Money-laundering watchdog to share information with securities regulator

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Canada’s money-laundering watchdog has struck a deal with the federal securities regulator to share information from their respective investigations as well as cut down on either agency doing similar work auditing the same firms and investment advisers suspected of money laundering.

The Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) has been roundly criticized by B.C.'s Attorney-General for its lack of transparency and inability to share information with relevant law-enforcement agencies and professional regulators.

Now, the government agency is adding another intelligence-sharing partner, announcing a memorandum of understanding on Thursday to better collaborate on the fight against money laundering with the Investment Industry Regulatory Organization of Canada (IIROC), the self-regulating body that licenses almost 30,000 people working in 170 investment advisory firms across the country. The two agencies said the agreement will enable them to share any evidence related to this sophisticated crime, as well as terrorist financing, that they uncover while auditing or examining investment firms.

“Agreements such as this one between IIROC and FinTRAC demonstrate our collaboration to detect and deter any suspicious activities that could threaten the integrity of Canada’s capital markets,” IIROC’s president and chief executive officer, Andrew Kriegler, said in a news release. "By sharing the information we collect and working cooperatively, we will streamline the compliance burden on the firms IIROC regulates, while maintaining investor protection.”

Nada Semaan, FinTRAC’s director and chief executive officer, said the agreement will stop the two agencies from duplicating their work on this front as well as reduce the “burden on securities dealers and help to protect Canadians and Canada’s economy.”

Following the release of two reports into money laundering in B.C.'s real estate sector earlier this month, Attorney-General David Eby said Ottawa needed to rework federal anti-money-laundering legislation to give other enforcement bodies access to the intelligence databases of FinTRAC, which he said had failed to protect residents of the province from this crime.

“There is significant opportunity for improvement at FinTRAC, as well as law enforcement,” he told reporters before B.C.'s NDP government called a public inquiry into how money laundering has corroded the provincial economy, inflated the housing market and contributed to the deadly opioid crisis.

Neither federal body stated how big a problem money laundering is in the country’s capital markets, but a 154-page draft analysis prepared by an employee at FinTRAC in 2014 and obtained by The Globe and Mail rated the sector as highly vulnerable to the crime given the incredible amount of wealth invested as well as the lack of disclosure required in some markets. That review, released through freedom-of-information law, stated “pump-and-dump" Ponzi schemes and financial products exempt from offering a prospectus as being of concern.

In recent years, FinTRAC has focused much of its fight against money laundering and terrorist financing to the real estate, banking and currency exchange sectors, which saw the majority of the agency’s 500 in-depth examinations in the 2017 fiscal year, according to its annual financial report. No figures were provided for the securities sector.

Former RCMP superintendent Garry Clement said Thursday’s announcement is good news for Canadians and an excellent use of federal resources.

“The bottom line is FinTRAC doesn’t have enough resources to cover in detail all these [investment advisory] agencies," he said.

In the end, he said, all the financial intelligence in the world doesn’t matter if the police and prosecutors don’t have the resources or experience to bring these cases to court.

Earlier this year, a U.S. State Department analysis called on Canada to take steps "to increase enforcement and prosecution” of its considerable money-laundering problem. That report noted only 169 trials on charges of money laundering have led to convictions in recent years, citing official data from 2010-14, which the report stated were the most recent available.