On April 21, 2020, FINTRAC published an update on its Suspicious Transaction Reporting (“STR” below) guidance. This update was necessary given the regulatory changes which will come into force on June 1, 2020.

Therefore, it is not surprising to read FINTRAC’s expectations regarding the submission of STRs “as soon as practicable”. But we can also see three other clarifications worth mentioning.

Here is a brief overview of what we need to remember about this directive.

1. As soon as practicable

means that the measures to determine the threshold of reasonable grounds to suspect are reached and that the development and submission of an STR are given the highest priority.

As mentioned in a previous article, and as confirmed by FINTRAC’s directive, it is important to document these measures as well as the management of priorities to avoid any confusion in the interpretation of the “as soon as practicable” principle.

2. Measures

FINTRAC specifies as follows the measures applicable to reach the threshold of reasonable grounds to suspect and stipulates that these measures must be described in the policies and procedures:

• Apply control and identify suspicious transactions (editor’s note: this refers to transactional monitoring mechanisms);
• Evaluate the facts and context concerning the suspicious transaction (editor’s note: FINTRAC has already published directives regarding the evaluation of facts and context);
• Establish a link between the money laundering and terrorist financing (below “ML/TF”) indicators and your assessment of the facts and context;
• In an STR, explain the grounds for which you suspect an offence by describing the facts, context, and ML/TF indicators that bring you to this conclusion.

If it has not already been done, make sure to review your procedures to integrate these notions and, mainly, the expected delays at each step.

3. Priority:

In this directive, it is stipulated that FINTRAC expects that you will not unreasonably prioritize another transaction monitoring task that could delay the submission of declarations. The more you will delay submitting STRs, the more you will have to give an adequate explanation. The STRs are sometimes complex, nevertheless, they must be processed as a priority and filled out in a timely manner.

The notion of priority, although it was mentioned several times by FINTRAC, is incorporated for the first time in this directive. Once more, a review of your procedures and the way you manage priorities is essential to comply with this directive.

4. Reasonable grounds to believe

We have noticed a new intriguing paragraph in the directive. In the section titled “Common STR deficiencies to avoid”, FINTRAC mentions again that the declaration threshold is reached once there are reasonable grounds to suspect a ML/TF offence. However, the following paragraph is added to this warning:

“If you identify a transaction whereby you reach reasonable grounds to believe that a ML/TF offence has occurred, you must begin an assessment of the related transactions immediately as you have surpassed the reasonable ground to suspect threshold. If assessed by FINTRAC and there are reasonable grounds to believe that a transaction is related to the commission of a ML/TF offence, and you have not begun an assessment of the facts, context, or ML/TF indicators, you may be cited for a missed STR.”

Our interpretation of this paragraph is that it refers to enhanced measures that must be applied when there are reasonable grounds to believe there is a ML/TF offence.

In short, with this regulatory change, it is evident that a priority must be given to STRs and that inappropriate delays will be questioned by authorities. As of June 1, 2020, you will have to support your arguments and, therefore, demonstrate that you have strong procedures in place.