Canada’s financial intelligence agency has levied a $7.4-million penalty against the Royal Bank of Canada for non-compliance with anti-money laundering and terrorist financing measures.
The Financial Transactions and Reports Analysis Centre of Canada said on Dec. 5 the violations include failing to submit suspicious transaction reports, where there were reasonable grounds to suspect ties to a money laundering offence.
The agency, known as Fintrac, tries to pinpoint money linked to illicit activities by electronically sifting millions of pieces of information each year from banks, insurance companies, money services businesses, and others.
It then discloses intelligence to police and other law-enforcement agencies about the suspected cases.
The $7,475,000 fine announced on Dec. 5 against the Royal Bank is the largest ever imposed by the agency.
Fintrac said the penalty was handed out early last month after violations were found during the course of a compliance examination in 2022.
It said that out of 130 case files it reviewed, the Royal Bank failed to submit 16 suspicious transaction reports, when there were reasonable grounds to suspect dealings were related to an attempted or actual money laundering or terrorist financing offence.
These included instances where the bank was served with production orders on clients, but failed to escalate or refer the files for the purpose of determining whether a suspicious transaction report should be submitted to Fintrac.
In instances related to fraud, transaction reports were not sent to Fintrac despite the presence of indicators supporting reasonable grounds to suspect commission of an offence.
The agency also found the bank 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 concluded that prior to May 2021, the bank was not filing separate reports for different branch locations.
A review of suspicious transaction reports submitted over a two-month period showed that 29 out of 34 reports included transactions for multiple locations that were not spelled out separately, contrary to Fintrac’s published guidance.
In a statement on Dec. 5, Royal Bank spokesperson Gillian McArdle said the bank chose not to appeal the penalty, but believes it is “not at all commensurate” with an administrative matter where there is no connection to money laundering or terrorist financing offences.
“We hold ourselves to the highest standards on our processes to report suspicious activity and quickly took action to address gaps,” Ms. McArdle said.
“Equally important, there is no finding that anyone exercised judgment in bad faith or knowingly contributed to violations.”
Fintrac director Sarah Paquet said in a statement the agency would continue to work with businesses to help them understand and comply with their obligations under the law.
“We will also be firm in ensuring that businesses continue to do their part and we will take appropriate actions when they are needed.”
In a recent speech, Ms. Paquet had clearly flagged Fintrac’s concern that some businesses were lagging behind.
The agency noted on Dec. 5 that administrative monetary penalties are meant to encourage change in the behaviour of businesses, not punish them.
In the 2022-2023 financial year, Fintrac issued six notices of non-compliance to businesses for a total of $1,113,569 in penalties.
Fintrac has imposed more than 125 penalties across various sectors since it received the legislative authority to do so 15 years ago.
