Language selection

Search

FINTRAC guidance related to the Ministerial Directive on Financial Transactions Associated with the Islamic Republic of Iran issued on July 25, 2020

Updated on February 24, 2024

From: Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

This guidance explains the requirements of the Ministerial Directive on Financial Transactions Associated with the Islamic Republic of Iran.

In this guidance

This guidance is related to the Ministerial Directive issued by the Minister of Finance that was published in the Canada Gazette and came into force on July 25, 2020.

1. Why this Ministerial Directive was issued

The Financial Action Task Force issued a statement in February 2020 which expressed its particular and exceptional concerns regarding Iran's failure to address strategic deficiencies in its anti-money laundering and combatting the financing of terrorism regime, and the serious threat this poses to the integrity of the international financial system. The Financial Action Task Force called on its members to apply effective counter-measures to protect their financial sectors from such risks.

As such, Canada's Finance Minister issued this Ministerial Directive to ensure the safety and integrity of Canada's financial system.

This Ministerial Directive includes requirements that:

Legal references

2. Who needs to apply this Ministerial Directive

This Ministerial Directive came into effect on July 25, 2020, and is applicable to every person or entity referred to in paragraphs 5(a), (b) and (h) of the Act. The specific persons and entities that are to take action in response to this Ministerial Directive are:

3. Requirements of the Ministerial Directive

Every bank, credit union, financial services cooperative, caisse populaire, authorized foreign bank and money services business must:

Legal references

3.1 Determining that a transaction originated from or is bound for Iran

When determining whether a transaction originates from or is bound for Iran, you need to look at a variety of elements because the circumstances of each transaction are different. You must consider the facts, contexts and indicators of a transaction to determine whether it is subject to the Ministerial Directive. Transactions originating from or bound for Iran may include, but are not limited to:

This Ministerial Directive does not apply to transactions where there is no suspicion or explicit connection with Iran and there is no evidence of the transaction originating from or being bound for Iran. For example:

For further clarity, if the details of your client in Canada include an Iranian address and the client requests that funds be sent to a beneficiary in a country other than Iran, where additional facts, context and indicators (for example, beneficiary account details) point to an association with Iran, then this transaction must be considered as bound for Iran, and treated accordingly.

Similarly, if the details of your client in Canada include an Iranian address and this client receives funds into their account from a sending account in a country other than Iran, but where additional facts, context and indicators (for example, sending account details), point to an association with Iran, then this transaction must be considered as originating from Iran, and treated accordingly.

Alternatively, if the details of your client in Canada include an Iranian address and this client requests that funds be sent to a beneficiary in a country other than Iran, for which additional facts, context and indicators do not bring to light an association with Iran, then this transaction is not required to be considered for the purpose of the Ministerial Directive.  

Unless the transaction is being carried out by, or benefitting, a representative of the Government of Iran in Canada, then the details of your client in Canada are not likely enough to consider the transaction against the obligations of the Ministerial Directive.

Note: When you have determined that a transaction originated from or was bound for Iran, you must apply the measures outlined in the Ministerial Directive.

3.2 Verifying the identity of every client who requests or benefits from a transaction originating from or bound for Iran

Under this Ministerial Directive, you must take enhanced identification measures that go beyond the identification triggers and requirements prescribed under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations. Transactions that fall below the reporting threshold amounts typically do not require that you verify the identity of clients. However, under this Ministerial Directive, you must:

3.3 Additional measures required

You must treat all transactions originating from or bound for Iran as high risk. In addition to verifying the identity of any client requesting or benefiting from such a transaction, under this Ministerial Directive, you must:

Note: It is the reporting entity that owns the relationship with the client that is required to carry out the additional measures outlined in the Ministerial Directive (i.e., verifying the identity of the client, and exercising the customer due diligence measures).

Legal references

4. Records you must keep and their retention period

4.1 Records of electronic funds and virtual currency transfers of any amount

For an electronic funds or virtual currency transfer of any amount originating from or bound for Iran, you must keep:

4.2 Records of receipt of cash or virtual currency – of any amount

You must keep a record of every cash or virtual currency transaction (any amount) that you receive that reflects a connection to Iran (such as cash received for the issuance of negotiable instruments or foreign exchange using Iranian rial). You must record:

4.3 Records of redeeming other negotiable instruments and records for issuing or redeeming transactions – of any amount:

Transactions originating from or bound for Iran also include the redemption of other negotiable instruments (for example, bank drafts, money orders, traveller's cheques, etc.) in any amount. These too will have to reflect a connection with Iran, such as the use of Iranian rial in the transaction, for the Ministerial Directive to be applicable. You must record:

4.4 Information on records and retention

If you are required by this Ministerial Directive to keep a record of information that is readily available in other records, you do not have to record the same information again. This means that if you keep the required information and can produce it during a FINTRAC examination, you do not need to create a new record to meet the obligations.

You must keep all records applicable to this Ministerial Directive in accordance with their associated record retention requirement, or for at least five years from the date the record was created.

5. Reporting transactions captured under this Ministerial Directive

5.1 Reporting an electronic funds transfer in any amount to FINTRAC:

Note: These transactions must have an Iranian address in at least one of the fields.

5.2 Reporting the receipt of any amount of cash to FINTRAC:

5.3 Reporting virtual currency transactions using the Large Virtual Currency Transaction Report :

5.4 Reporting negotiable instruments and issuing or redeeming transactions:

5.5 Reporting suspicious transactions and terrorist property:

5.6. Reporting timeframes:

Other

Your compliance program's policies and procedures should already include information on how your organization becomes aware of Ministerial Directives issued by the Minister of Finance and information on how your organization will respond. Once a Ministerial Directive has been issued, you must take steps to meet its requirements.

Your policies and procedures must also fully describe how you will make the determination that a transaction originates from or is bound for Iran and what specific mitigation measures you will take upon making this determination. For example, your policies and procedures could outline that you ask the purpose of a transaction. Similarly, you could research the origin or destination of a transaction to determine if the details about the sender, beneficiary or entities involved in the transaction, indicate that the transaction is originating from or bound for Iran.

Guidance on how to conduct and document your risk assessment can be found in the Risk assessment guidance. You are required to implement certain measures to mitigate the risk of transactions involving jurisdictions that are identified in Ministerial Directives. Examples of these measures can be found in General information on Part 1.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act provided by the Department of Finance Canada.

During a compliance examination, FINTRAC may assess your compliance with any Ministerial Directive in order to verify that you have taken appropriate mitigating measures in relation to related transactions. FINTRAC may also review your overall risk assessment to verify that you have documented and assessed the risk related to your business activities and clients involving these jurisdictions. Failure to comply with the measures of a Ministerial Directive is a very serious offence. The existing administrative monetary penalties regime extends to all Ministerial Directives, and failure to comply with a directive could result in a penalty. Penalties applicable to the breach of a directive can be found in the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations.

Date Modified: