Date: 20241210

Docket: T-2021-23

Citation: 2024 FC 1996

Ottawa, Ontario, December 10, 2024

PRESENT: Mr. Justice Norris

BETWEEN:

NORWICH REAL ESTATE SERVICES INC., DBA RE/MAX KELOWNA

Appellant

and

FINANCIAL TRANSACTIONS AND REPORTS ANALYSIS CENTRE OF CANADA

Respondent

CONFIDENTIAL JUDGMENT AND REASONS

[Redacted pursuant to the Order dated April 10, 2025]

I. OVERVIEW

[1] The appellant, Norwich Real Estate Services Inc (dba RE/MAX Kelowna), is a licensed real estate broker in Kelowna, British Columbia. |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||.

[2] In May 2023, following a compliance examination that had begun in March 2021, the appellant was served with a Notice of Violation by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). The notice alleged that the appellant had violated the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2000, c 17 (PCMLTFA or “the Act”) by failing to report financial transactions that occurred in the course of its activities with respect to which there were reasonable grounds to suspect that they related to the commission or attempted commission of a money laundering offence or a terrorist activity financing offence – |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||. In a decision dated August 25, 2023, the Director and Chief Executive Officer of FINTRAC concluded that the appellant had committed the alleged violation. The Director imposed an administrative monetary penalty (AMP) of $156,750.

[3] The appellant has appealed the Director’s decision under section 73.21 of the PCMLTFA. It does not dispute that it violated the Act by failing to report the transactions in question. Its appeal is limited to the amount of the AMP imposed by the Director.

[4] FINTRAC alleged, and the appellant accepts, that by the time the two properties were sold, the appellant should have submitted suspicious transaction reports concerning all of its client’s transactions relating to the properties. The appellant explained during the compliance examination and again in response to the Notice of Violation that it did not report the transactions at the time because, when the properties were sold, they were already subject to enforcement action by government authorities, including the British Columbia Director of Civil Forfeiture, and the appellant therefore believed that reports to FINTRAC were unnecessary. The appellant acknowledged that it was mistaken in thinking this and it revised its compliance procedures and training accordingly. As well, in response to the Notice of Violation, the appellant submitted suspicious transaction reports concerning the transactions in question, albeit belatedly.

[5] On appeal, the appellant submits that, in determining the appropriate amount of the AMP, the Director misconstrued the purpose of the AMP regime, failed to consider relevant factors, fettered her discretion, and breached the requirements of procedural fairness. The appellant asks the Court to reduce the amount of the penalty imposed. The respondent submits that the appellant has not established any basis to interfere with the AMP imposed and asks that the appeal be dismissed.

[6] For the reasons that follow, the appeal will be allowed. Briefly, in determining the amount of the penalty to be imposed on the appellant, section 73.11 of the PCMLTFA required the Director to take three things into account: first, that penalties have as their purpose to encourage compliance with the Act rather than to punish; second, the harm done by the violation; and third, the appellant’s history of compliance with the Act and related regulations. I agree with the appellant that the Director erred in her interpretation of section 73.11 by conflating two distinct factors: the appellant’s history of compliance and the non-punitive purpose of the penalty. I also agree with the appellant that the Director fettered her discretion and failed to take relevant circumstances into account when determining the harm done by the violation. On the other hand, I have not been persuaded that the Director breached the requirements of procedural fairness.

[7] Subsection 73.21(5) of the PCMLTFA provides that this Court may vary the AMP imposed by the Director. As I will also explain, I am not satisfied that it would be appropriate to do so in this case. Instead, the AMP imposed by the Director will be set aside and the matter will be remitted for redetermination in accordance with these reasons.

[8] Subsection 73.21(4) of the PCMLTFA states that, in an appeal, the Court “shall take every reasonable precaution, including, when appropriate, conducting hearings in private, to avoid the disclosure by the Court or any person or entity of information referred to in subsection 55(1)” of the Act. Subsection 55(1) identifies a number of categories of information that shall not be disclosed to the public. Accordingly, a confidential version of this Judgment and Reasons will be released to the parties first so that the Court may have the benefit of their submissions on what redactions, if any, are required by subsection 73.21(4) before the Judgment and Reasons is made available to the public.

II. BACKGROUND

A. Relevant Statutory Provisions

[9] As noted above, the transactions in question took place in |||| and ||||. The governing statute and regulations have been amended several times since then. As the Director recognized, the appellant’s conduct had to be evaluated, and the appropriate AMP had to be determined, in light of the provisions in effect at the time of the impugned conduct. The applicable provisions as they read at the relevant time are set out in what follows.

[10] Section 3 of the PCMLTFA states:

[11] Part 1 of the PCMLTFA sets out a number of record keeping, verification of identity, and reporting of suspicious transaction requirements that apply to persons and entities listed in section 5 of the Act, including real estate brokers like the appellant. This includes section 7 of the Act, which provided as follows at the relevant time:

[12] Subsection 9(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations, SOR/2001-317 (STR Regulations), together with Schedule 1 of the Regulations, sets out the information required in a suspicious transaction report. As well, at the relevant time, subsection 9(2) of the STR Regulations stated that the report “shall be sent to the Centre within 30 days after the day on which the person or entity or any of their employees or officers detects a fact respecting a financial transaction or an attempted financial transaction that constitutes reasonable grounds to suspect that the transaction or attempted transaction is related to the commission of a money laundering offence or a terrorist financing offence.” Failing to report a suspicious transaction or attempted transaction within the meaning of section 7 of the PCMLTFA is a violation of the Act for which an AMP may be imposed.

[13] Under subsection 4(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalty Regulations, SOR/2007-292 (AMP Regulations), violations of the Act are classified as minor, serious, or very serious. In the Schedule to the AMP Regulations, the failure to submit a suspicious transaction report under section 7 of the Act is classified as a very serious violation. Paragraph 5(c) of the AMP Regulations provides that, for an entity like the appellant, the range of penalty in respect of a very serious violation is from $1 to $500,000.

[14] The criteria for determining the penalty for a violation of the PCMLTFA are set out in section 73.11 of the Act:

[15] As provided for in section 73.11 of the Act, the AMP Regulations prescribe an additional factor to be taken into account in determining the appropriate penalty. Section 6 of the AMP Regulations states:

B. The 2021 Compliance Examination

[16] In March 2021, FINTRAC undertook a routine compliance examination of the appellant. As FINTRAC explained in a letter dated March 23, 2021, the examination was part of its “continuing mandate to assess the effectiveness of the programs for managing money laundering and terrorist activity financing risks and to assess compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act […] and its associated regulations.” The examination would cover the period from July 1, 2020, to December 31, 2020. The letter provided a list of items the appellant was required to provide to FINTRAC no later than April 23, 2021. A compliance interview would then be held by telephone on May 12, 2021.

