Canada Has Seen Suspicious Money Reports Surge and It’s Investigating A Lot Less

Canada has earned itself a reputation as a hub for dirty money over the past years, and it doesn’t seem to be phased by it. Financial Transactions and Reports Analysis Center of Canada (FINTRAC) data show reports of suspicious transactions have surged higher in recent years. At the same time, the financial watchdog is conducting fewer compliance audits. The move is particularly problematic for real estate, where housing is rising at a record rate and compliance audits are 60% lower than they were last year.

Canada Has Seen Suspicious Transactions Rise 270% Since 2016

Reports of suspicious transactions have exploded over the past few years in Canada. The agency received 468,079 suspicious transaction reports in the 2020-2021 period ending March 31. It’s 21.2% higher than a year before and 271.6% higher than the 2016-2017 period. Remember, these are just suspicious transaction reports — not the total received reports. The agency receives and “stores” over 30 million transaction reports annually.

Canadian Suspicious Transaction Reports

The number of suspicious transaction reports received by FINTRAC. FINTRAC reporting periods have a year end of March 31.

Source: FINTRAC; Better Dwelling.

FINTRAC Audits Have Fallen Over 62%

A surge in suspicious transactions didn’t cause FINTRAC to break a sweat, apparently. The agency dropped compliance audits sharply, conducting just 151 in the 2020-21 period. This is a drop of 62.2% from the previous period. The pandemic played a role in fewer audits, but this has been a longer-term trend. 

Canadian Suspicious Transaction Audits

FINTRAC compliance audits for entities required to file suspicious transactions.

Source: FINTRAC; Better Dwelling.

FINTRAC Audits of The Real Estate Industry Fell To Just 53

With all of the public outcry over real estate, they must be focusing on just that area, right? They did not. Compliance audits for real estate reporting fell to just 53 in 2020-21, down 63.7% from a year before. Since the 2016-17 period, audits to the industry are 65.1% lower. They did manage to find at least one brokerage breaking the rules by failing to comply.

Canadian Suspicious Transaction Audits

FINTRAC compliance audits for entities required to file suspicious transactions by industry.

Source: FINTRAC; Better Dwelling.

Canada has been revealed to be poorly positioned to enforce anti-money laundering rules. At the same time, the country has seen the number of suspicious transactions surge higher. A sharp increase in reporting isn’t necessarily an issue by itself.

However, it’s problematic when paired with the disassembly of financial crime resources in 2020, increased funding, and fewer audits. Some of this might be attributed to the pandemic, but this trend began well before.