Happy New Year to all our readers!
The past year saw a marked shift in regulatory expectations for the anti-money laundering (AML) and anti-terrorist financing (ATF) regime in Canada. In this blog post, we provide a quick recap of the key regulatory developments in the Canadian AML/ATF regime over the past year. We also look at what 2020 holds for AML/ATF regulatory compliance in Canada.
Key highlights of 2019
- New anti-money laundering rules introduced: In July 2019, amendments to the Regulations (New Amendments) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) were published in the Canada Gazette. Except for one change in respect of identity verification that is beneficial to reporting entities, the New Amendments will not come into force until June 1, 2020, and, in the case of certain provisions, until June 1, 2021. For further details on the New Amendments, please see our previous post here.
- More scope to prosecute money laundering: In June 2019, an amendment to section 462.31 of the Criminal Code came into force. The amendment added the mental element of "recklessness" to the offence of money laundering and criminalized the activity of moving money on behalf of another person or organization while being aware that there was a risk that the proceeds were derived from money laundering activities.
- Penalties for money laundering violations to be disclosed publicly: As of June 2019, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) was required to make all administrative monetary penalties (AMPs) imposed on violators public. In addition, FINTRAC's Administrative monetary penalties policy was updated to require it to be more public with its actions at specific stages in the penalty process. FINTRAC also published the guides it uses to assess the "harm done" criterion in relation to its AMPs, as part of its ongoing commitment to increasing the openness and transparency of its compliance activities. For further details, please see our previous post here.
- KYC requirements relaxed for non-face-to-face transactions: FINTRAC no longer requires an "original" identification document to verify an individual client. Instead, it is now sufficient to provide an "authentic, valid and current" copy of an identification document. This change has been in effect since June 2019 following the New Amendments, but the long awaited guidance from FINTRAC was only released in November.
- IIROC updated its AML/ATF guidance for securities dealers: In November 2019, the Investment Industry Regulatory Organization of Canada (IIROC) updated its AML/ATF guidance to: (i) reflect the New Amendments and other important guidance from FINTRAC; (ii) remove unnecessary duplications with guidance from FINTRAC; (iii) incorporate IIROC's recently issued amendments to the client identification and verification requirements; and (iv) make the guidance more easily understandable. IIROC's new guidance is set to take effect on June 1, 2020.
- Money laundering indicators for casinos released. As part of its renewed effort to clamp down on money laundering activities through casinos, FINTRAC published an operational alert in December 2019, which sets out certain indicators that are meant to assist casino businesses in identifying and reporting suspicious transactions that may be related to money laundering activities.
Outlook for 2020
Given the scope of regulatory developments in 2019, in our view the key takeaway for reporting entities this year is "change management". While implementation of many of the New Amendments is being delayed until June 2021, a few of them are expected to come into effect this year, such as the requirement for virtual currency dealers to register as money services businesses by June.
Reporting entities are now under considerable pressure to align their compliance programs and processes to ensure that they will be able to meet regulatory expectations. No doubt legacy systems will need to be updated and certain new ones put in place to mirror these expectations. As such, whether it be financial institutions, securities dealers, money services businesses, both domestic and foreign, or casinos, the message is clear to all reporting entities that Canada's AML/ATF regime is evolving. It is the responsibility of each reporting entity to ensure that nothing falls through the cracks as it seeks to successfully manage the necessary changes.
For more information regarding any aspect of the above, or any other aspect of Canada's AML/ATF legal framework, please contact the author.
The author would like to thank Bikaramjit S. Sandhu, articling student, for his contribution to this article.
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