WHAT ARE THE
Money laundering and terrorism financing laws in Canada?
In Canada money laundering and terrorism financing are serious offences and are governed by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated regulations.
WHAT ARE THE
Key obligations that reporting entities have under Canadian laws?
The key obligations under the PCMLTFA include:
- Customer Due Diligence (CDD) - covered entities, including banks, financial institutions, money services businesses, casinos, real estate brokers, accountants, and lawyers, are required to establish and implement risk-based CDD measures. This includes verifying the identity of customers, obtaining beneficial ownership information, and assessing the risk associated with each customer.
- Enhanced Due Diligence (EDD) - In cases where there is a higher risk of money laundering or terrorism financing, covered entities are required to apply enhanced due diligence measures. This may include obtaining additional information, conducting enhanced monitoring, and obtaining senior management approval for high-risk relationships.
- Reporting Suspicious Transactions - covered entities must report any knowledge, suspicion, or reasonable grounds to suspect money laundering or terrorism financing to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). The reports should be made promptly when suspicion arises.
- Record-Keeping - covered entities must maintain records of transactions, customer identification information, and supporting documentation for at least five years from the date of the last transaction. These records should be readily available for examination by regulatory authorities.
- Compliance Programs - covered entities are expected to establish and maintain effective AML/CTF compliance programs. This includes implementing internal policies, procedures, and controls to detect, prevent, and report money laundering and terrorism financing activities. Staff training and regular independent audits are also important components of these programs.
WHO ARE THE
ML/TF regulators in Canada and what functions do they perform?
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is the regulatory agency responsible for overseeing and enforcing these laws.
Canada actively cooperates with international counterparts in combating money laundering and terrorism financing. This involves exchanging information, cooperating on investigations, and providing assistance to other jurisdictions when requested.
On May 15, 2019, in the wake of four recent reports listed below that were commissioned by the Canadian Government, British Columbia Premier John Horgan announced the establishment of this Commission of Inquiry into Money Laundering in the province, known as the Cullen Commission.
As has been reported, British Columbia is seen as a jurisdiction in which money laundering is flourishing. There appears to be a consensus among law enforcement officials, academics and subject matter experts that this perception is rooted in reality. It is important to note that because of its secretive nature, money laundering activities do not leave behind much clear evidence of their existence, nor do they generally produce witnesses who are motivated to publicly speak about it. Nevertheless, it is a situation that many British Columbians are concerned about.
The Provincial Government has commissioned four recent reports dealing with money laundering in B.C.:
- Dirty Money: An Independent Review of Money Laundering in Lower Mainland Casinos Conducted for the Attorney General of British Columbia https://news.gov.bc.ca/files/Gaming Final Report.pdf Peter M. German, Q.C., March 31, 2018;
- Dirty Money – Part 2: Turning the Tide – An Independent Review of Money Laundering in B.C. Real Estate, Luxury Vehicle Sales & Horse Racing https://news.gov.bc.ca/files/Dirty Money Report Part 2.pdf Peter M. German, Q.C., March 31, 2019;
- Real Estate Regulatory Structure Review https://news.gov.bc.ca/files/Real Estate Regulatory Structure Review Report 2018.pdf Dan Perrin, 2018; and
- Combating Money Laundering in BC Real Estate https://news.gov.bc.ca/files/Combatting Money Laundering Report.pdf Maureen Maloney, Tsur Somerville and Brigitte Unger, March 31, 2019
WHAT ARE THE
Industry sectors subject to ML/TF regulations?
In Canada the main industries that are regulated under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) laws include:
WHAT ARE THE
Penalties for non-compliance with AML/CTF laws?
The penalties for non-compliance with money laundering and terrorism financing laws in Canada can vary depending on the specific offence committed and the provisions violated. The types of penalties that may apply include:
- Administrative Monetary Penalties - the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), has the power to impose administrative monetary penalties (AMPs). These penalties can be significant and can vary based on the severity of the violation and can range from thousands to millions of dollars and are intended to incentivise compliance. FINTRAC must make public all administrative monetary penalties imposed on their website for 5 years.
- Criminal offences - serious breaches of money laundering and terrorism financing laws can result in criminal charges. Criminal penalties can include fines and imprisonment, depending on the nature and severity of the offence. Convictions under the PCMLTFA and related legislation can lead to imprisonment for up to five years for summary conviction offences and up to 10 years for indictable offences.
- Forfeiture of Funds and Assets - authorities have the power to seize and forfeit funds and assets that are determined to be proceeds of crime or linked to terrorist financing activities. This can include freezing bank accounts, confiscating properties, or seizing other assets.
WHAT ARE THE
Largest fines for non-compliance with AML/CTF laws?
FINTRAC has shown they are willing to take action for non-compliance with AML/CTF laws and has used their enforcement powers extensively. FINTRAC’s website contains public notices of all administrative monetary penalties issued for the last 5-years and the key ones are as follows:
- Wealth One Bank - FINTRAC imposed a penalty of CAD$676,500 on Wealth One Bank of Canada for non-compliance with Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations (6 March 2023)
- Laurentian Bank of Canada - FINTRAC imposed a penalty of $486,750 on Laurentian Bank of Canada for non-compliance with Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations (29 April 2022)
- Industrial and Commercial Bank of China (ICBC) ICBC - Federal regulators have fined the Canadian operations of China’s biggest state-controlled bank $701,250 under the Proceeds of Crime and Terrorist Financing Act (29 April 2021)
- Royal Bank of Canada (RBC) - RBC was fined CAD 1.1 million (approximately USD$860,000) imposed for non-compliance with certain anti-money laundering and anti-terrorist financing obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (2015)
- Toronto-Dominion Bank (TD Bank) - TD Bank was fined CAD 1.2 million (approximately USD$940,000) for failure to report a large number of suspicious transactions and other deficiencies in its anti-money laundering controls (2017)
- Bank of Montreal (BMO) - BMO was fined CAD 1.25 million (approximately USD$980,000) for non-compliance with certain reporting obligations related to suspicious transactions (2016)
- Canadian Imperial Bank of Commerce (CIBC) - CIBC was fined CAD 385,000 (approximately USD$300,000) by FINTRAC for failure to report certain suspicious transactions and deficiencies in its compliance program (2017)