Financial services firms must not cut back on their efforts to fight money laundering despite the recession and the pressure to reduce expenses, regulators say.

Speaking to an information session on the fight against money laundering and terrorism financing in Toronto on Wednesday, Nicolas Burbidge, senior director, compliance division of the Office of the Superintendent of Financial Institutions, noted that the financial services industry has made progress in recent years against money laundering, but, he pointed out that “as cash has become harder to launder, criminals have become more creative in their efforts.”

Moreover, he noted that the financial crisis and the economic downturn have impacted the financial sector: “We understand the pressures on management to perform and to reduce expenses, but this should not occur at the expense of your anti-money laundering and anti-financing financing program. Your controls, and financial intelligence provided to FINTRAC, are critically important for the continued fight against financial crime, and the integrity of the Canadian and global financial systems.”

Burbidge said that “it is vital that Canada’s financial system continue to be seen as taking all the steps necessary to deter criminal elements that may seek to use the Canadian financial system for their own ends.”

That includes a commitment to the fight from the private sector.

Important changes were made to Canada’s anti-money laundering regime in 2008, he noted, but some firms haven’t adopted all the necessary changes.

“Although many financial institutions have now developed adequate plans to implement these changes, other institutions are still lagging in some key areas. We have had to underline the need for these institutions to apply adequate resources, controls and procedures to ensure effective compliance can be achieved. We will continue to take action as needed in this area,” he said.

A requirement for financial institutions to develop an inherent risk methodology, which enables them to identify situations that are at higher risk for money laundering and terrorism financing, is one of the biggest changes Burbidge noted. And, he reported that OSFI’s work “indicates that many financial institutions, large and small, are challenged by this requirement.”

He added: “It is critical to the success of the risk-based approach in your AML/ATF program that the assessment of money laundering and terrorism financing risk gets done right. The required controls flow from the assessment of risk, and if risks are not adequately identified, then controls are likely to be weak.”