Money-laundering watchdog to review practices

Money-laundering watchdog
Money-laundering watchdog

Money-laundering watchdog says it will review its practices after it was revealed Monday that Manulife Financial Corp. was the unnamed financial institution levied the largest penalty in the federal agency’s history.

Last April, Fintrac penalized Manulife $1,154,670 for failing to report a suspicious transaction and various money transfers. At the time, the federal agency did not name the company’s bank, saying it was exercising its discretion to do so — a decision that prompted a public outcry.

Manulife confirmed in a statement issued Monday that its banking unit was the one penalized for “administrative lapses” that were remedied in the first half of 2014. The disclosure came after the CBC, citing anonymous sources, identified Manulife Bank as the financial institution fined by Fintrac last year.

Experts speculated Fintrac’s decision not to name Manulife Bank could have come from an agreement whereby Manulife agreed not to pursue an appeal and pay the penalty in exchange for anonymity. Neither Fintrac nor Manulife have confirmed such a deal took place.

Fintrac director Gerald Cossette said in a statement that he used his discretion to bring about improved compliance behaviour as quickly as possible and send a message of deterrence to other businesses.

“We have found that court proceedings may take many years with information often being sealed and outcomes uncertain,” he said.

It’s likely Fintrac had an agreement with Manulife and felt a significant fine would be enough to satisfy the Canadian public, said Christine Duhaime, a lawyer at Duhaime Law, which specializes in counter-terrorist financing and anti-money laundering law practice.

However, there was significant backlash as the public felt granting a large corporation anonymity — something an average Joe wouldn’t be entitled to — wasn’t fair, she said.

The public needs to know who the entity behind such a large fine is, Duhaime said, adding she believes Fintrac won’t grant anonymity like this again if a similar matter comes up.

As a bank’s reputation is important to them, Duhaime said deterrents like naming them for wrongdoings can be effective.

“I think everybody probably learned a good lesson here about transparency and accountability to the Canadian public.”

Cossette said in his statement that after the penalty was made public, the agency saw increased reporting from Canadian businesses.

“We believe our message of deterrence was heard very clearly.”

He said he understands withholding the bank’s name may not have met public expectations when it comes to openness and transparency.

Fintrac will work with Finance Canada to review the legislation around its penalty program, he said.

“We are also examining our administrative monetary penalty policies to ensure, among other things, that they strike an appropriate balance between the need for transparency and the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.”

Manulife Financial said in its statement that it did not enable or facilitate money laundering. Cossette also said the actions in question had nothing to do with money laundering or financing terrorism.

Manulife explained that, “one violation involved a customer who had already been reported to law enforcement and Fintrac by Manulife. Additional information released by Fintrac in 2016 shows that Manulife proactively worked with law enforcement in both Canada and the United States in relation to the matter underlying the one suspicious transaction report (STR) violation, including advising law enforcement prior to the failure to file this one STR.”

Manulife Financial (TSX:MFC), one of the country’s biggest financial services businesses, said it considers the matter closed and doesn’t plan further comment. A spokesman declined to answer any questions on the matter.

Since March 2012, Fintrac has meted out $3.54 million in fines against 79 entities. Manulife Bank is the only bank to have been fined by Fintrac in that time.

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