Suspicious Transaction Reporting in Canada: Quality, Thresholds, and Common Pitfalls

Introduction

Suspicious Transaction Reports (STRs) are a cornerstone of Canada’s anti-money laundering (AML) and anti-terrorist financing (ATF) regime. Under Canadian law, banks, casinos, money services businesses (MSBs), real estate professionals, securities dealers, and other reporting entities must report any transaction (completed or attempted) that raises reasonable grounds to suspect a connection to money laundering or terrorist financing. These reports are filed with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canada’s financial intelligence unit, which analyzes STRs for potential criminal activity and disseminates intelligence to law enforcement. STR obligations in Canada align with international standards set by the Financial Action Task Force (FATF), which mandate reporting of all suspicious transactions (including attempts) regardless of dollar value. This article provides a comprehensive overview of STR requirements and best practices in Canada – from the legal framework and reporting thresholds, to red flags, quality tips, common mistakes, the value of STRs to FINTRAC, real-world case studies (2022–2025), and practical checklists for compliance officers. The goal is to help Canadian compliance professionals strengthen their STR processes, improve report quality, and understand how their efforts fit into the broader fight against financial crime.

Legal and Regulatory Framework for STRs in Canada

Legislation and Regulators: Canada’s STR regime is grounded in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated regulations. Section 7 of the Act and the Suspicious Transaction Reporting Regulations require all designated reporting entities to file an STR with FINTRAC when they have reasonable grounds to suspect that a financial transaction (or attempted transaction) is related to a money laundering (ML) or terrorist activity financing (TF) offense. FINTRAC acts as both the national financial intelligence unit (FIU) and the AML/ATF regulator, responsible for ensuring compliance with reporting obligations and for analyzing reports to produce intelligence disclosures. Other regulatory bodies, such as the Office of the Superintendent of Financial Institutions (OSFI), oversee prudential aspects for banks, but FINTRAC is the primary authority monitoring STR compliance across all sectors. Importantly, FINTRAC’s mandate is intelligence – it does not investigate crimes or lay charges, but provides information to law enforcement (e.g. RCMP, municipal police) and national security agencies (e.g. CSIS) to assist their investigations.

Who Must Report: All businesses in Canada that fall under the definition of “reporting entities” must file STRs. This encompasses banks and financial entities, credit unions, life insurance companies, securities dealers, MSBs (e.g. money remitters, foreign exchange dealers), real estate brokers or developers, casinos, accountants, dealers in precious metals and stones, and others. Employees of reporting entities are protected and expected to report internally; if an employer fails to report, an employee can file directly to FINTRAC as a last resort. No person or entity can be prosecuted for reporting a suspicion in good faith – Canadian law provides safe harbor from liability for STR submissions. Conversely, tipping off a client about an STR is prohibited. The Act makes it an offense to disclose that a suspicious transaction report will be or has been filed, if doing so could prejudice a criminal investigation. Compliance officers must handle STR investigations discreetly, gathering necessary information without alerting the client.

When and How to Report: A suspicious transaction report must be submitted to FINTRAC “as soon as practicable” after the reporting entity has completed the necessary measures to establish that reasonable suspicion exists. In practice, this means once you have observed the red flags, assessed the facts and context, and determined that the threshold of suspicion is met, you should file promptly – prioritizing the STR over routine tasks. While the law previously referenced a 30-day guideline, FINTRAC now emphasizes timeliness with flexibility: any delay must be reasonable and explained, and undue delay could be deemed non-compliant. Reports can be submitted electronically via FINTRAC’s web reporting system (F2R) or in paper form in exceptional cases. They must include prescribed information such as details of the transaction (amount, date, type, parties, etc.), client details, and critically a narrative explanation of the suspicion (often called the “details of suspicion” section). Notably, there is no monetary threshold for STRs – unlike large cash transaction reports or other threshold-based reports, an STR is required regardless of the dollar value of the transaction, if it is suspicious. This reflects the principle that even small transactions can be linked to criminal activity or terrorist financing (a standard echoed by FATF).

Suspicion Standard: The legal reporting threshold is “reasonable grounds to suspect” (RGS). This is a deliberately low threshold – lower than “proof” or even “reasonable grounds to believe,” but higher than a mere hunch. In FINTRAC’s guidance, RGS is described as a level of suspicion where there is at least a possibility an ML/TF offense is occurring, supported by some factual or contextual elements, not just a gut feeling. You are not required to confirm a crime or investigate like the police; rather, you must observe indicators and context that would lead a reasonable professional in your position to suspect something is illicit. If another person with similar training and experience would likely come to the same suspicion based on the facts and indicators, the RGS threshold is met. Canadian law also requires STRs for attempted transactions that are suspicious, even if the transaction doesn’t ultimately occur. For example, if a client inquires about making a large cash deposit and exhibits red flags but leaves before completing it, that attempted transaction should still be reported as an STR (with whatever details are known, such as approximate date/time of attempt).

Regulatory Expectations and Penalties: FINTRAC not only receives STRs but also enforces compliance through examinations and penalties. A failure to report suspicious transactions when required is a serious compliance violation. Since 2008, FINTRAC has had the power to levy Administrative Monetary Penalties (AMPs) for non-compliance with the PCMLTFA. These penalties are “non-punitive” but meant to encourage behavior change. In recent years, FINTRAC has stepped up enforcement: for instance, in 2023–24 alone it issued 12 violation notices totaling over $26 million in penalties. Violations commonly include failing to submit STRs where there were reasonable grounds to suspect ML/TF, alongside related failings in risk assessment and ongoing monitoring. Canada’s largest banks have not been exempt – FINTRAC imposed a record C$9.18 million penalty on TD Bank in 2024 and C$7.5 million on RBC in 2023 for, among other issues, not reporting suspicious transactions that should have been reported. These enforcement actions underscore that STR obligations are taken seriously, and regulators expect robust systems to detect and report suspicious activity.

Thresholds and Triggers for STRs Across Sectors

While the legal threshold for reporting – reasonable grounds to suspect – is consistent across all sectors, the types of transactions and behaviors that trigger suspicion can vary by industry. In every sector, the decision to file an STR should be based on an assessment of the facts and context of the transaction, combined with known money laundering/terrorist financing indicators. FINTRAC emphasizes considering all these elements holistically: a suspicious transaction often emerges from a pattern or combination of factors that “create a picture” suggesting illicit activity. Below we outline common STR triggers and red flags in a few key sectors – banks, MSBs, real estate, and casinos – noting both universal indicators and sector-specific scenarios:

• Banks and Financial Entities: Banks generate the majority of STRs in Canada and are on the front lines of detecting illicit finance. Common triggers include unusual account activity that is inconsistent with a customer’s profile, structuring of cash deposits or withdrawals to avoid thresholds, sudden unexplained movements of large funds, and transactions involving high-risk jurisdictions or entities. For example, if a personal account belonging to a modest-income client suddenly receives multiple large wire transfers from abroad that don’t fit the client’s known business or employment, this discrepancy is a major red flag. Transactions that are unnecessarily complex or involve round-number sums atypical for the client can also arouse suspicion. Banks should be alert to customers who ask questions about reporting requirements or seem to be “gaming” the system – e.g. splitting a $20,000 deposit into smaller amounts at different branches to evade a $10,000 reporting trigger. FINTRAC specifically flags clients who appear knowledgeable about reporting thresholds or attempt to avoid them (for instance, multiple cash deposits just under $10,000 at different ATMs on the same day). In fact, one recent enforcement case revealed that a Canadian bank had not been filing separate STRs for activity at different branches, potentially missing the pattern; FINTRAC now expects each suspicious occurrence to be reported, even if related, rather than consolidating them in a way that might obscure branch-level patterns. Banks must also watch for use of third parties (someone conducting a transaction on behalf of someone else), frequent transfers between seemingly unrelated parties, and indicators of corporate account misuse (e.g. business accounts used for personal transfers or vice versa). The bottom line is that banks need strong monitoring systems to catch anomalies and trained staff to escalate anything that “doesn’t add up” compared to what is expected for that client or account.

• Money Services Businesses (MSBs): MSBs such as remittance companies and currency exchanges handle fluid movements of cash and cross-border funds, which can be exploited for laundering. Typical suspicious triggers for MSBs include repeated transfers just below reporting thresholds (possible structuring), customers sending or receiving funds to/from high-risk countries without legitimate explanation, use of multiple senders or beneficiaries that seem unrelated, and inconsistent customer information. For instance, an MSB agent should be suspicious if one individual comes in to wire money multiple times a week to different people abroad, just under $10,000 each time, or if a group of customers appear to coordinate transactions to the same overseas account. FINTRAC has noted that illegal unregistered MSBs often facilitate underground banking; thus, if a customer or small business is moving unusually large sums through an MSB (especially if they claim to be doing so on behalf of others), it could indicate an underground banking scheme. A real case in 2023 involved an unregistered MSB in Montreal moving over $20 million overseas clandestinely; it was FINTRAC’s STR disclosures that helped police uncover that scheme. MSB compliance officers should use risk indicators such as transactions involving known fraud hotspots, customers who present identification that appears forged or altered, or those who are reluctant to provide required information. FINTRAC’s indicators guidance for MSBs (and banks) also highlights customers using multiple personal or foreign accounts for no apparent reason, which could signal layering of funds. Essentially, MSBs should be attentive to patterns of transactions that fall outside normal remittance behavior (e.g. numerous senders to one receiver, large currency exchanges by someone with no business reason, etc.), and file STRs when those patterns suggest possible laundering or terrorist financing.

• Real Estate Sector: Real estate brokers and developers in Canada have been brought under AML reporting obligations due to the risk of property purchases being used to launder large sums. The real estate sector historically filed relatively few STRs, but that is changing as awareness grows. Triggers in real estate can differ from banking transactions because they involve clients and funds in the context of property deals. Red flags include buyers attempting to make large cash payments for property, the use of third parties or “straw buyers” who are not actually the ones providing the funds, and situations where funds for a purchase come from atypical sources (e.g. a mortgage is paid off quickly with a sudden influx of unexplained money). FINTRAC and the Canadian Real Estate Association have highlighted indicators such as a client’s inability or refusal to identify the true source of funds for a down payment or involvement of offshore shell companies or numbered companies in property deals with no clear business rationale. Another red flag is a client who is “unrepresented” by a realtor and brings a suitcase of cash – while rare, such scenarios should immediately prompt questions and potentially an STR if the explanation is unsatisfactory. FINTRAC’s operational brief on real estate money laundering (2022) also pointed out signs of tax evasion-related laundering, such as manipulation of property values or use of funds routed through personal mortgages and loans to obscure the true origin. Real estate brokers must also be wary of unusual payment structures, like a third-party payor who has no obvious connection to the buyer, or payments coming from accounts in jurisdictions known for money laundering. Even flipping properties at inflated prices with the same parties involved can be a laundering technique (to wash dirty money by selling a property to a collaborator at a bogus high price). Because the real estate sector was found to be under-reporting STRs, FINTRAC in recent years has engaged in outreach – holding sector-specific forums and issuing alerts – to improve awareness. Compliance officers in this sector should familiarize themselves with FINTRAC’s list of real estate indicators and ensure that when they see multiple red flags (for example, a nervous buyer insisting on using cash and an unverified source of funds), they document the concerns and submit an STR.

• Casinos: Casinos deal with high volumes of cash and chips, making them a target for criminals to launder cash by gambling or simulating gambling. Canadian casinos must report large cash disbursements (≥ C$10,000) and also file STRs for any suspicious activity on their gaming floor or cash cage. Common casino STR triggers include patrons purchasing a large amount of chips in cash, engaging in minimal play, then cashing out with a casino cheque – a classic “minimal gaming” technique to turn cash into an ostensibly clean cheque. Another red flag is when a client asks for a casino payout cheque made out to a third party or with no specified payee, especially for amounts ≥ $3,000. This could indicate an attempt to transfer ill-gotten funds to someone else under cover of gambling winnings. FINTRAC’s casino-specific indicators also cite scenarios like groups of acquaintances colluding at table games to lose deliberately to one player, thereby transferring value under the guise of gambling. Structuring can occur in casinos as well: a patron might break up buy-ins into smaller transactions across different days or gaming areas to avoid detection. Other triggers: customers who exchange a large volume of small banknotes for larger ones or for casino chips (with no gaming purpose),patrons known to use multiple names or IDs, and requests to transfer funds between casino accounts in different cities without a clear purpose. Casinos must remain vigilant that some customers will use the casino as a currency exchange or money movement service rather than for entertainment. Any such unusual behavior, especially if coupled with indicators like reluctance to show ID, inquiries about FINTRAC reporting rules, or known links to crime, should prompt an STR. (Indeed, major casino-related money laundering cases in British Columbia’s past have shown how easily large sums of cash can be washed through casinos if not properly reported.)

Cross-Sectoral Perspective: Despite different business contexts, many red flags are universal. Clients who are evasive or reluctant to provide required information, who lie or produce false documents, or who exhibit nervous or defensive behavior under basic questioning appear suspicious in any industry. Similarly, transactions that make no economic sense, involve unexplained third parties, or are inconsistent with the customer’s normal activity profile are a common trigger for further scrutiny. All reporting entities should ensure they have processes to identify patterns over time (e.g. multiple small transactions that add up to large amounts) and across products or locations. According to FINTRAC, a single indicator in isolation may not prove anything, but if you observe one red flag, it should prompt a closer look for other facts or context that either dispel or confirm suspicion. Your internal threshold for reviewing transactions can be simple suspicion (a “gut feeling”), but the threshold to file the STR is reached when you’ve gathered enough from the facts, context, and indicators to articulate why something is plausibly illicit. It’s better to err on the side of caution and report once reasonable suspicion is formed, since failing to report when required can lead to regulatory penalties and missed opportunities to thwart crime.

