In Canada, Money Services Businesses (MSBs) are subject to regulatory oversight by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). As part of this oversight, FINTRAC may require MSBs to undergo an independent audit of their Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) compliance program.
Here’s what you need to know about the independent audit requirement for MSBs:
- Purpose: The purpose of the independent audit is to assess the effectiveness of the MSB’s AML/CTF compliance program in accordance with regulatory requirements. The audit helps identify any deficiencies or weaknesses in the program and provides recommendations for improvement.
- Scope: The scope of the independent audit typically covers various aspects of the MSB’s AML/CTF compliance program, including policies and procedures, customer due diligence practices, transaction monitoring, record-keeping, training, and reporting to FINTRAC.
- Independence: The audit must be conducted by an independent and qualified third party, such as an external auditor or consulting firm, with expertise in AML/CTF compliance. The auditor should have no conflicts of interest that could compromise their independence and objectivity.
- Requirements: FINTRAC may specify certain requirements or standards that the independent audit must adhere to, including the qualifications and experience of the auditor, the scope and methodology of the audit, and the reporting format.
- Frequency: The frequency of the independent audit requirement may vary depending on factors such as the size, complexity, and risk profile of the MSB’s business operations. FINTRAC may require audits to be conducted on a periodic basis, typically every two to three years.
- Reporting: Upon completion of the audit, the independent auditor prepares a report summarizing their findings, observations, and recommendations for the MSB. The MSB is required to provide the audit report to FINTRAC as part of its ongoing regulatory compliance obligations.
- Follow-up Actions: Based on the findings of the independent audit, the MSB must take appropriate remedial actions to address any deficiencies or weaknesses identified in its AML/CTF compliance program. This may include implementing corrective measures, enhancing internal controls, and providing additional training to staff.
Overall, the independent audit requirement plays a crucial role in helping MSBs strengthen their AML/CTF compliance efforts, mitigate regulatory risks, and demonstrate their commitment to combating financial crime. It’s essential for MSBs to proactively engage with the audit process, cooperate fully with the independent auditor, and promptly address any areas for improvement identified in the audit report.
