Tackling ‘snow washing’: expanding Canada’s anti-money laundering regime

Heading into 2025 and beyond, businesses will be subject to a variety of new and changing obligations in the anti-money laundering (AML) and anti-terrorist financing (ATF) sphere in Canada. Businesses will need to keep abreast of these developments and ensure their compliance programs are robust in their ability to address AML, ATF and sanctions requirements, as well as to respond to changes.

Work is also still needed for businesses to adapt to changes already made in 2023 and 2024, as the federal government and related agencies made concerted efforts to strengthen Canada’s AML and ATF regime. These changes followed increased domestic and international attention and scrutiny in recent years and are being made in preparation for Canada’s upcoming Financial Action Task Force evaluation, set to begin in December 2025.

Given the attention being paid to these issues, further developments are expected in the coming years as the federal government pursues the strategies set out in Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime Strategy 2023–2026 [PDF].

Legislative amendments coming into force

Amendments to PCMLTFA

Many legislative amendments that have been adopted during 2023 and 2024 are coming into force in 2025 and beyond. Targeted at enhancing Canada’s ability to combat money laundering, terrorist financing and sanctions evasion, these changes provide greater powers to regulators. Certain of these changes will require businesses to review and revise their compliance programs, policies and procedures.

In its 2024 budget [PDF], the federal government announced various legislative amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to combat money laundering, terrorist financing and sanctions evasion. These amendments arose in part out of an ongoing 2023 parliamentary review of the PCMLTFA and from public consultations [PDF] held by the Department of Finance and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) in 2023. The consultations investigated risks and vulnerabilities emerging from new financial technologies and the global threats to Canada’s national and economic security.

Some of these amendments to the PCMLTFA are already in force. First, the domestic and foreign money services business categories (MSBs) of reporting entities were expanded to include armoured car services. Further, the list of entities and bodies to whom FINTRAC is permitted to disclose information was expanded to include Immigration, Refugees and Citizenship Canada. The goal was to strengthen the integrity of Canada’s citizenship process.

FINTRAC is now also permitted to publicize additional information regarding administrative monetary penalties. This may include the relevant facts, analysis and considerations that formed part of a FINTRAC decision. As a result, we expect to see more fulsome reasoning from FINTRAC going forward, which should be of assistance to businesses seeking to determine how to comply with applicable requirements.

Businesses will need to keep abreast of regulatory developments and ensure their compliance programs are robust in their ability to address AML, ATF and sanctions requirements, as well as to respond to changes.

Further amendments to the PCMLTFA propose to expand reporting obligations to include transactions suspected to be related to sanctions evasion. Finally, additional regulations announced last year came into force. These regulations expanded the list of reporting entities to include mortgage lenders, administrators and brokers.

Some key amendments are not yet in effect and may come into force over the course of 2025 or beyond. These amendments include welcome changes related to information sharing that are intended to allow reporting entities to share individuals’ personal information where disclosure is reasonable for the purpose of detecting or deterring money laundering, terrorist financing or sanctions evasion. The amendments further permit information sharing between FINTRAC and provincial civil forfeiture offices to support seizure of property linked to unlawful activity. Other amendments will further expand the list of reporting entities to include cheque cashing businesses within the definition of MSB.

In addition, amendments creating a new regime administered by the Canada Border Services Agency (CBSA) are not yet in force. These amendments would facilitate, among other things, the reporting, search, and seizure of goods being imported and exported in and out of Canada to identify connections to proceeds of crime, money laundering, terrorist financing, and sanctions evasion.

Moreover, the ambit of the PCMLTFA continues to expand. The federal government has proposed that the regime cover all factoring companies, leasing companies and finance companies, although no legislative changes have been introduced to date. Draft legislation and regulations have, however, been published that would further expand the list of reporting entities to include title insurers and white-labelled automated teller machine operators.

Other regulatory proposals that may come into force in the coming months include the creation of a new sanctioned property report, additional criminal record check requirements for MSBs, and new requirements for casinos to inquire and report on the ultimate beneficiary of casino disbursements.

With ongoing efforts to expand both the scope of the PCMLTFA and the resources available to the regulatory authorities having responsibility for monitoring and enforcing AML and ATF requirements, one thing seems to be certain — that compliance and reporting obligations for businesses will only continue to increase.

Amendments to Criminal Code and to taxation statutes

Amendments to the Criminal Code aimed at combating money laundering, terrorist financing and sanctions evasion came into force on September 18, 2024. These amendments, among other things, provide new and enhanced tools in connection with investigations. Investigators can now obtain court orders requiring financial institutions to keep accounts open to assist in the investigation of suspected criminal offences. Repeating production orders can now be granted to authorize law enforcement to obtain ongoing, specified information on account activity connected to a person of interest in a criminal investigation.

