3. 2016 AML Benchmarking report 3
From the National AML services team
gained by completing over 150 anti-money
laundering compliance program-related
engagements in 2014-2015. These were
focused particularly on the MSB industry as well
as others, including securities dealers, financial
institutions, online transaction processing
organizations, trust companies and government
organizations. What’s apparent from our research
and experience is that the sector’s anti-money
laundering compliance programs are delivering
desired results. Specifically, there have been
significant improvements in the following areas:
• FINTRAC reporting;
• automated recordkeeping and transaction
monitoring systems;
• policy and procedure deficiencies; and
• staff and agent training comprehension.
However, it’s also apparent that many MSBs
need to focus more on the identification of
potentially suspicious transactions and
enhancing their assessment of inherent risks—
although we do see that this shift is already
starting. Our recent work indicates that many
MSBs are better positioned to focus on these
elements now that the other elements of
their programs are established.
The anti-money laundering team at
Grant Thornton LLP has had the opportunity
to work with money services businesses (MSBs)—
large, small and everything in between—from
all across Canada over the past few years.
It has given us great opportunity to meet those
who are connected with people, cultures and
communities from all over the world. In our
experience, the MSB industry is highly
entrepreneurial, dynamic, diverse and
serves the needs of many Canadians and
Canadian residents-to-be.
We believe the experience and knowledge
we’ve gained has placed us in a unique
position to offer insight into the status
of the industry’s anti-money laundering
compliance within Canada. This benchmarking
report reflects the culmination of public
research, as well as the knowledge we’ve
We are pleased to present our 2016
benchmarking report, Anti-money laundering
compliance in the money services business
industry. We hope that it will be used to benefit
organizations across the money services
and finance industry and assist you with
understanding today’s compliance benchmark,
as well as reach your goals for tomorrow.
Don’t hesitate to reach out to a member of our
national anti-money laundering services team:
Jennifer Fiddian-Green
Partner, Advisory Services
Patrick Ho
Senior Manager, Advisory Services
Robert Osbourne
Senior Manager, Advisory Services
Albina Alimerko
Manager, Advisory Services
Andres Betancourt
Senior Associate, Advisory Services
T +1 855 747 2647
E msb@ca.gt.com
4. 4 2016 AML Benchmarking report
there are cost benefit decisions being made
on whether or not to incur and manage
higher risk client relationships, there are also
decisions being made based on an individual
institution’s ability and capacity to manage
higher risk relationships. Meaning that, in
some cases, there is really not much a
higher-risk client can do to maintain a
banking relationship if their financial
institution has decided to exit them.
The Mutual Evaluation Report of Canada
published by the FATF in September 2016
has indicated that banks and MSBs appear to
be the main channels to launder the proceeds
of crime due to the products and services
they offer, their large client bases and their
exposure to high risk jurisdictions with
weak Anti-Money Laundering/Counter
Financing of Terrorism (AML/CFT) regimes
and significant money laundering and
terrorist financing (ML/TF) threats. These
findings continue to emphasize the challenge
that the MSB sector faces in obtaining or
maintaining their banking relationships.3
denying access to financial services for the
unbanked; it also has significant humanitarian,
economic, political and security implications,
including driving customers and illicit cash
flow to underground “shadow markets.”1
Regulators, including the Financial Action
Task Force (FATF), have been emphasizing
to financial institutions around the world
that, just because a customer may be
considered high risk, it does not mean they
are “unbankable.” Banks and other financial
institutions are encouraged to manage these
high-risk customer relationships. Moreover,
regulators have reiterated that denying financial
services to MSBs will drive underground
illicit activities that may have otherwise been
reported, inhibiting law enforcement’s efforts
to stem the growth of money laundering and
terrorist financing. As recently as May 26, 2016,
the deputy director of the Financial Crimes
Enforcement Network (FINCEN) in the
United States, Jamal El-Hindi, highlighted
the issue of de-risking MSBs in a speech to
the Conference of State Bank Supervisors,
State Federal Supervisory Forum.2
What we
are learning through this time is that while
own risks or reduce risk management
costs—a practice that left some businesses
without bank accounts and newer businesses
struggling to find banking partners.