[17] The compliance examination proceeded as planned. By letter dated October 19, 2021, FINTRAC provided the appellant with its findings. |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||| On July 28, 2022, FINTRAC provided the appellant with a revised statement of its findings.

[18] The revised statement identified || deficiencies but only one is relevant for present purposes: the failure to meet suspicious transaction reporting requirements with respect to |||| completed real estate transactions between ||||||||||||||||, and ||||||||||||||||||||||||||. |||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||. This deficiency had also been identified in the October 19, 2021, statement of findings.

[19] |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||

[20] Even though these transactions fell outside the time period initially identified for the compliance examination, they were added after they came to the attention of FINTRAC when, in conducting the examination, the appellant’s name was searched on the internet (a routine step in a FINTRAC compliance examination). The search had yielded two online news articles from the Vancouver Sun: one dated August 12, 2019; the other dated December 3, 2019. The articles were reporting on an action that had been commenced in August 2019 in the Supreme Court of British Columbia by the BC Civil Forfeiture Office in relation to the Kelowna and Big White properties. The articles stated that the BC Civil Forfeiture Office was seeking the forfeiture of both properties as the proceeds of crime – specifically, as the proceeds of an international stock fraud scheme. Citing court filings by the BC Civil Forfeiture Office, the articles mention the appellant by name as having been involved in the purchases of the properties. The articles also name CCI Ltd as the registered owner of the properties and as a defendant in the forfeiture action along with several others individuals and corporations, including Mr. Gomez Brana.

[21] In view of this information, which FINTRAC described as “adverse media,” the scope of the compliance examination was expanded to include these additional transactions. FINTRAC requested, and the appellant provided, records for the transactions. FINTRAC then conducted further internet searches and learned of additional adverse media, this time regarding the appellant’s client and its alleged connection to fraud and money laundering.

[22] When the || properties in question were sold (respectively, on ||||||||||||||||||||||||||||, and ||||||||||||||||||||), the sales were subject to approval by the Director of the BC Civil Forfeiture Office. Pursuant to that approval, the proceeds of the sales were paid into the BC Supreme Court to the credit of the forfeiture action.

[23] The background to the civil forfeiture proceeding, including the investigation by law enforcement agencies in Canada and elsewhere into the potential involvement of the appellant’s client and others in a fraudulent stock scheme and money laundering, is summarized in British Columbia (Director of Civil Forfeiture) v Cuatro Cienagas Inversiones Ltd, 2020 BCSC 2177. In that decision, the Court granted an interim preservation order with respect to the proceeds of the sales of the two properties.

[24] During FINTRAC’s examination, the appellant’s compliance officer, ||||||||||||||||||||||, stated that the company had not been aware of the media articles in which it was named in connection with the civil forfeiture action until FINTRAC had brought them to its attention. |||||||||||||||| confirmed, however, that the company knew that the sales of the properties in |||| required the approval of the Director of Civil Forfeiture and that the proceeds of the sales would be paid into court. |||||||||||||||| explained that the appellant believed at the time that the transactions relating to the || properties did not need to be reported to FINTRAC because the appellant knew Canadian law enforcement and taxation officials were already taking action against its client. In the appellant’s view, given this, things were well beyond there being a mere suspicion that the transactions may involve money laundering and there would therefore be no point to reporting them to FINTRAC.

C. FINTRAC’S Compliance Examination Findings

[25] The October 19, 2021, findings report listed the following ten indicia that, according to FINTRAC, provided reasonable grounds to suspect that the |||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||| related to the commission or attempted commission of a money laundering offence:

• 1)Foreign buyer, either an individual or company, or source of funds are from a jurisdiction with strict bank secrecy laws, weak anti-money laundering regimes, or with a high level of corruption.

• 2)There is an insufficient explanation for the source of funds.The transaction involves payments made by an unknown third party.

• 3)A party to this transaction was not identified or its existence was not confirmed.

• 4)All identification presented is foreign or cannot be checked for some reason.

• 5)All identification documents presented appear to be new or have recent issue dates.

• 6)Client uses multiple accounts at different financial institutions.

• 7)Transaction is not subject to financing.

• 8)Client purchases multiple properties in a short period.

• 9)Transactions in which parties are foreign or non-resident for tax purposes and their only purpose is capital investment.

• 10)Transactions involving persons who are named by a reliable source as being suspected of being involved in illegal activity.

[26] The statement of findings included an analysis of each of these factors as they related to the |||| transactions in issue.

[27] In summary, the statement of findings concluded as follows with respect to the |||| transactions:

Your organization failed to verify information about the corporate entities involved in the transaction, and did not adequately assess the increased risk associated with the client. This led your organization to fail in performing additional due diligence. High-risk clients require more frequent ongoing monitoring and enhanced measures, such as open-source searches, to support detection of suspicious transactions.

Consequently, there are reasonable grounds to suspect that the transactions conducted by your client are related to the commission or attempted commission of a money laundering offence. Specifically, based on the facts, context and indicators, there is a possibility that money laundering is occurring. Reasonable grounds to suspect is a low threshold of suspicion because the reason for suspicion does not need to be proven or verified.

[28] |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| || |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||

[29] The tenth factor identified by FINTRAC was the involvement of the BC Civil Forfeiture Office and media reporting concerning the alleged involvement of the appellant’s client and related entities in stock fraud and money laundering. This factor only emerged in 2019, after the original purchases of both properties. As described above, in August 2019, the BC Civil Forfeiture Office had commenced a legal action for the seizure of the Kelowna and Big White properties as proceeds of crime and any sale of the properties required approval by the Director of Civil Forfeiture. FINTRAC considered this to be a factor supporting a reasonable suspicion that all the transactions in question related to the commission or the attempted commission of a money laundering offence.

