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Updates to Canada’s anti-money laundering (AML) and anti-terrorist financing (ATF) regulatory regime have increased the cost and complexity of regulatory compliance. Regulators have brought more companies under their purview and introduced new requirements for current reporting entities. Credit unions, small- and medium-sized banks and a widening range of money service businesses in particular now find themselves under more scrutiny.
Companies face serious financial and reputational consequences if they fall short of Canada’s AML compliance requirements. In the last four years alone, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) publicly named and imposed more than $5 million in penalties on non-compliant companies.1
Against this backdrop, many organizations are reviewing their AML/ATF programs to better understand their risk exposure. They’re frequently finding gaps and realizing their traditional approaches are unsustainable and unable to keep pace with their own business growth or the evolving regulatory landscape.
Small- and mid-sized institutions often struggle to develop—as well as regularly review and update—a comprehensive compliance program that’s specific to their size and industry. At the same time, many smaller organizations lack the analytical and operational capabilities needed to collect, aggregate and investigate customer and transaction data, as well as pinpoint and remediate risks on a timely basis.
This makes it hard to comply with regulatory and legislative changes (see sidebar), including revisions to the forms institutions must file with FINTRAC to flag various transactions, such as large cash transfers and suspicious transactions.
These organizations also often struggle to keep up with their FINTRAC reporting obligations because of inadequate systems, resourcing, program structure or a combination of all three. Insufficient investments in preventative AML compliance create costly operational challenges, such as backlogs of alerts that need adjudication, cases requiring investigation and reports that must be filed.
Proposed and enacted amendments include:
Companies with high levels of compliance maturity understand the business case for reimagining their AML/ATF program. They develop end-to-end processes to extract data from across their organization and aggregate it into a single source of truth that can be analyzed using advanced analytics tools and used for decision making.
These organizations typically include the following considerations in their approach:
For most companies, resolving the operational challenges that lead to case backlogs requires a fresh approach. This is particularly true for complex and labour-intensive processes, such as transaction monitoring. Legacy operating models that rely on adding manual resources to manage a company’s AML/ATF compliance program become even more ineffective and inefficient as you grow in size and expand your operations.
We’ve seen companies bridge these gaps through managed services relationships that strengthen their financial crime risk management. Companies can gain a strategic advantage through these arrangements when they move beyond traditional outsourcing arrangements and look for more than cost savings. In fact, our research found that top-performing businesses often turn to a more strategic set of managed services partnerships that improves their access to talent and technology.
To gain this performance premium from a managed services relationship, it’s helpful to consider the business outcomes you want to achieve, rather than focusing on one-off solutions. Working with a managed services provider that combines industry insights, financial crime specialists and technology expertise lets you take a holistic approach to strengthening your risk management program—from policy and governance, to implementing and refining your monitoring program through to case investigations.
Small- and medium-sized financial institutions face pressure to modernize their financial crime risk management programs and meet evolving regulatory requirements. But reimagining your operations can do more than help you achieve compliance. It’s an opportunity to make your AML/ATF framework more reflective of your risk profile, reduce false positive alerts and onboard new clients faster.
This enhances your effectiveness, efficiency and client experiences, helping you build trust and deliver sustained risk management outcomes. Importantly, it also lowers the chances of your company inadvertently facilitating or participating in a financial crime—strengthening and protecting the community in which you operate.
At PwC Canada, we take a human-led and tech-powered approach to helping organizations solve their compliance challenges. We combine subject matter expertise, human judgment and advanced digital tools in our managed services capabilities and other financial crime solutions. Reach out to start a conversation about how we can help you modernize your AML/ATF program.
1. “Public notice of administrative monetary penalties,” Financial Transactions and Reports Analysis Centre of Canada, accessed October 12, 2023, https://fintrac-canafe.canada.ca/pen/4-eng.
Partner, National Financial Crime Practice Leader, PwC Canada
Tel: +1 416 869 2349