Federal anti-money laundering authority, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), sanctioned a Saskatoon-based bank for a series of alleged compliance violations.
FINTRAC imposed an administrative penalty of just over $600,000 on First Nations Bank of Canada (FNBC) for five violations of the AML rules that were uncovered in a compliance review.
The most serious violation involved failing to submit suspicious transaction reports in 31% of the files reviewed by FINTRAC when there were “reasonable grounds” to suspect that the transaction involved money laundering.
“FINTRAC’s examination revealed gaps in the bank’s application of its unusual transaction review processes,” the agency said in a notice.
Specifically, the agency found that the bank didn’t consider issues such as transactions that were “inconsistent with the client’s financial standing,” transactions that were structured to avoid reporting thresholds, and evidence of clients providing misleading information when questioned about transactions.
In addition to that “very serious” violation, FINTRAC also alleged that the bank committed several “serious” violations, and one “minor” violation — including failing to develop adequate compliance policies and procedures, failing to properly assess money laundering risks, and failing to follow its own policies in dealings with high-risk clients.
The agency reported that its exam found that the bank created a risk ranking scale, but that it didn’t have policies on how to manage clients from different risk categories. And, when it did identify risky clients, it didn’t take required measures to scrutinize their activity.
“While the bank conducted transaction monitoring based on alerts triggered by the clients’ account activity, FINTRAC did not observe ongoing monitoring for high-risk clients commensurate with their risk level,” it said.
Earlier this month, FNBC said that it is adopting AI-powered tools to enhance the efficiency and accuracy of its AML processes, and to improve its AML compliance.
“As a national bank serving Indigenous and non-Indigenous communities across Canada, maintaining strong compliance standards is essential to our mission,” said Karen Creen, chief compliance officer and chief anti-money laundering officer for FNBC, in a release.