[30] In summary, as set out in the letter of November 10, 2021, the appellant’s position with respect to this last factor was: (1) it was aware of the involvement of the BC Civil Forfeiture Office in 2019, including the need for approval of the sales of the properties; (2) it only became aware of the 2019 news articles when FINTRAC brought them to its attention during the 2021 examination; (3) the appellant’s thinking at the time of the sales of the properties was that the involvement of the BC Civil Forfeiture Office and law enforcement agencies (including the Royal Canadian Mounted Police) put it “beyond suspicion” that the transactions may be related to a money laundering offence; and (4) given that the law enforcement and the BC Civil Forfeiture Office were already involved and had linked the transactions to money laundering, a suspicious transaction report to FINTRAC would be redundant and, therefore, not necessary. The appellant accepted that it was mistaken in the last respect. |||||||||||||||| stated:

|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| || |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||

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[31] |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||

[32] After considering the appellant’s representations, FINTRAC issued a revised statement of findings on July 28, 2022. The findings relating to the transactions involving the |||||||||||||||| || |||| properties were substantially the same as in the October 19, 2021, report. The ten indicia providing reasonable grounds to suspect that the transactions related to the commission or attempted commission of a money laundering offence identified in the October 19, 2021, report were repeated verbatim in the July 28, 2022, report (although the analysis of a few of the indicia is expanded slightly). The overall conclusion set out in paragraph 27, above, is repeated verbatim in the revised statement of findings.

D. The Notice of Violation

[33] On May 9, 2023, FINTRAC issued a Notice of Violation against the appellant. It alleged that the appellant committed a single violation, namely:

Failure of a person or entity to report financial transactions that occurred in the course of its activities and in respect of which there are reasonable grounds to suspect that the transactions are related to the commission or the attempted commission of a money laundering or terrorist activity financing offence that occurred during the period of March 19, 2017, to October 8, 2019, which is contrary to section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and subsection 9(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Suspicious Transaction Reporting Regulations.

[34] Particulars set out in the notice state that the alleged violation relates to |||| transactions: |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||. The notice describes the violation as follows:

FINTRAC’s examination revealed that, in one instance, Norwich failed to report at least one financial transaction suspected on reasonable grounds to be related to the commission or the attempted commission of a ML/TF offence.

Specifically, this violation concerns one client (hereafter referred to as Client #1) of Norwich, whose transactions demonstrated a number of ML indicators. The pattern of transactions, as well as contextual information such as the location where the client operated and negative media exposure, reflect multiple suspicious transaction indicators of money laundering in real estate.

The suspicious transaction report (STR) indicators are consistent with common and/or industry-specific indicators listed in Money laundering and terrorist financing indicators – Real Estate [footnote omitted]. Similar indicators are also set out in Norwich’s documented policies and procedures (“Norwich Real Estate Services Inc. – Anti-Money Laundering & Counter Terrorist Financing Procedures for Real Estate Agents”, 7.4 Section G. Suspicious Transaction Indicators).

The presence of these indicators means Norwich met the legal threshold for submitting an STR in relation to a suspected ML/TF offence. However, Norwich failed to report these financial transactions in STRs to FINTRAC, despite the presence of these indicators.

[35] The Notice of Violation tracks the wording of section 7 of the PCMLTFA by alleging that there were reasonable grounds to suspect that the transactions in question related to the commission or attempted commission of a money laundering or a terrorist activity financing offence. There has never been any suggestion, however, that the transactions related to a terrorist activity financing offence; the concern has only ever been that they related to the commission or attempted commission of a money laundering offence.

[36] After summarizing the circumstances of the transactions in question, the notice sets out the following six indicators which, according to FINTRAC, provided reasonable grounds to suspect that the transactions related to the commission or attempted commission of a money laundering offence:

• 1)Transactions involving persons who are named by a reliable source as being suspected of being involved in illegal activity.

• 2)Foreign buyer, either an individual or company, or source of funds are from a jurisdiction with strict bank secrecy laws, weak anti-money laundering regimes, or with a high level of corruption.

• 3)There is an insufficient explanation for the source of funds.

• 4)All identification presented is foreign or cannot be checked for some reason.

• 5)All identification documents presented appear to be new or have recent issue dates.

• 6)Transactions in which parties are foreign or non-resident for tax purposes and their only purpose is capital investment.

[37] For each of these indicia, the notice provides an analysis of how they applied to the |||| transactions in issue. With respect to the first factor, which was also listed in FINTRAC’s compliance examination findings (see paragraphs 25 and 32, above), the notice highlighted the following:

• The appellant was aware at the time that the sales of the | properties in question required the approval of the Director of Civil Forfeiture.“Therefore,” according to the notice, “Norwich was aware of sufficient facts that it ought to have known the properties were related to illegal activities, and should have considered whether it had reached the threshold to submit a suspicious transaction report to FINTRAC.”

• The appellant, its client, and other related parties were named in news articles published on August 12, 2019, and December 3, 2019 (see paragraph 20, above).The articles specifically linked the appellant’s client and other related parties to a stock fraud scheme, money laundering, and other unlawful activities.

• During the time when the appellant was “conducting transactions” with ||, other “adverse media articles” were published concerning another corporation, the entity that had sent a wire payment to the appellant in the amount of $100,000 on March 27, 2017, towards the purchase of the Kelowna property.The articles alleged that this entity was engaged in money laundering and other unlawful activities.These articles were published on October 11, 2018, and December 3, 2018.(A third article, published on November 30, 2020, is also mentioned.)

• The appellant advised during the compliance examination that it was not aware of the adverse media reporting concerning |||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||| | ||||||||||||||||||||||.However, according to the notice, the appellant had failed to adequately assess the risk associated with its client and, as a result, it had failed to perform the additional due diligence called for with a “high risk” client such as this.Such additional due diligence would include open source searches about the client, which in turn could “support detection of suspicious transactions.”

• The appellant’s position was that it believed that the transactions did not need to be reported because it “believed Canadian law enforcement and taxation officials were taking action against the clients, and that there was no longer anything suspicious.”

[38] The notice also states that FINTRAC had assessed the applicable penalty to be $165,000. The notice then explains how FINTRAC arrived at this amount through a two-step process.

[39] At the first step, FINTRAC considers the harm done by the violation. It understands the harm done as the degree to which a violation interferes with the objectives of the Act, stated in section 3 of the PCMLTFA (this provision is set out in paragraph 10, above). Specifically, the harm done by a violation “is the degree to which the non-compliance interferes with the objectives of the Act or with FINTRAC’s mandate, which includes implementing specific measures to detect and deter money laundering and the financing of terrorist activities (ML/TF) and to facilitate the investigation and prosecution of ML/TF offences.” FINTRAC divides the penalty range into six levels, with the corresponding penalty ranging from $500,000 for a Level 1 harm to $25,000 for a Level 6 harm.

[40] In the present case, FINTRAC determined that the violation caused a Level 1 harm because a suspicious transaction report was not submitted and the appellant had not previously submitted any suspicious transaction reports in relation to the client in question. According to the notice, in such circumstances, the harm is “a complete loss of financial information, as the report is not available for FINTRAC’s analysis to produce financial intelligence that can be disclosed for the investigation and prosecution of ML and TF offences.” According to the notice, this is “the most severe case of non-compliance” with the Act. Thus, before considering any mitigating factors, the starting point penalty is $500,000, the maximum available penalty.

