An anti-money laundering (AML) effectiveness review is an evaluation that must be performed at its designated time. Failure to do so can lead to business troubles for your money service business (MSB).
Legal consequences may follow upon failure to complete your AML effectiveness review on time. Whether you’ve missed your deadline or want to be prepared for the future, we’ve got you covered.Â
Let’s look at what happens if you don’t complete your AML effectiveness review on time.
What is AML Effectiveness Review?
Canada’s fintech regulations require MSBs and other businesses to conduct timely AML effectiveness reviews. It is an evaluation that must be performed to find gaps in your company’s anti-money laundering compliance program.
The findings of an AML effectiveness review can be used to strengthen your company’s compliance policies. Another key purpose of the evaluation is to help your MSB stay compliant with FINTRAC regulations.
Is AML Effectiveness Review Legally Mandatory?
An AML effectiveness review is a legal requirement in Canada. Your company must perform this evaluation every two years to test its internal compliance program.
The mandatory process is an opportunity for MSBs to find gaps in their system and fix them. If you ignore the findings of an AML effectiveness review, your company may end up facing a sudden FINTRAC audit.
Who Should do an AML Effectiveness Review?
AML effectiveness reviews are supposed to be performed by:
- An independent internal or external party
- Someone who has no operational responsibility for the AML compliance program
- A person experienced in Canadian AML regulations and FINTRAC MSB rules
The best person to perform an AML effectiveness review is usually an external party, such as a fintech law firm. They can offer you unbiased individuals who handle such evaluations on a regular basis.
What Happens if you Don’t Complete Your AML Effectiveness Review on Time?
Missing your AML effectiveness review deadline can have grave consequences, such as:
- Legal Violation
Conducting an AML effectiveness review every two years is a legal requirement for MSBs. If you miss your deadline, your company will be in direct violation of Canadian fintech laws. A case can also be reported against your MSB for missing its AML effectiveness review.
- Consequences by FINTRAC
FINTRAC has complete authority to punish MSBs under the Proceeds of Crime and Terrorist Financing Act for non-compliance. If you fail to produce a copy of your most recent AML effectiveness review on FINTRAC’s regular examination, you’ll be in trouble.
The agency may punish you by:
- Enforcing an immediate AML audit
- Imposing monetary fines
- Cancelling your MSB license or enhancing scrutiny during registration renewal
- Flagging your business publicly for non-compliance
These consequences will harm your FINTRAC MSB’s reputation and financial position.
- Denial of Banking Services
AML effectiveness review copy is not only requested by FINTRAC, but also by banking partners. Your ongoing bank may want to see your latest evaluation results to ensure your business is not a risk to them.
If you cannot produce the review copy, your bank may deny you new services. They may also not renew your contract and let you go as a client.
MSBs that want to onboard a new bank also have to produce an AML effectiveness review copy. If you haven’t done an evaluation in the last two years, the bank will refuse to onboard you.
- Bank Account Closures
Some banks take strict measures when they find out a client has missed their AML review deadline. They may close your business accounts promptly to avoid bearing the burden of your non-compliance.
Your business can also get flagged by banking partners as a “high-risk MSB”. The overall consequence would be loss of ongoing and future banking relations.
If you were planning to onboard a big 5 Canadian bank, you would lose your chance to do that. An AML effectiveness review is essential for getting banked in Canada.
How to Avoid AML Effectiveness Review Deadline?
As a MSB owner, you have to meet various compliance requirements and conduct different audits. That’s why the biennial review may slip your mind. You can avoid forgetting the deadline by:
- Tracking Your AML Effectiveness Review Due Date
If you’ve already done an effectiveness review in the past, check the exact date. Set a firm calendar reminder for 22 months later and begin planning at least two months in advance.
- Maintaining Program Logs
Keep a record of all program updates, staff training logs, report filings, and audit logs. This will:
- Speed up your review process
- Demonstrate continuous improvement
- Strengthen your posture during any FINTRAC or bank audit
It will also allow you to conduct an emergency AML effectiveness review if your deadline is very close.
- Assigning a Team for AML Effectiveness Review
If you’re a small team, assign someone (typically the Compliance Officer) to:
- Schedule the review
- Identify an independent reviewer
- Prepare internal documents
Even though it’s a biennial obligation, treat the review like part of your annual compliance roadmap to ensure it never gets overlooked.
Never Miss Your AML Effectiveness Review Deadline With Renno Co. & Fintech
An AML effectiveness review is not a formality, it’s a cornerstone of your legal and operational compliance. Failure to complete it every two years can result in enforcement action, fines, account closures, and serious reputational harm.Â
Both regulators and banking partners expect you to have your evaluation completed, documented, and available on demand. Contact us today to schedule your AML effectiveness review and protect your FINTRAC MSB from avoidable compliance risk.
