FINTRAC Ministerial Directives Update March 2025
In today’s global financial landscape, staying informed about anti-money laundering (AML) requirements is essential for regulated entities across Canada. Recently, FINTRAC – the Financial Transactions and Reports Analysis Centre of Canada – issued an important advisory following the latest plenary meeting of the Financial Action Task Force (FATF). The advisory focuses on financial transactions linked to countries identified by the FATF, outlining the risks associated with specific high-risk jurisdictions and the obligations imposed on reporting entities. This article provides a comprehensive summary of the advisory and details the key countries and requirements to ensure compliance with Canada’s AML framework.
Overview of the FINTRAC Advisory
FINTRAC’s advisory serves as a crucial reminder that reporting entities must remain vigilant when processing financial transactions related to high-risk jurisdictions. The advisory follows the FATF’s regular updates and identifies countries with strategic deficiencies in their AML and counter-terrorist financing (CTF) regimes. It provides guidance on how to treat transactions associated with these jurisdictions and emphasizes the importance of thorough customer due diligence (CDD) and record-keeping.
Categories of Jurisdictions
The advisory classifies countries into several groups based on their AML/CTF risk profiles:
High-Risk Jurisdictions Subject to a Call for Action
The FATF has called on its member countries to apply countermeasures or enhanced due diligence for transactions involving certain jurisdictions. Specifically, the advisory highlights:
Democratic People’s Republic of Korea (DPRK): The FATF remains deeply concerned about the DPRK’s failure to address significant deficiencies in its AML/CTF system. Transactions involving the DPRK must be treated as high risk, requiring rigorous identity verification and enhanced customer due diligence. Reporting entities are instructed to exercise extreme caution when dealing with any transactions that have origins in or connections to the DPRK.
Iran: Similarly, Iran is classified as high risk. Every financial transaction originating from or destined for Iran must be subject to strict due diligence measures. This includes verifying the identities of clients and scrutinizing the source and purpose of funds to mitigate the risks of sanctions evasion and other illicit activities.
Myanmar: Although not subject to the same level of countermeasures as the DPRK or Iran, Myanmar is highlighted for requiring enhanced due diligence measures. Reporting entities must carefully assess transactions connected to Myanmar, taking into account geographic and contextual factors that may elevate the risk of money laundering or terrorist financing.
Jurisdictions Under Increased Monitoring (Grey List)
The advisory also identifies a number of countries that, due to ongoing strategic deficiencies, are subject to increased monitoring. These jurisdictions include:
Algeria, Angola, Bulgaria, Burkina Faso, Cameroon, Côte d’Ivoire, Croatia, Democratic Republic of the Congo, Haiti, Kenya, Lao People’s Democratic Republic, Lebanon, Mali, Monaco, Mozambique, Namibia, Nepal, Nigeria, South Africa, South Sudan, Syria, Tanzania, Venezuela, Vietnam, and Yemen.
Entities dealing with transactions from these regions must implement enhanced risk assessments and due diligence procedures. The regulatory expectation is that these transactions be scrutinized more closely to ensure that any money laundering or terrorist financing risks are effectively managed.
Jurisdictions No Longer Subject to Increased Monitoring
The advisory also notes that certain jurisdictions have made significant progress in addressing their AML/CTF deficiencies. For example, the Philippines has been removed from the ‘grey list’ and is no longer subject to increased monitoring. Although transactions linked to these jurisdictions may carry a lower risk than those on the grey list, reporting entities must still maintain adequate due diligence and risk assessment procedures.
FATF Actions on Terrorist Financing
The advisory includes detailed guidance regarding terrorist financing, particularly concerning the Islamic State (IS). Key points include:
Islamic State and its Affiliates: The FATF has issued public statements on the risks associated with the Islamic State, including its regional affiliates such as IS-Khorasan Province (ISKP), IS-Bangladesh, IS-Sinai Province (ISSP), IS-Democratic Republic of the Congo, IS-East Asia, IS in the Greater Sahara, IS-Libya, and IS-West Africa Province. Reporting entities are required to treat transactions related to these groups as high risk. This involves not only robust customer due diligence and enhanced transaction monitoring but also immediate reporting of any suspicious activities.