[41] The notice goes on to explain that, at the first step, FINTRAC also considers “any factors that are specific to the circumstance that may mitigate, slightly or significantly, the harm done by the violation and warrants a reduction to the penalty amount.” This sort of adjustment is discussed in FINTRAC’s Guide on harm done assessment for suspicious transaction reports violations (the “Harm Done Guide”). This document distinguishes between two types of mitigating factors: those present “as a result of actions or measures taken by the RE [reporting entity]” and those present “due to circumstances, the transaction and/or the client.” These, in turn, are broken down into major and minor mitigating factors. The Harm Done Guide provides several examples of major and minor mitigating factors.

[42] FINTRAC found that the appellant “did not present any mitigating factors for [its] consideration that could have further reduced the harm done at the time of the violation and, consequently, the amount of the penalty.” The base amount for the assessment of the penalty was, therefore, $500,000.

[43] The notice then explains that, at the second step, FINTRAC “looks at the compliance history of the reporting entity and the AMP’s purpose, which is to encourage compliance, not to punish.” For each violation, FINTRAC adjusts the base penalty amount determined in the first step, based on whether or not the entity in question “has previously been levied an AMP for that same violation.” For a first-time violation, the penalty is typically reduced to one-third of the base penalty. For a violation occurring a second time, the penalty is typically reduced to two-thirds of the base penalty. For violations occurring a third time or more, typically FINTRAC will apply the full base penalty.

[44] In the present case, FINTRAC found that the appellant had not previously received an AMP for the failure to report a suspicious transaction. The notice then states that “FINTRAC had no reason to deviate from its established guidelines.” Accordingly, FINTRAC found that “an adjustment for the compliance history and the non-punitive criteria reduces the penalty to 33%” of $500,000, the amount determined at the first step. Thus, FINTRAC determined that the appropriate penalty was $165,000.

[45] The notice explains that, if the appellant wished to contest either the violation or the amount of the penalty, it may make written representations to the Director of FINTRAC within 30 days.

E. The Appellant’s Representations

[46] Jerry Redman, the appellant’s owner, responded to the Notice of Violation by letter dated June 5, 2023. He did not contest that the appellant had committed the violation alleged. His representations were limited to the amount of the AMP for the violation.

[47] Looking first at the harm done, after acknowledging that, according to the Harm Done Guide, suspicious transaction reports are important for FINTRAC’s ability to develop financial intelligence and to assist in the investigation and prosecution of money laundering and terrorist financing offences, Mr. Redman submitted that, contrary to the determination in the notice, there had not been a complete loss of financial intelligence given that the transactions in question had already been targeted by other agencies. According to Mr. Redman, FINTRAC should consider this a mitigating factor in assessing the base amount of the penalty at step one. He wrote:

In the current context, when considering the harm done by the violation, in our respectful view, FINTRAC did not take into consideration that other Canadian government and law enforcement agencies were in fact aware of the facts underlying the transactions in question. We believe that the STR Harm Done Guide requires FINTRAC to consider this as a mitigating factor to further reduce the amount of the AMP issued in respect of the NOV [Notice of Violation].

Specifically, a consideration of the specific circumstances at hand demonstrate that the objectives of the STR reporting were at least partially met because the financial intelligence efforts to prosecute the underlying offence(s) were already underway. While the STRs in question may have provided additional intelligence, the failure to file the STR did not result in a complete loss of financial intelligence. As such, in keeping with the STR Harm Done Guide, the effect of the violation on Canada’s efforts to combat ML/TF was clearly mitigated. RE/MAX Kelowna submits that the associated AMP should be reduced to reflect this.

[48] Mr. Redman then linked the circumstances of the transactions at issue to the two kinds of mitigating factors identified in the Harm Done Guide. He submitted that the fact of Canadian law enforcement’s awareness of the appellant’s client and the client’s ties to criminal activity and to the properties in question was a mitigating factor that was present due to the circumstances, the transaction and/or the client. He also noted that “Information provided to law enforcement” is mentioned as a major mitigating factor in the Harm Done Guide. According to Mr. Redman, “the circumstances surrounding this violation, where Canadian law enforcement already had pertinent information about the client and transactions underlying the STRs in question [. . .] should similarly be considered a major mitigating factor and reduce the AMP accordingly.” In other words, the fact that law enforcement was already investigating the appellant’s client and had been able to connect the client to the two BC properties without a suspicious transaction report having been submitted should be considered a significant mitigating factor when considering the harm done by the failure to submit a report. Finally in this connection, Mr. Redman noted that on June 2, 2023, the appellant had submitted two suspicious transaction reports in relation to the series of transactions in question. In sum, the mitigating factors that are present reduced the harm caused by the violation significantly and the penalty should be reduced accordingly.

[49] Turning to the second step of the penalty assessment, Mr. Redman submitted that adjusting the penalty solely on the basis of it being for a first time violation failed to apply the statutory requirement that AMPs are not meant to punish. He submitted that the proposed AMP of $165,000 was so disproportionate to the appellant’s net earnings that it would actually have the effect of punishing the appellant. He also submitted that such a disproportionately high AMP violated FINTRAC’s principle of consistency, which required that reporting entities with the same types of non-compliance should be treated similarly. He pointed to other cases where much larger organizations had received AMPs for similar violations that constituted a much smaller proportion of their net income than was the case with the AMP proposed for the appellant. After noting the broad range of AMPs available for a breach of section 7 of the PCMLTFA (namely from $1 to $500,000), Mr. Redman wrote:

It is submitted that there is a reason why there is such a large range in the amount of an AMP that may be imposed. Specifically, the inclusion of such a broad range of AMPs in the AMP Regulations recognizes that one size does not fit all when it comes to AMPs and applying the principles of Section 73.11 of the PCMLTFA, the amount of each AMP must be considered on a case by case basis taking into account that an AMP is not meant to function as a penalty. It is submitted that because the AMP for a very serious violation can be as little as $1.00, there are appropriate instances where, given a regulated entity’s compliance history and financial position, a penalty at the lower end of the spectrum is appropriate. To find otherwise is contrary to the fundamental premise of statutory interpretation which provides that meaning must be given to every word in a statute. There is a range of penalties in the AMP Regulations for a reason: it is meant to take into account the unique circumstances of “each case” as dictated by Section 73.11 of the PCMLTFA. If this was not the statutory intent, then the range would start at a higher amount.

