Canada

TECHNICAL COMPLIANCE ANNEX
business models and the consequences of non-compliance. FINTRAC also has a range of offsite
mechanisms to conduct supervision of FIs including compliance assessment reports (CAR), deskbased
reviews, monitoring of financial transactions, observation letters, compliance enforcement
meetings, IT tools, voluntary self-disclosures of non-compliance and other awareness/assistance
tools. CARs are used to segment REs within a sector, with results being used to initiate desk and onsite
exams.
OSFI applies a risk-based approach to AML/CFT supervision. It has an AML/CFT risk assessment
separate from its prudential risk assessment model for FRFIs and directs its assessment program at
Canada’s largest banks and insurance companies and other FRFIs considered at highest risk of ML
and TF. OSFI’s risk assessment methodology focuses on the vulnerabilities of FRFIs to ML and TF,
looking at factors such as size, geographical spread, products, services and distribution channels and
quality of risk management generally. It assigns a risk profile on each institution considering the risk
factors and the quality of its risk management. OSFI’s risk assessment results in a classification of
FRFIs into categories of high, medium and low risk based on a combination of inherent risk, coupled
with broader prudential views on the quality of risk management. OSFI supervises FRFIs on a groupwide
basis and it conducts examinations of FRFI’s on a cyclical basis depending on an FRFI’s risk
ratings and when information is received from prudential supervisors and other regulators including
FINTRAC. OSFI also monitors major events or developments impacting the management or
operations of FRFIs that informs both the content of AML/CFT assessments and also the assessment
planning cycle.
FINTRAC and OSFI have agreed a concurrent approach to AML/CFT supervision of FRFIs allowing
for concurrent examinations in addition to individual examinations that both supervisors can
conduct of FRFIs. Both OSFI and FINTRAC exchange information that is relevant to FRFI’s
compliance with AML/CFT obligations. FINTRAC and provincial regulators also exchange
information and FINTRAC can conduct AML/CFT follow-up activities with provincially regulated REs
when AML/CFT issues are reported to it. Other supervisors also adopt risk assessments and
supervision that are related to AML/CFT. For example, IIROC uses a risk assessment model for
IIROC-regulated firms to determine priority focus and can apply an AML examination module by
IIROC that is judged to present an AML/CFT risk. The primary responsibility for AML/CFT
supervision remains with FINTRAC and any supervisory activity conducted by other supervisors’
supplements, but does not replace, FINTRAC’s responsibility to ensure compliance with the
PCMLTFA and Regulations made thereunder.
Technical compliance Annex
Criterion 26.6— FINTRAC reviews its risk model on an ongoing basis and recently reviewed its
sectoral analysis. FINTRAC also reviews its understanding of ML/TF risks for individual REs through
reviewing the institution’s compliance history, reporting behaviour and risk factors. In its ongoing
review of the risk assessment, FINTRAC regularly monitors and assesses actionable intelligence,
ML/TF risks and trigger events. OSFI reviews its AML/CFT risk profiles of FRFIs periodically. Risk
assessments are applied to DSIBs on a continuous basis, reflecting their dominance of the FRFI
sector and their very high-risk level. On-site assessments of DSIBs are conducted on a regular basis
and DSIBs may be subject to more intensive supervision (staging) where deficiencies have been
identified. The review of the risk profiling of other high-risk FRFIs is updated at less frequent
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