Unfortunately, the MSB sector has become
a regular target for de-risking by financial
institutions, especially those that have been
hit with fines for AML program breaches.
In Asia-Pacific, it is reported that banks no
longer provide services to MSBs, while in
the United States the situation is becoming
more and more difficult, if not impossible,
for the smaller MSB businesses. Currently,
of the five largest banks in Canada, we are
aware that two have programs in place to
on-board new MSB clients and maintain
accounts with existing MSB clients as long
as specific requirements are met on an
ongoing basis.
A number of regulatory authorities outside
of Canada continue to emphasize that
de-risking is not in line with international
guidelines and is, in fact, a misapplication of
the risk-based approach—and statements
have been made publicly to this effect. The
impact of account closures expands beyond
In 2012, Grant Thornton prepared the first
AML compliance benchmark report for
the money services business sector. It was
intended to provide useful data to the
industry on how it was performing in the
various areas of the compliance regime of
its members. This was in response to an
industry that was just beginning to organize
itself into a Canadian association that could
train and advocate effectively on members’
behalf. And this organization was necessary,
as MSBs both here in Canada and around
the world were, as a sector, confronted
with the impacts of financial institution
de-risking decisions.
Over the last decade, particularly after the
introduction of the risk-based approach,
financial institutions worldwide have
implemented “de-risking” strategies,
sometimes referred to as “de-banking” (the
closing of accounts), for clients perceived
to be “high risk.” Throughout this period
there has been a sense that some institutions,
rather than manage these higher risk clients,
opted to end client relationships across
sector groups altogether to minimize their
Introduction
5. 2016 AML Benchmarking report 5
phenomenon, with the estimated amount
of money laundered globally in any one
year ranging from 2-5% of global GDP,
or US$1 trillion to US$2 trillion.5
In Canada, the Proceeds of Crime (Money
Laundering) and Terrorist Financing Act
(PCMLTFA) created the Financial Transaction
and Reports Analysis Centre of Canada
(FINTRAC), Canada’s financial intelligence
unit. Over the past decade, regulated
organizations across the country have worked
to protect the integrity of Canada’s financial
systems by implementing programs to comply
with the PCMLTFA and its regulations and
by reporting transactions to FINTRAC.
As of June 23, 2016, there have been 2,113
MSBs registered with FINTRAC. We note
that there has been a steady decline in new
registrations since 2013 while the number
of MSBs that have ceased operations entirely
has increased. Since 2008, 787 MSBs have
ceased operating while 424 did not renew
their registrations on expiry (see table).
The MSB sector plays a vital role in the
movement of funds around the world,
particularly to developing countries where
the banking industry is not well established
and residents do not have ready access to
banking services. These companies are used
by immigrants to send funds to support their
relatives and friends in their countries of
origin. In 2015, the World Bank estimated
that remittance flows by international migrants
reached US$581 billion, of which $432 billion
flowed to low- or middle-income countries.
In 27 countries, remittances were equal to more
than 10% of the gross domestic product (GDP)
of those countries. In 2014, remittance outflows
from Canada amounted US$5.4 billion.4
Every year around the world, large amounts
of funds are generated from illegal activities,
including drug trafficking, human trafficking,
tax evasion, people smuggling, theft, arms
trafficking and corrupt practices. Money
laundering—the process of concealing the
source of illegally obtained money—plays a
crucial role in allowing criminals to continue
to perpetrate these crimes. Money laundering
and terrorist financing is a global
Registered Ceased Expired Revoked
Individual MSBs 68 105 46 12
Corporate MSBs 752 682 378 70
Totals 820 787 424 82
0
100
200
300
400
500
600
700
800
900
Registered Ceased Expired Revoked
Individual MSBs
Corporate MSBs
Totals
MSB Status since 2008
6. 6 2016 AML Benchmarking report
practices. In several areas throughout this
benchmarking report, we measured the
number of MSBs out of the benchmarking
population that had deficiencies in specific
areas. Deficiencies are defined specifically
as “items or areas where the MSB’s
documentation, process or reporting was
not sufficient to meet the requirements of
the PCMLTFA and its regulations.”
