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Proposed Updates to Canada’s Anti-Money Laundering and Terrorist Financing Regime

June 7, 2023 Financial Services Bulletin 6 minute read

Canada’s regulatory regime for anti-money laundering (“AML”) and anti-terrorist financing (“ATF”) is constantly under pressure to evolve as a result of emerging threats and changing global standards. Businesses operating within this regulatory framework must adapt to these new and evolving compliance obligations.

The 2023 Budget unveiled combatting financial crime as a priority for the federal government, highlighting projects like the federal beneficial ownership registry, modernizing financial sector oversight, and conducting a parliamentary review of the AML legislation. In addition to these projects, the Department of Finance (“Finance Canada”) has introduced a package of proposed regulatory amendments under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”), which we discuss in more detail below.

Proposed Regulatory Amendments under the PCMLTFA

All Mortgage Lenders Will Become Regulated Entities

In recent years, mortgages have increasingly been issued by businesses not covered by the PCMLTFA. Under the Regulations Amending Certain Regulations Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“Amending Regulations”), mortgage lenders as well as mortgage administrators and brokers fall within the scope of the PCMLTFA. The Amending Regulations define a “mortgage lender” as a “person or entity, other than a financial entity, that is engaged in providing loans secured by mortgages on real property or hypothecs on immovables.”[1]

Under the Amending Regulations, mortgage participants must, among other things, develop a compliance program, report suspicious transactions, report large cash and virtual currency transactions of $10,000 or more, and maintain records for receipts of every amount received for a mortgage.[2] They must also review their AML program every two years and conduct ongoing monitoring.

Mortgage lenders are required to verify client identities and keep various records relating to the client. They also need to determine whether a person they enter into a business relationship with is a politically exposed foreign or domestic person, the head of an international organization, or a family member or close associate of any of the foregoing, and keep the required records.

The provisions in respect of mortgage participants will come into force eight months after the Amending Regulations are published in the Canada Gazette, Part II.[3]

New AML Obligations for Armoured Car Companies

Armored car companies will also be subject to new AML obligations. In 2021, armoured car companies were designated as reporting entities under the PCMLTFA.[4] The specifics of the requirements for compliance have now been proposed in the Amending Regulations.

The Amending Regulations require entities that “collect currency, money orders, traveller’s cheques or other similar negotiable instruments for transport”, which include armoured car companies, to meet the following obligations:

  • Developing a compliance program;
  • Applying customer due diligence measures (e.g. identity verification and beneficial ownership requirements);
  • Record keeping (e.g. storing client identification records);
  • Transaction reporting (e.g. submit suspicious transaction and terrorist property reports as well as other reports, such as large cash ($10,000 or more) transaction reports to FINTRAC); and
  • Follow ministerial directives and transaction restrictions when funds go to or come from certain countries.

The provisions in respect of armoured car companies will come into force six months after the Amending Regulations are published in the Canada Gazette, Part II.[5]

Aligning Correspondent Banking Regulation with International Recommendations

Financial institutions will be required to engage in ongoing due diligence in respect of their correspondent banking relationships. Based on public information, financial entities must:

  • Take reasonable measures to assess the reputation of the foreign financial entity prior to entering into a relationship; and
  • Conduct a risk assessment of their correspondent banking relationships and conduct ongoing monitoring of their relationship to keep up to date.

Administrative monetary penalties will be imposed on non-compliant financial entities. This amendment is unlikely to be burdensome as many large financial institutions in Canada already undertake this work, largely due to the obligations that exist as a result of their operations in the United States.

The provisions in respect of correspondent banking will come into force eight months after the Amending Regulations are published in the Canada Gazette, Part II.[6]

Increasing Penalties for Illicit Cross-Border Cash

The Amending Regulations also increase penalties for the illicit movement of cash across borders under the Cross-border Currency and Monetary Instruments Reporting Regulations. A common money laundering technique involves moving cash linked to the proceeds of crime between jurisdictions in order to hide its origin. Under the PCMLTFA, people and entities must declare any currency or monetary instruments in their possession valued at $10,000 or more when crossing the Canadian border. Failure to do so may bring about a penalty as high as $5,000.

The Amending Regulations increase the penalties to the following:

  • 5% of the undeclared funds, up to a maximum of $2,500 for a first time offender who makes a full disclosure of the facts, if the funds were not concealed;
  • 25% of the undeclared funds for an offender who concealed the funds or made a false declaration or has a previous seizure; and
  • 50% of the undeclared funds for an offender who concealed the funds in a false compartment in a conveyance, or has a previous seizure for any form of concealment or making false declarations.

