Canada: Reviewing Canada's Anti-Money Laundering And Anti-Terrorist Financing Regime

Last Updated: April 4 2018
Article by Tracy Molino

On February 7, 2018, the Department of Finance (the Department) released a consultation paper (Consultation or Paper) as part of its review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations (the AML/ATF framework). After carefully reviewing the details of the Paper, our team at Dentons has prepared this analysis to highlight the following key findings that we hope will be useful to you and your business.

The Department's review of the legislative framework is intended to support the upcoming Parliamentary review of the administration and operation of the PCMLTFA, which takes place every five years. Parliament's review is meant to ensure that Canada's legislative AML/ATF framework responds effectively to developments in technology, risk environment and marketplace, and keeps pace with international expectations and commitments. The Paper proposes a broad range of potentially significant changes. The most notable proposals are described below:

1. New reporting entities

The Consultation proposes expanding the obligations under the PCMLTFA to new types of businesses operating in other (currently unregulated) high-risk areas. The Department notes the increased reporting resulting from these new reporting entities would also give rise to privacy concerns for Canadians. Stressed here, is the Department's focus on the need to weigh the cost of addressing identified risks against the potential benefits of preventing or tracing money laundering or terrorist financing activity. The proposed new reporting entities are:

(a) White Label Automated Teller Machines (WLATMs): The Consultation notes that WLATMs may be vulnerable to abuse because they can be loaded with large amounts of cash that are the proceeds of crime, and any entity or person can own them. In addition to that vulnerability, the Consultation argues that WLATMs should be subject to the same level of regulation as ATMs associated with established financial institutions.

However, the Consultation did not propose measures to address this vulnerability or level the playing field. Indeed, regulating the WLATM industry could prove challenging because, unlike traditional ATMs, the users of WLATMs have no client relationship with any of their users.

(b) Pari-mutuel betting and horse racing: With a similar risk-profile to casinos, the Paper proposes that these sectors should be regulated in much the same manner.

(c) Real estate sector: The real estate sector is covered to a degree in the PCMLTFA. Real estate brokers, sales representatives and developers have certain obligations. However, the Consultation proposes expanding the types of reporting entities to include non-federally-regulated mortgage lenders, including real estate investment trusts (REITs), mortgage investment corporations, mutual fund trusts, syndicated mortgages and individual private lenders.

This expansion would mark a significant and complex change that would have an obvious impact on the real estate sector.

(d) Designated non-financial businesses and professions (DNFBPs): While the PCMLTFA covers certain activities of some DNFBPs, such as accountants, dealers in precious metals and stones, and casinos, the Consultation proposes expanding the list of activities to include non-financial-transaction activities like operating legal arrangements, managing client funds, security and other assets

(e) Company Service Providers: The Consultation proposes including Company Service Providers as reporting entities. These organizations provide services related to the formation and administration of companies and the Consultation suggests they are exposed to high risk of money laundering.

(f) Finance, lease and factoring companies: The Consultation mentions the absence of coverage of these entities was noted in Canada's Financial Action Task Force Mutual Evaluation. Because these companies allow a range of payment methods, including cash, electronic funds transfers and cheques, they offer opportunities to be used throughout various stages of the money laundering process. While these activities are subject to the AML/ATF regime today, it is only when the activities are being carried out by a regulated entity.

(g) Armoured cars: The lack of AML/ATF regulation of the armoured car industry in Canada creates an environment that facilitates the anonymous movement of bulk cash. Without regulation, this anonymity could facilitate money laundering and terrorist financing because there are no requirements to conduct client identification, keep records, collect information regarding source of funds, or carry out any reporting.

(h) High-value goods dealers: Because high-value goods provide a variety of opportunities for money laundering, the Consultation proposes including high-value goods dealers under the PCMLTFA regime. The Paper includes antiquities, boats and yachts, and automobiles as examples of luxury goods.

