Budget 2023 announced that the federal government would launch a parliamentary review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the "PCMLTFA") this year, as required under that Act. Further to this, earlier this month the Department of Finance launched a public consultation to examine ways in which it can improve Canada's anti-money laundering and anti-terrorist financing ("AML") regime.

The consultation paper [PDF] provides background information and context on Canada's existing AML regime, including an overview of recent developments and key priorities going forward. As part of this background, the consultation paper discusses challenges to achieving operational effectiveness, which it states can cause negative perceptions of Canada as a jurisdiction that is not hostile to money laundering or other financial crime. In this context, the consultation paper refers to the 2016 Mutual Evaluation of Canada by the Financial Action Task Force (FATF) as well as the Cullen Commission in British Columbia.

The consultation paper explores potential ways to enhance the operational effectiveness of the AML regime, considers possible amendments to the legislative and regulatory framework, and discusses national and economic security. These points are addressed in a manner that is aligned with the priorities set out in Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime Strategy 2023-2026, which the Department of Finance published in March 2023.

The following highlights some key aspects that may impact businesses that are (or, as a result of the proposals, may become) subject to Canada's AML regime.

Federal, Provincial, and Territorial Collaboration

The consultation paper states that the government seeks to collaborate more closely with provinces and territories on cross-governmental issues related to money laundering and terrorist financing, including in the following priority areas:

  • Beneficial Ownership Transparency
    • The consultation paper discusses beneficial ownership initiatives, including Bill C-42, which was tabled in March 20203 and would implement a publicly accessible beneficial ownership registry.
  • The Legal Profession
    • The consultation paper notes the 2015 Supreme Court of Canada decision stating that the regulatory requirements of the AML framework, as they applied to the legal profession, violated the Charter, and states that the government will continue working with the Federation of Law Societies of Canada to explore issues related to money laundering and terrorist financing in the legal profession. As well, the consultation paper states that the federal government will consult with the governments of provinces and territories on AML issues in the legal profession and will monitor the ongoing efforts of the province of British Columbia to modernize their framework for legal service providers.
  • Civil Asset Forfeiture
    • The consultation paper discussed unexplained wealth orders, which are court orders compelling a person to provide information about their interest in a specific property where a designated government authority has established a suspicion that the property is associated with unlawful activity, and seeks views on whether and how unexplained wealth order measures could be incorporated into the federal legislative framework.

Enhancing Operational Effectiveness

  • Amendments to the Criminal Code
    • Various potential amendments to the Criminal Code are proposed in the consultation paper, including amendments related to the seizure and forfeiture of proceeds of crime and digital assets and the sentencing of money laundering offences.
  • Creation of a new Canada Financial Crimes Agency
    • The consultation explores the creation of a new Canada Financial Crimes Agency ("CFCA"), the sole purpose of which would be to investigate major financial crimes and which would become the lead enforcement agency against financial crimes. It also discusses the scope of the CFCA's mandate, structure and enforcement tools.
  • Enhancing Information Sharing
    • Enhancing information sharing, both within the public and private sectors and between public and private sector organizations, is proposed in an effort to better facilitate the detection and disruption of money laundering and terrorist financing. The government is seeking feedback on what types of information would be most valuable to share, what guardrails would best protect personal information while allowing additional information to be exchanged between organizations, how it can improve outreach and engagement with the non-profit sector on AML matters, how it can facilitate more timely, accessible and actionable financial intelligence disclosures from the Financial Transactions and Reports Analysis Centre of Canada ("FINTRAC") to law enforcement and national security agencies, and whether FINTRAC should be able to leverage findings from other regulators in its compliance examinations and share FINTRAC compliance information with other regulators.
    • The consultation also explores the creation of a database of politically exposed persons, heads of international organizations, and family members of such persons, to assist reporting entities with client verification requirements.

Legislative and Regulatory Framework

  • Review of Sectors to be Covered by the PCMLTFA
    • The consultation considers expanding the scope of persons and entities that are subject to the PCMLTFA to include, for example, the following:
      • uncertified accountants who perform prescribed triggering activities under the PCMLTFA;
      • all dealers in precious metals and stones (not only those that engage in the purchase or sale of precious metals and stones in the amount of $10,000 or more in a single transaction);
      • real estate for-sale-by-owner companies and real estate auction platforms;
      • building supply and renovation companies;
      • title insurers and mortgage insurers;
      • those that deal in high-value goods (such as yachts, aircrafts, art, etc.);
      • businesses that provide incorporation services to the public (referred to as company service providers);
      • white label automated teller machines (i.e., those that are privately owned and not branded by a financial institution);
      • factoring companies that supply short-term loans or the upfront payment for the accounts receivable of another business to address their cash-flow needs; and
      • financial crown corporations.
  • Differentiating Between PSPs and MSBs
    • The government is exploring whether payment service providers, some of which are already subject to the PCMLTFA and are required to register with FINTRAC as money services businesses ("MSBs"), should be differentiated from MSBs under the PCMLTFA and have separate regulatory requirements that account for the different risks in each sector.
  • Streamlining Regulatory Requirements
    • The government is seeking feedback on whether there are opportunities to streamline regulatory requirements, including by potentially clarifying the end-date of business relationships under the PCMLTFA, and by updating specific triggers and monetary thresholds applicable to certain sectors.
  • FINTRAC's Supervisory Powers
    • The consultation considers whether changes are necessary for FINTRAC to more effectively supervise persons and entities subject to the PCMLTFA, including changes to:
      • allow FINTRAC, in circumstances of urgent or significant non-compliance, to direct reporting entities to undertake a review of their compliance program by an independent external or internal reviewer and share the results with FINTRAC;
      • specify the knowledge and competencies required of a qualified compliance officer;
      • allow FINTRAC to record compliance examinations;
      • expand the details that FINTRAC may publish in respect of violations and penalties imposed;
      • allow FINTRAC to levy administrative penalties against directors, officers, and agents within an entity in certain case of violations of the PCMLTFA;
      • create an offence against reporting entities for knowingly providing false or misleading information to FINTRAC, or omitting information that should be provided to FINTRAC, in the course of fulfilling any requirement under the PCMLTFA and associated regulations; and
      • provide exemptive relief in connection with the testing of new technologies.
  • Additional Requirements
    • Registration
      • The government is also considering how it can strengthen the MSB registration framework to protect the sector from illicit and non-compliant actors and detect unregistered MSBs. Budget 2023 already announced the government's intention to criminalize the operation of unregistered MSBs.
      • The government is also considering expanding the registration requirements to apply to all reporting entities (rather than just MSBs).
  • Cash Transactions
    • The government is considering expanding large cash transaction reporting requirements to all businesses (not just reporting entities under the PCMLTFA), and amending the PCMLTFA to require all reporting entities to take reasonable measures to establish the source of wealth of an individual when conducting a financial transaction or transfer of a certain threshold.
    • In addition, the government is considering amending legislation to prohibit or otherwise restrict third-party cash deposits into personal bank accounts.

Comments or feedback in response to the specific questions and issues identified in the consultation paper, as well as further comments or feedback relevant to the scope of the consultation, may be submitted until August 1, 2023.

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.