Key Indicators and Red Flags Requiring STRs

Regulators and international bodies have published extensive lists of money laundering and terrorist financing indicators to guide institutions in spotting suspicious transactions. These indicators – essentially red flags – are patterns, behaviors, or characteristics that, especially in combination, suggest the possibility of criminal activity. Some key indicators that commonly warrant STRs in Canada include:

• Unusual Client Behavior or Profile: The client exhibits behavior that doesn’t align with normal business conduct or their known profile. Examples: a customer is unusually nervous or evasive when asked routine questions, or they proactively mention criminal involvement (“not to worry, I’ve had issues with tax authorities before”). A client might be overly curious about reporting rules, asking staff how to avoid triggering reports. Refusal to provide information or providing misleading, vague answers (e.g. about source of funds or the purpose of a transaction) is a glaring red flag. If the person’s ID or documents can’t be verified, or they present multiple different names on different occasions, suspicion should mount. Likewise, someone who appears to be living beyond their means with no clear source of income (for instance, an unemployed individual regularly sending or receiving large transfers) is cause for concern.

• Transactions Inconsistent with Known Profile: One of the most reliable indicators is when transactions deviate significantly from what’s expected of that client or business. For example, a long-time customer with low account balances suddenly receives a flurry of large international wires – this could indicate their account is being used as a funnel for illicit funds. FINTRAC notes that sudden changes in financial activity or volumes that lack a reasonable explanation often signal potential money laundering. Transactions that are atypical for the client’s occupation or line of business are suspect (e.g. a small local business account making high-value transfers to offshore accounts with no business rationale). If an account that was dormant or low-activity becomes very active with large movements, that change in pattern should trigger a review. Essentially, know-your-client (KYC) information provides the baseline – any major departures from that baseline (without a credible reason) can be red flags.

• Complex or Structured Transactions: Money launderers often try to obscure the trail by breaking transactions into many pieces or using convoluted paths. Structuring (also known as smurfing) – conducting transactions in amounts below reporting thresholds or using multiple locations to avoid detection – is a common sign of evasion. For instance, multiple cash deposits of $9,900 across different branches or days should raise suspicion of deliberate avoidance of the $10,000 reporting threshold. Transactions that involve complicated layers or transfers, especially where funds move rapidly through accounts (in-and-out) for no clear business purpose, are indicative of laundering schemes. An example might be a customer who receives a wire, immediately purchases cryptocurrency or monetary instruments, then quickly transfers those to a third party – such rapid turnover of funds could be an attempt to break the audit trail. FINTRAC highlights unnecessarily complex transactions (e.g. using multiple foreign exchanges or intermediate accounts for what could be a simple transfer) as red flags. If the structure or sequence of transactions seems engineered to confuse or hide the true origin/destination of funds, an STR is likely warranted.

• Use of Third Parties or Unknown Beneficiaries: The involvement of third parties in transactions where it’s not expected is a significant indicator. This can include payments made by one person on behalf of another with no reasonable explanation, or accounts that receive deposits from many different people who have no obvious connection to the account holder. In real estate, this might be someone other than the buyer providing the payment (potentially indicating nominee ownership). In banking, a personal account that regularly receives transfers from dozens of unrelated individuals (especially followed by outgoing transfers) looks like a possible money laundering pass-through or “funnel account”. Another scenario is the use of shell companies or intermediaries – for example, a client insists on routing funds through an offshore corporation with opaque ownership even though they could have sent it directly. Such indirection often signals an effort to hide true beneficiaries or origins. If an institution cannot reasonably determine who the money ultimately is for, or why a third party is involved, that should prompt suspicion. FINTRAC’s guidance explicitly advises reporting entities to note if a transaction appears to be done on behalf of someone else, as this is commonly seen in laundering (use of proxies, money mules, etc.).

• Geographic Risk Indicators: Transactions tied to certain jurisdictions can heighten suspicion, especially when coupled with other red flags. If funds are moving to or from a country known for lax AML controls, high corruption, or that is subject to sanctions, extra scrutiny is needed. FINTRAC has pointed out that transfers involving jurisdictions with a high risk of drug production, conflict zones, or known terrorist activity should be assessed carefully. For example, a wire transfer to a country that is a known tax haven, with no clear business reason, might be indicative of illicit asset movement. Similarly, a sudden flurry of small transfers to multiple foreign countries by one client may suggest involvement in an international money mule scheme or terrorist financing (which often uses lower dollar amounts). Any transaction involving a country on FATF’s high-risk list or subject to Canadian sanctions is inherently suspect and could form part of the STR narrative if other indicators are present. While geography alone doesn’t make a transaction suspicious, when a client with no overseas ties starts sending money to, say, Panama or Iran, it becomes a piece of the puzzle supporting reasonable grounds to suspect illegal activity.

• Indicators of Potential Terrorist Financing: Terrorist financing (TF) transactions can sometimes look different from typical money laundering. They may involve smaller amounts and may not exhibit the same profit-motivated patterns. However, there are red flags such as a customer making multiple funds transfers to nonprofits or NGOs in conflict regions, or purchasing high-value but easily transportable goods (like prepaid cards or gold) without a clear reason. FINTRAC has published indicators specifically related to TF – for example, use of personal accounts to collect donations that are then sent to regions where terrorist groups operate, or accounts that receive deposits in Canada followed by ATM withdrawals in a country bordering a conflict zone. If an institution sees transactions that could fit a known pattern of financing terrorism (especially if the client is also displaying extremist sympathies or is linked to persons of interest), those should be reported. The financial footprint of TF might be subtle – perhaps a series of $500 wire transfers to multiple individuals in another country – but combined with other context (such as media reports of those individuals’ ties), reasonable suspicion can be formed. Compliance officers should be aware of any domestic lists (e.g. Canada’s list of terrorist entities) and international sanctions, and treat hits or activity related to those as inherently suspicious.

In all cases, it’s crucial to remember that an indicator is just that – an indicator. Context and judgment are needed. FINTRAC advises that a single red flag in isolation might not be enough to warrant an STR, but it should prompt further assessment: look for additional facts or context that either explain the anomaly or add to the suspicion. Often it’s the combination of multiple indicators that solidifies the reasonable grounds to suspect. For example, consider a client who (1) asks how to avoid reporting, (2) deposits just under $10,000 repeatedly, and (3) cannot clearly explain the source of funds – taken together, these indicators strongly point to potential money laundering, whereas any one of them alone might be inconclusive. Compliance officers should train staff to recognize the common red flags (many of which we’ve listed above) and, importantly, to escalate concerns so that a proper analysis of facts, context, and indicators can be done to decide on filing an STR. FINTRAC maintains sector-specific indicator guidance and periodically issues operational alerts (e.g. on laundering of fentanyl proceeds, romance scams, human trafficking, etc.) with typologies and red flags to watch for. Staying current with these publications will help reporting entities refine their detection scenarios and better identify suspicious transactions before they become major problems.

