FINTRAC decides what matters to Canada’s banks during COVID-19, Westpac is a long way from reaching a formal settlement after its scandal and Germany is funding small businesses.

We share our financial regulatory highlights from the week of 30 March 2020.

FINTRAC Releases COVID-19 Priorities

Much of the world might be on lockdown, but financial crime isn’t. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) reiterated this last week in a message to entities subject to compliance obligations under Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Companies must continue to monitor for and flag fraudulent or suspicious transactions.

Yet while obligations must be met, FINTRAC recognizes that COVID-19’s spread has created unique business challenges. Businesses face staff shortages and limited resources due to the pandemic. In response to these issues, FINTRAC has made it clear that filing suspicious transaction reports (STRs) should be treated as priority number one. But where this isn’t possible and critical information must be shared, businesses should email emergencyreport-declarationurgente@fintrac-canafe.gc.ca.

FINTRAC also acknowledged that identity documents may be expired but still valid, given the impracticability of in-person renewals at this time. The agency has, therefore, confirmed these can be used in identity verification processes. That said, financial institutions should proceed with caution. It’s a fine line between making allowances as a result of COVID-19 and accepting expired documents without sufficient scrutiny. Therefore, other methods may still be preferable.

The regulator has paused the start of new supervisory examinations. It will not be offering telephone support for usual inquiries, asking instead that businesses pose their questions via email.

Lastly, FINTRAC advised all businesses to document any limitations they may experience with their compliance function and what steps they’re taking to mitigate the effects. Steps like automating manual tasks, for example, may help those working with reduced staff handle similar workloads. Documenting what actions have been taken will ensure that deficiencies due to the coronavirus are given proper consideration when FINTRAC resumes its normal assessment activities.

Other regulators are likely to follow suit in the coming months to adjust to industry-wide reduced capacity. FinCEN, for example, has also asked companies under US jurisdiction with concerns about complying with reporting obligations during the pandemic to contact them right away. But with fraud and other financial crime on the rise, clear guidance will help direct resources to where they can be most effective.

Scandal Settlement Still Out Of Reach

Westpac is still far from reaching a settlement with Australian regulator AUSTRAC, following the bank’s scandal in 2019. A criminal trial into the actions by Westpac are due to be heard by courts in summer, though of course that may be delayed by the current pandemic.

But some movement towards a settlement is being made. The Federal Court in Australia recently heard that the regulator and Westpac are moving towards a settlement that involves some admissions of fault by the bank over its AML/CFT breaches.

Westpac has been accused of 23 million breaches. The bank was also accused of enabling pedophile rings as some of the transactions involved related to child exploitation.

Mediation between Westpac and AUSTRAC has been ongoing for some time and the court has ordered the two to provide a partial statement of agreed facts. AUSTRAC argued against the order but the court agreed with Westpac that the underlying issues could be agreed.

Chief Justice Allsop warned both parties that the case is expected to be heard within 15 months. He went on to say: “The parties should not assume that it will be winter 2021 when this case is on for hearing, they should assume something more like summer 2020-21.”

€50 Billion Up For Grabs

Germany has responded to the self-employed and SME-owners who fear for their livelihoods with a federal aid fund of €50 billion.

The money is, in effect, for business-continuation. It’s to be used to protect those affected by providing them with the funding to cover ongoing payment obligations such as for renting business premises.

Freelancers and sole-traders are also covered by the fund. Businesses with up to five employees can receive a one-off payment of 9,000 euros for three months and those with up to ten employees receive 15,000 euros. However, these businesses must reside in Germany and be registered with a German tax office. The aid itself will be taxed – but only in 2021 and then only if the business manages to turn a profit.

The Federal Government has made clear that those who try to obtain the money illicitly will be prosecuted. However, how they’ll identify those who do so is unclear. The Federal Ministry of Finance and the Ministry of Economics has made clear that false statements may constitute subsidy fraud. Ostensibly it’ll be the banks and payments providers handling the payments who will be relied on to make sure applicants are being honest.

It’s also been stated outright that the fund is not to be used for businesses that were struggling prior to the coronavirus crisis. Again, how this will be argued and justified is likely to be decided by the banks handling the grants.

Federal Finance Minister Olaf Scholz welcomed the rapid agreement with the federal states, “In order to be able to focus on Coronavirus emergency aid now”. This is important, he said, “so that the aid reaches those affected on the ground quickly”.

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