1.02 - Regulatory Agencies

Question 1

What is OSFI and what role does it play?

Answer 1

OSFI = Office of the Superintendent of Financial Institutions. OSFI regulates and supervises all banks and federally incorporated financial institutions, such as insurance, trust and loan companies, and federally regulated pension plans.

Question 2

What are the two primary activities OSFI undertakes in regulating financial institutions?

Answer 2

1) OSFI provides input into the development and interpretation of legislation; 2) Approves applications to become federally regulated financial institutions

Question 3

What are the seven areas OSFI examines when supervising financial institutions?

Answer 3

1) Capitalization; 2) Limits on exposure; 3) Prudent and appropriate investments; 4) Liquidity; 5) Loan loss provisions; 6) Internal controls; 7) Skilled management

Question 4

What is the FCAC and what role does it play?

Answer 4

FCAC = Financial Consumer Agency of Canada. The FCAC is responsible for protecting and educating consumers regarding financial services.

Question 5

What is FINTRAC and what role does it play?

Answer 5

FINTRAC = Financial Transactions and Reports Analysis Centre of Canada. FINTRAC seeks to detect, prevent and deter money laundering and the financing of terrorist activities.

Question 6

Define the three stages of money laundering

Answer 6

1) Placement - placing the dirty money in circulation; 2) Layering - moving money through a series of transactions to disguise the source; 3) Integration - reintroducing it into the economy through deposit (usually via cheque) at an FI.

Question 7

What are 8 different ways criminals launder money?

Answer 7

1) Structuring - breaking large amount of cash into irregular sums of below threshold transactions; 2) Cash intensive businesses to mix dirty money with legal money (ie - bars, strip clubs, arcades); 3) trade-based laundering - over / under / multiple invoicing to transfer greater values between the importer and exporter (ie. art); 4) mobile / internet payments - low ID and regs make it easy to convert cash; 5) alternative remittance - crypto, exchange houses and money transfer systems sit outside of banking regs; 6) casinos - buy chips and cash out with a cheque quickly; 7) precious metals - bullion easy to convert to cash; 8) wire / electronic transfer - multiple hops occlude the source of the funds

Question 8

What are 9 general warning signs for money laundering?

Answer 8

1) Client - non-resident or outside the customer base; 2) Counterfeit or suspicious documents; 3) Business only done via third parties; 4) Client behaviour different from typical clients; 5) False contact information; 6) Contact information changes frequently; 7) Lifestyle and income incongruous; 8) Large cash holdings; 9) Frequent / large transfers of odd amounts to unknown entities

Question 9

What are 2 warning signs for securities-based laundering?

Answer 9

1) Structuring deposits; 2) Purchase of highly volatile products or in volatile markets where stock values can be easily manipulated

Question 10

What are 3 warning signs for insurance-based laundering?

Answer 10

1) Canceling a policy during the rescission period and asking for a refund via cheque; 2) Strong interest in cancellation terms, or surrender value; 3) Early redemption without explanation

Question 11

What is the maximum penalty for failing to report a suspicious transaction?

Answer 11

Up to 2M and up to 5 years in jail

Question 12

What is the maximum penalty for failing to report a large cash transaction?

Answer 12

Up to 1M and up to 5 years in jail

Question 13

What is the maximum penalty for failing to meet record keeping requirements required by anti-money laundering lesgislation?

Answer 13

Up to 500K and up to 5 years in jail

Question 14

What is the maximum penalty for failing to cooperate in a money laundering compliance review?

Answer 14

Up to 500K and up to 5 years in jail

Question 15

What is the maximum penalty for disclosing to the suspect party that a suspicious transaction report was filed?

Answer 15

Up to 2 years in jail

Question 16

What is a difference between the Privacy Act and PIPEDA?

Answer 16

The Privacy Act pertains to the handling of personal information with the federal government, whereas PIPEDA applies to the private sector regulated by federal law.

Question 17

What is PIPEDA?

Answer 17

PIPEDA = Personal Information Protection and Electronic Documents Act. PIPEDA ensures the confidentiality of information and that the use of information matches the intent under which it was collected.

Question 18

What are the 7 key types of information protected under PIPEDA?

Answer 18

1) Age and DOB; 2) race, nationality or ethnicity; 3) identifying numbers (SIN, DL, Passport, phone and address); 4) medical or employment history; 5) martial status; 6) financial information; 7) DNA

Question 19

What is the OPC and what role does it play?

Answer 19

OPC = Office of the Privacy Commissioner of Canada. The OPC enforces compliance with the Privacy Act and PIPEDA.

Question 20

Which provinces are exempt from PIPEDA and why?

Answer 20

BC, AB and QC are exempt from PIPEDA because they have substantially similar legislation (to PIPEDA) that is already in place.

Question 21

What is the CRTC and what role does it play?

Answer 21

CRTC = Canadian Radio-television and Telecommunications Commission. The CRTC regulates telecommunication, include telemarketing and compliance with the do to call list.

Question 22

What is the DNCL and how long does an organization have to comply once a number is registered?

Answer 22

DNCL = National Do Not Call List. Organizations have 31 days to remove a number for their call lists after it is registered.

Question 23

What is the permitted calling window for telemarketing per the CRTC?

Answer 23

M-F 9AM to 9:30PM, S/S 10AM to 6PM

Question 24

What are the penalties for non-compliance with the DNCL?

Answer 24

1.5K for individuals for each violation; 15K for corporations for each violation

Question 25

What is CASL?

Answer 25

CASL = Canada’s Anti-Spam Legislation. CASL gives the CRTC the authority to regulate certain forms of electronic contact.

Question 26

What are CEMs?

Answer 26

CEM = Commercial Electronic Messages. CEMs promote participation in a commercial activity and require consent (explicit or implied) to market a customer via CEM.

Question 27

What are the penalties for non-compliance with CASL?

Answer 27

10K for an individual’s first offence, 25K to 1M for subsequent offences; 100K for a business’ first offence, 250K to 10M for subsequent offences

Question 28

What are the 7 financial services regulated by provincial legislation?

Answer 28

1) Insurance; 2) Cooperative corporations; 3) Credit unions and caisse populaires; 4) Loan and trust companies; 5) Mortgage brokers; 6) Pensions; 7) Real estate

Question 29

Which 3 provinces have integrated financial regulation?

Answer 29

BC (Financial Institutions Commission in British Columbia); MB (Financial Institutions Regulation Branch in Manitoba); ON (the Financial Services Commission of Ontario).