Regional Situations Impacting AML Compliance
Beyond the designated high-risk jurisdictions, the advisory addresses broader regional concerns:
Afghanistan: Following the Taliban’s seizure of power and subsequent changes in the political landscape, FATF has issued statements emphasizing the risks associated with transactions connected to Afghanistan. Reporting entities must exercise caution and apply enhanced due diligence measures when processing transactions linked to Afghanistan.
Ukraine and the Russian Federation: In light of the ongoing geopolitical tensions and the full-scale invasion of Ukraine by Russia, the FATF has also issued statements regarding the Russian Federation. Reporting entities must now consider every financial transaction involving Russia as high risk. This includes verifying client identities rigorously, exercising enhanced due diligence, and maintaining detailed records as required under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).
The Middle East: The advisory touches on the evolving situation in the Middle East, where rapid political changes and ongoing conflicts have resulted in heightened money laundering and terrorist financing risks. Reporting entities are urged to consider these risks carefully in their risk assessments and due diligence processes.
The Role of Compliance and Record-Keeping
Central to the advisory is the emphasis on compliance and meticulous record-keeping. Under the PCMLTFA and associated regulations, reporting entities must:
Verify and Document: All financial transactions associated with high-risk jurisdictions must be verified with robust customer due diligence. This includes obtaining and recording the identity of individuals and entities involved, the source of funds, and the purpose of the transaction.
Maintain Comprehensive Records: Reporting entities are required to retain detailed records of all transactions, regardless of the amount. This record-keeping is crucial for both internal monitoring and external regulatory reporting, such as the timely submission of Suspicious Transaction Reports (STRs).
Ongoing Monitoring: Entities must continuously monitor transactions and business relationships, ensuring that any changes in risk profiles are promptly addressed. Ongoing monitoring helps to detect suspicious activities and ensures that compliance measures remain effective over time.
Why These Requirements Matter
For regulated entities in Canada, adherence to these AML requirements is not merely a regulatory formality—it is fundamental to maintaining the integrity of the financial system. The rigorous standards set by FINTRAC and FATF are designed to prevent money laundering and terrorist financing activities that can undermine economic stability and security.
By treating transactions from high-risk jurisdictions with the necessary level of scrutiny, reporting entities contribute to a safer financial environment. Failure to comply with these requirements not only results in significant financial penalties but also exposes organizations to reputational risks and operational disruptions.
How We Can Help
At Platino Consulting, we understand the complexities of FINTRAC’s AML requirements and the challenges faced by regulated entities in meeting these obligations. Our team of AML consultants is dedicated to helping your organization build and maintain robust compliance frameworks that address these risks effectively.
Our services include:
Customized Compliance Programs: We work with you to develop tailored compliance programs that align with FINTRAC’s regulations and your unique business model. This includes the creation of detailed policies and procedures, comprehensive risk assessments, and effective record-keeping practices.
Enhanced Due Diligence and Monitoring: We implement advanced transaction monitoring systems and enhanced due diligence measures to ensure that every financial transaction, especially those involving high-risk jurisdictions, is thoroughly scrutinized. Our solutions are designed to detect suspicious activities early and facilitate timely reporting.
Training and Support: Our team provides ongoing training and support to ensure that your staff is fully equipped to meet regulatory requirements. Through targeted training sessions and continuous support, we help create a culture of compliance within your organization.
Proactive Regulatory Intelligence: We keep you informed about the latest regulatory updates, including changes to the PCMLTFA and FINTRAC’s reporting obligations. This proactive approach enables you to adapt your compliance measures swiftly and effectively, reducing your exposure to potential fines and reputational damage.
FINTRAC’s latest advisory highlights the increasing complexity and importance of AML compliance for regulated entities in Canada. The guidance emphasizes the need for enhanced due diligence, robust record-keeping, and comprehensive monitoring of transactions linked to high-risk jurisdictions. For entities operating in this challenging regulatory landscape, staying compliant is not only a legal obligation—it is a critical component of your risk management strategy.
By partnering with Platino Consulting, your organization can effectively navigate these requirements and safeguard your operations against the risks of non-compliance. Our expert team is ready to work with you to build a compliance program that not only meets but exceeds regulatory expectations.
To ensure your organization remains compliant and protected, contact Platino Consulting today for a comprehensive AML compliance review. Let us help you build a robust framework that mitigates risks and secures your financial operations.
