FINTRAC Audits Could Mean Serious Penalties for Brokers
FINTRAC has begun to levy Administrative Monetary Penalties (AMPs) against businesses and individuals for non-compliance. Click here for an explanation of AMPs. As brokers, if you do not have a complete FINTRAC compliance regime in place and a risk assessment tool, you may be fined under the AMP process.
FINTRAC has recently completed a number of audits of brokerages across the country to gauge the real estate industry’s level of compliance, including several in Nova Scotia. Brokers who do not have compliance regimes or risk assessment models in place are at serious risk under the AMP process. In addition to establishing a compliance regime and risk assessment model, one challenge for brokers and REALTORS® is ensuring proper use of their risk assessment model.
The risk assessment form on REALTORLink® (under Compliance Centre, Money Laundering) is designed to help brokerages and REALTORS® think about clients and their transaction types when preparing their own risk assessment. Just completing the checklist is not a risk assessment. Rather, the information derived from the checklist is intended to be used as part of the constant refinement of office compliance procedures and training.
A risk assessment must address each of the following four factors:
1. Client and business relationships;
2. Products, services, and delivery channels;
3. Geographic location where activities are conducted; and
4. Any other relevant factors.
A risk assessment is designed to help REALTORS® and brokers determine which clients are high, medium or low risk. For high risk clients, special measures must be implemented. These special measures include:
1. Implementing risk mitigation controls (ask more questions, more information);
2. Implementing ongoing monitoring if in contact with client; and
3. Implementing processes to keep client information up-to-date if doing repeat business.
Brokerages must document these special measures in their policies and procedures for new or existing higher risk clients and outline how they will be used.
Essentially a brokerage or REALTOR® should be able to assess, based on their current and historic business, the characteristics of high risk client and take appropriate measures (as per their policies and procedures) when dealing with these clients. In the end, the main objective of the risk-based approach is to be able to determine which clients represent a higher risk, and if suspicious, report them to FINTRAC.
Linda Smardon
President, Nova Scotia Association of REALTORS®
Phone: 902-469-7700
lsmardon@ns.sympatico.ca
Posted by Paulette Upshall
on September 3, 2009