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Canadian AML Laws Grow in Scope

Canadian anti-money laundering laws continue to grow in scope and depth.

Attorneys from the Canadian firm of Borden Laden Gervais write about expanding efforts by Canada’s Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to impose AML obligations on payment service providers (PSPs) and other FinTech firms.

They write:

The government’s declaration of a public order emergency in February 2022 went away as quickly as the measures were enacted. However, the choice of statutory language the government used in the Emergency Economic Measures Order (order) and related Emergency Measures Regulations (regulations) under the Emergencies Act, along with remarks at that time by the deputy prime minister and minister of finance, left interested observers wondering whether fundamental changes to the application of Canada’s main federal anti-money laundering and anti-terrorist financing (AML and ATF) laws were afoot.

As matters have developed, despite the revocation of the public order emergency, some of these measures will now likely find a permanent place in Canada’s laws. The 2022 federal budget, tabled on 7 April 2022, announced that new regulations will be enacted to extend AML and ATF obligations to PSPs and crowdfunding platforms, as well as legislative changes to strengthen the main federal AML, ATF and related laws, which includes the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Act) and the Criminal Code.

Further, the government is conducting a comprehensive review of the AML and ATF regime to bring forth legislative proposals to address any identified gaps in the regime.

In the same way that FinCEN in the U.S. has expanded its budget, FINTRAC has also seen an additional $89.9 million over five years to support its AML and ATF efforts. Like FinCEN, FINTRAC is also tasked with implementing a national database of corporate beneficial ownership.

In April, Canadian regulators had issued an emergency order (since revoked) that required certain PSPs and crowdfunding platforms, to register with FINTRAC if they were in possession or control of property that is owned, held or controlled by or on behalf of a designated person under the regulations.

Registration with FINTRAC (analogous to obtaining an MSB license from FinCEN) is not difficult, but requires the entity to meet a wide range of AML compliance obligations. According to the writers from Borden Laden Gervais:

The regulatory burden includes building, instituting and overseeing a compliance programme subject to biennial audits and FINTRAC examinations, which must also address all relevant ongoing regulatory requirements including, but not limited to client identification, transaction reporting, and record keeping procedures. In addition, since the order drew directly from the payment functions that will be subject to the upcoming retail payments oversight framework under the new Retail Payment Activities Act, it is entirely possible that PSPs under the retail payments oversight framework will also automatically be subject to FINTRAC obligations.

Regulators in the U.S. and Canada no doubt look to each other to model approaches on AML compliance, so comparisons can be instructive.

I will be speaking on a panel comparing the Corporate Transparency Act and other AML compliance developments in the U.S. and Canada at the GGI World Conference in Montreal in October.

About The Author

Jonathan Wilson is the co-founder of FinCEN Report Company with 31 years of experience in corporate, M&A and securities matters. He is the author of The Corporate Transparency Act Compliance Guide (to be published by Lexis Nexis in the summer of 2023) and the Lexis Practical Guidance Practice Note on the Corporate Transparency Act.