As an industry regulated in part by the Financial Transactions
and Reports Analysis Centre of Canada (FINTRAC), Canadian
securities dealers and brokers are required to have an anti-money laundering program in place to identify and report
Recently, FINTRAC issued a report on the suspicious
transactions submitted from the securities industry, “Money
Laundering Trends and Typologies in the Canadian Securities
Sector”. The report provides vital insight and here are some of
• From 2007 to 2011, a total of 1,235 suspicious transaction
reports (STR) were submitted to FINTRAC from across the
country. Of these, almost half (552) were submitted in 2011.
• Since 2007, there has been a gradual increase in the number
of firms submitting reports. In 2011, 55 different organizations
submitted reports (in 2010 – 44). Despite the higher volumes
and number of firms reporting, some organizations have
never submitted an STR; more than half (62%) were firms
operating under larger financial institutions.
• In terms of the activity that was identified as suspicious,
55% were not associated with any securities products.
Other reported activity identified Canadian shares (16%) and
• STRs submitted to FINTRAC included four main
areas of suspicion: source and use of funds; person
conducting the transaction; complex transactions; and
the negotiation of securities.
• Recent money laundering risks have emerged including
the increased use of online brokerages, publicly listed shell
companies and direct electronic access to markets. In these
instances, the risks add an additional layer of opportunity for
money launderers to manipulate the securities industry sector.
The report also highlighted some recommendations:
• With complex schemes, money laundering may only become
apparent after considering reports from several sources.
• Enhanced due diligence likely needs to be performed for
clients that are foreign nationals or resident outside of
Canada; 13% of the STRs filed indicated that the person
conducting the transactions was outside of Canada.
• When submitting gatekeeper reports to other regulators, the
securities firm should consider filing an STR.
• FINTRAC’s report also identified several real examples of
money laundering based on the STRs filed by securities firms:
» Deposit of physical certificates;
» Over the counter securities;
» Early redemption and sales of securities; and
» Transfer of funds within and between accounts.
Whether securities firms are more aware of the requirements
to report or are simply now identifying more suspicious activity,
the number of STRs being filed now has increased. However, the
total number is still small considering that from 2007 to 2010 over
200,000 reports were submitted by all regulated industries.
Money Laundering in the Securities Industry
By Jennifer Fiddian-Green, Partner, Grant Thornton LLP
Patrick Ho, Senior Manager, Grant Thornton LLP