In evaluating the effectiveness of the various
MSB compliance program elements, different
measures were used to measure different
characteristics depending on the available
information. For example, use of an automated
versus a manual transaction processing system
was assessed to understand the occurrence
of, and effectiveness in, identifying transactions
where money laundering was suspected and
subsequently reported to FINTRAC. In
another instance, we reviewed whether or
not employee testing as part of an MSB’s
training process was effective by comparing
this practice against the level of recordkeeping
deficiencies identified.
Methodology
The information in this report represents
the Grant Thornton AML team’s aggregate
knowledge, gathered from over 150 AML-
related engagements (including over 103
different MSB organizations) completed
over the period January 2014 to December
2015. It’s also based on our experience and
knowledge from projects completed prior to
this period, some of which was incorporated
in the previous benchmark and survey
reports produced by Grant Thornton, as
well as information obtained from publicly
available sources.
The data used to compile this benchmarking
report has been reviewed to ensure that the
confidentiality of each entity is maintained,
and that the inclusion of information could
not be used to identify an individual business
or MSB organization. Only overall summary
statistics for the population of data available
to us (or a subset as appropriate to the
population) were used.
In determining the prevalence of a characteristic
or practice in the industry, we only included
information that we assessed as being reasonable
and reliable. The same MSB may have been
reviewed more than once and only the last
instance of reviewed results used. Furthermore,
information from AML reviews as well as
risk assessment assistance engagements was
used to assist with determining the
prevalence of specific characteristics and
Purpose
This benchmarking report is intended to
provide MSBs and financial institutions—
both of whom have AML compliance
objectives—with an essential tool to help
evaluate the results of an AML compliance
program review and any planned program
changes. It’s our experience that the AML
compliance programs of many MSB
organizations are now delivering rigour and
effectiveness that serve to protect Canada’s
financial systems from abuse by those with
illegal funds or criminal intent. We believe
that this report can help both MSBs and
financial institutions by establishing today’s
benchmark and tomorrow’s goals for
AML compliance programs. Specifically,
it should help:
• identify and evaluate the prevalence of
compliance practices found within the
MSB industry,
• determine the impact that specific
practices can have on a compliance
program’s effectiveness,
• establish effective MSB compliance
practices and determine the relative
standing of their organization within
the Canadian industry,
• enhance relationships between MSBs and
their financial institution partners, and
• improve financial institutions' and
regulators' understanding of the Canadian
industry's compliance practices and
evaluate the pace at which industry
change is progressing.
As of June 23, 2016, only 820 still remain
registered with FINTRAC, employing
17,129 agents.
Despite the vital role foreign exchange and
money remittance service providers play in
providing financial services to the “unbanked”
and “self-banked,” the fact is, these services
are targeted by and vulnerable to money
laundering and those wishing to finance
terrorism. FINTRAC reports indicate that
MSBs are the second-most used sector for
money laundering and terrorist financing
schemes after financial institutions, and
transactions through MSBs represent 36% of
all case disclosures made by FINTRAC to
law enforcement. Given their vulnerability to
both illicit activities and resulting de-risking
by banks, a rigorous and effective anti-money
laundering and terrorist financing deterrence
program is critical to the success of today’s
MSB organizations and their relationships
with stakeholder partners.6
7. 2016 AML Benchmarking report 7
This section of the report provides
background information to help the
user understand the profile of the MSBs
included in the benchmarking population.
Types of services offered by the MSBs
The majority of MSBs (80%) included in
the benchmark population provide money
remittance services and 76% of the population
provide currency exchange services. Other
services provided include cheque cashing,
money orders and payday loans. Many of
the MSBs provide several of these services.
This population is fairly reflective of the data
reported by FINTRAC7
in Money Laundering
and Terrorist Financing (ML/TF) Typologies
and Trends for Canadian Money Services
Businesses (MSBs) – July 2010 in which
MSBs were reported as predominantly
providing money remittance services
(75%) and foreign exchange services (70%).
Services offered by the MSBs included in the benchmarking population
Percentage of MSBs offering
80%
Remittance
14%
Money order
12%
Payday loans
17%
Cheque
cashing
19%
Remittance
as an agent
76%
Foreign
exchange
The graph below shows the services offered
by the MSB benchmarking population (note
that many MSBs offer more than one of the
listed services).