These proposed amendments would come into force upon registration.[7]

Additional Information to be Provided in Money Service Business Registration

The Amending Regulations propose enhancements to money service business (“MSB”) registration. MSBs must register with FINTRAC and renew their registration every two years to legally operate in Canada. Currently, the Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations do not require MSBs to provide certain information that is necessary for FINTRAC to assess risks associated with MSB applicants.

Under the Amending Regulations, MSBs will be obligated to provide the contact information of their CEO, president, directors, and every person who owns or controls 20% or more of the MSB.[8] Additionally, MSB applicants will have to submit the number of agents, mandataries and branches in each country.[9]

These requirements will come into force on the first anniversary of the day on which the Amending Regulations are published in the Canada Gazette, Part II.[10]

New Cost Recovery Framework for FINTRAC

Financial institutions can expect to pay additional fees to FINTRAC. Finance Canada introduced the Financial Transactions and Reports Analysis Centre of Canada Assessment of Expenses Regulations (“Assessment Regulations”) which establish a framework for FINTRAC to recover a portion of the costs of supervision from certain entities they regulate.[11] Various financial entities, including banks, authorized foreign banks, life insurance companies, among others, will be required to pay costs, the value of which is determined by a formula in the Assessment Regulations.

The Assessment Regulations, if published as proposed, will come into force on April 1, 2024.

Finance’s Updated Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada

In March 2023, Finance Canada released the Updated Assessment of the Inherent Risks of Money Laundering and Terrorist Financing in Canada (the “Report”). Finance Canada last conducted this assessment in 2015.

This 85-page Report analyzes threats and vulnerabilities that increase risk of money laundering or terrorist financing in Canada. Although not currently reporting entities under the PCMLTFA, the Report evaluated corporations, partnerships, express trusts, armoured car companies,[12] unregulated mortgage lenders, and various trade-based businesses, like import/export companies, freight forwarders, and custom brokers.

In respect of corporations, partnerships and express trusts, the Report identified a common vulnerability of hiding beneficial ownership information as a significant element of Canada’s money laundering risk landscape. The federal government is already prioritizing establishing a publically accessible beneficial ownership registry by the end of this year. Our previous bulletins, linked here and here, discuss the status of this registry.

As discussed above, mortgage lenders and armoured car companies should start preparing for their new compliance obligations. Based on the Report, trade-based businesses such as import/export companies, freight forwarders, and custom brokers may choose to start considering their money laundering exposure and be aware that they may become subject to AML and ATF compliance obligations. These entities may have to consider, in the future, hiring compliance professionals, designing compliance policies (like identification and record retention), and training existing staff on said policies.


Finance Canada estimates that over 24,000 Canadian financial institutions and non-financial businesses and professions are regulated under the PCMLTFA. Each of these entities face constantly evolving compliance obligations. Given the 2023 Budget’s focus on combatting financial crime and the above pending regulatory changes, regulated entities should keep up-to-date and continually review their AML and ATF compliance policies. Non-regulated entities may start evaluating their potential exposure to money laundering and terrorist financing, with a view to potentially being regulated in the future.

If you have any questions, please do not hesitate to contact us. Our team is available to assist clients with AML and ATF compliance.


[1] Canada Gazette Part I, Vol. 157, No. 7, p. 521, s. 1.
[2] Canada Gazette Part I, Vol. 157, No. 7, p. 523, s. 64.2-64.6.
[3] Canada Gazette Part I, Vol. 157, No. 7, p. 498.
[4] Budget Implementation Act 2021, No.1, SC 2021, c. 23, s. 159. This section will come into force on a day to be fixed by order of the Governor in Council. Specifically, persons and entities that are involved in “transporting currency or money orders, traveller’s cheques or other similar negotiable instruments except for cheques payable to a named person or entity” are subject to the PCMLTFA.
[5] Canada Gazette Part I, Vol. 157, No. 7, p. 498.
[6] Canada Gazette Part I, Vol. 157, No. 7, p. 499.
[7] Canada Gazette Part I, Vol. 157, No. 7, p. 499.
[8] Canada Gazette Part I, Vol. 157, No. 7, p. 511, s. 35.
[9] Canada Gazette Part I, Vol. 157, No. 7, p. 512, s. 39.
[10]Canada Gazette Part I, Vol. 157, No. 7, p. 513, s. 43(4).
[11] Canada Gazette, Part I, Vol. 157, No. 7, p. 514, Financial Transactions and Reports Analysis Centre of Canada Assessment of Expenses Regulations.
[12] Though already designated as reporting entities under the PCMLTA, armoured car companies have not yet been subject to reporting obligations which will begin once the Amending Regulations discussed above come into force.

by Maria Sagan, William Pellerin, and Tayler Farrell

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2023

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