Canada has had legislation in place to detect and deter money
laundering since 1991. Contrary to what some may expect, the
legislation (which has been amended several times over the last 24
years or so) applies (rightly) only to "reporting
entities" and not all business entities or
The reporting entities include what one would typically expect
to be covered by anti-money laundering (AML) legislation (e.g.,
financial institutions, money services businesses, casinos, etc.).
However, certain types of businesses may become subject to the AML
legislation as "reporting entities" even though there is
no useful purpose for such businesses to comply with the
For example, dealers in precious metals and stones are subject
to AML legislation. The rationale for this application is that some
criminals use precious metals and gems to launder money. A dealer
in precious metals and stones means an individual or an entity that
buys or sells precious metals, precious stones or jewellery in the
course of its business activities. A dealer becomes subject to the
Canadian legal requirements if it ever engages in the purchase or
sale of precious metals, precious stones or jewellery in an amount
of $10,000 or more in a single transaction. Precious metals
include gold, silver, palladium or platinum whether in coins, bars,
ingots, granules or in any other similar form. Precious
stones include diamonds, sapphires, emeralds, tanzanite, rubies or
alexandrite. Jewellery includes items made of precious metals,
precious stones or pearls intended for personal adornment, such as
earrings, bracelets, rings, necklaces, brooches, watches, etc.
Although there are legitimate reasons for requiring dealers in
precious metals and stones to comply with Canadian AML legislation,
the definition of dealers in precious metals and stones is so broad
that it could include manufacturers who use certain precious metals
in their manufacturing processes for industrial purposes only and
have no dealings with consumers or the public at large in respect
of such precious metals. In the United States, there is an
industrial use exemption for such manufacturers. In Canada,
however, there is currently no such exemption for industrial
manufacturers. There are exemptions for jewellery manufacturers but
oddly if you are a manufacturer of industrial products and use
precious metals in your production and cross the $10,000 monetary
threshold (which most manufactures of any significant size would
easily cross), you would become subject to the Canadian AML
Being subject to Canadian AML legislation means that, in
addition to having to comply with the reporting, record-keeping and
client identification requirements, you are also required to have
in place a compliance regime that meets the requirements under the
Canadian AML legislation.
Until the Canadian AML legislation is amended to include an
industrial use exemption similar to what is available in the United
States, any manufacturers who use precious metals or stones will
need to comply with the current requirements under the Canadian AML
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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