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SECTION I – OVERVIEW

Director’s Message

I am pleased to present the Departmental Performance Report (DPR) for the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) for the fiscal period ending March 31, 2007. In last year’s DPR, we reported a large increase in the value of transactions in our case disclosures. This year, the aggregate value of the transactions in our 193 case disclosures doubled again over the previous year, to almost ten billion dollars.

Reaching such new heights is testimony to an agency that grows stronger and more effective with every passing year and to a partnership with reporting entities, law enforcement and CSIS that is exactly what legislators originally envisaged. We are seeing further into the dark corners of criminal and terrorist financing activity and we are being sought out for financial intelligence on investigative targets. We are encouraged by the strong relationships we have built, both with our partners in the anti-money laundering and anti-terrorist activity financing regime, and with the financial entities that send reports to us.

Similarly, on the international front, partnerships continue to strengthen. New and existing financial intelligence units (FIUs) turn to us for both technical and case assistance, eager to build and improve their own organizations. In 2006-07, FINTRAC broadened its international links by signing 15 new MOU with foreign counterparts, now allowing FINTRAC to query and disclose information to a total of 45 foreign FIUs.

It was a watershed year for FINTRAC, one which saw us prepare to leap forward into new territory, with expanded responsibilities and a range of new information management and analysis tools.

This past year we were subject to Parliament’s five-year review of our governing legislation. Based on this review and taking into account five years of operational experience and evolving international standards, the Government brought forward a range of legislative amendments in Bill C-25 that will make considerable improvements to further strengthen Canada’s anti-money laundering and anti-terrorist financing regime. Canada is now poised to put into force an even stronger and more comprehensive regime.

We also brought to fruition an ambitious project, working with our Australian counterpart, AUSTRAC, implementing information technology upgrades to improve our data capture and analysis capability. This considerable undertaking led to information technology solutions and business process improvements that are already paying significant dividends and will continue to do so well into the future. This collaborative project with a fellow FIU is a shining example of how the world’s FIUs work together to help each other, all with the common goal of fighting transnational money laundering and terrorist activity financing.

We confidently look forward to another year of helping to protect Canadians, with new tools and new responsibilities, within a strengthened regime, and as an even more effective partner in the global fight against money laundering and terrorist activity financing.

Horst Intscher
Director

Management Representation Statement

I submit for tabling in Parliament, the 2006-07 Departmental Performance Report for the Financial Transactions and Reports Analysis Centre of Canada.

This document has been prepared based on the reporting principles contained in Guide for the Preparation of Part III of the 2007-2008 Estimates: Reports on Plans and Priorities and Departmental Performance Reports:

• It adheres to the specific reporting requirements outlined in the Treasury Board Secretariat guidance;
• It is based on the Centre's Strategic Outcome(s) and Program Activity Architecture that were approved by the Treasury Board;
• It presents consistent, comprehensive, balanced and reliable information;
• It provides a basis of accountability for the results achieved with the resources and authorities entrusted to it; and
• It reports finances based on approved numbers from the Estimates and the Public Accounts of Canada

Name: _______________
           Horst Intscher
Title: Director

Summary Information

Overview

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is a partner in Canada’s anti-money laundering and anti-terrorist activity financing initiative. The Centre’s main objective is to assist in the detection, prevention and deterrence of money laundering, the financing of terrorist activities and other threats to the security of Canada.

FINTRAC’s work focuses on three key activities: the first is to receive financial transaction reports and information from other sources to produce financial intelligence on suspected cases of money laundering, terrorist activity financing and other threats to the security of Canada. The second is to ensure compliance with FINTRAC’s governing legislation—the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)—by those financial institutions and businesses covered by the Act. The third is to produce strategic financial intelligence that sheds light on the patterns and trends that characterize the evolving methods used by money laundering and terrorist activity financing networks.

Mission

FINTRAC’s mission is to provide law enforcement and intelligence agencies with financial intelligence on money laundering, terrorist activity financing and other threats to the security of Canada, while protecting that personal information under its control.

Activities

FINTRAC’s mandate is to provide financial intelligence that facilitates the detection, prevention and deterrence of money laundering and the financing of terrorist activities and other threats to the security of Canada.

