2024 in review: White collar investigations, defence and compliance

As has been the trend in the last few years, 2024 cannot be considered a robust year for the prosecution of white collar matters in Canada, particularly in the areas of foreign corruption, competition or quasi-criminal securities prosecutions.

Nonetheless, Canadian regulators and enforcement agencies have continued to increase regulation and oversight of several industries in response to the constantly evolving risk environment for cyber and financial crimes, supply chain management and environmental compliance. This poses challenges for large public companies and small private entities alike.

With that in mind, we have identified the top 10 white collar investigation, defence and compliance issues from 2024.

1. Proposed new safeguards against money laundering and terrorist financing in limbo[1]

On November 30, 2024, the Government of Canada introduced draft amendments to regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “PMCLTFA”) which are now in limbo with the prorogation of Parliament. The proposed amendments were expansive and would have broadened the scope of the PMCLTFA regime in several ways including the following:

• Adding several new classes of reporting entities.
• Imposing mandatory reporting obligations where there are issues with opaque beneficial ownership.
• Enhancing the ability for reporting entities to share information.
• Expanding the powers of the Canadian Border Services Agency to combat trade based money laundering.

AML (“anti-money laundering”) is historically a non-partisan issue and it is likely that these changes, at least in some form, will become law although the timing is now in question.

The above proposals followed prior amendments made to the Criminal Code in September 2024 which provided broader powers for authorities to obtain court orders to compel financial institutions to keep an account open that is suspected to be involved in money laundering and to provide ongoing updates on activity within that account. These amendments are meant to assist authorities with money laundering investigations that might otherwise be stymied when a bank chooses to derisk the account holder.

Further amendments also widened access to digital asset warrants and restraint orders, allowing digital currency to be more easily seized and/or restrained where it is suspected of being the proceeds of crime.

In Re Durham Regional Police, 2024 ONSC 1928, the court confirmed that, in light of the availability of special warrants for digital assets (and related restraint and management orders), a general warrant is not available to the police for the search and seizure of cryptocurrency.

For more information, please see:

• Ottawa proposes new measures to fortify Canada's frontlines against money laundering and terrorist financing
• Strengthening Canada's response to financial crime: Changes for the financial services sector announced in the 2024 Fall Economic Statement

2. Mixed year for whistle-blower protections[2]

2024 was an interesting year for developments in the law of whistle-blowing protections, which emphasized the prospect of both greater and less substantial protections for complainants in the public and private spheres.

In Ottawa, Bill C-290 advanced to a second reading in the Senate. Bill C-290 proposed increased whistleblower protections for public service employees by amending the Public Servants Disclosure Protection Act[3] (the “Public Servants Act”). It expands the list of protected parties to include additional categories of public servants and extends the list of acts that constitute reprisal against whistleblowers. It also protects disclosures made to certain persons, extends the filing period for reprisal complaints and adds a duty to provide support to public servants.

By contrast, in Taylor v. Metrolinx,[4] the Ontario Superior Court of Justice ordered disclosure of the identity of a whistleblower so that a defamation suit could proceed. In that case, the applicants sought the identity of an individual who had reported to Metrolinx that the applicants and their corporation had committed fraud and embezzlement.

The Court held that the applicant’s interest in identifying the complainant in pursuit of their claims against them for defamation and other causes of action outweighed Metrolinx’s concern for the protecting the complainant’s confidentiality and safety.

In applying the Wigmore test, the Court found that the report made by the complainant did not qualify as confidential source information as the language in Metrolinx’s publicly accessible privacy policy warned of the potential disclosure of the complainant’s identity.

The Court drew an important distinction between outsiders who submit unsolicited allegations to a business (which was the case here) and an employee within a company who has a stake in maintaining relationships with employers and co-workers and specifically seeks protection from reprisal through whistle-blower protections.

3. Supreme Court of Canada strengthens privacy protection of consumer/client digital information in the hands of businesses

As Canadian courts continue to grapple with increasing cyber crime, the Supreme Court of Canada in R v Bykovets[5] issued a landmark 5-4 decision that police require prior judicial authorization to obtain the IP address of a user in the possession of a third-party business.

In that case, Mr. Bykovets was charged with making fraudulent online purchases at a liquor store. As part of their investigation, the police approached the third-party payment processing company used by the liquor store for online purchases and requested the IP address for the user who made the fraudulent purchases. The police then obtained a production order  compelling the internet service provider (“ISP”) to produce the name and  address associated with the IP address.

