Reporting Suspicious Transactions: “As Soon As Practicable”, Meaning What?
Included in the final amending regulations gazetted on July 10 amending the regulations made under the PC(ML)TFA is a significant change (effective June 1, 2020) as to when STRs must be reported to FINTRAC. Gone is the thirty-day requirement in s.9(2) of the PC(ML)STR regulations. In its place is the following:
The person or entity shall send the report to the Centre as soon as practicable after they have taken measures that enable them to establish that are reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering offence of terrorist activity financing offence.
The final wording is a change from the requirement in the draft regulations that STRs be filed within three days. It is likely intended to bring Canada closer to the FATF recommendation that suspicious transactions be reported promptly.
“As soon as practicable” is a phrase not uncommon in Canadian legislation. In the Criminal Code, it is used to limit police as to when they can lawfully demand breath or blood samples from suspected impaired drivers. As a result, it has received frequent judicial interpretation that can assist regulated entities in understanding what is expected of them under amended s.9(2).
What seems clear from the criminal case law is that “as soon as practicable” does not mean “immediately” or “without delay”. Nor is it the same as “forthwith” or “as soon as possible”, which can be interpreted as meaning that, devoid of the circumstances, as soon as “X” happens, the legal requirement at issue is triggered. Instead, “as soon as practicable” is dependent on the circumstances prevailing at the time. In that sense, it is an objective measurement of when it was feasible for the report (in the AML context) to be made. It permits delays in reporting, that are reasonable in the circumstances. But, reporting any time past this point risks non-compliance with the amended s.9(2).
There are two other, potential, ramifications to the amendment that may be less obvious. First, despite the use of the word “after” the word “practicable” in the new s.9(2), arguably it may be interpreted as requiring efficiency in reporting entities’ review and decision-making procedures in relation to reporting suspicious transactions or their attempts. Cumbersome procedures that have the effect of unreasonably delaying reporting may cause FINTRAC compliance officers (or a worse a Federal Court Justice in an AMPs appeal), to question whether it was feasible for an entity to report earlier than it did in compliance with s.9(2). Regulated entities may want to consider reviewing their procedures and improve on them where unnecessary delay-causing inefficiencies are found.
Second, the previous version of s.9(2) required reporting when a regulated entity “detects a fact respecting a financial transaction or an attempted financial transaction that constitutes reasonable grounds to suspect…” It has been amended to when entities have “taken measures that enable them to establish that are reasonable grounds to suspect…” The original may have caused compliance officers to seize on a single fact that they determined constituted reasonable grounds, ignoring other facts inconsistent with that conclusion that the entity may have relied on in deciding not to report. The amendment is much more generous to the decision-making of regulated entities. It permits a more general focus on all of the prevailing circumstances, which, with all due respect to the possible past practices of some officers, is the correct way in determining whether there are reasonable grounds to suspect.