Financial Crime World

Regime Review: Balancing Compliance Costs with Private Sector Engagement

As Canada’s economy continues to evolve, a crucial aspect of the government’s review of the money laundering and terrorist financing regime is balancing compliance costs with private sector engagement.

The Advisory Committee on Money Laundering and Terrorist Financing (ACMLTF)

The ACMLTF plays a vital role in this effort by bringing together representatives from the Department of Finance Canada, private sector members, and reporting entity sectors to provide insight into industry perspectives. Through regular meetings, the committee contributes to the development of legislation, regulation, guidance, and policy interpretations that take into account the potential impact on private sector entities.

Private Sector Engagement

The regime’s engagement with the private sector is not limited to ACMLTF. FINTRAC, Canada’s AML/ATF regulator, has established a Guidance and Policy Interpretation Working Group, which consults with reporting entities on new and revised guidance related to regulatory amendments. This collaborative approach aims to ensure that businesses have a clear understanding of their obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

Compliance Facilitation and Non-Compliance Detection

FINTRAC’s risk-based compliance program ensures that Canadian businesses meet their requirements under the PCMLTFA. Effective reporting entity compliance provides FINTRAC with information analyzed to generate actionable financial intelligence for law enforcement, national security agencies, and designated Regime partners. This intelligence is used to detect and address non-compliance.

Here are some key highlights of FINTRAC’s Compliance Engagement Strategy:

  • 166 outreach and engagement activities undertaken in 2019-20
  • Priorities set for engagement activities, including real estate, casino, and money services business sectors

Challenges Remain

Despite progress in compliance facilitation and non-compliance detection, challenges persist. Many smaller reporting entities face obstacles in understanding their ML/TF risks and staying up-to-date on evolving PCMLTFA obligations.

Here are some of the key challenges:

  • Smaller reporting entities may struggle to understand their ML/TF risks
  • Limited resources may make it difficult for these entities to stay up-to-date on evolving regulations

Conclusion

The ongoing review of the regime highlights the importance of balancing compliance costs with private sector engagement. By working closely with industry stakeholders, FINTRAC can ensure that businesses have a clear understanding of their obligations under the PCMLTFA and that effective reporting entity compliance is facilitated. The challenges remaining in this area underscore the need for continued support and guidance from the regulator to help smaller entities navigate the complexities of AML/ATF regulations.

In conclusion, balancing compliance costs with private sector engagement is crucial for ensuring that Canada’s financial system remains robust and resilient against money laundering and terrorist financing threats.