Registered dealers and advisers are well versed in the AML requirements contained in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The federal Department of Finance has recently released proposed amendments to regulations under the Act that would impact certain non-financial institution entities, including mortgage brokers, mortgage lenders and mortgage administrators.
The proposed amendments are a result of a number of studies and recommendations relating to the increased risk of money laundering in the real estate sector. A number of AML obligations, such as developing a compliance program, gathering prescribed KYC information (including beneficial ownership), keeping records, suspicious transaction reporting and monthly AML reports, would then apply. Penalties similar to those imposed on other sectors would also apply, which would range based on the harm done and the entity's history of compliance. For example, the range of penalty for a very serious violation would be from $1-$500,000 per violation for an entity.
If adopted, the amendments would come into force 8 months after their publication in the Canada Gazette, Part II. FINTRAC would be expected to release additional guidance specific to the mortgage industry to assist with interpretation of the new requirements. The draft regulations are open for comment until March 20, 2023.
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