The Exchange Bank of Canada has been fined $2.46 million for AML Failures

The Exchange Bank of Canada has been fined $2.46 million by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) for failing to meet anti-money laundering (AML) compliance standards.

The Toronto-based bank, which provides foreign currency exchange and international payment services, was found in violation of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act during a recent compliance examination.

FINTRAC’s investigation, conducted between December 2022 and April 2024, revealed shortcomings in the bank’s compliance program, including failing to report suspicious transactions, inadequate client monitoring, and unreported large cash transactions.

One major violation involved the bank’s failure to file Suspicious Transaction Reports (STRs) in five out of 26 reviewed cases. In one instance, a high-risk client engaged in transactions more than 10 times their typical weekly volume, amounting to millions of US dollars over a year. The bank closed its investigation without probing the sudden change in activity.

In another case, the bank neglected to investigate a client flagged in negative media coverage or verify the source of their funds.

FINTRAC also identified eight cases where the bank did not conduct the required periodic risk-based monitoring of its clients. Additionally, three large cash transactions exceeding $10,000 went unreported.

FINTRAC emphasised that the failure to report suspicious transactions is the most severe violation because it creates a significant gap in financial intelligence.

The Exchange Bank of Canada has disputed the penalty and is filing an appeal with the Federal Court. The bank argues that the fine is disproportionate to the alleged violations.

“We believe that substantial enhancements were implemented in recent years and EBC remains committed to maintaining the highest standards of ethical conduct and regulatory compliance,” said Randolph Pinna, the bank’s president and CEO. He added that the bank would continue improving its compliance program to align with evolving standards and industry expectations.

The bank clarified that the penalty does not imply involvement in money laundering or terrorist financing.

The penalty is part of FINTRAC’s intensified enforcement efforts ahead of an international review by the Financial Action Task Force (FATF), an intergovernmental body assessing countries’ financial crime controls. A poor evaluation could result in Canada being added to the FATF’s "grey list," potentially harming the country’s economic reputation and deterring foreign investment.

In recent months, FINTRAC has imposed some of its most significant fines on Canadian banks, including $7.475 million against the Royal Bank of Canada and $9.2 million against TD Bank.

FINTRAC’s CEO, Sarah Paquet, underscored the watchdog’s commitment to upholding compliance.

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https://www.mpamag.com/ca/mortgage-industry/industry-trends/exchange-bank-of-canada-fined-246m-for-anti-money-laundering-gaps/518011