Canada: FATF Mutual Evaluation Of Canada Report Released

Last Updated: September 22 2016
Article by Sharissa Ellyn and John Jason

Most Read Contributor in Canada, December 2017

On September 15th, the Financial Action Task Force (FATF) released its Mutual Evaluation Report (Report) of Canada's measures for combatting anti-money laundering (AML) and the financing of terrorism (CFT).  FATF is an international organization originally formed by the G-7 countries in 1989.  FATF has developed 40 Recommendations for measures that countries should take to combat money laundering.  Part of its mandate is to conduct peer reviews of the progress being made by its members in implementing the 40 Recommendations.  The report issued on September 15th follows an on-site visit by the International Monetary Fund conducted in November 2015.  The Report concludes that Canada has a strong anti-money laundering and anti-terrorist financing regime that achieves good results in some areas.  However, the report also states that further improvements are required for the regime to be fully effective.

Under FATF's assessment methodology, a country's systems are assessed both for their technical compliance with the 40 Recommendations and for their effectiveness in mitigating the risks and threats of money laundering, and financing of terrorism and proliferation of weapons of mass destruction.  With respect to technical compliance with the 40 Recommendations, Canada was rated as "compliant" (the best rating) or "largely compliant" with respect to 27 Recommendations, "partially compliant" with respect to six Recommendations" and "non-compliant" with respect to three Recommendations.  The effectiveness of Canada's efforts was rated "substantial" (its highest rating) in five of FATF's assessment areas, "moderate" in five and "low" (its lowest rating) in one assessment area.

The Report may lead to regulatory changes in order to address the gaps identified and to implement its recommendations.  As such, it may have significant implications for various sectors of Canada's economy, including banking, insurance, real estate, money transfer and other businesses and professions that facilitate financial transactions.  Some of the key recommendations, findings and observations discussed in the report are summarized below.  We have focused on those findings that will be of most interest to providers of financial services.

Key Findings, Recommendations and Observations

FinTRAC's Powers

FinTRAC should be authorized to request and obtain from any reporting entity (RE) further information related to suspicions of money laundering and terrorist financing.  Currently, FinTRAC is largely dependent on what is reported to it and does not have the ability to request additional information (beyond asking for clarification and completion of missing information).

Gaps in the Regime

All high-risk areas are covered by Canada's AML/CFT regime, except for the legal profession, online casinos, open loop prepaid cards and white label ATMs.  FATF believes that the AML/CFT regime should be extended to apply to open loop prepaid cards (including those provided by non-FIs), factoring companies, leasing and financing companies, check cashing businesses, unregulated mortgage lenders, online gambling, and virtual currencies.  Legislative steps have already been taken with respect to online gambling, open loop prepaid cards and virtual currencies.


FATF concluded that financial institutions (FIs) have a good understanding of their risks and obligations, but that this is not true for designated non-financial businesses and professions (DNFBPs) (including for example, accountants and real estate brokers).  FATF believes that Canada should consider introducing a licensing regime or other controls for DNFBPs.

Life Insurance Companies

FATF found that the life insurance sector appears to underestimate the level of risk that it faces and that provincially regulated insurance companies appear to have a weaker understanding of their ML/TF risk than federally regulated companies.  FATF also found that provincially regulated companies appear to be resistant to improving their compliance.

Supervision and Enforcement

FATF recommended that Canada increase its efforts to detect, pursue and bring before the courts cases of ML related to high-risk predicate offenses other than drugs and fraud (such as corruption and smuggling) as well as third-party ML, self-laundering, laundering of proceeds of crimes committed outside of Canada and the misuse of legal persons and trusts in ML activities.

FATF also believes that the sanctioning regime for breaches of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) has not been applied in a proportionate and/or sufficiently dissuasive manner.

Transparency of Legal Persons and Arrangements

FATF found that Canadian legal entities and legal arrangements are at a high risk of misuse for money laundering and terrorist financing purposes and this risk is not mitigated, especially in the case of nominee shareholding arrangements.  FATF felt that there is an undue reliance by FI's on customers' self-declarations for the purpose of confirming beneficial ownership and that FinTRAC and/or the Government of Canada should ensure compliance by all FIs with the requirement to confirm the accuracy of beneficial ownership information.

FATF Recommendations 24 and 25 address the use of legal persons (corporations) and legal arrangements (trusts) as vehicles for money laundering and terrorist financing stemming from the potential to use them as a means of hiding or obscuring the true beneficiary of a financial transaction. Under the Recommendations, countries are to ensure that adequate, accurate and timely information on beneficial ownership can be obtained by competent authorities.

Currently, no are no public registers that collect beneficial ownership information.  However, under the PCMLTFA, certain financial entities are required to obtain this information when opening and account for a company or trust.  In the absence of a public register of beneficial ownership information, the financial entities have no independent source for verification of the information provided by their customers.  FATF noted that law enforcement agencies can generally obtain this information but not necessarily on a timely basis.

The concern about the misuse of legal entities was exacerbated to some extent, in FATF's view, by the fact that lawyers are not currently subject to Canada's regime as often they are involved in the creation of corporate structures and could be a valuable source of beneficial ownership information.

In FATF's opinion, the lack of effectiveness for mitigating the risk associated with the use of legal persons and arrangements warranted a low effectiveness rating, and only a partially compliant rating for Recommendation 24 and a non-compliant rating for Recommendation 25.

Additional Guidance Needed

FATF believes that FinTRAC should issue further guidance (especially to non-FIs) regarding the new requirements relating to domestic politically exposed persons and should strengthen its feedback to small banks and the insurance sector on the use of suspicious transaction reports.

Guidance should also be provided to all REs to facilitate the detection of misuse of open-loop prepaid cards in ML and TF schemes.

Pending Legal Developments

Canada's Assessment of the Inherent Risks of Money Laundering and Terrorist Financing (published by the Department of Finance in July 2015 and which FATF refers to as the National Risk Assessment or NRA) will be updated this Fall to identify and prioritize actions to mitigate the residual risk (this is the risk remaining after considering the strength of Canada's AML and CTF regimes).  This may lead to additional legislative and/or regulatory amendments.

A second package of regulatory amendments expected to be released this Fall will include measures to address prepaid payment products, virtual currencies and MSBs without a physical presence in Canada.

About Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global law firm. We provide the world's preeminent corporations and financial institutions with a full business law service. We have 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

For more information about Norton Rose Fulbright, see

Law around the world

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions