FINTRAC Fines Toronto Currency Firm $249,000 for AML Violations

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) announced the fine on 4 November 2024 following a compliance review conducted in 2023. Marouf Management Inc., which also operates as Marouf Currency Exchange and 1998063 Ontario Inc., was found to have breached several requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

According to FINTRAC, the company lacked comprehensive compliance procedures. Its written policies were incomplete, contained inaccuracies, and failed to cover ministerial directives—particularly concerning services offered to countries deemed high-risk for money laundering.

FINTRAC classified this as a “serious violation”, noting that failure to maintain accurate, approved policies impairs a business’s ability to identify and respond to suspicious financial activity.

The regulator also found that Marouf Management Inc. had not assessed or documented risks associated with its operations. This included risks linked to clients, services, technologies, and geographical exposure. The absence of a structured risk assessment process can hinder the detection of high-risk clients or transactions and delay reporting of suspicious activity.

This was similarly categorised as a serious breach of compliance obligations.

A particularly severe violation stemmed from the firm’s failure to comply with a federal directive concerning financial transactions linked to the Islamic Republic of Iran. The examination revealed 44 instances where transactions from Iran, dated after 25 July 2020, were not reported as required.

The directive was issued by the Canadian Minister of Finance to mitigate national security risks. FINTRAC stated that non-compliance with such a directive poses “a very high risk” to Canada’s financial system and public safety.

This infraction was labelled “very serious” by FINTRAC and significantly contributed to the total fine.

Marouf Management Inc. also failed to maintain complete transaction records. In all 44 examined cases involving foreign exchange related to Iran, the firm omitted key details such as exchange rates and their sources.

Accurate record keeping is essential for financial oversight and enables regulators and law enforcement to track and analyse suspicious transactions. The failure to maintain such records was treated as a minor violation, though it contributed to the overall non-compliance profile.

The company was found to have submitted misleading information during its registration with FINTRAC. Although the firm declared that it offered virtual currency services, no such services were in operation during the compliance review. Additionally, bank account details used for transactions were not disclosed during registration.

Failing to provide accurate registration data hampers FINTRAC’s ability to monitor risk effectively and ensure adequate regulatory oversight. This breach was marked as serious.

Failure to Notify FINTRAC of Operational Changes

Lastly, the company failed to inform FINTRAC within the required 30-day window about its use of other money services businesses for client transactions. Timely updates are crucial for regulators to understand the structure and complexity of money services businesses and to adapt their risk-based monitoring accordingly.

This was also considered a serious violation.

FINTRAC is Canada’s financial intelligence unit, tasked with detecting and preventing money laundering and terrorist financing. Money services businesses in Canada are legally required to comply with stringent reporting, record keeping, and compliance standards.

Under Canadian law, failing to report suspicious transactions, maintain adequate records, or follow ministerial directives can result in severe penalties. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act gives FINTRAC the authority to conduct audits, issue fines, and refer cases to law enforcement.

The case against Marouf Management Inc. is one of several enforcement actions taken by FINTRAC in recent years as the agency increases scrutiny of high-risk financial sectors.

The penalty imposed on Marouf Management Inc. reflects the growing emphasis placed on anti-money laundering enforcement in Canada. As of this report, the company has challenged the decision in Federal Court. The outcome of that appeal remains pending.