Best Practices for High-Quality STR Content

Filing a suspicious transaction report is not just a checkbox exercise – the quality of the STR can significantly impact its usefulness to FINTRAC and law enforcement. A well-prepared STR provides a clear, concise, and informative account of why the transaction is suspicious, enabling analysts to quickly grasp the issue and potentially combine the report with others on the same subjects. Here are best practices to ensure high-quality STR content:

• Clearly Articulate the Suspicion in the Narrative: The narrative (often called the “Details of Suspicion” section) is the heart of an STR. In this free-text field, the reporting entity should explain the who, what, when, where, and why of the suspicious activity. A strong narrative is one that connects the dots between the facts of the transaction, the context, and the indicators or red flags that triggered the suspicion. It’s not enough to simply state “Client made a large cash deposit that seems suspicious.” Instead, a high-quality narrative might say: “Client deposited $9,500 cash at Branch X on 2025-07-01, then another $9,800 at Branch Y on 2025-07-02. The client asked tellers how to avoid government reporting. These deposits are inconsistent with the client’s stated occupation (teacher, $50K annual income). These facts and context provide reasonable grounds to suspect structuring to avoid reporting, potentially laundering illicit cash.” This example illustrates how including specific facts (dates, amounts, branch locations), relevant context (client’s occupation/income), and reference to indicators (structuring behavior, questions about reporting) gives FINTRAC a coherent story. FINTRAC explicitly encourages reporters to detail how the facts and context led them to suspect ML/TF, so that another trained person would reach the same conclusion. The narrative should answer key questions: What happened? Who was involved (client, third parties)? When and where did it occur? And most importantly, Why is this suspicious? – which means stating the ML/TF indicators or patterns observed.

• Use FINTRAC’s “Facts, Context, Indicators” Approach: As per FINTRAC guidance, structuring your thought process (and narrative) around facts, context, and indicators is a best practice. Facts are objective details (e.g. transaction amounts, dates, account numbers, client details that are known). Context is the background or circumstances that make those facts meaningful (e.g. knowing the client’s typical business activities, current events like a client’s region being in the news for drug trafficking, or the presence of negative media about the client). Indicators are the red flags that signal something is off (as discussed in the previous section). In writing an STR, list the concrete facts first (“Client did X, Y, Z”), then provide context (“which was unusual because…” or “client’s profile is such that…”), and reference the known indicators (“this matches known patterns of structuring” or “client’s behavior aligns with [Indicator XYZ]”). By doing so, you demonstrate that you have done the analysis to meet the reasonable suspicion threshold, and you make it easier for FINTRAC to understand your rationale. FINTRAC assessors have noted that they value STRs where the reporting entity can demonstrate how they reached their suspicion, rather than simply declaring the transaction suspicious. A tip: avoid including opinions or unsubstantiated guesses in the narrative – stick to what you observed and why those observations led you to suspect ML/TF (remember, a “fact” for STR purposes must be an event or element known to have happened, not a conjecture).

• Be Specific and Avoid Vague Language: Phrases like “funds of suspicious origin” or “client is suspicious” are not helpful without explanation. Instead of writing “client’s activity was irregular,” describe exactly what was irregular (e.g. “multiple cash deposits just under $10k, which is irregular compared to the client’s usual payroll deposits of ~$2k”). Pinpoint the anomalous behavior or transaction. If the suspicion involves a pattern, outline the pattern (e.g. frequency, amounts, timing). Rather than saying “possibly money laundering,” detail the indicators that point to money laundering. FINTRAC’s feedback often stresses avoiding generic statements and instead providing a narrative that another person can follow logically. Also, use plain language and define any internal terminology or acronyms. For example, if your bank has an internal code “RED1” for a certain alert, do not just say “Triggered RED1 alert” – FINTRAC won’t know what that means. Translate it: “Triggered internal alert (RED1) indicating rapid movement of funds through account.” Clarity is key. Imagine an analyst reading your report who has no prior knowledge of the case – will they understand what happened and why it mattered? If not, refine the narrative.

• Include All Relevant Details (But Only Relevant Ones): All required fields in the STR form must be completed to the extent possible, but the narrative allows you to add nuance and additional info that structured fields can’t capture. Make sure to include identifying details of all parties if known (full names, dates of birth for individuals; company names; account numbers involved; etc.). If third parties or beneficiaries are part of the suspicious transaction, explain their role. For instance: “The funds were deposited by Client A but the account beneficiary is Client B, who is a business partner of A. B was not present and A had authority over B’s account – unusual activity on behalf of another party.” If external information contributed to your suspicion (say, a negative news article naming the client in a fraud, or a police production order you received on the client previously), you can mention that as context as well, since FINTRAC can use that clue in analysis. Supporting documentation (like copies of receipts, images of fake IDs, etc.) generally are not submitted with STRs, but you should retain them in your records. In the STR, you can reference them (“Client provided ID (Ontario Driver’s License) which appeared altered – copy on file”). Avoid extraneous information that doesn’t pertain to the suspicion. The goal is a focused narrative: too little detail, and FINTRAC cannot act on it; too much irrelevant detail, and the real red flags get lost. A practical tip is to read your draft narrative and ask: Does each sentence help explain the suspicion or provide necessary background? If not, consider removing or simplifying it.

• Chronology and Structure: Often, organizing the narrative chronologically helps. Start at the beginning of the story: e.g., “On July 1, 2025, Client X did … Then on July 2, they did … On inquiry, they stated …” and so on. Then conclude with the analysis: “Based on the above, we suspect that … (money laundering/terrorist financing) because …”. However, if the case is complex with multiple threads, you might structure by topic (funds flow vs. client behavior, etc.). Use paragraphs or bullet points (if allowed) to break up different elements. Ensure the narrative has a logical flow – it should not jump haphazardly between unrelated points. Many institutions use an internal STR template or checklist for narratives, prompting the writer to cover key points such as: How was the suspicion first detected? What transaction or behavior is unusual? What is the client’s profile and does this deviate from it? What specific indicators are present? Following such a template can improve consistency and completeness in reporting.

• Timeliness and Completeness: A high-quality STR is also one that is submitted on time. If a report is filed months after the suspicious activity, its intelligence value may diminish (the funds might be long gone). Ensure your internal process moves efficiently from detection to investigation to reporting. Document the timeline in the narrative if relevant (e.g., “Transaction occurred on X date, unusual pattern recognized on Y date during review, investigation completed and STR submitted on Z date”). This shows FINTRAC that you acted as soon as reasonably practicable. Finally, double-check that all parts of the report are filled out – FINTRAC needs accurate data. Incomplete or erroneous fields (like misspelled names, wrong account numbers) can hamper analysis or linkage to other reports. Before submission, perform a quality control check: verify client IDs, transaction references, dates, etc., against your source documents. Consistency between the structured fields and the narrative is important too (the narrative shouldn’t contradict or omit something listed in the transaction details section).

By following these best practices, compliance officers can greatly enhance the value of their STRs. FINTRAC analysts have indicated that well-written narratives that clearly explain the grounds for suspicion are extremely helpful in their work. Remember that an STR might be one of many pieces of a puzzle; if your report is clear and detailed, it can be easily combined with others to form a bigger picture. A robust STR not only meets the legal requirement but also contributes meaningfully to Canada’s financial intelligence – enabling faster action against criminals and better strategic insights into emerging threats.

