Royal Bank of Canada Fined $7.4 Million for Anti-Money Laundering Violations

Canada’s financial intelligence agency, the Financial Transactions and Reports Analysis Centre (Fintrac), has imposed a penalty of $7.4 million on the Royal Bank of Canada for failing to comply with anti-money laundering and terrorist financing measures. This is the largest fine ever imposed by the agency.

Fintrac revealed that the violations include the bank’s failure to submit suspicious transaction reports when there were reasonable grounds to suspect ties to money laundering or terrorist financing. The agency sifts through millions of pieces of information each year from various financial institutions to identify money linked to illicit activities. It then shares intelligence with law enforcement agencies to investigate suspected cases.

During a compliance examination in 2022, Fintrac found that the Royal Bank had not submitted 16 suspicious transaction reports out of the 130 case files it reviewed. The bank also failed to escalate or refer files for determining the need to submit a suspicious transaction report to Fintrac, despite being served with production orders on clients. Additionally, transaction reports related to fraud were not sent to Fintrac, even when there were indicators supporting suspicions of an offense.

Furthermore, the agency discovered that the bank had not provided information in the prescribed form in suspicious transaction reports and had not kept its written policies and procedures up to date. Prior to May 2021, the bank was also not filing separate reports for different branch locations.

In response to the penalty, a spokesperson for the Royal Bank stated that the bank chose not to appeal but believed that the fine was not proportionate to the administrative matter at hand, as it had no connection to money laundering or terrorist financing offenses. The bank acknowledged its commitment to reporting suspicious activity and took action to address any gaps in its processes. The spokesperson confirmed that there was no finding of bad faith or intentional contribution to the violations.

Fintrac’s director, Sarah Paquet, emphasized the agency’s commitment to working with businesses to help them understand and comply with their legal obligations. Paquet also highlighted that Fintrac would be firm in enforcing businesses’ responsibilities and taking appropriate actions when necessary.

It is worth noting that administrative monetary penalties, such as the one imposed on the Royal Bank, are intended to promote change in business behavior rather than solely punish them. In the 2022-2023 financial year, Fintrac issued six notices of non-compliance to businesses, resulting in a total of $1,113,569 in penalties. Since its establishment 15 years ago, Fintrac has imposed over 125 penalties across various sectors.

Overall, the Royal Bank of Canada’s significant penalty serves as a reminder of the importance of financial institutions’ compliance with anti-money laundering and terrorist financing measures, as well as the potential consequences of non-compliance.

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