Geographical regions served by
MSBs that provide remittance services
Of the MSBs that provide money
remittance services, we found that while
a majority of the MSBs in the population
typically serve a specific geographic region,
a significant portion (41%)—up from
26% in 2012—provide remittance services
broadly to regions around the world,
either using established global networks
or their own proprietary networks.
Geographic service provision shifted in
other areas as well, with 4% of MSBs
now providing services to North America.
Also, while half of the MSBs in the benchmark
population provided remittance services to
and from Asian countries in 2012, that
number has now dropped to 38%.
4%
North America
6%
South America
41%
Non-specific
38%
Asia
6%
Africa
3%
Europe
2%
Middle East
Money remittance services: Regions served by MSBs 2016
10%
South America
26%
Non-specific
50%
Asia
8%
Africa
1%
Europe
5%
Middle East
Money remittance services: Regions served by MSBs 2012
Profile of the MSB population
8. 8 2016 AML Benchmarking report
Customer interaction types
The MSB benchmarking population
was analyzed to understand how MSBs
interacted with their customers. The
percentage of MSBs providing only
online access to customers was just 2%
while a strong majority (62%) interacted
only face-to-face. Thirty-six percent offered
both forms of access, but usually only after
an initial face-to-face meeting.
Types of clients served by MSBs
Clients served by MSBs include corporate
or other types of entities, individuals or
a combination of both. Corporate clients
typically served include institutions or
businesses that seek the services of the
MSB to assist them with making payments
to foreign vendors. These transactions
are usually for larger dollar amounts.
Individual clients generally seek the services
of the MSB to perform smaller currency
exchange transactions for the remittance
of money to family members, overseas or
personal travel.
The graph below shows the proportion of
MSBs that have corporate clients, individual
clients or both. While a significant number
(32%) of MSBs served both, an increasing
number are carving out a niche for
themselves by targeting either corporations
or individuals, with the latter often involving
a specific ethnic community.
Size of the MSB: number of
locations, employees, use of agents
While the MSB industry in Canada is
dominated by a handful of larger businesses,
there are also numerous smaller MSBs
ranging in size from one location to larger
organizations with hundreds of locations in
Canada and abroad. Location has been
defined, for purposes of this report, to
include branch and agent locations. Agents
are individuals or entities that are not
directly employed by the MSB, but are
authorized to act on behalf of the MSB to
provide money services to clients. Of the
MSB benchmark population, 32% provided
services to clients using agents, an increase of
24% from 2012. A number of the MSBs in
the benchmark population had less than five
employees, including owner-operated,
family-run businesses.
8%
32%
Individuals
Corporations
Both
60%
Types of clients served by the MSBs included
in the benchmarking population 2016
62%
36%
Face-to-face only
Online only
2%
Both
Customer interaction 2016
While 2% of MSBs in the population
provided online access only, this
percentage is expected to grow
as FinTech becomes more widely
accepted both by consumers and
within the financial sector.
9. Documented contracts with agents
A documented contract between an MSB
and its agent(s) can clearly lay out the duties
and obligations of each of the parties and
allow for an orderly means of settling any
disputes that may arise. Our research shows
that all MSBs with agency networks had
documented contracts in place with their
active agents.
Agent monitoring: background due
diligence and regular site visits
Sixty-one percent of MSBs with agency
networks conducted background due
diligence when first deciding to take on
a new agent. Further, 44% of MSBs perform
regular site visits of their agents. Site visits
usually included some testing, inspection
and inquiry of how regulatory requirements
were being adhered to. It was not necessarily
the same group of MSBs that performed
both of these procedures; only approximately
half of the MSBs that conducted due diligence
also performed regular agent site visits.
Review of AML compliance program
The MSB benchmarking population was
analyzed to understand the percentage
of MSBs whose compliance programs
had been subject to a prior review(s),
either performed by Grant Thornton
or another party. Approximately 84%
of the benchmarking population had
been subject to more than one
compliance program review.