Common Pitfalls in STR Filing

Even experienced compliance teams can stumble in their STR obligations. Recognizing common pitfalls is the first step to avoiding them. Below are some frequent errors, omissions, and bad practices in suspicious transaction reporting – and how to address them:

• Failure to File When Required: The gravest pitfall is not filing an STR at all when circumstances do warrant it. Recent enforcement cases indicate this remains an issue. For example, FINTRAC found that Royal Bank of Canada failed to submit at least 16 STRs that it should have, out of a sample of 130 reviewed cases. Similarly, in 2024 FINTRAC penalized TD Bank for multiple instances of not reporting suspicious transactions despite clear grounds.These violations often occur due to breakdowns in internal monitoring, inadequate training (staff didn’t recognize the red flags), or poor escalation procedures. To avoid this pitfall, institutions should ensure a strong AML compliance program where front-line staff and automated systems promptly flag unusual activities, and where compliance officers have the authority and awareness to investigate and file STRs. Regular audits or sample testing of alerts vs. STRs can help catch if something suspicious slipped through without a report. FINTRAC’s message is clear: if you have reasonable grounds to suspect, failing to report is not an option – it’s a legal breach that can lead to significant fines and reputational damage.

• Waiting for Proof or “Overvalidation”: Some compliance personnel err by thinking they need to fully confirm a crime before filing an STR. This can lead to dangerous delays or no report at all. Remember, the threshold is suspicion, not proof. A pitfall is conducting a drawn-out investigation trying to get absolute certainty (which is often impossible from within a financial institution) – during which time the suspicious activity continues unreported. If you have enough information to suspect reasonably, file the STR without delay. You are not accusing the client of a crime in court; you are providing a tip to FINTRAC. Overcoming this pitfall involves training staff on the RGS standard and instilling confidence that filing an STR is the correct course as soon as the threshold is met. FINTRAC even notes you do not need to verify every fact or prove the offense – just articulate your reasonable suspicion. In short, don’t let the perfect be the enemy of the good: a timely STR with partial information is often more useful than a late STR with complete information.

• Poor Narrative Quality (Vague or Insufficient Detail): As discussed in the best practices, a very common pitfall is submitting STRs with bland or uninformative narratives. Regulators have criticized reports that say little more than “Transaction appears suspicious” or use boilerplate language without specifics. Such STRs add minimal value and can frustrate analysts. For instance, an internal review might show a compliance officer simply copied a generic suspicion reason into multiple reports. To avoid this, ensure each narrative is customized to the scenario and explains the suspicion thoroughly. Another aspect of this pitfall is omitting key details that were known. If, say, a client was the subject of a previous law enforcement inquiry, leaving that out of the STR is a missed opportunity to give context. Or not mentioning that the client is a Politically Exposed Person (PEP) if that’s part of why the transaction is high-risk. Essentially, withholding relevant info – or conversely, obscuring it with vague wording – is a pitfall to avoid. It may help to implement a peer review step: have a second compliance officer read the narrative and ask, “Does this make sense? Is anything missing?” before submission.

• Using Incorrect or Misleading Terminology: This pitfall is subtler but can be problematic. Sometimes, filers may mislabel the type of suspicious activity or use legal terms incorrectly. For example, calling something “structuring” when in fact the amounts were above the threshold (so structuring is not the issue) could confuse the analysis. Or writing “money laundering offense” when all you saw was an indicator of fraud – it’s important to distinguish predicate offenses when possible (was it fraud proceeds being laundered, tax evasion proceeds, drug money?). While you might not always know the predicate crime, be careful with assumptions. Stick to describing behavior. Additionally, avoid internal jargon. If your bank uses “SAR” to mean “suspicious activity report” (a term in other jurisdictions), note that in Canada the term is STR, and FINTRAC might not recognize an internal acronym. Using the FINTRAC terminology and classification (e.g. “suspicious transaction”) is safer. Miscommunication can be a pitfall – ensure the language in the report would be understood by someone outside your institution.

• Overloading the System (Defensive Reporting): On the flip side of not reporting enough, there is the pitfall of filing too many low-quality STRs as a defense mechanism. Some institutions take a “when in doubt, file it out” approach to avoid ever being caught missing an STR. While it’s good to err on the side of reporting, flooding FINTRAC with thousands of reports that have minimal substance or represent everyday activity can backfire. This practice, known as defensive reporting, can overwhelm analysts and reduce the overall effectiveness of the system. A recent analysis noted that Canadian banks and entities filed over 600,000 STRs in a year – a record number – yet the number of actionable intelligence disclosures to police has not risen proportionately. This suggests many STRs may not provide real leads. Compliance officers should calibrate their systems to focus on quality over quantity. Filing an STR for every slightly atypical transaction without any assessment dilutes resources. The pitfall here is not applying judgment: remember that unusual does not always equal suspicious (there could be a reasonable explanation). It’s acceptable to decide not to report if after analysis you conclude there are no reasonable grounds – just document your decision process. Your goal is to report meaningful suspicions. Regulators want you to be vigilant, but also thoughtful. If an institution is filing STRs on, say, every cash deposit by seniors simply because they are higher risk clients, that could be considered an improper application of the threshold. Avoid formulaic or “tick-box” STR filing – it should be risk-driven, not just volume-driven.

• Lack of Documentation and Follow-Up: Another pitfall is not properly documenting your STR decision and not using filed STRs as a feedback loop. Every time you file (or choose not to file) an STR, you should document the rationale in your internal case management system. If regulators come in, they will want to see why a particular alert led to (or did not lead to) an STR. Failing to document can lead to situations where you can’t explain your decisions, which is a compliance problem. Additionally, not doing a post-mortem on STRs is a missed learning opportunity. For instance, if FINTRAC issues feedback or if an STR you filed eventually ties into a law enforcement case, share that knowledge internally (as much as confidentiality allows). A pitfall is treating STR filing as the end of the process – in reality, it should also inform your ongoing risk assessment. If you have filed many STRs on one client, that client likely should be reviewed for exiting the relationship or at least rated higher risk. Failing to escalate such issues internally (e.g., to senior management or to update the risk profile) is another common shortcoming. STRs shouldn’t go into a black hole within the institution; they are part of the risk management cycle.

• Tipping Off and Handling Clients Improperly: We mentioned tipping off as a legal no-no. A practical pitfall is mishandling interactions with the client during your STR evaluation. Some employees, out of either curiosity or zeal, might directly confront the client with suspicions or ask pointed questions that effectively reveal the investigation. This can tip off the client, potentially harming any external investigation and violating the law if done with intent to warn the client. The best practice is to gather what you need from existing records and normal business questions. If additional information is needed in a way that would be out-of-the-ordinary, consult with compliance management – you may decide to file based on what you have rather than alert the client. Training staff on how to be professionally curious without accusing the client is important. For example, asking “Could you help me understand the source of these funds? We ask because of our large transaction policy” is fine, but saying “This looks like money laundering, where did you really get it?” is obviously inappropriate. The pitfall of poor client handling can not only tip off criminals but could also harm innocent customer relationships if one jumps to conclusions. Thus, internal procedures should guide employees on how to escalate suspicions discreetly.

In summary, avoiding these pitfalls requires a strong compliance culture, adequate training, clear procedures, and ongoing monitoring of your own program’s effectiveness. Canadian regulators have increasingly been assessing not just whether STRs are filed, but the quality and timing of those reports/ They have penalized firms for not sufficiently developing their STR reporting processes or for delays in identifying suspicions. By learning from the mistakes of others – such as the cases where banks missed obvious red flags like multiple foreign accounts and negative news – compliance officers can tighten their own practices. Regular compliance program reviews (ideally annually, as required by regulation) should explicitly cover STR reporting: Are we detecting what we should? Are we filing in a timely manner? Are the reports well-written? Identifying gaps proactively will help prevent the serious consequences that come from these common pitfalls.

