FINTRAC: Updated Correspondent Banking Guidance for Canadian Institutions

• FINTRAC has released an updated version of its correspondent banking guidance, effective January 1, 2023.
• The new guidance clarifies existing requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFAT).
• Financial institutions must review the updated guidance to ensure their correspondent banking relationships comply with new requirements.
• Failure to comply with regulations could result in fines or other penalties.

The agency emphasizes that the updated guidance is not a new regulation but rather a clarification of existing requirements.

FINTRAC has released an updated version of its correspondent banking guidance, which aims to clarify the requirements for financial institutions in Canada. The new guidance is effective as of January 1, 2023. According to FINTRAC, the update reflects changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFAT). The agency emphasizes that the updated guidance is not a new regulation but rather a clarification of existing requirements. Financial institutions are expected to review the updated guidance and ensure their correspondent banking relationships comply with the new requirements.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFAT) requires financial institutions in Canada to implement measures to prevent money laundering and terrorist financing. The act sets out specific requirements for correspondent banking relationships, including the need for financial institutions to verify the identity of their correspondents and to conduct regular risk assessments. FINTRAC is responsible for enforcing these regulations and has issued guidance to help financial institutions comply with the requirements. The updated guidance reflects changes to the PCMLTFAT that came into effect in 2022.

The updated correspondent banking guidance from FINTRAC is significant for financial institutions in Canada, particularly in light of potential increased scrutiny on cross-border transactions. Lawyers and compliance officers should review the new requirements to ensure their clients' correspondent banking relationships comply with the regulations. Failure to comply with the requirements could result in fines or other penalties. The updated guidance also highlights the importance of ongoing risk assessments and due diligence in correspondent banking relationships. Financial institutions that fail to prioritize these measures may be at increased risk of non-compliance.

Lawyers and compliance officers should review the updated FINTRAC guidance to ensure their clients' correspondent banking relationships comply with new requirements, particularly in light of potential increased scrutiny on cross-border transactions.

Source: Original reporting via FINTRAC