Proposed changes to Canada’s AML and terrorist financing laws in 2023 Federal Budget

The 2023 Federal Budget (the Budget) proposes new legislative changes to combat money laundering and terrorism financing.

Amending Canada’s anti-money laundering and terrorist financing legislation

In the Budget, the Federal Government announced its intention to introduce legislative amendments to the Criminal Code and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The amendments aim to strengthen the investigative, enforcement, and information sharing tools of Canada's anti-money laundering and terrorist financing (AML/TF) regime.

The proposed legislative changes will:

• Give law enforcement the ability to freeze and seize virtual assets with suspected links to crime;
• Improve financial intelligence information sharing between law enforcement and the Canada Revenue Agency (CRA), and law enforcement and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC);
• Introduce a new offence for structuring financial transactions to avoid FINTRAC reporting;
• Strengthen the registration framework, including through criminal record checks, for currency dealers and other money services businesses to prevent their abuse;
• Criminalize the operation of unregistered money services businesses;
• Establish powers for FINTRAC to disseminate strategic analysis related to the financing of threats to the safety of Canada;
• Provide whistleblowing protections for employees who report information to FINTRAC;
• Broaden the use of non-compliance reports by FINTRAC in criminal investigations; and,
• Set up obligations for the financial sector to report sanctions-related information to FINTRAC.

The Budget also states that the Federal Government will conduct a parliamentary review of the PCMLTFA in 2023. This review will consider how different orders of government can facilitate collaboration and how those orders of government can better use existing tools in Canada’s AML/TF regime.

Increased oversight of the financial sector

The Budget further introduced efforts to protect Canada’s financial intuitions from the risk of AML/TF and foreign interference by countries like Russia and China. These efforts seek to modernize Canada’s financial sector and enhance regulatory oversight by the Office of the Superintendent of Financial Institutions (OSFI). OSFI is an independent Federal Government agency that regulates and supervises federally regulated financial institutions (FRFIs), including all banks operating in Canada, all federally incorporated or registered trust and loan companies, insurance companies, cooperative credit associations, and private pension plans.

The proposed changes will:

• Expand the mandate of the Office of the OSFI to include supervising FRFIs in order to determine ‎whether they have adequate policies and procedures to protect ‎themselves against threats to their integrity and security, ‎including protection against foreign interference;‎
• Expand the range of circumstances where OSFI can take control of ‎an FRFI to include where the integrity and security of that FRFI ‎is at risk, where all shareholders have been precluded from ‎exercising their voting rights, or where there are national security ‎risks;‎
• Expand the existing authority for the Superintendent to issue a ‎direction of compliance to include an act that threatens the ‎integrity and security of an FRFI;‎
• Provide new powers under the PCMLTFA to allow the Minister of ‎Finance to impose enhanced due diligence requirements to ‎protect Canada's financial system from the financing of national ‎security threats, and allow the Director of FINTRAC to share ‎intelligence analysis with the Minister of Finance to help assess ‎national security or financial integrity risks posed by financial ‎entities;‎
• Improve the sharing of compliance information between FINTRAC, ‎OSFI, and the Minister of Finance; and,‎
• Designate OSFI as a recipient of FINTRAC disclosures pertaining ‎to threats to the security of Canada, where relevant to OSFI's ‎responsibilities.‎

New Financial Crimes Agency

The Budget reaffirmed the Federal Government’s intention to create the Canada Financial Crimes Agency (CFCA). The CFCA was first introduced in the 2022 Federal Budget. According to the 2023 Budget, the CFCA will become Canada's lead enforcement agency against financial crime. It will bring together the expertise necessary to increase money laundering charges, prosecutions and convictions, and asset forfeiture results in Canada.

Conclusion

Money laundering and terrorism financing are serious crimes that affect Canadians' safety, security and quality of life. As such, Canadians should be confident that Canada’s AML/TF regime protects the financial sector and economy. The proposed changes in the Budget demonstrate Canada’s increasing commitment to strengthening Canada’s  AML/TF regime and are responsive to the complex and rapidly evolving problems associated with financial crimes. The proposed changes will enhance government oversight and allow for new enforcement mechanisms. We await further details of these proposed changes, to better understand their implications on Canadian businesses.