Financial Crime World

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Canada Strengthens Anti-Money Laundering Laws for Crowdfunding Services and Fintechs

The Canadian government has published changes to its anti-money laundering (AML) and anti-terrorist financing (ATF) regulations, which will impact crowdfunding services, fintechs, and payment service providers. The new laws aim to extend AML and ATF compliance obligations to approximately 1,000 businesses in these sectors.

Crowdfunding Platforms

  • Are now classified as money services businesses
  • Require registration with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
  • Must adhere to strict compliance programs

These changes will come into effect for all crowdfunding platform services that operate in Canada or provide services to Canadians.

Fintechs and Payment Service Providers

  • Delete a merchant processing exemption from the definition of electronic funds transfer (EFT)
  • Those who process merchant transactions must register with FINTRAC as money services businesses
  • Develop compliance programs
  • Report suspicious transactions

The new laws aim to address money laundering and terrorist financing risks associated with the development of new products and business practices. They also comply with recommendations from the Financial Action Task Force, an international organization that sets standards for AML and ATF regulations.

FINTRAC’s Approach

  • Will focus on educating impacted businesses about their obligations under the new laws
  • Will be reasonable in its assessment and enforcement approach
  • Will work closely with reporting entities to increase awareness and compliance

Payment service providers and crowdfunding platforms are advised to:

  • Register with FINTRAC immediately
  • Begin building their compliance programs
  • Prepare for increased scrutiny of their transactions and record-keeping practices

Québec Regime

  • The Québec government is likely to follow the federal regime in characterizing money services businesses
  • Payment service providers and crowdfunding platforms will need to register in that province as well

FINTRAC has pledged to update its guidance on the new laws, and experts anticipate further clarity on the scope and impact of these changes.