Canada's financial watchdog, the Financial Transactions and Reports Analysis Centre (FINTRAC), is ramping up its use of artificial intelligence (AI) in a bid to enhance the detection of suspicious transactions, aiming to strengthen its fight against financial crimes.
In a notable move last month, FINTRAC imposed fines totaling C$9 million ($6.7 million) on Canada's largest banks, Royal Bank of Canada and CIBC, for various violations, setting a record for fines against individual banks. This included failure to submit suspicious transaction reports, emphasizing the regulator's commitment to stringent oversight.
Quoting Donna Achimov, Deputy Director for Supervision at FINTRAC: "AI is allowing humans with the right mindset to analyze much more data than ever before, making it easier to detect more suspicious activity."
Despite Canada's reputation as a law-abiding democracy, estimates from think tanks suggest that between C$100 billion and C$130 billion is laundered annually in the country, underscoring the importance of robust anti-money laundering (AML) measures.
To bolster its efforts, FINTRAC has gained additional powers related to national security in recent years, resulting in a 28% increase in staffing levels in fiscal 2023 compared to two years prior. This expansion enables the agency to work in real-time, mitigating money laundering and terrorist financing risks more effectively.
Suggesting potential collaboration, Achimov added: "One way forward for FINTRAC is to use new technology to scour for suspicious transactions or even partner with financial institutions to lower risks."
In the 2022-2023 financial year, the number of reported suspicious transactions reached 560,858, a slight decrease from the previous year's 585,853 but significantly higher than the 114,422 reported in 2015-2016. Approximately 75% of these transactions between April and September 2023 were reported by financial institutions.
FINTRAC has intensified its oversight by increasing the frequency of meetings with larger banks to a quarterly basis and holding regular meetings with small and medium-sized banks.
The move towards enhanced scrutiny coincides with TD Bank facing a rare probe and potential fines from the U.S. Department of Justice regarding its AML practices. Experts in AML and legal matters suggest that FINTRAC's public naming of banks indicates an uptick in enforcement activities, urging financial institutions to reinforce their compliance measures.
Quoting Garry Clement, financial crime prevention expert and CEO of Clement Advisory Group: "Everybody's got to take a closer look... we've got to make sure that we've got our i's dotted, cross our t's, and we're not letting that dirty money get into our institutions."
