A robust anti-money laundering (AML) compliance and counter-terrorism financing (CTF) is essential for fintech companies in Canada. You need to appoint compliance officers and senior management roles for legally compliant operations.
While most money service businesses (MSBs) are aware of the responsibilities of their compliance officers, they lack information on senior management duties. We’ll help you understand your senior management’s role in AML/CTF compliance.
What is AML/CTF Compliance?
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act governs Canada’s AML and CTF compliance regime. It enforces policies for:
- MSBs
- Payment service providers (PSPs)
- Banks
- Credit unions
- Securities dealers
Your AML and CTF compliance program should implement measures that prevent money laundering. The policies must also help your business combat terrorist financing.
What are Senior Management’s Responsibilities for AML/CTF Compliance?
More than 24,000 private Canadian fintech businesses are on the frontline for combating financial crimes. These companies are achieving their goals with the help of internal senior management officers. The key legal responsibilities of senior management for AML and CTF compliance include:
- Approving AML/CTF Policies
The top responsibility of senior management is to review drafts of AML and CTF policies for their company. They must also approve specific measures in that draft, such as:
- The overall compliance program
- Internal guidelines for anti-money laundering and counter-terrorism financing
- Escalation protocols for handling AML and CTF compliance breaches
- Training programs for employees to maintain compliance
FINTRAC and other regulatory agencies expect senior management of a fintech company to understand their policies thoroughly. The managers must implement the compliance program effectively and approve new changes to strengthen it whenever necessary.
- Overseeing Risk Assessment Measures
All MSBs, such as cheque cashers and crypto asset providers, must base their AML compliance program on a risk-based approach. This means your senior management should:
- Set a general risk tolerance for the company
- Check the results of periodic internal risk assessments
- Ensure risk assessment results are used for making wise business decisions
Your company’s senior management must always implement general risk assessment steps. The measure is not only a legal obligation, but also critical for business operations.
- Appointing A Chief Compliance Officer
Every FINTRAC MSB must have a chief compliance officer (CCO) who helps with the maintenance of policies. This officer is appointed by senior management. A CCO must have:
- Authority to act independently
- Resources and staff to develop AML and CTF compliance measures
These are provided to the CCO by the senior management of a MSB. Your manager must ensure that the chief compliance officer they’re appointing has proper qualifications to lead the program.
- Reviewing AML/CTF Compliance Reports
Senior management of your company will receive timely compliance reports from the CCO, such as:
- Internal suspicious transaction report (STRs)
- Annual compliance effectiveness report
- Internal audit findings
- Risk assessment results
- Performance indicator report of AML and CTF compliance
Your senior management must review these reports and take necessary action to ensure your MSB’s AML/CTF compliance is intact.
- Identifying AML/CTF Compliance BreachesÂ
A MSB’s senior management officer must have an eye for detail to identify compliance breaches. The earlier mentioned reports and performance results have to be reviewed for not only strengths, but also weaknesses.
For example, if a suspicious transaction report shows a specific client engaging in high-risk behavior, your senior management must identify the pattern. They also have to take appropriate action against the breaches.
- Taking Action Against AML/CTF Compliance Breaches
If there is a reportable breach of AML/CTF policies, such as a failure to file a required report or an issue with sanctions screening, senior management is expected to:
- Investigate the root cause
- Ensure that the breach is addressed promptly
- Report it to regulators if required
- Oversee the implementation of a remediation plan
Reviewing reportable breaches of the AML/CTF Program and taking appropriate action is a key accountability mechanism.
What are the Consequences of Senior Management’s Failure?
The consequences of a senior management’s failure in AML/CTF are grave, including:
- Monetary penalties by FINTRAC, the Bank of Canada, and other institutions
- Loss of banking relations due to high-risk status
- Potential criminal liability, which may be addressed with imprisonment
Such penalties will lead to reputation damage and may cause permanent business closure.
Prevent AML/CTF Compliance Failure with Renno Co. & Fintech’s Help
Our firm supports fintechs, MSBs, and regulated entities by:
- Auditing their current AML/CTF framework
- Advising boards and executives on AML accountability
- Preparing governance documentation and board minutes
- Supporting the CCO appointment and onboarding
- Providing custom executive AML/CTF training
Whether you’re a startup or a scaling fintech, we help leadership teams meet their responsibilities while building trust with regulators and banking partners.
Contact us Today to Assist your Senior Management with AML/CTF Compliance
In today’s regulatory environment, ignorance is not a defence. As a director, founder, or C-level executive, you are responsible for AML/CTF compliance.
If you're unsure whether your leadership team is fulfilling these duties, now is the time to act and consult a fintech law firm.
Contact us today to ensure your senior management is meeting its AML/CTF responsibilities and building a defensible compliance culture from the top down.
