressure to alter the country's international reputation for its past stance on money laundering, the financial industry has been legally mandated to take a front-line position in the war on terrorism.

"Preventing organized crime and ensuring Canada's security is a responsibility we all share," Steinkey says. "Canada has an international reputation for a historically lax stance on money laundering, creating additional pressure for our Government to fix this issue quickly."

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) have identified Canadian financial institutions as being among the first businesses to potentially come into contact with questionable transactions. As a result, they are now required to adhere to tighter reporting and record-keeping guidelines.

The PCMLTFA requires entities including banks, credit unions, trust and loan companies, insurance companies, brokers, agents, securities dealers, portfolio managers and investment counselors to report suspicious financial activity to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

Canada’s financial intelligence unit, FINTRAC is a government agency created to collect, analyze and, when appropriate, disclose financial intelligence on suspected money laundering and terrorist financing activities.

	With few exceptions, PCMLTFA requires the following be reported:
			Include a mix of laddered GICs, mutual funds, insurance and
			Suspicious transactions
			Property owned or controlled by or on behalf of a terrorist or
			terrorist group
			Large cash transactions of $10,000 or more
			Electronic transfers of $10,000 or more

PCMLTFA also requires financial institutions to keep detailed records, ascertain adequate identification, and take reasonable measures to determine the source of funds and whether an individual is acting on behalf of a third party.

Since becoming effective June 12, 2002, PCMLTFA remains a work in progress as FINTRAC continues to seek standardized requirements for all affected sectors including the financial industry.