Background
Back on June 22, 2023, Bill C-47 received royal assent. As it relates to AML obligations, this has introduced changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). We have summarized what we believe to be the most significant changes below.
To make reading these changes a little easier, we (thanks Rodney) have created a redlined version of the legislation, with new content showing as tracked changes, which can be found here.
What’s Changed?
Structuring
Amendments to the PCMLTFA introduce structuring as an offence: “Every person or entity commits an offence that directly or indirectly undertakes, or attempts to undertake, a structured financial transaction.” For clarity, a structured financial transaction is a series of financial transactions that:
- cause a regulated entity to be in receipt of cash or virtual currency or involve the initiation of an international electronic funds transfer;
- would, if they occurred as a single financial transaction, require a person or entity referred to report to FINTRAC; and
- are undertaken with the intent that a regulated entity will not have to report the transaction to FINTRAC.
The offence of structuring would be punishable by a fine and/or imprisonment for a term up to five years.
These requirements come into force on a day to be fixed by order of the Governor in Council (which we are still awaiting).
Money Services Businesses (MSBs)
Amendments to the PCMLTFA will prohibit MSBs from engaging with agents or mandataries convicted of certain types of offences. As such, MSBs will be required to perform due diligence on their agents to ensure that they have not committed certain designated offences.
As part of due diligence, the following documents must be obtained and reviewed:
- a document that sets out their record of criminal convictions, or states that the person does not have one, that is issued by a competent authority in the jurisdiction in which the person resides; or
- if the agent or mandatary is an entity, for each of the chief executive officer, the president and the directors of the entity and for each person who owns or controls, directly or indirectly, 20% or more of the entity or the shares of the entity, a document that sets out the person’s record of criminal convictions, or states that the person does not have one, and that is issued by a competent authority in the jurisdiction in which the person resides.
If any documentation is in a language other than English or French, the person or entity shall also obtain and review a translation of it.
These requirements come into force on a day to be fixed by order of the Governor in Council (which we are still awaiting).
Also as it relates to MSBs, this round of changes has criminalized the operation of unregistered money services businesses. Any business or entity that knowingly engages in MSB activity for which it is not registered with FINTRAC is guilty of an offence and liable of a fine up to CAD 500,000 and/or imprisonment up to five years.
These requirements come into force June 22, 2024.
Back in 2022, The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) published an advisory related to Underground Banking through Unregistered Money Services Businesses highlighting the risk of such activity. If you suspect individuals or businesses are operating unregistered money services businesses or foreign money services businesses, you may wish to submit voluntary information to FINTRAC anonymously.
Other Changes
The amendments to the PCMLTFA will require regulated entities to report to FINTRAC where a reporting obligation arises under the Special Economic Measures Act as well as under the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law).
Related to Ministerial Directives, the Minister of Finance may issue orders setting conditions in respect of the trading or suspend or cancel trading of compliance units or invalidate any trade of compliance units if the Ministers are of the opinion that the trade or use of a compliance unit has a negative impact on the integrity of the Canadian financial system or its reputation.
As it relates to sharing of information, FINTRAC will be able to share information with different governmental departments, which includes sharing information with the Department of Finance for the purposes of granting, revoking, suspending or amending approvals under the Retail Payment Activities Act.
What Next?
Regulated entities that have transaction limits in place that are just under reporting thresholds (i.e., CAD 9,990) may want to rethink those limits and the reasons they are in place, due to the offence of “structuring”.
As it relates to MSB specific changes, compliance program updates may be required where existing agent relationships exist.
As with all legislative changes, we await FINTRAC guidance for clarity.
We’re Here To Help
If you would like assistance in understanding what these changes mean to your business, or if you need help in creating or updating your compliance program and processes, please get in touch.