Shining a light on compliance
by Tamanna Bhasin | February 23, 2025 2:44 pm
In the world of glittering diamonds, precious metals, and high-value jewellery, dealers in precious metals and precious stones are not immune to money laundering or terrorist financing threats and risks. In fact, they play a key role in preventing and detecting financial crime and helping to safeguard Canada’s financial system and economy.
The importance of compliance
Dealers in precious metals and precious stones must fulfill specific obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, including keeping records, verifying their clients’ identity, implementing a compliance program and reporting certain types of financial transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)—Canada’s financial intelligence unit and anti-money laundering and anti-terrorist financing supervisor.
These include suspicious transactions, which have no monetary threshold for reporting. In fulfilling these obligations, they must work hand-in-hand with FINTRAC.
FINTRAC’s mandate is to facilitate the detection, prevention and deterrence of money laundering, the financing of terrorist activities, and sanctions evasion while ensuring the protection of personal information under its control.
FINTRAC ensures that businesses subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated regulations, including dealers in precious metals and precious stones, comply with their legal obligations. These obligations are important and help deter criminals and terrorists from using Canada’s financial system to launder the proceeds of their crimes, finance terrorist activities, or evade sanctions. Compliance with the legislation ensures FINTRAC receives the information it needs to generate actionable financial intelligence for Canada’s law enforcement and national security agencies.
Implementing a comprehensive and effective compliance program is essential for businesses to fulfill their transaction reporting obligations. This program must ensure that proper processes are in place, that oversight is maintained, and that employees are adequately trained to recognize and report suspicious transactions effectively.
What is a suspicious transaction report?
A suspicious transaction report is one that dealers in precious metals and precious stones must submit to FINTRAC when they have reasonable grounds to suspect that a transaction or attempted transaction is related to the commission of money laundering, terrorist financing activity, or a sanction evasion offence. The suspicious transaction report is not just a formality, it is a key instrument in FINTRAC’s mandate to disclose financial intelligence to law enforcement and national security agencies.
In 2023–24, with the information it received from Canadian businesses, FINTRAC’s financial intelligence contributed to 266 significant, resource-intensive law enforcement investigations and many hundreds of other individual investigations at the municipal, provincial, and federal levels across the country and internationally.
Why are suspicious transaction reports important?
The dealers in the precious metals and precious stones sector’s unique handling of high-value items makes the sector an attractive target for those seeking to launder money or fund terrorist activities. The importance of suspicious transaction report submissions from the sector cannot be overstated. Each suspicious transaction report contributes to a larger picture, helping FINTRAC and its partners to identify and understand trends, methods, and networks associated with financial crimes.
Suspicious transaction reports often contain distinctive information which can only be gleaned from the sector’s perspective. This information can help uncover complex schemes and networks that might otherwise remain in the shadows.
Dealers in precious metals and precious stones are encouraged to ensure their transaction reports are thorough, timely, and in line with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated regulations’ reporting requirements. The sector’s suspicious transaction reports are invaluable.
What consists of reasonable grounds to suspect?
Reasonable grounds to suspect is the required threshold to submit a suspicious transaction report to FINTRAC and is a step above simple suspicion, as it implies there is a possibility that a money laundering, terrorist activity financing or sanctions evasion offence has occurred.
Dealers in precious metals and stones are only required to report when they reasonably suspect transactions could be related to money laundering, terrorist financing or sanctions evasion. They do not need to confirm the underlying details or provide evidence of a crime. Their suspicion should be based on objective reasoning, free from bias or prejudice.
Reaching this threshold means that the following elements have been considered:
- Facts
- Context
- Money laundering or terrorist activity financing indicators
- Sanctions evasion characteristics related to a financial transaction.
After reviewing this information, if it is concluded that there are reasonable grounds to suspect a particular financial transaction is related to the commission of a money laundering, terrorist activity financing or sanctions evasion offence, the transaction must be reported. In other words, if it is possible to demonstrate and articulate suspicion so another individual with similar knowledge, experience, or training would likely reach the same conclusion based on a review of the same information, it must be reported.
Many factors will support the assessment and conclusion that a money laundering, terrorist activity financing, or sanctions evasion offence has possibly occurred. These factors, along with an explanation of the assessment, must be included in the narrative section (Part G) of the suspicious transaction report.
How do you submit a suspicious transaction report?
The FINTRAC Web Reporting System is a secure and confidential process for submitting a suspicious transaction report. To access the system, please contact FINTRAC at its toll-free number, 1-866-346-8722, or by email at F2R@fintrac-canafe.gc.ca.
For more information, consult: fintrac-canafe.canada.ca/re-ed/dpms-eng.
Source URL: https://www.jewellerybusiness.com/features/shining-a-light-on-compliance/