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On October 24, 2013, The Office of the Privacy Commissioner of Canada released a report citing significant and continued privacy lapses within Canada’s intelligence unit responsible for money laundering and terrorist financing (known as FINTRAC). As in their 2009 audit, the Commissioner found that FINTRAC was receiving and keeping information it should not, that the agency and its partners were encouraging over-collection and reporting of information and was not sufficiently protecting the information it held.
As of March 2013, FINTRAC held about 165 million reports containing personal information, including reports regarding sizeable cash and wire transactions from a base of 300,000 reporting entities such as financial institutions, casinos, insurance companies, real estate companies, accountants and others. FINTRAC’s dual roles involve first ensuring the right companies collect the prescribed information and report the required transactions. Secondly, they are responsible for the analysis and disclosure of that information to domestic and foreign law enforcement intelligence and tax agencies when their legislative threshold has been compromised. Unlike other countries, Canada adopted an administrative intelligence unit model, which is meant to be a privacy barrier between personal banking information and law enforcement.
Over-reporting was observed by the Commissioner in these key areas:
Although FINTRAC’s practices for collecting and retaining information it does not have statutory authority for were pointed out in the 2009 report, the current audit found that FINTRAC still hasn’t taken satisfactory measures to permanently delete illicitly maintained information.
The report also cited areas in which compliance enforcement activities did not align with privacy laws:
FINTRAC’s examinations and speeches (including ones conducted this week) focus on the need for intelligence to carry out their function, and particularly on their desire for many suspicious transaction reports. We do not expect that focus to change, even in light of this report. FINTRAC’s response to the over-reporting deficiencies cited is telling, because it does not speak to deterring the activity (other than to broadly refer to ‘outreach’ activities), but instead focuses on excluding those reports from their analysis and destroying them at some point. Reporting entities continue to have an incentive to over-report because only under-reporting is punished with substantial penalties. In our view, reporting entities should report only prescribed transactions by developing and consistently applying strict criteria to determine which transactions meet the legislative threshold for reporting.
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