FINTRAC’s Use of STRs and Their Utility to Investigations

Suspicious transaction reports are often called the “life-blood” of financial intelligence. From FINTRAC’s perspective, STRs are among the most valuable reports it receives because they provide insights that go beyond raw transaction data. Unlike threshold-based reports (which might simply list a large transaction with no context), an STR contains the institution’s own analysis and context for why a transaction is out of the ordinary. Here’s how STRs are used and why high-quality STRs greatly assist FINTRAC and law enforcement:

• FINTRAC Analysis and Financial Intelligence Disclosures: Every STR that FINTRAC receives is reviewed and assessed by analysts. FINTRAC has sophisticated data systems to aggregate STRs with other reports (like large cash transactions, international electronic funds transfers, casino disbursement reports, etc.) and to look for patterns or connections. When FINTRAC finds enough indicia of potential criminal activity, they produce a financial intelligence disclosure to the appropriate authorities. STRs often form the starting point or critical piece of such analyses. For instance, one STR might seem isolated, but if FINTRAC sees multiple STRs from different banks all concerning the same individual, that can trigger a deeper look and lead to a referral to law enforcement. FINTRAC prioritizes STRs related to serious threats – the agency notes that for STRs linked to threats to Canada’s security (such as terrorism or major organized crime), it can expedite analysis and send a disclosure to police or national security partners within 24 hours. This shows the urgency and weight a strongly suspicious STR can carry. In practice, FINTRAC discloses hundreds of case briefs to law enforcement each year (each case can encompass information from dozens or hundreds of STRs and other reports). These intelligence packages help police start or advance investigations. For example, an STR about suspicious e-transfers might give police leads on a fraud ring’s fund movements that they wouldn’t have known otherwise. In one case, FINTRAC credited proactive STR reporting with assisting a major RCMP investigation (Project ODEON) that dismantled a fentanyl trafficking ring in 2023. The STRs, combined with other data, allowed FINTRAC to trace money flows in and out of the operation, contributing to 48 criminal charges. Simply put, STRs are a key input to FINTRAC’s analytical machine – and better inputs (quality and timely reports) yield better outputs (actionable intelligence).

• Strategic Intelligence and Trends: Beyond individual cases, FINTRAC aggregates and analyzes STR data in bulk to understand trends and emerging risks. STRs feed into the strategic intelligence reports, typologies, and alerts that FINTRAC publishes for the benefit of both law enforcement and reporting entities. For instance, FINTRAC’s strategic analysts might notice an increase in STRs mentioning certain keywords (like “cryptocurrency ATM” or “romance scam”) and investigate further, potentially producing an operational alert on that phenomenon. In recent years, FINTRAC has released alerts on topics such as laundering of proceeds from online child sexual exploitation, romance fraud, and fentanyl trafficking– these were informed by patterns seen in STRs and other reports. Moreover, FINTRAC can identify sectors that may be under-reporting or where compliance is lagging by looking at STR statistics. A few years ago, it was noted that very few STRs came from the real estate sector relative to its risk exposure. This spurred FINTRAC to conduct outreach and issue guidance specific to real estate indicators. So, STRs have the utility of helping shape national AML/ATF priorities and guidance. They essentially act as the collective “eyes and ears” of the financial system, allowing FINTRAC to spot where the criminals might be shifting tactics.

• Use in Investigations – Examples: A well-known utility of STRs is helping law enforcement “follow the money” in investigations of crimes like drug trafficking, fraud, corruption, and terrorism. Police often don’t have direct access to financial transactions in real time; they rely on FINTRAC to provide leads from the reporting system. When multiple STRs on the same subjects come in, FINTRAC can build a network analysis – mapping out accounts, entities, and fund flows. This can reveal the structure of a money laundering network or identify previously unknown co-conspirators. As a hypothetical example, a drug investigation might yield some suspects – FINTRAC, through STRs, might then identify that those suspects have banking relationships with certain MSBs that filed STRs about unusual transfers to Mexico, thereby giving police specific institutions and transactions to subpoena for evidence. We have concrete Canadian cases: in a 2021–2023 probe (Project Aimeur in Montreal), FINTRAC provided disclosures based on STRs and other reports that exposed an unregistered MSB moving money to Algeria via China. That financial intelligence directly led to charges under the PCMLTFA for operating an illegal MSB. Without those STRs flagging suspicious “underground banking” transactions, the activity might have gone undetected by authorities. In another instance, FINTRAC noted it continued to receive STRs related to Canadian extremist travelers (individuals leaving Canada to join terrorist groups) – these reports can support national security investigations by tracking how these individuals fund their travel or who is financially supporting them. Essentially, each STR is like a piece of a mosaic; one piece alone might not show much, but collectively they create a picture that can be crucial for investigators to see the full scenario.

• Feedback Loop and Improving Reporting: FINTRAC does provide some feedback to reporting entities, though by law it cannot divulge specifics of investigations to them. General feedback comes in the form of annual reports, statistics, and occasional commentary on STR quality. For example, FINTRAC has published “Feedback on Suspicious Transaction Reporting” for certain sectors in the past, giving anonymized examples of good STRs and poor STRs to illustrate expectations. Compliance officers should take advantage of such feedback to refine their internal training and processes. If FINTRAC indicates that, say, many STRs are missing details in the narrative or that attempted transactions are under-reported, use that information to adjust your approach. Also note that FINTRAC’s examination findings often highlight STR-related deficiencies (as we saw in enforcement cases). By knowing how FINTRAC uses STRs, reporting entities can better appreciate why completeness and accuracy matter. For instance, one FINTRAC examiner report cited that a securities dealer missed indicators like the same address being used by multiple unrelated clients – had they caught and reported that, FINTRAC could have linked those clients via that common address as part of a scheme. Understanding that FINTRAC looks for such linkages underscores the importance of including details like addresses, phone numbers, IP addresses, etc., in STRs.

• Law Enforcement Perspective: From the police/RCMP perspective, STRs (via FINTRAC disclosures) are intelligence leads, not evidence. However, they are extremely useful to point investigators in the right direction – saving time and resources. A senior RCMP officer once likened FINTRAC disclosures to a “treasure map” that can guide investigators to where the treasure (evidence) might be buried. In practice, law enforcement, upon receiving FINTRAC’s intel, will use traditional powers (court orders, warrants) to get the underlying bank records, do surveillance, etc. The initial STR that started it all remains confidential (and reporters are protected; their identity is not revealed to the subjects). Knowing this, compliance officers should feel assured that their reports have impact while their institutions maintain anonymity in the investigative process. It is also rewarding from an AML professional’s standpoint to see the outcomes: STRs have helped in identifying everything from large-scale tax evasion rings to corrupt public officials diverting funds, to child exploitation payment networks. FINTRAC often shares sanitized success stories in its publications to demonstrate how STRs made a difference, which can be motivating for front-line staff to hear.

