From Compliance To The Courtroom: Navigating Canada’s Rapidly Escalating Anti-Money Laundering Enforcement Landscape

Canada’s Anti-Money Laundering (AML) enforcement regime is undergoing a seismic shift. In 2025, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) issued 26 administrative monetary penalties (AMPs) – more than double the 12 issued in 2024. The largest single penalty on record, $177-million levied against Xeltox Enterprises Ltd. in October 2025, signalled that FINTRAC is prepared to wield its enforcement powers with unprecedented force.

The recently assented to Strengthening Canada's Immigration System and Borders Act (previously known as Bill C-12, S.C. 2026, c. 4) has increased penalty caps by up to 40 times previous levels. Before Bill C-12, the highest penalties in the system were capped at $100,000 for individuals and $500,000 for entities; under Bill C-12, those caps have now been increased to up to $4 million for individuals and $20 million for entities, making mid-range violations potentially ruinous.

In this new environment, the question is not whether your organization will face regulatory scrutiny, but when. This article, drawn from a recent presentation delivered by Léon Moubayed and Alexandra Belley-McKinnon, offers a practical roadmap for navigating the enforcement pipeline – from FINTRAC examination through Federal Court litigation. 

Stay Ahead – Proactive Compliance Is Your Best Defence

The strongest defence is proactive, documented compliance. This could mean recording even the smallest compliance action or update in a chronology: internal reviews, training, policy updates, risk assessments, FINTRAC communications and remedial steps. The more detailed this chronology, the more commitment your business will demonstrate during a FINTRAC examination. The chronology also provides the evidentiary foundation for representations to the Director and any judicial review before the Federal Court.

Between examinations, reporting entities should:

• Seek guidance from FINTRAC on grey areas before an examination to demonstrate good faith and help prevent adverse findings;
• Conduct two-year effectiveness reviews, as per The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), which should be used to identify and remedy weaknesses before FINTRAC does; and
• Voluntarily disclose identified non-compliance (via the Voluntary Self-Declaration of Non-Compliance (“VSDONC”)) to signal a culture of compliance and potentially mitigate or avoid a penalty.

The best time to build your defence is before you actually need one.

Litigation Starts at the Examination Stage

Litigation does not begin when a Notice of Violation is issued – it begins at the examination stage. The factual record created during FINTRAC’s examination will follow the entity through every subsequent stage of the enforcement pipeline, all the way to the court if an appeal is filed.

Under section 62(2) of the PCMLTFA, the entity has a statutory duty to assist: it must meet agreed timelines, provide access to its place of business and records, answer questions, make employees available, and help access computer-stored information. Failure is a “serious” violation that may attract an AMP, but the entity need not be passive. Each response, document and interview shapes the record that may ultimately end up before the courts. In short, the reporting entity should act as though it is already in litigation.

Advocate Early, Advocate Often

FINTRAC’s enforcement process offers multiple opportunities for engagement, and entities that take advantage of each one are far better positioned than those that wait passively for a decision.

The first opportunity is of course the examination stage, when the entity can submit information and submissions that may determine whether FINTRAC conducts a follow-up examination, recommends an AMP, discloses the matter to law enforcement (in extremely serious cases only), or takes no further action.

Then, if a Notice of Violation is issued, entities have 30 days to pay or submit written explanations. Written representations are the reporting entity’s critical record-building opportunity: every fact, argument and mitigating factor must be put before the Director; bare-bones representations will not be permitted to be supplemented if the case goes to court. The Director decides on a balance of probabilities whether a violation occurred, which means it should weigh all the explanations it has received before making a decision.

Lawyering up at this stage brings several key advantages:

• Case analysis and procedural fairness. Counsel can test the factual and evidentiary basis of FINTRAC’s allegations, identify procedural deficiencies, raise them early and preserve them for appeal.
• Mitigation and negotiation. Counsel can marshal evidence of compliance, remedial steps, co-operation and other mitigating factors, and engage with FINTRAC between the filing of the written representations and the issuance of a Notice of Decision to seek a reduction or cancellation of any recommended AMP.

FINTRAC’s enforcement process ends with a Notice of Decision, issued 90 days after the representations have been filed. In the Notice of Decision, FINTRAC’s Director may impose, reduce or cancel the penalty previously suggested in the Notice of Violation.

A person or entity who receives an adverse decision from the Director may appeal that decision to the Federal Court within 30 days. For minor violations with penalties under $10,000, the Director’s decision is final and is not subject to appeal.

On appeal, the Federal Court does not rehear the case or accept new evidence; it reviews only the material that was before the Director and asks whether the decision was lawful and reasonable on the record.

Build the Narrative – in Writing

Because the Federal Court reviews only the material before the Director, the written record is, for practical purposes, the only narrative that matters.

• Get everything in writing. Use written correspondence for all material interactions with FINTRAC because oral assurances and informal communications may be difficult to prove or invisible to the Director and the Court.
• Require the other side to take notes. During examinations and interviews, ask FINTRAC representatives to create contemporaneous records, or send your own notes to FINTRAC for confirmation.
• Ask them to specifically note important items. Ask the examiner to record key points made during an interview or meeting, creating a trail of the entity’s positions and co-operative posture.
• Pursue access to information requests. Use the Access to Information Act to request access to FINTRAC’s internal records in parallel to the examination, representations or appeal process. You may obtain material that reveals the reasoning behind a decision, inconsistencies or material for procedural fairness challenges.

Procedural Fairness as a Strategic Tool

The Federal Court has held that the level of procedural fairness owed to entities in FINTRAC’s enforcement process is “moderate.” This means that while full criminal-style procedural protections do not apply, the decision-maker must follow a process that is fundamentally fair.

• Inadequate disclosure. FINTRAC must provide sufficient information for the entity to understand the allegations and respond meaningfully. However, this does not require criminal-style disclosure;
• Delegation without independence. A Director who merely rubber-stamps staff recommendations without independent analysis may be vulnerable to challenge.
• “Moving target” allegations. When there are material shifts in the allegations among the Findings Letter, Notice of Violation and Director’s Decision, an entity may argue it was denied a fair opportunity to respond.
• Fettered discretion and the AMP methodology. FINTRAC may have fettered its discretion if it applied a rigid or formulaic methodology to calculate AMPs without genuinely considering the case-specific statutory criteria in section 73.11 of the PCMLTFA. Kabul Farms and Violator No. 10 accepted this argument, while Montecristo rejected it following legislative amendments. Any such argument must be tailored to the current statutory framework.

Key Takeaway: Preparation Is the Best Defence

Canada’s AML enforcement landscape is evolving rapidly, and the penalties for non-compliance have never been more severe. For reporting entities, the lessons from the frontlines of FINTRAC litigation are clear: invest in proactive compliance, build a thorough record during the representations stage, understand the new legal landscape under Bill C-12 and get legal advice early. The entities best positioned to weather enforcement treat compliance as an institution-wide commitment and prepare for litigation long before it actually starts.