One of Budget 2014's aims is to take the profit out of
crime. It fortifies anti-money-laundering (AML) measures and
enhances transparency of corporate ownership so criminals (and
would-be tax evaders) can't hide. It also targets terrorists by
improving our economic sanctions program and implementing measures
to prevent misuse of charities.
Canada's AML regime has been amended several times over the
last five years. The changes have imposed additional burdens on
banks, credit unions, insurers and securities dealers to conduct
ongoing transaction monitoring and client identification updates.
They also require more diligence in obtaining and retaining fresh
evidence on ultimate ownership and control of accounts clients
Budget 2014 promises amendments that are likely based on
consultations held in December 2011. They'll align our rules
with new international and sanctions standards standards, and
coordinate with new corporate transparency measures.
In response to international pressure and money laundering risks,
the budget also proposes expanding AML obligations to virtual
currencies and online casinos. Virtual currencies, such as
Bitcoins, haven't been subject to Canada's regulations
because they haven't been recognized as a currency.
Canada also wants to commit more funding to financial intelligence
by upping FINTRAC's budget by $2.2 million per year, and
allocating an additional $22.5 million to implement legislative
changes and improve analytical abilities.
Transparency in corporate ownership
Governments around the world are focused on tax compliance through
information sharing and transparency in corporate ownership. To
that end, Canada's already begun a consultation on making
public the (human) beneficial owners of federal corporations. In
addition, Canada's committed to considering a ban on bearer
instruments. These are shares and debt instruments that aren't
ascribed to a specific person; instead, ownership is based on
It's significant for entities with AML responsibilities because
regulations that came into force on February 1, 2014 obligates them
to collect and take steps to verify the beneficial ownership of
Economic sanctions Financial institutions have long lamented that
Canada's economic and terrorist sanctions lists are difficult
to act upon, partly because there are nine overlapping lists that
must be collected from five different websites. Additionally, the
data quality and formatting is sub-par. The government's been
examining the issue for years; the budget commits to adopting
administrative measures to improve the effectiveness of the
financial sanctions regime. But there's no mention of specific
measures, such as a consolidated list or screening tool.
Charities and terrorism
Terrorist abuse of Canadian charities is well-documented. To combat
it, the budget proposes giving the Minister of National Revenue
powers to control the charitable status of those receiving support
from state sponsors of terrorism. CRA has committed to helping
charities (and hopefully financial institutions as well) by
providing due diligence best practices for accepting gifts and
preventing terrorist abuse.
Note: This article was originally posted onAdvisor.ca
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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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