Crime poses threat to reputation: OSFI

Canadian financial institutions must take the problems of money laundering and terrorism funding seriously, not only to protect their own reputation, but that of Canada, according to the superintendent of financial institutions.

“Canada has a world-class financial system. It is very important for our reputation as a country, and for the reputation of our financial institutions, that we do as much as we can to keep organized crime from abusing our financial system,” said Nicholas Le Pan, head of Office of the Superintendent of Financial Institutions in a speech on Wednesday in Toronto.

“As Canadians we have to make sure that our financial system is doing a very good job to deter and detect money laundering and terrorism financing.”

He said most financial institutions are working to implement anti-money laundering and anti-terrorist funding (AML/ATF) regimes, but that a smaller number have been slow to adopt such measures. He said most of the boards of various financial institutions were keenly aware of the threat organized crime posed, but that a small number of boards were “clueless.”

“That is not satisfactory,” he said. “I have very low tolerance for slippage in this area. Good progress has been made but more needs to be done.”

About $2 billion worth of suspicious transactions take place in Canada each year, he said.

Le Pan stressed that Canada is not a lax jurisdiction in combating money-laundering, but that the standard is continually being raised. In 2007, the Canadian AML/ATF regime will be evaluated by the international Financial Action Task Force on Money Laundering (FATF), which will assess the system’s effectiveness.

There are 49 recommendations included in the task force’s best practices regime, but in Canada there is some concern over possible challenges under the Charter of Rights and Freedoms. In other jurisdictions, for example, the legal profession is expected to act as whistleblowers if they know their clients are involved in money laundering or terror financing. In Canada, such an action may be considered a violation of client confidentiality.

“We aim to be substantially compliant,” says Le Pan. “At OSFI, small deficiencies will not have severe supervisory consequences because we know how hard it is to do AML/ATF well in far-flung, complex operations.”

“But we will come down hard on entities with material problems that should have been identified by them and rectified well before we brought them to light,” he warned.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com