For those MSBs that had more than
one review of their program completed,
there was a decrease in documentation
deficiencies such as risk assessments,
policy and procedures (66% deficient
in 2012 and 57% in 2016); however, there
still continued to be recordkeeping and
reporting deficiencies.
Referrals are not enough. Background
due diligence results can be known
within days. Focused investigative
research can identify serious issues
or concerns you need to know about.
Make sure you get the facts about
the people you do business with—
the potential cost of failing to identify
problems can be prohibitively high.
Put in place documented contracts that clearly lay out compliance program
obligations and provide right of audit to protect your organization. Upfront
background due diligence and regular site visits to test compliance will protect
your organization over the longer term.
2016 AML Benchmarking report 9
10. Compliance program elements
Policies and procedures
A required element of an MSB’s compliance
program is to have documented compliance
policies and procedures. The majority of the
benchmarking population (59% of MSBs)
had deficiencies identified in their program
reviews. The remaining MSBs with no
identified deficiencies were likely to have
more than five employees, developed their
policies and procedures internally and
employed a compliance officer that had
received external training.
• no documentation that the manual/
policies and procedures had been
reviewed and authorized by senior
management; and
• no documentation of the responsibilities
of the compliance officer.
The most common policy and procedure
deficiencies included:
• insufficient detail of recordkeeping
responsibilities (e.g., requirement to
document beneficial ownership of
corporate customers);
• no documentation of when and how
to make third-party determinations;
• no definitions of third-party and/or
politically exposed foreign person
(PEFP) provided;
No deficiency
41%
Policy and procedure deficiencies
-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
No deficiencyDeficiency
More than
five employees
52%-46%
Less than or equal
to five employees
48%-54%
P&P developed
internally
86%-86%
Trained their compliance
officer internally
45%-51%
Note: This bar chart provides detail data results for the pie chart to the left.
Make sure that your policies and
procedures reflect and align with
your money services business
activities. Ensure this is true
for your risk assessment as well.
If your risk assessment includes
controls to mitigate risk, these
controls need to be performed.
10 2016 AML Benchmarking report
11. 2016 AML Benchmarking report 11
The risk assessment
A good risk assessment documents money
laundering and terrorist financing risks
specific to that individual business and
includes mitigating controls. This is a
required element of the AML compliance
program regime for an MSB, and it can
also be a roadmap to assist others with
understanding the business, the risks
associated with the money service
transactions facilitated, the customers
and the geographic regions serviced.
While all of the MSBs in the benchmarking
population had a documented risk
assessment, the majority (61%) were
still in the process of making the risk
assessment a practical reality of their
business operations.
Compliance officer
Each MSB is required to designate a
compliance officer (CO) responsible for
its AML compliance program. The data
available in the benchmarking population
was analyzed to try and understand who
was fulfilling the role and if and how this
person was supported. In the benchmarking
population, 35% of the MSBs had the owner
of the organization fulfilling the compliance
officer role. In general, these MSBs were
identified as smaller and more likely to have
policies and procedures with identified
deficiencies. For these MSBs, only a third
of the owners, in their role as compliance
officer, received external training. There was
no marked difference regarding recordkeeping
or reporting deficiencies for MSBs that had
the owner as the compliance officer versus
MSBs which had another individual fulfilling
that role.
Only a small number of the MSBs had
compliance officers that were certified
with relevant AML credentials (e.g., a
certified anti-money laundering specialist
designation). We expect that going
forward more organizations will require
this expertise and qualification of their
compliance officers.
Of the MSBs in the benchmarking population,
18% (down from 23% in 2012) had a
compliance officer that was supported by
a team providing assistance to oversee and
meet the compliance program requirements.
We noted that, for those MSBs with a
compliance officer supported by a team,
the rates of recordkeeping and reporting
deficiencies were higher. This indicates that
while these teams are monitoring and
processing a higher volume of transactions,
ongoing management of the compliance
program team is essential to ensure
effectiveness of results.
The Compliance Officer role requires
expertise and experience and needs to
be taken seriously. In 2014, US regulators
fined the former chief compliance officer
of Moneygram International8
for AML
failures in the company’s compliance
regime during his stewardship.