In summary, high-quality STRs are a critical intelligence resource. They help FINTRAC “connect the dots” and generate leads that keep Canada’s financial system safer. The utility of STRs is maximized when they are timely, detailed, and clearly justify the suspicion – exactly the factors we have discussed throughout this article. Compliance officers should take pride in crafting STRs well, knowing that each report could be the key that unlocks a case or prevents criminals from abusing the financial system. As FINTRAC’s director, Sarah Paquet, stated: businesses must do their part by reporting suspicions, and FINTRAC in turn will take appropriate action to protect Canadians and the economy. STRs are where that partnership between private sector and government truly comes to life.

Case Studies (2022–2025): Lessons from Good and Bad STR Practices

Examining real-world examples can illustrate the concepts of good and poor STR practices – and the consequences that follow. In recent years, Canada has seen both compliance crackdowns for failures in STR reporting and success stories where STRs aided major investigations. Here are several case studies from 2022–2025:

Case Study 1: Royal Bank of Canada (RBC) – Failure to Report Suspicious Transactions
Background: In 2023, FINTRAC imposed an unprecedented administrative monetary penalty of C$7.5 million on RBC, Canada’s largest bank, for AML compliance failures – notably the failure to file numerous STRs when it should have. This marked the first time such a significant fine was levied on a major Canadian bank for STR lapses. The penalty came after a FINTRAC examination in 2022 that reviewed 130 case files and found 16 instances where RBC did not submit an STR despite having reasonable grounds to suspect ML/TF.

What Went Wrong: FINTRAC cited that RBC had not been filing separate STRs for different branch locations prior to May 2021, indicating a gap in their reporting processes. Essentially, suspicious transactions occurring at various branches were not always reported individually, possibly due to a centralized approach that missed local patterns. Additionally, RBC was found to lack “appropriate and documented governance” for implementing AML procedures across its vast enterprise. This suggests that RBC’s internal controls for ensuring STR obligations (like clear policies, training, and oversight) were insufficient or inconsistently applied. RBC defended itself by saying the matters were administrative and not willful aiding of money laundering but the fact remains that STR obligations were not met on multiple occasions. The bank chose not to appeal the fine, indicating it acknowledged the findings.

Consequences and Lessons: The immediate consequence was the hefty fine (which RBC paid) and negative publicity – headlines across major media highlighted that RBC failed to flag suspicious activity and received a record penalty. This was a wake-up call not only for RBC but for all large financial institutions in Canada: even well-resourced compliance programs can have blind spots, and FINTRAC is willing to enforce penalties, ending an era that some called “free passes” for big banks. Compliance officers can learn that strong governance is essential – policies must be put into practice consistently at all branches and lines of business. RBC’s case underscores the need for ongoing monitoring: if one part of the bank identifies a suspicious matter, it cannot be assumed that’s enough; every instance meeting RGS must be reported. It also highlights that institutions should regularly review their STR filing processes – RBC updated its approach in 2021 (perhaps in response to regulator feedback) to ensure branch-level STRs are done, but by then some historical failures had occurred. The lesson is to be proactive: test your systems, ensure that, for example, multiple triggers at different locations all result in reports, and that nothing “falls between the cracks” of organizational silos. Lastly, RBC’s experience shows that even absent actual money laundering charges (FINTRAC emphasized this was an administrative enforcement, not an allegation that RBC facilitated laundering), the compliance miss is costly. The reputational impact can prompt customers and shareholders to demand better risk management.

Case Study 2: Toronto-Dominion Bank (TD) – Comprehensive Compliance Failures Including STRs
Background: In 2024, FINTRAC announced its largest penalty to date – about C$9.2 million – against TD Bank after a 2023 exam. TD was found to have committed multiple violations of the PCMLTFA, one of which was failure to submit STRs in cases where it should have. Other violations included poor risk assessment, not applying enhanced due diligence to high-risk situations, and inadequate ongoing monitoring.

What Went Wrong: The inclusion of STR filing failures in this case indicates that TD, like RBC, missed suspicious transactions. The presence of simultaneous failings (risk assessment, monitoring, etc.) suggests a systemic issue – if risk is not properly assessed and if high-risk accounts are not closely watched, suspicious transactions will go unnoticed and unreported. For instance, TD was cited for failing to take prescribed special measures for high-risk customers and not properly documenting ongoing monitoring. These missteps likely led to scenarios where red flags were either not detected in real time or not escalated. If a bank isn’t rigorously monitoring, it can’t report suspicions. We don’t have specifics on the STR misses, but it’s reasonable to infer they could involve things like not reporting suspicious wire transfers for clients deemed high-risk, or not filing about patterns that in hindsight were clearly problematic. TD’s case shows how failures in the early stages of the AML process (risk rating, due diligence) cascade into failures in the final stage (reporting).

Consequences and Lessons: TD paid the fine and, like RBC, suffered reputationally by being named as having the worst AML compliance fine in Canadian history. Internally, the bank no doubt initiated remediation – potentially revamping its risk models, retraining staff, and enhancing oversight. The lesson here is the interconnectedness of AML controls: STR reporting doesn’t happen in a vacuum. You can’t have effective STR filing if your institution hasn’t done a good job of identifying high-risk clients, understanding their activities, and monitoring their transactions. Compliance officers should ensure that upstream processes (KYC, transaction monitoring rules, etc.) are robust, because they directly feed into what suspicious activity gets flagged. It’s also a reminder that documentation is critical: one of TD’s violations was failing to keep records of the measures taken during ongoing monitoring. If an examiner can’t see your thought process or actions, they assume it didn’t happen. So beyond just doing the right thing, keep evidence – audit trails of alerts reviewed, rationales for decisions, etc. That can save you in an exam. In terms of STR specifics, TD’s penalty echoes RBC’s: no matter how large or sophisticated a bank is, regulators expect a belt-and-braces approach to catching and reporting suspicious transactions, especially for known high-risk areas (the mention of high-risk measures suggests maybe TD had issues with things like foreign PEP accounts or other sensitive categories where suspicion should have been high).

Case Study 3: Canaccord Genuity (Securities Dealer) – Missed Red Flags and STRs
Background: Canaccord Genuity, a well-known Canadian investment dealer, was fined C$544,500 by FINTRAC in mid-2025 for a series of AML deficiencies.The examination in 2023 found that Canaccord failed to file STRs for three highly suspicious transactions out of 100 files reviewed. FINTRAC pointed out that Canaccord’s processes failed to identify these suspicious transactions in a timely manner, and the firm missed obvious indicators linking the transactions to money laundering or terrorist financing.

What Went Wrong: FINTRAC’s statements on this case are quite instructive. The firm had several high-risk clients with red flags: for two clients, there were negative media reports that should have signaled risk (e.g. allegations of involvement in illicit activities), yet Canaccord did not respond to those red flags or factor them in. Key indicators were missed, such as a client using multiple foreign bank accounts for no apparent reason, multiple clients sharing the same address, and “misleading and vague” information in account files. Canaccord also didn’t properly review a client who had publicly available negative news connecting them to possible terrorism or money laundering. These lapses meant that when these clients conducted suspicious trades or transactions (perhaps large security liquidations or transfers out, inconsistent with their profile), Canaccord’s compliance failed to flag and report them. The firm also lacked well-documented procedures for STR reporting and didn’t update KYC/beneficial ownership info for high-risk accounts– which suggests an overall weak compliance program.

