In publishing a review paper on possible amendments to Canada’s anti-money laundering framework earlier this year, the Department of Finance warned that many more types of business could be subject to reporting and other compliance costs, driving up administrative costs in the private sector. The salient points of the proposed changes under discussion are highlighted here.
Reasons For Change
The Government says in the review paper published for public consultation on 7 February 2018, that several legislative and regulatory gaps have been identified in Canada’s anti-money laundering (AML) and combating the financing of terrorism (CFT) framework since its previous review. Furthermore, some shortcomings in the framework were highlighted by the Financial Actions Task Force’s most recent evaluation of the Canadian AML/CFT regime in 2016. The review paper therefore sought the views from interested parties on how the scope of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations can be substantially deepened and widened while not unduly burdening the private sector and compromising individual privacy.
Many of these gaps involve clarifying existing requirements for reporting entities or expanding the scope and depth of the obligations under the PCMLTFA to "high-risk areas". This would entail expanding requirements for Designated Non-Financial Businesses and Professions in relation to Politically Exposed Persons, Head of International Organisations (HIOs) and beneficial ownership.
In addition, the structuring of transactions to avoid reporting obligations would be prohibited and record-keeping and client identification standardised.
Furthermore, business engaged in the following sectors or activities would be brought into the scope of the AML regime:
- White Label Automated Teller Machines (WLATMs)
- Pari-Mutuel Betting and Horse Racing
- Leveraging Information in the Real Estate Sector
- Non-Federally Regulated Mortgage Lenders
- Designated Non-Financial Businesses and Professions' (DNFBPs) Non-Transactional Based Activities
- Company Service Providers
- Finance, Lease and Factoring Companies
- Armoured Cars
- High-Value Goods Dealers
- Jewellery Auction Houses
The review considers whether corporate transparency should be improved with the introduction of mechanisms to improve timely access to beneficial ownership information by authorities, such as with a registry of beneficial ownership, possibly open for public inspection. Timely access for competent authorities to accurate and up-to-date beneficial ownership information is one of the key standards recommended by the FATF.
Currently, corporate information requirements are spread across a number of different statutes at federal and provincial level.
The Government also sought views on the risks associated with legal entities that are not corporations, such as partnerships.
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The paper also raises the possibility of augmenting the administrative monetary penalties for breaches of the PCMLTFA by publicly naming those in receipt of an Administrative Monetary Penalty (AMP). It suggests that persons or entities involved in AMP appeals proceedings should no longer be able to apply for a confidentiality order. Its reasoning is that this represents a "significant departure" from the usual litigation processes.
As is noted in the paper itself, the risk is that by strengthening the AML/CFT framework with these provisions, the compliance burden on business will be significantly increased. Indeed, the paper states that many of the measures that have been identified "could potentially create a large number of new reporting entities, creating burden on the private sector and posing challenges to those responsible for overseeing compliance".
The consultation on the review paper concluded in May 2018, and it is not yet clear when or if it would start to legislate for any changes to the AML/CFT regime. However, the paper provides a very good idea of which direction such reforms would go.