At trial, Mr. Bykovets argued that the police breached his s. 8 Charter right to be free from unreasonable search and seizure when they obtained the IP address without prior judicial authorization. The trial court found that the appellant had no reasonable expectation of privacy in his IP address and therefore prior judicial authorization was not required. The appellant was convicted, and the conviction was upheld at the Court of Appeal.

In overturning the conviction, the majority of the Supreme Court of Canada held that IP addresses effectively function as a “link” to a digital archive which “may betray deeply personal information.” For this reason, individuals have a reasonable expectation of privacy in their IP address and a search warrant or production order is required before this information can be produced.

The minority found that the only information revealed by the IP address was the user’s ISP, which is not information that goes to the user’s biographical core. For this reason, there was no reasonable expectation of privacy in the IP address and no requirement for the police to seek prior judicial authorization.

4. Increasing trend toward prohibiting use of ephemeral message apps in the workplace

In Canada and the US, there has been increasing scrutiny of the use of ephemeral messaging apps in the workplace and for professional purposes.

Pure ephemeral messages are self-destructing messages with no backup or archiving option. Unlike a typical text message that is sent and remains on a user’s and receiver’s phone until manually deleted, ephemeral messages delete themselves after a set time. Some examples of platforms that offer this type of feature are Signal, WhatsApp, WeChat and Snapchat.

In the US, the Federal Trade Commission and Department of Justice issued a press release in January of 2024 specifically addressing the use of ephemeral messaging, stating that the legal responsibility to preserve documents when involved in a government investigation extends to “new methods of collaboration and information sharing tools, even including tools that allow for messages to disappear via ephemeral messaging capabilities.”

In Canada, the Department of Education in Nunavut came under scrutiny following a review by the Information and Privacy Commissioner, who raised concerns about senior management’s use of the messaging app WhatsApp to conduct departmental business, recommending that its use be discontinued. The Commissioner expressed concerns about the lack of transparency and accountability associated with using a third-party messaging app, noting that “WhatsApp messages do not go through government servers and are not accessible in the event of an access request.”

For more information, see Department of Education (Re), 2024 NUIPC 19 (CanLII).

5. Supreme Court of Canada rules administrative monetary penalties for securities fraud are discharged in bankruptcy

In Poonian v BC (Securities Commission)[6], the Supreme Court of Canada held that the administrative monetary penalties ordered by provincial securities regulators do not survive an order for the discharge of a bankrupt. Disgorgement orders, on the other hand, resulting from the same fraudulent conduct are not released and are payable by the bankrupt despite their discharge.

The Court provided considerable commentary on the exceptions to discharge under sections 178(1)(a) and (e) of the Bankruptcy and Insolvency Act. Section 178(1)(a) provides that a bankrupt cannot be discharged from “any fine, penalty, restitution order…imposed by a court in respect of an offence…”. The Court held that a “court” does not include an administrative tribunal and therefore the penalty and the disgorgement order made by the BC Securities Commission against the Poonians would not be captured by section 178(1)(a).

The Court also noted that section 178(1)(a) does not contemplate registration by a court of a fine imposed by an administrative tribunal, since the exception requires the imposing of a fine rather than the passive act of registering it.

Section 178(1)(e), provides an exception to discharge for a “debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation.” The Court found that the disgorgement order made by the BC Securities Commission resulted directly from a fraudulent misrepresentation and represents the value of the bankrupts’ fraud. It therefore falls under the exception in section 178(1)(e) and survives the discharge of a bankrupt.

The administrative monetary penalty, however, arose indirectly as a sanction by the Commission for making deceitful statements to investors. Given the absence of a direct link to the debt or liability, the exemption in section 178(1)(e) does not apply and the administrative monetary penalty would not survive discharge from bankruptcy.

Following the release of the Supreme Court of Canada decision in Poonian, the British Columbia Securities Commission called for an amendment to the Bankruptcy and Insolvency Act as the decision may compromise securities regulators’ ability to enforce monetary orders in respect of an insolvent wrongdoer.

6. Canadian Government makes substantial changes to its integrity regime for procurement processes[7]

Canada’s Integrity Regime, now known as the Office of Supplier Integrity and Compliance (“OSIC”), first came into public focus in 2018 as a result of corruption and bribery charges against the Canadian engineering firm SNC-Lavalin (“SNC”), which threatened to make SNC ineligible for government contracts pursuant to the OSIC’s Ineligibility and Suspension Policy.

