1. Develop red flags for the layering and integration stages
of money laundering. FINTRAC and securities regulators
have both commented that firms are not doing enough to
identify and monitor patterns beyond the placement stage of
money laundering. In addition to FINTRAC’s list of red-flags,
consider those identified by securities regulators and FATF.
This information can be found on their websites.
2. Remember to update your list of higher risk clients on a
regular basis as well as your overall risk assessment.
3. Don’t rely solely on manual trade reviews – In 2010, FINRA
fined securities firms for failing “to adopt effective procedures
for detecting suspicious activity. Instead, the firm used a
“manual” system, which involved a daily review of its trade
blotter.” Further, FINRA instructed clearing firms to consider
conducting “computerized surveillance of account activity to
detect suspicious transactions.
4. Make training relevant to your staff – instead of providing
generic AML training customize the training to reflect your
organization’s assessment of risks and related policies,
procedures and red-flags. While this takes time up front... it
can be highly effective and save time down the road.
For more information contact:
1. The international Financial Action Task Force (FATF) of which
Canada is a member.
Considering Higher Risk Characteristics:
Customers’ characteristics provide useful
information to identify higher risks for your
• Politically exposed foreign persons
• Customers with known criminal/questionable reputation
• Customers who conduct non face-to-face transactions
• Customers who are insiders, traders or employees
• Customers where there is third party involvement with obscure details
Countries differ in the level of corruption seen
as acceptable, in criminal activity, maturity of
markets, and attractiveness for terrorists.
• Customers may reside in these markets, transact to/from these markets and/or do
business in these markets
• Business may be conducted through countries identified as corrupt or tax havens
• Country is non-compliant with international AML efforts and are more likely to pose
a risk to the organization
Product, Services and Market
Size and types of transactions that we
typically complete will help identify what is
unusual or higher risk activity.
• Transactions in thinly-traded securities, physical/bearer securities, Futures, Jitney
trading, electronic transfer or trading of securities
• Participation in OTC markets, bulletin boards
• Products and services providing more anonymity to customers should be reviewed
for higher risk
Your organization’s relationship with the
customer is critical to controlling risks.
• Factors such as the length of time they have been a client, or if their transactions
have exhibited red-flags for money laundering in the past, or if identification records
are out of date, are important in evaluating risks
• Client due diligence activities are important mitigating controls