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This article was originally published on The Bottom Line.
CPA Canada wants the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) broadened to cover all individuals and firms who perform accounting functions in Canada but are not provincially regulated by one of the major professional associations.
The organization maintains the proposed amendment makes sense because activities like money laundering cannot happen without the assistance of those in accounting functions.
"When we look at the international standards and the international assessments of risk, accountants and people with accounting training and skill sets are the gatekeepers to the financial system," says Matthew McGuire, chair of CPA Canada’s anti-money laundering committee. "Applying the regulations only to accountants who are licensed isn’t good enough."
McGuire, a partner and national anti-money laundering practice leader for MNP LLP, was in Ottawa recently to speak to the standing Senate committee on banking, trade and commerce.
He also raised the need for Canada to align the PCMLTFA with recent recommendations by the Financial Action Task Force, an inter-governmental policy-making body which sets the standards worldwide for combating money laundering and terrorist financing threats.
"What we’re trying to say is, ‘Listen, before other countries and international bodies tell us that there are gaps in our legislation we ought to fix them ourselves.’ "
Meanwhile, he called for better information sharing about the outcomes of suspicious transaction reports that are submitted by accountants, financial institutions and other organizations to the Financial Transaction and Reporting Analysis Centre of Canada (FINTRAC).
If an accountant or firm reports a suspicious activity to FINTRAC, it rarely gets any feedback, he says.
"It’s never confirmed whether or not what you saw was actually suspicious, it’s not confirmed whether or not there was a conviction."
The problem is that without feedback from FINTRAC, says McGuire, accountants don’t understand whether the criteria they used for their analysis are valid.
McGuire says expanding reporting requirements to cover accountants who are not provincially regulated would help authorities in the fight against laundering and terrorist-financing activities because it would force individuals to scrutinize transactions more closely.
"For every accounting professional, the value of this process is that the law would require you to evaluate objectively the risk that your particular services are exploited for money laundering or terrorist financing. It takes you down that road and puts in place a mitigation plan.
"It forces you to consider the situation and then has you subject those types of transactions to scrutiny to determine whether or not they should be reported for consideration by law enforcement."
McGuire, a former intelligence analyst with FINTRAC in 2004, says accountants and those performing accounting functions are the first line of defence against money laundering.
"Everyone from the Financial Action Task Force to the United Nations Office on Drug and Crime has pointed out that accountants pose a very significant risk for money laundering," he says, with billions being laundered through the Canada economy every year.
"That cannot happen without the assistance of professional accountants. I think we’re only seeing a small piece of the puzzle when we’re only looking at provincially-regulated accountants."
Presently, the PCMLTFA defines a professional accountant as somebody who is a chartered accountant, a certified management accountant or certified general accountant.
Peter Lamey, senior communications officer at FINTRAC, says under the PCMLTFA an accounting firm means an entity that is engaged in the business of providing accounting services to the public and has at least one partner, employee or administrator that is an accountant.
Accountants and firms are subject to the PCMLTFA if they receive or pay funds, purchase or sell securities, properties or business assets, transfer funds or securities by any means.
David Barnabe, a senior media relations and consultations officer with the federal Department of Finance, says the government regularly reviews the PCMLTFA to ensure that Canada’s anti-money laundering and anti-terrorist financing regime remains effective.
"This includes assessing various sectors, such as the accounting sector, to determine if the money laundering and terrorist-financing risks in these sectors warrant expanding the scope of the regime."
Barnabe noted the government is developing a new money laundering and terrorist-financing risk assessment framework which could result in the PCMLTFA being expanded to cover additional types of individuals in the future as needed.
Craig Hannaford, a CGA, retired RCMP officer with substantial experience investigating white-collar crimes, and principal of Hannaford Partners Inc. in Burlington, Ont., says it would be a positive step to include all individuals and firms that perform accounting functions under the auspices of the PCMLTFA, because too many individuals who perform bookkeeping or advisory services or give financial advice aren’t covered.
"What you want to do is you sort of want to cover all the types of businesses that are involved in receiving cash and moving that cash. You want to get the point of entry of the cash into the system."
The problem with the present system, he says, is that anybody can hang out their shingle and say they’re a bookkeeper or they’re offering business services and there’s no restriction.
"I could go to one of these unregulated guys or businesses, some guy who’s a bookkeeper and say, ‘I have this $10,000 in cash from my business and could you deposit it for me?’ and there may be no duty for him to report that amount because his profession isn’t one of the listed professions in the money laundering act."
Hannaford says he sees merit in perhaps having a "basket clause" that makes it mandatory for any person or other business involved in processing of cash receipts to be required to have obligations to report under the PCMLTFA.
The problem, he says, is that even if all accounting types are covered by the PCMLTFA, criminals will still find ways to circumvent the system.
"If all the various accounting organizations were subject to the money-laundering regulations what will happen is the criminal money will find some other way to go in terms of providing accounting, providing money transfer services and under-the-table money transferring."
Hannaford says the criminal element is ingenious when it comes to money-laundering activities and authorities won’t be able to close down all the avenues.
"There’s always going to be some new way that people will figure out how to launder money which is basically taking illicit funds and transferring them into the legitimate economy."
However, he noted, the amendments being pursued by CPA Canada are a first step towards shutting down such operations.
"What these regulations are trying to do is create choke points as to where the money is coming into the system to try and close those."
Categories:Valuation, Forensics and Litigation Support
Related Topics:Anti-Money Laundering; Anti-Terrorism Financing; FINTRAC
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