(i) Jewellery auction houses: While dealers in precious metals and stones (DPMS) have requirements under the PCMLTFA, jewellery auction houses are not covered by those requirements. Bringing these entities under the AML/ATF framework would level the playing field within the DPMS sector.

2. Enhancing and strengthening identification methods

As part of the Department of Finance's effort to modernize the AML/ATF Framework, the Consultation proposes moving to more principles-based requirements when it comes to ascertaining the identity of a client. According to the Consultation, this shift would allow reporting entities to take a risk-based approach with respect to new technologies while supporting a more nimble framework.

While many will welcome the Department's openness to move away from prescriptive identity verification requirements, there will be some concern about striking the right balance between innovation and a robust identity-verification system, which may be better supported by prescriptive requirements.

3. The introduction of a regulatory sandbox

Citing the rapid growth of the FinTech sector and the use of regulatory sandboxes internationally, the Paper proposes the introduction of regulatory pilots, which would allow FinTechs to apply for time-limited exemptive relief to test their products or services in a live environment, or to allow for more flexible approaches to compliance, given the appropriate risk mitigants are in place. The Consultation also introduces to the Canadian framework the concept of administrative forbearance, which would allow the regulator to exempt entire classes of sectors or businesses from certain obligations.

The overall effect would be a more flexible, risk-based AML/ATF framework that is supportive of innovation. The suggestion is in keeping with the recommendations of the Competition Bureau's recent FinTech Market Study and would be viewed as a positive step to foster collaboration within the financial services industry. Indeed, moves to risk- and principles-based, functional regulation are being considered to some degree across the Canadian financial sector.

4. Beneficial ownership and corporate transparency

Corporate transparency and beneficial ownership are centrail themes to the Paper. The Department acknowledges the difficulty in maintaining accurate and up-to-date beneficial ownership information in Canada, which results in a variety of factors, including the shared federal and provincial jurisdiction over incorporation, the different requirements in each of those jurisdictions and the fact that information requirements are scattered across a number of different statutes. Moreover, Canada does not have a central registry of beneficial ownership information.

The Department is seeking views on how to improve corporate ownership transparency and access to beneficial ownership information by authorities that maintain the ease of doing business in Canada.

5. Strengthening Money Services Business (MSB) registration

The Department acknowledges that MSBs require access to financial services and have challenges maintaining accounts with financial institutions. The Paper references "de-risking" – the practice of financial institutions exiting relationships with and closing accounts of clients because the financial institution perceives the client to be high-risk. In comments that will sound similar to those who have read the Competition Bureau's FinTech Market Study, the Department reiterates that reporting entities are expected to manage their exposure, rather than eliminate it entirely.

The Paper notes that, while MSBs must be registered with FINTRAC, with their registration renewed every two years, the process could be improved to safeguard the financial system.

6. Strengthening intelligence capacity and enforcement

The Consultation proposes measures to address challenges faced by evolving crime practices and advancements in technology, including changes to:

(a) Electronic funds transfers (EFTs): Payments made through Canadian financial institutions where Canada is not the sending or receiving destination should be captured. New payment methods such as letters of credit and finance should also be captured.

(b) Bulk cash: The Consultation gives thought to whether Canada should place a limit on the amount of bulk cash a person could carry in Canada without a legitimate purpose, and whether Canada should develop a framework for registering and monitoring those businesses that deal in high volumes of cash.

7. Balancing enhanced information-exchange with protecting Canadians' privacy

According to the Consultation, protecting Canadians' privacy is paramount, but information sharing is critical for combatting money laundering and terrorist financing. To strengthen the government's ability to combat those crimes, the Department of Finance proposes to add additional "disclosure recipients" – public bodies that would benefit from specific types of financial intelligence.

8. Conclusion

This Consultation has potentially wide-reaching impacts, both for current reporting entities, and those individuals and organizations not currently regulated by the AML regime. Interested parties are advised to submit their comments to the Department of Finance before April 30, 2018.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

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. Specific Questions relating to this article should be addressed directly to the author.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions