Canada's banking regulator to sharpen focus on money laundering issues

By Nivedita Balu

TORONTO (Reuters) -Canada's banking regulator is to step up its focus on money laundering issues and will work with the country's financial intelligence agency to tackle such incidents, the regulator's head said on Friday.

"The intensity of money laundering risk is under-appreciated ... what you can expect from us is more focus on that issue," Peter Routledge, superintendent of Financial Institutions (OSFI) said at TD Securities annual conference.

Routledge noted that digitalization was a huge driver in the increased number of suspicious reports and that the sophistication of money laundering techniques in the world of artificial intelligence and deep fakes was evolving rapidly.

Last month, the Financial Transactions and Reports Analysis Centre (FINTRAC), fined two of the country's big banks - Royal Bank of Canada and CIBC - for a total of about C$9 million ($6.68 million) for violations that included failing to submit suspicious transaction reports, the first time it has taken such action.

"Money laundering is a threat. We'll have to work more closely with FINTRAC on evidence of significant money laundering issues at an institution ... It means our supervisors will be supervising in a more significant way," Routledge said.

In the United States, TD Bank is being investigated by the U.S. Department of Justice in relation to its compliance with anti-money-laundering rules, which could result in penalties.

Routledge said OSFI does not directly supervise the U.S. operations of Canadian banks, but works closely with the OCC and other authorities when they identify issues within the local subsidiaries.

He has previously said that OSFI would add oversight of non-financial risks such as cybersecurity, money laundering and terrorist financing, as geopolitical tensions escalate and also look into issues of foreign interference and national-security issues at the big banks.

FINTRAC is also ramping up its monitoring of suspicious transactions by modernising its systems and technologies after the federal government gave it new powers relating to national security.

Think tanks like C.D. Howe estimate between C$100 billion and C$130 billion is laundered annually in the country.

About 75% of all suspicious transactions between April and September 2023 were reported by financial institutions, according to FINTRAC data.

($1 = 1.3464 Canadian dollars)

(Reporting by Nivedita Balu in Toronto. Editing by Jane Merriman)