FINTRAC Signs MoU with Three U.S. Agencies to Strengthen AML Compliance

Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), has signed a memorandum of understanding (MOU) with 3 U.S. federal banking agencies to improve cross-border cooperation in combating financial crime.

The MOU provides a framework for information sharing between FINTRAC and the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Federal Reserve Board (FRB), as media states.

Discussions between the regulators have been ongoing for several years. However, recent issues at Toronto-Dominion Bank (TD) speed up the need for a more formalized information-sharing mechanism.

Earlier this year, FINTRAC imposed a record-breaking penalty of nearly C$9.2 million on TD Bank for non-compliance with AML regulations. In December 2023, the agency fined two of Canada’s largest banks, Royal Bank of Canada and CIBC, a total of approximately C$9 million for various violations, including failure to submit suspicious transaction reports.

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The Controversial Track Record of TD Bank

TD Bank has been involved in a money laundering scandal that first came to light over a year ago. The bank’s plans to acquire “Tennessee-based First Horizon Corp.” were derailed due to regulatory concerns related to money laundering issues.

In October 2023, the U.S. Department of Justice released a detailed report outlining how TD, a major U.S. lender, became involved in facilitating money laundering activities by criminal organizations and drug cartels.

The report revealed that TD allowed 3 separate money laundering networks to move over US$670 million through its bank accounts. Alarmingly, at least one of these schemes involved the direct participation of TD employees.

These serious allegations have raised significant concerns about TD’s internal controls and risk management practices. As investigations continue, the bank faces legal and financial penalties.

Canada Strengthens Unified Efforts to Combat Money Laundering

Canadian banks and government agencies are also facing pressure to combat global criminal organizations as the country’s anti-financial crime regime is reviewed by the Financial Action Task Force (FATF).

The FATF – an intergovernmental body responsible for setting global standards for combating money laundering and terrorist financing, will commence its evaluation of Canada’s anti-financial crime framework early next year.

The federal government has introduced new legislation to strengthen the country’s financial crime defenses.

It’s important to note that FINTRAC’s supervisory activities, which involve monitoring companies’ compliance with legal obligations, are distinct from its intelligence function.

The agency already has the capacity to share such information with foreign financial intelligence units, including the Financial Crimes Enforcement Network (FinCEN) in the U.S., through the Egmont Group.

In addition to its monetary policy responsibilities, the U.S. Federal Reserve oversees and regulates banks. A Fed spokesperson confirmed the agency’s participation in the MOU.

Chris Mathers, president of Chris Mathers Inc., a consulting and investigative firm, described the agreement as “long overdue.” He emphasized that the lack of information sharing between Canada and the U.S. has historically allowed criminals to operate with impunity.

“I think that this is just the beginning. When the new U.S. administration threatens tariffs if Canada doesn’t step up the fight against fentanyl, they aren’t just talking about policing the border”, Mathers said.

“Strict anti-money-laundering compliance is a key component of the U.S. anti-drug strategy, and the Canadian government needs to demonstrate that we are willing to partner with them. Information sharing between agencies is essential if we are going to even have a chance to stem the flow of fentanyl, in either direction”

Mr. Mathers

As per the media sources, this collaboration will enable the exchange of vital supervisory information between these regulatory bodies to combat financial crime, particularly money laundering and terrorist financing.