With major investments in innovation, a clearer legislative roadmap for open banking and the introduction of sweeping regulatory reforms, Canada's 2024 federal budget (Budget 2024), Fairness for Every Generation, aspires to foster a more modern and inclusive financial services industry – one with technology at its heart, consumers top of mind and an expanded arsenal for fighting financial crime.
Below, Gowling WLG's Financial Services and Technology (FSxT) team breaks down the key announcements poised to move the sector forward.
- Consumer-driven (open) banking
- Artificial intelligence (AI)
- Banking
- Lending
- Federally Regulated Financial Institution (FRFI) legislation and related changes
- Insurance
- Crypto-asset tax transparency
- Combatting financial crime
- Economic sanctions
- Innovation
1. Consumer-driven (open) banking
With respect to open banking (or as referred to by the federal government, "consumer-driven banking"), Budget 2024 announced that the Financial Consumer Agency of Canada (FCAC) will be mandated to oversee, administer, and enforce Canada's open banking framework. Framework legislation was not introduced nor a clear timetable for full implementation established, both which had been anticipated. However, the government is expected to introduce the first of two pieces of legislation required to implement the framework this spring, with the remaining elements to be legislated in the fall.
Additional details on the forthcoming legislative package were provided in Canada's Consumer-Driven Banking Framework (an updated version of the previously released 2023 Fall Economic Statement: Policy Statement on Consumer-Driven Banking ). Explore our article Budget 2024: Canada's Consumer-Driven Banking Framework for more information.
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2. Artificial intelligence (AI)
Prior to its release, Prime Minister Justin Trudeau announced that Budget 2024 would include a package containing approximately $2.4 billion worth of measures to secure a Canadian AI advantage. With a view to remaining competitive in the global AI race, the government has allocated:
- $2 billion over five years, starting in 2024-2025, to launch a new AI Compute Access Fund and Canadian AI Sovereign Compute Strategy to increase Canadian business, research and startup access to compute power.
- $200 million over five years starting, in 2024-2025, to spur AI startups to bring new technologies to market and accelerate AI adoption in agriculture, clean technology, health care and manufacturing.
- $100 million over five years, starting in 2024-2025, to be invested in the National Research Council's AI Assist Program to assist Canadian small- and medium-sized businesses and innovators in building and deploying new AI solutions.
- $50 million over four years, starting in 2025-2026, to be delivered through the Sectoral Workforce Solutions Program to support workers who may be impacted by AI (e.g. creative industries).
The governmental also announced several initiatives to ensure the safe and responsible use of AI. Budget 2024 proposes to provide $50 million over five years, starting 2024-2025, to create the AI Safety Institute of Canada with a view to better understanding and protecting against the risks of advanced and generative AI systems. Budget 2024 also proposes to provide $5.1 million in 2025-2026 to equip the AI and Data Commissioner Office with the necessary resources to enforce the proposed Artificial Intelligence and Data Act, and $3.5 million over two years, starting in 2024-2025, to advance Canada's leadership role with the Global Partnership on AI.
Follow Gowling WLG's Artificial Intelligence Law Group for more information on these developments.
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3. Banking
In addition to announcing Canada's open banking framework, Budget 2024 contained several important developments for the banking sector.
Non-sufficient funds (NSF) fees, which can currently be as high as $50, disproportionately affect low-income Canadians and those with a less-than-perfect credit history. Budget 2024 announced measures to regulate NSF fees charged by banks, which will be set out in draft regulations in the coming months. The proposed measures will include:
- Capping NSF fees at $10.
- Mandating that banks notify customers in advance of charging NSF fees, allowing a grace period for additional deposits to avoid the fee.
- Banning multiple NSF fees for repeated transactions.
- Limiting the frequency of NSF fees to one in every 72-hour period.
- Eliminating NSF fees for small overdrawn amounts below $10.
Budget 2024 also revealed that the government has instructed the FCAC to negotiate new agreements with Canadian banks to expand their provision of free and low-cost bank accounts, ranging from $0 to $4 per month. The government has further tasked FCAC with expanding account offerings to include more no-cost transactions, as well as increasing the number of people eligible to receive $0 fee bank accounts.
In a similar vein, the government has allocated $60 million over the next five years, starting in 2024-25, to Prosper Canada, a national charity dedicated to expanding economic opportunity for Canadians living in poverty through program and policy innovation. This funding will support the expansion of free community-based financial assistance services across Canada to people in need.
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4. Lending
Budget 2024 announced the following measures to strengthen the government's initiatives to combat predatory lending in Canada:
- Amending the Criminal Code to bolster the enforcement of criminal interest rates. These amendments will grant law enforcement the authority to prohibit the offering of credit at criminal interest rates and enable prosecutions of illegal and predatory lenders without requiring approval from the Attorney General.
- Collaborating with provinces and territories to improve and harmonize consumer protections nationwide. If necessary, the federal government may take legislative action to support these measures. Key initiatives include:
- Capping the costs of optional insurance products associated with high-cost loans, including payday loans.
- Improving transparency and marketing standards for high-cost and payday loans, potentially restricting advertising for these products.
- Strengthening regulations on payday loans, such as mandating disclosure requirements. This could involve setting minimum loan term durations, requiring installment repayments, and prohibiting loan rollovers.
- Enhancing measures against lead generators through increased action and harmonization.
- Improving monitoring and data collection practices in the high-cost loan market, including payday loans.
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5. Federally Regulated Financial Institution (FRFI) legislation and related changes
The Legislative Measures annex to Budget 2024 outlined several amendments to legislation that will affect the governing statutes of federally regulated financial institutions (FRFIs) and other related legislation. These amendments are outlined below:
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Subject
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Proposed changes
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Extending the Sunset Date of the Financial Institutions Statutes
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Legislative amendments to the Bank Act, the Insurance Companies Act, and the Trust and Loan Companies Act (the Financial Institutions Statutes) to extend the sunset date (beyond which the financial institutions can no longer carry on business) to June 30, 2026, from the current date of June 30, 2025.
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Diversity Disclosure in the FRFI Statutes
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Legislative amendments to the Financial Institutions Statutes to adapt the Canada Business Corporations Act diversity disclosure model for application to FRFIs. The CBCA model requires annual disclosure of diversity on boards and in senior management.
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Amending the Bank Act to Support the CDOR to CORRA Transition
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Amendments to the Bank Act to clarify the definitions of deposit-type instruments and principal-protected notes to ensure that term deposits issued based on interest rate benchmarks, such as the Canadian Overnight Repo Rate Average (CORRA), are deposit-type instruments. This supports continued operations following the phase-out of the Canadian Dollar Offered Rate (CDOR), effective June 28, 2024.
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Increasing OSFI Cashflow Flexibility
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Amendments to the Office of the Superintendent of Financial Institutions Act to increase the maximum amount that may be advanced to OSFI from the Consolidated Revenue Fund at any one time to $100 million from the current $40 million.
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Bank of Canada Act Amendments for Canadian Collateral Management Service
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Amendments to the Bank of Canada Act to ensure that the Bank of Canada continues to be authorized to enter into repo transactions for the purpose of implementing monetary policy once it joins the Canadian Collateral Management Service (CCMS), which is the emerging standard for engaging in tri-party repo transactions in Canada.
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Modernizing International Financial Institutions
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Legislative amendments to the European Bank for Reconstruction and Development Agreement Act and the International Development (Financial Institutions) Assistance Act to provide the authorities to purchase hybrid capital, provide guarantees, or use other innovative financial instruments that may be created from time to time, to support future initiatives at regional Multilateral Development Banks. In addition, the government proposes to amend the Bretton Woods and Related Agreements Act to increase the amount that Canada is permitted to pay the International Monetary Fund for quota subscriptions.
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6. Insurance
Budget 2024 contained a wide range of announcements affecting insurers operating in Canada, with particular focus on the property and casualty insurance sector. The most significant of these announcements concern the national flood insurance program, first announced in Budget 2023. In Budget 2024, the government announced its intention to establish a subsidiary of the Canada Mortgage and Housing Corporation (CMHC) to deliver the flood reinsurance program. The CMHC will receive $15 million in federal funding to advance the implementation of a national flood insurance program by 2025, delivered through reinsurance and an insurance subsidy for households at high-risk of flooding. The government will continue to advance its initiative to introduce a low-cost flood insurance program for high-risk properties within the next 12 months, working together with the provinces and territories and the insurance industry.
In addition to furthering the national flood insurance program, Canada's property and casualty insurance sector should note the following measures proposed in Budget 2024:
- Combatting auto theft:
- Amending the Criminal Code to provide additional tools for law enforcement and prosecutors to address auto theft in Canada.
- Amending the Radiocommunication Act to regulate the sale, possession, distribution, and import of devices used to steal cars.
- Housing:
- Updating the mortgage insurance rules to facilitate obtaining insurance for homeowners who are adding additional units to their homes.
- Predatory lending:
- Capping the costs of optional insurance products for high-cost loans, including payday loans.
Budget 2024 also contained announcements impacting the life and health insurance sector. Most notably, it provides $1.5 billion over five years to Health Canada to support the launch of the National Pharmacare Plan, which is governed by Bill C-64.
