Canada's Banking Regulator Urges Heightened AML Measures Amidst Concerns Over Money Laundering Issues

Peter Routledge, superintendent at the Office of the Superintendent of Financial Institutions (OSFI), has called upon Canadian banks to heighten their surveillance efforts in combating potential money laundering transactions. This appeal follows a series of anti-money laundering (AML) issues at TD Bank, Canada's second-largest lender. Routledge stressed the importance of all industry players implementing stricter AML practices, citing heightened risks associated with digitalization and geopolitical factors.

"It is incumbent upon regulators and boards of directors to redouble efforts on surveillance detection and response," Routledge emphasized during a roundtable discussion with journalists following an event hosted by the C.D. Howe Institute in Toronto. "I'm confident, but am I satisfied with where we are? No, we have to get better."

In response to the growing concerns surrounding AML practices, the Canadian government recently granted expanded powers to OSFI and FINTRAC (the Financial Transactions and Reports Analysis Centre of Canada) to bolster their oversight capabilities in this area. In January, OSFI introduced new guidelines, giving banks a one-year period to comply with stricter rules pertaining to integrity and security issues, encompassing cybersecurity, technology, third-party providers, corporate culture, and compliance.

Routledge underlined the meticulous consultation processes conducted by OSFI and welcomed criticism, stating, "If you think we're being rules-based and that undermines a broader contribution to public confidence in the Canadian financial system, then call us out. We welcome the challenge. Steel sharpens steel. We'll get better if you criticize us."

Recent instances of AML-related issues within Canadian financial institutions have raised significant concerns. TD Bank faced a fine of CAD $9.2 million for failures in reporting suspicious transactions, while Royal Bank of Canada's U.S.-based subsidiary, City National Bank, was penalized with a U.S. $65-million fine for deficiencies in internal controls and risk management processes. Moreover, FINTRAC imposed a CAD $6 million fine on Binance for its failure to report large virtual currency transactions.

TD Bank admitted to inadequate AML processes for detecting and responding to suspicious activities, highlighting uncertainties regarding the potential full cost of fines. Similarly, City National Bank acknowledged its internal control failings, while Binance faced penalties for its failure to report significant virtual currency transactions and register with FINTRAC. These incidents underscore the pressing need for stronger AML measures and heightened vigilance within the Canadian financial sector.

By fLEXI tEAM