REGULATORY OVERVIEW
- Finiqua Finance Ltd is registered as a Money Services Business (MSB) with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). MSB Registration Number: M24178970 providing the following MSB activities:
- Foreign Exchange Dealings
- Money Transferring
- Virtual Currency Dealings
- Payment Processing
Note that Finiqua Finance Ltd does not provide:
- Money orders
- Traveler’s cheques
- Cheque cashing
- Issuing and redeeming money orders
- Casino or gambling services
- Crowdfunding services
- Finiqua Finance Ltd, and related entities, strive to follow the rules and regulations defined by Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and adopt MSB best practices where possible.
As Finiqua Finance Ltd provides MSB services we are required to:
- Report eligible transactions
- Identify clients according to MSB guidelines
- Facilitate independent review of our compliance program
- Facilitate regular training of employees with regard to AML/CTF
- Maintain a risk assessment and risk-based approach to service delivery
FINTRAC provides regulatory oversight to the MSB industry and Finiqua Finance Ltd is registered with FINTRAC as noted above.
Finiqua Finance Ltd has implemented a compliance regime that references the requirements for MSBs under the PCMLTFA.
Finiqua Finance Ltd may be subject to audits by FINTRAC, the Canadian Securities Commission or other regulatory entities.
Finiqua Finance Ltd supports the efforts of FINTRAC to mitigate and curtail illicit activity and will provide the required assistance to FINTRAC, and it’s designates, in the event of an audit or reportable event.
NON-COMPLIANCE
Compliance with FINTRAC guidelines is not optional. Non-compliance with regulations and legislation may result in criminal or administrative penalties.
Criminal penalties may include:
- Failure to report suspicious transactions: up to $2 million and/or 5 years imprisonment.
- Failure to report a large cash transaction or an electronic funds transfer: up to $500,000 for the first offense, $1 million for subsequent offenses.
- Failure to meet record keeping requirements: up to $500,000 and/or 5 years imprisonment.
- Failure to provide assistance or provide information during compliance examination: up to $500,000 and/or 5 years imprisonment.
- Disclosing the fact that a suspicious transaction report was made, or disclosing the contents of such a report, with the intent to prejudice a criminal investigation: up to 2 years imprisonment.
Administrative penalties may include:
- A minor violation: $1 to $1,000 per violation
- A serious violation: $1 to $100,000 per violation
- A very serious violation: $1 to $100,000 per violation for an individual and/or $1 to $500,000 per violation for an entity
Internally, employees found or suspected of non-compliance with this policy or any regulations/legislation may be subject to disciplinary procedures inclusive of dismissal.
INTRODUCTION
Our primary regulatory concern is FINTRAC MSB requirements however other requirements worth noting are:
FATF Recommendation 16
FATF recommendations are non-binding and represent “ best practice” for FIUs and the entities they regulate. Recommendation 16 SPECIFICALLY addresses virtual asset service providers:
- Virtual asset service providers (VASP) must register with local FIU.
- FIUs should supervise/regulate VASPs.
- VASPs should implement a customer identification program where clients are identified at a threshold of $1,000.00 in usage or greater.
- VASPs should provide KYC and other information to law enforcement and similar 3rd parties on request.
- VASPs should comply with international requests for information from law enforcement and regulatory bodies.
Travel Rule (FINTRAC)
Commonly known as the “travel rule” this requires financial institutions to share the following information for any transaction involving one or more financial institution:
- Transmitter name
- Transmitter account number
- Transmitter address
- Transmitter banking/financial institution details
- Amount of transaction
- Date of transaction
- Recipient banking/financial institution details
- Recipient name
- Recipient account number
- Recipient address
As such, Finiqua Finance Ltd observes and implements “best practice” with regard to AML/CTF regulations wherever feasible in the course of our business.
MONEY LAUNDERING DEFINED
Money laundering is defined as the process used to disguise, or attempt to disguise, the source of funds or assets derived/sourced from criminal or illicit activity.
3 typical stages of the process:
- Placement – initial deposit of proceeds of crime into the financial system, placement may or may not include the predicate offense from which illicit funds were derived.
- Layering – conducting multiple transactions and/or transfers to convert illicit funds to another form and obfuscate the true source/original placement.
- Layering may include transferring the value from one vehicle/object to another including purchase of high value assets (jewelry, vehicles, property) and multiple money transfers from one instrument to another (money orders, checks, bearer bonds, prepaid cards, etc.).
- Multiple Virtual Currency transactions between related wallets is a perfect example of layering.
- Integration – withdrawal or conversion of the funds to a “clean” form. Money laundering may, or may not be, accompanied by a predicate criminal offence.
- A simple money laundering scheme may involve using a stolen financial instrument to purchase a high value item intended for resale, in this case theft of the financial instrument precedes the use/attempted conversion of the same.
- A more complex scheme could involve the purchase of multiple prepaid cards followed by fictitious purchases with the cards to a shell merchant with the intention of receiving the funds via a settlement payment.
Money laundering may, or may not be, accompanied by a predicate criminal offense.
A simple money laundering scheme may involve using a stolen financial instrument to purchase a high value item intended for resale, in this case theft of the financial instrument precedes the use/attempted conversion of the same.
A more complex scheme could involve the purchase of multiple prepaid cards followed by fictitious purchases with the cards to a shell merchant with the intention of receiving the funds via a settlement payment.
