Anti-money laundering offensive: no grace period for insurance industry

By Ian Bolduc | June 27 2008 02:47PM

The Financial Transactions Reports Analysis Centre of Canada (FINTRAC) is not giving life insurance companies and representatives a grace period to comply with the new administrative rules after the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) comes into effect.

Advisors need to be extra vigilant when gathering client information, while all firms must now put a compliance program in place. The new measures are primarily intended to root out money laundering and ease investigations and potential lawsuits. Starting June 23, insurers and advisors that do not abide by the new regulations could face fines of up to $2 million and jail sentences of up to five years. As of December 30, 2008, administrative penalties will be added to the list.

Large Cash Transactions

Currently, advisers are required to submit Large Cash Transaction Reports to FINTRAC when they receive $10,000 or more from a client in a single transaction. The new procedure will require representatives to indicate the client’s date of birth, even if his or her identity has already been verified, and to keep a copy of the document in their files.

Another new feature is the Suspicious Transactions Report. Previously, the procedure was required only for completed transactions. Now attempted transactions must be reported as well. According to FINTRAC, an example of an attempt may be a deposit cancelled because a client refuses to supply the pieces of identification requested. Also, a discussion about a transaction, for which concrete gestures have been made by the client or the advisor, must now be documented in the report.

Employee compliance

Life insurance companies must put specific measures in place to ensure employee compliance. For instance, firms must appoint someone in charge of compliance, define new requirements and put them in writing, and introduce a continuous training program on this subject.

To prepare for the coming into effect of the new law, some insurers have been distributing information on these changes to their sales channels and posting information on their websites. Manulife Financial and Sun Life Financial explain the impact of the new requirements on their forms. Canada Life has issued an electronic advisory to its marketing network.

To publicize the new legal framework, FINTRAC held information sessions in January and February, spokesman Peter Lamay confirms. For those that could not attend the sessions, the organization has broadcast seminars on the Internet and posted information on its website.