Daily Dash: Canada Proposes Strengthened Regulations For Money Services Businesses

July 10, 2024
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Canada’s federal government is looking to introduce criminal record checks for key personnel at domestic money service businesses, while BNP Paribas has been fined for "severe" AML failures in Luxembourg.

Canada Proposes Strengthened Regulations For Money Services Businesses

Canada's Department of Finance has introduced proposed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) aimed at enhancing the regulatory framework for money services businesses (MSBs).

This initiative follows commitments made by the federal government in the 2023 budget to tighten anti-money laundering (AML) legislation.

Under the existing PCMLTFA, both foreign and domestic MSBs are required to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and renew their registration biennially.

Foreign MSBs currently need to submit criminal record checks for key personnel, including CEOs, presidents, directors and any significant stakeholders. However, under the proposed amendments, this requirement would also be extended to domestic MSBs.

Additionally, the new regulations would mandate that MSBs conduct and submit criminal record checks for their agents during registration and re-registration. 

Entities acting as agents would also need to perform checks on their own key personnel and submit these to FINTRAC every two years, and all MSBs would be required to retain these records for five years.

The Department of Finance is inviting public comments on these proposed amendments until August 5, 2024.

BNP Paribas Fined €3m For 'Severe' AML Failures In Luxembourg

The Luxembourg subsidiary of BNP Paribas has been issued a €3m administrative penalty for “severe” non-compliance of the state’s anti-money laundering and counter-terrorism financing (AML/CTF) rules.

Between May and November 2021, Luxembourg’s Commission de Surveillance du Secteur Financier (CSSF) conducted an inspection of the bank to assess its internal and governance framework in relation to a group of related clients.

During the inspection, the CSSF identified “deficient” enhanced due diligence checks on source of funds and source of wealth among the group of clients, despite their higher AML risk.

The regulator also found that the bank did not collect “complete, consistent and duly documented information” on the clients.

The fine was mitigated by the bank’s “full cooperation” with the CSSF during the investigation, and its introduction of an action plan to remedy the AML weaknesses identified.

Visa, Mastercard Extend EU Antitrust Commitments On Interchange Fees

Visa and Mastercard have voluntarily extended their antitrust commitments on inter-regional interchange fees beyond November 2024. 

The European Commission, which made these commitments legally binding in April 2019, has acknowledged this decision. 

Originally, the companies agreed to reduce these fees by an average of 40 percent for payments within the European Economic Area (EEA) using consumer cards issued outside the region.

Under the extended commitment, the caps on interchange fees will remain in place for another five years, until November 2029. The fees for card-present (offline) transactions will stay capped at 0.2 percent for debit cards and 0.3 percent for credit cards. 

For card-not-present (online) transactions, the caps will remain at 1.15 percent for debit cards and 1.5 percent for credit cards.

"At this stage, the commission has no indications that the market has substantially changed and that the caps agreed in 2019 would not be appropriate anymore," the commission said in a statement. 

However, the commission added that the voluntary undertakings by Visa and Mastercard do not prevent it from conducting investigations or opening proceedings should it "obtain concrete evidence showing that the current caps would not be appropriate anymore". 

Iran, Russia Complete Stage One Of Payment System Linkage

The Central Bank of Iran (CBI) has announced that Iranians will soon be able to use Russia’s MIR card payment system to spend and withdraw cash in Russia.

Mohammad-Reza Farzin, CBI governor, said the linkage with Russia’s MIR network is expected to go live next month.

As quoted by local media, Farzin made the announcement while in St Petersburg this weekend for the Financial Congress of the Bank of Russia.

He added that stage two of the partnership will see Iran’s SHETAB card network opened up to Russian nationals in Iran.

In stage three, SHETAB card holders will be able to spend at point of sale (POS) terminals in Russia.

The two countries also signed an agreement on the use of national currencies to facilitate bilateral trade.

Dutch Finance Minister Proposes Law To Restrict UBO Register Access

The Dutch minister of finance has presented a draft law, “Amendment Act Restricting Access to Ultimate Beneficial Owners Register”, to the House of Representatives.

The proposed legislation seeks to tighten regulations surrounding access to information on the ultimate beneficial owners (UBOs) of companies and other legal entities. It also aims to enhance privacy and security by limiting access to UBO registers.

As proposed, only competent authorities, entities subject to customer due diligence obligations under the Anti-Money Laundering Directives, and parties involved in sanctions compliance, monitoring and enforcement would be granted access.

The legislation follows a Court of Justice of the European Union ruling at the end of 2022 that the benefit of public access is not proven, and can interfere with the private lives of those on the registers.

DBS Hit By $1.3m Fine For Monitoring Failures In Hong Kong

The Hong Kong Monetary Authority (HKMA) has issued a HK$10m ($1.3m) fine to the local subsidiary of DBS, Singapore’s largest bank, for violations of anti-money laundering and counter-terrorism financing (AML/CTF) laws.

The regulator found that from 2012 to 2019 the bank failed to continuously monitor and conduct enhanced due diligence during “high risk” business situations. DBS also failed to keep records on some of the customers involved, the HKMA said.

The case came to light following an HKMA investigation of DBS’ systems and compliance controls.

The HKMA said the penalty was mitigated by DBS’ cooperation and its lack of previous violations of Hong Kong’s AML/CTF laws.

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