An effectively implemented risk assessment
fundamentally affects how an MSB conducts
its business. Common areas for improvement
include:
• the need to identify higher risk clients
and implement specific enhanced due
diligence measures;
• the mitigation of controls that are
applied consistently and operating as
they should;
• the review and periodic testing of risk
assessments; and
• the implementation of enhanced due
diligence procedures for onboarding
and monitoring of agents.
Training
Documented ongoing training on compliance
program requirements must be maintained.
We looked at how the compliance officers
of MSBs received and maintained their
training as well as how the training for
others in the organization was delivered and
maintained. In the MSB benchmarking
population, the compliance officers primarily
obtained their training by accessing internal
resources or visiting and using the resources
on the FINTRAC website. This group
accounted for 51% (2012: 65%) of the
compliance officers for which data was
available. The remaining 49% (2012: 35%)
of compliance officers were also receiving
some degree of external training. The data
indicates that more compliance officers are
The risk assessment really needs to be the foundation of your AML program.
Document your higher risks and ensure you are actively monitoring for these higher
risk customers and transactions. Once identified, protect yourself and your business
by executing on your documented controls, such as obtaining source of funds
information before you take on responsibility for facilitating the transaction.
Compliance officer with team Compliance officer without team
-80% -70% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80%
Have recordkeeping
deficiencies
4% Have reporting deficiencies-11%
-74% 65%
12. 12 2016 AML Benchmarking report
internal resources only to train staff had
higher rates of deficiency in recordkeeping
and reporting as opposed to MSBs using
both internal and external resources. This
was a significant change from the 2012
benchmark which indicated the opposite.
Testing as part of training
Testing reinforces learning. It also helps the
MSB determine whether its training efforts
have been effective and provides additional
motivation for staff. In the benchmarking
population, 61% of MSBs use testing as
part of their staff training program, and
39% do not use any form of documented
testing. The MSBs that used testing in
their program were actually more likely
to have recordkeeping deficiencies and were
more likely to operate from one location.
However, MSBs that used testing were also
more likely to report STRs. This number is
accessing externally-provided training.
There was no marked difference regarding
recordkeeping or reporting deficiencies
betweencompliance officerstrained internally
or externally. However, the externally
trained officers did have fewer identified
deficiencies regarding policy and procedure
documentation and risk assessments. It is
essential to remember that good training
is only one element of your compliance
program and that all of the compliance
program elements need to be in place and
working, including the monitoring for and
reporting of suspicious transactions.
There are now MSB industry-tailored training
resources available, which organizations
can access online and use to track
employee completion and test results.
Testing doesn’t only reinforce learning;
it also helps MSBs understand the level
of knowledge their staff has. Additionally,
it demonstrates a commitment to AML
and locks in your training investment.
Training programs for staff may be developed
internally or externally, or in combination.
In the benchmarking population, the majority
(69%) of MSBs used internal resources
exclusively to train staff, 12% used external
resources exclusively and 19% used a
combination of programs. The current
benchmark indicates that MSBs using
External
12%
19%
Internal
69%
Both
Type of training 2016
increasing as anticipated, as training evolves
to focus more on how to identify suspicious
transactions, with less focus on the details
of the recordkeeping requirements.
61%
No testing
39%
Use of testing
Use of testing in training 2016
Recordkeeping
In the benchmarking population, 58% of
the MSBs had recordkeeping deficiencies
(down from 76% in 2012). This is a very
significant improvement and may be
attributable to the increased use of automated
Have recordkeeping
deficiencies
Trained CO externally
Had more than one location
-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
Had filed an STR46%
64%
44%
41%-61%
-51%
-69%
-52%
No testing employedTesting employed
Training should include materials that
are relevant to the employee’s role within
the organization, and should provide an
understanding of AML as well as specific
knowledge necessary for that person
to perform their part of the MSB’s AML
strategy. Don’t provide blanket training.
Train and review your specific recordkeeping
requirements with staff. Use examples specific
to your organization to make it effective.
