FINTRAC Reporting Failures at Primary Capital Inc.: $93,390 Penalty Shows the Cost of Compliance Gaps

On September 18, 2025, FINTRAC (the Financial Transactions and Reports Analysis Centre of Canada) announced that Primary Capital Inc., an exempt market securities dealer headquartered in Toronto, was fined $93,390 for four violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The penalty was imposed on May 15, 2025, has been paid in full, and proceedings have ended.

This case is significant for securities dealers and other reporting entities because it highlights recurring compliance weaknesses: outdated or incomplete compliance policies, missing risk assessments, failure to conduct effectiveness reviews, and inadequate screening for politically exposed persons (PEPs).

The Four FINTRAC Violations

1. Inadequate Compliance Policies and Procedures (Serious Violation)

FINTRAC found that Primary Capital Inc.:

• Did not sufficiently document compliance policies related to reporting and KYC requirements.
• Failed to outline ongoing monitoring measures for business relationships.
• Lacked clear timeframes for STR (Suspicious Transaction Report) and terrorist property reporting.
• Omitted references to ministerial directives, such as the DPRK directive issued in 2017.

Policies and procedures are the backbone of AML compliance. If they are incomplete, outdated, or not approved by a senior officer, FINTRAC considers this a serious violation.

2. Failure to Assess and Document ML/TF Risks (Serious Violation)

Under subsection 9.6(2) of the PCMLTFA, businesses must assess risks across prescribed factors such as:

• Products, services, and delivery channels
• Clients and business relationships
• Geography
• Affiliates and subsidiaries

Although Primary Capital's policies stated that a risk assessment had been completed, FINTRAC found no documentation to support this claim. Without a documented risk-based assessment, regulators cannot confirm whether the business has identified and mitigated potential threats.

3. Failure to Conduct an Effectiveness Review (Serious Violation)

Regulations require that compliance programs be reviewed and tested regularly for effectiveness. Primary Capital's policies claimed this would occur, but FINTRAC found no documented evidence of such a review.

This gap indicates that AML frameworks may not be operating as intended. In FINTRAC's view, no documentation = no compliance.

4. Inadequate Screening for Politically Exposed Persons (Minor Violation)

FINTRAC also determined that Primary Capital Inc.:

• Did not take reasonable measures to determine whether clients were politically exposed persons (PEPs), heads of international organizations, family members, or close associates.
• Focused screening only on foreign PEPs, ignoring domestic PEPs, international organization heads, and associated family/close contacts.

While classified as a minor violation, this is a common and high-risk failure. PEPs are considered high-risk customers globally, and FINTRAC expects securities dealers to have rigorous onboarding and monitoring processes in place.

Why This Matters: Lessons for Securities Dealers and Other Reporting Entities

The $93,390 penalty against Primary Capital Inc. underscores several key lessons for Canadian businesses under the PCMLTFA:

1. Policies must be complete, current, and approved by senior officers. Incomplete or outdated compliance manuals will not meet FINTRAC's standard.
2. Risk assessments must be documented—not just claimed. If it isn't written down, FINTRAC assumes it hasn't been done.
3. Effectiveness reviews are mandatory. Regular testing of policies, training, and risk frameworks must be evidenced in writing.
4. PEP screening must cover all categories. Domestic PEPs, international organization heads, and their associates are just as important as foreign PEPs.

The Role of FINTRAC Reporting and FINTRAC API

At the heart of compliance is accurate FINTRAC reporting. Securities dealers, like MSBs and casinos, must submit:

These reports are critical to FINTRAC's intelligence gathering. But without automation, reporting is error-prone and time-consuming.

That's where the FINTRAC API comes in. By integrating directly into compliance systems, the API allows businesses to:

• Automate STR, LCTR, LVCTR, and EFTR submissions.
• Validate submissions against FINTRAC's schemas.
• Maintain an auditable record of all reporting activity.
• Reduce the risk of missed deadlines or incomplete filings.

Increasing FINTRAC Enforcement

The Primary Capital penalty is part of a broader enforcement trend:

• In 2024–25, FINTRAC issued 23 Notices of Violation totaling more than $25 million—the highest annual penalty amount in its history.
• More than 150 penalties have been imposed since 2008, cutting across financial institutions, MSBs, casinos, DPMS dealers, and securities firms.

This shows that FINTRAC is actively targeting all sectors, including exempt market dealers, and no business is too small or niche to escape scrutiny.

How to Stay Compliant and Avoid FINTRAC Penalties

To reduce compliance risks, securities dealers and other reporting entities should:

• Automate reporting via the FINTRAC API.
• Conduct annual, documented risk assessments covering all prescribed factors.
• Maintain comprehensive, up-to-date policies and procedures approved by senior officers.
• Perform independent effectiveness reviews of compliance programs.
• Implement robust PEP screening across all categories: domestic, foreign, international, and associated individuals.
• Provide ongoing AML training to staff and agents.

Final Thoughts

The $93,390 penalty against Primary Capital Inc. highlights that FINTRAC expects more than surface-level compliance. Documentation, automation, and ongoing testing are not optional—they are essential.

With enforcement levels rising, the cost of non-compliance will only grow. By adopting FINTRAC API-based automation tools like Comply+, Canadian securities dealers and other reporting entities can meet their obligations, protect their reputation, and avoid costly penalties.