FINTRAC: Trends in COVID-19 Transaction Reporting
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has issued a special bulletin on their analysis of transaction reporting during the COVID-19 pandemic.
This new report follows earlier guidance on temporary flexibility issued by FINTRAC on March 25, 2020.
The Canadian Anti-Fraud Centre’s (CAFC) analysis of fraud reporting has shown areas that may pose an increased money laundering risk associated with the exploitation of the pandemic.
While the COVID-19 pandemic has not had a significant impact on the overall volume of suspicious transaction reports (STR) and electronic funds transfer reports (EFTRs), the volume of casino disbursement reports (CDR) and large cash transaction reports (LCTR) has significantly decreased.
FINTRAC says the overall decrease in large cash transactions is likely a result of the physical distancing and public health measures as they have resulted in a general decline in cash transactions and business closures, including casinos.
While large cash transactions decreased, there was an 86 percent increase associated with reporting from dealers in precious metals and stones.
Observations in Suspicious Transaction Reporting
An analysis of STRs containing a reference to COVID-19 highlights general suspicions of money laundering based on the nature of transactions, FINTRAC stated.
They also reported they are suspicious of the laundering of fraud proceeds as Financial Intelligence Units in other jurisdictions have reported similar findings.
The COVID-19 pandemic represents an unprecedented situation that may lead to unusual transaction activities, FINTRAC stated. While many unusual patterns may reflect legitimate needs to access financial services during this challenging time, some individuals may attempt to profit from the current situation to facilitate money laundering.
The COVID-19 pandemic, and associated closures and physical distancing measures, has disrupted some money laundering methods – particularly those that rely on the placement of illicit cash into cash-intensive businesses – and may expose criminals seeking alternate venues to integrate illicit proceeds into the financial system.
The characteristics of suspicious transaction reports highlighted below may not necessarily be indicative of money laundering, but should be examined along with additional risk indicators:
Transaction activity that is atypical or not in-line with the client’s financial profile.
Being unable to comply with reporting entity requests for further information regarding client financial activity.
Large currency exchanges for unclear purpose, or for the purpose of travel that is not plausible given the COVID-19 pandemic.
Large cash deposits where the source of funds is unclear, or not plausible given the current pandemic.
Explanations for transactions deemed unlikely given the business profile and the anticipated impact of the COVID-19 pandemic on the operating model (e.g., restaurants, bars, gyms, travel industry, etc.).
Unusual large cash deposits to business accounts, particularly in sectors most impacted by the COVID-19 pandemic or outside the norm for any business types.
Unusual or suspicious transactions involving the sale or procurement of personal protective equipment or other medical or hygiene supplies that are in high demand due to the COVID-19 pandemic. Transactions may involve individuals seeking to purchase small quantities or large-scale procurement by institutions.
Transactions that may be related to COVID-19 variations of existing mass marketing fraud schemes.
Large cash withdrawals by individuals may be indicative of fraud victimization or the laundering of proceeds of fraud activities, often using mules who may have previously been victimized.