Further, the amendments have expanded the circumstances in which special digital asset warrants and restraint orders may be issued. Additionally, the amendments have broadened the types of financial data authorities are able to request through production orders under the Criminal Code to include the account numbers and identifiers associated with digital assets.

Amendments to the Income Tax Act and Excise Tax Act that authorize Canada Revenue Agency (CRA) officials to seek general warrants through court applications are also now in force.

Together, these legislative amendments expand the powers of law enforcement and various regulatory authorities, and lend greater strength to Canada’s efforts to fight money laundering, terrorist financing and other financial crimes.

Transparency in beneficial ownership

Beneficial ownership transparency continued to be in the spotlight in 2024, with the federal government’s beneficial ownership registry legislation coming into force in January 2024. Experts and advocacy groups had been calling for the introduction of a mandatory beneficial ownership registry in Canada for many years, seeing it as one of the most powerful tools for governments to combat money laundering, tax evasion, and terrorist financing.

Federally incorporated corporations governed by the Canada Business Corporations Act are now required to file prescribed beneficial ownership information with Corporations Canada. Some of the reported information is made publicly accessible on Corporations Canada’s free online registry.

The registry is currently live and expected to become substantially complete in early 2025. This publicly accessible information should act as an important tool for collecting and verifying beneficial ownership information. The registry should benefit not only enforcement authorities, but also companies with beneficial ownership and know-your-client obligations under the PCMLTFA.

At the provincial level, Québec’s beneficial ownership registry legislation was passed in 2023, and the registry became live in July 2024. British Columbia’s beneficial registry legislation is currently in progress.

As we move into 2025, it remains to be seen whether the other provinces will follow suit as well — which will be crucial for beneficial ownership transparency to be effective in combatting money laundering in the long term.

Enhanced enforcement

Over and above legislative change, Canada continues to enhance its AML and ATF enforcement toolkit. Increasingly, monies are being allocated by the federal government to enforcement authorities other than FINTRAC. With enhanced funding, the hope is that increased law enforcement resources will be able to drive greater efforts to combat financial crimes.

The 2024 federal budget allocated $1.7 million over two years to the Department of Finance to finalize the design and legal framework of the Canada Financial Crimes Agency (CFCA). As we have previously written in a December 11, 2023, article, the CFCA was announced by the federal government in 2022 to act as Canada’s lead enforcement agency against financial crime. As currently envisioned, the CFCA would act as a nation-wide agency whose sole purpose is to investigate highly complex crimes and enforce federal law in this area. It would also bring together existing law enforcement resources of the RCMP, FINTRAC, and the CRA.

The 2024 budget also allocated $29.9 million over five years to the CBSA to support the implementation of its new authorities under the PCMLTFA to combat international financial crime. This funding reflects the government’s increasing attention to “trade-based” financial crime, which disguises proceeds of crime as legitimate international trade transactions. The federal government has also announced its intention to create a “Trade Transparency Unit” to detect, deter, and disrupt trade-based financial crime.

In an effort to provide long-term funding to FINTRAC, in early 2024 the funding of FINTRAC’s compliance program shifted from taxpayers to reporting entities subject to the PCMLTFA. The change allows FINTRAC to recover the costs of its compliance program and related activities from the entities it oversees. Simultaneously, FINTRAC has seen an increase in enforcement. In 2023–2024, FINTRAC issued 12 Notices of Violation of non-compliance to businesses for a total of more than $26 million. We expect this trend to continue over the course of 2025.

Focus for 2025 and beyond

There is a clear and increasing focus in Canada on AML and ATF compliance and enforcement that has been building over the past several years. This focus reflects the federal government’s strategy set out in Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime Strategy 2023–2026 [PDF]. At the core of the strategy is a commitment to address AML and ATF gaps, including weaknesses in information sharing, low levels of investigations, and prosecutions, and legislative and regulatory gaps.

Going forward, businesses should expect ongoing and incremental changes to Canada’s AML and ATF landscape during the remainder of the 2023–2026 strategy period. At the same time, businesses should be live to anti-money laundering, terrorist financing and sanctions compliance, including a focus on understanding the counterparties with whom they transact. While this may look different for a regulated entity under the PCMLTFA than for a business that is not subject to those formal statutory requirements, anti-money laundering will continue to be at the forefront for the government and enforcement authorities throughout 2025, and, accordingly, should be front of mind for all businesses as well.