Remaining amendments to certain Regulations made under the Proceeds of Crime (Money Laundering and Terrorist Financing Act) (PCMLTFA) that create or change obligations for its reporting entities (REs) came into force on June 1, 2021, including specific record-keeping and reporting obligations related to virtual currency transactions.  FINTRAC has published a recent notice on the assessment of these obligations.

The first phase of amendments to the PCMLTFA came into force last year on June 1, 2020 and added regulatory obligations for businesses dealing in virtual currencies. As discussed in a previous blog post, these obligations include requirements for domestic and foreign persons and entities dealing in virtual currencies to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) as "money services businesses" (MSBs), implement a full compliance program and report any transactions that they suspect may be related to money laundering or terrorist financing activity.

Large Virtual Currency Transactions

The second phase of the amendments recently came into force on June 1, 2021, and require REs to comply with obligations related to virtual currency transactions by submitting a Large Virtual Currency Transaction Report (LVCTR) to FINTRAC when they receive an amount of virtual currency equivalent to C$10,000 or more in a single transaction or over multiple transactions in a 24-hour period. FINTRAC has indicated a flexible transition period between June 1, 2021 and December 1, 2021 to provide REs with enough time to implement their LVCTR systems and meet their reporting obligations. As of June 1, 2021, REs must (i) keep records of all reportable transactions, (ii) complete the implementation of a LVCTR system as soon as possible prior to December 1, 2021, and (iii) submit all unreported large virtual currency transactions for the period of June 1, 2021 to November 30, 2021 as soon as possible and no later than March 31, 2022 using FINTRAC Upload or the FINTRAC web reporting system (F2R). After December 1, 2021, REs are required to submit LVCTRs within five business days after the date on which the virtual currency amount is received.

International Electronic Fund Transfers

As of June 1, 2021, REs must submit an electronic funds transfer (EFT) report to FINTRAC when they either initiate or receive an international EFT of C$10,000 or more in a single transaction or over a 24-hour period. As REs transition their reporting systems to meet this requirement, FINTRAC expects that there may be instances of over or under-reporting for a period of time. In both situations a voluntary self-declaration of non-compliance (VSDONC) form must be submitted to FINTRAC. Furthermore, transactions that are not required to be reported should be deleted from FINTRAC's database as soon as possible. For transactions that cannot be reported, REs must keep a record of reportable transactions until their reporting systems are updated to comply with the requirements. Reporting systems must be updated by December 1, 2021 and REs have until March 31, 2022 to submit all unreported EFT transactions for the period between June 1, 2021 and November 30, 2021.

Other Amendments

FINTRAC has also issued guidance over the past several months on other amendments to the PCMTFA and obligations that came into force on June 1, 2021, including:  

  • the application of all domestic MSB obligations to foreign MSBs;
  • the circumstances in which a business relationship is created;
  • updated and expanded obligations regarding client verification requirements and beneficial ownership information;
  • reasonable measures to determine whether a person is a foreign or domestic politically exposed person, a head of an international organization, or a family member or close associate of a foreign politically exposed person; and
  • updated record-keeping requirements.

Travel Rule

Also effective as of June 1, 2021 is the "travel rule" which requires specific information to be included when an EFT or virtual currency transfer is sent or received. This requirement applies to financial entities, domestic and foreign MSBs (and casinos with respect to EFTs) when initiating EFTs or virtual currency transfers. Furthermore, reasonable measures must be taken to ensure that the travel rule information is included when a virtual currency transfer or EFT is received, either as an intermediary or final recipient. 

Detailed guidance on these and other requirements can be found here on FINTRAC's website. 

Compliance Assessments

Due to the extended time to implement proper reporting systems, full compliance with all of the obligations that took effect on June 1, 2021 will not be assessed by FINTRAC until after April 1, 2022. Prior to this date, FINTRAC will continue to assess compliance with existing regulatory requirements and review any updated compliance program elements to provide feedback. FINTRAC may also assess transactional information for a period prior to April 1, 2022 but taking into consideration flexible measures announced in its earlier notice.

For a broader discussion of virtual currency regulation in Canada please see our publication available here.

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.