Best Practices for Adhering to AML Regulations in Canada by 2025
Canada is set to reinforce its Anti-Money Laundering (AML) regulations, with proposed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) slated for December 2024. These amendments aim to increase penalties for non-compliance, with maximum fines for companies reaching up to C$20 million per violation notice and individual penalties capped at C$4 million.
The need for these changes becomes apparent when we look back at the FATF's 2016 evaluation, which highlighted several deficiencies in Canada's AML system. Since then, Canada has made significant strides in rectifying these issues, as shown by its reversal of most deficient indexes from 2016 to 2021.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) plays a crucial role in enforcing these regulations. In response to the identified deficiencies, the government amended regulations to strengthen AML/CFT requirements. FINTRAC is expected to get expanded authority, with the ability to issue compliance orders and coordinate better with other federal agencies overseeing the financial sector.
To stay compliant with Canadian AML law, companies must implement a clear set of procedures, including appointing a Money Laundering Reporting Officer (MLRO), staff training, risk assessment, conducting Customer Due Diligence (CDD), Simplified Due Diligence (SDD) and Enhanced Due Diligence (EDD), screening for persons on sanction lists, Politically Exposed Persons (PEPs) lists, transaction monitoring, ongoing monitoring of customer behavior and transactions, recordkeeping for at least five years from the date of the end of a business relationship or final transaction, reporting suspicious activity, and having a comprehensive compliance policy in place.
Artificial intelligence and automation are transforming AML compliance by improving fraud detection, reducing false positives, and enhancing regulatory reporting. AI optimizes Suspicious Transaction Reports (STRs) and other compliance filings, making them more accurate and efficient. AI assigns dynamic risk scores to customers and transactions, making due diligence more precise. FINTRAC also plans to implement a scorecard system, potentially with the help of artificial intelligence, to give out real-time feedback to financial institutions and businesses, improving their monitoring capabilities.
One of the most concrete upcoming AML-related regulatory actions in Canada is the implementation of the Mortgage Services Act in British Columbia, enhancing regulatory oversight to address money laundering risks particularly in mortgage services. This indicates ongoing efforts at the provincial level to strengthen AML-related controls in real estate sectors.
Canada is likely to undergo a mutual evaluation by the Financial Action Task Force (FATF) to assess compliance with AML/CTF frameworks in 2025-2026. Given the country's commitment to meeting international AML standards, as demonstrated by its adherence to FATF recommendations, these evaluations could prompt further regulatory adjustments.
For precise details about federal AML regulatory changes beyond provincial measures like BC’s Mortgage Services Act, it is recommended to consult official Canadian federal regulatory bodies such as FINTRAC or the Department of Finance Canada. The legislative landscape may be evolving outside the scope of the current search results.
- The proposed amendments to Canada's Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) aim to increase penalties for non-compliance with AML regulations, reaching up to C$20 million for companies and C$4 million for individuals.
- In the realm of personal-finance and business, companies in Canada are required to implement a clear set of AML procedures, including appointing a Money Laundering Reporting Officer (MLRO), staff training, risk assessment, and ongoing monitoring of customer behavior and transactions.
- Education and self-development in AML compliance is essential for businesses in Canada, as artificial intelligence and automation are transforming the industry by improving fraud detection and regulatory reporting, making AML procedures more accurate and efficient.
- General-news sources suggest that Canada is likely to undergo a mutual evaluation by the Financial Action Task Force (FATF) in 2025-2026, which could prompt further regulatory adjustments in response to international AML standards.
- Crime-and-justice issues related to money laundering are a concern in Canada, with ongoing efforts at the provincial level, such as the implementation of the Mortgage Services Act in British Columbia, to strengthen AML-related controls in real estate sectors.
