FINTRAC AML Regulations effective October 11, 2024: here's what brokers need to know
As of October 11, 2024, Canadian mortgage brokers will face new responsibilities under FINTRAC’s anti-money laundering (AML) and anti-terrorist financing (ATF) regulations. This change puts brokers on the front line in monitoring and reporting suspicious financial activity, a role that institutional lenders and the real estate sector have been handling for years.
With the deadline quickly approaching, many brokers are asking the same question: How do I know if I’m ready? According to Dong Lee (pictured), CEO of Axiom Innovations, while some details about FINTRAC’s requirements remain unclear, it’s critical for brokers to start taking steps now.
“There are some things that won’t be negotiable,” Lee explained. “Implementing a compliance manual, assigning a compliance officer for AML, ensuring good training and record-keeping - these are all things that brokerages and agents will need to do.”
Take your time before buying services
One challenge for brokers is that FINTRAC’s approach to AML compliance is principles-based rather than rules-based. This means that instead of following a strict checklist, brokers will need to interpret and apply broad guidelines to their business operations. While this gives brokers flexibility, it also creates some uncertainty about exactly what is required.
Given this ambiguity, Lee urges brokers not to rush into purchasing compliance-related services until there’s more clarity about FINTRAC’s full expectations.
“For example, there’s been a lot of conversation around ID verification,” Lee explained. “If you have a customer who’s been with a credit bureau for three years or longer, that technically means your ID verification is done. So, there are vendors trying to sell services that may not be necessary. In the end, your brokerage will set the tone for what’s required.”
Lee also points out that some issues mentioned in the regulations—like large cash transactions or virtual currency transactions—aren’t typically relevant to most mortgage brokers. Yet, brokers are still expected to address them in their compliance efforts.
“Overall, we think everyone needs to take a deep breath and not rush into buying these services, at least until we get more clarity on how far FINTRAC wants to take this,” Lee said. “However, the key is that you have to do something before October 11.”
How to start preparing
While the regulatory landscape is complex, tools are available to help brokers manage these new requirements. Axiom Innovations’ mortgage broker platform, Scarlett, has been designed with the upcoming changes in mind, offering brokers a way to streamline their compliance efforts.
“What we’ve done at Scarlett is give mortgage brokerages the tools to document their compliance around FINTRAC, and to get real-time reporting on it,” said Lee. “We want to provide the tools for brokerages and agents to do this as seamlessly as possible, and take some of the manual work out of it.”
These kinds of tools can be pivotal as brokers adapt to a regulatory environment that is still evolving. According to Lee, it could be many months before FINTRAC conducts audits, which will clarify exactly how much compliance is necessary. In the meantime, platforms like Scarlett can help brokers stay ahead of the game.
For brokers who might think these regulations won’t apply to them, Lee offers a word of caution. The potential penalties for non-compliance are real, and they’re not limited to big players.
“Brokers may think that fines only happen to big institutional players, but the truth is that real estate brokerages have been fined too,” said Lee. “This should be a wake-up call - it won’t just be a slap on the wrist if you don’t comply. FINTRAC is serious about this.”
The bottom line? Brokers need to prepare right out of the gate to avoid costly fines and penalties. To find out more about how Scarlett can help you meet FINTRAC’s AML and ATF regulations, click here.
