Urwiassi?ed

Overview of the Grant
Thornton Report:

?Reporting Entity Sector Profiles -
Money Iaunderfng and terrorist financing
vulnerability assessments?

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To edit the header and footer (Classification and RDIMS), go to View Slide Master.



 

 

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Backgroun d/Cantext

- FINTRAC hired Grant Themtm (GT) to develop RE sector
waf?es; (80$ the same 233 ?seem; risk. pm?leg?) by researching

thee {seams and conducting intewiaws with $86th insidars,

Tha (3T work aim sought {0 identify MUTE: risks and vm?erabii?ieg in
each same!" and incim?ea a camparative {has sectors (as $382"
the Statement 0f Wmic develaped by mat repremms their
views, not 

infarmatiom mata?ned wiihm the firm} minor? is to be} used in
cmjanctian with knowiedge, expertise, arid unique-
to see the ?nancial transaction reports is internatly

deveiep the sector {$53k waf?es.
- it wi? atsa asai?st in gravidiag input t0 the Finance ied Natimai Risk
Assessment

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Methodology and Approach
methodciagy inmived informa?on gaihering few
primary sources:

1) Reievant anti/imitative materiai FATF seem?
guidance; ather magnify seem? risk assessmems; em);

2) Pub?a mamas {swarm {inc?uding news; media, Statiatics Canada,

market arid seam? ecmamic data industry stati?tics, em);

3) interview& with GT AML speciaiista {Gamesticaiiy and
imamationa?iy); and

4) InterviQW$ with industry ingiderg in each of the mama

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Methodology and Approach 
Cont?d

As per the contract with GT, 31 sectors were assessed.

Due to time congtraints an the cantmat, prioritized
the sectors in the fonowiag way, which aliowed GT is: priomze
their focus by 383103":

1} Reai Emate

2} in Pracicus Metals Stems {Dink/ES)
3) Sacuritieg Easiers
Aesountants

5) Life insurance

6) 8C Notaries

Credit un?cns

8} Casings

??anciai 
Lawyers

?11) M883

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RE Sector Profiles

Far each RE sector, GT pravidad FENTRAC with a sectar
profile that includes information an the:

Structure, Size and sagmentatim 0f the RE popuiatim;
Ecanomic and financiai statistics;
Raguiatory emimnmem;

- Constraints cm the sector;

- Asmcia?ens that exist;

- Emerging izus?ness 86mm

Preducts and services affeyed;

?fypas of custom?rs;

Geographic cans?demtims;

reievan?: Enformatian;

Key paints from interviews; and
- Risk 

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RE Sector Pro?les Cont?d

AH maimed in the sector prefifes is imam; and vaiuablg
to however, {ha mes? interesiing informatiem emanates
{he iaterviews canducted with same? imidemx?exper?g, as wait
as the risk factms sec?ms.

$ector ii of Wewiews Samar 
Canducmd 

     

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Conc?ucta?

R831 Esiate BC Nataries 1

8 Credit Unians 
10 Casims 2
Aacoumanta 5 Finam?ai 6

En??es

Life insurance 2 Lawyem 8
MSBs 5 Total 57

 

 

 

 

 

 

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Gecees??iee

Key Risk Identified by GT

1) Relationships/Linkages
- Use ef trust accounts was identi?ed as high risk (Ree? Estate,
Accounting, Lawyers).
The ?gatekeeper male? was determined te be risky (Securities,
Life insurance, M383, Lawyers}

2) Geography Factors
Purchase ef reel estate and ievestmeet assets (Securities) with
e?shefe money was. identified ae high risk.
Access :0 glebai merkete else high risk Gide, financial
entities, M81353).



 

 

 

1) Business relationships/linkages risk factors

The use of legal trust accounts was noted specifically as an area of concern, particularly
for the real estate, accounting and legal sectors.

The concept of the ?gatekeeper role? came through in our research for each of securities,
accounting, life insurance, and the legal sectors.

These factors were given higher weighting in the consideration of risk.

2) Geography risk factors

The purchase of Canadian real estate assets with offshore money and/or by offshore
persons was noted as a significant risk factor.

Similarly, the purchase of investment assets through Canadian securities firms with
offshore money, particularly through the use of off shore companies, was noted as a
significant risk.

The ability to access global markets through Canadian sector participants was also rated
higher for vulnerability risks (particularly via dealers in precious metals, credit
unions, financial entities and MSBs).



 

 

Unc?ss?ied

Key Risk Factors Identified by GT
Cont?d

3) General Market and Delivery Channel Risk
- Market competitiveness, structures in place, ethics, size of entity are of
criticai importance (especially with smelter entities within Real Estate and
M88 sectors).

4) Transaction Methods and Types
use of corporate vehicles is: conceal ownership, source and purpose of
transactions. was identified as high risk (Real Estate, $ecurities)

5} Custerer Types and Charaateristics
Generaiiy applicable across all sectors but of e?evatad risk to sectors that
provide professionai services across and within other sectors
{Accountanta, Lawyers).



 

 

 

3) General market and delivery channel risk factors

Market competitiveness, the structures in place to support the quality of services
provided, and the ethics of individual persons working within the sector are of critical
importance (especially when the size of the entity is considered).

Of critical importance for the real estate and money service businesses sectors as, at the
smaller end of the market, there is often no quality and ethics infrastructure in place.

Also the case for the securities, accountants, lawyers and credit union sectors except
that there is a regulated environment for these sectors, which to some extent mitigates
the vulnerability.

4) Transaction methods types risk factors

The use of corporate vehicles was specifically noted as a higher risk factor in the real
estate and securities sectors and is generally seen as a method to conceal ownership,
source and purpose of funds/transaction and adds to the opacity of the environment.

5) Customer types and characteristics risk factors

This category and grouping of risk was seen as generally applicable across all sectors.

However, it was noted that the accounting and legal sectors are both ones which
provide professional services across and within markets and also to participants of the
other sectors researched. For each of these two sectors, especially at the smaller end of

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the market, customer due diligence and acceptance practices varied considerably.
Accordingly, these risk factors were rated higher.

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