With regard to Finiqua Finance Ltd the largest money laundering risks lie in criminals seeking to purchase crypto to place and layer illicit funds in the legitimate economy, criminals conducting illicit transactions on behalf of themselves or an undisclosed third party, or criminals using stolen identities/financial instruments to purchase crypto currencies.
TERRORIST FINANCING DEFINED
Terrorist financing is the application of funds/assets, whether legitimately derived or not, to fund terrorist activities and organizations.
Funds may be sourced from donations, real business activities, AND from criminal sources such as drug/human trafficking and other illicit industries.
The movement of funds for terrorist financing often mimics that of money laundering in that one, or more, of the points at which the funds enter/exit the financial system is being intentionally obfuscated.
WHAT DOES THIS MEAN FOR FINIQUA FINANCE LTD
Finiqua Finance Ltd is committed to deterring and combating money laundering/terrorist financing in any capacity possible.
Finiqua Finance Ltd has adopted a risk-based approach and compliance strategy that is approved by executives.
Per this policy, and other related policies, Finiqua Finance Ltd is committed to full compliance with requirements that are designed to deter and detect actual/potential money laundering/terrorist financing (ML/TF) as well as other activities that enable/facilitate OR are related to ML/TF such as fraud.
Finiqua Finance Ltd encourages and actively develops an internal culture of compliance and ethics among Full and Part time Staff and contractors.
Finiqua Finance Ltd dedicates resources to compliance and risk management including implementing the below recommendations from FINTRAC for a sufficient compliance regime:
- Appointment of a dedicated, knowledgeable Chief Compliance Officer.
- Development and maintenance of a risk management program.
- Documented training program for all Finiqua Finance Ltd staff.
- Development and application of internal policies, processes and other initiatives directly related to anti-money laundering/counter terrorist financing.
- Regularly scheduled independent reviews to assess the efficacy and relevance of the regime.
Finiqua Finance Ltd must renew FINTRAC MSB registration every 2 years.
IMMUNITY FROM PROSECUTION
Finiqua Finance Ltd recognizes that part of any effective compliance regime is protection for those who comply or attempt to comply in good faith.
Finiqua Finance Ltd supports the requirement for personnel to identify and report suspicious or otherwise reportable transactions to FINTRAC and will attempt to protect said staff from civil and criminal proceedings where possible.
RISK-BASED APPROACH
Finiqua Finance Ltd employs a risk-based approach as a best practice advised by FINTRAC and therefore development and implementation of the compliance program is informed by the risk appetite of Finiqua Finance Ltd and its partners.
In accordance with regulations the Compliance team conducts risk assessments specifically related to money laundering and terrorist financing risks on all customers, counterparties and vendors.
Incident to the risk assessment process the Compliance team makes and implements recommendations to diminish risk to an acceptable level.
Finiqua Finance Ltd’s risk assessment results are rated on a three tiered system – low, medium, or high risk for Money Laundering.
Periodic reviews for clients are dependent on the file risk rating
- Low – 10 months
- Medium – 5 months
- High – 2 months
This risk assessment process considers the following items:
- Where are clients located?
- Where are their end customers located?
- How is service provided to these clients? (Electronically, in person, etc.)
- Types of service offered to clients
- Types of clients serviced
- Type of customers using the service
Finiqua Finance Ltd strives to mitigate risk whenever possible.
Where risk cannot be sufficiently mitigated/transferred/avoided Finiqua Finance Ltd will decline to engage in the risky activity.
Effective risk assessment and mitigation is critical to maintaining positive associations/perceptions of the Finiqua Finance Ltd brand.
Maintaining positive relations with our external partners including Banks, regulators and other 3rd parties we conduct business with. It is prudent for the Finiqua Finance Ltd and the Executive team to adhere to PCMLTFA and to avoid any negative effect on the company brand, ensuring we do not contravene the PCMLTFA or other salient regulations and finally, deterring and decreasing the amount of illicit activity in general.
Comprehensive Risk Disclosure Policy Available upon Request.
On-going Transaction Monitoring
On an ongoing basis, the Finiqua Finance Ltd Compliance team will monitor the transaction behavior of the users while monitoring the volumes and frequency of their transactions.
In addition to the above, our tools enable us to identify the red flags based on different parameters we use for risk profiling of our customer base such as:
- Occupation/profession
- Expected transaction volumes and frequency
- Age
- Geographical Location
TRANSACTION RECORDS
Finiqua Finance Ltd stores an electronic record of all transactions processed through our systems regardless of type, status, or amount.
All transaction records are stored for a minimum of 5 years per FINTRAC guidelines, and will be stored for the lifetime of the Finiqua Finance Ltd business unless a client/customer specifically requests the deletion of their information per the terms governing privacy and consent in their jurisdiction.
Any questions regarding destruction of records can be directed to: contact@finiqua.com
Reporting of Unusual/Suspicious Transactions/Activity
All Finiqua Finance Ltd staff and 3rd party contractors are required to monitor, detect and report unusual/potentially suspicious activities or transactions to the CAMLO, who will in turn, conduct an in-depth investigation, and determine whether an external report should be made to the relevant authorities.
Finiqua Finance Ltd is committed to reporting all suspicious activity and/or transactions to the Principle regulator (FINTRAC).
Comprehensive AML/CTF Policy Available upon Request by contacting: contact@finiqua.com