In response to the growing complexity and scale of global financial crime, Canada is overhauling its anti-money laundering ("AML") and sanctions regime. Recent reforms reflect a significant shift in regulatory intensity and are also motivated by the upcoming mutual evaluation of Canada's AML regime by the Financial Action Task Force ("FATF"), scheduled to begin in late 2025.
This bulletin summarizes the proposed changes to Canada's AML regime through Bill C-2, the Strong Borders Act. Tabled in Parliament on June 3, 2025, portions of the legislation may take effect as early as later this year if passed. Major penalties are in play for non-compliant businesses. These proposed changes are discussed in Part 1 of this bulletin, where we focus on the proposed amendments most relevant to Canadian businesses..
Beyond Bill C-2, the Canadian government also fast-tracked changes originally planned for October 1, 2025. Effective April 1, 2025, financing and leasing companies, factoring companies, and cheque-cashing companies are now reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations ("PCMLTFA") and traders are required to declare whether imported or exported goods are proceeds of crime. These changes are discussed in Part 2 of this bulletin.
Part 1: What's New in Bill C-2
While Bill C-2 is widely recognized for its impact on immigration and border control, it also marks a significant expansion of AML obligations and enforcement powers under the PCMLTFA. The changes with a potentially major impact on Canadian business include:
- Enrollment Requirement: All reporting entities will be required to enroll with FINTRAC, except money services businesses ("MSBs") because MSBs are already required to register with FINTRAC.1 Enrollment will require submitting prescribed information via a set process within a specified timeframe to be listed on FINTRAC's public 'roll'.2 Enrolled entities will be required to renew within a set period, follow the prescribed process, and notify FINTRAC of any changes to their information within 30 days.3 FINTRAC can deny or revoke enrollment for non-payment of penalties or links to non-compliant entities.4 The prescribed information required for enrollment has not yet been published, but may include details such as the entity's name, business address, and reporting entity category. It remains to be seen whether entities must provide information for each operating location or if enrollment is assessed at the corporate group level. This is a critical issue for multi-site businesses such as national retailers. Entities that fail to enroll may be subject to compliance orders, revocation of enrollment, administrative monetary penalties, and other enforcement actions.
- Restrictions on Cash Transactions: Bill C-2 introduces a new offence under the PCMLTFA, prohibiting the acceptance of cash payments, donations, or deposits of $10,000 or more in a single transaction or in a series of related transactions.5 The prohibition applies broadly to any person or entity engaged in a business, profession, or charitable solicitation.6 The Bill includes a narrow exemption for certain financial sector entities, such as banks, trust companies, and loan companies. It also grants regulatory authority to prescribe additional exempt entities or specific transactions by regulation. The exemption does not currently extend to many other financial intermediaries, including MSBs that routinely handle large volumes of cash, such as armoured car companies or banknote dealers. This is an offence under the PCMLTFA that may be prosecuted by indictment, with a maximum penalty of a fine equal to three times the amount of cash involved. For reporting entities, a breach of the cash prohibition may also result in administrative monetary penalties imposed by FINTRAC. Further guidance is expected to clarify how this prohibition will apply in practice, particularly for cash-intensive businesses.
- Compliance Program Design and Effectiveness: Bill C-2 introduces new requirements for compliance programs to be risk-based and effective.7 The amendments give FINTRAC expanded authority to assess whether a reporting entity's compliance program is adequate and functioning as intended. While FINTRAC has long promoted risk-based approaches through guidance, the inclusion of this requirement in legislation reflects a shift towards enforceable standards. Businesses must now treat risk-based frameworks as a legal obligation, not merely best practice, with FINTRAC explicitly empowered to assess their adequacy and effectiveness in enforcement actions.
- Compliance Agreements and Orders: Any reporting entity found to be in violation of the PCMLTFA provisions must enter into a mandatory compliance agreement with FINTRAC. This marks a significant shift from the previous regime, where such agreements were discretionary. Failure to enter into or comply with such an agreement triggers a compliance order, with non-compliance resulting in additional penalties and possible public disclosure of required remedial measures.8
- Increased Administrative Monetary Penalties: Bill C-2 establishes a new monetary penalty framework under the PCMLTFA regulations. While administrative monetary penalties are not new, the legislation codifies tiered categories—minor, serious, and very serious violations—with substantially increased maximums. Previously, penalties were capped at $1,000 for minor violations, $100,000 for serious violations, and $500,000 for very serious violations.9 Under Bill C-2, the new maximums rise to $40,000, $4 million, and $20 million respectively. Penalties may be cumulative but will be capped at $20 million or 3% of global revenue, applied at the group level for affiliated entities.10 FINTRAC may also take into account an entity's ability to pay when determining penalty amounts, subject to strict evidence requirements.11
Part 2: New Reporting Entities, Import Declaration Requirement, and Information Sharing Permitted as of April 1, 2025
Canada also accelerated the introduction of separate AML amendments originally slated to come into force October 1, 2025. These changes were fast-tracked and came into force on April 1, 2025. The McMillan team previously published on these changes.
Key changes include:
- New Reporting Entities: The PCMLTFA was amended to include new reporting entities, notably factoring companies, cheque-cashing businesses, and finance and leasing companies. As of April 1, 2025, these sectors must now comply with requirements under the PCMLTFA, including reporting, recordkeeping, and internal compliance programs.12
- Trade-Based Financial Crime Measures: Importers, exporters, bonded warehouses, producers, and logistics partners must now declare whether goods are proceeds of crime or tied to money laundering, terrorist financing, or sanctions evasion.13 The CBSA has stated that a report or declaration made under the Customs Act for any of the current commercial processes will satisfy the requirements in the PCMLTFA and is evaluating whether any forms or commercial processes will require updating.14 Entities must also retain prescribed records and file a report at each occurrence of suspected illicit cross-border trade under Part 2.1 of the PCMLTFA.15 To encourage compliance, FINTRAC enforces an administrative monetary penalty regime with fines up to the value of the goods or financial transaction involved.16
- Enhanced Information Sharing: Reporting entities are now permitted to share an individual's personal information with each other without the individual's consent, provided that sharing of the information is reasonable for the purposes of detecting or deterring money laundering, terrorist financing, or sanctions evasion—and where obtaining consent would compromise that purpose.17 Participating entities must develop a Code of Practice detailing how information will be securely handled; these Codes must be submitted to and approved by the Office of the Privacy Commissioner and renewed every five years.18
Footnotes
1. Bill C-2, Strong Borders Act, 1st Sess, 45th Parl, 2025, cl 87 (first reading 3 June 2025).
2. Bill C-2, Strong Borders Act, 1st Sess, 45th Parl, 2025, cl 87 (first reading 3 June 2025).
3. Bill C-2, Strong Borders Act, 1st Sess, 45th Parl, 2025, cl 87 (first reading 3 June 2025).
4. Bill C-2, Strong Borders Act, 1st Sess, 45th Parl, 2025, cl 87 (first reading 3 June 2025).
5. Bill C-2, Strong Borders Act, 1st Sess, 45th Parl, 2025, cl 136 (first reading 3 June 2025).
6. Bill C-2, Strong Borders Act, 1st Sess, 45th Parl, 2025, cl 136 (first reading 3 June 2025).
7. Bill C-2, Strong Borders Act, 1st Sess, 45th Parl, 2025, cl 84 (first reading 3 June 2025).
8. Bill C-2, Strong Borders Act, 1st Sess, 45th Parl, 2025, cl 105 (first reading 3 June 2025).
9. Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2000, c 17, s 5.
10. Bill C-2, Strong Borders Act, 1st Sess, 45th Parl, 2025, cl 124 (first reading 3 June 2025).
11. Bill C-2, Strong Borders Act, 1st Sess, 45th Parl, 2025, cl 101 (first reading 3 June 2025).
12. Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2000, c 17, s 5.
13. Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2000, c 17, s 39.02.
14. Canada Border Services Agency, D19-15-1: Commercial Accounting Declarations – Trade Based Financial Crime (1 June 2023).
15. Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2000, c 17, s 39.02.
16. Canada Gazette, Part I, Volume 158, Number 48; Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2000, c 17, s 39.39.
17. Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2000, c 17, s 11.01.
18. Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, SOR/2002-184, Part 8.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