[50] On the basis of the foregoing, Mr. Redman submitted that the proposed AMP “is excessive in the circumstances and should be appropriately reduced to an amount that is not punitive and that is in keeping with the proportionality of fines charged to other regulated entities.”

III. DECISION UNDER REVIEW

[51] The Director found on a balance of probabilities that the appellant committed the violation alleged in the Notice of Violation. She imposed a reduced AMP of $156,750.

[52] In considering whether the appellant had violated the PCMLTFA, the Director reviewed the six indicators of money laundering set out in the notice (see paragraph 36, above). She applied the indicators to the series of transactions in question, finding that they provided reasonable grounds to suspect that the transactions related to the commission or attempted commission of a money laundering offence. The Director noted that, while the appellant had explained why it did not submit suspicious transaction reports at the time, FINTRAC had concluded that the appellant’s explanation “did not change the deficiency related to the failure to STRs [sic].” The Director observed that the PCMLTFA “does not set an exemption to an entity’s reporting requirements based on its belief that law enforcement and taxation authorities are already aware of suspicious activities.” Finally, the Director also noted that, in its representations, the appellant “does not contest” that it committed the violation alleged in the notice. The Director concluded: “Following my review of the facts and the indicators present for these transactions, I have determined on a balance of probabilities that Norwich committed this violation.”

[53] Turning to the appropriate penalty, the Director began by noting that, in determining whether to impose the proposed penalty, a lesser penalty or no penalty, she must apply the criteria set out in section 73.11 of the PCMLTFA and section 6 of the AMP Regulations – that is, she must consider the harm done by the violation, the appellant’s compliance history, and that the objective of the penalty is to encourage compliance rather than to punish.

[54] Regarding the harm done, the Director noted the appellant’s submission that the harm done was mitigated by the fact that Canadian authorities were already aware of the transactions in question and that the financial intelligence that would have been provided by suspicious transaction reports was already known to Canadian law enforcement. The Director rejected this submission for the following reasons:

FINTRAC’s STR Guide [the Harm Done Guide] states that the first category of major mitigating factors are a result of actions or measures taken by a reporting entity and not due to circumstances. In order to consider Norwich’s argument that Canadian law enforcement were already aware of the facts underlying to the transactions as a major mitigating factor, Norwich would have had to provide the information related to these transactions directly to Canadian law enforcement, which it did not. Therefore, a reduction of the base penalty amount for this violation is not applicable.

[55] On the other hand, the Director was prepared to consider as a minor mitigating factor the fact that the appellant had eventually reported the series of transactions in question on June 2, 2023. As a result, she reduced the proposed base penalty by $25,000 to $475,000, stating: “I consider that such a reduction appropriately takes into account the mitigation of the harm done by Norwich’s submission of the STRs after the transaction had been brought to Norwich’s attention by FINTRAC during the examination.”

[56] The Director then turned to the appellant’s compliance history and the non-punitive purpose of AMPs. The Director dealt with these factors together under a single heading. After noting the appellant’s submission that the disproportionately high proposed AMP would be punitive and would violate the principle of consistency (i.e. that similar reporting entities should be treated in a similar manner in relation to the same kinds of non-compliance), the Director wrote:

To this effect, I note that AMPs are assess [sic] in a consistent and fair manner, using the same criteria, based on the type of deficiency and the level or [sic] harm resulting from said deficiency. FINTRAC officers follow established policies and procedures to make sure that similar entities with the same types and extent of non-compliance can expect to be treated in a similar manner. The process and factors that go into calculating a proposed penalty are available on the FINTRAC website and were explained to Norwich in the Notice.

[57] The Director also rejected the appellant’s submission that the broad range of available penalties and the need to determine the appropriate penalty in light of the particular circumstances of the case at hand supported a significantly lower penalty than the one proposed in the notice. The Director wrote:

To this effect, I note that the publically available STR Guide cited by Norwich, clearly states that a level 1 violation garners a base penalty of $500,000. The guide explains that the maximum penalty of $500,000 is applied when a suspicious transaction is not reported, that no STR has been, after the examination, submitted to FINTRAC, and there is [sic] no other mitigating factors.

This situation is the worst scenario possible and poses the highest level of harm because FINTRAC does not have the information it needs to produce financial intelligence, achieve its mandate and contribute to the objectives of the Act. As there are no factors mitigating the risk of ML/TF, the unreported suspicious transactions, and risks and vulnerabilities to the financial system remain undetected.

[58] Despite the appellant’s submissions, the Director was satisfied that the proposed penalty (reduced by $25,000 to recognize the submission of the STRs as a minor mitigating factor) “adequately takes into account the criteria in section 73.11 of the Act and section 6 of the AMP Regulations.” The adjusted base penalty took into account the harm done by the violation. The approach set out in the Notice of Violation of “reducing [the] base penalty to 33% of the original amount adequately took into account Norwich’s history of compliance and the non-punitive nature of the penalty.” Accordingly, the Director imposed an administrative monetary penalty of $156,750.

IV. STANDARD OF REVIEW

[59] This is an appeal of the Director’s decision under section 73.21 of the PCMLTFA. That provision grants the appellant an unrestricted right of appeal against the AMP imposed by the Director.

[60] There is no dispute that, in the absence of any indication that Parliament intended otherwise, this Court should apply appellate standards of review to the Director’s decision: see Canada (Citizenship and Immigration) v Vavilov, 2019 SCC 65 at paras 36-37. That is to say, in considering questions of law raised by the appeal, including questions of statutory interpretation, the Court should apply the standard of correctness; it is free to replace the opinion of the Director with its own (Vavilov, at para 37; Housen v Nikolaisen, 2002 SCC 33 at para 8). In considering questions of fact or questions of mixed fact and law where a legal principle is not readily extricable, the Court should apply the standard of palpable and overriding error (Vavilov, at para 37; Housen, at paras 10, 19, and 26-37). This is a highly deferential standard of review (Benhaim v St‑Germain, 2016 SCC 48 at para 38). Questions of procedural fairness raised in this appeal are also subject to appellate standards of review (Law Society of Saskatchewan v Abrametz, 2022 SCC 29 at paras 28-29).

