Minor FINTRAC offences that once carried penalties of up to $1,000 per violation can now cost up to $40,000. Serious violations have jumped from $100,000 to as much as $4 million per violation.
The implementation of Bill C-12 earlier this year drastically increased FINTRAC’s administrative monetary penalties, some by up to 40 times their previous amount, and brokerages are taking notice.
Cara Morgan, broker of record and owner of Royal LePage Solutions, with locations in and around Calgary, says the increased penalties have reshaped how her brokerage approaches operational compliance.
“Rather than simply an administrative task, compliance is now embedded directly into the management of every deal,” she explains.
Having an agent merely fill out a client identification form or receipt of funds record is no longer enough. To stay compliant, brokerages have had to completely overhaul their existing procedures.
A handful of companies offer full FINTRAC compliance solutions that go far beyond a form to satisfy a Realtor’s obligations. According to Friedrich Klaus, co-founder of Illuminai Intelligence Corp., brokerages carry the lion’s share of the obligation when it comes to FINTRAC compliance.
Illuminai, ReallyTrusted and Fintracker are three all-encompassing FINTRAC solutions that many Canadian brokerages have hired to do the heavy lifting. For brokerages, compliance goes far beyond their Realtors flagging a transaction with a potentially suspicious client.
The 5 pillars
Instead, brokerage compliance is assessed by looking at a brokerage’s entire framework and whether it has met the requirements of Canadian anti-money laundering (AML) law. To determine whether a brokerage has met these requirements, FINTRAC looks at five compliance guidelines, or “pillars.” The first is appointing the company’s FINTRAC compliance officer. The second pillar is just as important: ongoing AML training.
Morgan, who uses ReallyTrusted to keep RLP Solutions compliant, says the “ReallyTrusted Academy provides comprehensive training and allows us to maintain verifiable training records.”
According to Greg Dent, chief operating officer at ReallyTrusted, training and support are essential but often overlooked.
“High-quality training is one of the five pillars FINTRAC sets out for a complete compliance program and a provider that can’t point to training, consulting services and a FINTRAC support desk may be more of a tech company than a compliance partner,” Dent says.
All three programs offer similar services to meet FINTRAC’s five pillars. Another pillar is creating and maintaining a policies and procedures manual. This responsibility can be especially taxing for brokerages, which bear the weight of maintaining and updating their policies every time the governing law changes.
“Because we establish the documentation, we are then able to keep the program (documentation and otherwise) up to date as things change in the sector,” says Dent. “We have provided our clients with three updates so far this calendar year. Sometimes, those updates are the direct result of regulatory change — for instance, the implementation of [Bill C-12], which significantly increased FINTRAC’s penalties.”
Screening every client
Assessing every client’s risk is another pillar brokerages must meet to satisfy their FINTRAC obligations. To assess the risk of every client a Realtor works with, all three programs run clients through a series of screening lists. ReallyTrusted runs every client through several sanctions and terrorist lists, including the United Nations Security Council list, the Consolidated Canadian Autonomous Sanctions List and Interpol, among others.
Other screening tools include checks for adverse media, which, according to Klaus, is more than a Google search.
“A Google search is not going to have a number of important categories like debarments or specific AML/KYC (Know Your Customer) investigations conducted by foreign governments,” says Klaus.
Some real estate boards in Ontario, including the Toronto Regional Real Estate Board and the Cornerstone Association of Realtors, have adopted Fintracker as their preferred FINTRAC compliance program. They offer members free access to parts of the program, including its forms, online app and in-person ID scanning.
Independent reviews and examinations
All three providers also offer an independent effectiveness review, which is the final pillar outlined by FINTRAC.
“Illuminai has always led the way when it comes to compliance,” Klaus says. “Our policies and procedures and effectiveness review services are [designed] by a former FINTRAC auditor to ensure our customers receive a harmonized set of policies that are effective and tested.”
Dent explains that for customers whose programs were built by ReallyTrusted, effectiveness reviews are conducted by an outside party.
“For FINTRAC Express clients, we assist in compiling data and ensuring it is properly ‘packaged,’ but we have a long-term partnership that ensures the review is not conducted by our own team,” Dent says. “Because we are the ones who set up the program and it is not best practice to audit a program you developed.”
Instead, those reviews are conducted by people with at least 10 years’ experience in the real estate anti-money laundering sector. Morgan says her brokerage’s effectiveness review this past year was “seamless,” and having a third party conduct it meant being able to “deliver an unbiased, third-party assessment that satisfies FINTRAC requirements.”
When FINTRAC announces a brokerage examination, ReallyTrusted also supports brokerages with a three-pronged approach. The first is training the compliance officer on questions they may be asked. The second is analyzing the transactions under review.
“Third, we sit in the examination as a consultant,” Dent says. “In that role, we are able to help clarify the scope of questions and help the compliance officer locate the relevant information in their program documentation.”
Still on the hook
All three programs streamline FINTRAC compliance through fillable online forms, compliance monitoring and audit prep. But they don’t remove the onus on agents or brokerages to do their due diligence.
“The brokerage team remains responsible for file review, escalation to review high-risk files and final sign-off,” Morgan says. “The brokerage remains responsible for submitting suspicious transaction reports.”
Having stepped into the world of real estate as a receptionist over a decade ago, Diana worked in the industry at different capacities and climbed the ladder since. She has supported Realtors as a front desk assistant, organized incoming paperwork as a deals admin, and processed closings as a head-office accountant. Working at several brokerages gave her insight into their inner workings, from recruiting, social media marketing, commission payouts, and everything in between.
The face of real estate is often portrayed as a confident Realtor, but the hardworking cogs within the real estate machine — office admins, assistants, receptionists, and clerks — are often forgotten. Using her real estate and journalism experience, Diana sheds light on everything going on behind the scenes, while keeping the machine humming along.
