Canada’s FINTRAC Imposes Fine on Questrade for Serious AML Breaches

Canada’s financial watchdog that supervises Money Laundering and terrorist financing has issued details of violations committed by a Canadian regulated broker dealer.

Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), a government organization that reports to Canada's ministry of finance, has found Questrade, a domestic financial services firm guilty of negligence in relation to serious principles in the way it deals with money laundering. As a result, FINTRAC enforced a financial penalty in 2011 to the Multi-Asset discount broker.

FINTRAC announced full details of the violations committed by Questrade in a press statement. The Order states that: “Questrade, Inc., a securities dealer in Toronto, Ontario, was imposed an administrative monetary penalty of $346,140 on October 19, 2011, for committing nine violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (the Regulations).”

FINTRAC, a government organization, was set up in 2000 to specifically tackle money laundering and terrorist financing related crimes. Canada has a range of financial regulators for brokers, banks and fund managers operating in the financial markets arena. Questrade is a member of the Investment Industry Regulatory Organization of Canada, a self-regulatory organization which oversees all investment dealers.

During FINTRAC’s investigations, Questrade was found to have poor systems and controls in its compliance and anti-money laundering procedures. The major issues according to the briefing issues were:

• Failure to report a suspicious transaction;
• Incomplete compliance policies and procedures, failure to develop a written ongoing compliance training program and failure to take special measures for high risk activities;
• Inadequate practices of ascertaining client identity and confirming the existence of an entity other than a corporation, failure to enter into an agreement or arrangement with an agent or mandatory for the purposes of ascertaining identity, and incomplete record keeping;
• Failure to take reasonable measures to determine whether a person is a politically exposed foreign person.

The financial penalty is one of the first issued to a financial services broker for such activities, highlighting Canada's commitment to safeguarding its financial services sector.

Canada's financial regulators adhere to state regulations which vary from region to region. In October 2013, the Ontario Securities Commission (OSC) cautioned investors about global FX broker, YouTradeFX, and advised users not to deal with unauthorized brokerage firms.

Questrade was unavailable to provide a comment.

Money laundering related breaches are taken seriously by regulatory authorities in developed countries. Recently, the UK's FCA imposed a £7 million fine on Standard Bank for lapsed controls when dealing with high risk customers.