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Fintrac Levies $7.4-million Penalty Against RBC for Not Reporting Suspicious Transactions

Canada’s financial watchdog, the Financial Transactions and Reports Analysis Centre (Fintrac), has imposed a record-breaking $7.4-million fine on the Royal Bank of Canada for failing to comply with anti-money laundering and terrorist financing measures.

Fintrac disclosed on Tuesday that the violations involved the bank’s failure to submit suspicious transaction reports when there were reasonable grounds to suspect connections to money laundering offenses. The agency electronically sifts through vast amounts of data annually from banks, insurance companies, and other financial entities to identify money tied to illicit activities, sharing intelligence with law enforcement.

The $7,475,000 penalty, the largest ever by Fintrac, was levied early last month following violations uncovered during a 2022 compliance examination. Out of 130 case files reviewed, the Royal Bank neglected to submit 16 suspicious transaction reports, even when there were reasonable grounds to suspect involvement in money laundering or terrorist financing.

Instances were found where the bank failed to escalate or refer files after being served with production orders on clients, and in cases related to fraud, transaction reports were not submitted despite indicators supporting suspicions of criminal activity. The bank also failed to provide information in the prescribed form in suspicious transactions reports and did not keep written policies and procedures up to date.

The examination revealed that before May 2021, the bank was not filing separate reports for different branch locations. Additionally, a review of suspicious transaction reports submitted over two months showed that 29 out of 34 reports included transactions for multiple locations that were not detailed separately, contrary to Fintrac’s guidance.

In response, Royal Bank spokesperson Gillian McArdle stated that while the bank chose not to appeal the penalty, it believes the fine is disproportionate to an administrative matter with no connection to money laundering or terrorist financing offenses.

Fintrac director Sarah Paquet, in a statement, emphasized the agency’s commitment to working with businesses to help them understand and comply with their legal obligations. Paquet had previously expressed concern in a speech that some businesses were falling behind in meeting their responsibilities.

Fintrac clarified that administrative monetary penalties aim to encourage behavioral change in businesses rather than simply punishing them. In the 2022-2023 financial year, Fintrac issued six notices of non-compliance, totaling $1,113,569 in penalties. Over the past 15 years, since gaining legislative authority, Fintrac has imposed more than 125 penalties across various sectors.

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