On May 31, 2024, the Government of Canada introduced revisions to the Ineligibility and Suspension Policy (the first amendments since 2016), drastically expanding the list of events giving rise to debarment (i.e., ineligibility for government contracts), eliminating prescribed periods of ineligibility and providing a list of discretionary factors to be considered when determining an ineligibility period.

a) Additional grounds for debarment

Prior to the recent revisions, offences resulting in automatic debarment were limited to offences related to fraud on the government, bribery, forgery, stock market manipulation, money laundering and secret commissions under the Criminal Code, certain offences under the Competition Act such as bid rigging and false or misleading advertising and bribery and accounting offences under the Corruption of Foreign Public Officials Act.

The amended policy now adds the following:

• Offences related to terrorist financing, municipal corruption, human trafficking, and fraud (not limited to fraud on the government), under the Criminal Code.
• Trafficking and importing offences under the Controlled Drugs and Substances Act.
• Offences related to illegal contributions under the Canada Elections Act.
• Offences related to fraud, collusion or insider trading under provincial securities legislation.
• Foreign offences and provincial offences that are similar to the listed offences under the Criminal Code.
• Violations of prohibitions under Canadian economic sanction law, including the United Nations Act, Special Economic Measures Act, the Justice for Victims of Corrupt Foreign Officials Act or the Freezing Assets of Corrupt Foreign Officials Act.

b) Factors to consider in establishing ineligibility

The previous Ineligibility and Suspension Policy set out prescribed periods of debarment based on the circumstances that led to the finding of ineligibility. The revised policy replaced the prescribed periods with discretionary factors to be considered by the Registrar.

These factors involve an assessment of the seriousness of the conduct at issue versus the steps taken by the supplier to ensure that similar conduct does not recur. In assessing the seriousness of the conduct, the Registrar will take into account, among other things, the following:

• The supplier’s role in the conduct.
• The degree of planning involved and the duration and complexity of the scheme.
• The extent of senior management involvement in the offence.
• The profits realized by the supplier.
• The supplier’s previous conduct.

In assessing the mitigation measures implemented by the supplier the Registrar will consider the following:

• Whether voluntary disclosure of the offence was made to the OSIC.
• Whether the supplier conducted a thorough. internal investigation and cooperated with authorities.
• Whether disciplinary action was taken against individuals involved in the offence.
• Whether internal control systems were in place at the time of the conduct at issue.
• The adoption of an effective compliance program that will prevent recurrence and implementation of other measures recommended by the Registrar.
• Insight of senior management into the seriousness of the conduct.

7. Amendments to the Competition Act tighten merger controls and scrutiny of greenwashing, expand private access to the Competition Tribunal[8]

On June 20, 2024, the changes to the Competition Act introduced by Bill C- 59, the Fall Economic Statement Implementation Act, 2023 became law. The amendments modernized Canada’s competition regime, notably tightening controls around anti-competitive mergers and other prohibited conduct while increasing accessibility for private parties to obtain standing before the Competition Tribunal.

The amendments created a rebuttable presumption that a merger is anti-competitive “if it significantly increases concentration or market share.” The presumption will apply if:

• The concentration index after the merger increases or is likely to increase by more than 100; and either:
  • The concentration index after the merger is or is likely to be more than 1,800.
  • The combined market share of the parties to the merger or proposed merger is or is more likely to be more than 30 per cent.

The amendments also addressed “greenwashing”, the practice of making false or misleading claims about a company's environmental impact. The changes require companies to substantiate environmental claims with testing in accordance with an internationally recognized methodology.

Coming into force June 20, 2025, the Competition Act will also extend private access rights to cases involving deceptive marketing practices and create a civil provision dealing with anti-competitive agreements. Importantly, the changes allow the Competition Tribunal to order those who contravene the Competition Act to make monetary payments to persons affected by the anti-competitive conduct.

8. Public Safety Canada provides updated guidance on the interpretation of the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Supply Chains Act”)

The Supply Chains Act (sometimes referred to as the “Modern Slavery Act”) came into force on January 1, 2024. The Act requires businesses to publicly report the measures they have taken to address the risk that forced labour and child labour has been used in their supply chain.

Many businesses faced challenges interpreting the novel legislation to determine their compliance obligations. In response, on November 24, 2024, Public Safety Canada provided the following “Updated Guidance” to address any ambiguities under the Supply Chains Act.

A concise summary of the guidance can be found here. In short, the guidance clarifies the definition of an “entity” and the triggering criteria for reporting obligations, including the circumstances in which an entity will be considered to be importing goods into Canada.

