On February 13, 2013, the Government of Canada published in the
Canada Gazette certain amendments to the Proceeds of Crime (Money
Laundering) and Terrorist Financing Regulations (the Regulations).
These amendments will come into force one year after their
publication (i.e., in February 2014).
The full text of the amendments can be found here. In summary, these amendments (a version
of which was previously published in October 2012 for comment) are
meant to address certain deficiencies identified by the Financial
Action Task Force (FATF) in the customer identification and due
diligence provisions of the Regulations. FATF is the international
body that sets standards for anti-money laundering and
anti-terrorist financing (AML/ATF) activities. Canada is a founding
member of the FATF. In its 2008 evaluation of Canada, FATF
identified deficiencies in Canada's requirements relating to
customer identification and due diligence, and Canada was found to
be non-compliant with FATF Recommendation 5. The stated purposes of
the amendments are: to ensure that Canadian reporting entities
clearly understand their customer due diligence (CDD) obligations;
to improve Canada's compliance with Recommendation 5; and to
promote the continuing strength of Canada's AML/ATF regime.
The amendments to the Regulations make the following
clarifications to the CDD provisions of the Regulations:
The term "business relationship" will now be defined
in the Regulations. The Regulations will also be amended to clarify
that, in order to meet their obligations to identify and report
suspicious transactions, reporting entities should conduct ongoing
monitoring of business relationships with clients, using a
risk-based approach, and should obtain information concerning the
purpose of a business relationship when entering into a business
relationship with a client.
The circumstances in which reporting entities should take
enhanced CDD measures in respect of high-risk customers, activities
or transactions will be clarified to clearly indicate that enhanced
measures should be taken in respect of all high-risk clients and
activities, and a list of enhanced measures from which reporting
entities can choose will be added. The measures include keeping
client information up to date and conducting enhanced ongoing
The Regulations require certain reporting entities to obtain
identification information, in designated circumstances, from all
persons who own 25% or more of a corporation or entity. The
amendments specifically clarify that those reporting entities
should also obtain documentary evidence from the client that
confirms the beneficial ownership information that they have
The Regulations will be amended to clarify that no exceptions
exist to reporting entities' current obligations to conduct CDD
measures in respect of any transaction or activity which gives rise
to a suspicion of money laundering or terrorist financing.
Before these amendments to the Regulations come into force, the
Financial Transactions and Reports Analysis Centre of Canada
(Canada's financial intelligence unit) and the Office of the
Superintendent of Financial Institutions (responsible for
administering the federal financial institutions statutes in
Canada) will provide updated guidance in order to address the
comments provided by stakeholders on the previous version of these
amendments published in October 2012.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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On December 19, 2016 the Government of Canada released its much anticipated guidelines on the national security review of investments under the Investment Canada Act (the "National Security Guidelines").
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