On Nov. 30, 2024, the Government of Canada published draft amendments to regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the "PCMLTFA"). The stated purpose of the proposed amendments is to strengthen Canada's Anti-Money Laundering and Anti-Terrorist Financing ("AML/ATF") framework and address evolving threats to Canada's financial system[1] while aligning the country with international standards set by the Financial Action Task Force,[2] the international AML/ATF standard-setting body.

The proposed amendments implement key commitments from the last three federal budgets, as well as the 2023 Fall Economic Statement, and complement recent changes made to the PCMLTFA in Budget Implementation Act, 2024, No. 1, which received Royal Assent on June 20, 2024.

The proposed amendments are planned to come into force in two phases. Those related to information sharing would come into force immediately upon publication of the final regulations in the Canada Gazette. The other amendments would come into force on Oct. 1, 2025, to allow in-scope businesses to prepare to comply with the new requirements.

What the proposed amendments mean for business

  1. Expanding the scope of regulated entities

    The proposed amendments would expand the list of regulated entities under the PCMLTFA to include factoring, cheque-cashing, and leasing and financing companies.

    For leasing and financing companies, only financing and leasing arrangements for business purposes, passenger vehicles and goods valued above $100,000 are proposed to be in scope. Financing and leasing services for low-value goods would be excluded from the PCMLTFA.

    Factoring companies, cheque-cashing companies and leasing and financing companies that are within scope will be regulated by the Financial Transactions and Reports Analysis Centre of Canada ("FINTRAC") and required to implement compliance measures set out in the PCMLTFA. These include AML/ATF compliance programs, customer due diligence, record-keeping, and reporting of suspicious transactions. Such companies would also be required to verify identity and keep a record of every transaction of $3,000 or more.

    An administrative monetary penalty for non-compliance is proposed with a range of $1,000 to $500,000 depending on the seriousness of the violation.

  2. Enhancing transparency around beneficial ownership

    For current reporting entities regulated by FINTRAC, the proposed amendments would enhance the accuracy of the beneficial ownership registry of corporations governed under the Canada Business Corporations Act by requiring a mandatory report where a reporting entity determines that there is a material discrepancy between what is reported on the register and what has been reported by a company to the reporting entity regarding their beneficial ownership.

    Importantly, this mandatory reporting would only be triggered where the reporting entity determines that there is a high risk of a money laundering or terrorist financing offence. Where a material discrepancy is identified, reporting entities would have 15 days to report the discrepancy unless the discrepancy is resolved.

    No explanation is provided as to what constitutes the resolution of a material discrepancy, but presumably it involves the correction of the information provided in the registry or the information provided to the reporting entity. Similarly, no definition is provided as to what constitutes a "material discrepancy" although the draft regulations specify that spelling errors and minor variations in name or address would not constitute a material discrepancy.

    Reporting entities that fail to submit a mandatory report where required could be subject to an administrative monetary penalty of between $1 and $1000 per violation.

    Companies that are required to provide beneficial ownership information to Corporations Canada would be further incentivized to ensure the accuracy of the information provided, as discrepancies could lead to mandatory reporting and potential scrutiny.

  3. Modernizing information sharing among reporting entities

    The proposed amendments would grant reporting entities expanded abilities to voluntarily share personal information without an individual's knowledge or consent where the disclosure is reasonable to detect or deter money laundering, terrorist financing, and sanctions evasion. This enhanced information sharing, which would be overseen by FINTRAC and the Office of the Privacy Commissioner of Canada ("OPC"), would necessitate updates to data management and privacy protocols.

    Information sharing between reporting entities would require a Code of Practice on how the information is to be shared and how privacy protections for personal information that is received will be maintained. This Code must be approved by the OPC and incorporate the following requirements:

    • Use of Information requirements: Codes must outline the regulated entities that are subject to the Code, the purpose and manner in which personal information may be disclosed without knowledge or consent, data retention measures, and compliance with privacy laws under PIPEDA.
    • Timeline for OPC approval: The OPC has 90 days to approve submissions, with a potential 15-day extension. Unanswered submissions are deemed approved.
    • Renewals: Codes must be resubmitted every five years or following material modifications.
    • Complaints: Individuals can file complaints with the OPC for alleged non-compliance with a Code.

      These provisions aim to balance enhanced collaboration with privacy safeguards. There is at least some risk, however, that the additional regulatory burden and potential for complaints may dissuade information-sharing among entities.

  4. Strengthening border controls

    Ottawa proposes to grant the Canada Border Services Agency (CBSA) the power to seize and forfeit goods where it has reasonable grounds to believe that the goods are proceeds of crime or related to money laundering, terrorist financing or sanctions evasion.

    Traders (persons or entities) would be required to attest to the CBSA that imported and exported goods are not proceeds of crime or related to money laundering, terrorist financing, or sanctions evasion. They would also be required to attest that the goods represented as being imported/exported are, in fact, being imported/exported, as a means to combat the use of phantom shipments.

    Entities involved in importing and exporting goods would need to implement systems to report transactions to the CBSA, ensuring adherence to the new trade-based financial crime reporting obligations. Record-keeping requirements would also be imposed similar to what is already required for customs and tax purposes.

    An administrative monetary penalty for non-compliance is proposed, with penalties ranging from $1 to $500 (for cases involving full disclosure and no reasonable ground to believe the violation was intentionally committed), or the value of the goods or alternatively the value of the financial transaction purporting to pay for the goods (in cases of intentional violations).

Looking ahead and submitting feedback

Stakeholders are encouraged to provide their input on the proposed amendments by Dec. 30, 2024. The consultation presents an important opportunity for industry participants to shape the future of Canada's AML/ATF framework and address potential implementation challenges.

More broadly, Canadian businesses should determine whether the proposed amendments would apply to them and require changes to their business practices. Reporting entities, in particular, should review their current compliance frameworks and prepare for these upcoming changes to the PCMLTFA.

All in-scope businesses should monitor for the release of the final version of the proposed amendments in the Canada Gazette in 2025. Implementing robust systems and processes now can ensure readiness and minimize risks of non-compliance.

Our White Collar Defence & Investigations, International Trade and Customs and Financial Services Regulation teams at Gowling WLG remain committed to providing you with strategic guidance and updates on these developments. We would also be pleased to advise you in preparing comments for the consultation on the proposed amendments. Please contact us for further details on how these policy changes may affect your business operations and for tailored advice on navigating the evolving trade and regulatory landscapes.

[1] Among these threats are risks identified in reviews conducted in recent years, including the 2018 Parliamentary Review of the PCMLTFA, the Commission of Inquiry into Money Laundering in British Columbia, known as the "Cullen Commission," and other governmental reports.

[2] Implementing these recommendations will help Canada to prepare for its next mutual evaluation by the Financial Action Task Force in 2025–26.