The Future of OSFI Supervision of AML - Dentons

OSFI stresses that B-8 “does not create any new regulatory requirements.” Instead, it is “intended to assist FRFIs in identifying and complying ... {{BCKData.LocationHeading}} {{BCKData.GoButton}} {{!!location.countrycode?location.countryName:location.officeName}} {{headerData.hamburgerPrimaryFeatureHeading}} {{tile.title}} {{headerData.hamburgerSecondaryFeatureHeading}} {{tile.title}} Contactus TheFutureofOSFISupervisionofAML HomeKnowledge TheFutureofOSFISupervisionofAML TheFutureofOSFISupervisionofAML RegionalCapabilities   July7,2021 InCanada,boththeOfficeoftheSuperintendentofFinancialInstitutions(OSFI)andtheFinancialTransactionsandReportsAnalysisCentre(FINTRAC)haverolestoplayincombattingmoneylaunderingandterroristfinancing(referredcollectivelytoAML/CTFinthisarticle). Historically,OSFIhasassessedtheeffectivenessofafederally-regulatedfinancialinstitution’s(FRFI)AML/ATFprogrampursuanttoOSFIGuidelineB-8–DeterringandDetectingMoneyLaunderingandTerroristFinancing(B-8).WhiletheGuidelineacknowledgesFINTRAC’sresponsibilityforensuringcompliancewithPart1ofthePCMLTFregime,OSFImaintainedthatits: mandateincludessupervisingfinancialsoundnessandpromotingtheadoptionofpoliciesandproceduresdesignedtomitigaterisk.OSFIbelievesthattheriskmanagementoutcomesidentifiedinthisGuidelinewillfurtherreducethesusceptibilityofFRFIstobeingusedbyindividualsororganizationstolaunderfundsandfightterroristfinancing,therebyreducingtheirexposuretodamagestotheirreputation,akeyassetinthefinancialservicesindustry.   OSFIstressesthatB-8“doesnotcreateanynewregulatoryrequirements.”Instead,itis“intendedtoassistFRFIsinidentifyingandcomplyingwithapplicableAML/ATFrequirementsandmeasurescontainedintheProceedsofCrime(MoneyLaundering)andTerroristFinancingAct(thePCMLTFA)andRegulations.” B-8wasfirstreleasedin1996,fiveyearsafterthePCMLTFAwasdeclaredinforce.BoththeGuidelineandtheActweregovernmentalresponsestothe40recommendationsfromtherelativelynewFinancialActionTaskForce(theFATF)–anintergovernmentalbodythatdevelops,monitorsandevaluatescountryAML/ATFstandards.WiththeformationofFINTRACfouryearslater,in2000,thetworegulatorybodieshadacertaindegreeofjointoversightoverFRFIs’AML/ATFprograms.TheFATFhasnotconsideredthisarrangementoptimal.Inits2016reportAnti-moneylaunderingandcounter-terroristfinancingmeasuresinCanada–2016,theFATFstates: SupervisorycoverageofFRFIsisgood,butthecurrentsupervisorymodelgeneratessomeunnecessaryduplicationofeffortbetweenOSFIandFINTRAC. FINTRAChasincreaseditssupervisorycapacitytoanadequatelevelbutitssector-specificexpertiseisstillsomewhatlimited.OSFIconductseffectiveAML/CFTsupervisionwithlimitedresources… [Canadashould]coordinatemoreeffectivelysupervisionofFRFIsbyOSFIandFINTRACtomaximizetheuseofresourcesandexpertiseandreviewimplementationofCanada’ssupervisoryapproachtoFRFIs. Overthepastseveralyears,OSFIandFINTRAChavebeenworkingtoeliminateduplicativeoversightandmanagetheregulatoryburdenonFRFIs.ThisnewregulatoryapproachconfirmsFINTRACastheagencyresponsibleforconductingAML/ATFassessmentsofFRFIstoensurecompliancewiththePCMLTFregime. NotethatinMarch2020,theCOVID-19pandemicpausedOSFI’stransitionalworkwhiletheregulatorredirectedresourcestootherpressingpriorities.InOctober2020,asthisworkresumedinearnest,OSFIissuedanIndustryLetterseekingFRFIinputintothe“ongoingrelevanceof…B-8…givenFINTRAC’sroleastheCanadianfederalsupervisorforAML/ATF.”Specifically,theIndustryLettersoughtFRFIviewson: WhetheramendmentstoGuidelineE-13(RegulatoryComplianceManagement)areneededtoclarifyOSFI’sexpectationsforcomplianceriskmanagementgenerally;and WhetherB-8shouldberescinded,orwhethercertainB-8elementsshouldbeincorporatedintoarevisedGuidelineE-13. OnMay17,2021,OSFIpublisheditsConsultationResponse.Inthatresponse,theregulatorindicatedthatmostrespondentssupportedrescindingB-8initsentirety,withoutexpressinganeedforcorrespondingamendmentstootherOSFIGuidelines.BecauseOSFIisplanningoncarryingoutacomprehensivereviewofGuidelineE-13in2022,theregulatorwillendeavortoaddressitscompliancemanagementapproachmoregenerally,ratherthanfocusingontheirapproachthroughmultipleguidelinesseparately.OSFIalsoindicatedthatitwillrescindB-8onJuly26,2021. Itisimportanttonotethat,whileB-8mayberescinded,OSFIstillhasoversightofanyAML/ATFriskthatcouldhaveanimpactonaFRFI’sfinancialsoundness.TheregulatorwillcontinuetocoordinateandshareinformationwithFINTRACasrequired,andinkeepingwithinternationalbestpractices. FormoreinformationonthisandotherFinancialServicesRegulatorymatters,pleasecontactTracyMolinoorAngelaShaffer.   Keycontacts TracyMolino TracyMolino Counsel,TorontoTorontoD+1 416 862 3417 Emailme [email protected] AngelaShaffer AngelaShaffer Counsel,TorontoTorontoD+1 416 863 4565 Emailme [email protected] Relatedpractices,sectorsandbusinessissues BankingandFinance BankingRegulation FinancialInstitutions FinancialInstitutionsRegulatory FinTechinCanada   Keepintouch     Contactus   Share LinkedinTwitter Email Print Howcantheworld'slargestlawfirmhelpyoutoday? Contactusorfindanofficeinyourlocation.   Disclaimer UnsolicitedemailsandotherinformationsenttoDentonswillnotbeconsideredconfidential,maybedisclosedtoothers,maynotreceivearesponse,anddonotcreatealawyer-clientrelationship.IfyouarenotalreadyaclientofDentons,pleasedonotsendusanyconfidentialinformation. Cancel Accept     Redirection Youareswitchingtoanotherlanguage.PleaseclickConfirmbelowtocontinue. CancelAccept     LeavingSite YouwillnowbetakenfromtheglobalDentonswebsitetothe$redirectingsitewebsite.Toproceed,pleaseclickAccept. Cancel Accept   ImportantNotice Agree Disagree