FINTRAC Advisory Concerning Financial Transactions Involving High-Risk Countries Identified by FATF

On November 28, 2022, the Financial Transactions and Reports Analysis Centre (FINTRAC) issued an advisory (the “Advisory”) concerning financial transactions related to countries identified by the Financial Action Task Force (FATF) as high-risk jurisdictions and jurisdictions under increased monitoring.

Background

The Advisory follows two statements recently issued by the FATF:

• a statement on high-risk jurisdictions subject to a call for action, which identifies jurisdictions for which the FATF has called on countries to apply countermeasures or enhanced due diligence given significant strategic deficiencies noted in those jurisdictions’ regimes to counter money laundering, terrorist financings, and financing of proliferation, and
• a statement on jurisdictions under increased monitoring, which identifies jurisdictions that have developed an action plan with the FATF to address deficiencies in their anti-money laundering and counter-terrorist financing (AML/CFT) strategies.

The Advisory also references earlier statements issued by the FATF in respect of various matters concerning high-risk jurisdictions as set out below.

Highlights of the Advisory

The Advisory brings together key aspects of various FATF statements. In particular, the Advisory notes:

• While the FATF has paused the review process it began for Iran and the Democratic People’s Republic of Korea (DPRK), these jurisdictions remain subject to the FATF’s call for countermeasures in respect of Iran and DPRK and the FATF continues to encourage other jurisdictions to apply countermeasures that are effective and proportionate to the risks.
• In connection with strategic deficiencies related to its AML/CFT regime, Myanmar remains subject to a FATF call on other jurisdictions to apply enhanced due diligence measures proportionate to the risks arising from this jurisdiction. FINTRAC encourages reporting entities that are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to consider whether they are required to file a suspicious transaction report of one or more financial transactions or attempted financial transactions emanating from, or destined to, Myanmar.
• FATF brings attention to several other jurisdictions that have strategic AML/CFT deficiencies, including Albania, Barbados, Burkina Faso, Cambodia, Cayman Islands, Haiti, Jamaica, Jordan, Mali, Morocco, Myanmar, Nicaragua, Pakistan, Panama, Philippines, Senegal, South Sudan, Türkiye, United Arab Emirates, Uganda, Democratic Republic of the Congo, Mozambique, and Tanzania. The FATF notes that several of these jurisdictions have developed an action plan with the FATF to address such deficiencies.
• Nicaragua and Pakistan are no longer subject to the FATF’s increased monitoring process as each has improved the elements of its AML/CFT regime.
• The FATF previously expressed concern about the financing generated by, and provided to, the terrorist group known as the Islamic State. FINTRAC reminds all reporting entities subject to the PCMLTFA of their obligation to submit a terrorist property report to FINTRAC without delay, once they have met the threshold to disclose under the Criminal Code or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (RIUNRST). Reporting entities are also encouraged to undertake enhanced customer due diligence with respect to clients and beneficiaries involved in financial transactions emanating from, or destined to, a jurisdiction under Islamic State control.
• The FATF previously expressed concern about the money laundering and terrorist financing risk environment in Afghanistan. FINTRAC reminds reporting entities of their obligation to submit a terrorist property report to FINTRAC without delay, once they have made a disclosure under the Criminal Code or the RIUNRST. FINTRAC also advises reporting entities to consider whether they must file a suspicious transaction report in respect of financial transactions emanating from, or destined to, Afghanistan.
• With respect to the situation in Ukraine and the Russian Federation, FINTRAC notes the FATF previously expressed concern about the invasion’s impact globally on the money laundering, terrorist financing and proliferation financing risk environment as well as the integrity of financial systems, the broader economy and safety and security. The FATF called on all jurisdictions to provide advice and facilitate information sharing with their private sectors to assess and mitigate these risks. FINTRAC advises that reporting entities should consider whether to file a suspicious transaction report in respect of financial transactions emanating from, or destined to, Russia. FINTRAC also notes the number of new sanctions measures that Canada has imposed in respect of Russia.

For further information concerning the matters referenced in the Advisory and what they might mean from a compliance perspective, please contact any member of our Financial Services Regulatory Group.

The author would like to thank Cathy Costa-Faria, Associate for her assistance in writing this Update.