13. Transaction reporting (large cash
and electronic funds transfers)
In the benchmarking population, 40%
had large cash and/or electronic funds
transfers (LCTs and EFTs) reporting
deficiencies, down from 66% in 2012. Given
the high rate of deficiency, we looked in
detail at the percentage of transaction reports
that had reporting deficiencies for each MSB,
and then averaged and summarized this. Out
of all of the reports reviewed, 26% (2012:
33.4%) of LCT reports and 23% (2012:
38.5%) of EFT reports had deficiencies.
The most common deficiencies were:
• late filings (most common),
• reportable transactions not identified by
the MSB until the completion of the review
(this was most common for transactions
meeting the 24-hour rule threshold), and
• incorrect information included in filings.
Transaction processing system
The transaction processing system refers to
the manner in which a customer transaction
is recorded. An automated transaction system
refers to a system where the customer’s
information, as well as the transaction
information, is electronically recorded and
then processed. A manual system refers to
a process for which both the customer and
transaction information is first recorded
manually (on paper). Information from a
manual system is kept in paper format, or
it may be entered into a spreadsheet. In the
benchmarking population, 72% (2012: 54%)
of MSBs used automated transaction systems
while 28% (2012: 46%) of MSBs used a
manual system. The MSBs that used automated
transaction systems usually had more locations
and processed a higher volume of customer
transactions. Automated systems also resulted
in a higher likelihood of the MSB filing an
STR report with FINTRAC. The rates of
recordkeeping deficiencies were high regardless
of whether the MSB was using an automated
or manual transaction processing system.
systems to process transactions—which
had a particularly positive impact on
recordkeeping. In 2016, 72% of MSBs
were using automated systems compared
to 54% in 2012.
Some common recordkeeping deficiencies
were found in the benchmarking population.
These include:
• Failure to communicate requirements
clearly (i.e., staff were not obtaining
address, telephone or date of birth
information from clients)
• Incomplete or unclear documentation
of information (e.g., self-employed,
manager, owner)
• Poorly documented information
regarding corporate beneficial
ownership or individuals authorized
to transact for the corporation
• No documentation for third-party and
PEPF client inquiries
Occupation—this is really all about trying
to understand the source of a person’s
funds, that is, how they earn their money.
Documenting that someone is a manager
doesn’t provide any information as to
source of funds. Be specific and detailed.
Don’t make assumptions for your clients.
When required, third party and politically
exposed persons inquiries need to be
made and documented. Also, for larger
transactions, ones out of pattern or not
expected for a client, inquire and document
as to source of funds—don’t assume it.
Ensuring that the 24-hour
reporting rule requirement is
met can be tricky for MSBs
that process a high volume
of transactions using a manual
system. It will be harder and
harder to justify maintaining
manual records. Before you
make the system investment,
even the use of a simple
spreadsheet can assist with
ensuring the requirements
are met.
Automated
72%
28%
Manual
Transaction processing system 2016
2016 AML Benchmarking report 13
14. We identified that less than half of the
MSBs in the benchmarking population
had transactions which the MSB needed
to review in order to determine whether
or not any STR filing was required, an
improvement over 2012. At the time of
the review, these MSBs had not documented
any form of previous monitoring of these
transactions. The most commonly identified
types of transactions were:
• numerous transactions made by the same
customer over shorter time periods
(e.g., one to ten days); and
• larger transactions conducted by
customers where source of funds
information was unknown, or what was
known/documented was not clear/did
not make sense.
Terrorists and designated individuals
We analyzed the data available to identify
how many MSBs were using an automated
system to check customer names against
available listings of sanctioned individuals
and entities. Results showed that 29%
(2012: 57%) of MSBs were manually
checking customer names, and 71% (2012:
43%) had an automated process to do this
for them. Most MSB organizations that were
manually checking were doing so against the
OSFI list only, whereas when an automated
process was used to do the checking, usually
multiple lists were checked, including at least
the OSFI and OFAC lists.
Suspicious transactions
Nearly half of the 2016 benchmarking
population (48%) submitted STRs with
FINTRAC over the time period reviewed,
which was generally a three-month to
one-year timeframe. This is a significant
improvement over the 2012 study where
only 27% submitted STRs. This may
be a result of more organizations using
automated transaction monitoring systems.