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7. Crypto-asset tax transparency
Budget 2024 announced the government's intention to implement the Organization for Economic Cooperation and Development's (OECD) Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard by 2026 to respond to the increased risk of tax evasion brought about by the growth of crypto-asset markets. Transposing the OECD framework into Canadian law would allow for the collection and exchange of information by and between tax authorities representing approximately 50 participating jurisdictions. It is anticipated new annual reporting requirements will apply to crypto-asset service providers resident or carrying on business in Canada beginning in 2027. Budget 2024 proposes to provide $51.6 million over five years starting in 2024-2025 and $7.3 million per year annually to the Canada Revenue Agency to implement and administer these initiatives.
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8. Combatting financial crime
Budget 2024 contained several announcements intended to mitigate the risks of financial crime to Canadians. This continues the government's efforts since 2017 to fight financial crime amid a constantly evolving risk landscape. These announcements propose a suite of changes to financial crime legislation in Canada, the establishment of a new law enforcement agency specifically targeting financial crime, and measures to address international trade-based fraud and money laundering.
Canada's financial crime legislation will undergo numerous changes through Budget 2024. The following changes are planned for the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA):
- Introducing a process overseen by the Office of the Privacy Commissioner whereby reporting entities under the PCMLTFA will be able to share information with each other more effectively to detect financial crime, while preserving privacy protections for personal information.
- Enabling the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to disclose financial intelligence in the following two ways:
- To support provincial and territorial civil forfeiture offices in seizing property linked to unlawful activities.
- To Immigration, Refugees and Citizenship Canada in connection with Canada's citizenship process.
- Expanding the application of the PCMLTFA to factoring companies, cheque cashing businesses and leasing and finance companies.
- Allowing FINTRAC to publicize more information about violations under the PCMLTFA in an effort to enhance transparency and encourage compliance.
- Making additional technical amendments.
In addition, Budget 2024 announced the following proposed legislative amendments:
- Amendments to the Criminal Code:
- Empowering courts to issue orders requiring financial institutions to keep accounts open during investigations of suspected criminal offenses.
- Empowering courts to issue repeating production orders, which would allow law enforcement to obtain ongoing, specified information from accounts linked to persons of interest in criminal investigations.
- Amendments to the Income Tax Act and Excise Tax Act:
- Authorizing Canada Revenue Agency officials conducting criminal investigations to seek general warrants through court applications.
Over the last few years, the government has previewed the introduction of a new financial crimes enforcement agency in Canada. The Canada Financial Crimes Agency (CFCA) will act as Canada's lead enforcement agency for financial crime, which the government intends to empower and staff accordingly to increase Canada's effectiveness in fighting financial crime. Budget 2024 has allocated $1.7 million over two years, starting in 2024-25, to finalize the design and legal framework for the CFCA.
Budget 2024 has also allocated $29.9 million over five years to Canada's customs and immigration enforcement agency, the Canada Border Services Agency (CBSA), starting in 2024-25. Of this amount, $5.1 million is for remaining amortization, and $4.2 million is ongoing funding for the purpose of implementing CBSA's new authorities under the PCMLTFA announced in the Fall Economic Statement 2023.
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9. Economic sanctions
Alongside the measures announced in Budget 2024 aimed at tackling financial crimes, Budget 2024 underscores Canada's continued focus on using economic measures as a tool for protecting Canadians and Canadian values in response to global instability and conflict – including by bolstering Canada's economic sanctions regime and detecting and deterring sanctions evasion. In particular, Budget 2024 reinforces Canada's condemnation of Russia's invasion of Ukraine, with allocations made to measures – ranging from symbolic to substantive – that aim to further sanction Russia's conduct, respond to resulting global instability, and maintain Canada's national security and the integrity of its financial systems.
Symbolically, Canada announced changes to the educational institutions at which Canadian students will be eligible for Canada Student Financial Assistance. Beginning on August 1, 2024, no financial assistance will be provided to Canadian citizens or permanent residents studying at Russian post-secondary institutions. This measure is backed by a reference to sanctions compliance and ensuring federal funding does not flow to institutions that are subject to international sanctions. Many Russian public and financial institutions are sanctioned entities listed in Schedule 1 of the Special Economic Measures (Russia) Regulations, and therefore subject to a comprehensive dealings ban.
More substantively, and as anticipated, Budget 2024 announced Canada's intention to advance as of yet unarticulated further amendments to Canada's sanctions regime, aimed at identifying additional avenues to ensure the effectiveness of sanctions against Russia, in cooperation with its allies. Given the focus of Canada's recent engagement with international partners in this sphere, such as Canada's recent coordinated action with the US to target Belarussian support for the Russian regime, sanctions amendments targeting regimes that support Russia and enable sanctions evasion can be expected.
