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In a significant development, Canada's primary financial crime watchdog, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), has levied a substantial fine of C$7.5 million (approximately $5.52 million) on the Royal Bank of Canada (RBC). The penalty is a consequence of RBC's failure to submit Suspicious Transaction Reports (STRs) in three instances, highlighting compliance shortcomings.
RBC, the largest bank in Canada, has chosen not to contest FINTRAC's decision. While confirming their commitment to maintaining high reporting standards for suspicious activities, RBC expressed dissatisfaction with the scale of the penalty. The bank clarified that the fine is related to administrative lapses and does not imply any connection to money laundering or terrorist financing offenses. Furthermore, RBC emphasized that there was no indication of bad faith or intentional violation on the part of its personnel.
The penalty, imposed on November 3, follows a compliance examination conducted by FINTRAC in 2022. The regulator found that RBC had not submitted STRs for various branch locations before May 2021 and lacked proper governance documentation for implementing Anti-Money Laundering (AML) procedures.
Specifically, RBC failed to submit 16 suspicious transaction reports out of 130 cases reviewed by FINTRAC. These instances included situations where the bank received production orders on clients but did not escalate or refer the files for potential STR submission. Additionally, cases related to fraud were not reported to FINTRAC despite the presence of indicators supporting suspicions of money laundering or terrorist financing offenses.
FINTRAC's examination also revealed that, before May 2021, RBC was not filing separate STRs for different branch locations, violating prescribed reporting guidelines. The bank was found to lack appropriate and documented governance for developing, updating, and implementing AML/ATF policies and procedures. Some procedures related to the identification and reporting of STRs were deemed incomplete, inadequate, or inapplicable.
Commenting on the situation, Garry Clement, CEO of Clement Advisory Group, noted a shift in FINTRAC's approach, signaling increased vigilance. He remarked, "What we're seeing is, FINTRAC is taking a different approach, and they have in the past… I don't think there are going to be any more free passes."
This penalty on RBC is considered a rarity among Canadian banks, and it comes in the wake of TD Bank, the country's second-largest lender, revealing an investigation by the U.S. Justice Department for AML compliance issues in the United States earlier this year.
TD Bank has also been responding to inquiries from regulators and law enforcement related to its AML compliance program. The probe was initiated after TD Bank called off its $13.4-billion acquisition of U.S. lender First Horizon in May.
While RBC has not immediately responded to requests for comment, this development underscores the evolving landscape of financial crime oversight in Canada, with regulators adopting a more stringent stance and emphasizing the importance of compliance in preventing money laundering and terrorist financing activities.
By fLEXI tEAM