Consequences and Lessons: The fine itself, while smaller than the banks’ fines, is significant for a securities broker and came with public censure. It also coincided with other regulatory actions (Canada’s investment industry regulator fined Canaccord $3 million for gatekeeping failures around the same time), showing a pattern of compliance issues. For the compliance community, this case illustrates the importance of a 360-degree risk view: not just transaction monitoring, but also screening for adverse news and having an effective KYC refresh program. Negative news about a client, especially concerning financial crime, should immediately trigger a review of that client’s activity and potentially an STR if suspicious transactions are found. Canaccord’s oversight in not incorporating media screening is a cautionary tale – many compliance programs now use open-source intelligence and adverse media feeds as part of ongoing monitoring. Also, the case shows that indicators like shared addresses or unusual account structures (multiple foreign accounts) need to be actively considered. FINTRAC explicitly listed those as missed indicators. A good practice is to have systems that can flag if two unrelated clients list the same address or contact info – this could indicate a laundering network. Moreover, Canaccord’s failure to document compliance procedures and processes for STRs is something easily correctable – every firm should have a written procedure that says how staff escalate suspicions, who reviews and approves STR filings, and how they are submitted. Not having that is an unnecessary pitfall that FINTRAC won’t overlook. The takeaway: even if the volume of transactions is smaller in a securities context than banking, the expectations are the same. Know your client, pay attention to red flags (including external info), and report suspicions promptly. One can imagine that those three missed STRs could have involved, for example, penny stock trades linked to pump-and-dump schemes or transfers involving offshore hedge funds – whatever they were, FINTRAC deemed them “highly suspicious” and obvious in hindsight. It’s a reminder to approach alerts with a critical eye and not dismiss odd transactions just because, say, the dollar amounts might not be huge in investment terms.

Case Study 4: Exchange Bank of Canada – STR and Monitoring Failures
Background: Exchange Bank of Canada (EBC), a small Schedule I bank specializing in foreign exchange services, was fined about C$2.45 million in late 2024. This penalty followed a long examination (Dec 2022 to Apr 2024) and included multiple violations. Crucially, EBC was cited for failure to submit STRs where there were reasonable grounds to suspect ML/TF. They also failed in ongoing monitoring of business relationships and failed to report a large cash receipt, indicating multiple gaps.

What Went Wrong: The fact that EBC didn’t report STRs suggests it missed some clear suspicious transactions or patterns. Being a forex-focused bank, typical issues could include not reporting clients who exchanged unusually large amounts of cash or travelers cheques without logical reasons, or failing to report suspicious wire flows involving currency exchanges. The violation of not conducting ongoing monitoring ties in: if you’re not monitoring accounts continuously, you won’t notice things that become suspicious over time. Possibly EBC had a program where accounts weren’t being regularly reviewed against expected activity or risk profiles, leading them to overlook evolving suspicious conduct. The mention of failing to report receipt of an amount from a person/entity implies they may have missed a large cash transaction report (LCTR) or similar, which is another report type. Missing an LCTR threshold (e.g. failing to report someone bringing in ≥$10,000 in cash) is a basic error, hinting at poor internal controls. Combined with missing STRs, it paints a picture of a compliance program not adequately watching transactions nor following up on anomalies.

Consequences and Lessons: EBC’s fine, while lower than those of big banks, was large relative to its size and made clear that no institution is too small to escape enforcement. Publicity around it noted that FINTRAC is covering “most business sectors” with over 140 penalties issued since 2008. The lessons here emphasize fundamentals: ongoing monitoring must be conducted and documented (it’s a legal requirement) – each client relationship needs periodic screening and transaction scrutiny. If EBC had done that, they likely would have caught those suspicious transactions and filed STRs rather than later being told by examiners that they should have. Also, like Canaccord, the case highlights that indicators were present (“reasonable grounds to suspect” existed) but were not acted upon. This underlines training – staff must be trained to recognize and escalate red flags. A specific lesson is the importance of integration between business operations and compliance: if frontline tellers or forex dealers noticed weird behavior but there was no mechanism or culture to report it to compliance, that’s a failure. Ensuring a speak-up culture and easy avenues to flag concerns is key. From a technical perspective, this case may push smaller FIs and MSBs to invest in better transaction monitoring systems or to outsource some compliance functions if needed, as the cost of non-compliance is clearly higher. Lastly, the inclusion of failing to report a large cash receipt suggests maybe the bank had technology or human error that let a >$10k cash transaction slip by without a report. That’s a relatively black-and-white requirement; missing it indicates a need for more robust controls (like system blocks if a transaction exceeds threshold until reporting info is collected). The big picture: even one missed STR can become a violation if FINTRAC finds you had grounds. EBC’s list of violations included exactly that phrasing. So compliance officers should think: if FINTRAC pulled 100 of our transactions, would they identify any that look suspicious which we didn’t report? If the honest answer is yes, then there’s work to do now, before an exam forces the issue.

Conclusion

Suspicious Transaction Reporting in Canada is a critical obligation and a powerful tool in combating financial crime. Compliance officers must navigate a complex landscape of legal requirements, practical challenges, and evolving threats. By understanding the regulatory framework (the who, what, when of STR duties under PCMLTFA and FINTRAC guidance), and by rigorously applying the “reasonable grounds to suspect” threshold across all sectors, they can ensure that no bona fide suspicion goes unreported. Recognizing common indicators and red flags – from structuring to unexplained wealth to third-party involvement – allows institutions to detect suspicious patterns early. Equally important is the craftsmanship of high-quality STRs: a well-structured narrative with facts, context, and indicators clearly laid out can dramatically increase an STR’s utility to FINTRAC and investigators. Avoiding pitfalls such as failing to report, reporting too late, or submitting vague narratives is essential, as demonstrated by the enforcement cases against major banks and others where deficiencies led to multi-million dollar penalties.

From FINTRAC’s vantage point, each STR is a piece of the financial intelligence puzzle – one that can trigger swift action against threats or contribute to strategic insights on emerging risks. The case studies reviewed (spanning banks, securities, real estate, and money services) provide real lessons: institutions that fell short on STR obligations faced consequences, whereas robust reporting helped disrupt criminal schemes and earned commendations from law enforcement. Canadian compliance teams should take these lessons to heart. The period of 2022–2025 saw regulators raising the bar on AML compliance and no hesitation in naming and shaming non-compliance – but also saw improved industry awareness and success stories where good compliance made a difference.

In the end, effective suspicious transaction reporting is about vigilance, clarity, and integrity. It requires a compliance culture where staff at all levels understand the importance of reporting suspicions and feel equipped to do so correctly. Compliance officers, as the guardians of that culture, should continuously educate, remind, and support their teams using tools like the checklists provided. By doing so, they not only protect their institutions from regulatory and reputational risk, but also contribute to the safety and security of Canada’s financial system. As FINTRAC’s Director aptly put it, businesses must do their part and FINTRAC will do theirs. STRs are the linchpin in this public-private partnership. Through diligent and high-quality suspicious transaction reporting, Canadian reporting entities play an indispensable role in the collective fight against money laundering and terrorist financing – turning mere pieces of data into actionable intelligence that helps keep crime in check.