As well, MSBs that filed STRs were less
likely to have delivered their training using
internal resources and to have developed
their policies and procedures internally.
-80% -60% -40% -20% 0% 20% 40% 60% 80% 100%-100%
Use an automated transaction58%
Develop their
P&P internally
89%-61%
Trained their
compliance officer
58%
Trained their
staff internally
66%
Had more than five employees49%
Had five or fewer employees51%
Had more than one location43%
Note: This bar chart provides detail data results for the pie chart on this page.
Had filed an STR Have not filed STRs
-80%
-84%
-38%
-52%
-50%
-50%
-60%
It’s critical that all staff (front
counter, back office/ processing
and management) are properly
trained and aware of how to
recognize the red flags of an
unusual transaction—one that
raises suspicion of money
laundering or terrorist financing.
Training is now expected to be
tailored to the role and position
of your staff.
MSBs that are not identifying and
reporting suspicious transactions
to FINTRAC need to really stand
back and assess their risk,
identification and monitoring
processes. Is their compliance
program really effective? Today
the expectation is that within this
industry an effective program will
identify suspicious transactions.
If you are not reporting, you need
to be able to prove that you don’t
have to.
Have not filed STR’s
52%
48%
Filed STR’s
MSBs that filed STRs 2016
14 2016 AML Benchmarking report
15. We determined that for the MSBs using
an automated system, during the time of
their compliance program review, 25%
of these MSBs had identified deficiencies.
Deficiencies were specifically related to:
• the list the system was using to check
names against being outdated, in some
cases by several months; and
• technical issues with the system, such
that the comparison process was simply
not working as it was supposed to.
Automated
71%
29%
Manual
Terrorist and designated individuals
detection system 2016
Deficiency
identified
25%
75%
No deficiency
Automated detection system
with deficiencies 2016
0 banking partners
2%
58%
2 Banking partners
17%
> 2 banking partners
23%
1 Banking partner
Number of banking partners held by MSBs
1. http://www.globalcenter.org/wp-content/uploads/2015/11/rr-bank-de-risking-181115-en.pdf
2. https://www.fincen.gov/news_room/nr/html/20160606.html
3. http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-canada-2016.html
4. http://www.worldbank.org/en/news/press-release/2016/04/13/remittances-to-developing-countries-edge-up-slightly-in-2015
5. http://www.unodc.org/unodc/en/money-laundering/globalization.html
6. http://www.fintrac.gc.ca/publications/typologies/2012-04-eng.asp#s1-4
7. Money Laundering and Terrorist Financing (ML/TF) Typologies and Trends for Canadian Money Services Businesses (MSBs),”
FINTRAC Typologies and Trends Reports (July 2010): http://www.fintrac.gc.ca/publications/typologies/2010-07-eng.asp
8. https://www.complianceweek.com/blogs/enforcement-action/former-moneygram-cco-fined-1-million#.V_fuD00VDmI
Don’t hesitate to reach out
to a member of our national
anti-money laundering
services team:
Jennifer Fiddian-Green
Partner, Advisory Services
Patrick Ho
Senior Manager, Advisory Services
Robert Osbourne
Senior Manager, Advisory Services
Albina Alimerko
Manager, Advisory Services
Andres Betancourt
Senior Associate, Advisory Services
T +1 855 747 2647
E msb@ca.gt.com
Understanding source of funds: A bank
account is where the money last comes
from before it comes to your organization;
knowing this is not enough. Find out how the
money came to be owned and in the control
of your potential customer.
Transactions need to be monitored for
unusual, potentially suspicious activity.
Make sure this process is documented.
2016 AML Benchmarking report 15
16. Audit • Tax • Advisory
www.GrantThornton.ca
Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd
About Grant Thornton LLP in Canada
Grant Thornton LLP is a leading Canadian accounting and advisory firm providing audit, tax and advisory
services to private and public organizations. We help dynamic organizations unlock their potential for growth
by providing meaningful, actionable advice through a broad range of services. Together with the Quebec firm
Raymond Chabot Grant Thornton LLP, Grant Thornton in Canada has approximately 4,000 people in offices
across Canada. Grant Thornton LLP is a Canadian member of Grant Thornton International Ltd, whose member
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