How to avoid common FINTRAC audit issues

Every year, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) examines (a.k.a. audits) hundreds of real estate brokerages across Canada to determine whether they are meeting their anti-money laundering obligations. In some cases, after an audit, FINTRAC gives the brokerage top marks. Yay! In other cases, FINTRAC gives the brokerage a failing grade. Boo!

What separates the “yays” from the “boos,” you ask?

We recently sat down with FINTRAC to get a better understanding of this very question. In other words, we asked, “What are some of the common areas members are being cited as being deficient?” Here are some practical tips we learned from that conversation:

Salespersons

  1. Be as detailed as possible when writing down a client’s business or occupation. “Businessman” “entrepreneur” or “consultant” is not going to pass muster. When in doubt, add more detail.
  2. Use the latest forms. CREA’s FINTRAC Regime template forms can be found on REALTOR Link® or WEBForms®. The old paper forms you printed off a couple of years ago and which are sitting in your drawer may be outdated.
  3. Corporate clients are different beasts and come with different obligations:
    1. Don’t forget that when confirming the existence of a corporation, there is an obligation to identify the person conducting the transaction on behalf of the corporation and to ascertain the existence of the corporate entity itself.
    2. You need to keep a copy of the part of the client’s official corporate records showing the provisions relating to the power to bind the corporation as it relates to the transaction.

Brokers and brokerages

  1. Document, document, document. Document all your FINTRAC-related policies in your FINTRAC policies and procedures manual. For example:
    1. Document the training program you make your salespersons take.
    2. Document the fact you don’t accept cash to cut down on your anti-money laundering risk.
    3. Document the fact you require all transactional paperwork be reviewed by your compliance officer. Document!
  2. CREA’s template policies and procedures manual may be used as a base for your brokerage’s FINTRAC policies and procedure manual… but only if it has been tailored to reflect what is actually happening at your brokerage. The manual contains many blank spaces and these should be replaced with your brokerage-specific practices.
  3. The obligation to review the brokerage’s FINTRAC policies and procedures to test its effectiveness is separate from the obligation to complete a brokerage risk assessment. Perhaps the confusion stems from the fact both are conducted approximately every two years. Regardless of the reason, they are different obligations and brokerages must do both.
  4. Complete a detailed brokerage risk assessment. If you’re using CREA’s template form, the checklist at the front of the form is just the starting point a detailed analysis must be included in part 3 of the form. If you need additional help analyzing your risk, use FINTRAC’s risk-based approach workbook.
  5. A good FINTRAC compliance officer is key. They should have the authority to discharge their responsibilities effectively. This is not a junior position so don’t appoint a junior to the job.

So, don’t despair! With a little FINesse, your business will stay on TRAC (and the “dad” award for cheesy FINTRAC jokes goes to… me)!

The article above is for information purposes and is not legal advice or a substitute for legal counsel.

Simon Parham, Legal Counsel, is always on hand to provide helpful advice to CREA, Boards, and Associations on all aspects of federal legislation that can be reduced to an acronym, including: PIPEDA; FINTRAC; and the DNCL. In his spare time, Simon enjoys running, camping, discovering the world with his daughter, and planning his “big year.”


4 thoughts on “How to avoid common FINTRAC audit issues”

  1. Good morning Simon
    I just listened and watched your video presentation to the Fraser Valley Real Estate Board – it was excellent and I wanted to sincerely thank you.

    I am looking at CREA’s website and can’t find where all the FINTRAC samples are to use including CREA’s template policies and procedures manual may be used as a base for your brokerage’s FINTRAC policies and procedure manual…

    Could you please let me know where I find all the FINTRAC info on your website. Thanks again Barb


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