New Regulations Amending Canadian Anti-Money Laundering
As reported in our October 2012 Blakes Bulletin, amendments to the general regulations
under the Proceeds of Crime (Money Laundering) and Terrorist
FinancingRegulations (the Revised Regulations) were
published in final form in the Canada Gazette, Part II on February 13, 2013. The
Revised Regulations will become effective on January 31, 2014.
It is hoped that the one-year implementation period will provide
regulated institutions with sufficient time to update their AML/ATF
policies and modify their systems to address the new monitoring and
record keeping requirements set out in the Revised Regulations. The
content of the Revised Regulations remains substantially unchanged
from the version released in October 2012 (discussed in our
bulletin), with the following exceptions:
1. As noted in our bulletin, the Regulations introduce the
concept of a "business relationship" and provide that
once a business relationship is established, regulated entities
will be required to conduct ongoing monitoring of the business
relationship. The original Regulations provided certain exemptions
from the scope of a business relationship (and thus exemptions from
the requirement to conduct ongoing monitoring). One of these
exemptions included circumstances where a client already had an
account with a financial entity, securities dealer or casino.
The result of this exclusion was to effectively exempt all
existing account holders of these regulated entities from
the ongoing monitoring requirements. This oversight has been
corrected in the Revised Regulations and there is no longer an
exemption for ongoing monitoring of existing client
However, it is interesting to note that one of the exemptions
from the definition of "business relationship" which
remains in the Revised Regulations is the opening of a business
account by a financial entity, securities dealer or casino
where the identity of at least three persons who are authorized to
give instructions in respect of the account has been
Given that the Regulatory Impact Analysis Statement accompanying
the Revised Regulations specifically provides that existing
accounts are in fact subject to the definition of a
business relationship, it is difficult to understand how the
exemption for business accounts remains in place as, on its face,
it seems to imply that all business accounts are exempt. However,
it is more likely that this exclusion is meant to apply on
"account opening" so that the obligation to monitor (and
the business relationship) does not occur immediately on the
opening of the account, but instead thereafter once any
transactions or other activity is undertaken.
2. The Revised Regulations clarify that regulated entities are
required to keep up-to-date records in respect of the
purpose and intended nature of the business relationship between
the regulated entity and their client. Previously there was only a
requirement to maintain the record but not to keep it updated.
3.The Revised Regulations also clarify that the requirement to
obtain beneficial ownership information and to conduct ongoing
monitoring does not apply in respect of a group plan account held
with a dividend reinvestment plan or a distribution reinvestment
plan, where the plan sponsor is an entity whose shares or units are
traded on a Canadian stock exchange and operates in a country that
is a member of the Financial Action Task Force. This amendment was
added to minimize the application of the Revised Regulations to
lower risk accounts.
Other than the foregoing, the Revised Regulations have been
released in the form discussed in the previous bulletin. As noted,
these Revised Regulations will come into force on January 31,
In response to the Revised Regulations, the Department of
Finance has indicated that both FinTrac and OSFI will publish
updated guidance. It is hoped that this guidance will provide more
instruction on the expectations of the Regulators in respect of
business relationships and the ongoing monitoring requirements.
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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