In Canada, a Foreign Exchange Dealer (FXD) must adhere to specific regulations and legal requirements to operate within the financial system. The key regulatory framework for FXDs is primarily overseen by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and, in some provinces, by provincial securities regulators. Here are the main regulations that a Foreign Exchange Dealer in Canada must follow:
The PCMLTFA is the primary legislation governing anti-money laundering (AML) and counter-terrorist financing (CTF) in Canada. FXDs are considered Money Services Businesses (MSBs) under this act and are subject to specific obligations, including registration with FINTRAC.
FXDs are required to register with FINTRAC and comply with its reporting and record-keeping requirements. Registration involves providing information about the business, its ownership, and its anti-money laundering and counter-terrorist financing (AML/CTF) compliance program.
FXDs must perform customer due diligence to verify the identity of their clients and assess the nature of their business relationships. This includes obtaining information about the beneficial ownership of clients.
FXDs are required to maintain records of transactions and certain customer information for a specified period. This is essential for tracking and reporting financial activities when necessary.
FXDs are obligated to report certain transactions to FINTRAC. This includes large cash transactions, electronic funds transfers (EFTs) of $10,000 or more, and suspicious transactions. Timely and accurate reporting is crucial in combating money laundering and terrorist financing.
FXDs are required to establish and implement a comprehensive AML/CTF compliance program. This program should include internal controls, ongoing monitoring, employee training, and risk assessments to ensure compliance with regulatory requirements.
FXDs must conduct a risk assessment of their business operations to identify and mitigate potential money laundering and terrorist financing risks.
In addition to federal regulations, FXDs may be subject to specific provincial regulations and licensing requirements. Some provinces have additional rules related to the operation of financial services businesses.
FXDs should stay informed about any updates to AML/CTF regulations, guidelines, and best practices. Seeking legal advice and consulting with compliance experts can help ensure that Foreign Exchange Dealers in Canada meet their regulatory obligations and operate within the legal framework.