Feds proposed several changes Canada's money laundering legislation
The 2024 budget proposal demonstrates Ottawa’s continued focus on financial crime, says Alana Scotchmer, a partner at Gowling WLG and member of the firm’s financial services regulation group.
“There's a lot in here,” she says. “They're keeping the pressure on, but we still have a long way to go.”
In the recently introduced “Budget 2024: Fairness for Every Generation,” the federal government has proposed several amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).
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These include introducing a process for financial institutions to share information more effectively to counter financial crime. The Office of the Privacy Commissioner of Canada would oversee the process.
The budget includes proposed amendments allowing the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to disclose financial information to support provincial and territorial civil forfeiture offices and Immigration, Refugees and Citizenship Canada. Ottawa also proposed to allow FINTRAC to publicize more information about PCMLTFA violations and to expand PCMLTFA’s application to companies in the factoring, cheque-cashing, and leasing and financing businesses.
Ottawa is proposing amendments to the Criminal Code to allow courts to issue orders requiring banks to keep accounts open during criminal investigations and to issue repeating production orders allowing law enforcement to obtain ongoing information on people connected with criminal investigations.
The budget also announced $1.7 million in funding over two years for the Department of Finance to finalize the Canada Financial Crimes Agency.
According to Scotchmer, what’s needed is more of a commitment to the transformation of FINTRAC. While Canada requires “a ton of reporting” from financial institutions, there is more that can be done with all that information. The available technology, including AI, is an opportunity to manage FINTRAC’s massive data sets more efficiently and effectively.
“What FINTRAC can do for society is huge, but it's a question of taking a process that is not efficient and turning it into an efficient process.”
To effectively address financial crime, she adds that FINTRAC also needs a larger budget and expanded powers.
While Scotchmer says financial crime was not as significant a priority for the federal Liberal government when they took power in 2015, it has become a larger part of the conversation as the global geopolitical situation has deteriorated.
“When we're talking to members of the industry and folks who regulate financial institutions, it's more and more about geopolitical risks. Part of that is the risk that state and non-state actors will try to interfere in our financial services system.”
Ottawa has also had a broader focus on national security in recent years, she says, implementing mechanisms to review financial institutions at various points in their lifecycle and examine whether their operations or ownership pose national security risks.
Scotchmer says that the Cullen Commission revealed that Canada lacked a robust system for countering financial crime. The Cullen Commission explored money laundering in British Columbia and recommended various regulatory changes in 2022. While the report primarily focused on BC, she says, it also “indicted the treatment of financial crime by the federal government,” finding Canada has “big holes in our legislation.”
“Since that time, the government's really been looking at revamping the legislation, figuring out what resources it currently has, and how to deploy those in a smarter way.”
One example is the recent mandate that federal corporations governed under the Canada Business Corporations Act file information on beneficial ownership with Corporations Canada. Beneficial owners are those who, individually or jointly, own, control, or direct at least 25 percent of a company’s shares. Eventually, this information will be held in a searchable online registry.
New FINTRAC reporting requirements will be in force in October, under which financial institutions must report any suspicious transactions. In 2019, FINTRAC started making all administrative monetary penalties public.
“The government has put in place these measures to really try to get a hold of what's happening in terms of financial crime.”