FINTRAC’s activities include:

• Receive reports on suspicious and prescribed financial transactions, and receive and collect information relevant to money laundering and terrorist activity financing;
• Receive reports on the cross-border movement of large amounts of currency or monetary instruments;
• Analyze and assess the information it receives;
• Provide domestic law enforcement with financial intelligence that it suspects would be relevant to the investigation or prosecution of money laundering and terrorist activity financing offences;
• Provide the same information to the Canada Revenue Agency (CRA) if the Centre also determines that the information is relevant to an offence of evading or attempting to evade paying federal taxes, and to the Canada Border Services Agency (CBSA) if the Centre determines that the intelligence is also relevant to an offence of evading or attempting to evade duties or certain provisions of the Immigration and Refugee Protection Act;
• Provide CSIS with financial intelligence that it suspects would be relevant to threats to the security of Canada (including suspected terrorist activity financing);
• Provide financial intelligence to foreign financial intelligence units with which it has concluded a memorandum of understanding providing for the exchange of such information;
• Ensure compliance by financial institutions and other reporting entities with their obligations under the PCMLTFA and regulations;
• Ensure that personal information under its control is protected from unauthorized disclosure;
• Provide strategic intelligence, advice and analysis that enhance awareness and understanding of money laundering and terrorist activity financing, and that inform the development of effective Canadian and multilateral counter-strategies;
• Enhance public awareness and understanding of matters related to money laundering.

Benefits for Canadians

FINTRAC is an essential component of the community of organizations that combat organized crime and terrorism under Canada's anti-money laundering and anti-terrorist financing (AML/ATF) regime. The Centre’s role as Canada’s financial intelligence unit (FIU) is to safeguard Canada’s financial system by contributing to the creation of a more hostile environment for money laundering and terrorist activity financing in Canada; by supporting the public safety and national security of Canadians; and by upholding personal privacy.

FINTRAC facilitates the investigation and prosecution of money laundering, terrorist activity financing and other threats to the security of Canada by receiving information on financial transactions, analysing it, and disclosing the resulting financial intelligence to the appropriate law enforcement agency or to the Canadian Security Intelligence Service (CSIS).

By ensuring compliance by financial institutions and other reporting entities with their obligations under the PCMLTFA, the Centre helps to create a formidable deterrent to those who would use legitimate financial channels to launder money or to finance terrorism. In Canada, banks and other financial services businesses maintain internal compliance regimes that ensure that the trail of financial transactions can be followed, and that law enforcement agencies can effectively pursue cases of suspected money laundering and terrorist activity financing.

Money laundering and terrorist activity financing are transnational in nature, necessitating the participation of all countries for their successful detection and deterrence. FINTRAC’s work with international bodies such as the Financial Action Task Force (FATF) and the Egmont Group makes a strong contribution on Canada’s behalf, toward developing and adopting new international anti-money laundering and anti-terrorist activity financing standards. The operational links the Centre has forged with other FIUs throughout the world are a vital part of Canada’s contribution to the international fight against terrorism, money laundering and transnational organized crime.

