Dealers take on FINTRAC training

If your dealership hasn’t already done it, here’s something you might expect in the near future — FINTRAC-mandated training on the revised anti-money laundering regulations, which came into effect this June.

Some firms have already started.

Just last week, Interglobe Financial Services Corp. and Blonde & Little Financial Services Ltd. jointly conducted a one-hour web-based training session for their mutual fund and life insurance representatives to bring them up to speed with regulatory revisions to Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

Online attendance, at about 85 representatives, was higher than expected, according to Interglobe’s chief compliance officer Julie Yim, which she attributed to the convenience of the web-based format.

Chris Steele, a branch manager at Blonde & Little who took the training, found it extremely timely. “As people get back from summer vacations, parents return to their routines, and kids go back to school, we’re going to soon enter a new investment phase, and interact with a lot more clients. Lots of money will change hands.

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“While anti-money laundering is an issue that has been talked about regularly since the early 2000, the depth and level of responsibility are new. The revised regulations and the training have brought that to the forefront. We’ll now have to be much more attentive to situations,” Steele added.

The training, which closely followed FINTRAC instructions, was tailored to alert advisors to potential indicators of suspicious activity, such as a client exhibiting unusual concern regarding the firm’s compliance and reporting requirements, or wishing to engage in transactions that don’t make sense and are inconsistent with his or her business strategy. Advisors were instructed to be wary of customers acting on behalf of a third party and who might be reluctant to provide any information about that entity.

Other red-flag customers included those wishing to invest money without much knowledge of the industry; and those trying to dissuade their advisors from following routine verification procedures.

Account activity that should trigger alarm bells includes large-cash transactions that appear to be structured to avoid government reporting requirements. Advisors are instructed to report any transactions involving $10,000 or over, and any unusual activity without apparent reason.

Even though Steele rates his level of awareness as fairly high, he said the training provided some good updates on the kinds of questions advisors should ask clients during the KYC process, and, more importantly, how they should ask them without insulting those clients. “Basically explaining, ‘it isn’t about you; it’s part of our job.’ “

Steele, who has had extensive experience working in casinos, attested to the rigorous anti-money laundering training in that sector. For him, this training reaffirmed that the financial industry was catching up.

Mutual fund and life insurance dealers who took part in the training were also updated about account-opening protocol if the client isn’t physically present, and if they have never met the client in person. In this case, they were asked to either demand attestation from a commissioner of oaths or guarantor in Canada stating that they have seen valid identification; or confirm that a cheque drawn by the client on a deposit account with a financial entity has been cleared.

Advisors were further instructed to pay attention to subtle differences between money laundering and terrorist financing indicators. For example, amounts relating to terrorist financing may generally be smaller.

In addition, Interglobe and Blonde & Little’s representatives were instructed to ascertain if their client is a politically exposed foreign person (PEFP) at the time of account opening, and make a determination of status within 14 days of account activation.

And if a client has held office on behalf of a foreign government, advisors were asked to take measures to track the source of funds; obtain their compliance officer’s approval to maintain the account within 14 days of activation; and monitor the account for any suspicious transactions.

Penalties of non-compliance could, in some cases, cost advisors as much as $5 million in fines, land them in jail for five years, or both.

Furthermore, to ensure their own safety when dealing with suspicious characters and make sure they don’t unwittingly prejudice a criminal investigation, advisors were asked not to disclose suspicious activity to anyone (including customers). Indiscrete disclosure could come with a criminal penalty of two years.

The advisors who took part will be administered a test based this week on the training. In addition, all the questions advisors asked during the training are being addressed by compliance officers and will be circulated through e-mail both to advisors who attended and those who did not.

Filed by Kanupriya Vashisht, Advisor’s Edge, kanu.vashisht@advisor.rogers.com

(08/18/08)