V. ANALYSIS

A. Introduction

[61] As set out above, the Notice of Violation alleged a single violation of section 7 of the PCMLTFA – namely, that the appellant had failed to report suspicious financial transactions that occurred between ||||||||||||||||||||||||||||||||||||||||||||||||||||. The notice alleged that there were |||| such transactions during this period: the |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||. Considering all |||| transactions together, the notice alleged that there were reasonable grounds to suspect that the transactions related to the commission or attempted commission of a money laundering offence and the appellant had failed to report them as required. Under subsection 9(2) of the STR Regulations, a suspicious transaction report was required within 30 days after the day on which the appellant “detect[ed]” facts that constituted reasonable grounds to suspect that the transactions were related to the commission or attempted commission of a money laundering offence (this provision has since been amended). The notice does not specify when the appellant allegedly detected such facts in relation to the transactions in question but the wording of the violation implies that this was at or around the time of the sales of the properties. The appellant accepted that this was the case. The appellant also accepted that, by failing to submit suspicious transaction reports within the required timeframe, it had violated section 7 of the PCMLTFA. The only point in dispute was the appropriate penalty.

[62] The appellant contends that the process followed by the Director in making her decision did not comply with the requirements of procedural fairness because the Director simply “rubber-stamped” the allegations and analysis set out in the Notice of Violation. The appellant also contends that the Director erred in her interpretation of the statutory provisions governing how the amount of an AMP should be determined, that she fettered her discretion, and that she failed to take relevant factors into account when determining the appropriate AMP in this case.

[63] As I have already stated, I agree with the appellant that the substance of the Director’s decision on penalty rests on reviewable errors. On the other hand, I am not persuaded that the process by which the decision was made breached the requirements of procedural fairness. I will deal with the procedural fairness issue first before turning to the substantive flaws in the decision.

B. Did the Director breach the requirements of procedural fairness?

[64] Some additional background is necessary to put this ground of appeal in context.

[65] As set out above, FINTRAC issued the Notice of Violation on May 9, 2023. The appellant responded to the notice by letter dated June 5, 2023. As well, on June 2, 2023, the appellant submitted two STRs in relation to the transactions in question.

[66] On August 23, 2023, FINTRAC’s Review and Appeal Unit (RAU) submitted a memorandum for decision to the Director. The memorandum recommended maintaining the violation alleged and imposing a revised penalty of $156,750 because the fact that the appellant had eventually submitted suspicious transaction reports should be considered a minor mitigating factor. On August 24, 2023, a proposed notice of decision (including reasons for the decision) was completed. On August 25, 2023, the RAU provided its final recommendation to the Director. That same day, the decision was signed on behalf of the Director and issued to the appellant.

[67] The salient point for present purposes is that the reasons set out in the August 24, 2023, proposed notice of decision and in the Director’s August 25, 2023, decision are identical. As well, both draw substantially from the analysis and recommendations prepared earlier by the RAU. Moreover, in all the documents, the determination of the appropriate penalty follows exactly the same methodology described in the Notice of Violation (although a lower penalty was ultimately recommended by the RAU and approved by the Director).

[68] The appellant submits that the decision fails to comply with the requirements of procedural fairness because the Director effectively repeats the reasoning in the Notice of Violation without proper consideration of any of the arguments it had advanced in response to the notice. According to the appellant, it was denied a fair hearing and “a true opportunity to be heard.”

[69] I do not agree.

[70] In order to ensure that the appellant knew the case it had to meet, the Notice of Violation set out the relevant facts and FINTRAC’s analysis in commendable detail. As well, in the interests of consistent and transparent decision making concerning the appropriate penalty for a given violation, FINTRAC has established a methodology for making that determination. This methodology is described in public documents prepared by FINTRAC, including the Harm Done Guide, cited above. It is described and applied in the Notice of Violation served on the appellant. It is also described and applied in the Director’s decision.

[71] In my view, it was entirely proper for the Director to follow FINTRAC’s established methodology in determining the appropriate penalty; indeed, for her to have done otherwise would defeat the very purpose of having an established and publicly-available methodology. As discussed below, there are reasons to question whether the methodology is consistent with the governing statutory scheme and whether it was applied reasonably in this case; however, these are not issues of procedural fairness. Furthermore, that the appellant’s representations were taken into account is demonstrated by the fact that the base penalty was reduced from the one stated in the Notice of Violation in order to take into account that the appellant had eventually submitted suspicious transaction reports. As well, the Director’s decision addresses the appellant’s other representations directly. To the extent that those representations failed to persuade the Director to impose a lower penalty than had been recommended to her by the RAU, as will be discussed below, this was due to errors in the Director’s understanding and application of the AMP scheme, not because the appellant was denied “a true opportunity to be heard.”

[72] Likewise, I am not persuaded that the short turnaround time (less than one day) between the RAU’s final recommendation and the Director’s decision suggests that the Director simply rubber-stamped the RAU’s recommendation and did not give the matter due consideration, as the appellant contends.

[73] It is well established that an administrative decision maker like the Director is not required to personally perform all the tasks conferred on them by the law; they can rely on their staff to undertake an initial review and to prepare a file for a decision, among other duties: see Violator no. 10 v Canada (Attorney General), 2018 FCA 150 at paras 41-42; and Château d’Ivoire Stores Inc v Canada (Attorney General), 2022 FC 405 at para 41. As Justice Pamel (then a member of the Federal Court) observed in Château d’Ivoire Stores in response to an argument very similar to the one advanced here, “The fact that staff members prepared a memorandum and recommendations for the Director based upon their review of the file and included a draft Notice of Decision for the Director to consider does not necessarily lead to the conclusion that the Director divested herself of final decision-making authority” (at para 25).

[74] The Supreme Court of Canada held in Law Society of Saskatchewan v Abrametz, 2022 SCC 29, that inordinate delay in administrative proceedings is contrary to the interests of society; decisions by administrative decision makers “need to be rendered promptly and efficiently” (at para 46). The Director should not be faulted for dealing with the matter promptly once it was brought to her for a decision. What is essential “is that the person designated to make a decision or his or her delegate personally consider the file and adopt the recommendations that have been made” (Violator no. 10, at para 43). The appellant has not established any reason to think that this did not occur in the present case.

C. Did the Director err in her understanding and application of the AMP scheme?

[75] I agree with the appellant that the Director’s understanding and application of the AMP scheme under the PCMLTFA and related regulations is flawed in two key respects: in how she considered the non-punitive purpose of penalties under the Act and in her assessment of the harm done by the violation. While these errors are intertwined in the Director’s decision, it is helpful to examine them separately.

(1) Non-punitive purpose

[76] As previously stated, by the combined operation of section 73.11 of the PCMLTFA and section 6 of the AMP Regulations, in determining the amount of the penalty to impose on the appellant, the Director was required to take three things into account: first, “that penalties have as their purpose to encourage compliance with this Act rather than to punish;” second, the harm done by the violation; and third, the appellant’s history of compliance with the Act and related regulations.