Departmental Priorities

			2006-07 ($ millions)
Status on Performance			Planned Spending	Actual Spending1
Strategic Outcome: Financial intelligence that contributes to the detection and deterrence of money laundering and terrorist activity financing in Canada and abroad.
Alignment to Government of Canada Outcomes: FINTRAC’s role as Canada’s financial intelligence unit (FIU) is to safeguard Canada’s financial system by contributing to the creation of a more hostile environment for money laundering and terrorist activity financing in Canada. The Centre’s strategic outcome and activities support the following Government of Canada outcomes: A fair and secure marketplace; Safe and secure communities; A safe and secure world through international cooperation.
Program Activity: Collection, Analysis and Dissemination of Financial Information* Technology-driven financial intelligence analysis and case disclosures that are widely accepted by law enforcement and intelligence agencies with a program that fosters compliance by the reporting entities.
Deliver timely and high quality financial intelligence to law enforcement and national security agencies, and foreign financial intelligence units. Financial intelligence analysis, and case disclosures that are widely accepted and used in investigations by law enforcement, CSIS and foreign financial intelligence units.	Successfully met expectations – FINTRAC’s case disclosures were unprecedented in the total value they represented and in the complexity of networks revealed. The Centre’s financial intelligence made a relevant and meaningful contribution to the fight against money laundering and terrorist activity financing.	30.4		24.1
Ensure compliance with the PCMLTFA. Increased compliance with the law by reporting entities through more robust detection and deterrence of non-compliance. This will be accomplished through a risk-based compliance program comprised of awareness activities, the monitoring of data quality, compliance questionnaires, examinations, and by taking appropriate remedial action when non-compliance is detected.	Successfully met expectations – FINTRAC continued to build and refine its national compliance program, and made progress on a substantial number of initiatives. An increased number of compliance examinations were conducted in all reporting sectors. FINTRAC’s compliance team also conducted a substantial number of presentations, meetings and seminars for reporting entities, industry associations, regulators and law enforcement agencies.	14.5		11.5
Disseminate strategic information on money laundering and terrorist activity financing to partners, stakeholders, and the general public. Provide strategic intelligence, advice and analysis that enhance awareness and understanding of money laundering and terrorist activity financing and inform the development of effective Canadian and multilateral counter-strategies.	Successfully met expectations – Through macro-analysis of its case disclosures and the sharing of strategic information, FINTRAC supported the work of policy-makers, domestic partners in law enforcement and national security and the financial community. FINTRAC also supported Canada’s commitments on the international front, with partners such as the Egmont Group and the FATF, strengthening relationships important in the global effort to fight money laundering and terrorist activity financing.	4.8		3.8

¹The variance between the planned and actual spending relates to deferral of spending for new initiatives under Bill C-25. Bill C-25 received Royal Assent in December 2006.

^* Resource figures for FINTRAC’s program activity Collection, Analysis and Dissemination of Financial Information include all associated corporate support costs.

Financial Resources ($ millions)

Planned Spending	Total Authorities	Actual Spending*
49.7	40.3	39.4

^*The variance between the planned and actual spending relates to deferral of spending for new initiatives under Bill C-25. Bill C-25 received Royal Assent in December 2006.

Human Resources

Planned	Actual	Difference
265.4	222	43.4

The Year in Review

FINTRAC made 193 case disclosures of financial intelligence to law enforcement agencies, to CSIS and to counterpart foreign financial intelligence units. The total value of the disclosed transactions reached just over $9.8 billion, nearly doubling last year’s results. Again this year, the increasingly complex cases that were disclosed pinpointed new suspects and financial transactions, and triggered new investigations or provided significant input to ongoing investigations or prosecutions.

During 2006-07, FINTRAC worked extensively with its partners on the successful Parliamentary review of the PCMLTFA. FINTRAC assisted in the development of the legislative amendments contained in Bill C-25, which Parliament adopted in December, 2006. The amendments extend the coverage of the PCMLTFA to new entities and professions, fortify the deterrence provisions of the Act and expand the range of information that FINTRAC may disclose to law enforcement and intelligence agencies. These changes strengthen Canada’s AML/ATF regime and respond to findings made by the Auditor General in her evaluation of the regime. They also help make Canada even more compliant with the new international standards of the Financial Action Task Force (FATF).

The Centre continued to strengthen its national compliance program through a wide range of initiatives. Outreach activities, including presentations and seminars, have been and continue to be important vehicles for raising awareness among reporting entities. FINTRAC, together with the national and provincial regulators, conducted an increased number of compliance examinations across all reporting sectors. In addition, the Centre signed two additional compliance information-sharing agreements with national and provincial regulators, bringing the total to 17. FINTRAC also developed an integrated system to guide and monitor its risk assessment program and initiated a review of its risk assessment model in order to ensure its effectiveness.

Internationally, FINTRAC has demonstrated its strong commitment to sustaining and broadening the cooperative ties that are so important in the global effort to fight money laundering and terrorist activity financing. This has helped establish Canada as a major player in global crime-fighting efforts, and this position has been reinforced by the Egmont Group’s decision to establish its permanent Secretariat in Toronto.

FINTRAC’s international role underlines its commitment to creating and maintaining a powerful and knowledgeable global network to fight money laundering and terrorist activity financing. In 2006-07, the Centre signed 15 more memoranda of understanding (MOU) with foreign FIUs, bringing the total number as of March 31, 2007 to 45.

FINTRAC continued to strengthen it strategic intelligence capacity in support of its tactical intelligence and compliance programs. In addition to sharing strategic intelligence with domestic and international partners, FINTRAC's Macro-Analysis and Research unit produced new feedback products aimed at reporting entities and introduced automated solutions to assist in the production of operational statistics and management information.

In addition, FINTRAC and other domestic partners worked closely with the FATF on its comprehensive evaluation of Canada’s compliance with international standards to counter money laundering and terrorist activity financing.

FINTRAC made considerable upgrades to its information systems. A landmark achievement was the completion, in collaboration with Australia’s financial intelligence unit, AUSTRAC, of an initiative known as Base Mining Technology (BMT). This new technology enables FINTRAC to greatly improve on the timeliness and quality of the data it receives from reporting entities and other sectors with reporting obligations. The degree of international interest that this work has sparked has been very encouraging: since September 2006, FINTRAC has received eight visits from international colleagues, including a World Bank delegation with representatives from 11 jurisdictions, and a review of some aspects of the BMT project was part of every visit.

Every year, FINTRAC produces an Annual Report that provides additional details about the Centre’s activities and achievements in carrying out its mandate to detect, prevent and deter money laundering and terrorist activity financing. The Annual Report can be accessed at www.fintrac.gc.ca.

Key Results for 2006-07 by Priority

In FINTRAC’s 2006-07 Report on Plans and Priorities (RPP), the Centre outlined the results it hoped to achieve for its program activity, Collection, Analysis and Dissemination of Financial Information, according to its three main priorities. For consistency, this performance report reproduces the three priorities and describes the key results achieved below.

1. Deliver timely and high-quality financial intelligence to law enforcement and national security agencies, and foreign financial intelligence units.

Anticipated Result:
Financial intelligence analysis, and case disclosures that are widely accepted and used in investigations by law enforcement, CSIS and foreign financial intelligence units.

The production and disclosure of timely and relevant financial intelligence is central to the achievement of the Centre's strategic outcome. It is of the utmost importance that tactical intelligence produced by the Centre enhances the capacity of law enforcement, CSIS and foreign financial intelligence units to detect and deter money laundering, terrorist activity financing and other threats to the security of Canada.

The feedback received from law enforcement and national security agencies provides a clear indication of the impact of the Centre’s financial intelligence. It shows not only that the disclosures feed into investigations and prosecutions that are already underway, but also that, in an increasing number of instances, they identify completely new cases of suspected money laundering or terrorist activity financing. Of significance, as well, is the fact that close to half of all FINTRAC’s disclosures provided its partners with names of individuals previously unknown to them.

FINTRAC was able to produce case disclosures of higher dollar value and broader scope than in previous years. In 2006-07, the Centre made 193 case disclosures, of which 152 were for suspected money laundering, 33 were for suspected terrorist activity financing and/or other threats to the security of Canada, and eight involved both suspected money laundering and suspected terrorist activity financing and/or threats to the security of Canada. The total dollar value of FINTRAC’s case disclosures was $9.8 billion, nearly double the transaction value reached in 2005-06.

The total value of the transactions included in disclosures of suspected terrorist activity financing and other threats to the security of Canada was approximately $200 million.

The increasingly complex and detailed picture of suspect money movements that FINTRAC case disclosures provided to investigators is demonstrated by the increase in the number of transactions, the number of reporting entities represented, and the total dollar value of the suspect transactions involved in each disclosure. For example, there were eight case disclosures that gave rise to suspicions of money laundering, with a combined value of $1.6 billion.

Money launderers spread their transactions over several and often widely dispersed locations to try to conceal their activities. This is reflected in the growing number of case disclosures involving multiple reporting entities. The percentage of case disclosures involving six or more reporting entities has risen steeply over the past four years. This year, 60 per cent of FINTRAC’s disclosures were based on reports from more than six entities.