The most substantive measures announced in Budget 2024 deal with sanctions enforcement, and emphasize and strengthen the existing connections between enforcement measures targeting sanctions evasion and those targeting other financial crimes. In particular, Canada identifies combatting sanctions evasion as one of the rationales for the proposed amendments to the PCMLTFA announced in Budget 2024. For more information on the proposed changes to the PCMLTFA, see the section of this article on Combatting Financial Crime.
This demonstrates Canada's continued intention to facilitate the use of Anti-Money Laundering (AML) and other financial system controls to identify and address sanctions evasion. A continued focus on the role of financial institutions as a gatekeeper for sanctions-contravening activities can be expected.
This announcement is in line with developments over the course of 2023, where FINTRAC has taken on an increasingly significant role in gathering intelligence relating to the contravention and circumvention of Canada's sanctions against Russia, and in collaborating with foreign authorities as part of this exercise. FINTRAC has published bulletins characterizing the proceeds of transactions in circumvention of sanctions as illicit proceeds, dealing in which may be considered a money laundering offence, and providing guidance on the identification of sanctions evasion within the financial services sector.[1]
Furthermore, Bill C-59, An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, is also currently being considered by Parliament. This Bill would amend the PCMLTFA to expressly include sanctions evasion within the scope of the reporting, analysis and disclosure scheme of the PCMLTFA. These amendments would require reporting entities to report where they have reasonable suspicion that a transaction, or attempted transaction, that occurs within the scope of their activities is related to the commission of a sanctions evasion offence.
Finally, Budget 2024 announced a multi-year organizational transformation of Global Affairs Canada (GAC). GAC is the department of the Federal government primarily responsible for sanctions policy development and enforcement. However, notably absent from Budget 2024 is any reference to increased allocations of resources to GAC for sanctions administration and enforcement, or the promised economic sanctions tribunal. GAC had announced this last year, but nothing further has been released. In the meantime, GAC faces an enormous backlog of permit applications, particularly in relation to Russian sanctions. Instead, Budget 2024 refers to allocations to support recruitment and training for the foreign service, compensation for staff at Canada's missions abroad, strengthening GAC's information management & IT systems, and bolstering Canada's presence at the United Nations in New York.
For more information on these topics, please contact a member of Gowling WLG's International Trade & Customs Group.
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10. Innovation
Budget 2024 sets out numerous ongoing measures designed to boost research, innovation and productivity in Canada, including:
- $2 billion to fuel Canada's Global Innovation Clusters and grow these innovation ecosystems to promote commercialization, support intellectual property creation and retention, and help scale Canadian businesses.
- $725 million over five years starting in 2024-25 to allow qualifying businesses to immediately write off the entire cost of investments in patents, data network infrastructure equipment, computers, and other data processing equipment.
- $600 million over four years starting in 2025-26 for future enhancements to the Scientific Research and Experimental Development (SR&ED) tax incentives program.
- $399.8 million over five years starting in 2025-26 to support Canada's sub-atomic physics research laboratory, located on the University of British Columbia's Vancouver campus enabling new medical breakthroughs and treatments, from drug development to cancer therapy.
- $200 million in cash over two years starting in 2026-27 to increase access to venture capital funding for equity-seeking entrepreneurs.
- $176 million over five years, starting in 2025-26, to a national organization that manages Canada's ultra high-speed infrastructure network to connect researchers, educators, and innovators with network speeds hundreds of times faster, and more secure, than conventional home and office networks.
- $14.5 million over two years, starting in 2024-25, to Innovation, Science and Economic Development Canada to ensure that small- and medium-sized clean tech businesses benefit from specialized intellectual property support to grow their businesses and leverage intellectual property.
The government also announced its intention to work with Talent for Innovation Canada to develop a pilot initiative to focus on attracting, training, and deploying top talent across four key sectors: bio-manufacturing; clean technology; electric vehicle manufacturing; and microelectronics, including semiconductors. To ensure regulation keeps pace with the speed of new innovations rather than holding innovation back, the government stated its focus on cutting red tape and advancing work on regulatory "sandboxes" to create temporary rules to enable the testing of products, services, or new regulatory approaches.
Please refer to the following complementary reports by Gowling WLG for information on other announcements contained in Budget 2024:
As we continue to monitor the developments announced in Budget 2024, our team members are available to help stakeholders assess the effects of these proposed changes and industry trends, and provide answers and insights with respect to their adoption and implementation.
Please feel free to contact the authors or a member of our FSxT or Financial Services Regulation groups to learn more.