[77] As was done in the Notice of Violation, the Director determined the appropriate penalty by following a two-step process. First, she determined the base penalty in light of the harm done. Then, she made an adjustment to the base penalty in light of the appellant’s compliance history and the non-punitive purpose of an AMP under the Act. The only adjustment she made on this basis, however, was a reduction of the penalty to one-third of the base penalty. The Director stated: “I find that the Notice’s approach of reducing this base penalty to 33% of the original amount adequately took into account Norwich’s history of compliance and the non-punitive nature of the penalty.”

[78] The appellant submits that the Director has conflated two factors that the Act requires her to consider separately. The appellant’s history of compliance and the non-punitive purpose of the penalty are distinct considerations under the statutory scheme and it was an error of law for the Director to make a single adjustment of the base penalty to account for both factors. I agree.

[79] As we have seen, under FINTRAC’s standard methodology (which the Director also followed), the second step of the penalty calculation consists of a single adjustment to the base penalty, depending on compliance history: the base penalty is reduced by two-thirds in the case of a first violation, it is reduced by one-third in the case of a second violation, and it is not reduced at all in the case of a third or subsequent violation. Assuming without deciding that this is a reasonable way to take compliance history into account, it was an error for the Director to fail to give separate consideration to the non-punitive purpose of the penalty, as section 73.11 of the Act requires, after making an appropriate adjustment based on compliance history. The Director simply asserts, without any supporting analysis, that the adjustment to one-third of the base penalty applied in the appellant’s case “adequately took into account” both the appellant’s history of compliance and the non-punitive purpose of the penalty.

[80] In so concluding, the Director failed to consider whether the adjusted penalty was actually necessary to encourage compliance with the Act or whether a lower penalty would be sufficient to meet this objective. A penalty that exceeds what is necessary to meet the objective of encouraging compliance is inconsistent with section 73.11 of the Act and may well be punitive, which would also be contrary to section 73.11 (Guindon v Canada, 2015 SCC 41 at paras 75-77). What is necessary to encourage compliance must be determined in light of all the circumstances of the case, including why the violation occurred, the violator’s insights into what it did wrong, and whether the violator had taken meaningful steps to ensure that a similar violation does not happen again. All of these factors were present in the appellant’s case but the Director did not consider them in any way. Instead, she relied entirely on the adjustment based on the appellant’s compliance history, which is a separate factor, in concluding that the penalty is not punitive. She failed to give meaningful – or, indeed, any – consideration to what is necessary to encourage compliance with the Act, a factor she was required to consider in its own right under section 73.11. This is an error of law warranting the Court’s intervention.

[81] Before leaving this point, I would note that the appellant also submits that the Director erred by imposing a penalty that was so large relative to the appellant’s net earnings as to have a punitive effect on the appellant, contrary to section 73.11 of the Act. This is a question of mixed fact and law and the appellant has not established a palpable and overriding error in this regard. Importantly, the Director did not dispute the legal premise of the appellant’s submissions: that the impact on the appellant of the penalty imposed must not be so great as to have a punitive effect. While the appellant’s concerns about the size of the penalty are understandable, and while the Director could certainly have said more to explain why she was satisfied, on the information before her, that the penalty she imposed did not have such an impact on the appellant as to become punitive, the appellant has not established that this aspect of the decision gives rise to a reviewable error.

(2) The harm done

[82] In determining the appropriate penalty, the Director began by considering the harm done by the violation (the first step in FINTRAC’s standard methodology, as discussed above). According to the Harm Done Guide, the failure to report a suspicious transaction is classified as a Level 1 harm (the highest level of harm) because there has been a “Complete loss of financial intelligence – report is not available and cannot be used for analysis.” FINTRAC has determined that this level of harm should attract the maximum available penalty ($500,000) as the base penalty prior to considering mitigating factors. As the Harm Done Guide puts it, this is “the worst scenario and poses the highest level of harm.” Likewise, the notice asserted that the failure to submit a suspicious transaction report “is the most severe case of non-compliance.” The Director adopted this view, finding that the maximum available penalty is the appropriate starting point in this case. She then found that the fact that the appellant had eventually submitted suspicious transaction reports was a minor mitigating factor that warranted reducing the base penalty to $475,000. On the other hand, the Director rejected the appellant’s submission that the fact that Canadian authorities had already identified the properties as potentially related to money laundering by the time the appellant would have had reasonable grounds to suspect that this was the case should be considered a significant mitigating factor when assessing the harm done by the failure to report the transactions. The appellant submits that the Director fell into reviewable error in concluding that this circumstance was not a mitigating factor.

[83] I agree.

[84] FINTRAC defines “harm” as the degree to which a violation interferes with achieving the objectives of Part 3 of the Act, which is the part of the Act that established FINTRAC. As stated in section 40 of the Act, the object of Part 3 is to establish an agency with various duties and functions. Among those duties and functions is to collect, analyse, assess and disclose information “in order to assist in the detection, prevention and deterrence of money laundering and of the financing of terrorist activities” (PCMLTFA, paragraph 40(b)). This is an objective determination.

[85] FINTRAC’s methodology, which the Director followed, begins with the presumption that a failure to report a suspicious transaction results in a complete loss of financial intelligence, the risk of money laundering will go undetected, and the maximum penalty should therefore be the starting point for the calculation of the appropriate penalty. As it must, FINTRAC also recognizes that this presumption may not be correct in a given case. It recognizes that circumstances can be present, whether as a result of the actions of the reporting entity or otherwise, that mitigate or lessen the actual harm done in a given case.

[86] On the unusual facts of this case, the degree to which FINTRAC’s mandate or the objectives of the Act were actually frustrated by the appellant’s failure to submit suspicious transaction reports was an open question given that law enforcement was already well aware of the transactions in question and their potential link to money laundering and had taken steps to seize the properties. The Director did not consider this to be a mitigating factor, however, because, in her view, “In order to consider Norwich’s argument that Canadian law enforcement were already aware of the facts underlying to [sic] the transactions as a major mitigating factor, Norwich would have had to provide the information related to these transactions directly to Canadian law enforcement, which it did not.”

[87] This precondition is not found in the Act or in the Regulations. Rather, the Director derives it from a policy document, the Harm Done Guide. There, as discussed above, a distinction is drawn between mitigating factors present as a result of actions taken by the reporting entity and mitigating factors present “due to circumstances, the transaction and/or the client.” For reasons that are not entirely clear from the document, FINTRAC appears to consider that major mitigating factors (i.e. factors that warrant a reduction of the base penalty by $75,000) can only stem from actions taken by the reporting entity while factors present due to circumstances, the transaction, and/or the client can only ever be minor mitigating factors, which only warrant a reduction of the base penalty by $25,000.