On average, each case disclosure made in 2006-07 involved a total of 458 transactions valued at $51 million. Last year, the average was 261 transactions valued at close to $30 million, and in 2004-05, $14.4 million. Of note this year is that 16 cases each involved transactions totalling over $100 million. Of those 16 cases, two involved transactions valued at between $500 million and $1 billion and three had a value of more than $1 billion.

FINTRAC’s partners have played a significant role as well. Canadian financial institutions and other financial intermediaries are becoming more effective in detecting suspicious transactions. The number of suspicious transaction reports (STRs) received by FINTRAC has increased dramatically from 29,367 in 2005-06 to this year’s total of 39,036.

In 2006-07 FINTRAC also made 35 case disclosures to 14 foreign FIUs with which it has a MOU. In instances where information was disclosed in response to a query from one of its international counterparts, FINTRAC also sought their permission to disclose this information to relevant partners.

2. Ensure compliance with the PCMLTFA.

Anticipated Result:
Increased compliance with the law by reporting entities through more robust detection and deterrence of non-compliance. This will be accomplished through a risk-based compliance program comprised of awareness activities, the monitoring of data quality, compliance questionnaires, examinations, and by taking appropriate remedial action when non compliance is detected.

The quality of FINTRAC’s financial intelligence is directly related to the quality and quantity of reports the Centre receives from reporting entities. As part of FINTRAC’s Collection, Analysis and Dissemination of Financial Information program activity, the Centre’s compliance program seeks to promote and facilitate compliance with the law by reporting entities and to detect and deter non-compliance. This not only has the effect of improving the quality and quantity of reports received by FINTRAC, it also has a strong deterrent effect, as it makes it more difficult for those who would launder money or seek to raise funds for terrorist activity to carry out their activities unnoticed and in anonymity. Compliance activities can directly assist investigations and prosecutions in addition to the deterrent effect they provide. For example, when financial institutions request identification from clients, this information can be made available to law enforcement and to prosecutors. And, this additional scrutiny up front greatly increases deterrence.

FINTRAC is enhancing its detection and deterrence capacity as a result of the passage of Bill C-25 and related regulations. These include the creation of a registration system for money services businesses (MSBs), the establishment of an administrative monetary penalty regime, enhanced customer due diligence measures and the addition of new sectors with record-keeping and/or reporting obligations under the regime.

Over the past year, FINTRAC employed a number of tools and approaches in its efforts to inform reporting entities and to assist them in meeting their obligations. These efforts included:

• Distributing close to 104,000 pamphlets and information sheets to reporting entities and individuals in response to their questions about FINTRAC;
• Conducting more than 330 presentations, meetings and seminars with reporting entities and associations reaching over 14,000 people;
• Responding to over 3,200 call centre enquiries from reporting entities;
• Utilising FINTRAC’s Web site to create and distribute a series of plainly-written and frequently updated guidelines and feedback documents to assist specific sectors and reporting entities with reporting and other obligations under the Act. This year, there were 662,738 visits to FINTRAC’s Web site, a 34% increase over the previous year.

Through the use of a risk-based approach, the Centre identified sectors and individuals with a high risk of non-compliance and then focused its activities on these entities.

FINTRAC’s risk assessment process ensures that the focus of its compliance resources is on those areas and reporting entities at greatest risk of non-compliance. In 2006-07, the Centre transferred its risk data into one integrated system, the FINTRAC Risk Assessment Tool, in order to guide and monitor its risk assessment program. FINTRAC also initiated a review of its risk assessment model in order to ensure its continued effectiveness.

The use of compliance questionnaires is an important key to assessing and increasing compliance. This year, the Centre sent almost 4,500 questionnaires to reporting entities in the real estate, money services businesses, life insurance and accounting sectors. The response rate to these questionnaires was 63%.

This year, FINTRAC performed 237 on-site examinations. The Centre also entered into two additional compliance information-sharing agreements, or memoranda of understanding (MOU) with national and provincial regulators, bringing the total number of MOU to 17. FINTRAC’s MOU partners conducted a further 189 examinations, which helped to lessen the regulatory burden placed on reporting entities by limiting duplication of the examinations performed. The total number of examinations conducted, both by FINTRAC and its MOU partners increased by 134, or 46%, over the previous year.

