Canada's anti-money laundering body to leverage AI bets to crack down on bad actors

Money seized by police during a bust is displayed at RCMP headquarters In Surrey, B.C., on December 7, 2022. THE CANADIAN PRESS/Jonathan Hayward

Canada's anti-money laundering agency is increasing its reliance on artificial intelligence (AI) to detect suspicious transactions, betting the use of the latest technology will help better fight financial crimes, a top official said.

The Financial Transactions and Reports Analysis Centre (FINTRAC) raised a few eyebrows last month when it fined the country's two biggest banks - Royal Bank of Canada and CIBC - for a total of C$9 million for violations that included failing to submit suspicious transaction reports, setting a record for fines issued on individual banks.

In comparison, the agency has collected C$23 million in penalties across most business sectors since it received the authority to do so in 2008.

Canada has a reputation of being a law-abiding democracy; think tanks like C.D. Howe estimate between C$100 billion and C$130 billion is laundered annually in the country.

FINTRAC's Deputy Director for Supervision Donna Achimov told Reuters that AI is allowing humans who have the right mindset to analyze much more data than ever before and making it easier to detect more suspicious activity.

The federal government has also added new powers relating to national security, helping FINTRAC staff up in recent years. Staffing levels increased about 28 per cent in fiscal 2023 from two years ago.

The additional resources will help the agency led by Sarah Paquet to work in real-time and mitigate money laundering and terrorist financing risks.

Achimov said one way forward for FINTRAC is to use new technology to scour for suspicious transactions, or additionally to even partner with financial institutions to lower risks.

Suspicious transactions for the 2022-2023 financial year reached 560,858 compared with 585,853 in the previous year and sharply higher than the 114,422 reported in 2015-2016.

About 75 per cnet of all suspicious transactions between April and September 2023 were reported by financial institutions.

The agency has also significantly increased the frequency of meetings to a quarterly occurrence with the larger banks and has held meetings with small and medium-sized banks regularly.

FINTRAC's increased scrutiny comes at a time when TD is facing a rare probe and a likely fine by the U.S. Department of Justice related to its AML practices, shortly after it called off its First Horizon acquisition.

AML and legal experts said FINTRAC's decision to name the banks instead of handling administrative penalties behind closed doors indicates an increase in enforcement activities in the future.

"Everybody's got to take a closer look ... we got to make sure that we've got our i's dotted, cross our t's and we're not letting that dirty money get into our institutions," said Garry Clement, financial crime prevention expert and CEO of Clement Advisory Group.

(Reporting by Nivedita Balu in Toronto; Editing by Andrea Ricci)