9. Employers to face increased exposure as a result of amendments to Ontario’s Occupational Health and Safety Act[9]

Changes to Ontario’s Occupational Healthy and Safety Act (the “OHSA”) expand the employer’s obligations in the virtual work environment, and similarly broaden the powers of the Chief Prevention Officer (the “CPO”) to monitor and investigate employer conduct to ensure compliance with the OHSA.

a) OHSA amended to address virtual work environments

On October 28, 2024, Bill 190, the Working for Workers Five Act, 2024, received royal assent and has expanded the scope of the OHSA’s application to include work outside the traditional employment environment.

Pursuant to section 3(1.1), the OHSA now applies to “telework” performed in a private residence. The OHSA excludes “private residence” from the definition of “industrial establishment” to ensure workspaces located in one’s home are not considered offices for the purposes of the OHSA.

Bill 190 expands the definition of “Workplace Harassment” and “Workplace Sexual Harassment” under the OHSA to include unwelcome behaviors occurring “virtually or through the use of information or communication technology.”

The amendments represent the Ontario government’s increased efforts to regulate non-traditional work environments. Heading into the new year, employers should make sure they are equipped to meet their obligations under the OHSA by crafting company policies that address the challenges of the virtual workplace.

b) Increased minimum fine and expanded powers for Chief Prevention Officer (“CPO”)

On December 19, 2024, Bill 229, the Working for Workers Six Act, 2024, received royal assent. Significantly, Bill 229 provides for a minimum $500,000 fine for a corporation found guilty of a second offence in a two-year period involving a death or serious injury of a worker.  

Bill 229 also expanded the powers of the CPO, including the ability to assess and approve training programs which were delivered outside of Canada and to establish, amend or revoke policies for general training requirements under the OHSA.

10. Courts confirm duty to cooperate with inspectors in OHS and Environmental inspections

In 2024, courts in Alberta and Quebec reiterated the duty to cooperate with inspectors in regulatory investigations.

In Neustaedter v. Alberta (Labour Relations Board),[10] the Alberta Court of Appeal upheld an appeal from the Alberta Labour Relations Board confirming penalties under the Alberta Occupational Health and Safety Act (“OHSA”) for interfering with and refusing to participate in interviews related to a workplace fatality. The penalties were levied after the counsel for the company refused to allow employees to be interviewed by OHS officers unless counsel was present.

In dismissing the appeal of the penalties, the Alberta Court of Appeal noted that section 51(j) of the OHSA expressly gives OHS officers the authority to interview and obtain statements for the purposes of the OHSA; section 53(2) mandates that witnesses comply with an OHS officer’s request for information; and section 54 requires witnesses to cooperate. 

The Alberta Court of Appeal indicated that it did not find any authority to suggest that the section 7 Charter “principles of fundamental justice” include an entitlement to have legal counsel present during such an interview, noting that “even in criminal cases, where the jeopardy is higher, there is no right to have counsel present during police questioning.”

A similar principle emerged in the context of environmental inspections in a recent enforcement action against ArcelorMittal Exploitation Minière Canada s.e.n.c. (“ArcelorMittal”) in Quebec.

In that case, officers conducting an inspection requested certain documents from ArcelorMittal to verify compliance with the Metal and Diamond Mining Effluent Regulations and Fisheries Act, which ArcelorMittal refused to provide. The Fisheries Act prohibits obstructing or hindering an inspector who is carrying out legislated duties or functions. It also imposes a duty on individuals to provide “reasonable assistance” to an inspector and provide any relevant information reasonably requested.

In November 2024, ArcelorMittal plead guilty to violating the Fisheries Act for obstructing enforcement officers in the performance of their duties and was ordered to pay a fine of $100,000 CAD.

Although an exemplary case in the Fisheries Act context, similar (and potentially graver) consequences can arise from failing to cooperate with an inspection in most federal and provincial legislative regimes.

To ensure regulatory compliance while minimizing reputational and financial risk, it is prudent to implement a plan addressing the actions to be taken during environmental inspections and investigations. Because of the inherent overlap between investigations and inspections, it is important that both regulatory activities be addressed in a comprehensive plan, particularly since an inspection may turn into an investigation.

For more information, please see Environmental inspections in Canada: Recent case highlights the potential consequences of failing to cooperate

Conclusion

Heading into 2025, it is clear that proactive risk assessment provides the best platform for a business’s continuing sustainability and growth.

At Gowling WLG, we can work with your business to identify and navigate the complex compliance risks that the Canadian business environment now presents. The implementation of comprehensive compliance plans will act as pre-crisis management allowing your business to avoid disruption and continue to flourish.