Ensuring the proper interpretation of legislative requirements is essential to an effective compliance program. During the year, the Centre created and issued a new FINTRAC Interpretation Notice (FIN), (Large Cash Transaction and Electronic Funds Transfer Reporting Requirements: Two or More Transactions in a 24-Hour Period), and continued to develop a national knowledge base for the use of the Centre’s regional team members, who are the primary point of contact for reporting entities. FINTRAC also carried out a review of its compliance policies and procedures in order to ensure their effectiveness.

In the past year, FINTRAC completed a large-scale collaborative undertaking with Australia’s financial intelligence unit, AUSTRAC, on an initiative known as Base Mining Technology (BMT). This initiative was aimed at overhauling the Centre’s data capture and analysis software to improve the timeliness and quality of the data received, and to give FINTRAC’s analysts better tools to uncover and analyze suspect financial activity. This international collaboration is a hallmark of how financial intelligence units worldwide have been helping each other to improve their collective efforts in common cause against money launderers.

The impact of BMT on the Centre’s operations has been sweeping. It has enabled FINTRAC to streamline its business processes and create a new set of information technology foundation products and services. In particular, it has helped the Centre to improve significantly the timeliness and quality of the data received from reporting entities and other domestic partners. As a result, such data is now ready for analysis in close to real time.

3. Disseminate strategic information on money laundering and terrorist activity financing to partners, stakeholders, and the general public.

Anticipated Result:
Provide strategic intelligence, advice and analysis that enhance awareness and understanding of money laundering and terrorist activity financing and inform the development of effective Canadian and multilateral counter-strategies.

FINTRAC has a legislated mandate to enhance public awareness and understanding of matters related to money laundering, most specifically with reporting entities covered by the PCMLTFA. To raise awareness of money laundering and terrorist activity financing and help alert Canadians to the threat posed by these activities, FINTRAC undertakes a number of activities including:

• Publishing and disseminating an Annual Report to Parliament;
• Publishing articles in trade journals and newsletters;
• Publishing pamphlets and other printed material for distribution to reporting entities and their clients; and
• Operating a Web site and a call centre to provide information to reporting entities and the public.

Visits to FINTRAC’s Web site increased to 662,738 this year. The Web site is particularly useful for reporting entities, providing them with valuable tools and information. The Centre made several enhancements to the site’s contents, such as making a series of publications available to provide feedback to specific reporting entity sectors on transaction reports submitted to the Centre. Sanitized money laundering cases were also posted to illustrate how reported data allows FINTRAC to connect suspicious money movements, thus contributing to eventual case disclosures.

In the 2006-07 fiscal year, FINTRAC made five presentations to parliamentary committees with an account of its results and an explanation of its processes and operations, including a presentation to parliamentarians on the process by which a case is built.

In addition to sharing its most recent strategic intelligence and perspectives with law enforcement and intelligence partners, FINTRAC met requests for high-level analyses from various agencies, including CSIS’s Integrated Threat Assessment Centre (ITAC) and the Criminal Intelligence Service Ontario (CISO).

FINTRAC’s Macro-Analysis and Research unit contributed to the provision of feedback to several reporting sectors, notably banks, casinos, credit unions, money services businesses and foreign exchange dealers, through the development of STR feedback products. These documents characterized what makes a good STR through sample reports, and provided reasons for suspicion that appeared in our disclosures. They also presented a historical breakdown of reporting volumes.

FINTRAC continued to engage with its international counterparts in various fora aimed at promoting the development and dissemination of strategic intelligence. FINTRAC’s contribution to research at the international level is bolstered by the fact that we are one of a number of FIUs worldwide that receives reports on international electronic funds transfers. The ability to analyze such reports enables FINTRAC and its counterparts to share important insights into global patterns of money laundering and terrorist financing.

In 2006 07, the Macro-Analysis and Research unit also contributed to the development of policies to meet domestic and international commitments. These included support given to the Department of Finance in preparation for the Financial Action Task Force’s evaluation of Canada’s anti-money laundering and anti terrorist financing regime.

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