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Canada’s Battle Against Money Laundering and Terrorist Financing: A Comprehensive Regime

Ottawa - The Canadian government has taken significant steps to combat money laundering and terrorist financing through a comprehensive regime, comprising three pillars: Prevention and Detection, Information Sharing, and Disruption.

Prevention and Detection

At the heart of Canada’s anti-money laundering (AML) and anti-terrorist financing (ATF) regime are reporting entities, such as financial institutions and certain non-financial businesses and professions, which are required to implement prevention and detection measures under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). These entities must:

Identify their clients
Keep records
Establish and administer an internal AML/ATF compliance program

To prevent money laundering and terrorist financing, Canada also requires greater transparency in corporate and trust ownership. Financial institutions, money services businesses, life insurance dealers, and securities dealers must identify the beneficial owners of corporations and trusts with whom they do business. Provincial and federal corporate laws, registries, and securities regulations also contribute to preventing and detecting money laundering and terrorist financing.

Canada’s AML/ATF regime includes a mandatory reporting system for suspicious financial transactions, large cross-border currency transfers, and certain other prescribed transactions. Reporting entities must:

Identify money laundering and terrorist financing risks
Put in place measures to mitigate those risks through ongoing monitoring of transactions and enhanced customer due diligence measures

FINTRAC, Canada’s financial intelligence unit, analyzes information submitted by reporting entities and disseminates the results to regime partners under prescribed conditions respecting individuals’ privacy. This information can be used to support domestic and international investigations and prosecutions, or in the form of trends and typologies reports to educate the public on money laundering and terrorist financing issues.

Disruption

The final pillar of Canada’s AML/ATF regime focuses on disrupting money laundering and terrorist financing activities. Regime partners, such as CSIS, CBSA, and the RCMP, supported by FINTRAC’s intelligence disclosures and analysis activities, undertake financial investigations in relation to money laundering, terrorist financing, and other profit-oriented crimes. CRA also plays an important role in investigating tax evasion and detecting charities that may be involved in illegal activities.

International Cooperation

Canada recognizes the importance of international cooperation in combating money laundering and terrorist financing. The country is a founding member of the Financial Action Task Force (FATF) and plays an active role in developing international AML/ATF standards and monitoring their implementation among FATF members. Canada also commits to sharing financial intelligence with international partners to support global efforts to combat money laundering and terrorist financing.

Chart 1: FINTRAC Case Disclosure from 2015-16 to 2019-20

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The Canadian government is committed to a publicly accessible beneficial ownership registry of federally incorporated businesses by 2023, as announced in Budget 2022. This initiative will enhance transparency and help prevent and detect money laundering and terrorist financing.

Conclusion

Overall, Canada’s AML/ATF regime is designed to prevent and detect money laundering and terrorist financing, share information with partners, and disrupt illegal activities. Through this comprehensive approach, the government aims to protect the financial system, promote economic stability, and ensure the security of Canadians.