[88] One example of a major mitigating factor offered in the Harm Done Guide is where the reporting entity provided important information directly to law enforcement. The Director is correct that a major mitigating factor of this sort was not present here because the appellant did not share any information with law enforcement. However, the appellant’s point was that law enforcement authorities already knew about the transactions and this fact demonstrates that there had not been a complete loss of financial intelligence. Indeed, according to the appellant, it was far from clear what additional financial intelligence would have been gained if the reports had been submitted, given what the authorities already knew about the transactions. The important point was not that the appellant had alerted law enforcement about the transactions (it did not do so) but that law enforcement already knew about them through their own efforts and this potentially reduced the harm resulting from the appellant’s failure to report the transactions to FINTRAC.

[89] The Director does not explain why the fact that law enforcement authorities were well aware of the transactions by the time the appellant (according to FINTRAC) should have submitted suspicious transaction reports would not be considered even a minor mitigating factor arising from the circumstances, the transaction, and/or the client. Nor does she explain why the fact that law enforcement authorities were already aware of the transactions could not be considered a major mitigating factor even in cases where it was not the reporting entity that had alerted them. While this particular circumstance is not mentioned in the Harm Done Guide, the guide states that the factors it identifies “are given as examples but do not constitute a complete list.”

[90] Instead of following this guidance, the Director appears to have treated the examples as an exhaustive catalogue of pigeonholes into which a given circumstance must fit if it is to be considered a mitigating factor. I agree with the appellant that, in determining the harm actually done by the appellant’s failure to submit suspicious transaction reports, the Director fettered her discretion and failed to consider relevant factors (Maple Lodge Farms Ltd v Government of Canada, [1982] 2 S.C.R. 2 at 6-7; Kanthasamy v Canada (Citizenship and Immigration), 2015 SCC 61 at para 32). This is an error warranting the Court’s intervention.

D. Should the Court vary the penalty?

[91] The flaws in the Director’s decision identified above entail that the penalty the Director imposed on the appellant cannot stand. The appellant submits that the Court should vary the penalty imposed. As noted earlier, the Court has the power to do so under subsection 73.21(5) of the PCMLTFA. I am not satisfied, however, that it would be appropriate to do so in this case.

[92] The appellant submits that the appropriate penalty would be $24,750. It arrives at this figure as follows:

• a)For an entity with net revenue in the range of the appellant’s, the starting point base penalty for a Level 1 violation should be $200,000.

• b)Given that the harm done was almost entirely mitigated by the prior involvement of law enforcement, the base penalty should be reduced by 50% or $100,000.

• c)Further mitigation should be recognized for the appellant having eventually submitted suspicious transaction reports by reducing the base penalty by a further $25,000 (as the Director also did).

• d)Following FINTRAC’s usual methodology, the resulting base penalty ($75,000) should then be reduced by two-thirds given the appellant’s compliance history (this was the appellant’s first failure to report).

• e)This results in a penalty of $24,750.

[93] For the following reasons, I am not persuaded that this is an appropriate case to vary the penalty rather than remit the matter for redetermination by the Director.

[94] First, the lower starting point suggested by the appellant may go some way to ensuring that the penalty is not punitive but the choice of starting point is more a matter of policy than law. The Director would be in a much better position than the Court could ever be to decide whether there should be different starting points for Level 1 harms depending on the size of the reporting entity and, if so, what those starting points should be.

[95] Second, for the reasons stated above, the Director erred in failing to consider whether the prior involvement of law enforcement should, in and of itself, constitute a mitigating factor in this case. In its penalty calculation, however, the appellant goes further and posits that this should be considered a major mitigating factor and that it should warrant the reduction of a base penalty by 50%. These are questions of policy, not law. Again, the Director would be in a much better position to evaluate the soundness of the appellant’s approach to this factor than the Court could ever be.

[96] Third, I am not aware of any specific guidance in the jurisprudence concerning when the Court should exercise its power to vary a penalty imposed by the Director. As a result, one must be guided by general principles. A key consideration is the need to respect Parliament’s institutional design choices (Vavilov, at para 36). While Parliament has given the Court the power to vary a decision of the Director (including, obviously, a penalty imposed), it is also the case that Parliament gave the Director primary responsibility for determining penalties for violations of the PCMLTFA. The Court is meant to play an appellate role, not the role of first-instance decision maker. These institutional design choices suggest that the Court should exercise circumspection before pre-empting the Director’s determination of the appropriate penalty in a given case.

[97] Finally, while I can understand why the appellant would want to know without further delay the amount of the penalty it must pay, in the circumstances of this case, I do not consider this factor to be sufficient to outweigh the concerns I have just outlined.

[98] In my view, it would exceed the Court’s proper role to vary the penalty imposed by the Director, as the appellant suggests. Rather, the matter of the appropriate penalty should be remitted to the Director for redetermination in accordance with these reasons.

VI. CONCLUSION

[99] For these reasons, the appeal will be allowed. The administrative monetary penalty imposed by the Director will be set aside and the matter of the appropriate penalty will be remitted to the Director for redetermination in accordance with these reasons.

[100] The parties agreed that the successful party should be awarded costs in the all-inclusive amount of $7,500.

JUDGMENT IN T-2021-23

THIS COURT’S JUDGMENT is that

1. The appeal is allowed.

2. The administrative monetary penalty imposed by the Director is set aside and the matter is remitted to the Director for redetermination in accordance with these reasons.

3. Costs are awarded to the appellant in the all-inclusive amount of $7,500.

“John Norris”

FEDERAL COURT

SOLICITORS OF RECORD

DOCKET:	T-2021-23
STYLE OF CAUSE:	NORWICH REAL ESTATE SERVICES INC, DBA RE/MAX KELOWNA v FINANCIAL TRANSACTIONS AND REPORTS ANALYSIS CENTRE OF CANADA
PLACE OF HEARING:	Toronto, Ontario
DATE OF HEARING:	June 11, 2024
CONFIDENTIAL JUDGMENT AND REASONS:	NORRIS J.
DATED:	December 10, 2024

APPEARANCES:

Iris Fischer Laura Dougan Sara Bolourchian	For The AppELLANT
Asad Moten Adam Feldman	For The Respondent

SOLICITORS OF RECORD:

Blake, Cassels & Graydon LLP Barristers & Solicitors Toronto, Ontario	For The AppELLANT
Attorney General of Canada Toronto, Ontario	For The Respondent